UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
Gene L. Needles, Jr., PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant’s telephone number, including area code: (817) 391-6100
Date of fiscal year end: January 31, 2015
Date of reporting period: July 31, 2014
ITEM 1. REPORTS TO STOCKHOLDERS.
Acadian Emerging Markets Managed Volatility, Earnest Partners Emerging Markets Equity and SGA Global Growth Funds may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The risks of investing in foreign equities are heightened when investing in emerging markets. The Acadian Emerging Markets Managed Volatility Fund may produce more modest gains than other stock funds as a trade-off for the potentially lower downside risk from investments in lower volatility securities. Because the SGA Global Growth Fund may invest in fewer issues than a more diversified portfolio, the fluctuating value of a single holding may have a greater impact on the value of the Fund. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Global Evolution Frontier Markets Income Fund: Investing in fixed-income securities entails interest rate risk, which is the risk that fixed-income securities will decrease in value with increases in market interest rates. Frontier market debt may be particularly sensitive to interest rate fluctuations. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal. Emerging and frontier market countries have experienced difficulty in servicing their sovereign debt on a timely basis, which has led to defaults and the restructuring of indebtedness. The decline in an issuer’s credit rating can cause the price of its bonds to go down. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The risks of investing in foreign securities are magnified when investing in emerging and frontier markets. Frontier market countries generally have smaller economies and less developed capital markets or legal, regulatory and political systems than traditional emerging market countries. It may be particularly difficult to enforce the rights of debt holders in frontier and emerging markets. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit/counterparty, management and the risk that a position could not be closed when more advantageous. The Fund may invest significantly in a derivative type called a credit-linked note, which is a debt obligation the performance of which is tied to underlying sovereign debt. Investing in derivatives could result in losing more than the amount invested. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater impact on the value of the Fund. Please see the prospectus for a complete discussion of the Funds’ risks. There can be no assurances that the investment objectives of these Funds will be met.
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 | July 31, 2014 |
|
After an unsteady start amid concerns regarding the direction of U.S. monetary policy, emerging markets staged an impressive rebound. An improving macroeconomic environment, as well as lower market volatility, were two key indicators that contributed to the late surge in the six-month period under review. Additionally, political leaders overseas continue to be proactive with their respective monetary policies amid rising geopolitical tension, particularly in frontier markets such as Iraq, Ukraine and the Middle East. |
A combination of an improving U.S. labor market and an uptick in inflation spurred the U.S. Federal Reserve Bank (the “Fed”) to announce that it will likely end its bond-buying program in October. Each new month brings new data and with that, a new review of the facts to validate or alter the direction of quantitative easing. The decisions made in Washington will have a direct impact on the highly leveraged emerging and frontier economies.
It is likely that these two macroeconomic trends – U.S. monetary policy and geopolitical tensions – will continue to be major areas of interest for global and emerging market investors. While the headlines may rightly focus on the crisis zones, it is important to note that political and economic reforms enacted in countries such as Indonesia, China and India helped fuel the market outperformance in the back half of the period. Against this backdrop, the MSCI Emerging Markets Index returned 15.70% for the six months ended July 31, 2014, while the MSCI All Country World Index returned 9.26%.
Active managers who stay true to their investment disciplines can help navigate an always changing marketplace. We at American Beacon are fortunate to have several asset managers who have shown that kind of acumen over the course of many years and through varied market conditions.
For the six months ended July 31, 2014:
| • | The American Beacon Acadian Emerging Markets Managed Volatility Fund (Investor Class) returned 15.45%. |
| • | The American Beacon Earnest Partners Emerging Markets Equity Fund (Investor Class) returned 16.80%. |
| • | The American Beacon SGA Global Growth Fund (Investor Class) returned 3.84%. |
For the period from February 25, 2014 (the Fund’s inception), to July 31, 2014, the American Beacon Global Evolution Frontier Markets Income Fund (Investor Class) returned 5.49%.
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
American Beacon Acadian Emerging Markets Managed Volatility FundSM
July 31, 2014 (Unaudited)
2
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Performance Overview
July 31, 2014 (Unaudited)
3
American Beacon Earnest Partners Emerging Markets Equity FundSM
Performance Overview
July 31, 2014 (Unaudited)
4
American Beacon Earnest Partners Emerging Markets Equity FundSM
Performance Overview
July 31, 2014 (Unaudited)
5
American Beacon SGA Global Growth FundSM
Performance Overview
July 31, 2014 (Unaudited)
6
American Beacon SGA Global Growth FundSM
Performance Overview
July 31, 2014 (Unaudited)
7
American Beacon Global Evolution Frontier Markets Income FundSM
Performance Overview
July 31, 2014 (Unaudited)
8
American Beacon Global Evolution Frontier Markets Income FundSM
Performance Overview
July 31, 2014 (Unaudited)
9
American Beacon FundsSM
Fund Expenses
July 31, 2014 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from February 1, 2014 (or the inception date of the class) through July 31, 2014.
Actual Expenses
The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as sales charges (loads). Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
10
American Beacon FundsSM
Fund Expenses
July 31, 2014 (Unaudited)
11
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
See accompanying notes
12
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
See accompanying notes
13
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
See accompanying notes
14
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
| Futures Contracts Open on July 31, 2014 (000’s): | ||||||||||||||||||
| Description |
Type | Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
|||||||||||||
| Mini MSCI EAFE Emerging Markets September Futures |
Long | 8 | September, 2014 | $ | 422 | $ | (5 | ) | ||||||||||
|
|
|
|
|
|||||||||||||||
| $ | 422 | $ | (5 | ) | ||||||||||||||
|
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|
|
|
|||||||||||||||
See accompanying notes
15
American Beacon Earnest Partners Emerging Markets Equity FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
See accompanying notes
16
American Beacon Earnest Partners Emerging Markets Equity FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
Futures Contracts Open on July 31, 2014 (000’s):
| Description |
Type | Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||
| Mini MSCI EAFE Emerging Markets September Futures |
Long | 8 | September, 2014 | $ | 422 | $ | 5 | |||||||||||||
|
|
|
|
|
|||||||||||||||||
| $ | 422 | $ | 5 | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||
See accompanying notes
17
American Beacon SGA Global Growth FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
See accompanying notes
18
American Beacon SGA Global Growth FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
Futures Contracts Open on July 31, 2014 (000’s):
| Description |
Type | Number of Contracts |
Expiration Date | Contract Value |
Unrealized Appreciation (Depreciation) |
|||||||||||||||
| Mini MSCI EAFE Emerging Markets September Futures |
Long | 1 | September, 2014 | $ | 96 | $ | (1 | ) | ||||||||||||
| S&P 500 Mini E Index September Futures |
Long | 2 | September, 2014 | 192 | — | |||||||||||||||
|
|
|
|
|
|||||||||||||||||
| $ | 288 | $ | (1 | ) | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||
See accompanying notes
19
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
| Par AmountE | Fair Value | |||||||||||
| (000’s) | (000’s) | |||||||||||
| Argentina - 2.76% |
||||||||||||
| Foreign Government Obligations - 2.76% |
||||||||||||
| Argentina Bonar Bonds, 7.00%, Due 4/17/2017 |
$ | 500 | $ | 456 | ||||||||
| Provincia de Buenos Aires, 10.875%, Due 1/26/2021A |
350 | 324 | ||||||||||
| Republic of Argentina, 8.75%, Due 5/7/2024 |
550 | 516 | ||||||||||
|
|
|
|||||||||||
| Total Argentina (Cost $1,238) |
1,296 | |||||||||||
|
|
|
|||||||||||
| Armenia - 0.90% (Cost $413) |
||||||||||||
| Foreign Government Obligations - 0.90% |
||||||||||||
| Republic of Armenia, 6.00%, Due 9/30/2020A |
400 | 420 | ||||||||||
|
|
|
|||||||||||
| Bangladesh - 4.02% (Cost $1,907) |
||||||||||||
| Structured Notes - 4.02% |
||||||||||||
| Bangladesh Treasury Bond (Issuer Standard Chartered Bank), 11.23%, Due 1/15/2019B |
BDT | 1,850 | 1,884 | |||||||||
|
|
|
|||||||||||
| Belize - 1.08% (Cost $497) |
||||||||||||
| Foreign Government Obligations - 1.08% |
||||||||||||
| Republic of Belize, 6.767%, Due 2/20/2038A B C |
BZD | 707 | 504 | |||||||||
|
|
|
|||||||||||
| Bosnia and Herzegovina - 0.77% (Cost $368) |
||||||||||||
| Foreign Government Obligations - 0.77% |
||||||||||||
| Bosnia & Herzegovina Government Bond, 1.125%, Due 12/11/2021B F |
EUR | 625 | 359 | |||||||||
|
|
|
|||||||||||
| Brazil - 1.39% (Cost $628) |
||||||||||||
| Foreign Government Obligations - 1.39% |
||||||||||||
| Nota Do Tesouro Nacional, 10.00%, Due 1/1/2025 |
BRL | 1,650 | 650 | |||||||||
|
|
|
|||||||||||
| Costa Rica - 1.73% |
||||||||||||
| Foreign Government Obligations - 1.73% |
||||||||||||
| Republic of Costa Rica, |
||||||||||||
| 11.13%, Due 3/28/2018A |
CRC | 200,000 | 396 | |||||||||
| 11.50%, Due 12/21/2022A |
CRC | 210,000 | 418 | |||||||||
|
|
|
|||||||||||
| Total Costa Rica (Cost $807) |
814 | |||||||||||
|
|
|
|||||||||||
| Dominican Republic - 3.42% |
||||||||||||
| Foreign Government Obligations - 3.42% |
||||||||||||
| Dominican Republic, |
||||||||||||
| 15.95%, Due 6/4/2021A |
DOP | 21,500 | 639 | |||||||||
| 11.50%, Due 5/10/2024A |
DOP | 40,000 | 968 | |||||||||
|
|
|
|||||||||||
| Total Dominican Republic (Cost $1,598) |
1,607 | |||||||||||
|
|
|
|||||||||||
| Ecuador - 3.67% |
||||||||||||
| Foreign Government Obligations - 3.67% |
||||||||||||
| Republic of Ecuador,A |
||||||||||||
| 9.375%, Due 12/15/2015A |
DUR | 300 | 315 | |||||||||
| 7.95%, Due 6/20/2024A |
DUR | 1,350 | 1,404 | |||||||||
|
|
|
|||||||||||
| Total Ecuador (Cost $1,667) |
1,719 | |||||||||||
|
|
|
|||||||||||
| Egypt - 2.91% (Cost $1,347) |
||||||||||||
| Foreign Government Obligations - 2.91% |
||||||||||||
| Arab Republic of Egypt, 6.875%, Due 4/30/2040A |
1,400 | 1,365 | ||||||||||
|
|
|
|||||||||||
| Gabon - 1.86% (Cost $856) |
||||||||||||
| Foreign Government Obligations - 1.86% |
||||||||||||
| Gabonese Republic, 6.375%, Due 12/12/2024A |
800 | 870 | ||||||||||
|
|
|
|||||||||||
| Georgia - 1.94% (Cost $903) |
||||||||||||
| Foreign Government Obligations - 1.94% |
||||||||||||
| Republic of Georgia, 6.875%, Due 4/12/2021A |
800 | 908 | ||||||||||
|
|
|
|||||||||||
See accompanying notes
20
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
| Par AmountE | Fair Value | |||||||||||
| (000’s) | (000’s) | |||||||||||
| Ghana - 2.07% |
||||||||||||
| Foreign Government Obligations - 2.07% |
||||||||||||
| Ghana Government Bond, |
||||||||||||
| 16.90%, Due 3/7/2016 |
GHS | $ | 200 | $ | 52 | |||||||
| 26.00%, Due 6/5/2017 |
GHS | 1,500 | 434 | |||||||||
| Republic of Ghana, 7.875%, Due 8/7/2023A |
GHS | 500 | 484 | |||||||||
|
|
|
|||||||||||
| Total Ghana (Cost $1,115) |
970 | |||||||||||
|
|
|
|||||||||||
| Honduras - 1.74% (Cost $811) |
||||||||||||
| Foreign Government Obligations - 1.74% |
||||||||||||
| Honduras Government Bond, 7.50%, Due 3/15/2024A |
800 | 818 | ||||||||||
|
|
|
|||||||||||
| Iraq - 1.14% (Cost $527) |
||||||||||||
| Foreign Government Obligations - 1.14% |
||||||||||||
| Republic of Iraq, 5.80%, Due 1/15/2028A |
600 | 534 | ||||||||||
|
|
|
|||||||||||
| Ivory Coast - 3.14% (Cost $1,421) |
||||||||||||
| Foreign Government Obligations - 3.14% |
||||||||||||
| Ivory Coast Government Bond, 7.774%, Due 12/31/2032A |
1,500 | 1,472 | ||||||||||
|
|
|
|||||||||||
| Kenya - 4.33% (Cost $2,031) |
||||||||||||
| Foreign Government Obligations - 4.33% |
||||||||||||
| Kenya Infrastructure Bond, 11.00%, Due 9/15/2025 |
KES | 176,000 | 2,029 | |||||||||
|
|
|
|||||||||||
| Mongolia - 3.12% (Cost $1,492) |
||||||||||||
| Foreign Government Obligations - 3.12% |
||||||||||||
| Mongolia International Bond, 5.125%, Due 12/5/2022A |
MNT | 1,700 | 1,462 | |||||||||
|
|
|
|||||||||||
| Mozambique - 3.22% (Cost $1,477) |
||||||||||||
| Foreign Government Obligations - 3.22% |
||||||||||||
| Moz Ematum Finance, 6.305%, Due 9/11/2020A |
1,500 | 1,511 | ||||||||||
|
|
|
|||||||||||
| Nicaragua - 1.35% (Cost $654) |
||||||||||||
| Foreign Government Obligations - 1.35% |
||||||||||||
| Republic of Nicaragua, 5.00%, Due 2/1/2019 |
690 | 634 | ||||||||||
|
|
|
|||||||||||
| Nigeria - 3.75% (Cost $1,681) |
||||||||||||
| Foreign Government Obligations - 3.75% |
||||||||||||
| Nigeria Government Bond, 15.10%, Due 4/27/2017 |
NGN | 260,000 | 1,756 | |||||||||
|
|
|
|||||||||||
| Pakistan - 3.14% |
||||||||||||
| Foreign Government Obligations - 3.14% |
||||||||||||
| Islamic Republic of Pakistan, |
||||||||||||
| 7.25%, Due 4/15/2019A |
1,150 | 1,196 | ||||||||||
| 7.875%, Due 3/31/2036A |
300 | 276 | ||||||||||
|
|
|
|||||||||||
| Total Pakistan (Cost $1,462) |
1,472 | |||||||||||
|
|
|
|||||||||||
| Rwanda - 3.55% (Cost $1,636) |
||||||||||||
| Foreign Government Obligations - 3.55% |
||||||||||||
| Republic of Rwanda, 6.625%, Due 5/2/2023A |
1,600 | 1,664 | ||||||||||
|
|
|
|||||||||||
| Senegal - 3.21% (Cost $1,513) |
||||||||||||
| Foreign Government Obligations - 3.21% |
||||||||||||
| Republic of Senegal, 6.25%, Due 7/30/2024A |
1,500 | 1,503 | ||||||||||
|
|
|
|||||||||||
| Serbia - 3.39% (Cost $1,688) |
||||||||||||
| Foreign Government Obligations - 3.39% |
||||||||||||
| Serbia Treasury Bonds, 10.00%, Due 5/8/2017 |
RSD | 140,000 | 1,587 | |||||||||
|
|
|
|||||||||||
See accompanying notes
21
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
| Par AmountE | Fair Value | |||||||||||
| (000’s) | (000’s) | |||||||||||
| Seychelles - 1.44% (Cost $635) |
||||||||||||
| Foreign Government Obligations - 1.44% |
||||||||||||
| Republic of Seychelles, 5.00%, Due 1/1/2026A B |
$ | 700 | $ | 676 | ||||||||
|
|
|
|||||||||||
| Sri Lanka - 4.15% |
||||||||||||
| Foreign Government Obligations - 4.15% |
||||||||||||
| Sri Lanka Government Bond, |
||||||||||||
| 7.50%, Due 8/15/2018 |
LKR | 130,000 | 981 | |||||||||
| 10.60%, Due 7/1/2019 |
LKR | 115,000 | 967 | |||||||||
|
|
|
|||||||||||
| Total Sri Lanka (Cost $1,933) |
1,948 | |||||||||||
|
|
|
|||||||||||
| Supranational - 1.49% (Cost $710) |
||||||||||||
| Foreign Government Obligations - 1.49% |
||||||||||||
| International Bank for Reconstruction and Development, 3.40%, Due 4/15/2017D |
UYU | 15,990 | 700 | |||||||||
|
|
|
|||||||||||
| Turkey - 0.72% (Cost $314) |
||||||||||||
| Foreign Government Obligations - 0.72% |
||||||||||||
| Republic of Turkey, 10.70%, Due 2/24/2016 |
TRY | 700 | 337 | |||||||||
|
|
|
|||||||||||
| Uganda - 3.21% |
||||||||||||
| Foreign Government Obligations - 3.21% |
||||||||||||
| Uganda Government Bond, |
||||||||||||
| 13.375%, Due 2/25/2016 |
UGX | 1,000,000 | 382 | |||||||||
| 10.75%, Due 9/8/2016 |
UGX | 1,700,000 | 621 | |||||||||
| 14.125%, Due 12/1/2016 |
UGX | 1,300,000 | 504 | |||||||||
|
|
|
|||||||||||
| Total Uganda (Cost $1,562) |
1,507 | |||||||||||
|
|
|
|||||||||||
| Uruguay - 2.25% (Cost $1,056) |
||||||||||||
| Foreign Government Obligations - 2.25% |
||||||||||||
| Uruguay Government International Bond, 5.00%, Due 9/14/2018D |
UYU | 22,667 | 1,057 | |||||||||
|
|
|
|||||||||||
| Venezuela - 4.07% (Cost $1,815) |
||||||||||||
| Foreign Government Obligations - 4.07% |
||||||||||||
| Republic of Venezuela, 9.00%, Due 5/7/2023 |
VEF | 2,275 | 1,906 | |||||||||
|
|
|
|||||||||||
| Vietnam - 2.52% (Cost $1,151) |
||||||||||||
| Structured Notes - 2.52% |
||||||||||||
| Vietnam Government Bond (Issuer Citigroup, Inc.), 8.50%, Due 2/28/2016A |
VND | 1,100 | 1,183 | |||||||||
|
|
|
|||||||||||
| Zambia - 3.63% |
||||||||||||
| Foreign Government Obligations - 3.63% |
||||||||||||
| Zambia Government Bond, |
||||||||||||
| 0.01%, Due 4/6/2015 |
ZMW | 7,000 | 1,002 | |||||||||
| 10.00%, Due 2/16/2017 |
ZMW | 5,500 | 699 | |||||||||
|
|
|
|||||||||||
| Total Zambia (Cost $1,722) |
1,701 | |||||||||||
|
|
|
|||||||||||
| Shares | ||||||||||||
| SHORT-TERM INVESTMENTS - 9.81% (Cost $4,599) |
||||||||||||
| JPMorgan U.S. Government Money Market Fund, Capital Class |
4,599,049 | 4,599 | ||||||||||
|
|
|
|||||||||||
| TOTAL INVESTMENTS - 96.89% (Cost $45,234) |
45,422 | |||||||||||
| OTHER ASSETS, NET OF LIABILITIES - 3.11% |
1,456 | |||||||||||
|
|
|
|||||||||||
| TOTAL NET ASSETS - 100.00% |
$ | 46,878 | ||||||||||
|
|
|
|||||||||||
Percentages are stated as a percent of net assets.
See accompanying notes
22
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
July 31, 2014 (Unaudited)
| A | Reg S - Security purchased under the Secrities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. |
| B | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
| C | Step Up/Down - A scheduled increase in the exercise or conversion price at which a warrant, an option, or a convertible security may be used to acquire shares of common stock. |
| D | Inflation-Indexed Note. |
| E | In U.S. Dollars unless otherwise noted. |
| F | Fair valued pursuant to procedures approved by the Board of Trustees. |
Foreign Currency Contracts Open on July 31, 2014:
| Type |
Currency | Principal Amount Covered by Contract |
Settlement Date | Counterparty | Unrealized Appreciation |
Unrealized (Depreciation) |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||||||
| Sell |
EUR | 1,339,126 | 8/22/2014 | SSB | $ | 15,024 | $ | — | $ | 15,024 | ||||||||||||||
| Sell |
EUR | 669,563 | 8/22/2014 | SSB | 8,912 | — | 8,912 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| $ | 23,936 | $ | — | $ | 23,936 | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
See accompanying notes
23
American Beacon FundsSM
Statements of Assets and Liabilities
July 31. 2014 (Unaudited) (in thousands, except share and per share amounts)
| Acadian Emerging Markets Managed Volatility Fund |
Earnest Partners Emerging Markets Equity Fund |
SGA Global Growth Fund |
Global Evolution Frontier Markets Income Fund |
|||||||||||||
| Assets: |
| |||||||||||||||
| Investments in unaffiliated securities, at fair value A |
$ | 20,859 | $ | 6,122 | $ | 5,988 | $ | 45,422 | ||||||||
| Foreign currency, at fair valueB |
54 | — | — | 110 | ||||||||||||
| Deposit with brokers for futures contracts |
8 | 17 | 7 | — | ||||||||||||
| Dividends and interest receivable |
80 | 17 | 6 | 790 | ||||||||||||
| Receivable for investments sold |
— | — | — | 814 | ||||||||||||
| Receivable for fund shares sold |
278 | — | — | 3,466 | ||||||||||||
| Receivable for tax reclaims |
1 | — | 2 | — | ||||||||||||
| Receivable for expense reimbursement (Note 2) |
14 | 17 | 14 | 13 | ||||||||||||
| Unrealized appreciation of foreign currency contracts |
— | — | — | 24 | ) | |||||||||||
| Prepaid expenses |
37 | 28 | 44 | 116 | ||||||||||||
| Other assets |
— | 11 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
21,331 | 6,212 | 6,061 | 50,755 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities: |
||||||||||||||||
| Payable for investments purchased |
— | — | — | 3,614 | ||||||||||||
| Payable for fund shares redeemed |
— | — | — | 228 | ||||||||||||
| Payable for variation margin from open futures contracts |
— | 8 | — | — | ||||||||||||
| Dividends payable |
— | — | — | 2 | ||||||||||||
| Management and investment advisory fees payable |
12 | 4 | 2 | 19 | ||||||||||||
| Administrative service and service fees payable |
7 | 2 | 2 | 14 | ||||||||||||
| Transfer agent fees payable |
— | — | 1 | — | ||||||||||||
| Custody and fund accounting fees payable |
4 | 3 | — | — | ||||||||||||
| Professional fees payable |
44 | 45 | 21 | — | ||||||||||||
| Payable for prospectus and shareholder reports |
— | 3 | — | — | ||||||||||||
| Other liabilities |
— | 2 | 1 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
67 | 67 | 27 | 3,877 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Assets |
$ | 21,264 | $ | 6,145 | $ | 6,034 | $ | 46,878 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Analysis of Net Assets: |
||||||||||||||||
| Paid-in-capital |
19,491 | 5,940 | 5,352 | 46,497 | ||||||||||||
| Undistributed net investment income |
216 | 29 | 20 | 43 | ||||||||||||
| Accumulated net realized gain (loss) |
(12 | ) | (124 | ) | 142 | 132 | ||||||||||
| Unrealized appreciation of investments |
1,608 | 319 | 525 | 408 | ||||||||||||
| Unrealized (depreciation) of currency transactions |
(34 | ) | (24 | ) | (4 | ) | (202 | ) | ||||||||
| Unrealized appreciation or (depreciation) of futures contracts |
(5 | ) | 5 | (1 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net assets |
$ | 21,264 | $ | 6,145 | $ | 6,034 | $ | 46,878 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding at no par value (unlimited shares authorized): |
||||||||||||||||
| Institutional Class |
1,168,824 | 306,208 | 371,420 | 1,164,995 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Y Class |
161,964 | 98,636 | 8,421 | 2,245,708 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor Class |
332,657 | 166,971 | 7,882 | 530,104 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| A Class |
226,962 | 10,000 | 31,440 | 528,913 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| C Class |
31,007 | 10,000 | 25,649 | 81,494 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net assets (not in thousands): |
||||||||||||||||
| Institutional Class |
$ | 12,950,605 | $ | 3,183,177 | $ | 5,043,481 | $ | 11,995,732 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Y Class |
$ | 1,793,299 | $ | 1,024,761 | $ | 114,226 | $ | 23,141,677 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor Class |
$ | 3,675,292 | $ | 1,730,531 | $ | 106,667 | $ | 5,457,081 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| A Class |
$ | 2,505,330 | $ | 103,523 | $ | 425,186 | $ | 5,446,234 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| C Class |
$ | 339,937 | $ | 102,858 | $ | 344,705 | $ | 837,518 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying notes
24
American Beacon FundsSM
Statements of Assets and Liabilities
July 31, 2014 (Unaudited) (in thousands, except share and per share amounts)
| Acadian Emerging Markets Managed Volatility Fund |
Earnest Partners Emerging Markets Equity Fund |
SGA Global Growth Fund |
Global Evolution Frontier Markets Income Fund |
|||||||||||||
| Net asset value, offering and redemption price per share: |
| |||||||||||||||
| Institutional Class |
$ | 11.08 | $ | 10.40 | $ | 13.58 | $ | 10.30 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Y Class |
$ | 11.07 | $ | 10.39 | $ | 13.56 | $ | 10.30 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor Class |
$ | 11.05 | $ | 10.36 | $ | 13.53 | $ | 10.29 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| A Class |
$ | 11.04 | $ | 10.35 | $ | 13.52 | $ | 10.30 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| A Class (offering price) |
$ | 11.71 | $ | 10.98 | $ | 14.34 | $ | 10.81 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| C Class |
$ | 10.96 | $ | 10.29 | $ | 13.44 | $ | 10.28 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| A Cost of investments in unaffiliated securities |
$ | 19,285 | $ | 5,827 | $ | 5,467 | $ | 45,234 | ||||||||
| B Cost of foreign currency |
$ | 54 | $ | — | $ | — | $ | 111 | ||||||||
See accompanying notes
25
American Beacon FundsSM
Statements of Operations
For the Six Months Ended July 31, 2014 (Unaudited) (in thousands)
| Acadian Emerging Markets Managed Volatility Fund |
Earnest Partners Emerging Markets Equity Fund |
SGA Global Growth Fund |
Global Evolution Frontier Markets Income Fund |
|||||||||||||
| Investment Income: |
||||||||||||||||
| Dividend income from unaffiliated securities (net of foreign taxes) A |
$ | 314 | $ | 67 | $ | 51 | $ | — | ||||||||
| Interest income |
— | — | — | 757 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total investment income |
314 | 67 | 51 | 757 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Expenses: |
||||||||||||||||
| Management and investment advisory fees (Note 2) |
57 | 17 | 14 | 55 | ||||||||||||
| Administrative service fees (Note 2): |
||||||||||||||||
| Institutional Class |
17 | 5 | 7 | 14 | ||||||||||||
| Y Class |
1 | 1 | — | 12 | ||||||||||||
| Investor Class |
4 | 2 | — | 2 | ||||||||||||
| A Class |
3 | — | 1 | 1 | ||||||||||||
| C Class |
— | — | 1 | 1 | ||||||||||||
| Transfer agent fees: |
||||||||||||||||
| Institutional Class |
— | — | 1 | 1 | ||||||||||||
| Y Class |
— | — | — | 1 | ||||||||||||
| Investor Class |
— | 1 | 1 | 1 | ||||||||||||
| A Class |
— | — | — | 1 | ||||||||||||
| C Class |
— | — | — | 1 | ||||||||||||
| Custody and fund accounting fees |
33 | 24 | 11 | 15 | ||||||||||||
| Professional fees |
42 | 43 | 31 | 76 | ||||||||||||
| Registration fees and expenses |
49 | 49 | 49 | 37 | ||||||||||||
| Service fees (Note 2): |
||||||||||||||||
| Y Class |
1 | — | — | 4 | ||||||||||||
| Investor Class |
3 | 1 | — | 2 | ||||||||||||
| A Class |
1 | — | — | 1 | ||||||||||||
| Distribution fees (Note 2): |
||||||||||||||||
| A Class |
2 | — | 1 | 1 | ||||||||||||
| C Class |
1 | 1 | 1 | 2 | ||||||||||||
| Prospectus and shareholder report expenses |
5 | 6 | 5 | 5 | ||||||||||||
| Other expenses |
3 | 5 | 4 | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
222 | 155 | 127 | 235 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net fees waived and expenses reimbursed (Note 2) |
(100 | ) | (120 | ) | (96 | ) | (108 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net expenses |
122 | 35 | 31 | 127 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net investment income |
192 | 32 | 20 | 630 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Realized and unrealized gain (loss) from investments: |
||||||||||||||||
| Net realized gain (loss) from: |
||||||||||||||||
| Investments |
16 | (21 | ) | 111 | 149 | |||||||||||
| Foreign currency transactions |
(13 | ) | (9 | ) | — | 16 | ||||||||||
| Futures contracts |
41 | 36 | 14 | — | ||||||||||||
| Change in net unrealized appreciation or (depreciation) of: |
||||||||||||||||
| Investments |
1,793 | 553 | 69 | 408 | ||||||||||||
| Foreign currency transactions |
298 | 61 | (4 | ) | (202 | ) | ||||||||||
| Futures contracts |
7 | 6 | 9 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net gain from investments |
2,142 | 626 | 199 | 371 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in net assets resulting from operations |
$ | 2,334 | $ | 658 | $ | 219 | $ | 1,001 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| A Foreign taxes |
36 | 7 | 5 | 28 | ||||||||||||
See accompanying notes
26
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
| Acadian Emerging Markets Managed Volatility Fund |
Earnest Partners Emerging Markets Equity Fund |
|||||||||||||||
| Six Months Ended July 31, 2014 |
From September 27 to January 31, 2014 |
Six Months Ended July 31, 2014 |
From September 19 to January 31, 2014 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Increase (Decrease) in Net Assets: |
||||||||||||||||
| Operations: |
||||||||||||||||
| Net investment income (loss) |
$ | 192 | $ | 19 | $ | 32 | $ | (9 | ) | |||||||
| Net realized gain (loss) from investments, futures contracts, and foreign currency transactions |
44 | (46 | ) | 6 | (134 | ) | ||||||||||
| Change in net unrealized appreciation or (depreciation) from investments, futures contracts, and foreign currency transactions |
2,098 | (529 | ) | 620 | (320 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from operations |
2,334 | (556 | ) | 658 | (463 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributions to Shareholders: |
||||||||||||||||
| Net investment income: |
||||||||||||||||
| Institutional Class |
— | (5 | ) | — | — | |||||||||||
| Y Class |
— | — | — | — | ||||||||||||
| Investor Class |
— | (1 | ) | — | — | |||||||||||
| A Class |
— | — | — | — | ||||||||||||
| C Class |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net distributions to shareholders |
— | (6 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Capital Share Transactions: |
||||||||||||||||
| Proceeds from sales of shares |
6,711 | 8,053 | 2,416 | 1,974 | ||||||||||||
| Reinvestment of dividends and distributions |
— | 6 | — | — | ||||||||||||
| Cost of shares redeemed |
(268 | ) | (10 | ) | (498 | ) | (942 | ) | ||||||||
| Redemption fees |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in net assets from capital share transactions |
6,443 | 8,049 | 1,918 | 1,032 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in net assets |
8,777 | 7,487 | 2,576 | 569 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Assets: |
||||||||||||||||
| Beginning of period |
12,487 | 5,000 | 3,569 | 3,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of Period * |
$ | 21,264 | $ | 12,487 | $ | 6,145 | $ | 3,569 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| * Includes undistributed net investment income (loss) of |
$ | 216 | $ | 8 | $ | 29 | $ | (2 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying notes
27
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
| SGA Global Growth Fund | Global Evolution Frontier Markets Income Fund |
|||||||||||||||
| Six Months Ended July 31, 2014 |
Four Months Ended Jan. 31, 2014 |
Year Ended Sept. 30, 2013 |
From Feb. 25 to July 31, 2014 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Increase (Decrease) in Net Assets: |
||||||||||||||||
| Operations: |
||||||||||||||||
| Net investment income |
$ | 20 | $ | 2 | $ | (8 | ) | $ | 630 | |||||||
| Net realized gain from investments, futures contracts, and foreign currency transactions |
125 | 54 | 81 | 165 | ||||||||||||
| Change in net unrealized appreciation or (depreciation) from investments, futures contracts, and foreign currency transactions |
74 | (24 | ) | 252 | 206 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in net assets resulting from operations |
219 | 32 | 325 | 1,001 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributions to Shareholders: |
||||||||||||||||
| Net investment income: |
||||||||||||||||
| Institutional Class |
— | — | — | (267 | ) | |||||||||||
| Y Class |
— | — | — | (268 | ) | |||||||||||
| Investor Class |
— | — | — | (50 | ) | |||||||||||
| A Class |
— | — | — | (26 | ) | |||||||||||
| C Class |
— | — | — | (9 | ) | |||||||||||
| Net realized gain from investments: |
||||||||||||||||
| Institutional Class |
— | (86 | ) | (37 | ) | — | ||||||||||
| Y Class |
— | (2 | ) | — | — | |||||||||||
| Investor Class |
— | (2 | ) | — | — | |||||||||||
| A Class |
— | (7 | ) | — | — | |||||||||||
| C Class |
— | (2 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net distributions to shareholders |
— | (99 | ) | (37 | ) | (620 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Capital Share Transactions: |
||||||||||||||||
| Proceeds from sales of shares |
418 | 994 | 1,984 | 36,494 | ||||||||||||
| Reinvestment of dividends and distributions |
— | 99 | 37 | 616 | ||||||||||||
| Cost of shares redeemed |
(25 | ) | (9 | ) | (1 | ) | (613 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in net assets from capital share transactions |
393 | 1,084 | 2,020 | 36,497 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in net assets |
612 | 1,017 | 2,308 | 36,878 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Assets: |
||||||||||||||||
| Beginning of period |
5,422 | 4,405 | 2,097 | 10,000 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of Period * |
$ | 6,034 | $ | 5,422 | $ | 4,405 | $ | 46,878 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| * Includes undistributed net investment income (loss) of |
$ | 20 | $ | — | $ | (7 | ) | $ | 43 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying notes
28
American Beacon FundsSM
July 31, 2014 (Unaudited)
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of twenty-nine 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 Acadian Emerging Markets Managed Volatility Fund (“Acadian”), the American Beacon Earnest Partners Emerging Markets Equity Fund (“Earnest Partners”), the American Beacon SGA Global Growth Fund (“SGA”), and the American Beacon Global Evolution Frontier Markets Income Fund (“Global Evolution”) (each a “Fund” and collectively, the “Funds”), each a series of the Trust.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
Class Disclosure
February 25, 2014 was the inception date of all classes of the Global Evolution Fund.
Each 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, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”) | |
| C Class | General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC | |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
2. Transactions with Affiliates
Management Agreement
The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Funds an annualized fee equal to 0.05% of the average daily net assets. The Funds pay the unaffiliated investment advisors hired to direct investment activities of the Funds. Management fees paid by the Funds during the six months ended July 31, 2014 were as follows (in thousands):
| Fund |
Management Fee Rate |
Management Fee |
Amounts paid to Investment Advisors |
Net Amounts Retained by Manager |
||||||||||||
| Acadian |
0.69 | % | $ | 57 | $ | 53 | $ | 4 | ||||||||
| Earnest Partners |
0.72 | % | 17 | 16 | 1 | |||||||||||
| SGA |
0.49 | % | 14 | 13 | 1 | |||||||||||
| Global Evolution |
0.55 | % | 55 | 50 | 5 | |||||||||||
29
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to each 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 Funds. Prior to June 30, 2014, the Manager received an annualized fee of 0.40% of the average daily net assets of the A and C Classes of the Fund. Beginning July 1, 2014, the Manager received an annualized fee of 0.30% of the average daily net assets of the A and C Classes of the Funds.
Distribution Plans
The Funds, except for the A and C Classes, have 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 Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to separately compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of 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.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.
Interfund Lending Program
Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the six months ended July 31, 2014, the Earnest Partners Fund borrowed on average $125,909 for 3 days at an average rate of 0.70% with interest charges of $7. These amounts are recorded as interest expense on the Statements of Operations herein.
Expense Reimbursement Plan
The Manager agreed to reimburse the following Funds to the extent that total annual fund operating expenses exceeded a Fund’s expense cap. For the six months ended July 31, 2014, the Manager waived or reimbursed expenses as follows:
30
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
| Expense Cap | ||||||||||||||||||
| Fund |
Class | 2/2/14 - 6/30/14 |
7/1/14 - 7/31/14 |
Reimbursed or (Recovered) Expenses |
Expiration | |||||||||||||
| Acadian |
Institutional | 1.35 | % | 1.35 | % | $ | 74,187 | 2018 | ||||||||||
| Acadian |
Y | 1.45 | % | 1.45 | % | 5,209 | 2018 | |||||||||||
| Acadian |
Investor | 1.73 | % | 1.73 | % | 12,413 | 2018 | |||||||||||
| Acadian |
A | 1.85 | % | 1.75 | % | 7,536 | 2018 | |||||||||||
| Acadian |
C | 2.60 | % | 2.50 | % | 1,256 | 2018 | |||||||||||
| Earnest Partners |
Institutional | 1.35 | % | 1.35 | % | 87,816 | 2018 | |||||||||||
| Earnest Partners |
Y | 1.45 | % | 1.45 | % | 9,150 | 2018 | |||||||||||
| Earnest Partners |
Investor | 1.73 | % | 1.73 | % | 17,271 | 2018 | |||||||||||
| Earnest Partners |
A | 1.85 | % | 1.75 | % | 2,698 | 2018 | |||||||||||
| Earnest Partners |
C | 2.60 | % | 2.50 | % | 2,686 | 2018 | |||||||||||
| SGA |
Institutional | 0.98 | % | 0.98 | % | 81,508 | 2018 | |||||||||||
| SGA |
Y | 1.08 | % | 1.08 | % | 1,962 | 2018 | |||||||||||
| SGA |
Investor | 1.36 | % | 1.36 | % | 2,208 | 2018 | |||||||||||
| SGA |
A | 1.48 | % | 1.38 | % | 6,752 | 2018 | |||||||||||
| SGA |
C | 2.23 | % | 2.13 | % | 3,909 | 2018 | |||||||||||
| Global Evolution |
Institutional | 1.15 | % | 1.15 | % | 57,213 | 2018 | |||||||||||
| Global Evolution |
Y | 1.25 | % | 1.25 | % | 37,181 | 2018 | |||||||||||
| Global Evolution |
Investor | 1.53 | % | 1.53 | % | 6,406 | 2018 | |||||||||||
| Global Evolution |
A | 1.65 | % | 1.55 | % | 4,618 | 2018 | |||||||||||
| Global Evolution |
C | 2.40 | % | 2.30 | % | 2,478 | 2018 | |||||||||||
Of these amounts, $14,059 $16,551, $14,068, and $13,210 was payable to the Manager at July 31, 2014 for the Acadian, Earnest Partners, SGA, and Global Evolution Funds, respectively. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
| Fund |
Recovered Expenses | Excess Expense Carryover |
Expiration of Reimbursed Expenses |
|||||||||
| Acadian |
$ | — | $ | 118,179 | 2017 | |||||||
| Earnest Partners |
— | 148,500 | 2017 | |||||||||
| SGA |
— | 79,392 | 2017 | |||||||||
During the period ended July 31, 2014, the Funds did not record a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely.
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the six months ended July 31, 2014, Foreside collected $1,549, $0, $349, and $1,930 for Acadian, Earnest Partners, SGA, and Global Evolution Funds, respectively, from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the six months ended July 31, 2014, there were no CDSC fees collected for Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the six months ended July 31, 2014, there were no CDSC fees collected for Class C Shares.
31
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”), for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The prices of debt securities may be determined using quotes obtained from brokers. The values of structured notes are based on the price movements of a referenced security or index.
Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Fund determines that developments between the close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of its portfolio securities, the Fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Funds’ pricing time of 4:00 p.m. Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. These securities are fair valued using a pricing service and are categorized as Level 2 in the fair value hierarchy. The pricing service, using methods approved by the Board, considers the correlation of the trading patterns of the foreign security to intraday trading in the U.S. markets, based on indices of domestic securities and other appropriate indicators such as prices of relevant ADRs and futures contracts.
Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, pursuant to procedures established by the Fund’s Board.
32
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
Valuation Inputs
Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
| Level 1 - |
Quoted prices in active markets for identical securities. | |
| Level 2 - |
Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | |
| Level 3 - |
Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. | |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date are categorized as Level 2 of the fair value hierarchy.
Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts and structured notes, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers. Depending on the product and the terms of the transaction, the fair value of the financial derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends, and exchange rates. Financial derivatives that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
33
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the six months ended July 31, 2014, there were no transfers between levels. As of July 31, 2014, the investments were classified as described below (in thousands):
| Acadian Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Foreign Preferred Stocks |
$ | 421 | $ | — | $ | — | $ | 421 | ||||||||
| Foreign Common Stocks |
6,481 | 13,535 | — | 20,016 | ||||||||||||
| Short-Term Investments – Money Market Funds |
422 | — | — | 422 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments in Securities |
$ | 7,324 | $ | 13,535 | $ | — | $ | 20,859 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial Derivative Instruments—Liabilities |
||||||||||||||||
| Futures Contracts |
$ | (5 | ) | $ | — | $ | — | $ | (5 | ) | ||||||
| Earnest Partners Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Foreign Preferred Stocks |
$ | 155 | $ | — | $ | — | $ | 155 | ||||||||
| Foreign Common Stocks |
1,512 | 4,003 | — | 5,515 | ||||||||||||
| Short-Term Investments – Money Market Funds |
451 | — | — | 451 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments in Securities |
$ | 2,118 | $ | 4,003 | $ | — | $ | 6,121 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial Derivative Instruments—Assets |
||||||||||||||||
| Futures Contracts |
$ | 6 | $ | — | $ | — | $ | 6 | ||||||||
| SGA Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Foreign Common Stocks |
$ | 1,028 | $ | 1,800 | $ | — | $ | 2,828 | ||||||||
| U.S. Common Stocks |
2,832 | — | — | 2,832 | ||||||||||||
| Short-Term Investments – Money Market Funds |
328 | — | — | 328 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments in Securities |
$ | 4,188 | $ | 1,800 | $ | — | $ | 5,988 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial Derivative Instruments—Liabilities |
||||||||||||||||
| Futures Contracts |
$ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||
| Global Evolution Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Foreign Government Obligations |
$ | — | $ | 37,756 | $ | — | $ | 37,756 | ||||||||
| Structured Notes |
— | 3,067 | — | 3,067 | ||||||||||||
| Short-Term Investments – Money Market Funds |
4,599 | — | — | 4,599 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments in Securities |
$ | 4,599 | $ | 40,823 | $ | — | $ | 45,422 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial Derivative Instruments—Assets |
||||||||||||||||
| Forward Currency Contracts |
$ | — | $ | 24 | $ | — | $ | 24 | ||||||||
| * | Refer to the Schedule of Investments for industry information |
During the six months ended July 31, 2014, Acadian transferred foreign common stock with a value of $7,246 and common stock with a value of $7,818 and SGA transferred foreign common stock with a value of $1,289 from Level 1 to Level 2 as of the end of period in accordance with fair value procedures established by the Board (in thousands).
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of
34
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in fair values of securities held and is reported with all other foreign currency gains and losses in the Funds’ Statements of Operations.
Dividends to Shareholders
Dividends from net investment income of the Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If the Funds’ investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Funds. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Funds. This amount is reported with the net realized gain in the Funds’ Statements of Operations, if applicable.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Redemption Fees
All Classes of the Acadian, Earnest Partners, and Global Evolution Funds impose a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Funds. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Funds pro-rata based on their respective net assets.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made
35
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
4. Securities and Other Investments
American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), and Non-Voting Depositary Receipts (“NVDRs”)
ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. GDRs are in bearer form and traded in both the U.S. and European securities markets. NVDRs represent financial interests in an issuer but the holder is not entitled to any voting rights. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Fund’s possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the Fund may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Fund to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
Restricted Securities
Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Reg S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the periods ended July 31, 2014 are disclosed in the Notes to the Schedules of Investments.
Real Estate Investment Trusts
The Funds may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. The Funds re-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.
Inflation-Indexed Bonds
The SiM High Yield Opportunities Fund may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted based on the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as
36
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
interest income on the Statements of Operations, even though investors do not receive their principal until maturity.
Structured Notes
Structured notes are hybrid securities that combine a debt obligation with an embedded derivative component. The derivative component is linked to changes in the value of an underlying reference asset or index so as to modify the return characteristics of the debt obligation. During the period, the Global Evolution Fund invested in structured notes to obtain a customized exposure and return structure that was not otherwise available.
Fluctuations in the value of structured notes are recorded as unrealized gains and losses. Net payments are recorded as net realized gains and losses. At maturity, or when the note is sold, the Fund records a realized gain or loss. Structured notes are often leveraged, increasing the volatility of each note’s value relative to the change in the underlying reference asset or index. These notes may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of a decline in the value of the underlying reference asset or index. Structured notes may also be more volatile, less liquid, and more difficult to accurately price than less complex or more traditional debt securities. These notes are subject o prepayment, credit, and interest rate risks similar to those of conventional fixed income securities.
Other Investment Company Securities and Other Exchange Traded Products
The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
Master Agreements
The Global Evolution Fund is a party to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties that govern transactions in over-the-counter derivative and foreign exchange contracts entered into by the Fund and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors surrounding the settlement of certain forward settling transactions, such as delayed
37
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
delivery or sale-buyback financing transactions by and between a Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral.
5. Financial Derivative Instruments
Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Funds’ securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Funds bear the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Funds also bear the credit risk if the counterparty fails to perform under the contract.
During the periods ended July 31, 2014, the Global Evolution Fund entered into foreign currency exchange contracts primarily for return enhancement and hedging.
The Fund’s foreign currency contract notional dollar values outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following tables illustrate the quarterly volume of foreign currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD (in thousands).
| Outstanding Contract Amounts Bought | ||||||||
| For the Quarter Ended |
January 31, 2014 | July 31, 2014 | ||||||
| Global Evolution |
$ | — | $ | 2,009 | ||||
| Outstanding Contract Amounts Sold | ||||||||
| For the Quarter Ended |
January 31, 2014 | July 31, 2014 | ||||||
| Global Evolution |
$ | — | $ | 667 | ||||
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.
During the six months ended July 31, 2014, the Funds entered into future contracts primarily for exposing cash to markets.
38
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
The Funds’ average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
| Average Futures Contracts Outstanding | ||||||||
| For the Quarter Ended |
January 31, 2014 | July 31, 2014 | ||||||
| Acadian |
2 | 4 | ||||||
| Earnest Partners |
6 | 3 | ||||||
| SGA |
1 | 2 | ||||||
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
| Fair Values of financial derivative instruments not accounted for as hedging instruments on the Statements of Assets and Liabilities as of July 31, 2014: | ||||||||||||||||||
| Assets |
Derivative | Acadian | Earnest | SGA | Global Evolution |
|||||||||||||
| Unrealized appreciation of futures contracts |
Equity Contracts | $ | 7 | $ | 6 | $ | 9 | $ | — | |||||||||
| Unrealized appreciation of foreign currency contracts |
Foreign Exchange Contracts |
— | — | — | 24 | |||||||||||||
| The effect of financial derivative instruments not accounted for as hedging instruments on the Statements of Operations for the six months ended July 31, 2014: | ||||||||||||||||||
| Statements of Operations |
||||||||||||||||||
| Net realized gain from futures contracts |
Equity Contracts | $ | 41 | $ | 36 | $ | 14 | $ | 1 | |||||||||
| Net realized gain from foreign currency contracts |
Foreign Exchange Contracts |
— | — | — | 33 | |||||||||||||
| Change in net unrealized (depreciation) of futures contracts |
Equity Contracts | 7 | 6 | 9 | — | |||||||||||||
| Change in net unrealized appreciation of foreign currency contracts |
Foreign Exchange Contracts |
— | — | — | 24 | |||||||||||||
| (1) See Note 3 in the Notes to Financial Statements for additional information. |
| (2) The volume of derivative activity described above is reflective of the derivative activity through the current period of operations. |
6. Principal Risks
In the normal course of business the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company or country. Failure of the other party to a transaction to perform (credit and counterparty risk), for example, by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Funds’ income. Similar to credit risk, the Funds may be exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Funds’ investments may be illiquid and the Funds may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.
Market Risks
The Funds’ investments in financial derivatives and other financial instruments expose the Funds to various risks such as, but not limited to, interest rate, foreign currency and equity risks.
39
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e. yield) movements. In addition, the value of emerging and frontier market fixed income securities may be particularly sensitive to interest rate changes.
If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.
The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. The values of equity securities for companies operating in emerging markets may also be affected by political uncertainty, limited liquidity, and other country-specific factors. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
Counterparty Credit Risk
A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as Deposits with brokers for futures contracts and Payable to brokers for futures contracts, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Funds and additional required collateral is delivered to/pledged by the Funds on the next business day. To the extent amounts due to the
40
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
Funds from its counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Offsetting Assets and Liabilities
The Funds are parties to enforceable master netting agreements between brokers and counterparties such as International Swaps and Derivatives Association (“ISDA”) agreements, Master Repo Agreements and Master Forward Agreements which provide for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, July 31, 2014 (in thousands).
Acadian Fund
Offsetting of Financial Assets and Derivative Assets as of July 31, 2014:
| Description |
Gross Amounts of Recognized Assets |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
| Futures Contracts |
$ | — | $ | — | $ | — | ||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of July 31, 2014:
| Net Amount of Assets Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset in the Statements of Assets and Liabilities |
|||||||||||||||
| Counterparty |
Financial Instruments |
Cash Collateral Received |
Net Amount |
|||||||||||||
| Goldman Sachs & Co. |
$ | — | $ | — | $ | — | $ | — | ||||||||
Earnest Partners Fund
Offsetting of Financial Assets and Derivative Assets as of July 31, 2014:
| Description |
Gross Amounts of Recognized Assets |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
| Futures Contracts |
$ | 8 | $ | — | $ | 8 | ||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of July 31, 2014:
| Net Amount of Assets Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset in the Statements of Assets and Liabilities |
|||||||||||||||
| Counterparty |
Financial Instruments |
Cash Collateral Received |
Net Amount |
|||||||||||||
| Goldman Sachs & Co. |
$ | 8 | $ | — | $ | — | $ | 8 | ||||||||
SGA Fund
Offsetting of Financial Assets and Derivative Assets as of July 31, 2014:
| Description |
Gross Amounts of Recognized Assets |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
| Futures Contracts |
$ |
— |
|
$ | — | $ | — | |||||
41
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of July 31, 2014:
| Net Amount of Assets Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset in the Statements of Assets and Liabilities |
|||||||||||||||
| Counterparty |
Financial Instruments |
Cash Collateral Received1 |
Net Amount |
|||||||||||||
| Goldman Sachs & Co. |
$ | — | $ | — | $ | — | $ | — | ||||||||
Global Evolution Fund
Offsetting of Financial Assets and Derivative Assets as of July 31, 2014:
| Description |
Gross Amounts of Recognized Assets |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
| Foreign Currency Contracts |
$ | 24 | $ | — | $ | 24 | ||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of July 31, 2014:
| Net Amount of Assets Presented in the Statements of Assets and Liabilities |
Gross Amounts Not Offset in the Statements of Assets and Liabilities |
|||||||||||||||
| Counterparty |
Financial Instruments |
Cash Collateral Received1 |
Net Amount |
|||||||||||||
| State Street Bank London |
$ | 24 | $ | — | $ | 24 | $ | — | ||||||||
7. Federal Income and Excise Taxes
It is the policy of the Funds 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 Funds are treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended January 31, 2014 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
The tax character of distributions paid were as follows (in thousands):
| Acadian | Earnest Partners | |||||||||||||||
| Six months ended July 31, 2014 |
From Sept. 27 to January 31, 2014 |
Six months ended July 31, 2014 |
From Sept. 19 to January 31, 2014 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Distributions paid from: |
||||||||||||||||
| Ordinary income* |
||||||||||||||||
| Institutional Class |
$ | — | $ | 5 | $ | — | $ | — | ||||||||
| Y Class |
— | — | — | — | ||||||||||||
| Investor Class |
— | 1 | — | — | ||||||||||||
| A Class |
— | — | — | — | ||||||||||||
| C Class |
— | — | — | — | ||||||||||||
| Long-Term Capital Gain |
||||||||||||||||
| Institutional Class |
— | — | — | — | ||||||||||||
| Y Class |
— | — | — | — | ||||||||||||
| Investor Class |
— | — | — | — | ||||||||||||
| A Class |
— | — | — | — | ||||||||||||
| C Class |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions paid |
$ | — | $ | 6 | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
42
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
| SGA | Global Evolution | |||||||||||||||
| Six months ended July 31, 2014 |
Four months ended Jan. 31, 2014 |
Year ended September 30, 2013 |
Six months ended July 31, 2014 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Distributions paid from: |
||||||||||||||||
| Ordinary income* |
||||||||||||||||
| Institutional Class |
$ | — | $ | — | $ | — | $ | 267 | ||||||||
| Y Class |
— | — | — | 268 | ||||||||||||
| Investor Class |
— | — | — | 50 | ||||||||||||
| A Class |
— | — | — | 26 | ||||||||||||
| C Class |
— | — | — | 9 | ||||||||||||
| Long-Term Capital Gain |
||||||||||||||||
| Institutional Class |
— | 86 | 37 | — | ||||||||||||
| Y Class |
— | 2 | — | — | ||||||||||||
| Investor Class |
— | 2 | — | — | ||||||||||||
| A Class |
— | 7 | — | — | ||||||||||||
| C Class |
— | 2 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions paid |
$ | — | $ | 99 | $ | 37 | $ | 620 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| * | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of July 31, 2014 the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
| Acadian | Earnest Partners |
SGA | Global Evolution |
|||||||||||||
| Cost basis of investments for federal income tax purposes |
$ | 19,316 | $ | 5,902 | $ | 5,473 | $ | 45,234 | ||||||||
| Unrealized appreciation |
2,038 | 413 | 631 | 689 | ||||||||||||
| Unrealized depreciation |
(495 | ) | (194 | ) | (116 | ) | (501 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net unrealized appreciation or (depreciation) |
1,543 | 219 | 515 | 188 | ||||||||||||
| Undistributed ordinary income |
257 | 29 | 56 | 199 | ||||||||||||
| Accumulated long-term gain or (loss) |
(27 | ) | (43 | ) | 111 | — | ||||||||||
| Other temporary differences |
(1 | ) | — | — | (6 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributable earnings or (deficits) |
$ | 1,772 | $ | 205 | $ | 682 | $ | 381 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or (depreciation) are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gain or (loss) on investments in passive foreign investment companies, 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 Statements of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from the foreign currency and gains (losses) from sales of investments in passive foreign investment companies that have been reclassed as of July 31, 2014 (in thousands):
| Acadian | Earnest Partners |
SGA | Global Evolution |
|||||||||||||
| Paid-in-capital |
$ | — | $ | — | $ | — | $ | — | ||||||||
| Undistributed net investment income |
15 | (1 | ) | — | 33 | |||||||||||
| Accumulated net realized gain (loss) |
(15 | ) | 1 | 1 | (33 | ) | ||||||||||
| Unrealized appreciation or (depreciation) of investments and futures contracts |
— | — | (1 | ) | — | |||||||||||
43
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses. Prior to RIC MOD, net capital losses incurred by the Funds were carried forward for eight years and treated as short-term losses. RIC MOD requires that post-enactment net capital losses be used before pre-enactment net capital losses.
For the six month period ending July 31, 2014 Acadian Emerging Markets Managed Volatility Fund has $17 short-term post enactment capital loss carryforward and Earnest Partners Emerging Markets Equity Fund has $44 short-term post enactment capital loss carryforward (in thousands).
For the six month period ending July 31, 2014 Acadian Emerging Markets Managed Volatility Fund utilized $9 short-term and $26 long term post enactment capital loss carryforwards and Earnest Partners Emerging Markets Equity Fund utilized $38 short-term and $15 long term post enactment capital loss carryforwards (in thousands).
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended July 31, 2014 were as follows (in thousands):
| Acadian | Earnest Partners | SGA | Global Evolution | |||||||||||||
| Purchases (excluding U.S. government securities) |
$ | 7,637 | $ | 2,446 | $ | 1,386 | $ | 43,385 | ||||||||
| Sales and maturities (excluding U.S. government securities) |
1,449 | 540 | 1,066 | 2,929 | ||||||||||||
9. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds (dollars and shares in thousands):
For the Six Months ended July 31, 2014
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| Acadian Emerging Markets Managed Volatility Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
| Shares sold |
136 | $ | 1,402 | 123 | $ | 1,311 | 200 | $ | 2,086 | |||||||||||||||
| Redemption Fees |
— | — | — | — | — | — | ||||||||||||||||||
| Reinvestment of dividends |
— | — | — | — | — | — | ||||||||||||||||||
| Shares redeemed |
(6 | ) | (73 | ) | (12 | ) | (125 | ) | (6 | ) | (60 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase in shares outstanding |
130 | $ | 1,329 | 111 | $ | 1,186 | 194 | $ | 2,026 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| A Class | C Class | |||||||||||||||
| Acadian Emerging Markets Managed Volatility Fund |
Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold |
170 | $ | 1,748 | 15 | $ | 164 | ||||||||||
| Redemption Fees |
— | — | — | — | ||||||||||||
| Reinvestment of dividends |
— | — | — | — | ||||||||||||
| Shares redeemed |
(1 | ) | (10 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
169 | $ | 1,738 | 15 | $ | 164 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
44
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| Earnest Partners Emerging Markets Equity Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
| Shares sold |
— | $ | — | 85 | $ | 851 | 158 | $ | 1,565 | |||||||||||||||
| Redemption Fees |
— | — | — | — | — | — | ||||||||||||||||||
| Reinvestment of dividends |
— | — | — | — | — | — | ||||||||||||||||||
| Shares redeemed |
(51 | ) | (476 | ) | — | — | (2 | ) | (22 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase (decrease) in shares outstanding |
(51 | ) | $ | (476 | ) | 85 | $ | 851 | 156 | $ | 1,543 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| A Class | C Class | |||||||||||||||
| Earnest Partners Emerging Markets Equity Fund |
Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold |
— | $ | — | — | $ | — | ||||||||||
| Redemption Fees |
— | — | — | — | ||||||||||||
| Reinvestment of dividends |
— | — | — | — | ||||||||||||
| Shares redeemed |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
— | $ | — | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| SGA Global Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
| Shares sold |
10 | $ | 132 | — | $ | 5 | — | $ | 2 | |||||||||||||||
| Redemption Fees |
— | — | — | — | — | — | ||||||||||||||||||
| Reinvestment of dividends |
— | — | — | — | — | — | ||||||||||||||||||
| Shares redeemed |
(1 | ) | (18 | ) | — | — | (1 | ) | (7 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase (decrease) in shares outstanding |
9 | $ | 114 | — | $ | 5 | (1 | ) | $ | (5 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| A Class | C Class | |||||||||||||||
| SGA Global Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold |
4 | $ | 49 | 17 | $ | 230 | ||||||||||
| Redemption Fees |
— | — | — | — | ||||||||||||
| Reinvestment of dividends |
— | — | — | — | ||||||||||||
| Shares redeemed |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
4 | $ | 49 | 17 | $ | 230 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| Global Evolution Frontier Markets Income Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
| Shares sold |
179 | $ | 1,841 | 2,254 | $ | 23,146 | 517 | $ | 5,320 | |||||||||||||||
| Redemption Fees* |
— | — | — | — | — | — | ||||||||||||||||||
| Reinvestment of dividends |
26 | 266 | 26 | 267 | 5 | 50 | ||||||||||||||||||
| Shares redeemed |
(1 | ) | (3 | ) | (44 | ) | (452 | ) | (2 | ) | (20 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase in shares outstanding |
204 | $ | 2,104 | 2,236 | $ | 22,961 | 520 | $ | 5,350 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| A Class | C Class | |||||||||||||||
| Global Evolution Frontier Markets Income Fund |
Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold |
530 | $ | 5,461 | 71 | $ | 726 | ||||||||||
| Redemption Fees* |
— | — | — | — | ||||||||||||
| Reinvestment of dividends |
2 | 26 | 1 | 7 | ||||||||||||
| Shares redeemed |
(13 | ) | (137 | ) | — | (1 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
519 | $ | 5,350 | 72 | $ | 732 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| * | Amounts less than $500. |
45
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
For the Period ended January 31, 2014
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| Acadian Emerging Markets Managed Volatility Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
| Shares sold |
579 | $ | 5,798 | 41 | $ | 420 | 129 | $ | 1,306 | |||||||||||||||
| Redemption Fees |
— | — | — | — | — | — | ||||||||||||||||||
| Reinvestment of dividends |
— | 5 | — | — | — | 1 | ||||||||||||||||||
| Shares redeemed |
— | — | — | (4 | ) | (1 | ) | (6 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase in shares outstanding |
579 | $ | 5,803 | 41 | $ | 416 | 128 | $ | 1,301 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| A Class | C Class | |||||||||||||||
| Acadian Emerging Markets Managed Volatility Fund |
Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold |
48 | $ | 475 | 6 | $ | 54 | ||||||||||
| Redemption Fees |
— | — | — | — | ||||||||||||
| Reinvestment of dividends |
— | — | — | — | ||||||||||||
| Shares redeemed |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
48 | $ | 475 | 6 | $ | 54 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| Earnest Partners Emerging Markets Equity Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
| Shares sold |
198 | $ | 1,932 | 3 | $ | 30 | 1 | $ | 12 | |||||||||||||||
| Redemption Fees |
— | — | — | — | — | — | ||||||||||||||||||
| Reinvestment of dividends |
— | — | — | — | — | — | ||||||||||||||||||
| Shares redeemed |
(101 | ) | (942 | ) | — | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase in shares outstanding |
97 | $ | 990 | 3 | $ | 30 | 1 | $ | 12 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| A Class | C Class | |||||||||||||||
| Earnest Partners Emerging Markets Equity Fund |
Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold |
— | $ | — | — | $ | — | ||||||||||
| Redemption Fees |
— | — | — | — | ||||||||||||
| Reinvestment of dividends |
— | — | — | — | ||||||||||||
| Shares redeemed |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
— | $ | — | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| SGA Global Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
| Shares sold |
22 | $ | 301 | 8 | $ | 105 | 8 | $ | 107 | |||||||||||||||
| Redemption Fees |
— | — | — | — | — | — | ||||||||||||||||||
| Reinvestment of dividends |
6 | 86 | — | 2 | — | 2 | ||||||||||||||||||
| Shares redeemed |
(1 | ) | (9 | ) | — | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase in shares outstanding |
27 | $ | 378 | 8 | $ | 107 | 8 | $ | 109 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| A Class | C Class | |||||||||||||||
| SGA Global Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold |
27 | $ | 371 | 8 | $ | 110 | ||||||||||
| Redemption Fees |
— | — | — | — | ||||||||||||
| Reinvestment of dividends |
1 | 7 | — | 2 | ||||||||||||
| Shares redeemed |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase in shares outstanding |
28 | $ | 378 | 8 | $ | 112 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
46
American Beacon FundsSM
Notes to Financial Statements
July 31, 2014 (Unaudited)
For the Year ended September 30, 2013
| Institutional Class | ||||||||
| SGA Global Growth Fund |
Shares | Amount | ||||||
| Shares sold |
158 | $ | 1,984 | |||||
| Reinvestment of dividends |
3 | 37 | ||||||
| Shares redeemed |
— | (1 | ) | |||||
|
|
|
|
|
|||||
| Net increase in shares outstanding |
161 | $ | 2,020 | |||||
|
|
|
|
|
|||||
47
American Beacon Acadian Emerging Markets Managed Volatility FundSM
(For a share outstanding throughout the period)
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| Six Months Ended July 31, 2014 |
Sept. 27A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Sept. 27A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Sept. 27A to Jan. 31, 2014 |
|||||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 9.59 | $ | 10.00 | $ | 9.59 | $ | 10.00 | $ | 9.58 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
0.11 | 0.02 | 0.07 | 0.01 | 0.08 | 0.00 | B | |||||||||||||||||
| Net gains (losses) on investments (both realized and unrealized) |
1.38 | (0.42 | ) | 1.41 | (0.41 | ) | 1.39 | (0.41 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total income (loss) from investment operations |
1.49 | (0.40 | ) | 1.48 | (0.40 | ) | 1.47 | (0.41 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions: |
||||||||||||||||||||||||
| Dividends from net investment income |
— | (0.01 | ) | — | (0.01 | ) | — | (0.01 | ) | |||||||||||||||
| Distributions from net realized gains |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
— | (0.01 | ) | — | (0.01 | ) | — | (0.01 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Redemption fees added to beneficial interests B |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 11.08 | $ | 9.59 | $ | 11.07 | $ | 9.59 | $ | 11.05 | $ | 9.58 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return C |
15.54 | %D | (4.05 | )%D | 15.43 | %D | (4.05 | )%D | 15.34 | %D | (4.15 | )%D | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios and supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (in thousands) |
$ | 12,951 | $ | 9,969 | $ | 1,793 | $ | 489 | $ | 3,675 | $ | 1,326 | ||||||||||||
| Ratios to average net assets: |
||||||||||||||||||||||||
| Expenses, before reimbursements |
2.64 | %E | 4.20 | %E | 2.58 | %E | 6.19 | %E | 2.77 | %E | 5.46 | %E | ||||||||||||
| Expenses, net of reimbursements |
1.35 | %E | 1.35 | %E | 1.45 | %E | 1.45 | %E | 1.73 | %E | 1.73 | %E | ||||||||||||
| Net investment income (loss), before expense reimbursements |
1.06 | %E | (2.30 | )%E | 1.37 | %E | (4.30 | )%E | 1.13 | %E | (3.60 | )%E | ||||||||||||
| Net investment income (loss), net of reimbursements |
2.35 | %E | 0.55 | %E | 2.51 | %E | 0.44 | %E | 2.16 | %E | 0.13 | %E | ||||||||||||
| Portfolio turnover rate |
9 | %D | 9 | %D,F | 9 | %D | 9 | %D,F | 9 | %D | 9 | %D,F | ||||||||||||
| A | Commencement of operations. |
| B | Amount represents less than $0.01 per share. |
| C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
| D | Not annualized. |
| E | Annualized. |
| F | Portfolio turnover rate is for the period from September 27, 2013 through January 31, 2014. |
48
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Financial Highlights
(For a share outstanding throughout the period)
| A Class | C Class | |||||||||||||||
| Six Months Ended July 31, 2014 |
Sept. 27A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Sept. 27A to Jan. 31, 2014 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| $ | 9.58 | $ | 10.00 | $ | 9.55 | $ | 10.00 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 0.08 | 0.00 | B | 0.05 | (0.01 | ) | |||||||||||
| 1.38 | (0.41 | ) | 1.36 | (0.43 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 1.46 | (0.41 | ) | 1.41 | (0.44 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| — | (0.01 | ) | — | (0.01 | ) | |||||||||||
| — | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| — | (0.01 | ) | — | (0.01 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| — | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 11.04 | $ | 9.58 | $ | 10.96 | $ | 9.55 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 15.24 | %D | (4.15 | )%D | 14.76 | %D | (4.45 | )%D | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 2,505 | $ | 554 | $ | 340 | $ | 149 | |||||||||
| 2.87 | %E | 7.71 | %E | 3.77 | %E | 10.04 | %E | |||||||||
| 1.83 | %E | 1.85 | %E | 2.60 | %E | 2.60 | %E | |||||||||
| 1.47 | %E | (5.92 | )%E | 0.14 | %E | (8.13 | )%E | |||||||||
| 2.50 | %E | (0.07 | )%E | 1.32 | %E | (0.68 | )%E | |||||||||
| 9 | %D | 9 | %D,F | 9 | %D | 9 | %D,F | |||||||||
49
American Beacon Earnest Partners Emerging Markets Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
| Six Months Ended July 31, 2014 |
Sept. 19A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Sept. 19A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Sept. 19A to Jan. 31, 2014 |
|||||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 8.89 | $ | 10.00 | $ | 8.88 | $ | 10.00 | $ | 8.87 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income from investment operations: |
||||||||||||||||||||||||
| Net investment income (loss) |
0.06 | (0.02 | ) | 0.06 | (0.02 | ) | 0.07 | (0.03 | ) | |||||||||||||||
| Net gains (losses) on investments (both realized and unrealized) |
1.45 | (1.09 | ) | 1.45 | (1.10 | ) | 1.42 | (1.10 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total income (loss) from investment operations |
1.51 | (1.11 | ) | 1.51 | (1.12 | ) | 1.49 | (1.13 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less distributions: |
||||||||||||||||||||||||
| Dividends from net investment income |
— | — | — | — | — | — | ||||||||||||||||||
| Distributions from net realized gains |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Redemption fees added to beneficial interests F |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 10.40 | $ | 8.89 | $ | 10.39 | $ | 8.88 | $ | 10.36 | $ | 8.87 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total return B |
16.99 | %C | (11.10 | )%C | 17.00 | %C | (11.20 | )%C | 16.80 | %C | (11.30 | )%C | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios and supplemental data: |
||||||||||||||||||||||||
| Net assets, end of period (in thousands) |
$ | 3,183 | $ | 3,175 | $ | 1,025 | $ | 116 | $ | 1,731 | $ | 100 | ||||||||||||
| Ratios to average net assets: |
||||||||||||||||||||||||
| Expenses, before reimbursements |
7.00 | %D | 10.52 | %D | 5.18 | %D | 14.61 | %D | 5.30 | %D | 15.15 | %D | ||||||||||||
| Expenses, net of reimbursements |
1.35 | %D | 1.35 | %D | 1.45 | %D | 1.45 | %D | 1.73 | %D | 1.73 | %D | ||||||||||||
| Net investment (loss), before expense reimbursements |
(4.39 | )%D | (9.70 | )%D | (2.05 | )%D | (13.67 | )%D | (2.05 | )%D | (14.26 | )%D | ||||||||||||
| Net investment income (loss), net of reimbursements |
1.27 | %D | (0.53 | )%D | 1.69 | %D | (0.51 | )%D | 1.52 | %D | (0.85 | )%D | ||||||||||||
| Portfolio turnover rate |
12 | %C | 28 | %C,E | 12 | %C | 28 | %C,E | 12 | %C | 28 | %C,E | ||||||||||||
| A | Commencement of operations. |
| B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
| C | Not annualized. |
| D | Annualized. |
| E | Portfolio turnover rate is for the period from September 19, 2013 through January 31, 2014. |
| F | Amount represents less than $0.01 per share. |
50
American Beacon Earnest Partners Emerging Markets Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| A Class | C Class | |||||||||||||||
| Six Months Ended July 31, 2014 |
Sept. 19A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Sept. 19A to Jan. 31, 2014 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| $ | 8.87 | $ | 10.00 | $ | 8.85 | $ | 10.00 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 0.04 | (0.04 | ) | 0.00 | (0.06 | ) | |||||||||||
| 1.44 | (1.09 | ) | 1.44 | (1.09 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 1.48 | (1.13 | ) | 1.44 | (1.15 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| — | — | — | — | |||||||||||||
| — | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| — | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| — | — | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 10.35 | $ | 8.87 | $ | 10.29 | $ | 8.85 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 16.69 | %C | (11.30 | )%C | 16.27 | %C | (11.50 | )%C | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 103 | $ | 89 | $ | 103 | $ | 89 | |||||||||
| 7.40 | %D | 15.21 | %D | 8.16 | %D | 15.97 | %D | |||||||||
| 1.83 | %D | 1.85 | %D | 2.58 | %D | 2.60 | %D | |||||||||
| (4.74 | )%D | (14.35 | )%D | (5.50 | )%D | (15.10 | )%D | |||||||||
| 0.83 | %D | (0.99 | )%D | 0.08 | %D | (1.74 | )%D | |||||||||
| 12 | %C | 28 | %C,E | 12 | %C | 28 | %C,E | |||||||||
51
American Beacon SGA Global Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Institutional Class | ||||||||||||||||||||
| Six Months Ended July 31, 2014 |
Four Months Ended Jan. 31, |
Year Ended September 30, |
Dec. 31E to Sept. 30, 2011 |
|||||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Net asset value, beginning of period |
$ | 13.05 | $ | 13.15 | $ | 12.04 | $ | 9.48 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from investment operations: |
||||||||||||||||||||
| Net investment income (loss) |
0.07 | 0.01 | (0.04 | )F | (0.05 | )F | (0.04 | )F | ||||||||||||
| Net gains (losses) on investments (both realized and unrealized) |
0.46 | 0.15 | 1.36 | 2.61 | (0.48 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total income (loss) from investment operations |
0.53 | 0.16 | 1.32 | 2.56 | (0.52 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Less distributions: |
||||||||||||||||||||
| Dividends from net investment income |
— | — | — | — | — | |||||||||||||||
| Distributions from net realized gains |
— | (0.26 | ) | (0.21 | ) | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
— | (0.26 | ) | (0.21 | ) | — | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 13.58 | $ | 13.05 | $ | 13.15 | $ | 12.04 | $ | 9.48 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total return B |
4.06 | %C | 1.13 | %C | 11.21 | %H | 27.00 | %H | (5.20 | )%CH | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios and supplemental data: |
||||||||||||||||||||
| Net assets, end of period (in thousands) |
$ | 5,043 | $ | 4,738 | $ | 4 | $ | 2 | $ | 1 | ||||||||||
| Ratios to average net assets: |
||||||||||||||||||||
| Expenses, before reimbursements |
4.28 | %D | 5.28 | %D | 8.00 | % | 12.02 | % | 28.14 | %D | ||||||||||
| Expenses, net of reimbursements |
0.98 | %D | 1.00 | %D | 1.75 | % | 1.75 | % | 1.74 | %D | ||||||||||
| Net investment (loss), before expense reimbursements |
(2.51 | )%D | (4.12 | )%D | (6.56 | )% | (10.76 | )% | (26.92 | )%D | ||||||||||
| Net investment income (loss), net of reimbursements |
0.79 | %D | 0.16 | %D | (0.31 | )% | (0.49 | )% | (0.52 | )%D | ||||||||||
| Portfolio turnover rate |
19 | %C | 15 | %G | 39 | % | 41 | % | 48 | %C | ||||||||||
| A | Commencement of operations. |
| B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
| C | Not annualized. |
| D | Annualized. |
| E | Commencement of operations for the Predecessor Fund is December 31, 2010. |
| F | The Predecessor Fund calculated the change in undistributed net investment income based on average shares outstanding during the period. |
| G | Portfolio turnover rate is for the period from October 1, 2013 through January 31, 2014 and is not annualized. |
| H | Total returns would have been lower had expenses not been waived or absorbed by the Predecessor Fund. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares. |
52
American Beacon SGA Global Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Y Class | Investor Class | A Class | C Class | |||||||||||||||||||||||||||||
| Six Months Ended July 31, 2014 |
Oct. 4A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Oct. 4A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Oct. 4A to Jan. 31, 2014 |
Six Months Ended July 31, 2014 |
Oct. 4A to Jan. 31, 2014 |
|||||||||||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||||||
| $ | 13.05 | $ | 13.25 | $ | 13.03 | $ | 13.25 | $ | 13.03 | $ | 13.25 | $ | 13.00 | $ | 13.25 | |||||||||||||||||
|
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|
|
|
|
|||||||||||||||||
| 0.04 | — | 0.03 | (0.01 | ) | 0.02 | — | 0.01 | (0.04 | ) | |||||||||||||||||||||||
| 0.47 | 0.06 | 0.47 | 0.05 | 0.47 | 0.04 | 0.43 | 0.05 | |||||||||||||||||||||||||
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 0.51 | 0.06 | 0.50 | 0.04 | 0.49 | 0.04 | 0.44 | 0.01 | |||||||||||||||||||||||||
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| — | (0.26 | ) | — | (0.26 | ) | — | (0.26 | ) | — | (0.26 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| — | (0.26 | ) | — | (0.26 | ) | — | (0.26 | ) | — | (0.26 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| $ | 13.56 | $ | 13.05 | $ | 13.53 | $ | 13.03 | $ | 13.52 | $ | 13.03 | $ | 13.44 | $ | 13.00 | |||||||||||||||||
|
|
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|
|||||||||||||||||
| 3.91 | %C | 0.37 | %C | 3.84 | %C | 0.22 | %C | 3.76 | %C | 0.22 | %C | 3.38 | %C | (0.01 | )%C | |||||||||||||||||
|
|
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|
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|
|
|
|
|
|||||||||||||||||
| $ | 114 | $ | 105 | $ | 107 | $ | 107 | $ | 425 | $ | 363 | $ | 345 | $ | 109 | |||||||||||||||||
| 4.70 | %D | 10.23 | %D | 5.46 | %D | 10.37 | %D | 4.78 | %D | 8.22 | %D | 5.35 | %D | 11.36 | %D | |||||||||||||||||
| 1.08 | %D | 1.08 | %D | 1.36 | %D | 1.36 | %D | 1.46 | %D | 1.48 | %D | 2.20 | %D | 2.23 | %D | |||||||||||||||||
| (2.93 | )%D | (9.09 | )%D | (3.70 | )%D | (9.22 | )%D | (3.00 | )%D | (6.91 | )%D | (3.56 | )%D | (10.22 | )%D | |||||||||||||||||
| 0.69 | %D | 0.06 | %D | 0.41 | %D | (0.22 | )%D | 0.33 | %D | (0.17 | )%D | (0.41 | )%D | (1.09 | )%D | |||||||||||||||||
| 19 | %C | 15 | %G | 19 | %C | 15 | %G | 19 | %C | 15 | %G | 19 | %C | 15 | %G | |||||||||||||||||
53
American Beacon Global Evolution Frontier Markets Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Institutional Class | Y Class | Investor Class | ||||||||||
| Feb. 25A to July 31, 2014 |
Feb. 25A to July 31, 2014 |
Feb. 25A to July 31, 2014 |
||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
| Net asset value, beginning of period |
$ | 10 .00 | $ | 10.00 | $ | 10.00 | ||||||
|
|
|
|
|
|
|
|||||||
| Income from investment operations: |
||||||||||||
| Net investment income |
0.26 | 0.26 | 0.25 | |||||||||
| Net gains (losses) on investments (both realized and unrealized) |
0.29 | 0.30 | 0.29 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total income (loss) from investment operations |
0.55 | 0.56 | 0.54 | |||||||||
|
|
|
|
|
|
|
|||||||
| Less distributions: |
||||||||||||
| Dividends from net investment income |
(0.25 | ) | (0.26 | ) | (0.25 | ) | ||||||
| Distributions from net realized gains |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total distributions |
(0.25 | ) | (0.26 | ) | (0.25 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Redemption fees added to beneficial interests E |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Net asset value, end of period |
$ | 10.30 | $ | 10.30 | $ | 10.29 | ||||||
|
|
|
|
|
|
|
|||||||
| Total return B |
5.57 | %C | 5.63 | %C | 5.39 | %C | ||||||
|
|
|
|
|
|
|
|||||||
| Ratios and supplemental data: |
||||||||||||
| Net assets, end of period (in thousands) |
$ | 11,996 | $ | 23,142 | $ | 5,457 | ||||||
| Ratios to average net assets: |
||||||||||||
| Expenses, before reimbursements |
2.41 | %D | 2.16 | %D | 2.33 | %D | ||||||
| Expenses, net of reimbursements |
1.15 | %D | 1.25 | %D | 1.53 | %D | ||||||
| Net investment income, before expense reimbursements |
4.82 | %D | 5.64 | %D | 5.51 | %D | ||||||
| Net investment income, net of reimbursements |
6.08 | %D | 6.55 | %D | 6.32 | %D | ||||||
| Portfolio turnover rate |
16 | %C | 16 | %C | 16 | %C | ||||||
| A | Commencement of operations. |
| B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
| C | Not annualized. |
| D | Annualized. |
| E | Amount represents less than $0.01 per share. |
54
American Beacon Global Evolution Frontier Markets Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
| A Class | C Class | |||||||
| Feb. 25A to July 31, 2014 |
Feb. 25A to July 31, 2014 |
|||||||
| (unaudited) | (unaudited) | |||||||
| $10.00 | $ | 10.00 | ||||||
|
|
|
|
|
|||||
| 0.24 | 0.21 | |||||||
| 0.30 | 0.28 | |||||||
|
|
|
|
|
|||||
| 0.54 | 0.49 | |||||||
|
|
|
|
|
|||||
| (0.24 | ) | (0.21 | ) | |||||
| — | — | |||||||
|
|
|
|
|
|||||
| (0.24 | ) | (0.21 | ) | |||||
|
|
|
|
|
|||||
| — | — | |||||||
|
|
|
|
|
|||||
| $ | 10.30 | $ | 10.28 | |||||
|
|
|
|
|
|||||
| 5.45 | %C | 4.92 | %C | |||||
|
|
|
|
|
|||||
| $ | 5,446 | $ | 837 | |||||
| 2.63 | %D | 3.83 | %D | |||||
| 1.57 | %D | 2.35 | %D | |||||
| 4.84 | %D | 3.79 | %D | |||||
| 5.90 | %D | 5.28 | %D | |||||
| 16 | %C | 16 | %C | |||||
55
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreements and Investment Advisory Agreements of the Funds (Unaudited)
At its November 11-12, 2013 meetings, the Board of Trustees (“Board”) considered the approval of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Trust”) on behalf of American Beacon Global Evolution Frontier Markets Income Fund, a new series of the Trust (“Global Evolution Fund”) and the approval of a new investment advisory agreement among the Manager, Global Evolution USA, LLC (“Global Evolution”) and the Trust with respect to the Global Evolution Fund (“Global Evolution Agreement”).
Approval of Management Agreement on Behalf of the Global Evolution Fund
In advance of the meeting, the Board requested and reviewed information provided by the Manager in connection with its consideration of the Management Agreement for the Global Evolution Fund, 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 Global Evolution Fund; |
| • | identification of the professional personnel who are proposed to be assigned primary responsibility for managing the Global Evolution Fund; |
| • | an analysis of the proposed advisory fee, and fee waivers, 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 Board’s consideration of the Management Agreement. |
The Board also considered information that had been provided by the Manager to the Board at the May 2013 meeting in connection with the renewal of the Management Agreement between the Manager and the Trust as it related to the existing series of the Trust (“Existing Funds”), and updated information regarding recent business initiatives and various personnel changes at the Manager.
Provided below is an overview of the primary factors the Board considered at its November 11-12, 2013 meetings at which the Board considered the approval of the Management Agreement. In determining whether to approve the Management Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services to be provided; (2) the estimated costs to be incurred by the Manager in rendering its services and the resulting profits or losses; (3) the extent to which economies of scale, if any, have been taken into account in setting the fee schedule; (4) whether fee levels reflect economies of scale, if any, for the benefit of investors; (5) comparisons of services and fees with contracts entered into by the Manager with the Existing Funds and with the Acadian Emerging Markets Managed Volatility Fund, Earnest Partners Emerging Markets Equity Fund and the SGA Global Growth Fund (“New Funds”); and (6) any other benefits derived or anticipated to be derived by the Manager from its relationship with the Global Evolution Fund.
The Board did not identify any particular information that was most relevant to its consideration of 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 investment advisory 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 Global Evolution Fund.
Nature, Extent and Quality of Services. 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 2013 meeting. At that meeting, the Board received detailed information regarding the Manager, including information with respect to the scope of services provided by the Manager to the Existing Funds and the background and experience of the Manager’s key investment personnel. At the May meeting, the Board also considered the Manager’s investment approach and goal to provide consistent above average long-term performance at a low cost on behalf of the Existing Funds and the Manager’s culture of compliance and support for compliance operations that reduces risks to the Existing Funds. The Board noted the Manager’s representation that the advisory and related services proposed to be provided to the Global Evolution Fund will be consistent with the services provided to the Existing Funds. The Board also noted that the Global Evolution Fund is a single-manager fund and, therefore, the Manager will not allocate assets among multiple investment advisors, which it does for many of the 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 Global Evolution 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 Global Evolution Fund.
Investment Performance. The Board noted that the Global Evolution Fund is newly organized and, therefore, had no historical performance for the Board to review. The Board also noted that the Trustees would review the performance of Global Evolution in connection with their consideration of the Global Evolution Agreement.
Costs of the Services Provided to the Global Evolution Fund and the Profits Realized by the Manager from its Relationship with the Global Evolution Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the estimated revenues to be earned and the expenses to be incurred by the Manager. The Board also considered that the Manager will receive administrative service fees to compensate the Manager for providing shareholder and administrative services to the Global Evolution Fund. The Board noted the Manager’s representation that its accounting system does not provide for cost allocation on a fund by fund basis. Accordingly, the Manager created an allocation of expenses based upon the estimated percentage of time spent by its employees on non-distribution related business. Based on the foregoing information, the Board concluded that the estimated profitability at projected asset levels was reasonable in light of the services to be performed by the Manager.
56
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
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 Manager’s proposed management fee schedule. The Board considered a comparison of the management fee rate to be charged by the Manager under the Management Agreement versus the fee rates charged to comparable funds. The Board noted the Manager’s representation that there are no relevant peer group expense ratio comparisons. However, the Board also noted that the management fee rate proposed by the Manager for the Global Evolution Fund is lower than other Morningstar, Inc. (“Morningstar”) actively-managed emerging markets bond funds. In addition, the Board considered that the proposed management fee rate is consistent with the fee rates paid by the Existing Funds and the New Funds. The Board also considered that the Manager has agreed to contractually limit the expenses of the Global Evolution Fund for at least one year following the inception date of the Global Evolution Fund at competitive market levels. This information assisted the Board in concluding that the management fee rate appeared to be within a reasonable range for the services to be provided to the Global Evolution Fund, in light of all the factors considered.
Economies of Scale. The Board considered that the fees to be paid to Global Evolution will be paid directly by the Global Evolution Fund and that the Manager would not benefit economically from that proposed fee arrangement.
Benefits Derived from the Relationship with the Global Evolution Fund. The Board considered the Manager’s representation that it does not anticipate any material “fall-out” benefits resulting from its proposed relationship with the Global Evolution Fund. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Global Evolution Fund appear to be fair and reasonable.
Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Global Evolution Fund or the Manager, as that term is defined in the 1940 Act: (1) concluded that the proposed management fee is fair and reasonable; (2) determined that the Global Evolution Fund and its shareholders would benefit from the Manager’s management of the Global Evolution Fund; and (3) approved the Management Agreement.
Approval of Investment Advisory Agreement with Global Evolution USA, LLC
In advance of the meeting, the Board requested and reviewed information provided by Global Evolution in connection with its consideration of the Global Evolution Agreement, and the Investment Committee of the Board met with representatives of Global Evolution. The Board considered, among other materials, responses by Global Evolution to inquiries requesting:
| • | a description of the advisory and related services proposed to be provided to the Global Evolution Fund; |
| • | identification of the professional personnel to perform services for the Global Evolution Fund and their education, experience and responsibilities; |
| • | a comparison of investment performance of the Luxembourg-based investment fund (“UCITS”) sponsored by Global Evolution’s parent company with the performance of applicable peer groups and indices; |
| • | an analysis of the proposed advisory fee, including a comparison with fee rates charged to other clients for which similar services are provided and anticipated economies of scale; |
| • | a description of the portfolio managers’ compensation and, if compensation is tied to performance, a description of the oversight mechanism to prevent a manager with lagging performance from taking undue risks; |
| • | a description of Global Evolution’s compliance program and any material compliance matters, as well as its trading activities; |
| • | a discussion of Global Evolution’s financial condition and confirmation that Global Evolution’s financial condition would not impair its ability to provide high-quality services to the Global Fund; and |
| • | any other information that Global Evolution believed would be material to the Board’s consideration of the Global Evolution Agreement. |
Provided below is an overview of the primary factors the Board considered at its November 11-12, 2013 meetings at which the Board considered the approval of the Global Evolution Agreement. In determining whether to approve the Global Evolution Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services to be provided; (2) the investment performance of Global Evolution; (3) the costs to be incurred by Global Evolution in rendering its services and the resulting profits or losses; (4) the extent to which economies of scale, if any, have been taken into account in setting the fee schedule; (5) whether fee levels reflect these economies of scale, if any, for the benefit of investors; (6) comparisons of services and fees with contracts entered into by the Global Evolution with other clients; and (7) any other benefits anticipated to be derived by Global Evolution from its relationship with the Global Evolution Fund.
The Board did not identify any particular information that was most relevant to its consideration of the Global Evolution Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of Global Evolution 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 Global Evolution Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Global Evolution Agreement were reasonable and fair and that the approval of the Global Evolution Agreement was in the best interests of the Global Evolution Fund.
Nature, extent and quality of the services to be provided by Global Evolution. The Board considered information regarding Global Evolution’s principal business activities, its reputation, financial condition and overall capabilities to perform the services under the
57
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Global Evolution Agreement. The Board considered that, as a newly organized investment adviser, Global Evolution would be supported by the investment resources, and infrastructure of its parent company. The Board also considered the adequacy of Global Evolution’s compliance program, which also covers its parent company. In addition, the Board considered the background and experience of the portfolio management personnel who will be assigned responsibility for managing the Global Evolution Fund. The Board considered Global Evolution’s representation that the financial condition of its parent company is adequate to support the provision by Global Evolution of high quality advisory services to the Global Evolution Fund and that current staffing levels were adequate to service the Global Evolution Fund. In addition, the Board took into consideration the Manager’s recommendation of Global Evolution. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by Global Evolution were appropriate for the Global Evolution Fund in light of its investment objective and, thus, supported a decision to approve the Global Evolution Agreement.
Performance of Global Evolution. The Board evaluated the performance information provided by Global Evolution and the Manager regarding the performance of the UCITS as compared to the JPMorgan EMBI Global Diversified Index (“JPM EMBI Index”) and a relevant peer universe of funds and managers pursuing similar investment objectives. The Board considered that the annualized performance of the UCITS outperformed the JPM EMBI Index for all relevant time periods. The Board also considered how the UCITS would have ranked in the Morningstar Emerging Markets Bond Category, noting that Morningstar does not have a frontier debt category. Based on the foregoing information, the Board concluded that the historical investment performance record of Global Evolution supported approval of the Global Evolution Agreement.
Comparisons of the amounts to be paid under the Agreement with those under contracts between Global Evolution and its other clients. In evaluating the Global Evolution Agreement, the Board reviewed the proposed advisory fee rate for services to be performed by Global Evolution on behalf of the Global Evolution Fund. The Board noted that Global Evolution’s investment advisory fee rate under the Global Evolution Agreement would be paid to Global Evolution by the Global Evolution Fund. The Board considered Global Evolution’s representation that the proposed fee rate is lower than the minimum fees its parent company charges to the UCITS, and the representation that it does not currently have a subadvisory relationship with respect to its frontier markets debt strategy and, therefore, could not provide a basis for comparison of the amounts to be paid under the Global Evolution Agreement. In this regard, the Board also noted the Manager’s representation that the most relevant peer group expense ratio comparisons for the Global Evolution Fund was for Morningstar actively-managed emerging markets bond funds. The Board noted that the combined management and advisory fee rate to be paid to the Manager and Global Evolution was lower than industry averages for this peer group. After evaluating this information, the Board concluded that Global Evolution’s advisory fee rate under the Global Evolution Agreement was reasonable in light of the services to be provided to the Global Evolution Fund.
Costs of the services to be provided and profits to be realized by Global Evolution and its affiliates from its relationship with the Global Evolution Fund. The Board did not consider the costs of the services to be provided and profits to be realized by Global Evolution from its relationship with the Global Evolution Fund, noting instead the arm’s-length nature of the relationship between the Manager and Global Evolution with respect to the negotiation of the advisory fee rate on behalf of the Global Evolution Fund.
Economies of Scale. The Board considered Global Evolution’s representation that the proposed fee rate anticipates any economies of scale in connection with the services that it will provide to the Global Evolution Fund. In this regard, the Board considered Global Evolution’s representation that there is limited worldwide capacity for investment in frontier market debt. Based on the foregoing information, the Board concluded that the breakpoints under the proposed fee schedule reflect economies of scale associated with the services to be provided to the Global Evolution Fund by Global Evolution.
Benefits to be derived by Global Evolution from the relationship with the Global Evolution Fund. The Board considered the “fall-out” or ancillary benefits that might accrue to Global Evolution as a result of its relationship with the Global Evolution Fund, including greater exposure in the marketplace with respect to Global Evolution’s investment process and expanding the level of assets under management by Global Evolution. The Board noted Global Evolution’s representation that it was not possible to quantify the benefits that might accrue to Global Evolution from its relationship with the Global Evolution Fund. The Board also noted Global Evolution’s representation that it does not use soft dollars. Based on the foregoing information, the Board concluded that the potential benefits accruing to Global Evolution by virtue of its relationship with the Global Evolution Fund appear to be fair and reasonable.
Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Global Evolution Fund, the Manager or Global Evolution, as that term is defined in the 1940 Act, concluded that the proposed investment advisory fee rate is fair and reasonable and that the approval of the Global Evolution Agreement is in the best interests of the Global Evolution Fund and approved the Global Evolution Agreement.
58
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61
Delivery of Documents
eDelivery is NOW AVAILABLE- Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
|
|
| |
| By E-mail: american_beacon.funds@ambeacon.com |
On the Internet: Visit our website at www.americanbeaconfunds.com | |
|
| |
| By Telephone: Institutional, Y and Investor Classes Call (800) 658-5811 |
By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 | |
| Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Fund’s portfolio holdings is also available on www.americanbeaconfunds.com, approximately twenty days after the end of each month. |
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. | |
Fund Service Providers:
| CUSTODIAN State Street Bank and Trust Boston, Massachusetts |
TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas |
DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds, American Beacon Acadian Emerging Markets Managed Volatility Fund, American Beacon Earnest Partners Emerging Markets Equity Fund, American Beacon SGA Global Growth Fund, and American Beacon Global Evolution Frontier Markets Income Fund are service marks of American Beacon Advisors, Inc.
SAR 7/14
ITEM 2. CODE OF ETHICS.
The Trust did not amend the code of ethics that applies to its principal executive and financial officers (the “Code”) nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable.
(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: October 7, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By | /s/ Gene L. Needles, Jr. | |
| Gene L. Needles, Jr. | ||
| President |
Date: October 7, 2014
| By | /s/ Melinda G. Heika | |
| Melinda G. Heika | ||
| Treasurer |
Date: October 7, 2014