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)
Registrants telephone number, including area code: (817) 391-6100
Date of fiscal year end: June 30, 2012
Date of reporting period: June 30, 2012
ITEM 1. | REPORT TO STOCKHOLDERS. |
The intrinsic value of stocks selected for the Fund may never be realized by the market, and the price 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.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. The advisors strategies and the Funds 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 | June 30, 2012 |
![]() |
In February of this year, we broadened the investment opportunities American Beacon offers to investors by introducing the American Beacon Bridgeway Large Cap Value Fund to the American Beacon Funds family. The sub-advisor of this established fund, Bridgeway Capital Management, will continue investing the Fund in the same way that it has since launching the Fund in 2003. As manager of the Fund, American Beacon Advisors will oversee and monitor the investment team to ensure they continue to adhere to their statistically driven and evidence-based process. |
Although it has lessened in recent months, the last 12 months were marked by periods of significant market volatility. Investors were repeatedly concerned, then reassured, then concerned again as headlines covered the continuing debt crisis in Europe, a fragile U.S. recovery and slowing growth in China.
Despite this challenging environment, for the 12-month period ended June 30, 2012, the American Beacon Bridgeway Large Cap Value Fund (Institutional Class) returned 2.60%.
With ongoing uncertainty in the eurozone, the upcoming Presidential election and the looming fiscal cliff of expiring tax cuts and automatic spending cuts, we may see further market turbulence in the months to come. But regardless of the headlines, American Beacon remains focused on seeking opportunities and meeting market challenges to deliver the type of consistency in performance and service that our shareholders value.
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
June 30, 2012 (Unaudited)
2
American Beacon Bridgeway Large Cap Value FundSM
Performance Overview
June 30, 2012 (Unaudited)
3
American Beacon Bridgeway Large Cap Value FundSM
Performance Overview
June 30, 2012 (Unaudited)
4
American Beacon Bridgeway Large Cap Value FundSM
Fund Expenses
June 30, 2012 (Unaudited)
5
American Beacon Bridgeway Large Cap Value FundSM
Report of Independent Registered Public Accounting Firm
To the Shareholders of and the Board of Trustees of
American Beacon Bridgeway Large Cap Value Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Bridgeway Large Cap Value Fund (one of the funds constituting the American Beacon Funds) (the Fund), as of June 30, 2012, and the related statement of operations, statement of changes in net assets, and financial highlights for the year then ended. 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 audit. The statement of changes in net assets for the year ended June 30, 2011, and the financial highlights for each of the four years in the period then ended were audited by other auditors whose report dated August 25, 2011, expressed an unqualified opinion on those statements and financial highlights.
We conducted our audit 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 audit 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 Funds 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 June 30, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides 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 Bridgeway Large Cap Value Fund at June 30, 2012, and the results of its operations the changes in its net assets, and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles.
![]() |
Dallas, Texas
August 29, 2012
6
American Beacon Bridgeway Large Cap Value FundSM
June 30, 2012
See accompanying notes
7
American Beacon Bridgeway Large Cap Value FundSM
Schedule of Investments
June 30. 2012
See accompanying notes
8
American Beacon Bridgeway Large Cap Value FundSM
Schedule of Investments
June 30, 2012
Futures Contracts Open on June 30, 2012 ($ 000s):
Description | Type | Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||
S&P 500 Mini E Index Future |
Long | 5 | September, 2012 | $ | 339 | $ | 8 | |||||||||||||
|
|
|
|
|||||||||||||||||
$ | 339 | $ | 8 | |||||||||||||||||
|
|
|
|
See accompanying notes
9
American Beacon Bridgeway Large Cap Value FundSM
Statement of Assets and Liabilities
June 30. 2012 (in thousands, except share and per share amounts)
Assets: |
||||
Investments in unaffiliated securities, at fair value A |
$ | 27,268 | ||
Deposit with brokers for futures contracts |
14 | |||
Dividends and interest receivable |
38 | |||
Receivable for fund shares sold |
135 | |||
Receivable for expense reimbursement (Note 2) |
24 | |||
Receivable for variation margin from open futures contracts |
7 | |||
Prepaid expenses |
59 | |||
|
|
|||
Total assets |
27,545 | |||
|
|
|||
Liabilities: |
||||
Payable for fund shares redeemed |
7 | |||
Management and investment advisory fees payable (Note 2) |
28 | |||
Administrative service and service fees payable (Note 2) |
7 | |||
Professional fees payable |
40 | |||
Other liabilities |
3 | |||
|
|
|||
Total liabilities |
85 | |||
|
|
|||
Net assets |
$ | 27,460 | ||
|
|
|||
Analysis of Net Assets: |
||||
Paid-in-capital |
24,222 | |||
Undistributed net investment income |
200 | |||
Accumulated net realized loss |
(1,353 | ) | ||
Unrealized appreciation of investments and futures contracts |
4,391 | |||
|
|
|||
Net assets |
$ | 27,460 | ||
|
|
|||
Shares outstanding at no par value (Unlimited shares authorized): |
||||
Institutional Class |
1,820,374 | |||
|
|
|||
Y Class |
346 | |||
|
|
|||
Investor Class |
14,542 | |||
|
|
|||
A Class |
18,673 | |||
|
|
|||
C Class |
960 | |||
|
|
|||
Net asset value, offering and redemption price per share: |
||||
Institutional Class (Net assets $26,949,818) |
$ | 14 .80 | ||
|
|
|||
Y Class (Net assets $5,118) |
$ | 14 .80 | ||
|
|
|||
Investor Class (Net assets $215,000) |
$ | 14 .78 | ||
|
|
|||
A Class (Net assets $275,860) (offering price $15.67) |
$ | 14 .77 | ||
|
|
|||
C Class (Net assets $14,147) |
$ | 14 .73 | ||
|
|
|||
A Cost of investments in unaffiliated securities |
$ | 22,885 |
See accompanying notes
10
American Beacon Bridgeway Large Cap Value FundSM
Statement of Operations
For the Year Ended June 30, 2012 (in thousands)
Investment Income: |
||||
Dividend income from unaffiliated securities (net of foreign taxes)A |
$ | 680 | ||
|
|
|||
Total investment income |
680 | |||
|
|
|||
Expenses: |
||||
Management and investment advisory fees (Note 2) |
137 | |||
Administrative service fees (Note 2): |
||||
Institutional Class |
40 | |||
Transfer agent fees: |
||||
Institutional Class |
28 | |||
Y Class |
3 | |||
Investor Class |
5 | |||
A Class |
3 | |||
C Class |
3 | |||
Custody and fund accounting fees |
25 | |||
Professional fees |
44 | |||
Registration fees and expenses |
49 | |||
Service fees (Note 2): |
||||
Institutional Class |
11 | |||
Prospectus and shareholder reports expense |
10 | |||
Insurance fees |
3 | |||
Trustee fees |
5 | |||
Other expenses |
5 | |||
|
|
|||
Total expenses |
371 | |||
|
|
|||
Net fees waived and expenses reimbursed (Note 2) |
(146 | ) | ||
|
|
|||
Net expenses |
225 | |||
|
|
|||
Net investment income |
455 | |||
|
|
|||
Realized and unrealized gain (loss) on investments: |
||||
Net realized gain (loss) from: |
||||
Investments |
2,186 | |||
Futures contracts and swap agreements |
(54 | ) | ||
Change in net unrealized appreciation or (depreciation) from: |
||||
Investments |
(1,997 | ) | ||
Futures contracts and swap agreements |
8 | |||
|
|
|||
Net gain on investments |
143 | |||
|
|
|||
Net increase in net assets resulting from operations |
$ | 598 | ||
|
|
|||
A Foreign taxes |
$ | 7 |
See accompanying notes
11
American Beacon Bridgeway Large Cap Value FundSM
Statement of Operations
For the Year Ended June 30, 2012 (in thousands)
Year Ended June 30, 2012 |
Year Ended June 30, 2011 |
|||||||
Increase (Decrease) in Net Assets: |
||||||||
Operations: |
||||||||
Net investment income |
$ | 455 | $ | 412 | ||||
Net realized gain from investments, futures contracts, and swap agreements |
2,132 | 3,093 | ||||||
Change in net unrealized appreciation or (depreciation) from investments, futures contracts, and swap agreements |
(1,989 | ) | 3,512 | |||||
|
|
|
|
|||||
Net increase in net assets resulting from operations |
598 | 7,017 | ||||||
|
|
|
|
|||||
Distributions to Shareholders: |
||||||||
Net investment income: |
||||||||
Institutional Class |
(357 | ) | (462 | ) | ||||
|
|
|
|
|||||
Net distributions to shareholders |
(357 | ) | (462 | ) | ||||
|
|
|
|
|||||
Capital Share Transactions: |
||||||||
Proceeds from sales of shares |
3,152 | 4,744 | ||||||
Reinvestment of dividends and distributions |
333 | 446 | ||||||
Cost of shares redeemed |
(5,913 | ) | (7,632 | ) | ||||
|
|
|
|
|||||
Net (decrease) in net assets from capital share transactions |
(2,428 | ) | (2,442 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in net assets |
(2,187 | ) | 4,113 | |||||
|
|
|
|
|||||
Net Assets: |
||||||||
Beginning of period |
29,647 | 25,534 | ||||||
|
|
|
|
|||||
End of Period * |
$ | 27,460 | $ | 29,647 | ||||
|
|
|
|
|||||
* Includes undistributed net investment income of |
$ | 200 | $ | 176 | ||||
|
|
|
|
See accompanying notes
12
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
1. Organization and Significant Accounting Policies
American Beacon Funds (the Trust), which is comprised of 24 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 Bridgeway 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.
Reorganization
The American Beacon Bridgeway Large Cap Value Fund is the legal successor to the Bridgeway Large Cap Value Fund (the Predecessor Fund). The accounting and performance history of Class N Shares of the Predecessor Fund was redesignated as that of the Institutional Class Shares of the Fund. On February 3, 2012, the Fund (which had no prior activity or net assets) acquired all the net assets of the Predecessor Fund pursuant to a plan of reorganization. The exchange consisted of the Predecessor Funds Class N shares for the Funds Institutional Class shares at the same aggregate value.
The acquisition was accounted for as a tax-free exchange after the close of business on February 3, 2012, as follows:
Institutional Shares |
1,985,390 | |||
Net Assets |
$ | 28,714,401 | ||
Net Investment Income |
$ | 175,553 | ||
Unrealized Appreciation |
$ | 5,720,363 |
The reorganization shifted the management oversight responsibility from Bridgeway Capital Management, Inc. (Bridgeway) to the Manager. The Manager engaged Bridgeway as the sub-advisor to the Fund, thus maintaining the continuity of the portfolio management.
For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from the Predecessor Fund were carried forward to align ongoing reporting of the Funds realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
Class Disclosure
February 3, 2012 was the inception date of the Y, Investor, A, and C Classes.
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 directly or through an intermediary | |
A Class |
General public and investors investing through an intermediary with applicable sales charges | |
C Class |
General public and investors investing through an intermediary with applicable sales charges |
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.
13
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
New Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) ASU No. 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. Generally Accepted Accounting Principles (U.S. GAAP) and the International Financial Reporting Standards (IFRSs). ASU No. 2011-04 amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. ASU No. 2011-04 is effective for fiscal years beginning after December 15, 2011 and for interim period January 1, 2012 to June 30, 2012.
Management has evaluated the implications of these changes and determined that the impact of the new guidance will only affect the disclosure requirements related to the financial statements. However, as the Fund did not hold any Level 3 investments as of June 30, 2012, the financial statement disclosures were not affected.
2. Transactions with Affiliates
Management Agreement
Prior to February 3, 2012, the manager of the Predecessor Fund received an advisory fee comprised of a base fee and a performance adjustment. The base fee equaled the base annual fee rate of 0.50% times the average daily net assets of the Fund. The performance adjustment equaled 0.33% times the difference in cumulative total return between the Fund and the Russell 1000 Value Index with dividends reinvested (the Predecessor Index) over a rolling five-year performance period. The performance adjustment varied from a minimum of -0.05% to a maximum of +0.05%. However, the performance adjustment rate was zero if the difference between the cumulative Funds performance and the Predecessor Index performance was less than or equal to 2%. Since February 3, 2012, 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 portfolio management services. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisor hired by the Manager to direct investment activities of the Fund. Management fees paid during the year ended June 30, 2012 were as follows (dollars in thousands):
Management Fee Rate |
Management Fee |
Amounts paid to Investment Advisor |
Net Amounts Retained by Manager | |||
0.50% |
$137 | $92 | $45 |
Administrative Services Agreement
Prior to February 3, the Predecessor Fund contracted with BNY Mellon Investment Servicing (US) Inc. to serve as the Funds administrator and incurred $25,434 in administrative service fees. Since February 3, the Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, and Investor Classes of the Fund and 0.40% of the average daily net assets of the A and C Classes of the Fund. For the period ended June 30, 2012, expenses for the Y, Investor, A, and C Classes were less than $500.
14
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
Distribution Plans
The Fund, except for the 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 will 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 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 A 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. For the period ended June 30, 2012, expenses for the A and C Classes of the Fund were less than $500.
Service Plans
Prior to February 3, the Predecessor Fund incurred $10,984 in shareholder servicing fees. Since February 3, 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 the Fund. For the period ended June 30, 2012, expenses for the Y, Investor, A, and C Classes were less than $500.
Interfund Lending Program
Since February 3, and 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. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended June 30, 2012, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
Prior to February 3, the Predecessor Fund contractually agreed to reimburse operating expenses to the extent that total annual fund expenses exceeded 0.84%. At the time of reorganization, the Predecessor Fund had reimbursed expenses of $57,908.
After the reorganization, the Manager agreed to reimburse the following to the extent that total annual fund operating expenses exceeded a Funds expense cap. Of these amounts, $11,491 was receivable from the Manager at June 30, 2012. For the period ended June 30, 2012, the Manager waived or reimbursed expenses as follows:
Expense Cap | ||||||||||||||||||||||
Fund |
Class | 7/1/11 to 2/3/12 |
2/3/12 to 3/29/13 |
Waived or Reimbursed Expenses |
Expenses Ineligible for Recoupment |
Expiration | ||||||||||||||||
Bridgeway Large Cap Value |
Institutional | 0.84 | % | 0.84 | % | $ | 120,503 | $ | 57,908 | 2015 | ||||||||||||
Bridgeway Large Cap Value |
Y | N/A | 0.94 | % | 2,950 | | 2015 | |||||||||||||||
Bridgeway Large Cap Value |
Investor | N/A | 1.22 | % | 4,742 | | 2015 | |||||||||||||||
Bridgeway Large Cap Value |
A | N/A | 1.34 | % | 3,055 | | 2015 | |||||||||||||||
Bridgeway Large Cap Value |
C | N/A | 2.09 | % | 2,959 | | 2015 |
15
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
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. Reimbursements made by the Predecessor Fund are not eligible for this Plan. For the period ended June 30, 2012, the Fund 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. Since February 3, (the inception date of the A Class), Foreside has not collected any fees from the sale of Class A Shares.
A contingent deferred sales charge (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 period ended June 30, 2012 no CDSC charges were collected.
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 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 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 Trusts Board of Trustees (the Board).
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (variation margin) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.
Valuation Inputs
Various inputs may be used to determine the fair value of the 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. |
16
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
Level 3 - |
Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Funds 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 end of period timing recognition is used for the significant transfers between Levels of the Funds assets and liabilities. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for the Fund.
The Funds investments are summarized by level based on the inputs used to determine their values. U.S. GAAP also requires all significant transfers between any levels to be disclosed. During the year ended June 30, 2012, the Fund transferred short-term investments with a value of $366,580 from Level 2 to Level 1 as of the end of the period in accordance with fair value procedures established by the Board. The Predecessor Fund categorized money market instruments as level 2 and the transfer was made to follow the procedures for leveling money market instruments followed by the Manager. As of June 30, 2012, the investments were classified as described below (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stock |
$ | 26,901 | $ | | $ | | $ | 26,901 | ||||||||
Short-Term Investments |
367 | | | 367 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 27,268 | $ | | $ | | $ | 27,268 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Futures Contracts |
$ | 8 | $ | | $ | | $ | 8 |
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.
17
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
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 Funds 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 Funds 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 Trusts 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 Trusts 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.
18
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
5. Financial Derivative Instruments
Total Return Swaps
Prior to February 3, the Predecessor Fund entered into total return swaps. Total return swaps are agreements that provide a Fund with a return based on the performance of an underlying asset, in exchange for fee payments to a counterparty based on a specified rate. The difference in the value of these income streams is recorded daily by the Funds and is settled in cash monthly. The fee paid by a Fund will typically be determined by multiplying the face value of the swap agreement by an agreed upon interest rate. In addition, if the underlying asset declines in value over the term of the swap, a Fund would also be required to pay the dollar value of that decline to the counterparty. Total return swaps could result in losses if the underlying asset does not perform as anticipated by the Adviser. A Fund may use its own NAV as the underlying asset in a total return swap. This strategy serves to reduce cash drag (the impact of cash on a Funds overall return) by replacing it with the impact of market exposure based upon a Funds own investment holdings. All total return swaps were terminated prior to February 3, 2012 and the Fund no longer invests in these types of investments.
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.
Values of Derivative Instruments not accounted for as hedging instruments as of June 30, 2012 (in thousands)(2):
Statement of Assets and Liabilities |
Derivatives | Fair Value | ||||||
Unrealized appreciation or (depreciation) of investments and futures contracts (1) |
Equity Contracts | $ | 8 |
Effect of derivative instruments not accounted for as hedging instruments for the year ended June 30, 2012 (in thousands):
Statement of Operations |
Derivatives | Total | ||||||
Net realized gain (loss) from swap agreements |
Credit Contracts | $ | (54 | ) | ||||
Change in net unrealized appreciation or (depreciation) from futures contracts |
Equity Contracts | 8 |
(1) | Includes cumulative appreciation or (depreciation) of futures contracts is reported in the Schedule of Investments footnotes. Only current days variation margin as reported within the Statement of Assets and Liabilities. |
(2) | The volume of derivative activity described above is reflective of the derivative activity through the current period of operations. |
6. 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.
19
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
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 June 30, 2011 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.
The tax character of distributions paid were as follows (in thousands):
Year Ended June 30, 2012 |
Year Ended June 30, 2011 |
|||||||
Distributions paid from: |
||||||||
Ordinary income* |
||||||||
Institutional Class |
$ | 357 | $ | 462 | ||||
Y Class |
| | ||||||
Investor Class |
| | ||||||
A Class |
| | ||||||
C Class |
| | ||||||
|
|
|
|
|||||
Total distributions paid |
$ | 357 | $ | 462 | ||||
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of June 30, 2012, 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 |
$ | 22,909 | ||
Unrealized appreciation |
5,337 | |||
Unrealized depreciation |
(978 | ) | ||
|
|
|||
Net unrealized appreciation or (depreciation) |
4,359 | |||
Undistributed ordinary income |
191 | |||
Accumulated long-term gain or (loss) |
(1,236 | ) | ||
Other temporary differences |
(76 | ) | ||
|
|
|||
Distributable earnings or (deficits) |
$ | 3,238 | ||
|
|
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 and the realization for tax purposes of unrealized gains or (losses) on certain derivative instruments.
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 the realization for tax purposes of unrealized gains or (losses) on certain derivative instruments and reclassification of income from real estate investment securities as of June 30, 2012 (in thousands):
Paid-in-capital |
$ | | ||
Undistributed net investment income |
(74 | ) | ||
Accumulated net realized gain (loss) |
74 | |||
Unrealized appreciation or (depreciation) of investments and futures contracts |
|
20
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the RIC MOD) was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.
As of June 30, 2012, the capital loss carryforward position of the Fund, prior to the provisions of RIC MOD that may be applied against any realized net taxable gain in each succeeding year or until the expiration date, whichever occurs first, is $1,227 expiring in 2018 (in thousands). The Fund utilized $2,262 of net capital loss carryforwards for the year ended June 30, 2012.
Net capital losses incurred after October 31, 2011 and within the taxable year are deemed to arise on the first business day of the Funds next taxable year. For the year ended June 30, 2012, the Fund deferred $84 of capital loss to July 1, 2012 (in thousands).
7. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended June 30, 2012 were $9,827 and $12,616, respectively (in thousands).
8. Securities Lending
Prior to February 3, the Predecessor Fund lent its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers were 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 was monitored and marked to market daily. Daily mark to market amounts were 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 could have resulted in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
As of June 30, 2012, the Fund did not have any securities on loan.
21
American Beacon Bridgeway Large Cap Value FundSM
Notes to Financial Statements
June 30, 2012
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 June 30, 2012
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold |
189 | $ | 2,646 | | $ | 5 | 15 | $ | 212 | |||||||||||||||
Reinvestment of dividends |
25 | 333 | | | | | ||||||||||||||||||
Shares redeemed |
(422 | ) | (5,912 | ) | | | | (1 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in shares outstanding |
(208 | ) | $ | (2,933 | ) | | $ | 5 | 15 | $ | 211 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
A Class | C Class | |||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||
Shares sold |
19 | $ | 274 | 1 | $ | 15 | ||||||||||||||||||
Reinvestment of dividends |
| | | | ||||||||||||||||||||
Shares redeemed |
| | | | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase in shares outstanding |
19 | $ | 274 | 1 | $ | 15 | ||||||||||||||||||
|
|
|
|
|
|
|
|
For the Year Ended June 30, 2011
Institutional Class | ||||||||
Shares | Amount | |||||||
Shares sold |
335 | $ | 4,744 | |||||
Reinvestment of dividends |
33 | 446 | ||||||
Shares redeemed |
(572 | ) | (7,632 | ) | ||||
|
|
|
|
|||||
Net (decrease) in shares outstanding |
(204 | ) | $ | (2,442 | ) | |||
|
|
|
|
10. Change in Independent Registered Public Accounting Firm (Unaudited)
The Fund engaged Ernst & Young, LLP (E&Y) as the independent registered public accounting firm for the fiscal year ending June 30, 2012. E&Y replaces BBD, LLP (BBD), the Funds previous independent registered public accounting firm, who was dismissed upon completion of the tax-free reorganization. The change in accountants was approved by the Audit Committee of the Board of Trustees on November 7, 2011. During the periods that BBD served as the Predecessor Funds independent registered public accounting firm and through February 3, 2012, BBDs audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope, or accounting principle. There were no disagreements between the Fund and BBD on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
22
This page intentionally left blank.
23
American Beacon Bridgeway Large Cap Value FundSM
(For a share outstanding throughout the period)
Institutional ClassE | Y Class | |||||||||||||||||||||||
Feb. 3 to | ||||||||||||||||||||||||
Year Ended June 30, | June 30, | |||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | 2012 | |||||||||||||||||||
Net asset value, beginning of period |
$ | 14 .62 | $ | 11 .44 | $ | 9 .74 | $ | 13 .63 | $ | 17 .07 | $ | 14 .46 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income from investment operations: |
||||||||||||||||||||||||
Net investment income |
0 .24 | 0 .20D | 0 .19D | 0 .23D | 0 .22D | 0 .09 | ||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) |
0 .12 | 3 .21 | 1 .73 | (3 .89) | (2 .94) | 0 .25 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total income (loss) from investment operations |
0 .36 | 3 .41 | 1 .92 | (3 .66) | (2 .72) | 0 .34 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less distributions: |
||||||||||||||||||||||||
Dividends from net investment income |
(0 .18) | (0 .23) | (0 .22) | (0 .23) | (0 .21) | | ||||||||||||||||||
Distributions from net realized gains on securities |
| | | | (0 .51) | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total distributions |
(0 .18) | (0 .23) | (0 .22) | (0 .23) | (0 .72) | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net asset value, end of period |
$ | 14 .80 | $ | 14 .62 | $ | 11 .44 | $ | 9 .74 | $ | 13 .63 | $ | 14 .80 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total returnF |
2 .60% | 30 .02% | 19 .65% | (26 .88)% | (16 .46)% | 2 .35%A | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ratios and supplemental data: |
||||||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 26,950 | $ | 29,647 | $ | 25,534 | $ | 27,996 | $ | 54,144 | $ | 5 | ||||||||||||
Ratios to average net assets (annualized): |
||||||||||||||||||||||||
Expenses, before reimbursements |
1 .30% | 1 .17% | 1 .11% | 0 .98% | 0 .80% | 144 .39%B | ||||||||||||||||||
Expenses, net of reimbursements |
0 .82% | 0 .84% | 0 .84% | 0 .84% | 0 .79% | 0 .94%B | ||||||||||||||||||
Net investment income (loss), before reimbursements |
1 .17% | 1 .17% | 1 .32% | 2 .06% | 1 .37% | (141 .90)%B | ||||||||||||||||||
Net investment income, net of reimbursements |
1 .66% | 1 .50% | 1 .58% | 2 .20% | 1 .38% | 1 .54%B | ||||||||||||||||||
Portfolio turnover rate |
36% | 43% | 49% | 65% | 28% | 36%C |
A | Not annualized. |
B | Annualized. |
C | Portfolio turnover rate is for the period from July 1, 2011 to June 30, 2012. |
D | Per share amounts calculated based on the average daily shares outstanding during the period. |
E | Prior to the reorganization on February 3, 2012, the Institutional Class was known as Class N. |
F | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. |
24
American Beacon Bridgeway Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | A Class | C Class | ||||||||
Feb. 3 to June 30, 2012 |
Feb. 3 to June 30, 2012 |
Feb. 3 to June 30, 2012 |
||||||||
$ | 14 .46 | $ | 14 .46 | $ | 14 .46 | |||||
|
|
|
|
|
|
|||||
0 .03 | 0 .01 | 0 .02 | ||||||||
0 .29 | 0 .30 | 0 .25 | ||||||||
|
|
|
|
|
|
|||||
0 .32 | 0 .31 | 0 .27 | ||||||||
|
|
|
|
|
|
|||||
| | | ||||||||
| | | ||||||||
|
|
|
|
|
|
|||||
| | | ||||||||
|
|
|
|
|
|
|||||
$ | 14 .78 | $ | 14 .77 | $ | 14 .73 | |||||
|
|
|
|
|
|
|||||
2 .21%A | 2 .14%A | 1 .87%A | ||||||||
|
|
|
|
|
|
|||||
$ | 215 | $ | 276 | $ | 14 | |||||
18 .30%B | 15 .39%B | 64 .88%B | ||||||||
1 .22%B | 1 .34%B | 2 .09%B | ||||||||
(15 .48)%B | (13 .13)%B | (62 .47)%B | ||||||||
1 .59%B | 0 .92%B | 0 .32%B | ||||||||
36%C | 36%C | 36%C |
25
American Beacon Bridgeway Large Cap Value FundSM
Privacy Policy & Federal Tax Information
June 30, 2012 (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 Funds income and distribution for the taxable year ended June 30, 2012. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2011.
The Fund designated the following items with regard to distributions paid during the fiscal year ended June 30, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Corporate Dividends Received Deduction |
100 | % | ||
Qualified Dividend Income |
100 | % |
26
Disclosure Regarding the Board of Trustees Approval of Investment
Advisory Agreements of the Funds (Unaudited)
At the August 9-10, 2011 Board meeting, the Board considered the approval of the Investment Management Agreement (Management Agreement) between American Beacon Advisors, Inc. (Manager) and American Beacon Funds (Trust) on behalf of the American Beacon Bridgeway Large Cap Value Fund, (the New Fund), pending the reorganization of the Bridgeway Large-Cap Value Fund (the Old Fund) into a new series of the Trust (a Reorganization). Prior to the meeting, the Board requested and reviewed information provided by the Manager in connection with its consideration of the Management Agreement and the Investment Committee of the Board met with representatives of the Manager. The Board considered, among other materials, responses by the Manager to inquiries requesting:
| a description of the advisory and related services proposed to be provided to the New Fund; |
| identification of the professional personnel who are proposed to be assigned primary responsibility for managing the New Fund; |
| a comparison of the performance of the Old Fund with its industry peer group; |
| an analysis of the proposed advisory fee, a comparison to the fees charged to other comparable clients and an explanation of any differences between the fee schedules; and |
| any other information the Manager believed would be material to the Boards consideration of the Agreement. |
The Board also considered information that had been provided by the Manager to the Board at the May 2011 Board meeting in connection with the renewal of the Management Agreement between the Manager and the Trust as it relates to other existing series of the Trust (Existing Funds).
The Board did not identify any particular information that was most relevant to its consideration to approve the Management 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. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Management 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 the Management Agreement were reasonable and fair and that the approval of the Management Agreement was in the best interests of the New Fund and its shareholders. Provided below is an overview of the primary factors the Trustees considered in approving the Management Agreement.
Nature, extent and quality of the services to be provided by the Manager. The Board noted that it had considered the renewal of the Management Agreement between the Manager and the Trust as it relates to the Existing Funds at its May 2011 meeting. At that meeting, the Board received detailed information regarding the Manager, including information regarding the scope of the services provided by the Manager to the Existing Funds and the background and experience of the Managers key investment personnel. The Board also considered at the May meeting the Managers disciplined investment approach and goal to provide consistent above average long-term performance at a low cost on behalf of the Existing Funds and the Managers record in building improved compliance, control and credit functions that reduce risks for all series of the Trust. The Board noted the Managers representation that the advisory and related services proposed to the New Fund will be consistent with the services provided to the Existing Funds except that the New Fund is a single-manager fund and therefore the Manager will not allocate assets among multiple investment advisors, which it does for many, but not all, Existing Funds. The Board considered the background and experience of key investment personnel who will have primary responsibility for the day-to-day oversight of the New Fund. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management to be provided by the Manager were appropriate for the New Fund.
Performance. The Board noted that the New Fund is new and therefore had no historical performance for the Board to review. As a result, the Board concluded that historical investment performance was not a material factor in the approval of the Management Agreement for the New Funds.
Comparisons of the amounts to be paid to the Manager under the Management Agreement and other funds in the relevant Morningstar category. In evaluating the Management Agreement, the Board reviewed the Managers proposed management fee schedule. For each New Fund, the Board considered a comparison of the management fee rate to be charged by the Manager under the Management Agreement, together with the proposed advisory fee rate to be paid to the sub-advisor, versus the fee rates charged by comparable funds. The Board noted that the management fee rate proposed by the Manager for the New Fund is lower than overall industry averages. The Board also noted that the management fee rate proposed by the Manager is consistent with other funds of the Trust. In addition, the Board considered that the Manager has agreed to contractually limit the expenses of the New Fund for at least one year following the inception date of the New Fund at competitive market levels. This information assisted the Board in concluding that the management fee rates appeared to be within a reasonable range for the services to be provided to the New Fund, in light of all the factors considered.
Costs of the services to be provided and profits to be realized by the Manager from the relationship with the New Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues to be earned and the expenses to be incurred by the Manager in connection with the services to be provided to the New Fund. The Board also considered that the Manager will receive service and administrative fees to compensate the Manager for providing administrative services to the New Fund and to compensate third-party administrators and broker-dealers for services to New Fund shareholders. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services to be performed by the Manager.
Extent to which economies of scale would be realized as the New Fund grows and whether fee levels reflect these economies of scale for the benefit of New Fund investors. The Board considered that the fees to be paid to the sub-advisor of the New Fund will be passed through the Manager by the New Fund and that the Manager would not benefit economically from the proposed fee agreement. The Board also considered the Managers representation that the fee schedules for the New Fund generally reflects breakpoints in the sub-advisory fees and that the Manager believes that the proposed fee rates for the New Fund properly reflects economies of scale for the benefit of New Fund shareholders. Thus, the Board concluded that the New Fund will be receiving economies of scale due to the breakpoints incorporated into the fee schedules.
27
Disclosure Regarding the Board of Trustees Approval of Investment
Advisory Agreements of the Funds (Unaudited)
Benefits to be derived by the Manager from the relationship with the New Fund. The Board considered the Managers representation that it does not anticipate any material fall-out benefits resulting from its proposed relationship with the New Fund. After consideration of this information, the Board concluded that the potential benefits that may accrue to the Manager by virtue of its relationship with the New Fund were not a material factor in approving the Management Agreement.
Boards 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 the sub-advisor to the New Fund, as that term is defined in the Investment Company Act of 1940, as amended (1940 Act), concluded that the proposed management fee is reasonable and that the approval of the Management Agreement is in the best interests of the New Fund and its shareholders and, as a result, approved the Management Agreement.
Approval of Appointment of Bridgeway Capital Management, Inc.
At the August 9-10, 2011 Board meeting, the Manager proposed that the Board approve Bridgeway Capital Management, Inc. (Bridgeway) as an investment sub-advisor to the New Fund, a new series of the Trust, following the reorganization of the Old Fund into the New Fund. Prior to the meeting, the Board requested and reviewed information provided by Bridgeway in connection with its consideration of Bridgeway as an investment advisor to the New Fund and the Investment Committee of the Board met with representatives from Bridgeway. The Board considered, among other materials, responses by Bridgeway to inquiries requesting:
| a description of the advisory and related services proposed to be provided to the New Fund; |
| identification of the professional personnel to perform services for the New Fund and their education, experience and responsibilities; |
| a comparison of investment performance of accounts managed by Bridgeway that have investment objectives and policies comparable to the New Fund with the performance of applicable peer groups and indices; |
| an analysis of the proposed subadvisory fee; |
| a description of the portfolio managers compensation, including any incentive arrangements, and if compensation is tied to performance, a description of the oversight mechanisms to prevent a manager with lagging performance from taking undue risks; |
| a description of Bridgeways compliance program and matters, as well as its trading activities; |
| a discussion of Bridgeways financial condition and the potential impact of Bridgeways financial condition on services to be performed for the New Fund; and |
| any other information Bridgeway believed would be material to the Boards consideration of the Agreement. |
The Board considered multiple factors when evaluating Bridgeway and in approving the Investment Advisory Agreement between the Manager and Bridgeway on behalf of the New Fund (Agreement), including Bridgeways experience, its reputation and financial condition, the past performance of the Old Fund, its overall capabilities to perform the services under the Agreement and its willingness to perform those services for the New Fund. A discussion of the factors relating to the Boards selection of Bridgeway and approval of the Agreement follows.
Nature, extent and quality of the services to be provided by Bridgeway. The Board considered Bridgeways investment philosophy and investment process, as well as the background and experience of its portfolio managers. The Board also considered Bridgeways investment resources, infrastructure and the adequacy of its compliance program. In addition, the Board took into consideration the Managers recommendation on behalf of Bridgeway. Bridgeway also represented that it was adequately staffed and resourced to effectively service the New Fund and can accommodate significant growth. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management to be provided by Bridgeway were appropriate for the New Fund.
Performance of Bridgeway. The Board evaluated Bridgeways performance information regarding the Old Fund as compared to the Average of Large-Cap Value Peers (LCV Peers) (which includes all funds in the Morningstar Large Cap Value category, excluding index, ETFs, life cycle, target date, and fund of funds), and the Russell 1000 Value Index (Index). The Board noted that the Old Fund outperformed the LCV Peers and Index for the annualized one-, three- and five-year periods. Thus, the Board concluded that the historical investment performance record of Bridgeway supported approval of the Agreement.
Comparisons of the amounts to be paid under the Agreement with those under contracts between Bridgeway and its other clients. In evaluating the Agreement, the Board reviewed the proposed advisory fee rate to be paid to Bridgeway for services performed on behalf of the New Fund. The Board also noted that Bridgeways investment advisory fee rate under the Agreement will be paid through the Manager by the New Fund, and that the management fee rate charged by the Manager, together with the proposed advisory fee rate to be paid to Bridgeway, was lower than the industry average fee rate for accounts with a similar investment mandate. After consideration of this information, the Board concluded that the fee rate to be paid to Bridgeway was reasonable in light of the services to be performed by Bridgeway.
Costs of the services to be provided and profits to be realized by Bridgeway and its affiliates from the relationship with the New Fund. The Board did not consider the costs of the services to be provided and profits to be realized by Bridgeway from its relationship with the New Fund, noting instead the arms-length nature of the relationship between the Manager and Bridgeway with respect to the negotiation of the advisory fee rate on behalf of the New Fund.
28
Disclosure Regarding the Board of Trustees Approval of Investment
Advisory Agreements of the Funds (Unaudited)
Extent to which economies of scale would be realized as the New Fund grows and whether fee levels reflect these economies of scale for the benefit of New Fund investors. The Board considered that the Manager negotiated breakpoints in Bridgeways fee rate based on the levels of assets in the New Fund. Thus, the Board concluded that the New Fund is receiving economies of scale due to the breakpoints incorporated into the fee schedule.
Benefits to be derived by Bridgeway from the relationship with the New Fund. The Board considered the fall-out or ancillary benefits that may accrue to Bridgeway as a result of the advisory relationship with the New Fund. In this regard, the Board considered Bridgeways representation that it does not anticipate accruing any fall-out benefits as a result of its relationship with the New Fund. The Board also considered Bridgeways representation that it does not engage in any soft dollar arrangements, purchases research on a very limited basis, and that as a result of its relationship with the New Fund it may receive ancillary benefits that include marketing benefits, data services pricing and portfolio trading execution. After consideration of this information, the Board concluded that the potential benefits that may accrue to Bridgeway by virtue of its relationship with the New Fund were not a material factor in approving the Agreement.
Boards Conclusion. The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. However, based on the various considerations described above, the Board, including a majority of Trustees who are not interested persons of the New Fund, the Manager or Bridgeway, 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 New Fund and its shareholders and, as a result, approved the Agreement.
29
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the Trust) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trusts 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* |
||||
Alan D. Feld** (75) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-2008);Trustee, 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 (68) | 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 (51) | 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 (57) | 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 (69) | Trustee since 2008 | Chairman Emeritus (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Board 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 (68) | 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). |
30
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 | ||
R. Gerald Turner (66) | 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); Director, First Broadcasting Investment Partners, LLC (2003-2007); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
Paul J. Zucconi,CPA (71) | Trustee since 2008 | Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-Present); Director, Titanium Metals Corporation (producer of titanium melted and mill products) (2002-Present); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
OFFICERS | ||||
Term One Year |
||||
Gene L. Needles, Jr. (57) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2012), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (53) | VP, Secretary and Chief Legal Officer since 2006 |
Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Secretary (2008-Present), Lighthouse Holdings Parent, Inc. | ||
Brian E. Brett (52) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (45) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2011), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (41) | 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 (58) | 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 (51) | 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 (48) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (37) | 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). |
31
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address |
Position, Term of Office and Length of Time Served with the Trust |
Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Samuel J. Silver (49) | 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 (40) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 |
Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc. | ||
John J. Okray (38) | Asst. Secretary since 2010 | Assistant General Counsel, American Beacon Advisors, Inc. (2010-Present); Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010). | ||
Sonia L. Bates (55) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc. |
* | The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. |
** | Mr. Feld is deemed to be an interested person of the Trusts, as defined by the 1940 Act. Mr. Felds law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trusts and Master Trusts sub-advisor. |
32
This page intentionally left blank.
33
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 Funds 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 institutions 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 |
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 Funds Forms N-Q are available on the SECs website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SECs Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SECs Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Funds portfolio holdings is also available on (www.americanbeaconfunds.com), the Funds website 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 Funds Statement of Additional Information, is available free of charge on the Funds website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SECs website at www.sec.gov. The Funds proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Funds Forms N-PX are available on the SECs website at www.sec.gov. The Funds 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 the American Beacon Bridgeway Large Cap Value Fund are service marks of American Beacon Advisors, Inc.
AR 6/12
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 February 16, 2010 to disclose a change in the Principal Financial Office. 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 Trusts Board of Trustees has determined that Mr. Paul Zucconi, a member of the Trusts Audit and Compliance Committee, is an audit committee financial expert as defined in Form N-CSR. Mr. Paul Zucconi is independent as defined in Form N-CSR.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
(a) Audit Fees |
Fiscal Year Ended | |||
$144,159 |
8/31/2011 | |||
$328,501 |
10/31/2011 | |||
$ 72,527 |
12/31/2011 | |||
$ 27,241 |
6/30/2012 | |||
$162,479 |
8/31/2012 | |||
$372,802 |
10/31/2012 | |||
$ 54,482 |
11/30/2012 | |||
$163,621 |
12/31/2012 |
(b) Audit-Related Fees |
Fiscal Year Ended | |||
$0 |
8/31/2011 | |||
$0 |
10/31/2011 | |||
$0 |
12/31/2011 | |||
$0 |
6/30/2012 | |||
$0 |
8/31/2012 | |||
$0 |
10/31/2012 | |||
$0 |
11/30/2012 | |||
$0 |
12/31/2012 |
*Review of N-1A filings
(c) Tax Fees |
Fiscal Year Ended | |||
$ 3,426 |
8/31/2011 | |||
$50,971 |
10/31/2011 | |||
$ 3,398 |
12/31/2011 | |||
$ 3,500 |
6/30/2012 | |||
$28,000 |
8/31/2012 | |||
$74,500 |
10/31/2012 | |||
$ 7,000 |
11/30/2012 | |||
$10,500 |
12/31/2012 |
(d) All Other Fees |
Fiscal Year Ended | |||
$0 |
8/31/2011 | |||
$0 |
10/31/2011 | |||
$0 |
12/31/2011 | |||
$0 |
6/30/2012 | |||
$0 |
8/31/2012 | |||
$0 |
10/31/2012 | |||
$0 |
11/30/2012 | |||
$0 |
12/31/2012 |
(e)(1) Pursuant to its charter, the Trusts Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trusts 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 Trusts 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 auditors 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 | Advisers Affiliates Providing Ongoing Services to Registrant |
Fiscal Year Ended | |||||
$ 3,426 |
$7,885 | N/A | 8/31/2011 | |||||
$50,971 |
$0 | N/A | 10/31/2011 | |||||
$ 3,398 |
$0 | N/A | 12/31/2011 | |||||
$ 3,500 |
$0 | N/A | 6/30/2012 | |||||
$28,000 |
$0 | N/A | 8/31/2012 | |||||
$74,500 |
$0 | N/A | 10/31/2012 | |||||
$ 7,000 |
$0 | N/A | 11/30/2012 | |||||
$10,500 |
$0 | N/A | 12/31/2012 |
(h) | Not applicable. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trusts 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 Trusts 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 Trusts internal control over financial reporting.
ITEM 12. | EXHIBITS. |
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds | ||
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President |
Date: September 7, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President |
Date: September 7, 2012
By | /s/ Melinda G. Heika | |
Melinda G. Heika | ||
Treasurer |
Date: September 7, 2012
For period ended 6/30/12
Registrant Name: American Beacon Funds
File Number: 811-4984
EXHIBIT 99.CODE ETH
AMERICAN BEACON FUNDS
AMERICAN BEACON MILEAGE FUNDS
AMERICAN BEACON SELECT FUNDS
AMERICAN BEACON MASTER TRUST
Code of Ethics for Principal Executive and Financial Officers
Dated: February 16, 2010
Purpose
The American Beacon Funds, the American Beacon Mileage Funds, the American Beacon Select Funds, and the American Beacon Master Trust (collectively, the Trusts) have adopted this Code of Ethics for Principal Executive and Financial Officers (the Code), which applies to the Trusts Principal Executive Officer and Principal Financial Officer (the Covered Officers as set forth in Exhibit A), for the purpose of promoting:
| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| full, fair, accurate, timely, and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission (the SEC) and in other public communications made by the registrant; |
| compliance with applicable governmental laws, rules, and regulations; |
| the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and |
| accountability for adherence to the Code. |
Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
Conflicts of Interest
For purposes of this Code, a conflict of interest occurs when a Covered Officers personal interests interfere with the interests of, or his/her service to, the Trusts. For example, a conflict of interest would arise if a Covered Officer, or a member of his/her family, receives improper personal benefits as a result of his/her position with the Trusts.
Certain conflicts of interest arise out of the relationship between Covered Officers and the Trusts and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (Investment Company Act) and the Investment Advisers Act of 1940 (Investment Advisers Act). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trusts because of their status as affiliated persons of the Trusts.
Conflicts also may arise from a Covered Officers position or employment at American Beacon Advisors, Inc. (AmBeacon), the Trusts manager, and his/her position with each Trust. This Code recognizes that the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on AmBeacon and the Trusts. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trusts and AmBeacon and is consistent with the performance by the Covered Officers of their duties as officers of the Trusts. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trusts.
Each Covered Officer should not:
| use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trusts whereby the Covered Officer would benefit personally to the detriment of the Trusts; or |
| cause the Trusts to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of the Trusts. |
At times, certain situations may arise that may, or may not, be considered conflicts of interest under this Code. Covered Officers are encouraged to discuss such situations with the Trusts Chief Legal Officer (CLO). Examples of these types of situations include:
| service as a director on the board of any public or private company; |
| the receipt of any non-nominal gifts in excess of $150; |
| the receipt of any entertainment from any company with which the Trusts have current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; |
| any ownership interest in, or any consulting or employment relationship with, any of the Trusts service providers, other than AmBeacon, the distributor for the Trusts shares, or any affiliated person thereof; |
| a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trusts for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officers employment, such as compensation or equity ownership. |
Disclosure and Compliance
Each Covered Officer:
| should familiarize himself/herself with the disclosure requirements generally applicable to the Trusts; |
| should not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts Trustees and auditors, and to governmental regulators and self-regulatory organizations; |
| should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Trusts and AmBeacon with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and |
| is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. |
Reporting and Accountability
Each Covered Officer must:
| upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands the Code; |
| annual thereafter affirm to the Board that he/she has complied with the requirements of the Code; |
| complete at least annually the Officer Questionnaire by detailing any directorships with public or private companies and/or material relationships or transactions with affiliated persons of any Trust or its series; |
| not retaliate against any other Covered Officer or any employee of the Trusts or their affiliated persons for reports of potential violations that are made in good faith; and |
| notify the Legal Officer promptly if he/she knows of any violations of this Code. Failure to do so is itself a violation of this Code. |
The CLO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. In addition, the CLO is authorized and encouraged to consult with counsel to the Trusts and counsel to the Independent Trustees of the Trusts Boards of Trustees. However, any approvals or waivers sought by the Covered Officers will be considered by the Independent Trustees.
The Trusts will follow these procedures in investigating and enforcing this Code:
| the CLO will take all appropriate action to investigate any potential violations reported to him; |
| if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action; |
| any matter that the CLO believes is a violation will be reported to the Independent Trustees; |
| if the Independent Trustees concur that a violation has occurred, they will inform and make a recommendation to the applicable Trusts Board of Trustees, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of AmBeacon or its board; or a recommendation to dismiss the Covered Officer; |
| the Independent Trustees will be responsible for granting waivers, as appropriate; and |
| any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. |
Other Policies and Procedures
This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies there under. Insofar as other policies or procedures of the Trusts, AmBeacon, the distributor for the Trusts shares, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts and AmBeacons codes of ethics under Rule 17j-1 under the Investment Company Act and the more detailed policies and procedures set forth in the Trusts Statement of Policy on Material Non-Public Information are separate requirements applying to the Covered Officers and others, and are not part of nor replaced by this Code.
Amendments
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of Independent Trustees.
Confidentiality
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board of Trustees, its counsel and AmBeacon.
Internal Use
This Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion.
EXHIBIT A
Persons Covered by this Code of Ethics:
Position with each Trust |
Name | |
Principal Executive Officer, President | Gene L. Needles, Jr. | |
Principal Financial Officer, Treasurer | Melinda G. Heika |
For period ended 6/30/2012
Registrant Name: American Beacon Funds
File Number: 811-4984
EXHIBIT 99.CERT
I, Melinda G. Heika, certify that:
1. I have reviewed this report on Form N-CSR of American Beacon Funds;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: | September 7, 2012 | /s/ Melinda G. Heika | ||||
Melinda G. Heika | ||||||
Treasurer | ||||||
American Beacon Funds |
I, Gene L. Needles, Jr., certify that:
1. I have reviewed this report on Form N-CSR of American Beacon Funds;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: | September 7, 2012 | /s/ Gene L. Needles, Jr. | ||||
Gene L. Needles, Jr. | ||||||
President | ||||||
American Beacon Funds |
For period ended 6/30/2012
Registrant Name: American Beacon Funds
File Number: 811-4984
EXHIBIT 99.906CERT
Gene L. Needles, Jr. and Melinda G. Heika, respectively, the President and Treasurer of the American Beacon Funds (the Registrant), each certify to the best of his or her knowledge and belief that:
1. the Registrants report on Form N-CSR for the period ended June 30, 2012 (the Form N-CSR) fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
/s/ Gene L. Needles, Jr. | /s/ Melinda G. Heika | |||
Gene L. Needles, Jr. | Melinda G. Heika | |||
President | Treasurer | |||
American Beacon Funds | American Beacon Funds |
Date: September 7, 2012
A signed original of this written statement required by Section 906 has been provided to American Beacon Funds and will be retained by American Beacon Funds and furnished to the Securities and Exchange Commission or its staff.
G)E
M4WI.5&-Z:V,Y9"<_/@H\/V%D;V)E+7AA<"UF:6QT97)S(&5S8STB0U(B/SX*
M/'@Z>&%P;65T82!X;6QN 1Q;A;0RPZ9$+1O'*58UTLC*RLH(()!!(*^?5]IW
MJWMK"XVN_MM=J\J2`ABI#('I6@-0=>0`#BH84RG]]?(>'L+Y+X;Y`YG9'\-P
MV`SO54N-Z]PFY"E5!M#IS`[2VIM#;;;RR.%KQ-F9]N;,HTK _=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KW
MOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>
MZO\`_P#A,O\`]O6=G?\`B"^Z?_==A?<+>_W_`$[J[_YZX/\`CQZDSVH_Y6I/
M^:+_`/'3U](KW@CUD]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O
M?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]
MU[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?
MNO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW1;/E_P#]DV=L
M?]J"D_\`=YBO;D7]HO5)/@;[.M>+_BGM=TS_`)NO_]<*?YV/_,D.EO\`Q+]5
M_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U
M[KWOW7NNP;>]]>ZZ]ZZ]ZGKWOW7NO>_=>Z][]U[KW_%+>_=>Z[_XI;_8>_4`
M\L=>^7EUU_OO]M]/?NM]=_X_U^O^/XY]^ZU3KU_]]_Q/^O[]\_/KU!UU[]U[
MKW_&_P#;'ZCW[KW7O^-?[Q[]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[
MKWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_
M=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NK_P#_`(3+_P#;UG9W_B"^Z?\`W787
MW"WO]_T[J[_YZX/^/'J3/:C_`)6I/^:+_P#'3U](KW@CUD]U[W[KW7O?NO=>
M]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[K
MW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]
M^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW
M7O?NO=>]^Z]U[W[KW1;/E_\`]DV=L?\`:@I/_=YBO;D7]HO5)/@;[.M>+_BG
MM=TS_FZ__]`*?YV/_,D.EO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_
M`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][
M]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7N
MO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]
MU[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3
M+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]
M?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO
M=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W
M[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=
M>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=Y
MBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_]$*?YV/_,D.EO\`Q+]5_P"\7G/>3/W<
M/^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>
MZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWO
MW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z
M][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW
M7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQ
MZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O
M?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]
MU[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?
MNO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T
M6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_](*?YV/_,D.
MEO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^
MZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[
MKWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_
M=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[K
MWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'78
M7W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[K
MW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]
M^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW
M7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^
MZ]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_B
MGM=TS_FZ_],*?YV/_,D.EO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_
M`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][
M]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7N
MO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]
MU[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3
M+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]
M?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO
M=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W
M[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=
M>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=Y
MBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_]0*?YV/_,D.EO\`Q+]5_P"\7G/>3/W<
M/^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>
MZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWO
MW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z
M][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW
M7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQ
MZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O
M?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]
MU[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?
MNO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T
M6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_]4*?YV/_,D.
MEO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^
MZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[
MKWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_
M=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[K
MWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'78
M7W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[K
MW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]
M^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW
M7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^
MZ]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_B
MGM=TS_FZ_]8*?YV/_,D.EO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_
M`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][
M]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7N
MO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]
MU[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3
M+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]
M?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO
M=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W
M[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=
M>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=Y
MBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_]<*?YV/_,D.EO\`Q+]5_P"\7G/>3/W<
M/^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>
MZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWO
MW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z
M][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW
M7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQ
MZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O
M?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]
MU[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?
MNO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T
M6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_]`*?YV/_,D.
MEO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^
MZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[
MKWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_
M=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[K
MWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'78
M7W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[K
MW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]
M^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW
M7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^
MZ]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_B
MGM=TS_FZ_]$*?YV/_,D.EO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_
M`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][
M]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7N
MO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]
MU[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3
M+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]
M?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO
M=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W
M[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=
M>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=Y
MBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_](*?YV/_,D.EO\`Q+]5_P"\7G/>3/W<
M/^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>
MZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWO
MW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z
M][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW
M7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQ
MZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O
M?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]
MU[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?
MNO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T
M6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_],*?YV/_,D.
MEO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^
MZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[
MKWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_
M=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[K
MWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3+_\`;UG9W_B"^Z?_`'78
M7W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]?2*]X(]9/=>]^Z]U[W[K
MW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]
M^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW
M7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^
MZ]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=YBO;D7]HO5)/@;[.M>+_B
MGM=TS_FZ_]0*?YV/_,D.EO\`Q+]5_P"\7G/>3/W^5GYB_Z5X_ZO)U#7O#_
M`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][
M]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7N
MO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]
MU[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[J__`/X3
M+_\`;UG9W_B"^Z?_`'787W"WO]_T[J[_`.>N#_CQZDSVH_Y6I/\`FB__`!T]
M?2*]X(]9/=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO
M=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W
M[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=
M>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]T6SY?_P#9-G;'_:@I/_=Y
MBO;D7]HO5)/@;[.M>+_BGM=TS_FZ_]4*?YV/_,D.EO\`Q+]5_P"\7G/>3/W<
M/^5GYB_Z5X_ZO)U#7O#_`,D7;/\`GJ_Y\/6N)[R^ZQZZ][]U[KWOW7NO>_=>
MZ][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWO
MW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>ZXNRHK.[!$12[N?HJJ
M"6)_H%`O[V./#K8!)H!4GI1[HVENG9.8DV]O';N8VMGH:3&Y"7#9VBEQ^1CH
M ZZ_AN@*L0.D?T`L/]L!?W[KW6+[1K
M\EOKSQS_`(_CW[KW49J9R2#J(N>/&?\`'W[KW422E;41<@<<:;?@?X'W[KW4
M&>B))X).G@Z3]>;0Q3Q,
MDHX@BA_8>F;V]TUT_P"-VENG,X#<^ZL1MO.9/:^RVPD>\-Q4&,K*G![6DW-5
M5-#MN/<&4BB:CQ4N?K:*:*C6=U:I>%P@;0UD\EU;13P6TLZ+<2ZM"D@,^D`M
MI!RVD$%J5H"">/3R6\\D4DZ0NT*4U,`2%KPJ>`KY5X],'M_IGKDJL[*B@EG9
M44"UV9B%51?BY8V'OQ-`2>'6P"2`!4]+O=?5?9FPZ[=&,WOU[O'9V3V168/'
M[PQVY]NY+`Y#:];N>@ARNVZ;.T&2IZ>KQK[AQE3'4T7D15JH)$DC+(RDHK;<
M]NO5MY+.^BECE#%"C*P<*:-I()#!2*,1P.#TIGL+VV+?4VDD;+2H92I%>%00
M"*^5>/2#]K>DO3O@-O9_=>9H=N[6PF7W)N#)M.F-PF!QU9ELM7/2TTU;4_:8
M^@AGJYQ2T=-)-*50B.&-W:RJ2&IIX;:)Y[B58X5XLQ``J0!4G`J2!]IZ=BAE
MG<1PQ,\A\@"3CY#K/N':NY]HU5'0[JV_F=N5F1Q5'G<=39K'U./ER&$R+3IC
M\S0_
`J`!04`IPZ3;CNE_NTL<^X73S3*@4,Y)-
M!ZGS/S/0/Z5/-O\`6^HM^/IQ^/\`>/9I05KY_P"K_9_;TAU/I*ZL==E01S^/
MQ8W_`#_OOZ^_<10\/\G6E9EK0D?82/\`5_AZZ*J?Q_O/^''^V_WKW[TZWKDS
MWD?83_GZ[T@D&W/'UO\`4?ZY_P![]ZI^SKVH@:03I]*_ZO\`5Y==Z5O>W-_]
MX_U_\/>P`*T''KVIJ4U&E/G3KB46Q6WI)U%#?03>XNGZ>#^;7]^&/+/6_$?3
MH+G1Z5-/V5_/KO2O]`2/S^?IQ]/\/?C0\>O:W`H&('RKUXJ#P1]/][YO<"WO
MQS7K09E-0Q'Y^G^H_MZ[L+W'!`L&!(8"]^&'JM?\7M[]\J"G6U=T-8V*MZ@F
MO[>N@H%K`+8ZAI&DAO\`5!OJ&_Q^O^]^]$5!'E_+K09@VL-1ZUKG_/U[2O/'
MZN6N2=1'TU)ZG
MK8K^ZVSVLO+VRD*72RD!AQ748E)'H:'##*FAZ(;_`"Q/DAWCC/G1TCBZWM7L
M+/X3L7=&6VUO##9_=V:S6.SE-D=N9JJIZNJIZ=??NO=>
M]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[K
MW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=%L^7_\`V39VQ_VH*3_W
M>8KVY%_:+U23X&^SK7B_XI[7=,_YNO_0"G^=C_S)#I;_`,2_5?\`O%YSWDS]
MW#_E9^8O^E>/^KR=0U[P_P#)%VS_`)ZO^?#UKB>\ONL>NO>_=>Z][]U[KWOW
M7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z]
M[]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[I4;(V7N/LC>>T>O=GT+9+=
M>^]S8/9^VJ%0S?=9S<>2IL5C(W"!F6%:JJ5I&`]$:LQX'M'N-_:[587NYWT@
M6SMX7D=O144LQ\LT&/4TITJLK6:_N[:QMD+3RR*JCU+&@'`_M\NMI+YS?*GJ
M[^7ILCXW_#J+X\=7?(S$[>ZOQM?EMN=CR4)PN&FVX\.*Q^ZFPE9MC/TM1F=Y
M;BDRN06HEBBE6[L"2Q]X>^WG)V\>Y^YSB:=8+C4R$Q@EB*ROI
M<1ZM)`R<'!/1'RQ[B[9+O=A:1\K6ED+B01F6)54]YH`=*"HU:2033%>(ZJ\_
MF8_'R7XW?,WMS9U)AZK$[2W7E!V7L>.HAFC@.&WHTF1RE'222Q1+)%B-SFMI
M]*W$2!%/N7?:3F@AZK;_EM*7^>GQ:5
M49F/9P"HH+,Q_NWN#Z*H))_UO
@[LOM_S&N\6YO[,VME!(K22R4"*`PX,31B>"@5J<#H7OY\I=OG)CY)(9J=
MI^E]F2K%.C1RQK+D\XRJZ-8Z@#8_T/LD^[B!_K>2!6!`OY02/]*E:?+TZ,?>
M'/-4=01_BJ?X6Z&C^3P5:=M8Y`;6K^DJHY)!(M[]U[I29'8
MVS]Y1/-)0T