UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
220 East Las Colinas Boulevard, Suite 1200
Irving, Texas 75039
(Address of principal executive offices)-(Zip code)
Gene L. Needles, Jr., PRESIDENT
220 East Las Colinas Boulevard, Suite 1200
Irving, Texas 75039
(Name and address of agent for service)
Registrants telephone number, including area code: (817) 391-6100
Date of fiscal year end: December 31, 2014
Date of reporting period: December 31, 2014
ITEM 1. | REPORT TO STOCKHOLDERS. |
ANNUAL REPORT December 31, 2013 S&P 500® INDEX FUND SMALL CAP INDEX FUND-Closed to new investors INTERNATIONAL EQUITY INDEX FUND December 31, 2014 AHL Managed futures strategy fund bahl & gaynor small cap growth fund BRIDGEWAY LARGE CAP VALUE FUND HOLLAND LARGE CAP GROWTH FUND STEPHENS SMALL CAP GROWTH FUND (Closed to New Investors) STEPHENS MID-CAP GROWTH FUND
AHL Managed Futures Strategy Fund: Investing in derivative instruments involves liquidity, credit, interest rate and market risks. The use of quantitative models may lead to high levels of trading and concentration among certain investments, resulting in higher trading costs and return volatility. Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. Bahl & Gaynor Small Cap Growth Fund: Investing in small-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund may participate in a securities lending program. Bridgeway Large Cap Value Fund: Investing in value stocks may limit downside risk over time; however, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. While the Fund is managed pursuant to a tax management strategy, the Funds investments could create capital gains. The use of futures contracts for cash management may subject the Fund to losing more money than invested. Holland Large Cap Growth Fund: Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. The use of futures contracts for cash management may subject the Fund to losing more money than invested. Stephens Small Cap Growth Fund: Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in small-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund may participate in a securities lending program. Stephens Mid-Cap Growth Fund: Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in medium-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund may participate in a securities lending program.
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 |
December 31, 2014 |
Dear Shareholders,
2014 was a good year for domestic equity investors; the markets were calm and stocks ended the year above average following two modest pullbacks. The S&P 500 Index, a U.S. large-cap stock bellwether, gained 13.69% buoyed by accelerated economic growth and increased earnings. Of the 10 industry sectors in which the S&P 500 Index is divided, only two lost ground during the year: Energy (-9.99%) and Telecommunications Services (-1.91%). The Russell Midcap Index, a barometer of mid-cap stocks, gained 13.22%. And the Russell 2000 Index, which generally represents the small-cap segment, gained 4.89%. |
In contrast, international equity investments declined. Many of the worlds economies struggled throughout the year and the stronger U.S. dollar lowered the value of foreign investments. The MSCI EAFE Index, which measures the worlds developed market, closed down at -4.90%.
At American Beacon Advisors, we are proud to offer a broad range of equity funds that are capable of navigating economic storms and market downturns in the U.S. and abroad. We are fortunate to have several asset managers who have stayed the course for many years and through a variety of economic and market conditions. To further broaden the investment options available to our shareholders, in 2014 we introduced two new mutual funds, each led by experienced and well-respected sub-advisors the American Beacon Bahl & Gaynor Small Cap Growth Fund and the American Beacon AHL Managed Futures Strategy Fund.
For the 12 months ended December 31, 2014:
| American Beacon Bridgeway Large Cap Value Fund (Investor Class) returned 13.89%. |
| American Beacon Holland Large Cap Growth Fund (Investor Class) returned 6.99%. |
| American Beacon Stephens Small Cap Growth Fund (Investor Class) returned -3.35%. |
| American Beacon Stephens Mid-Cap Growth Fund (Investor Class) returned 2.97%. |
With respect to our newer funds:
| For the period from July 15, 2014 (the Funds inception), to December 31, 2014, the American Beacon Bahl & Gaynor Small Cap Growth Fund (Investor Class) returned 7.08%. |
| For the period from August 19, 2014 (the Funds inception), to December 31, 2014, the American Beacon AHL Managed Futures Strategy Fund (Investor Class) returned 13.23%. |
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
Futures and Commodity Market Overview
December 31, 2014 (Unaudited)
2
American Beacon AHL Managed Futures Strategy FundSM
Performance Overview
December 31, 2014 (Unaudited)
3
American Beacon AHL Managed Futures Strategy FundSM
Performance Overview
December 31, 2014 (Unaudited)
4
Domestic Equity Market Overview
December 31, 2014 (Unaudited)
5
American Beacon Bahl & Gaynor Small Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
6
American Beacon Bahl & Gaynor Small Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
7
American Beacon Bridgeway Large Cap Value FundSM
Performance Overview
December 31, 2014 (Unaudited)
8
American Beacon Bridgeway Large Cap Value FundSM
Performance Overview
December 31, 2014 (Unaudited)
9
American Beacon Holland Large Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
10
American Beacon Holland Large Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
11
American Beacon Stephens Small Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
12
American Beacon Stephens Small Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
13
American Beacon Stephens Mid-Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
14
American Beacon Stephens Mid-Cap Growth FundSM
Performance Overview
December 31, 2014 (Unaudited)
15
American Beacon FundsSM
Fund Expenses
December 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 redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing costs (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 July 1, 2014 through December 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 Institutional and Investor 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 Funds actual expense ratio and an assumed 5% per year rate of return before expenses (not the Funds 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 Institutional and Investor 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.
16
American Beacon FundsSM
Fund Expenses
December 31, 2014 (Unaudited)
17
American Beacon FundsSM
Fund Expenses
December 31, 2014 (Unaudited)
See accompanying notes 18 |
American Beacon FundsSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of American Beacon AHL Managed Futures Strategy Fund, American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Mid-Cap Growth Fund, and American Beacon Stephens Small Cap Growth Fund:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon AHL Managed Futures Strategy Fund, American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Mid-Cap Growth Fund, and American Beacon Stephens Small Cap Growth Fund (six of the funds constituting the American Beacon Funds) (collectively, the Funds), as of December 31, 2014, and the related statements of operations, changes in net assets, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon AHL Managed Futures Strategy Fund, American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Mid-Cap Growth Fund, and American Beacon Stephens Small Cap Growth Fund at December 31, 2014, the results of their operations, the changes in their net assets, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
March 2, 2015
19
American Beacon AHL Managed Futures Strategy FundSM
December 31, 2014
Shares | Fair Value | |||||||
(000s) | ||||||||
SHORT-TERM INVESTMENTS 91.05% |
||||||||
Money Market Funds 1.79% |
||||||||
JPMorgan U.S. Government Money Market Fund, Capital ClassA |
744,374 | $ | 744 | |||||
|
|
|||||||
Par Amount | ||||||||
(000s) | ||||||||
U.S. Treasury Bills 89.26% |
||||||||
U.S. Treasury Bill , 0.019%, Due 3/19/2015A |
$ | 37,198 | 37,199 | |||||
|
|
|||||||
Total Short-Term Investments (Cost 37,943) |
37,943 | |||||||
|
|
|||||||
TOTAL INVESTMENTS 91.05% (Cost $37,943) |
37,943 | |||||||
OTHER ASSETS, NET OF LIABILITIES 8.95% |
|
3,731 | ||||||
|
|
|||||||
TOTAL NET ASSETS 100.00% |
$ | 41,674 | ||||||
|
|
Percentages are stated as a percent of net assets.
Purchased Futures Contracts Open on December 31, 2014:
Commodity Futures Contracts
Description |
Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
||||||||
LME Lead FuturesA |
3 | January 2015 | $ | 138,825 | $ | (5,729 | ) | |||||
LME Primary Aluminum FuturesA |
4 | January 2015 | 183,375 | (21,854 | ) | |||||||
LME Primary Aluminum FuturesA |
5 | February 2015 | 229,969 | (26,147 | ) | |||||||
LME Zinc FuturesA |
2 | January 2015 | 108,400 | (7,811 | ) | |||||||
LME Zinc FuturesA |
2 | February 2015 | 108,562 | (5,686 | ) | |||||||
Wheat (CBT) FuturesA |
3 | March 2015 | 88,463 | (6,819 | ) | |||||||
|
|
|
|
|||||||||
$ | 857,594 | $ | (74,046 | ) | ||||||||
|
|
|
|
Currency Futures Contracts
Description |
Number of Contracts |
Expiration Date | Contract Value |
Unrealized Appreciation (Depreciation) |
||||||||
90-Day Eurodollar Futures |
6 | March 2016 | $ | 1,482,300 | $ | (458 | ) | |||||
90-Day Eurodollar Futures |
11 | December 2016 | 2,698,575 | (290 | ) | |||||||
90-Day Eurodollar Futures |
29 | September 2017 | 7,083,612 | 661 | ||||||||
90-Day Sterling Futures |
106 | March 2016 | 20,455,275 | 20,366 | ||||||||
90-Day Sterling Futures |
110 | December 2016 | 21,145,735 | 22,175 | ||||||||
U.S. Dollar Index Futures |
19 | March 2015 | 1,722,293 | 38,105 | ||||||||
|
|
|
|
|||||||||
$ | 54,587,790 | $ | 80,559 | |||||||||
|
|
|
|
Equity Futures Contracts
Description |
Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
||||||||
Amsterdam Index Futures |
4 | January 2015 | $ | 411,417 | $ | 18,256 | ||||||
DAX Index Futures |
2 | March 2015 | 595,556 | 9,632 | ||||||||
E-Mini Russell 2000 Futures |
8 | March 2015 | 960,560 | 22,463 | ||||||||
Euro Stoxx 50 Index Futures |
7 | March 2015 | 265,376 | (270 | ) | |||||||
Hang Seng Index Futures |
2 | January 2015 | 304,965 | 544 | ||||||||
H-SHARES Index Futures |
9 | January 2015 | 695,718 | 5,297 | ||||||||
IBEX 35 Index Futures |
1 | January 2015 | 123,961 | (2,551 | ) | |||||||
MSCI Taiwan Stock Index Futures |
30 | January 2015 | 1,029,300 | (3,368 | ) | |||||||
NASDAQ 100 E-Mini Futures |
22 | March 2015 | 1,862,410 | 15,211 | ||||||||
Nikkei 225 (SGX) Futures |
16 | March 2015 | 1,160,795 | (16,441 | ) | |||||||
OMXS30 Index Futures |
54 | January 2015 | 1,016,022 | 25,538 | ||||||||
S&P 500 E-mini Futures |
26 | March 2015 | 2,668,120 | 60,348 | ||||||||
SPI 200 Futures |
1 | March 2015 | 109,867 | (1,307 | ) | |||||||
TOPIX Index Futures |
6 | March 2015 | 705,043 | (12,801 | ) | |||||||
|
|
|
|
|||||||||
$ | 11,909,110 | $ | 120,551 | |||||||||
|
|
|
|
See accompanying notes 20 |
American Beacon AHL Managed Futures Strategy FundSM
Schedule of Investments
December 31, 2014
Interest Rate Futures Contracts
Description |
Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
||||||||
10-Year Japanese Government Bond (OSE) Futures |
19 | March 2015 | $ | 23,443,062 | $ | 120,515 | ||||||
3-Month Euro Euribor Futures |
125 | March 2016 | 37,789,489 | 14,855 | ||||||||
3-Month Euro Euribor Futures |
27 | December 2016 | 8,157,221 | 4,582 | ||||||||
3-Month Euro Euribor Futures |
69 | September 2017 | 20,829,532 | 16,280 | ||||||||
Australia 10-Year Bond Futures |
48 | March 2015 | 5,021,643 | 46,094 | ||||||||
Australia 3-Year Bond Futures |
144 | March 2015 | 13,082,463 | 26,984 | ||||||||
Euro-Bobl Futures |
47 | March 2015 | 7,409,331 | 37,287 | ||||||||
Euro-Bund Futures |
26 | March 2015 | 4,903,874 | 85,188 | ||||||||
Euro-Buxl 30-Year Bond Futures |
7 | March 2015 | 1,312,735 | 51,521 | ||||||||
Long GILT Futures |
31 | March 2015 | 5,775,287 | 115,189 | ||||||||
U.S. 10-Year Treasury Note Futures |
20 | March 2015 | 2,535,937 | 3,094 | ||||||||
U.S. 2-Year Treasury Note Futures |
10 | March 2015 | 2,185,938 | (4,070 | ) | |||||||
U.S. 5-Year Treasury Note Futures |
19 | March 2015 | 2,259,664 | (5,236 | ) | |||||||
U.S. Long Bond (CBT) Futures |
13 | March 2015 | 1,879,313 | 35,803 | ||||||||
U.S. Ultra Bond (CBT) Futures |
15 | March 2015 | 2,477,813 | 81,207 | ||||||||
|
|
|
|
|||||||||
$ | 139,063,302 | $ | 629,293 | |||||||||
|
|
|
|
Sold Futures Contracts Open on December 31, 2014:
Commodity Futures Contracts
Description |
Number of Contracts |
Expiration Date | Contract Value |
Unrealized Appreciation (Depreciation) |
||||||||
Brent Crude FuturesA |
6 | February 2015 | $ | 343,980 | $ | 75,716 | ||||||
Cocoa FuturesA |
17 | March 2015 | 494,700 | (6,568 | ) | |||||||
Coffee C FuturesA |
3 | March 2015 | 187,425 | 11,112 | ||||||||
Copper FuturesA |
13 | March 2015 | 918,288 | 38,729 | ||||||||
Corn FuturesA |
8 | March 2015 | 158,800 | (4,342 | ) | |||||||
Gas Oil (ICE) FuturesA |
6 | February 2015 | 312,750 | 4,044 | ||||||||
Gasoline RBOB FuturesA |
6 | February 2015 | 370,969 | 17,344 | ||||||||
Gold 100oz FuturesA |
20 | February 2015 | 2,368,200 | 24,777 | ||||||||
LME Copper FuturesA |
2 | February 2015 | 316,350 | 7,849 | ||||||||
LME Lead FuturesA |
5 | January 2015 | 231,375 | 20,719 | ||||||||
LME Lead FuturesA |
3 | February 2015 | 139,200 | 12,952 | ||||||||
LME Lead FuturesA |
3 | March 2015 | 139,350 | 4,849 | ||||||||
LME Nickel FuturesA |
1 | February 2015 | 90,687 | 1,705 | ||||||||
LME Nickel FuturesA |
1 | March 2015 | 90,834 | 3,646 | ||||||||
LME Primary Aluminum FuturesA |
4 | January 2015 | 183,375 | 12,977 | ||||||||
LME Primary Aluminum FuturesA |
5 | February 2015 | 229,969 | 14,315 | ||||||||
LME Primary Aluminum FuturesA |
17 | March 2015 | 785,719 | 25,491 | ||||||||
LME Zinc FuturesA |
2 | January 2015 | 108,400 | 2,757 | ||||||||
LME Zinc FuturesA |
3 | February 2015 | 162,844 | 3,214 | ||||||||
LME Zinc FuturesA |
2 | March 2015 | 108,825 | (930 | ) | |||||||
Natural Gas FuturesA |
11 | February 2015 | 317,790 | 91,942 | ||||||||
Natural Gas Swap FuturesA |
4 | April 2015 | 28,810 | 7,446 | ||||||||
Natural Gas Swap FuturesA |
4 | May 2015 | 29,040 | 7,216 | ||||||||
Natural Gas Swap FuturesA |
4 | June 2015 | 29,530 | 6,726 | ||||||||
Natural Gas Swap FuturesA |
4 | July 2015 | 30,120 | 6,136 | ||||||||
Natural Gas Swap FuturesA |
4 | August 2015 | 30,260 | 5,996 | ||||||||
Natural Gas Swap FuturesA |
4 | September 2015 | 30,110 | 6,146 | ||||||||
Natural Gas Swap FuturesA |
4 | October 2015 | 30,380 | 5,876 | ||||||||
Natural Gas Swap FuturesA |
8 | November 2015 | 63,400 | 15,132 | ||||||||
Natural Gas Swap FuturesA |
8 | December 2015 | 67,560 | 10,971 | ||||||||
Natural Gas Swap FuturesA |
8 | January 2016 | 70,620 | 7,911 | ||||||||
Natural Gas Swap FuturesA |
8 | February 2016 | 70,600 | 7,931 | ||||||||
Natural Gas Swap FuturesA |
8 | March 2016 | 69,760 | 8,771 | ||||||||
NY Harbor ULSD FuturesA |
5 | February 2015 | 385,056 | 12,058 | ||||||||
Silver FuturesA |
8 | March 2015 | 623,960 | 24,194 | ||||||||
Soybean FuturesA |
6 | March 2015 | 307,050 | 5,762 | ||||||||
Sugar #11 (World Markets) FuturesA |
71 | March 2015 | 1,154,630 | 144,942 | ||||||||
WTI Crude FuturesA |
8 | February 2015 | 426,160 | 55,427 | ||||||||
|
|
|
|
|||||||||
$ | 11,506,876 | $ | 700,939 | |||||||||
|
|
|
|
See accompanying notes 21 |
American Beacon AHL Managed Futures Strategy FundSM
Schedule of Investments
December 31, 2014
Currency Futures Contracts
Description |
Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
||||||||
Australian Dollar Currency Futures |
20 | March 2015 | $ | 1,624,400 | $ | 28,748 | ||||||
Canadian Dollar Currency Futures |
26 | March 2015 | 2,235,220 | 29,178 | ||||||||
Euro FX Currency Futures |
33 | March 2015 | 4,994,137 | 73,978 | ||||||||
Japanese Yen Currency Futures |
29 | March 2015 | 3,026,513 | (34,925 | ) | |||||||
Mexican Peso Futures |
51 | March 2015 | 1,721,250 | 80,756 | ||||||||
Pound Sterling Currency Futures |
53 | March 2015 | 5,157,563 | (2,489 | ) | |||||||
Swiss Franc Currency Futures |
14 | March 2015 | 1,762,950 | 25,463 | ||||||||
|
|
|
|
|||||||||
$ | 20,522,033 | $ | 200,709 | |||||||||
|
|
|
|
Equity Futures Contracts
Description |
Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
||||||||
FTSE 100 Index Futures |
3 | March 2015 | $ | 304,979 | $ | (11,933 | ) | |||||
FTSE/JSE Top 40 Index Futures |
8 | March 2015 | 306,079 | (13,510 | ) | |||||||
FTSE/MIB Index Futures |
2 | March 2015 | 230,744 | (7,797 | ) | |||||||
KOSPI 200 Index Futures |
26 | March 2015 | 2,885,866 | 5,570 | ||||||||
S&P/TSX 60 Index Futures |
2 | March 2015 | 293,200 | (16,113 | ) | |||||||
|
|
|
|
|||||||||
$ | 4,020,868 | $ | (43,783 | ) | ||||||||
|
|
|
|
Forward Currency Contracts Open at December 31, 2014:
Type |
Currency |
Principal Amount |
Settlement Date |
Counterparty |
Unrealized Appreciation |
Unrealized (Depreciation) |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||
Buy |
CAD | 15,158 | 1/15/2015 | DUB | $ | 53 | $ | | $ | 53 | ||||||||||
Buy |
JPY | 29,517 | 1/15/2015 | DUB | | (1,055 | ) | (1,055 | ) | |||||||||||
Buy |
KRW | 454,633 | 1/16/2015 | DUB | 1,550 | | 1,550 | |||||||||||||
Buy |
KRW | 454,633 | 1/16/2015 | DUB | | (5,370 | ) | (5,370 | ) | |||||||||||
Buy |
KRW | 454,633 | 1/16/2015 | DUB | | (4,437 | ) | (4,437 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | 67 | | 67 | |||||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (304 | ) | (304 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (81 | ) | (81 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | 290 | | 290 | |||||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (46 | ) | (46 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (125 | ) | (125 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (45 | ) | (45 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (172 | ) | (172 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (115 | ) | (115 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (203 | ) | (203 | ) | |||||||||||
Buy |
PHP | 391,175 | 1/7/2015 | DUB | | (710 | ) | (710 | ) | |||||||||||
Buy |
PHP | 391,175 | 1/7/2015 | DUB | | (53 | ) | (53 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (55 | ) | (55 | ) | |||||||||||
Buy |
PHP | 55,882 | 1/7/2015 | DUB | | (11 | ) | (11 | ) | |||||||||||
Buy |
PHP | 221,863 | 7/1/2015 | DUB | | (1,043 | ) | (1,043 | ) | |||||||||||
Buy |
PHP | 221,863 | 7/1/2015 | DUB | | (1,277 | ) | (1,277 | ) | |||||||||||
Buy |
PHP | 221,863 | 7/1/2015 | DUB | | (1,302 | ) | (1,302 | ) | |||||||||||
Buy |
TWD | 79,112 | 1/14/2015 | DUB | | (418 | ) | (418 | ) | |||||||||||
Buy |
TWD | 79,112 | 1/14/2015 | DUB | | (737 | ) | (737 | ) | |||||||||||
Buy |
TWD | 79,112 | 1/14/2015 | DUB | 384 | | 384 | |||||||||||||
Sell |
EUR | 277,426 | 1/15/2015 | DUB | 10,550 | | 10,550 | |||||||||||||
Sell |
INR | 5,208,048 | 1/23/2015 | DUB | | (24,666 | ) | (24,666 | ) | |||||||||||
Sell |
INR | 512,914 | 1/23/2015 | DUB | | (3,869 | ) | (3,869 | ) | |||||||||||
Sell |
JPY | 7,276 | 1/15/2015 | DUB | 61 | | 61 | |||||||||||||
Sell |
KRW | 4,273,548 | 1/16/2015 | DUB | | (17,843 | ) | (17,843 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (170 | ) | (170 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 790 | | 790 | |||||||||||||
Sell |
MYR | 785,996 | 1/13/2015 | DUB | | (2,587 | ) | (2,587 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 163 | | 163 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (129 | ) | (129 | ) | |||||||||||
Sell |
MYR | 142,908 | 1/13/2015 | DUB | | (451 | ) | (451 | ) |
See accompanying notes 22 |
American Beacon AHL Managed Futures Strategy FundSM
Schedule of Investments
December 31, 2014
Type |
Currency |
Principal Amount |
Settlement Date |
Counterparty |
Unrealized Appreciation |
Unrealized (Depreciation) |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | $ | 784 | $ | | $ | 784 | ||||||||||
Sell |
MYR | 2,500,897 | 1/13/2015 | DUB | 28,297 | | 28,297 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 344 | | 344 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 302 | | 302 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 377 | | 377 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (22 | ) | (22 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 17 | | 17 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 130 | | 130 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (62 | ) | (62 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (24 | ) | (24 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (79 | ) | (79 | ) | |||||||||||
Sell |
MYR | 285,817 | 1/13/2015 | DUB | | (657 | ) | (657 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (91 | ) | (91 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (209 | ) | (209 | ) | |||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | 21 | | 21 | |||||||||||||
Sell |
MYR | 71,454 | 1/13/2015 | DUB | | (113 | ) | (113 | ) | |||||||||||
Sell |
PHP | 1,676,464 | 1/7/2015 | DUB | | (10,389 | ) | (10,389 | ) | |||||||||||
Sell |
PHP | 55,882 | 1/7/2015 | DUB | | (91 | ) | (91 | ) | |||||||||||
Sell |
PHP | 55,882 | 1/7/2015 | DUB | | (70 | ) | (70 | ) | |||||||||||
Sell |
PHP | 55,882 | 1/7/2015 | DUB | | (19 | ) | (19 | ) | |||||||||||
Sell |
SEK | 6,981 | 1/15/2015 | DUB | 72 | | 72 | |||||||||||||
Sell |
TWD | 2,136,011 | 1/14/2015 | DUB | 24,127 | | 24,127 | |||||||||||||
Sell |
TWD | 158,223 | 1/14/2015 | DUB | | (767 | ) | (767 | ) | |||||||||||
Buy |
BRL | 1,580,017 | 1/5/2015 | RBS | 2,255 | | 2,255 | |||||||||||||
Buy |
BRL | 188,097 | 1/5/2015 | RBS | | (6,516 | ) | (6,516 | ) | |||||||||||
Buy |
BRL | 225,717 | 1/5/2015 | RBS | | (8,907 | ) | (8,907 | ) | |||||||||||
Buy |
CLP | 82,299 | 1/14/2015 | RBS | | (187 | ) | (187 | ) | |||||||||||
Buy |
CNY | 1,688,690 | 1/23/2015 | RBS | | (15,578 | ) | (15,578 | ) | |||||||||||
Buy |
CNY | 80,414 | 1/23/2015 | RBS | | (894 | ) | (894 | ) | |||||||||||
Buy |
CNY | 80,414 | 1/23/2015 | RBS | | (1,146 | ) | (1,146 | ) | |||||||||||
Buy |
CNY | 482,483 | 1/23/2015 | RBS | | (5,663 | ) | (5,663 | ) | |||||||||||
Buy |
CNY | 80,414 | 1/23/2015 | RBS | | (973 | ) | (973 | ) | |||||||||||
Buy |
CNY | 160,828 | 1/23/2015 | RBS | | (1,973 | ) | (1,973 | ) | |||||||||||
Buy |
COP | 84,128 | 1/21/2015 | RBS | | (3,284 | ) | (3,284 | ) | |||||||||||
Buy |
COP | 252,384 | 1/21/2015 | RBS | | (12,544 | ) | (12,544 | ) | |||||||||||
Buy |
COP | 84,128 | 1/21/2015 | RBS | | (3,505 | ) | (3,505 | ) | |||||||||||
Sell |
AUD | 105,907 | 1/15/2015 | RBS | 968 | | 968 | |||||||||||||
Sell |
BRL | 1,730,494 | 1/5/2015 | RBS | 52,728 | | 52,728 | |||||||||||||
Sell |
BRL | 263,336 | 1/5/2015 | RBS | 4,470 | | 4,470 | |||||||||||||
Sell |
BRL | 186,633 | 2/3/2015 | RBS | 2,038 | | 2,038 | |||||||||||||
Sell |
BRL | 1,567,713 | 2/3/2015 | RBS | | (3,322 | ) | (3,322 | ) | |||||||||||
Sell |
BRL | 186,633 | 2/3/2015 | RBS | | (588 | ) | (588 | ) | |||||||||||
Sell |
BRL | 186,633 | 2/3/2015 | RBS | | (1,338 | ) | (1,338 | ) | |||||||||||
Sell |
CLP | 740,694 | 1/14/2015 | RBS | 5,019 | | 5,019 | |||||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | 510 | | 510 | |||||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | 748 | | 748 | |||||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | 1,245 | | 1,245 | |||||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | 1,034 | | 1,034 | |||||||||||||
Sell |
CLP | 164,599 | 1/14/2015 | RBS | | (1,441 | ) | (1,441 | ) | |||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | | (1,269 | ) | (1,269 | ) | |||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | | (756 | ) | (756 | ) | |||||||||||
Sell |
CLP | 411,496 | 1/14/2015 | RBS | | (2,629 | ) | (2,629 | ) | |||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | | (925 | ) | (925 | ) | |||||||||||
Sell |
CLP | 82,299 | 1/14/2015 | RBS | | (1,276 | ) | (1,276 | ) | |||||||||||
Sell |
CLP | 81,764 | 3/26/2015 | RBS | | (124 | ) | (124 | ) | |||||||||||
Sell |
COP | 673,025 | 1/21/2015 | RBS | 66,722 | | 66,722 | |||||||||||||
Sell |
COP | 84,128 | 1/21/2015 | RBS | 2,307 | | 2,307 | |||||||||||||
Sell |
COP | 84,128 | 1/21/2015 | RBS | 2,374 | | 2,374 | |||||||||||||
Sell |
HKD | 162,535 | 1/15/2015 | RBS | 17 | | 17 | |||||||||||||
Sell |
KRW | 227,328 | 1/15/2015 | RBS | | (1,156 | ) | (1,156 | ) | |||||||||||
Sell |
PEN | 667,348 | 1/28/2015 | RBS | 10,871 | | 10,871 | |||||||||||||
Sell |
PEN | 250,256 | 1/28/2015 | RBS | 3,294 | | 3,294 |
See accompanying notes 23 |
American Beacon AHL Managed Futures Strategy FundSM
Schedule of Investments
December 31, 2014
Type |
Currency |
Principal Amount |
Settlement Date |
Counterparty |
Unrealized Appreciation |
Unrealized (Depreciation) |
Net Unrealized Appreciation (Depreciation) |
|||||||||||||
Sell |
PEN | 83,419 | 1/28/2015 | RBS | $ | 898 | $ | | $ | 898 | ||||||||||
Sell |
PEN | 82,811 | 2/26/2015 | RBS | 1,445 | | 1,445 | |||||||||||||
Sell |
PEN | 82,811 | 2/26/2015 | RBS | 509 | | 509 | |||||||||||||
Sell |
PEN | 331,242 | 2/26/2015 | RBS | 3,354 | | 3,354 | |||||||||||||
Sell |
PEN | 82,811 | 2/26/2015 | RBS | | (129 | ) | (129 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||||
$ | 231,185 | $ | (155,990 | ) | $ | 75,195 | ||||||||||||||
|
|
|
|
|
|
A | All or a portion represents positions held by the American Beacon Cayman Managed Futures Strategy Fund, Ltd. |
Glossary
Counterparty Abbreviations:
DUB | Deutsche Bank AG | RBS | Royal Bank of Scotland PLC | |||||||
Currency Abbreviations: | ||||||||||
AUD | Australian Dollar | EUR | Euro | PEN | Peruvian Nuevo | |||||
BRL | Brazilian Real | HKD | Hong Kong Dollar | PHP | Philippine Peso | |||||
CAD | Canadian Dollar | INR | Indian Rupee | SEK | Swedish Krona | |||||
CLP | Chilean Peso | JPY | Japanese Yen | TWD | Taiwan Dollar | |||||
CNY | Chinese Yuan | KRW | South Korean Won | |||||||
COP | Columbian Peso | MYR | Malaysian Ringgit |
See accompanying notes 24 |
American Beacon Bahl & Gaynor Small Cap Growth FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 25 |
American Beacon Bahl & Gaynor Small Cap Growth FundSM
Schedule of Investments
December 31, 2014
Futures Contracts Open on December 31, 2014:
Description |
Type | Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
|||||||||
Russell 2000 Mini Index March Futures |
Long | 1 | March 2015 | $ | 120,070 | $ | 4,335 | |||||||
|
|
|
|
|||||||||||
$ | 120,070 | $ | 4,335 | |||||||||||
|
|
|
|
See accompanying notes 26 |
American Beacon Bridgeway Large Cap Value FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 27 |
American Beacon Bridgeway Large Cap Value FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 28 |
American Beacon Bridgeway Large Cap Value FundSM
Schedule of Investments
December 31, 2014
Futures Contracts Open on December 31, 2014:
Description |
Type | Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
|||||||||
S&P 500 Mini E Index March Futures |
Long | 158 | March 2015 | $ | 16,213,960 | $ | (168,879 | ) | ||||||
|
|
|
|
|||||||||||
$ | 16,213,960 | $ | (168,879 | ) | ||||||||||
|
|
|
|
See accompanying notes 29 |
American Beacon Holland Large Cap Growth FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 30 |
American Beacon Holland Large Cap Growth FundSM
Schedule of Investments
December 31, 2014
Futures Contracts Open on December 31, 2014:
Description |
Type | Number of Contracts |
Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) |
|||||||||
S&P 500 Mini E Index March Futures |
Long | 34 | March 2015 | $ | 3,489,080 | $ | 35,146 | |||||||
|
|
|
|
|||||||||||
$ | 3,489,080 | $ | 35,146 | |||||||||||
|
|
|
|
See accompanying notes 31 |
American Beacon Stephens Small Cap Growth FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 32 |
American Beacon Stephens Small Cap Growth FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 33 |
American Beacon Stephens Mid-Cap Growth FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 34 |
American Beacon Stephens Mid-Cap Growth FundSM
Schedule of Investments
December 31, 2014
See accompanying notes 35 |
American Beacon FundsSM
Statements of Assets and Liabilities
December 31, 2014 (in thousands, except share and per share amounts)
AHL Managed Futures Strategy Fund |
Bahl & Gaynor Small Cap Growth Fund |
Bridgeway Large Cap Value Fund |
||||||||||
Assets: |
| |||||||||||
Investments in unaffiliated securities, at fair value A |
$ | 37,943 | $ | 3,988 | $ | 1,223,479 | ||||||
Cash |
310 | | | |||||||||
Deposit with brokers for futures contracts |
2,918 | 5 | 538 | |||||||||
Dividends and interest receivable |
| 3 | 1,048 | |||||||||
Receivable for investments sold |
93 | | 5,231 | |||||||||
Receivable for fund shares sold |
126 | | 12,590 | |||||||||
Receivable for expense reimbursement (Note 2) |
104 | 32 | | |||||||||
Receivable for variation margin on open futures contracts |
316 | | | |||||||||
Unrealized appreciation from foreign currency contracts |
231 | | | |||||||||
Prepaid expenses |
44 | 37 | 41 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
42,085 | 4,065 | 1,242,927 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities: |
||||||||||||
Payable for investments purchased |
| | 1,334 | |||||||||
Payable for fund shares redeemed |
| | 1,603 | |||||||||
Payable for variation margin from open futures contracts |
80 | 1 | 161 | |||||||||
Payable under excess expense reimbursement plan (Note 2) |
| | 73 | |||||||||
Management and investment advisory fees payable |
33 | 2 | 387 | |||||||||
Administrative service and service fees payable |
13 | 1 | 556 | |||||||||
Transfer agent fees payable |
2 | 2 | 17 | |||||||||
Custody and fund accounting fees payable |
| | 8 | |||||||||
Professional fees payable |
32 | 20 | 22 | |||||||||
Payable for prospectus and shareholder reports |
2 | 3 | 29 | |||||||||
Unrealized depreciation from foreign currency contracts |
156 | | | |||||||||
Cash overdraft |
93 | | | |||||||||
Other liabilities |
| | 2 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
411 | 29 | 4,192 | |||||||||
|
|
|
|
|
|
|||||||
Net Assets |
$ | 41,674 | $ | 4,036 | $ | 1,238,735 | ||||||
|
|
|
|
|
|
|||||||
Analysis of Net Assets: |
||||||||||||
Paid-in-capital |
39,029 | 3,797 | 1,114,922 | |||||||||
Undistributed (or overdistribution of) net investment income |
212 | 1 | | |||||||||
Accumulated net realized gain |
744 | 6 | 2,660 | |||||||||
Unrealized appreciation of investments |
| 228 | 121,322 | |||||||||
Unrealized appreciation of currency transactions |
75 | | | |||||||||
Unrealized appreciation or (depreciation) of futures contracts |
1,614 | 4 | (169 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net assets |
$ | 41,674 | $ | 4,036 | $ | 1,238,735 | ||||||
|
|
|
|
|
|
|||||||
Shares outstanding at no par value (unlimited shares authorized): |
||||||||||||
Institutional Class |
2,627,859 | 289,665 | 13,129,742 | |||||||||
|
|
|
|
|
|
|||||||
Y Class |
42,467 | 36,194 | 4,998,038 | |||||||||
|
|
|
|
|
|
|||||||
Investor Class |
276,720 | 22,365 | 28,128,293 | |||||||||
|
|
|
|
|
|
|||||||
A Class |
825,273 | 15,313 | 4,383,703 | |||||||||
|
|
|
|
|
|
|||||||
C Class |
36,837 | 13,372 | 1,441,033 | |||||||||
|
|
|
|
|
|
|||||||
Net assets (not in thousands): |
||||||||||||
Institutional Class |
$ | 28,765,259 | $ | 3,102,721 | $ | 313,660,568 | ||||||
|
|
|
|
|
|
|||||||
Y Class |
$ | 464,644 | $ | 387,622 | $ | 119,162,044 | ||||||
|
|
|
|
|
|
|||||||
Investor Class |
$ | 3,023,636 | $ | 239,138 | $ | 668,659,150 | ||||||
|
|
|
|
|
|
|||||||
A Class |
$ | 9,019,308 | $ | 163,704 | $ | 103,716,652 | ||||||
|
|
|
|
|
|
|||||||
C Class |
$ | 401,475 | $ | 142,469 | $ | 33,536,254 | ||||||
|
|
|
|
|
|
See accompanying notes 36 |
American Beacon FundsSM
Statements of Assets and Liabilities
December 31, 2014 (in thousands, except share and per share amounts)
AHL Managed Futures Strategy Fund |
Bahl & Gaynor Small Cap Growth Fund |
Bridgeway Large Cap Value Fund |
||||||||||
Net asset value, offering and redemption price per share: |
| |||||||||||
Institutional Class |
$ | 10.95 | $ | 10.71 | $ | 23.89 | ||||||
|
|
|
|
|
|
|||||||
Y Class |
$ | 10.94 | $ | 10.71 | $ | 23.84 | ||||||
|
|
|
|
|
|
|||||||
Investor Class |
$ | 10.93 | $ | 10.69 | $ | 23.77 | ||||||
|
|
|
|
|
|
|||||||
A Class |
$ | 10.93 | $ | 10.69 | $ | 23.66 | ||||||
|
|
|
|
|
|
|||||||
A Class (offering price) |
$ | 11.60 | $ | 11.34 | $ | 25.10 | ||||||
|
|
|
|
|
|
|||||||
C Class |
$ | 10.90 | $ | 10.65 | $ | 23.27 | ||||||
|
|
|
|
|
|
|||||||
A Cost of investments in unaffiliated securities |
$ | 37,943 | $ | 3,760 | $ | 1,102,157 |
See accompanying notes 37 |
American Beacon FundsSM
Statements of Assets and Liabilities
December 31, 2014 (in thousands, except share and per share amounts)
Holland Large Cap Growth Fund |
Stephens Small Cap Growth Fund |
Stephens Mid- Cap Growth Fund |
||||||||||
Assets: |
| |||||||||||
Investments in unaffiliated securities, at fair value A C |
$ | 100,842 | $ | 717,479 | $ | 130,162 | ||||||
Investments in affiliated securities, at fair value B |
| 43,153 | 5,242 | |||||||||
Deposit with brokers for futures contracts |
156 | | | |||||||||
Dividends and interest receivable |
54 | 26 | 10 | |||||||||
Receivable for investments sold |
| 854 | | |||||||||
Receivable for tax reclaims |
| 1 | | |||||||||
Receivable for fund shares sold |
39 | 498 | 161 | |||||||||
Prepaid expenses |
14 | 34 | 14 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
101,105 | 762,045 | 135,589 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities: |
||||||||||||
Payable for investments purchased |
| 6,437 | 902 | |||||||||
Payable for fund shares redeemed |
25 | 3,940 | 153 | |||||||||
Payable for variation margin from open futures contracts |
41 | | | |||||||||
Payable under excess expense reimbursement plan (Note 2) |
| 132 | 14 | |||||||||
Payable upon return of securities loaned |
| 59,279 | 5,685 | |||||||||
Management and investment advisory fees payable |
36 | 388 | 58 | |||||||||
Administrative service and service fees payable |
38 | 223 | 44 | |||||||||
Transfer agent fees payable |
2 | 25 | 6 | |||||||||
Custody and fund accounting fees payable |
| 8 | 2 | |||||||||
Professional fees payable |
20 | 26 | 23 | |||||||||
Payable for prospectus and shareholder reports |
3 | 19 | 7 | |||||||||
Other liabilities |
5 | 8 | 6 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
170 | 70,485 | 6,900 | |||||||||
|
|
|
|
|
|
|||||||
Net Assets |
$ | 100,935 | $ | 691,560 | $ | 128,689 | ||||||
|
|
|
|
|
|
|||||||
Analysis of Net Assets: |
||||||||||||
Paid-in-capital |
70,693 | 611,891 | 104,897 | |||||||||
Undistributed (or overdistribution of) net investment income |
| | | |||||||||
Accumulated net realized gain (loss) |
1,369 | (2,216 | ) | 805 | ||||||||
Unrealized appreciation of investments |
28,838 | 81,885 | 22,987 | |||||||||
Unrealized appreciation of futures contracts |
35 | | | |||||||||
|
|
|
|
|
|
|||||||
Net assets |
$ | 100,935 | $ | 691,560 | $ | 128,689 | ||||||
|
|
|
|
|
|
|||||||
Shares outstanding at no par value (unlimited shares authorized): |
||||||||||||
Institutional Class |
699,364 | 21,717,262 | 4,553,434 | |||||||||
|
|
|
|
|
|
|||||||
Y Class |
2,883 | 10,390,157 | 161,805 | |||||||||
|
|
|
|
|
|
|||||||
Investor Class |
3,173,281 | 9,372,572 | 1,151,970 | |||||||||
|
|
|
|
|
|
|||||||
A Class |
39,861 | 621,381 | 974,329 | |||||||||
|
|
|
|
|
|
|||||||
C Class |
23,922 | 181,613 | 114,792 | |||||||||
|
|
|
|
|
|
|||||||
Net assets (not in thousands): |
||||||||||||
Institutional Class |
$ | 18,102,557 | $ | 359,958,471 | $ | 87,620,400 | ||||||
|
|
|
|
|
|
|||||||
Y Class |
$ | 74,361 | $ | 171,901,004 | $ | 3,109,192 | ||||||
|
|
|
|
|
|
|||||||
Investor Class |
$ | 81,153,971 | $ | 147,227,308 | $ | 19,551,562 | ||||||
|
|
|
|
|
|
|||||||
A Class |
$ | 1,011,971 | $ | 9,701,510 | $ | 16,505,844 | ||||||
|
|
|
|
|
|
|||||||
C Class |
$ | 592,178 | $ | 2,771,316 | $ | 1,901,906 | ||||||
|
|
|
|
|
|
|||||||
Net asset value, offering and redemption price per share: |
||||||||||||
Institutional Class |
$ | 25.88 | $ | 16.57 | $ | 19.24 | ||||||
|
|
|
|
|
|
|||||||
Y Class |
$ | 25.79 | $ | 16.54 | $ | 19.22 | ||||||
|
|
|
|
|
|
|||||||
Investor Class |
$ | 25.57 | $ | 15.71 | $ | 16.97 | ||||||
|
|
|
|
|
|
|||||||
A Class |
$ | 25.39 | $ | 15.61 | $ | 16.94 | ||||||
|
|
|
|
|
|
|||||||
A Class (offering price) |
$ | 26.94 | $ | 16.56 | $ | 17.97 | ||||||
|
|
|
|
|
|
|||||||
C Class |
$ | 24.75 | $ | 15.26 | $ | 16.57 | ||||||
|
|
|
|
|
|
|||||||
A Cost of investments in unaffiliated securities |
$ | 72,004 | $ | 635,594 | $ | 107,175 | ||||||
B Cost of investments in affiliated securities |
$ | | $ | 43,153 | $ | 5,242 | ||||||
C Fair value of securities on loan |
$ | | $ | 57,934 | $ | 5,565 |
See accompanying notes 38 |
American Beacon FundsSM
Statements of Operations
For the year ended December 31, 2014 (in thousands)
AHL Managed Futures Strategy Fund |
Bahl & Gaynor Small Cap Growth Fund |
Bridgeway Large Cap Value Fund |
||||||||||
Investment Income: |
||||||||||||
Dividend income from unaffiliated securities |
$ | 1,071 | $ | 23 | $ | 14,229 | ||||||
Interest income |
| | | |||||||||
|
|
|
|
|
|
|||||||
Total investment income |
1,071 | 23 | 14,229 | |||||||||
|
|
|
|
|
|
|||||||
Expenses: |
||||||||||||
Management and investment advisory fees (Note 2) |
112 | 9 | 2,968 | |||||||||
Administrative service fees (Note 2): |
||||||||||||
Institutional Class |
29 | 4 | 503 | |||||||||
Y Class |
| | 166 | |||||||||
Investor Class |
1 | | 1,400 | |||||||||
A Class |
2 | | 183 | |||||||||
C Class |
| | 42 | |||||||||
Transfer agent fees: |
||||||||||||
Institutional Class |
2 | 2 | 89 | |||||||||
Y Class |
2 | 2 | 3 | |||||||||
Investor Class |
2 | 2 | 19 | |||||||||
A Class |
2 | 2 | 8 | |||||||||
C Class |
2 | 2 | 2 | |||||||||
Custody and fund accounting fees |
1 | 3 | 63 | |||||||||
Professional fees |
334 | 70 | 51 | |||||||||
Registration fees and expenses |
29 | 37 | 121 | |||||||||
Service fees (Note 2): |
||||||||||||
Y Class |
| | 55 | |||||||||
Investor Class |
| | 1,699 | |||||||||
A Class |
1 | | 82 | |||||||||
C Class |
| | 20 | |||||||||
Distribution fees (Note 2): |
||||||||||||
A Class |
2 | | 136 | |||||||||
C Class |
| 1 | 133 | |||||||||
Prospectus and shareholder report expenses |
15 | 11 | 100 | |||||||||
Trustee fees |
| | 38 | |||||||||
Other expenses |
4 | 4 | 24 | |||||||||
|
|
|
|
|
|
|||||||
Total expenses |
540 | 149 | 7,905 | |||||||||
|
|
|
|
|
|
|||||||
Net fees waived and expenses reimbursed/recouped by Manager (Note 2) |
(371 | ) | (133 | ) | 92 | |||||||
|
|
|
|
|
|
|||||||
Net expenses |
169 | 16 | 7,997 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
902 | 7 | 6,232 | |||||||||
|
|
|
|
|
|
|||||||
Realized and unrealized gain (loss) from investments: |
||||||||||||
Net realized gain (loss) from: |
||||||||||||
Investments |
| 6 | 13,377 | |||||||||
Foreign currency transactions |
205 | | | |||||||||
Futures contracts |
1,034 | | 2,576 | |||||||||
Change in net unrealized appreciation or (depreciation) of: |
||||||||||||
Investments |
| 228 | 83,248 | |||||||||
Foreign currency transactions |
75 | | | |||||||||
Futures contracts |
1,614 | 4 | (426 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net gain from investments |
2,928 | 238 | 98,775 | |||||||||
|
|
|
|
|
|
|||||||
Net increase in net assets resulting from operations |
$ | 3,830 | $ | 245 | $ | 105,007 | ||||||
|
|
|
|
|
|
See accompanying notes 39 |
American Beacon FundsSM
Statements of Operations
For the year ended December 31, 2014 (in thousands)
Holland Large Cap Growth Fund |
Stephens Small Cap Growth Fund |
Stephens Mid-Cap Growth Fund |
||||||||||
Investment Income: |
||||||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A |
$ | 959 | $ | 2,058 | $ | 531 | ||||||
Income derived from securities lending, net |
| 1,378 | 96 | |||||||||
|
|
|
|
|
|
|||||||
Total investment income |
959 | 3,436 | 627 | |||||||||
|
|
|
|
|
|
|||||||
Expenses: |
||||||||||||
Management and investment advisory fees (Note 2) |
417 | 4,779 | 669 | |||||||||
Administrative service fees (Note 2): |
||||||||||||
Institutional Class |
52 | 1,048 | 218 | |||||||||
Y Class |
| 547 | 9 | |||||||||
Investor Class |
224 | 468 | 73 | |||||||||
A Class |
4 | 37 | 66 | |||||||||
C Class |
3 | 10 | 7 | |||||||||
Transfer agent fees: |
||||||||||||
Institutional Class |
1 | 158 | 48 | |||||||||
Y Class |
| 48 | | |||||||||
Investor Class |
8 | 13 | 4 | |||||||||
A Class |
| 2 | 3 | |||||||||
C Class |
| 1 | 1 | |||||||||
Custody and fund accounting fees |
13 | 58 | 15 | |||||||||
Professional fees |
35 | 56 | 38 | |||||||||
Registration fees and expenses |
58 | 110 | 79 | |||||||||
Service fees (Note 2): |
||||||||||||
Y Class |
| 182 | 3 | |||||||||
Investor Class |
198 | 412 | 64 | |||||||||
A Class |
2 | 16 | 28 | |||||||||
C Class |
1 | 4 | 3 | |||||||||
Distribution fees (Note 2): |
||||||||||||
A Class |
3 | 26 | 47 | |||||||||
C Class |
7 | 28 | 21 | |||||||||
Prospectus and shareholder report expenses |
6 | 69 | 11 | |||||||||
Trustee fees |
5 | 35 | 6 | |||||||||
Other expenses |
10 | 33 | 16 | |||||||||
|
|
|
|
|
|
|||||||
Total expenses |
1,047 | 8,140 | 1,429 | |||||||||
|
|
|
|
|
|
|||||||
Net fees waived and expenses reimbursed/recouped by Manager (Note 2) |
46 | 208 | (12 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net expenses |
1,093 | 8,348 | 1,417 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
(134 | ) | (4,912 | ) | (790 | ) | ||||||
|
|
|
|
|
|
|||||||
Realized and unrealized gain (loss) from investments: |
||||||||||||
Net realized gain (loss) from: |
||||||||||||
Investments |
9,874 | 31,911 | 8,718 | |||||||||
Commission recapture (Note 3) |
2 | | | |||||||||
Futures contracts |
430 | | | |||||||||
Change in net unrealized appreciation or (depreciation) of: |
||||||||||||
Investments |
(3,585 | ) | (54,645 | ) | (4,843 | ) | ||||||
Futures contracts |
(32 | ) | | | ||||||||
|
|
|
|
|
|
|||||||
Net gain (loss) from investments |
6,689 | (22,734 | ) | 3,875 | ||||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in net assets resulting from operations |
$ | 6,555 | $ | (27,646 | ) | $ | 3,085 | |||||
|
|
|
|
|
|
|||||||
A Foreign taxes |
| | 3 |
See accompanying notes 40 |
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
AHL Managed Futures Strategy Fund |
Bahl & Gaynor Small Cap Growth Fund |
Bridgeway Large Cap Value Fund |
||||||||||||||
From Aug. 19 to Dec. 31, 2014 |
From July 15 to Dec. 31, 2014 |
Year Ended Dec. 31, 2014 |
Year Ended Dec. 31, 2013 |
|||||||||||||
Increase (Decrease) in Net Assets: |
||||||||||||||||
Operations: |
||||||||||||||||
Net investment income |
$ | 902 | $ | 7 | $ | 6,232 | $ | 1,601 | ||||||||
Net realized gain from investments, foreign currency transactions, and futures contracts |
1,239 | 6 | 15,953 | 10,972 | ||||||||||||
Change in net unrealized appreciation or (depreciation) from investments, foreign currency transactions, and futures contracts |
1,689 | 232 | 82,822 | 33,594 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in net assets resulting from operations |
3,830 | 245 | 105,007 | 46,167 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Distributions to Shareholders: |
||||||||||||||||
Net investment income: |
||||||||||||||||
Institutional Class |
(774 | ) | (5 | ) | (2,129 | ) | (390 | ) | ||||||||
Y Class |
(12 | ) | (1 | ) | (792 | ) | (93 | ) | ||||||||
Investor Class |
(35 | ) | | (2,728 | ) | (1,089 | ) | |||||||||
A Class |
(243 | ) | | (488 | ) | (90 | ) | |||||||||
C Class |
(9 | ) | | (93 | ) | (2 | ) | |||||||||
Net realized gain from investments: |
||||||||||||||||
Institutional Class |
(210 | ) | | (4,669 | ) | (1,182 | ) | |||||||||
Y Class |
(3 | ) | | (1,747 | ) | (304 | ) | |||||||||
Investor Class |
(9 | ) | | (10,006 | ) | (4,130 | ) | |||||||||
A Class |
(66 | ) | | (1,551 | ) | (468 | ) | |||||||||
C Class |
(3 | ) | | (496 | ) | (36 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net distributions to shareholders |
(1,364 | ) | (6 | ) | (24,699 | ) | (7,784 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Capital Share Transactions: |
||||||||||||||||
Proceeds from sales of shares |
33,129 | 791 | 895,125 | 357,638 | ||||||||||||
Reinvestment of dividends and distributions |
1,364 | 6 | 24,214 | 7,700 | ||||||||||||
Cost of shares redeemed |
(285 | ) | | (168,475 | ) | (23,683 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in net assets from capital share transactions |
34,208 | 797 | 750,864 | 341,655 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in net assets |
36,674 | 1,036 | 831,172 | 380,038 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Assets: |
||||||||||||||||
Beginning of period |
5,000 | 3,000 | 407,563 | 27,525 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
End of Period * |
$ | 41,674 | $ | 4,036 | $ | 1,238,735 | $ | 407,563 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
* Includes undistributed (or overdistribution of) net investment income of |
$ | 212 | $ | 1 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes 41 |
American Beacon FundsSM
Statement of Changes in Net Assets (in thousands)
Holland Large Cap Growth Fund |
Stephens Small Cap Growth Fund |
Stephens Mid-Cap Growth Fund |
||||||||||||||||||||||
Year Ended Dec. 31, 2014 |
Year Ended Dec. 31, 2013 |
Year Ended Dec. 31, 2014 |
Year Ended Dec. 31, 2013 |
Year Ended Dec. 31, 2014 |
Year Ended Dec. 31, 2013 |
|||||||||||||||||||
Increase (Decrease) in Net Assets: |
||||||||||||||||||||||||
Operations: |
||||||||||||||||||||||||
Net investment (loss) |
$ | (134 | ) | $ | (124 | ) | $ | (4,912 | ) | $ | (3,334 | ) | $ | (790 | ) | $ | (636 | ) | ||||||
Net realized gain from investments, commission recapture, and futures contracts |
10,306 | 7,369 | 31,911 | 22,621 | 8,718 | 4,109 | ||||||||||||||||||
Change in net unrealized appreciation or (depreciation) from investments and futures contracts |
(3,617 | ) | 15,055 | (54,645 | ) | 116,658 | (4,843 | ) | 18,914 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations |
6,555 | 22,300 | (27,646 | ) | 135,945 | 3,085 | 22,387 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Distributions to Shareholders: |
||||||||||||||||||||||||
Net investment income: |
||||||||||||||||||||||||
Institutional Class |
| (3 | ) | | (56 | ) | | (43 | ) | |||||||||||||||
Y Class |
| | | (26 | ) | | (1 | ) | ||||||||||||||||
Investor Class |
| (3 | ) | | (12 | ) | | (18 | ) | |||||||||||||||
A Class |
| | | | | (9 | ) | |||||||||||||||||
C Class |
| | | | | (1 | ) | |||||||||||||||||
Net realized gain from investments: |
||||||||||||||||||||||||
Institutional Class |
(1,687 | ) | (1,173 | ) | (14,779 | ) | (11,150 | ) | (5,108 | ) | (2,006 | ) | ||||||||||||
Y Class |
(7 | ) | (6 | ) | (7,036 | ) | (6,930 | ) | (185 | ) | (53 | ) | ||||||||||||
Investor Class |
(7,647 | ) | (5,613 | ) | (6,460 | ) | (6,374 | ) | (1,310 | ) | (1,131 | ) | ||||||||||||
A Class |
(97 | ) | (78 | ) | (420 | ) | (404 | ) | (1,127 | ) | (624 | ) | ||||||||||||
C Class |
(59 | ) | (53 | ) | (122 | ) | (91 | ) | (130 | ) | (57 | ) | ||||||||||||
Return of Capital |
||||||||||||||||||||||||
Institutional Class |
| | | (666 | ) | | (50 | ) | ||||||||||||||||
Y Class |
| | | (432 | ) | | (1 | ) | ||||||||||||||||
Investor Class |
| | | (377 | ) | | (28 | ) | ||||||||||||||||
A Class |
| | | (24 | ) | | (16 | ) | ||||||||||||||||
C Class |
| | | (6 | ) | | (1 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net distributions to shareholders |
(9,497 | ) | (6,929 | ) | (28,817 | ) | (26,548 | ) | (7,860 | ) | (4,039 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Capital Share Transactions: |
||||||||||||||||||||||||
Proceeds from sales of shares |
12,416 | 17,319 | 226,308 | 437,144 | 54,295 | 51,249 | ||||||||||||||||||
Reinvestment of dividends and distributions |
9,472 | 6,889 | 28,166 | 25,225 | 7,117 | 3,826 | ||||||||||||||||||
Cost of shares redeemed |
(13,539 | ) | (13,009 | ) | (215,176 | ) | (71,212 | ) | (44,790 | ) | (14,149 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in net assets from capital share transactions |
8,349 | 11,199 | 39,298 | 391,157 | 16,622 | 40,926 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets |
5,407 | 26,570 | (17,165 | ) | 500,554 | 11,847 | 59,274 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net Assets: |
||||||||||||||||||||||||
Beginning of period |
95,528 | 68,958 | 708,725 | 208,171 | 116,842 | 57,568 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
End of Period * |
$ | 100,935 | $ | 95,528 | $ | 691,560 | $ | 708,725 | $ | 128,689 | $ | 116,842 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
* Includes undistributed (or overdistribution of) net investment income of |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes 42 |
American Beacon FundsSM
December 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the Trust), which is comprised of thirty-one Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the Act), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon AHL Managed Futures Strategy Fund, the American Beacon Bahl & Gaynor Small Cap Growth Fund, the American Beacon Bridgeway Large Cap Value Fund, the American Beacon Holland Large Cap Growth Fund, the American Beacon Stephens Small Cap Growth Fund, and the American Beacon Stephens Mid-Cap Growth Fund (each a Fund and collectively, the Funds), each a series of the Trust.
American Beacon Advisors, Inc. (the Manager) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
The Manager has closed the Stephens Small Cap Growth Fund to new shareholders as of the close of business on December 31, 2014. Existing shareholders as of that date may continue to purchase, redeem, or exchange shares of the Funds on any business day, which is any day the New York Stock Exchange is open for business.
Class Disclosure
July 15, 2014 was the inception date of all classes of the Bahl & Gaynor Small Cap Growth Fund. August 19, 2014 was the inception date of all classes of the AHL Managed Futures Strategy 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.
New Accounting Pronouncements
In June 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-08, Financial Services Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, which amends the criteria that define an investment company and clarifies the measurement guidance and requires new disclosures for investment companies. Under the ASU, an entity that is registered under the Investment Company Act of 1940 automatically qualifies as an investment company. The ASU was effective for the periods ending December 31, 2013. Management has evaluated the implications of the ASU and determined that adoption thereof will not have a material impact on the financial statements.
43
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
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 year ended December 31, 2014 were as follows (in thousands):
Fund |
Management Fee Rate |
Management Fee |
Amounts paid to Investment Advisors |
Amounts Paid to Manager |
||||||||||||
AHL Managed Futures Strategy |
1.05 | % | $ | 112 | $ | 107 | $ | 5 | ||||||||
Bahl & Gaynor Small Cap Growth |
0.56 | % | 9 | 8 | 1 | |||||||||||
Bridgeway Large Cap Value |
0.39 | % | 2,968 | 2,589 | 379 | |||||||||||
Holland Large Cap Growth |
0.44 | % | 417 | 370 | 47 | |||||||||||
Stephens Small Cap Growth |
0.68 | % | 4,779 | 4,276 | 503 | |||||||||||
Stephens Mid-Cap Growth |
0.55 | % | 669 | 597 | 72 |
As compensation for services provided by the Manager in connection with securities lending activities conducted by the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 25% of such loan fees. This fee is included in Income derived from securities lending and management and investment advisory fees on the Statements of Operations. During the year ended December 31, 2014, securities lending fees paid to the Manager were $152,784 and $11,880 for the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds, respectively.
Administration Agreement
The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to each Fund. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, and Investor Classes of the Funds. Prior to July 1, 2014, the Manager received 0.40% of the average daily net assets of the A and C Classes of each Fund. Beginning July 1, 2014, the Manager received 0.30% of the average daily net assets of the A and C Classes of each Fund.
Distribution Plans
The Funds, except for the 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.
44
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
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 Fund.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the MM Select Fund) or the U.S. Government Money Market Select Fund (the USG Select Fund) (collectively, the Select Funds). The Select Funds and the Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as the investment advisor to the Select Funds and receives Management and Administration fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended December 31, 2014, the Manager earned $47,406 and $7,158 from the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds securities lending collateral, respectively invested in the Select 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 year ended December 31, 2014, the Stephens Small Cap Growth Fund borrowed on average $1,307,476 for 5 days at 0.70% with interest charges of $125.89 and the Stephens Mid-Cap Growth Fund borrowed on average $1,196,466 for 21 days at 0.70% with interest charges of $479.05. 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 Funds expense cap. For the year ended December 31, 2014, the Manager waived or reimbursed expenses as follows:
Expense Cap | ||||||||||||
Fund |
Class | 1/1/14 to 6/30/14 |
7/1/14 to 12/31/14 |
Reimbursed or (Recovered) Expenses |
Expiration | |||||||
AHL Managed Futures Strategy* |
Institutional | N/A | 1.54% | $ | 330,492 | 2017 | ||||||
AHL Managed Futures Strategy* |
Y | N/A | 1.64% | 3,782 | 2017 | |||||||
AHL Managed Futures Strategy* |
Investor | N/A | 1.92% | 8,997 | 2017 | |||||||
AHL Managed Futures Strategy* |
A | N/A | 1.94% | 24,130 | 2017 | |||||||
AHL Managed Futures Strategy* |
C | N/A | 2.69% | 3,846 | 2017 | |||||||
Bahl & Gaynor Small Cap Growth** |
Institutional | N/A | 0.98% | 105,371 | 2017 | |||||||
Bahl & Gaynor Small Cap Growth** |
Y | N/A | 1.08% | 8,600 | 2017 | |||||||
Bahl & Gaynor Small Cap Growth** |
Investor | N/A | 1.36% | 6,478 | 2017 | |||||||
Bahl & Gaynor Small Cap Growth** |
A | N/A | 1.38% | 6,523 | 2017 | |||||||
Bahl & Gaynor Small Cap Growth** |
C | N/A | 2.13% | 5,932 | 2017 | |||||||
Bridgeway Large Cap Value |
Institutional | 0.84% | 0.84% | (75,063 | ) | 2017 | ||||||
Bridgeway Large Cap Value |
Y | N/A | N/A | (2,895 | ) | 2017 | ||||||
Bridgeway Large Cap Value |
A | 1.34% | 1.24% | (9,918 | ) | 2017 | ||||||
Bridgeway Large Cap Value |
C | 2.09% | 1.99% | (3,665 | ) | 2017 | ||||||
Holland Large Cap Growth |
Institutional | N/A | N/A | (654 | ) | 2017 | ||||||
Holland Large Cap Growth |
Y | N/A | N/A | 29 | 2017 | |||||||
Holland Large Cap Growth |
Investor | N/A | N/A | (45,562 | ) | 2017 | ||||||
Holland Large Cap Growth |
A | 1.39% | 1.29% | 99 | 2017 | |||||||
Holland Large Cap Growth |
C | 2.14% | 2.04% | 28 | 2017 |
45
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
Expense Cap | ||||||||||||
Fund |
Class | 1/1/14 to 6/30/14 |
7/1/14 to 12/31/14 |
Reimbursed or (Recovered) Expenses |
Expiration | |||||||
Stephens Small Cap Growth |
Institutional | 1.09% | 1.09% | $ | (95,567 | ) | 2017 | |||||
Stephens Small Cap Growth |
Y | 1.19% | 1.19% | (7,230 | ) | 2017 | ||||||
Stephens Small Cap Growth |
Investor | 1.35% | 1.35% | (103,365 | ) | 2017 | ||||||
Stephens Small Cap Growth |
A | N/A | 1.49% | (1,469 | ) | 2017 | ||||||
Stephens Small Cap Growth |
C | N/A | 2.24% | (277 | ) | 2017 | ||||||
Stephens Mid-Cap Growth |
Institutional | 0.99% | 0.99% | 37,188 | 2017 | |||||||
Stephens Mid-Cap Growth |
Y | 1.09% | 1.09% | (78 | ) | 2017 | ||||||
Stephens Mid-Cap Growth |
Investor | 1.37% | 1.37% | (26,034 | ) | 2017 | ||||||
Stephens Mid-Cap Growth |
A | 1.49% | 1.39% | 1,139 | 2017 | |||||||
Stephens Mid-Cap Growth |
C | 2.24% | 2.14% | 320 | 2017 |
* | August 19, 2014 is the inception date of the Fund. |
** | July 15, 2014 is the inception date of the Fund. |
Of these amounts, $72,957, $283, $131,402, and $14,005 was payable to the Manager at December 31, 2014 for the Bridgeway Large Cap Value, Holland Large Cap Growth, Stephens Small Cap Growth, and Stephens Mid-Cap Growth Funds, respectively. $103,966 and $32,017 was receivable from the Manager at December 31, 2014 for the AHL Managed Futures Strategy Fund and Bahl and Gaynor Small Cap Growth Funds, respectively. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The Funds did not record a liability for potential reimbursemtns due to the current assessment that reimbursements are unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund |
Recovered Expenses |
Excess Expense Carryover |
Expiration of Reimbursed Expenses | |||||||
Bridgeway Large Cap Value |
$ | 85,667 | $ | 108,637 | 2015 | |||||
Bridgeway Large Cap Value |
5,874 | 76,230 | 2016 | |||||||
Holland Large Cap Growth |
46,216 | 7,001 | 2015 | |||||||
Holland Large Cap Growth |
| 104 | 2016 | |||||||
Stephens Small Cap Growth |
169,735 | 9,511 | 2015 | |||||||
Stephens Small Cap Growth |
38,173 | 56,030 | 2016 | |||||||
Stephens Mid-Cap Growth |
26,112 | 90,237 | 2015 | |||||||
Stephens Mid-Cap Growth |
| 60,289 | 2016 |
The Manager recovered excess carryover expenses of $75,063 from the Institutional Class and $2,895 from the Y Class of the Bridgeway Large Cap Value Fund, expiring in 2015 and $9,918 from the A Class and $3,665 from the C Class of the Bridgeway Large Cap Value Fund, expiring in 2015 and 2016; $654 from the Institutional Class and $45,562 from the Investor Class of the Holland Large Cap Growth Fund, expiring in 2015; $95,567 from the Institutional Class and $7,230 from the Y Class of the Stephens Small Cap Growth Fund, expiring in 2015 and 2016, $103,365 from the Investor Class, $1,469 from the A Class, and $277 from the C Class of the Stephens Small Cap Growth Fund expiring in 2015; and $78 from the Y Class and $26,034 from the Investor Class of the Stephens Mid-Cap Growth Fund, expiring in 2015.
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 year ended December 31, 2014, Foreside collected $727, $74,460, $1,624, $8,909, and $16,971 for AHL Managed Futures Strategy, Bridgeway Large Cap Value, Holland Large Cap Growth, Stephens Small Cap Growth, and Stephens Mid-Cap Growth Funds, respectively, from the sale of Class A Shares.
46
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended December 31, 2014, there were no CDSC fees collected for Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended December 31, 2014, CDSC fees of $5,362, $891, and $1,816 were collected for the Bridgeway Large Cap Value, Stephens Small Cap Growth, and Stephens Mid-Cap Growth Funds, respectively.
Consolidation of Subsidiaries
The consolidated Schedule of Investments of the American Beacon AHL Managed Futures Strategy Fund (the CFC Fund), includes the accounts of the American Beacon Cayman Managed Futures Strategy Fund Ltd., a wholly-owned and controlled subsidiary (the Subsidiary). All inter-company accounts and transactions have been eliminated in consolidation for the CFC Fund.
For Federal tax purposes, taxable income for the CFC Fund and its Subsidiary are calculated separately. The Subsidiary is classified as a controlled foreign corporation under the Internal Revenue Code of 1986 (the Code) and the Subsidiarys taxable income is included in the calculation of the CFC Funds taxable income. Net losses of the Subsidiary are not deductible by the CFC Fund either in the current period or future periods. The Subsidiary has a fiscal year end of December 31st for financial statement consolidation purposes and a nonconforming tax year end of November 30th.
The CFC Fund may invest up to 25% of its total assets in the Subsidiary, which acts as an investment vehicle in order to effect certain investments consistent with the CFC Funds investment objectives and policies. The CFC Fund expects to achieve a significant portion of its exposure to commodities and commodities-related investments through investment in the Subsidiary. Unlike the CFC Fund, the Subsidiary may invest without limitation in commodities and commodities-related investments.
Inception Date of Subsidiary |
Subsidiary Net Assets at December 31, 2014 |
% of Total Net Assets of the Fund at December 31, 2014 |
Net Realized Gain (Loss) from Investments Held in Subsidiary |
|||||||||||||
American Beacon Cayman Managed Futures Strategy Fund, Ltd. |
August 19, 2014 | $ | 9,697,430 | 23.3 | % | $ | 1,067,121 |
CFTC Regulation
On August 13, 2013, the CFTC adopted rules to harmonize conflicting United States Securities and Exchange Commission (the SEC) and Commodity Futures Trading Commission (CFTC) disclosure, reporting and recordkeeping requirements for registered investment companies that do not meet an exemption from the definition of commodity pool. The harmonization rules provide that the CFTC will accept the SECs disclosure, reporting, and recordkeeping regime as substituted compliance for substantially all of the otherwise applicable CFTC regulations as long as such investment companies meet the applicable SEC requirements.
The AHL Managed Futures Strategy Fund is a commodity pool, as defined in the regulation of the CFTC and operated by the Manager, a commodity pool operator regulated by the CFTC.
47
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the Exchange), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (ETFs) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing net asset value (NAV) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates market value.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trusts Board of Trustees (the Board).
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (variation margin) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.
For valuation purposes, the last quoted price 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 NYSE 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 NYSE. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A Fund may also fair value securities in other situations, such as when a particular foreign market is closed but the Fund is open. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service.
Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, established by the Funds Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 | Quoted prices in active markets for identical securities. |
48
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
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 Funds own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
The Funds investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (U.S. GAAP) also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Funds assets and liabilities. During the year ended December 31, 2014, there were no transfers between levels. As of December 31, 2014, the investments were classified as described below (in thousands):
AHL Managed Futures Strategy Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Money Market Funds |
$ | 744 | $ | | $ | | $ | 744 | ||||||||
U.S. Treasury Bills |
| 37,199 | | 37,199 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 744 | $ | 37,199 | $ | | $ | 37,943 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Derivative InstrumentsAssets |
||||||||||||||||
Futures Contracts |
$ | 1,834 | $ | | $ | | $ | 1,834 | ||||||||
Forward Currency Contracts |
| 231 | | 231 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,834 | $ | 231 | $ | | $ | 2,065 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Derivative InstrumentsLiabilities |
||||||||||||||||
Futures Contracts |
$ | (219 | ) | $ | | $ | | $ | (219 | ) | ||||||
Forward Currency Contracts |
| (156 | ) | | (156 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | (219 | ) | $ | (156 | ) | $ | | $ | (375 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Bahl & Gaynor Small Cap Growth Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock |
$ | 3,793 | $ | | $ | | $ | 3,793 | ||||||||
Short-Term Investments Money Market Funds |
195 | | | 195 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 3,988 | $ | | $ | | $ | 3,988 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Derivative Instruments |
||||||||||||||||
Futures Contracts |
$ | 4 | $ | | $ | | $ | 4 | ||||||||
Bridgeway Large Cap Value Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock |
$ | 1,208,161 | $ | | $ | | $ | 1,208,161 | ||||||||
Short-Term Investments Money Market Funds |
15,318 | | | 15,318 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 1,223,479 | $ | | $ | | $ | 1,223,479 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Derivative Instruments |
||||||||||||||||
Futures Contracts |
$ | (169 | ) | $ | | $ | | $ | (169 | ) |
49
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
Holland Large Cap Growth Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock |
$ | 97,037 | $ | | $ | | $ | 97,037 | ||||||||
Short-Term Investments Money Market Funds |
3,805 | | | 3,805 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 100,842 | $ | | $ | | $ | 100,842 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Derivative Instruments |
||||||||||||||||
Futures Contracts |
$ | 35 | $ | | $ | | $ | 35 | ||||||||
Stephens Small Cap Growth Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock |
$ | 691,744 | $ | | $ | | $ | 691,744 | ||||||||
Short-Term Investments Money Market Funds |
9,609 | | | 9,609 | ||||||||||||
Securities Lending Collateral invested in Money Market Funds |
59,279 | | | 59,279 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 760,632 | $ | | $ | | $ | 760,632 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Stephens Mid-Cap Growth Fund* |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock |
$ | 123,620 | $ | | $ | | $ | 123,620 | ||||||||
Short-Term Investments Money Market Funds |
6,099 | | | 6,099 | ||||||||||||
Securities Lending Collateral invested in Money Market Funds |
5,685 | | | 5,685 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 135,404 | $ | | $ | | $ | 135,404 | ||||||||
|
|
|
|
|
|
|
|
* | Refer to the Schedule of Investments for industry information. |
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the 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.
50
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trusts organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trusts maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
4. Securities and Other Investments
American Depositary Receipts (ADRs)
ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Funds 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.
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.
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, unit investment trusts, and other investment companies of the
51
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
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 Funds 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 Funds 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 issuers portfolio securities.
5. Financial Derivative Instruments
Forward Foreign Currency Contracts
The AHL Managed Futures Strategy Fund 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 Fund bears 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 Fund also bears the credit risk if the counterparty fails to perform under the contract.
For the year ended December 31, 2014, the Fund entered into foreign currency exchange contracts primarily for hedging.
The Funds foreign currency contract notional dollar values outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following tables illustrate the average quarterly volume of foreign currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD (in thousands).
Average Forward Foreign Currency Notional Amount Outstanding at December 31, 2014 |
||||||||
Fund |
Purchased Contracts |
Sold Contracts |
||||||
AHL Managed Futures Strategy(1) |
$ | 13,424 | $ | 26,208 |
(1) | The averages presented are representative of the inception date to the period end. |
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.
52
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
During the year ended December 31, 2014, the Funds entered into future contracts primarily for exposing cash to markets.
The Funds average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding |
||||
Fund |
Year ended December 31, 2014 |
|||
AHL Managed Futures Strategy(1) |
1,308 | |||
Bahl & Gaynor Small Cap Growth(1) |
1 | |||
Bridgeway Large Cap Value |
128 | |||
Holland Large Cap Growth |
26 |
(1) | The averages presented are representative of the inception date to the period end. |
The following is a summary of the Funds derivative financial instruments categorized by risk exposure (in thousands) (1):
AHL Managed Futures Strategy
Fair values of financial instruments on the Statement of Assets and Liabilities as of December 31, 2014 (in thousands):
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||
Foreign exchange contracts |
Commodity contracts |
Currency Contracts |
Equity Contracts |
Interest Rate Contracts |
Total | |||||||||||||||||||
Assets: |
||||||||||||||||||||||||
Unrealized appreciation of foreign currency contracts |
$ | 231 | $ | | $ | | $ | | $ | | $ | 231 | ||||||||||||
Receivable for variation margin from open futures |
| 175 | 57 | 19 | 65 | 316 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 231 | $ | 175 | $ | 57 | $ | 19 | $ | 65 | $ | 547 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities: |
||||||||||||||||||||||||
Unrealized depreciation of foreign currency contracts |
$ | (156 | ) | $ | | $ | | $ | | $ | | $ | (156 | ) | ||||||||||
Payable for variation margin from open futures contracts(2) |
| (5 | ) | (7 | ) | (67 | ) | (1 | ) | (80 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | (156 | ) | $ | (5 | ) | $ | (7 | ) | $ | (67 | ) | $ | (1 | ) | $ | (236 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
The effect of financial derivative instruments on the Statement of Operations for the year ended December 31, 2014 (in thousands):
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||
Foreign exchange contracts |
Commodity contracts |
Currency Contracts |
Equity Contracts |
Interest Rate Contracts |
Total | |||||||||||||||||||
Realized gain (loss) of derivatives recognized as a result from operations: |
||||||||||||||||||||||||
Net realized gain (loss) from foreign currency transactions |
$ | 246 | $ | | $ | | $ | | $ | | $ | 246 | ||||||||||||
Net realized gain (loss) from futures contracts |
| | 1,062 | (808 | ) | 780 | 1,034 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 246 | $ | | $ | 1,062 | $ | (808 | ) | $ | 780 | $ | 1,280 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net change in unrealized appreciation or (depreciation) of derivatives recognized as a result from operations: |
||||||||||||||||||||||||
Change in net unrealized appreciation or (depreciation) from foreign currency contracts |
$ | 75 | $ | | $ | | $ | | $ | | $ | 75 | ||||||||||||
Change in net unrealized appreciation or (depreciation) from futures contracts |
| 628 | 281 | 77 | 629 | 1,615 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 75 | $ | 628 | $ | 281 | $ | 77 | $ | 629 | $ | 1,690 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
53
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
Fair Values of financial derivative instruments not accounted for as hedging instruments as of December 31, 2014:
Assets |
Derivative | Bahl & Gaynor Small Cap Growth |
Bridgeway Large Cap Value |
Holland Large Cap Growth |
||||||||||
Receivable for variation margin from open futures |
Equity Contracts |
$ | | $ | | $ | | |||||||
Liabilities |
||||||||||||||
Payable for variation margin from open futures contracts(2) |
Equity Contracts |
1 | 161 | 41 | ||||||||||
|
|
|
|
|
|
|||||||||
$ | (1 | ) | $ | (161 | ) | $ | (41 | ) | ||||||
|
|
|
|
|
|
The effect of financial derivative instruments not accounted for as hedging instruments during the year ended December 31, 2014:
Statements of Operations |
||||||||||||||
Net realized gain (loss) from futures contracts |
Equity Contracts |
$ | | $ | 2,576 | $ | 430 | |||||||
Change in net unrealized appreciation or (depreciation) of futures contracts |
Equity Contracts |
4 | (426 | ) | (32 | ) | ||||||||
|
|
|
|
|
|
|||||||||
$ | 4 | $ | 2,150 | $ | 398 | |||||||||
|
|
|
|
|
|
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investment footnotes. Only current days variation margin is reported within the Statement of Assets and Liabilities. |
6. Principal Risks
In the normal course of business the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuers debt and could reduce the Funds income. Similar to credit risk, the Funds may be exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Funds investments may be illiquid and the Funds may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.
Market Risks
The Funds investments in financial derivatives and other financial instruments expose the Funds to various risks such as, but not limited to, interest rate, foreign currency and equity risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed incomes market price to interest rate (i.e. yield) movements.
If the Funds invest directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject
54
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
to the risk that those currencies will decline in value relative to the base currency of the Funds, or, in the case of hedging positions, that the Funds base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Funds investments in foreign currency denominated securities may reduce the returns of the Fund.
The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
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 brokers 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 brokers customers, potentially resulting in losses to the Funds.
Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as Deposits with brokers for futures contracts and Payable to brokers for futures contracts, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Funds and additional required collateral is delivered to/pledged by the Funds on the next business day. To the extent amounts due to the Funds from its counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds 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 ISDA, 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
55
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements such as repurchase agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, December 31, 2014 (in thousands).
AHL Managed Futures Strategy
Offsetting of Financial Assets and Derivative Assets as of December 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(2) |
$ | 316 | $ | | $ | 316 | ||||||
Forward Currency Contracts |
231 | | 231 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 547 | $ | | $ | 547 | ||||||
|
|
|
|
|
|
Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2014
Description |
Gross Amounts of Recognized Liabilities |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
Futures Contracts (2) |
$ | (80 | ) | $ | | $ | (80 | ) | ||||
Forward Currency Contracts |
(156 | ) | | (156 | ) | |||||||
|
|
|
|
|
|
|||||||
$ | (236 | ) | $ | | $ | (236 | ) | |||||
|
|
|
|
|
|
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 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 |
|||||||||||||
BOA Merrill Lynch(2) |
$ | 155 | $ | | $ | | $ | 155 | ||||||||
JP Morgan(2) |
41 | | | 41 | ||||||||||||
Credit Suisse(2) |
40 | | | 40 | ||||||||||||
Deutsche Bank AG |
(11 | ) | | | (11 | ) | ||||||||||
Royal Bank of Scotland PLC |
86 | | | 86 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 311 | $ | | $ | | $ | 311 | ||||||||
|
|
|
|
|
|
|
|
(2) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
Bahl & Gaynor Small Cap Growth Fund
Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2014
Description |
Gross Amounts of Recognized Liabilities |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
Futures Contracts(2) |
$ | (1 | ) | $ | | $ | (1 | ) |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 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.(2) |
$ | (1 | ) | $ | | $ | | $ | (1 | ) |
(2) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
56
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
Bridgeway Large Cap Value Fund
Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2014
Description |
Gross Amounts of Recognized Liabilities |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
Futures Contracts(2) |
$ | (161 | ) | $ | | $ | (161 | ) |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 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.(2) |
$ | (161 | ) | $ | | $ | | $ | (161 | ) |
(2) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
Holland Large Cap Growth Fund
Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2014
Description |
Gross Amounts of Recognized Liabilities |
Gross Amounts Offset in the Statements of Assets and Liabilities |
Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities |
|||||||||
Futures Contracts(2) |
$ | (41 | ) | $ | | $ | (41 | ) |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 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.(2) |
$ | (41 | ) | $ | | $ | | $ | (41 | ) |
(2) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
Stephens Small Cap Growth
Offsetting of Financial Assets and Derivative Assets as of December 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 |
|||||||||
Securities on Loan |
$ | 57,934 | $ | | $ | 57,934 |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 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(1) |
Net Amount |
|||||||||||||
Barclays Capital, Inc. |
$ | 4,213 | $ | | $ | (4,213 | ) | $ | | |||||||
BNP Paraibas Prime Brokerage |
6,781 | | (6,781 | ) | | |||||||||||
Citigroup Global Markets, Inc. |
4,800 | | (4,800 | ) | | |||||||||||
Credit Suisse Securities LLC |
9,632 | | (9,632 | ) | | |||||||||||
Deutsche Bank Securities, Inc. |
14,261 | | (14,261 | ) | | |||||||||||
Goldman, Sachs & Co. |
5,119 | | (5,119 | ) | | |||||||||||
JPMorgan Clearing Corp. |
8,867 | | (8,867 | ) | | |||||||||||
Scotia Capital USA Inc. |
4,261 | | (4,261 | ) | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total: |
$ | 57,934 | $ | | $ | (57,934 | ) | $ | | |||||||
|
|
|
|
|
|
|
|
(1) | Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $59,279 has been received in connection with securities lending transactions. |
57
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
Stephens Mid-Cap Growth
Offsetting of Financial Assets and Derivative Assets as of December 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 |
|||||||||
Securities on Loan |
$ | 5,565 | $ | | $ | 5,565 |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 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(1) |
Net Amount |
|||||||||||||
Barclays Capital, Inc. |
$ | 1,347 | $ | | $ | (1,347 | ) | $ | | |||||||
BNP Paraibas Prime Brokerage |
1,284 | | (1,284 | ) | | |||||||||||
Citigroup Global Markets, Inc. |
688 | | (688 | ) | | |||||||||||
Deutsche bank Securities, Inc. |
1,078 | | (1,078 | ) | | |||||||||||
Goldman, Sachs & Co. |
372 | | (372 | ) | | |||||||||||
Merrill Lynch, Pierce, Fenner |
547 | | (547 | ) | | |||||||||||
UBS Securities, LLC |
249 | | (249 | ) | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total: |
$ | 5,565 | $ | | $ | (5,565 | ) | $ | | |||||||
|
|
|
|
|
|
|
|
(1) | Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $5,685 has been received in connection with securities lending transactions. |
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 December 31, 2014 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in Other expenses on the Statements of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
The tax character of distributions paid were as follows (in thousands):
58
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
AHL Managed Futures Strategy |
Bahl & Gaynor Small Cap Growth |
|||||||||||||||
Period Ended December 31, 2014 |
Period Ended December 31, 2014 |
|||||||||||||||
Distributions paid from: |
||||||||||||||||
Ordinary income* |
||||||||||||||||
Institutional Class |
$ | 863 | $ | 5 | ||||||||||||
Y Class |
13 | 1 | ||||||||||||||
Investor Class |
39 | | ||||||||||||||
A Class |
271 | | ||||||||||||||
C Class |
11 | | ||||||||||||||
Long-Term Capital Gain |
||||||||||||||||
Institutional Class |
121 | | ||||||||||||||
Y Class |
2 | | ||||||||||||||
Investor Class |
5 | | ||||||||||||||
A Class |
38 | | ||||||||||||||
C Class |
1 | | ||||||||||||||
|
|
|
|
|||||||||||||
Total distributions paid |
$ | 1,364 | $ | 6 | ||||||||||||
|
|
|
|
|||||||||||||
Bridgeway Large Cap Value | Holland Large Cap Growth | |||||||||||||||
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||||||||||||
Distributions paid from: |
||||||||||||||||
Ordinary income* |
||||||||||||||||
Institutional Class |
$ | 4,256 | $ | 601 | $ | 4 | $ | 17 | ||||||||
Y Class |
1,588 | 146 | | | ||||||||||||
Investor Class |
7,289 | 1,823 | 18 | 63 | ||||||||||||
A Class |
1,195 | 173 | 1 | 1 | ||||||||||||
C Class |
319 | 9 | | 1 | ||||||||||||
Long-Term Capital Gain |
||||||||||||||||
Institutional Class |
2,542 | 972 | 1,683 | 1,160 | ||||||||||||
Y Class |
951 | 250 | 7 | 6 | ||||||||||||
Investor Class |
5,445 | 3,396 | 7,629 | 5,552 | ||||||||||||
A Class |
844 | 385 | 96 | 77 | ||||||||||||
C Class |
270 | 29 | 59 | 52 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total distributions paid |
$ | 24,699 | $ | 7,784 | $ | 9,497 | $ | 6,929 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Stephens Small Cap Growth | Stephens Mid-Cap Growth | |||||||||||||||
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||||||||||||
Distributions paid from: |
||||||||||||||||
Ordinary income* |
||||||||||||||||
Institutional Class |
$ | | $ | 728 | $ | | $ | 43 | ||||||||
Y Class |
| 462 | | 1 | ||||||||||||
Investor Class |
| 393 | | 18 | ||||||||||||
A Class |
| 24 | | 9 | ||||||||||||
C Class |
| 6 | | 1 | ||||||||||||
Long-Term Capital Gain |
||||||||||||||||
Institutional Class |
14,779 | 10,478 | 5,108 | 2,006 | ||||||||||||
Y Class |
7,036 | 6,494 | 185 | 53 | ||||||||||||
Investor Class |
6,460 | 5,993 | 1,310 | 1,131 | ||||||||||||
A Class |
420 | 379 | 1,127 | 624 | ||||||||||||
C Class |
122 | 86 | 130 | 57 | ||||||||||||
Tax Return of Captial |
||||||||||||||||
Institutional Class |
| 666 | | 50 | ||||||||||||
Y Class |
| 432 | | 1 | ||||||||||||
Investor Class |
| 377 | | 28 | ||||||||||||
A Class |
| 24 | | 16 | ||||||||||||
C Class |
| 6 | | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total distributions paid |
$ | 28,817 | $ | 26,548 | $ | 7,860 | $ | 4,039 | ||||||||
|
|
|
|
|
|
|
|
59
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
As of December 31, 2014, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
AHL Managed Futures |
Bahl & Gaynor Small Cap Growth |
Bridgeway Large Cap Value |
Holland Large Cap Growth |
Stephens Small Cap Growth |
Stephens Mid-Cap Growth |
|||||||||||||||||||
Cost basis of investments for federal income tax purposes |
$ | 37,943 | $ | 3,760 | $ | 1,102,157 | $ | 72,227 | $ | 621,077 | $ | 106,937 | ||||||||||||
Unrealized appreciation |
| 355 | 147,396 | 29,675 | 112,978 | 26,428 | ||||||||||||||||||
Unrealized depreciation |
| (127 | ) | (26,074 | ) | (1,060 | ) | (32,702 | ) | (3,646 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net unrealized appreciation or (depreciation) |
| 228 | 121,322 | 28,615 | 80,276 | 22,782 | ||||||||||||||||||
Undistributed ordinary income |
867 | 8 | | | | | ||||||||||||||||||
Accumulated long-term gain or (loss) |
773 | 3 | 2,491 | 1,627 | (607 | ) | 1,010 | |||||||||||||||||
Other temporary differences |
1,005 | | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Distributable earnings or (deficits) |
$ | 2,645 | $ | 239 | $ | 123,813 | $ | 30,242 | $ | 79,669 | $ | 23,792 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or (depreciation) are attributable primarily to the tax deferral of losses from wash sales and the realization for tax purposes of unrealized gains or (losses) on certain derivative instruments.
Due to inherent differences in the recognition of income, expenses and realized gains or (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from the reclassifications of income from net operating losses used to offset short-term capital gains, non-utilization of net operating losses, tax return of capital, and dividend reclasses that have been reclassed as of December 31, 2014 (in thousands):
AHL Managed Futures |
Bahl & Gaynor Small Cap Growth |
Bridgeway Large Cap Value |
Holland Large Cap Growth |
Stephens Small Cap Growth |
Stephens Mid-Cap Growth |
|||||||||||||||||||
Paid-in-capital |
$ | (179 | ) | $ | | $ | | $ | (1 | ) | $ | (4,913 | ) | $ | (790 | ) | ||||||||
Undistributed net investment income |
383 | | (2 | ) | 134 | 4,912 | 790 | |||||||||||||||||
Accumulated net realized gain (loss) |
(204 | ) | | 2 | (133 | ) | 1 | | ||||||||||||||||
Unrealized appreciation or (depreciation) of investments and futures contracts |
| | | | | |
Under the Regulated Investment Company Modernization Act of 2010 (the RIC MOD), net capital losses recognized by Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses. Prior to RIC MOD, net capital losses incurred by the Funds were carried forward for eight years and treated as short-term losses. RIC MOD requires that post-enactment net capital losses be used before pre-enactment net capital losses.
For the fiscal year ended December 31, 2014, the Funds did not have capital loss carryforwards.
Net capital losses (in thousands) incurred after October 31, 2014 and within the taxable year are deemed to arise on the first business day of the Funds next taxable year. For the year ended December 31, 2014, the Bridgeway Large Cap Value Fund deferred $1,904 of short-term capital loss, the Stephens Small Cap Growth Fund deferred $607 of short-term capital loss, and the Holland Large Cap Growth Fund deferred $85 of short-term capital loss to January 1, 2015.
60
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2014 were as follows (in thousands):
AHL Managed Futures |
Bahl & Gaynor Small Cap Growth |
Bridgeway Large Cap Value |
Holland Large Cap Growth |
Stephens Small Cap Growth |
Stephens Mid-Cap Growth |
|||||||||||||||||||
Purchases (excluding U.S. government securities) |
$ | | $ | 3,937 | $ | 950,498 | $ | 25,030 | $ | 346,461 | $ | 49,297 | ||||||||||||
Sales and maturities (excluding U.S. government securities) |
| 378 | 228,972 | 28,049 | 320,522 | 44,660 |
9. Securities Lending
The Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds may lend their securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark to market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the Agent) in money market mutual funds, and other short-term investments, as designated by the Manager.
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retain 80%, 10%, and 10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive certain income associated with that security and any gain or loss in the market price that may occur during the term of the loan. In the case of domestic equities, the value of any dividend is received in the form of a substitute payment approximately equal to the dividend. In the case of foreign securities, a negotiated amount is received that is less than the actual dividend, but higher than the dividend amount minus the foreign tax that the Fund would be subject to on the dividend.
Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.
61
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
As of December 31, 2014, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):
Fund |
Fair Value of Securities on Loan |
Non-Cash Collateral |
Cash Collateral Posted by Borrower |
|||||||||
Stephens Small Cap Growth |
$ | 57,934 | $ | | $ | 59,279 | ||||||
Stephens Mid-Cap Growth |
5,565 | | 5,685 |
Cash collateral is listed on the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds Schedules of Investments and is shown on the Statements of Assets and Liabilities. Income earned on these investments, grossed up by the securities lending fees paid to the Manager, is included in Income derived from securities lending on the Statements of Operations.
Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Funds Schedules of Investments or Statements of Assets and Liabilities.
10. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds (dollars and shares (in thousands):
For the Year Ended December 31, 2014
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
AHL Managed Futures Strategy Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
2,078 | $ | 20,819 | 31 | $ | 342 | 269 | $ | 2,889 | |||||||||||||||
Reinvestment of dividends |
91 | 984 | 1 | 15 | 4 | 44 | ||||||||||||||||||
Shares redeemed |
(1 | ) | (6 | ) | | (3 | ) | (7 | ) | (73 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in shares outstanding |
2,168 | $ | 21,797 | 32 | $ | 354 | 266 | $ | 2,860 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
AHL Managed Futures Strategy Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
805 | $ | 8,803 | 26 | $ | 276 | ||||||||||
Reinvestment of dividends |
29 | 309 | 1 | 12 | ||||||||||||
Shares redeemed |
(18 | ) | (203 | ) | | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
816 | $ | 8,909 | 27 | $ | 288 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Bahl & Gaynor Small Cap Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
29 | $ | 295 | 26 | $ | 276 | 12 | $ | 130 | |||||||||||||||
Reinvestment of dividends |
1 | 5 | | 1 | | | ||||||||||||||||||
Shares redeemed |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in shares outstanding |
30 | $ | 300 | 26 | $ | 277 | 12 | $ | 130 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Bahl & Gaynor Small Cap Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
5 | $ | 55 | 4 | $ | 35 | ||||||||||
Reinvestment of dividends |
| | | | ||||||||||||
Shares redeemed |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
5 | $ | 55 | 4 | $ | 35 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Bridgeway Large Cap Value Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
10,620 | $ | 243,491 | 4,580 | $ | 105,825 | 19,278 | $ | 435,281 | |||||||||||||||
Reinvestment of dividends |
282 | 6,758 | 100 | 2,387 | 532 | 12,696 | ||||||||||||||||||
Shares redeemed |
(1,508 | ) | (34,472 | ) | (615 | ) | (14,093 | ) | (4,560 | ) | (103,940 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in shares outstanding |
9,394 | $ | 215,777 | 4,065 | $ | 94,119 | 15,250 | $ | 344,037 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
62
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
A Class | C Class | |||||||||||||||
Bridgeway Large Cap Value Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
3,516 | $ | 80,273 | 1,342 | $ | 30,255 | ||||||||||
Reinvestment of dividends |
78 | 1,862 | 22 | 511 | ||||||||||||
Shares redeemed |
(685 | ) | (15,181 | ) | (35 | ) | (789 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
2,909 | $ | 66,954 | 1,329 | $ | 29,977 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Holland Large Cap Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
30 | $ | 790 | 1 | $ | 20 | 406 | $ | 11,224 | |||||||||||||||
Reinvestment of dividends |
64 | 1,687 | | 7 | 296 | 7,645 | ||||||||||||||||||
Shares redeemed |
(8 | ) | (226 | ) | (1 | ) | (30 | ) | (466 | ) | (12,671 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in shares outstanding |
86 | $ | 2,251 | | $ | (3 | ) | 236 | $ | 6,198 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Holland Large Cap Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
11 | $ | 290 | 4 | $ | 92 | ||||||||||
Reinvestment of dividends |
4 | 92 | 2 | 41 | ||||||||||||
Shares redeemed |
(14 | ) | (373 | ) | (9 | ) | (239 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in shares outstanding |
1 | $ | 9 | (3 | ) | $ | (106 | ) | ||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Stephens Small Cap Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
7,803 | $ | 133,916 | 3,053 | $ | 52,340 | 2,277 | $ | 36,690 | |||||||||||||||
Reinvestment of dividends |
865 | 14,382 | 412 | 6,840 | 408 | 6,431 | ||||||||||||||||||
Shares redeemed |
(4,750 | ) | (80,142 | ) | (4,766 | ) | (78,398 | ) | (3,312 | ) | (52,961 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in shares outstanding |
3,918 | $ | 68,156 | (1,301 | ) | $ | (19,218 | ) | (627 | ) | $ | (9,840 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Stephens Small Cap Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
149 | $ | 2,425 | 59 | $ | 937 | ||||||||||
Reinvestment of dividends |
25 | 401 | 7 | 112 | ||||||||||||
Shares redeemed |
(200 | ) | (3,184 | ) | (31 | ) | (491 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in shares outstanding |
(26 | ) | $ | (358 | ) | 35 | $ | 558 | ||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Stephens Mid-Cap Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
2,114 | $ | 42,235 | 146 | $ | 2,898 | 200 | $ | 3,555 | |||||||||||||||
Reinvestment of dividends |
258 | 4,995 | 8 | 155 | 71 | 1,224 | ||||||||||||||||||
Shares redeemed |
(1,018 | ) | (20,206 | ) | (77 | ) | (1,500 | ) | (929 | ) | (15,848 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in shares outstanding |
1,354 | $ | 27,024 | 77 | $ | 1,553 | (658 | ) | $ | (11,069 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Stephens Mid-Cap Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
269 | $ | 4,753 | 49 | $ | 854 | ||||||||||
Reinvestment of dividends |
38 | 643 | 6 | 100 | ||||||||||||
Shares redeemed |
(377 | ) | (6,640 | ) | (34 | ) | (596 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in shares outstanding |
(70 | ) | $ | (1,244 | ) | 21 | $ | 358 | ||||||||
|
|
|
|
|
|
|
|
63
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
For the year ended December 31, 2013
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Bridgeway Large Cap Value Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
2,399 | $ | 47,501 | 957 | $ | 18,562 | 13,250 | $ | 260,496 | |||||||||||||||
Reinvestment of dividends |
74 | 1,549 | 19 | 395 | 249 | 5,209 | ||||||||||||||||||
Shares redeemed |
(420 | ) | (8,050 | ) | (46 | ) | (931 | ) | (651 | ) | (13,227 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in shares outstanding |
2,053 | $ | 41,000 | 930 | $ | 18,026 | 12,848 | $ | 252,478 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Bridgeway Large Cap Value Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
1,504 | $ | 28,959 | 109 | $ | 2,120 | ||||||||||
Reinvestment of dividends |
25 | 511 | 2 | 36 | ||||||||||||
Shares redeemed |
(74 | ) | (1,465 | ) | (1 | ) | (10 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
1,455 | $ | 28,005 | 110 | $ | 2,146 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Holland Large Cap Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
497 | $ | 12,868 | 5 | $ | 105 | 136 | $ | 3,442 | |||||||||||||||
Reinvestment of dividends |
45 | 1,177 | | 4 | 217 | 5,613 | ||||||||||||||||||
Shares redeemed |
(4 | ) | (107 | ) | (3 | ) | (69 | ) | (509 | ) | (12,635 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in shares outstanding |
538 | $ | 13,938 | 2 | $ | 40 | (156 | ) | $ | (3,580 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Holland Large Cap Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
19 | $ | 493 | 17 | $ | 411 | ||||||||||
Reinvestment of dividends |
2 | 57 | 1 | 38 | ||||||||||||
Shares redeemed |
(4 | ) | (93 | ) | (4 | ) | (105 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
17 | $ | 457 | 14 | $ | 344 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Stephens Small Cap Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
9,305 | $ | 150,456 | 11,641 | $ | 197,877 | 5,538 | $ | 80,195 | |||||||||||||||
Reinvestment of dividends |
665 | 11,559 | 414 | 7,255 | 358 | 5,922 | ||||||||||||||||||
Shares redeemed |
(2,206 | ) | (34,487 | ) | (715 | ) | (12,352 | ) | (1,513 | ) | (22,866 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in shares outstanding |
7,764 | $ | 127,528 | 11,340 | $ | 192,780 | 4,383 | $ | 63,251 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Stephens Small Cap Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
460 | $ | 6,830 | 121 | $ | 1,786 | ||||||||||
Reinvestment of dividends |
24 | 400 | 6 | 89 | ||||||||||||
Shares redeemed |
(89 | ) | (1,386 | ) | (8 | ) | (121 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
395 | $ | 5,844 | 119 | $ | 1,754 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Stephens Mid-Cap Growth Fund |
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold |
1,448 | $ | 27,514 | 72 | $ | 1,271 | 750 | $ | 11,862 | |||||||||||||||
Reinvestment of dividends |
106 | 2,043 | 2 | 47 | 66 | 1,134 | ||||||||||||||||||
Shares redeemed |
(371 | ) | (6,854 | ) | (14 | ) | (255 | ) | (350 | ) | (5,575 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase in shares outstanding |
1,183 | $ | 22,703 | 60 | $ | 1,063 | 466 | $ | 7,421 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Stephens Mid-Cap Growth Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
574 | $ | 9,470 | 70 | $ | 1,132 | ||||||||||
Reinvestment of dividends |
33 | 567 | 2 | 35 | ||||||||||||
Shares redeemed |
(91 | ) | (1,453 | ) | | (12 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
516 | $ | 8,584 | 72 | $ | 1,155 | ||||||||||
|
|
|
|
|
|
|
|
64
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
11. Subsequent Event
Agreement and Plan of Merger
On November 20, 2014, Lighthouse Holdings Parent, Inc. (LHPI), the indirect parent company of American Beacon Advisors, Inc., the Trusts investment manager, entered into an Agreement and Plan of Merger pursuant to which LHPI agreed to be acquired by investment funds managed by Kelso & Company, L.P. and Estancia Capital Management, LLC, both of which are private equity firms (Transaction). The Transaction is expected to close in the second calendar quarter of 2015, subject to customary closing conditions, including obtaining necessary client consents and approval from the Funds shareholders. There can be no assurance that the Transaction will be consummated as contemplated or that necessary conditions will be satisfied.
This change in control is deemed to be an assignment under the Investment Company Act of 1940 (the 1940 Act) of the Trusts existing investment management agreement with the Manager and the sub-advisory agreements between the Trusts, the Manager, and each sub-advisor to the Funds and will result in automatic termination of each agreement. A new investment management agreement has been submitted to the Funds shareholders for approval and the Funds Board of Trustees approved new agreements with each sub-advisor under substantially the same terms as the current agreements.
The Transaction is not expected to result in any change in the portfolio management of the Fund or in the Funds investment objectives or policies.
65
American Beacon AHL Managed Futures Strategy FundSM
(For a share outstanding throughout the period)
Institutional Class | Y Class | Investor Class | A Class | C Class | ||||||||||||||||
August 19 to Dec. 31, 2014A |
August 19 to Dec. 31, 2014A |
August 19 to Dec. 31, 2014A |
August 19 to Dec. 31, 2014A |
August 19 to Dec. 31, 2014A |
||||||||||||||||
Net asset value, beginning of period |
$ | 10 .00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||||||
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Income from investment operations: |
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Net investment income |
0.24 | 0.30 | 0.30 | 0.32 | 0.27 | |||||||||||||||
Net gains (losses) on investments (both realized and unrealized) |
1.10 | 1.03 | 1.02 | 1.00 | 1.02 | |||||||||||||||
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Total income (loss) from investment operations |
1.34 | 1.33 | 1.32 | 1.32 | 1.29 | |||||||||||||||
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Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
(0.31 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.31 | ) | ||||||||||
Distributions from net realized gains |
(0.08 | ) | (0.08 | ) | (0.08 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
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Total distributions |
(0.39 | ) | (0.39 | ) | (0.39 | ) | (0.39 | ) | (0.39 | ) | ||||||||||
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Net asset value, end of period |
$ | 10.95 | $ | 10.94 | $ | 10.93 | $ | 10.93 | $ | 10.90 | ||||||||||
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Total return B |
13.43 | %C | 13.33 | %C | 13.23 | %C | 13.23 | %C | 12.93 | %C | ||||||||||
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Ratios and supplemental data: |
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Net assets, end of period (in thousands) |
$ | 28,765 | $ | 465 | $ | 3,024 | $ | 9,019 | $ | 401 | ||||||||||
Ratios to average net assets: |
||||||||||||||||||||
Expenses, before reimbursements |
4.97 | %D | 7.71 | %D | 5.98 | %D | 5.31 | %D | 8.75 | %D | ||||||||||
Expenses, net of reimbursements |
1.54 | %D | 1.64 | %D | 1.92 | %D | 1.94 | %D | 2.68 | %D | ||||||||||
Net investment income, before expense reimbursements |
2.73 | %D | 12.50 | %D | 10.41 | %D | 32.48 | %D | 7.02 | %D | ||||||||||
Net investment income, net of reimbursements |
6.17 | %D | 18.58 | %D | 14.47 | %D | 35.85 | %D | 13.09 | %D | ||||||||||
Portfolio turnover rate |
| %E | | %E | | %E | | %E | | %E |
A | August 19, 2014 is the inception date of the AHL Managed Futures Strategy Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is calculated based on the lesser of long-term purchases or sales divided by the average long-term fair value during the period. The Fund did not invest in any long-term securities during the reporting period. |
66
American Beacon Bahl & Gaynor Small Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | Investor Class | A Class | C Class | ||||||||||||||||
July 15 to Dec. 31, 2014E |
July 15 to Dec. 31, 2014E |
July 15 to Dec. 31, 2014E |
July 15 to Dec. 31, 2014E |
July 15 to Dec. 31, 2014E |
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Net asset value, beginning of period |
$ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||||||
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Income from investment operations: |
||||||||||||||||||||
Net investment income (loss) |
0.02 | 0.01 | 0.01 | 0.00 | (0.02 | ) | ||||||||||||||
Net gains (losses) on investments (both realized and unrealized) |
0.71 | 0.72 | 0.70 | 0.71 | 0.69 | |||||||||||||||
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Total income (loss) from investment operations |
0.73 | 0.73 | 0.71 | 0.71 | 0.67 | |||||||||||||||
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Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
(0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | ||||||||||
Distributions from net realized gains |
| | | | | |||||||||||||||
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Total distributions |
(0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | ||||||||||
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Net asset value, end of period |
$ | 10.71 | $ | 10.71 | $ | 10.69 | $ | 10.69 | $ | 10.65 | ||||||||||
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Total return A |
7.28 | %B | 7.28 | %B | 7.08 | %B | 7.08 | %B | 6.68 | %B | ||||||||||
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Ratios and supplemental data: |
||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 3,103 | $ | 388 | $ | 239 | $ | 164 | $ | 142 | ||||||||||
Ratios to average net assets: |
||||||||||||||||||||
Expenses, before reimbursements |
8.98 | %C | 11.71 | %C | 12.62 | %C | 13.84 | %C | 13.72 | %C | ||||||||||
Expenses, net of reimbursements |
0.98 | %C | 1.08 | %C | 1.36 | %C | 1.38 | %C | 2.13 | %C | ||||||||||
Net investment (loss), before expense reimbursements |
(7.51 | )%C | (10.06 | )%C | (11.12 | )%C | (12.35 | )%C | (12.23 | )%C | ||||||||||
Net investment income (loss), net of reimbursements |
0.49 | %C | 0.57 | %C | 0.14 | %C | 0.10 | %C | (0.64 | )%C | ||||||||||
Portfolio turnover rate |
12 | %D | 12 | %D | 12 | %D | 12 | %D | 12 | %D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover rate is for the period from July 15, 2014 to December 31, 2014, and is not annualized. |
E | July 15, 2014 is the inception date of the Bahl & Gaynor Small Cap Growth Fund. |
67
American Beacon Bridgeway Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||
Year Ended December 31, |
Six Months Ended Dec. 31, 2012 |
Year Ended June 30, | ||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||
Net asset value, beginning of period |
$ | 21.39 | $ | 15.85 | $ | 14.80 | $ | 14.62 | $ | 11.44 | $ | 9.74 | ||||||||||||
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Income from investment operations: |
||||||||||||||||||||||||
Net investment income |
0.10 | 0.11 | 0.20 | 0.24 | 0.20 | A | 0.19 | A | ||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) |
2.94 | 5.87 | 1.14 | 0.12 | 3.21 | 1.73 | ||||||||||||||||||
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|||||||||||||
Total income (loss) from investment operations |
3.04 | 5.98 | 1.34 | 0.36 | 3.41 | 1.92 | ||||||||||||||||||
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Less distributions: |
||||||||||||||||||||||||
Dividends from net investment income |
(0.17 | ) | (0.11 | ) | (0.29 | ) | (0.18 | ) | (0.23 | ) | (0.22 | ) | ||||||||||||
Distributions from net realized gains |
(0.37 | ) | (0.33 | ) | | | | | ||||||||||||||||
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|||||||||||||
Total distributions |
(0.54 | ) | (0.44 | ) | (0.29 | ) | (0.18 | ) | (0.23 | ) | (0.22 | ) | ||||||||||||
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Net asset value, end of period |
$ | 23.89 | $ | 21.39 | $ | 15.85 | $ | 14.80 | $ | 14.62 | $ | 11.44 | ||||||||||||
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Total return B |
14.18 | % | 37.77 | % | 9.04 | %C | 2.60 | % | 30.02 | % | 19.65 | % | ||||||||||||
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Ratios and supplemental data: |
||||||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 313,661 | $ | 79,889 | $ | 26,669 | $ | 26,950 | $ | 29,647 | $ | 25,534 | ||||||||||||
Ratios to average net assets: |
||||||||||||||||||||||||
Expenses, before reimbursements or recoupments |
0.79 | % | 1.01 | % | 1.73 | %D | 1.30 | % | 1.17 | % | 1.11 | % | ||||||||||||
Expenses, net of reimbursements or recoupments |
0.84 | % | 0.84 | % | 0.84 | %D | 0.82 | % | 0.84 | % | 0.84 | % | ||||||||||||
Net investment income (loss), before reimbursements or recoupments |
1.08 | % | 0.98 | % | 1.38 | %D | 1.17 | % | 1.17 | % | 1.32 | % | ||||||||||||
Net investment income (loss), net of reimbursements or recoupments |
1.04 | % | 1.16 | % | 2.27 | %D | 1.66 | % | 1.50 | % | 1.58 | % | ||||||||||||
Portfolio turnover rate |
31 | % | 38 | % | 21 | %C | 36 | % | 43 | % | 49 | % |
A | Per share amounts calculated based on average daily shares outstanding during the period. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Commencement of operations. |
F | Portfolio turnover rate is for the period from July 1, 2011 to June 30, 2012. |
68
American Beacon Bridgeway Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | A Class | ||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, |
Six Dec. 31, |
Feb. 3E to June 30, |
Year Ended December 31, |
Six Dec. 31, |
Feb. 3E June 30, |
Year Ended December 31, |
Six Dec. 31, |
Feb. 3E June 30, |
||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2012 | 2014 | 2013 | 2012 | 2012 | 2014 | 2013 | 2012 | 2012 | |||||||||||||||||||||||||||||||||||
$ 21.35 | $ | 15.84 | $ | 14.80 | $ | 14.46 | $ | 21.28 | $ | 15.81 | $ | 14.78 | $ | 14.46 | $ | 21.22 | $ | 15.78 | $ | 14.77 | $ | 14.46 | ||||||||||||||||||||||||
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0.13 | 0.22 | 0.07 | 0.09 | 0.14 | 0.21 | 0.12 | 0.03 | 0.09 | 0.19 | 0.15 | 0.01 | |||||||||||||||||||||||||||||||||||
2.90 | 5.72 | 1.26 | 0.25 | 2.82 | 5.68 | 1.19 | 0.29 | 2.84 | 5.64 | 1.15 | 0.30 | |||||||||||||||||||||||||||||||||||
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3.03 | 5.94 | 1.33 | 0.34 | 2.96 | 5.89 | 1.31 | 0.32 | 2.93 | 5.83 | 1.30 | 0.31 | |||||||||||||||||||||||||||||||||||
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(0.17) | (0.10 | ) | (0.29 | ) | | (0.10 | ) | (0.09 | ) | (0.28 | ) | | (0.12 | ) | (0.06 | ) | (0.29 | ) | | |||||||||||||||||||||||||||
(0.37) | (0.33 | ) | | | (0.37 | ) | (0.33 | ) | | | (0.37 | ) | (0.33 | ) | | | ||||||||||||||||||||||||||||||
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(0.54) | (0.43 | ) | (0.29 | ) | | (0.47 | ) | (0.42 | ) | (0.28 | ) | | (0.49 | ) | (0.39 | ) | (0.29 | ) | | |||||||||||||||||||||||||||
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$ 23.84 | $ | 21.35 | $ | 15.84 | $ | 14.80 | $ | 23.77 | $ | 21.28 | $ | 15.81 | $ | 14.78 | $ | 23.66 | $ | 21.22 | $ | 15.78 | $ | 14.77 | ||||||||||||||||||||||||
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14.15 | % | 37.55 | % | 8.98 | %C | 2.35 | %C | 13.89 | % | 37.28 | % | 8.84 | %C | 2.21 | %C | 13.76 | % | 37.01 | % | 8.78 | %C | 2.14 | %C | |||||||||||||||||||||||
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$ 119,162 | $ | 19,914 | $ | 36 | $ | 5 | $ | 668,659 | $ | 274,114 | $ | 489 | $ | 215 | $ | 103,717 | $ | 31,300 | $ | 311 | $ | 276 | ||||||||||||||||||||||||
0.84 | % | 0.93 | % | 3.75 | %D | 144.38 | %D | 1.11 | % | 1.08 | % | 2.26 | %D | 18.30 | %D | 1.19 | % | 1.38 | % | 2.21 | %D | 15.39 | %D | |||||||||||||||||||||||
0.85 | % | 0.94 | % | 0.93 | %D | 0.94 | %D | 1.11 | % | 1.09 | % | 1.21 | %D | 1.22 | %D | 1.21 | % | 1.34 | % | 1.33 | %D | 1.34 | %D | |||||||||||||||||||||||
1.03 | % | 1.07 | % | (0.51 | )%D | (141.90 | )%D | 0.76 | % | 0.95 | % | 1.00 | %D | (15.48 | )%D | 0.69 | % | 0.61 | % | 0.90 | %D | (13.13 | )%D | |||||||||||||||||||||||
1.03 | % | 1.06 | % | 2.31 | %D | 1.54 | %D | 0.76 | % | 0.94 | % | 2.05 | %D | 1.59 | %D | 0.67 | % | 0.66 | % | 1.78 | %D | 0.92 | %D | |||||||||||||||||||||||
31 | % | 38 | % | 21 | %C | 36 | %F | 31 | % | 38 | % | 21 | %C | 36 | %F | 31 | % | 38 | % | 21 | %C | 36 | %F |
69
American Beacon Bridgeway Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||
Year Ended December 31, |
Six Months Ended Dec. 31, 2012 |
Feb. 3E to June 30, 2012 |
||||||||||||||
2014 | 2013 | |||||||||||||||
Net asset value, beginning of period |
$ | 21.00 | $ | 15.70 | $ | 14.73 | $ | 14.46 | ||||||||
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|||||||||
Income from investment operations: |
||||||||||||||||
Net investment income |
0.02 | 0.18 | 0.09 | 0.02 | ||||||||||||
Net gains (losses) on investments (both realized and unrealized) |
2.69 | 5.47 | 1.17 | 0.25 | ||||||||||||
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Total income (loss) from investment operations |
2.71 | 5.65 | 1.26 | 0.27 | ||||||||||||
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|||||||||
Less distributions: |
||||||||||||||||
Dividends from net investment income |
(0.07 | ) | (0.02 | ) | (0.29 | ) | | |||||||||
Distributions from net realized gains |
(0.37 | ) | (0.33 | ) | | | ||||||||||
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Total distributions |
(0.44 | ) | (0.35 | ) | (0.29 | ) | | |||||||||
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Net asset value, end of period |
$ | 23.27 | $ | 21.00 | $ | 15.70 | $ | 14.73 | ||||||||
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Total return B |
12.88 | % | 36.02 | % | 8.54 | %C | 1.87 | %C | ||||||||
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Ratios and supplemental data: |
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Net assets, end of period (in thousands) |
$ | 33,536 | $ | 2,346 | $ | 20 | $ | 14 | ||||||||
Ratios to average net assets: |
||||||||||||||||
Expenses, before reimbursements |
1.92 | % | 2.13 | % | 6.81 | %D | 64.88 | %D | ||||||||
Expenses, net of reimbursements |
1.94 | % | 2.09 | % | 1.77 | %D | 2.09 | %D | ||||||||
Net investment (loss), before reimbursements |
(0.05 | )% | (0.13 | )% | (3.55 | )%D | (62.47 | )%D | ||||||||
Net investment income (loss), net of reimbursements |
(0.08 | )% | (0.08 | )% | 1.49 | %D | 0.32 | %D | ||||||||
Portfolio turnover rate |
31 | % | 38 | % | 21 | %C | 36 | %F |
A | Per share amounts calculated based on average daily shares outstanding during the period. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Commencement of operations. |
F | Portfolio turnover rate is for the period from July 1, 2011 to June 30, 2012. |
70
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71
American Beacon Holland Large Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended December 31, | March 1A to Dec. 31, |
|||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period |
$ | 26.57 | $ | 21.60 | $ | 20.30 | $ | 20.00 | $ | 17.88 | ||||||||||
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Income from investment operations: |
||||||||||||||||||||
Net investment income (loss) |
0.03 | 0.02 | 0.09 | B | (0.02 | )C | (0.01 | )C | ||||||||||||
Net gains (losses) on investments (both realized and unrealized) |
1.94 | 7.02 | 2.47 | 0.71 | 2.61 | |||||||||||||||
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Total income (loss) from investment operations |
1.97 | 7.04 | 2.56 | 0.69 | 2.60 | |||||||||||||||
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Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
| (0.01 | ) | (0.08 | ) | | | |||||||||||||
Distributions from net realized gains on securities |
(2.66 | ) | (2.06 | ) | (1.18 | ) | (0.39 | ) | (0.48 | ) | ||||||||||
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Total distributions |
(2.66 | ) | (2.07 | ) | (1.26 | ) | (0.39 | ) | (0.48 | ) | ||||||||||
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Net asset value, end of period |
$ | 25.88 | $ | 26.57 | $ | 21.60 | $ | 20.30 | $ | 20.00 | ||||||||||
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Total return D |
7.31 | % | 32.73 | % | 12.57 | % | 3.47 | % | 14.58 | %E | ||||||||||
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Ratios and supplemental data: |
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Net assets, end of period (in thousands) |
$ | 18,103 | $ | 16,292 | $ | 1,619 | $ | 1,193 | $ | 1,126 | ||||||||||
Ratios to average net assets: |
||||||||||||||||||||
Expenses, before reimbursements or recoupments |
0.89 | % | 0.86 | % | 1.32 | % | 1.49 | % | 1.91 | %F | ||||||||||
Expenses, net of reimbursements or recoupments |
0.89 | % | 0.89 | % | 0.96 | % | 1.20 | % | 1.20 | %F | ||||||||||
Net investment income (loss), before expense reimbursements or recoupments |
0.14 | % | 0.24 | % | 0.07 | % | (0.38 | )% | (0.77 | )%F | ||||||||||
Net investment income (loss), net of reimbursements or recoupments |
0.13 | % | 0.21 | % | 0.43 | % | (0.09 | )% | 0.06 | %F | ||||||||||
Portfolio turnover rate |
27 | % | 29 | % | 18 | % | 12 | % | 18 | % |
A | Commencement of operations. |
B | For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period. |
C | The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
E | Not annualized. |
F | Annualized. |
G | Portfolio turnover rate is for the period from January 1, 2012 to December 31, 2012. |
72 |
American Beacon Holland Large Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | A Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, |
Mar. 23A to Dec. 31, |
Year Ended December 31, | Year Ended December 31, | Feb. 1A to Dec. 31, |
||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 26.53 | $ | 21.59 | $ | 23.00 | $ | 26.36 | $ | 21.52 | $ | 20.24 | $ | 19.97 | $ | 17.94 | $ | 26.22 | $ | 21.43 | $ | 20.23 | $ | 19.96 | $ | 17.40 | |||||||||||||||||||||||||
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(0.02 | ) | 0.02 | 0.09 | B | (0.04 | ) | (0.05 | ) | 0.02 | B | (0.05 | )C | (0.04 | )C | (0.08 | ) | (0.03 | ) | 0.03 | B | (0.05 | )C | (0.04 | )C | ||||||||||||||||||||||||||
1.94 | 6.98 | (0.26 | ) | 1.91 | 6.95 | 2.45 | 0.71 | 2.55 | 1.91 | 6.88 | 2.41 | 0.71 | 3.08 | |||||||||||||||||||||||||||||||||||||
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1.92 | 7.00 | (0.17 | ) | 1.87 | 6.90 | 2.47 | 0.66 | 2.51 | 1.83 | 6.85 | 2.44 | 0.66 | 3.04 | |||||||||||||||||||||||||||||||||||||
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| 0.00 | (0.06 | ) | | 0.00 | (0.01 | ) | | | | 0.00 | (0.06 | ) | | | |||||||||||||||||||||||||||||||||||
(2.66 | ) | (2.06 | ) | (1.18 | ) | (2.66 | ) | (2.06 | ) | (1.18 | ) | (0.39 | ) | (0.48 | ) | (2.66 | ) | (2.06 | ) | (1.18 | ) | (0.39 | ) | (0.48 | ) | |||||||||||||||||||||||||
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(2.66 | ) | (2.06 | ) | (1.24 | ) | (2.66 | ) | (2.06 | ) | (1.19 | ) | (0.39 | ) | (0.48 | ) | (2.66 | ) | (2.06 | ) | (1.24 | ) | (0.39 | ) | (0.48 | ) | |||||||||||||||||||||||||
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$ | 25.79 | $ | 26.53 | $ | 21.59 | $ | 25.57 | $ | 26.36 | $ | 21.52 | $ | 20.24 | $ | 19.97 | $ | 25.39 | $ | 26.22 | $ | 21.43 | $ | 20.23 | $ | 19.96 | |||||||||||||||||||||||||
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7.13 | % | 32.59 | % | (0.79 | )%E | 6.99 | % | 32.21 | % | 12.18 | % | 3.33 | % | 14.03 | % | 6.88 | % | 32.11 | % | 11.99 | % | 3.33 | % | 17.51 | %E | |||||||||||||||||||||||||
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$ | 74 | $ | 79 | $ | 23 | $ | 81,154 | $ | 77,426 | $ | 66,568 | $ | 58,682 | $ | 54,128 | $ | 1,012 | $ | 1,028 | $ | 467 | $ | 13 | $ | 12 | |||||||||||||||||||||||||
1.11 | % | 0.97 | % | 10.18 | %F | 1.15 | % | 1.26 | % | 1.44 | % | 1.64 | % | 1.77 | % | 1.35 | % | 1.40 | % | 2.73 | % | 10.06 | % | 42.81 | %F | |||||||||||||||||||||||||
1.08 | % | 0.99 | % | 0.98 | %F | 1.21 | % | 1.27 | % | 1.29 | % | 1.35 | % | 1.35 | % | 1.34 | % | 1.39 | % | 1.38 | % | 1.40 | % | 1.40 | %F | |||||||||||||||||||||||||
(0.10 | )% | 0.15 | % | (8.77 | )%F | (0.13 | )% | (0.17 | )% | (0.08 | )% | (0.53 | )% | (0.64 | )% | (0.32 | )% | (0.28 | )% | (0.97 | )% | (8.94 | )% | (41.83 | )%F | |||||||||||||||||||||||||
(0.06 | )% | 0.12 | % | 0.43 | %F | (0.19 | )% | (0.18 | )% | 0.07 | % | (0.24 | )% | (0.22 | )% | (0.31 | )% | (0.27 | )% | 0.37 | % | (0.28 | )% | (0.22 | )%F | |||||||||||||||||||||||||
27 | % | 29 | % | 18 | %G | 27 | % | 29 | % | 18 | % | 12 | % | 18 | % | 27 | % | 29 | % | 18 | % | 12 | % | 18 | % |
73 |
American Beacon Holland Large Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||
Year Ended December 31, |
Mar. 23A to Dec. 31, |
|||||||||||
2014 | 2013 | 2012 | ||||||||||
Net asset value, beginning of period |
$ | 25.82 | $ | 21.29 | $ | 22.90 | ||||||
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Income from investment operations: |
||||||||||||
Net investment income (loss) |
(0.36 | ) | (0.17 | ) | 0.01 | |||||||
Net gains (losses) on securities (both realized and unrealized) |
1.95 | 6.76 | (0.38 | ) | ||||||||
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Total income (loss) from investment operations |
1.59 | 6.59 | (0.37 | ) | ||||||||
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Less distributions: |
||||||||||||
Dividends from net investment income |
| 0.00 | (0.06 | ) | ||||||||
Distributions from net realized gains |
(2.66 | ) | (2.06 | ) | (1.18 | ) | ||||||
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Total distributions |
(2.66 | ) | (2.06 | ) | (1.24 | ) | ||||||
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Net asset value, end of period |
$ | 24.75 | $ | 25.82 | $ | 21.29 | ||||||
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Total return A |
6.05 | % | 31.10 | % | (1.65 | )%B | ||||||
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Ratios and supplemental data: |
||||||||||||
Net assets, end of period (in thousands) |
$ | 592 | $ | 703 | $ | 281 | ||||||
Ratios to average net assets (annualized): |
||||||||||||
Expenses, before reimbursements |
2.10 | % | 2.15 | % | 6.17 | %C | ||||||
Expenses, net of reimbursements |
2.09 | % | 2.14 | % | 2.12 | %C | ||||||
Net investment (loss), before expense reimbursements |
(1.07 | )% | (1.04 | )% | (3.85 | )%C | ||||||
Net investment income (loss), net of reimbursements |
(1.07 | )% | (1.03 | )% | 0.20 | %C | ||||||
Portfolio turnover rate |
27 | % | 29 | % | 18 | %G |
A | Commencement of operations. |
B | For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period. |
C | The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
E | Not annualized. |
F | Annualized. |
G | Portfolio turnover rate is for the period from January 1, 2012 to December 31, 2012. |
74 |
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75
American Beacon Stephens Small Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||||||
Year Ended December 31, |
One Month Ended Dec. 31, |
Year Ended November 30, | Year Ended December 31, |
One Month Ended Dec. 31, |
Feb. 24I to Nov. 30, |
|||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2012E | 2011E | 2010E | 2014 | 2013 | 2012 | 2012 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period |
$ | 17.83 | $ | 12.99 | $ | 13.54 | $ | 13.14 | $ | 12.03 | $ | 9.37 | $ | 17.81 | $ | 12.98 | $ | 13.54 | $ | 13.59 | ||||||||||||||||||||
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Income from investment operations: |
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Net investment income (loss) |
(0.07 | ) | (0.05 | ) | 0.06 | (0.04 | )H | (0.11 | )A | (0.09 | )A | (0.12 | ) | (0.04 | ) | 0.01 | (0.02 | ) | ||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) |
(0.49 | ) | 5.60 | 0.23 | 1.43 | 1.37 | 2.75 | (0.45 | ) | 5.58 | 0.27 | (0.03 | ) | |||||||||||||||||||||||||||
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Total income (loss) from investment operations |
(0.56 | ) | 5.55 | 0.29 | 1.39 | 1.26 | 2.66 | (0.57 | ) | 5.54 | 0.28 | (0.05 | ) | |||||||||||||||||||||||||||
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Less distributions: |
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Dividends from net investment income |
| 0.00 | | | | | | 0.00 | | | ||||||||||||||||||||||||||||||
Distributions from net realized gains |
(0.70 | ) | (0.67 | ) | (0.84 | ) | (0.99 | ) | (0.15 | ) | | (0.70 | ) | (0.68 | ) | (0.84 | ) | | ||||||||||||||||||||||
Return of capitalJ |
| (0.04 | ) | | | | | | (0.03 | ) | | | ||||||||||||||||||||||||||||
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Total distributions |
(0.70 | ) | (0.71 | ) | (0.84 | ) | (0.99 | ) | (0.15 | ) | | (0.70 | ) | (0.71 | ) | (0.84 | ) | | ||||||||||||||||||||||
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Redemption fees added to beneficial interests |
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Net asset value, end of period |
$ | 16.57 | $ | 17.83 | $ | 12.99 | $ | 13.54 | $ | 13.14 | $ | 12.03 | $ | 16.54 | $ | 17.81 | $ | 12.98 | $ | 13.54 | ||||||||||||||||||||
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Total return B |
(3.14 | )% | 42.93 | % | 2.15 | %C | 11.74 | % | 10.49 | % | 28.39 | % | (3.20 | )% | 42.88 | % | 2.07 | %C | (0.37 | )%C | ||||||||||||||||||||
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Ratios and supplemental data: |
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Net assets, end of period (in thousands) |
$ | 359,959 | $ | 317,341 | $ | 130,342 | $ | 88,815 | $ | 52,336 | $ | 39,169 | $ | 171,901 | $ | 208,196 | $ | 4,563 | $ | 2,699 | ||||||||||||||||||||
Ratios to average net assets: |
||||||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupmentsK |
1.08 | % | 1.11 | % | 1.20 | %D | 1.20 | % | 1.15 | % | 1.35 | % | 1.16 | % | 1.19 | % | 1.36 | %D | 2.05 | %D | ||||||||||||||||||||
Expenses, net of reimbursements or recoupmentsK |
1.10 | % | 1.09 | % | 1.06 | %D | 1.10 | % | 1.10 | % | 1.10 | % | 1.16 | % | 1.19 | % | 1.16 | %D | 1.21 | %D | ||||||||||||||||||||
Net investment income (loss), before reimbursements or recoupments |
(0.59 | )% | (0.73 | )% | 0.54 | %D | (0.84 | )% | (0.91 | )% | (1.09 | )% | (0.67 | )% | (0.79 | )% | 0.19 | %D | (1.57 | )%D | ||||||||||||||||||||
Net investment income (loss), net of reimbursements or recoupments |
(0.61 | )% | (0.71 | )% | 0.68 | %D | (0.74 | )% | (0.86 | )% | (0.84 | )% | (0.686 | )% | (0.78 | )% | 0.38 | %D | (0.73 | )%D | ||||||||||||||||||||
Portfolio turnover rate |
46 | % | 39 | % | 6 | %C | 45 | % | 36 | % | 66 | % | 46 | % | 39 | % | 6 | %C | 45 | %F |
A | The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Prior to the reorganization on February 24, 2012, the Institutional and Investor Classes were known as Class I and Class A, respectively. |
F | Portfolio turnover rate is for the period from December 1, 2011 through November 30, 2012. |
G | Amount represents less than $0.01 per share. |
H | For purposes of this calculation, the change in undistributed net investment income was derived by dividing the change in undistributed net investment income by shares outstanding at November 30, 2012. |
I | Commencement of operations. |
J | The tax return of capital is calculated based on outstanding shares at the time of distribution. |
K | Expense ratios may exceed stated expense caps in Note 2 due in part to security lending expense. |
76 |
American Beacon Stephens Small Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, |
One Month Ended Dec. 31, |
Year Ended November 30, | Year Ended December 31, |
One Month Ended Dec. 31, |
Feb. 24I to Nov. 30, |
Year Ended December 31, |
One Month Ended Dec. 31, |
Feb. 24I to Nov. 30, |
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2014 | 2013 | 2012 | 2012E | 2011E | 2010E | 2014 | 2013 | 2012 | 2012 | 2014 | 2013 | 2012 | 2012 | |||||||||||||||||||||||||||||||||||||||||
$ | 16.98 | $ | 12.42 | $ | 12.99 | $ | 12.67 | $ | 11.64 | $ | 9.09 | $ | 16.91 | $ | 12.40 | $ | 12.98 | $ | 13.07 | $ | 16.66 | $ | 12.32 | $ | 12.91 | $ | 13.07 | |||||||||||||||||||||||||||
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(0.16 | ) | (0.04 | ) | 0.02 | (0.06 | )H | (0.14 | )A | (0.11 | )A | (0.18 | ) | (0.10 | ) | 0.01 | (0.07 | ) | (0.24 | ) | (0.13 | ) | 0.00 | (0.06 | ) | ||||||||||||||||||||||||||||||
(0.41 | ) | 5.31 | 0.25 | 1.37 | 1.32 | 2.66 | (0.42 | ) | 5.32 | 0.25 | (0.02 | ) | (0.46 | ) | 5.18 | 0.25 | (0.10 | ) | ||||||||||||||||||||||||||||||||||||
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(0.57 | ) | 5.27 | 0.27 | 1.31 | 1.18 | 2.55 | (0.60 | ) | 5.22 | 0.26 | (0.09 | ) | (0.70 | ) | 5.05 | 0.25 | (0.16 | ) | ||||||||||||||||||||||||||||||||||||
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| 0.00 | | | | | | 0.00 | | | | 0.00 | | | |||||||||||||||||||||||||||||||||||||||||
(0.70 | ) | (0.69 | ) | (0.84 | ) | (0.99 | ) | (0.15 | ) | | (0.70 | ) | (0.71 | ) | (0.84 | ) | | (0.70 | ) | (0.71 | ) | (0.84 | ) | | ||||||||||||||||||||||||||||||
| (0.02 | ) | | | | | | (0.00 | )E | | | | | | | |||||||||||||||||||||||||||||||||||||||
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(0.70 | ) | (0.71 | ) | (0.84 | ) | (0.99 | ) | (0.15 | ) | | (0.70 | ) | (0.71 | ) | (0.84 | ) | | (0.70 | ) | (0.71 | ) | (0.84 | ) | | ||||||||||||||||||||||||||||||
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| | | | 0.00 | G | 0.00 | G | | | | | | | | | |||||||||||||||||||||||||||||||||||||||
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$ | 15.71 | $ | 16.98 | $ | 12.42 | $ | 12.99 | $ | 12.67 | $ | 11.64 | $ | 15.61 | $ | 16.91 | $ | 12.40 | $ | 12.98 | $ | 15.26 | $ | 16.66 | $ | 12.32 | $ | 12.91 | |||||||||||||||||||||||||||
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(3.35 | )% | 42.62 | % | 2.08 | %C | 11.44 | % | 10.15 | % | 28.05 | % | (3.54 | )% | 42.28 | % | 2.01 | %C | (0.69 | )%C | (4.20 | )% | 41.17 | % | 1.94 | %C | (1.22 | )%C | |||||||||||||||||||||||||||
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$ | 147,227 | $ | 169,799 | $ | 69,786 | $ | 67,506 | $ | 47,101 | $ | 45,911 | $ | 9,702 | $ | 10,942 | $ | 3,131 | $ | 2,941 | $ | 2,771 | $ | 2,447 | $ | 349 | $ | 343 | |||||||||||||||||||||||||||
1.31 | % | 1.39 | % | 1.62 | %D | 1.56 | % | 1.40 | % | 1.60 | % | 1.51 | % | 1.57 | % | 1.79 | %D | 2.08 | %D | 2.26 | % | 2.33 | % | 3.21 | %D | 6.15 | %D | |||||||||||||||||||||||||||
1.37 | % | 1.35 | % | 1.34 | %D | 1.36 | % | 1.35 | % | 1.35 | % | 1.52 | % | 1.59 | % | 1.58 | %D | 1.61 | %D | 2.27 | % | 2.34 | % | 2.33 | %D | 2.35 | %D | |||||||||||||||||||||||||||
(0.81 | )% | (1.01 | )% | 0.23 | %D | (1.20 | )% | (1.16 | )% | (1.33 | )% | (1.02 | )% | (1.18 | )% | 0.04 | %D | (1.68 | )%D | (1.76 | )% | (1.93 | )% | (1.36 | )%D | (5.71 | )%D | |||||||||||||||||||||||||||
(0.88 | )% | (0.96 | )% | 0.50 | %D | (1.00 | )% | (1.11 | )% | (1.08 | )% | (1.03 | )% | (1.20 | )% | 0.25 | %D | (1.21 | )%D | (1.77 | )% | (1.94 | )% | (0.48 | )%D | (1.91 | )%D | |||||||||||||||||||||||||||
46 | % | 39 | % | 6 | %C | 45 | % | 36 | % | 66 | % | 46 | % | 39 | % | 6 | %C | 45 | %F | 46 | % | 39 | % | 6 | %C | 45 | %F |
77 |
American Beacon Stephens Mid-Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||||||
Year Ended December 31, |
One Month Ended Dec. 31, |
Year Ended November 30, | Year Ended December 31, |
One Month Ended Dec. 31, |
Feb. 24A to |
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2014 | 2013 | 2012 | 2012B | 2011B | 2010B | 2014 | 2013 | 2012 | 2012 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period |
$ | 19.76 | $ | 15.38 | $ | 15.24 | $ | 13.69 | $ | 12.44 | $ | 9.63 | $ | 19.76 | $ | 15.38 | $ | 15.23 | $ | 15.09 | ||||||||||||||||||||
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Income from investment operations: |
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Net investment income (loss) |
(0.04 | ) | (0.05 | ) | 0.02 | | C | (0.10 | )D | (0.09 | )D | (0.06 | ) | (0.08 | ) | 0.02 | (0.03 | ) | ||||||||||||||||||||||
Net gains from investments (both realized and unrealized) |
0.72 | 5.12 | 0.20 | 1.55 | 1.35 | 2.90 | 0.72 | 5.15 | 0.21 | 0.17 | ||||||||||||||||||||||||||||||
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Total income from investment operations |
0.68 | 5.07 | 0.22 | 1.55 | 1.25 | 2.81 | 0.66 | 5.07 | 0.23 | 0.14 | ||||||||||||||||||||||||||||||
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Less distributions: |
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Dividends from net investment income |
| (0.01 | ) | | | | | | (0.01 | ) | | | ||||||||||||||||||||||||||||
Distributions from net realized gains on securities |
(1.20 | ) | (0.66 | ) | (0.08 | ) | | | | (1.20 | ) | (0.68 | ) | (0.08 | ) | | ||||||||||||||||||||||||
Tax return of capital J |
| (0.02 | ) | | | | | | (0.00 | )H | | | ||||||||||||||||||||||||||||
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Total distributions |
(1.20 | ) | (0.69 | ) | (0.08 | ) | | | | (1.20 | ) | (0.69 | ) | (0.08 | ) | | ||||||||||||||||||||||||
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Redemption fees added to beneficial interests |
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Net asset value, end of period |
$ | 19.24 | $ | 19.76 | $ | 15.38 | $ | 15.24 | $ | 13.69 | $ | 12.44 | $ | 19.22 | $ | 19.76 | $ | 15.38 | $ | 15.23 | ||||||||||||||||||||
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Total return E |
3.41 | % | 33.14 | % | 1.43 | %F | 11.32 | % | 10.05 | % | 29.18 | % | 3.31 | % | 33.14 | % | 1.50 | %F | 0.93 | %F | ||||||||||||||||||||
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Ratios and supplemental data: |
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Net assets, end of period (in thousands) |
$ | 87,620 | $ | 63,236 | $ | 31,005 | $ | 30,503 | $ | 13,208 | $ | 7,124 | $ | 3,109 | $ | 1,672 | $ | 374 | $ | 222 | ||||||||||||||||||||
Ratios to average net assets: |
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Expenses, before reimbursements or recoupmentsK |
1.05 | % | 1.12 | % | 1.31 | %G | 1.28 | % | 1.65 | % | 2.27 | % | 1.10 | % | 1.14 | % | 1.53 | %G | 3.85 | %G | ||||||||||||||||||||
Expenses, net of reimbursements or recoupmentsK |
1.00 | % | 0.99 | % | 0.99 | %G | 1.03 | % | 1.25 | % | 1.25 | % | 1.10 | % | 1.09 | % | 1.09 | %G | 1.09 | %G | ||||||||||||||||||||
Net investment income (loss), before reimbursements or recoupments |
(0.53 | )% | (0.70 | )% | 1.37 | %G | (0.62 | )% | (1.12 | )% | (1.81 | )% | (0.57 | )% | (0.73 | )% | 0.69 | %G | (3.09 | )%G | ||||||||||||||||||||
Net investment income (loss), net of reimbursements or recoupments |
(0.48 | )% | (0.58 | )% | 1.69 | %G | (0.37 | )% | (0.72 | )% | (0.79 | )% | (0.58 | )% | (0.68 | )% | 1.13 | %G | (0.33 | )%G | ||||||||||||||||||||
Portfolio turnover rate |
37 | % | 25 | % | 1 | %F | 27 | % | 30 | % | 20 | % | 37 | % | 25 | % | 1 | %F | 27 | %I |
A | Commencement of operations. |
B | Prior to the reorganization on February 24, 2012, the Institutional Class and Investor Classes were known as Class I and Class A, respectively. |
C | For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period. |
D | The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period. |
E | 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. |
F | Not annualized. |
G | Annualized. |
H | Amount represents less than $0.01 per share. |
I | Portfolio turnover rate is for the period from December 1, 2011 through November 30, 2012. |
J | The tax return of capital is calculated based on outstanding shares at the time of distribution. |
K | Expense ratios may exceed stated expense caps in Note 2 due in part to security lending expense. |
78 |
American Beacon Stephens Mid-Cap Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, |
One Month Ended Dec. 31, 2012 |
Year Ended November 30, | Year Ended December 31, |
One Month Ended Dec. 31, 2012 |
Feb. 24A to Nov. 30, 2012 |
Year Ended December 31, |
One Month Ended Dec. 31, 2012 |
Feb. 24A to Nov. 30, 2012 |
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2014 | 2013 | 2012B | 2011B | 2010B | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||
$ | 17.64 | $ | 13.83 | $ | 13.72 | $ | 12.36 | $ | 11.26 | $ | 8.74 | $ | 17.61 | $ | 13.83 | $ | 13.72 | $ | 13.62 | $ | 17.38 | $ | 13.75 | $ | 13.63 | $ | 13.62 | |||||||||||||||||||||||||||
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(0.36 | ) | (0.08 | ) | 0.02 | (0.14 | )C | (0.11 | )D | (0.10 | )D | (0.19 | ) | (0.10 | ) | 0.02 | (0.05 | ) | (0.27 | ) | (0.16 | ) | 0.02 | (0.04 | ) | ||||||||||||||||||||||||||||||
0.89 | 4.58 | 0.17 | 1.50 | 1.21 | 2.62 | 0.72 | 4.57 | 0.17 | 0.15 | 0.66 | 4.47 | 0.18 | 0.05 | |||||||||||||||||||||||||||||||||||||||||
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0.53 | 4.50 | 0.19 | 1.36 | 1.10 | 2.52 | 0.53 | 4.47 | 0.19 | 0.10 | 0.39 | 4.31 | 0.20 | 0.01 | |||||||||||||||||||||||||||||||||||||||||
| (0.01 | ) | | | | | | (0.01 | ) | | | | 0.00 | | | |||||||||||||||||||||||||||||||||||||||
(1.20 | ) | (0.68 | ) | (0.08 | ) | | | | (1.20 | ) | (0.68 | ) | (0.08 | ) | | (1.20 | ) | (0.68 | ) | (0.08 | ) | | ||||||||||||||||||||||||||||||||
| (0.00 | )H | | | | | | (0.00 | )H | | | | (0.00 | )H | | | ||||||||||||||||||||||||||||||||||||||
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(1.20 | ) | (0.69 | ) | (0.08 | ) | | | | (1.20 | ) | (0.69 | ) | (0.08 | ) | | (1.20 | ) | (0.68 | ) | (0.08 | ) | | ||||||||||||||||||||||||||||||||
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| | | | | 0.00 | H | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||
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$ | 16.97 | $ | 17.64 | $ | 13.83 | $ | 13.72 | $ | 12.36 | $ | 11.26 | $ | 16.94 | $ | 17.61 | $ | 13.83 | $ | 13.72 | $ | 16.57 | $ | 17.38 | $ | 13.75 | $ | 13.63 | |||||||||||||||||||||||||||
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2.97 | % | 32.71 | % | 1.37 | %F | 11.00 | % | 9.77 | % | 28.83 | % | 2.97 | % | 32.49 | % | 1.37 | %F | 0.73 | %F | 2.21 | % | 31.35 | % | 1.45 | %F | 0.07 | %F | |||||||||||||||||||||||||||
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$ | 19,552 | $ | 31,912 | $ | 18,585 | $ | 18,092 | $ | 20,034 | $ | 15,076 | $ | 16,506 | $ | 18,396 | $ | 7,302 | $ | 7,063 | $ | 1,902 | $ | 1,626 | $ | 302 | $ | 147 | |||||||||||||||||||||||||||
1.27 | % | 1.38 | % | 1.68 | %G | 1.67 | % | 1.91 | % | 2.52 | % | 1.45 | % | 1.57 | % | 1.81 | %G | 1.83 | %G | 2.22 | % | 2.28 | % | 2.68 | %G | 14.54 | %G | |||||||||||||||||||||||||||
1.38 | % | 1.37 | % | 1.37 | %G | 1.40 | % | 1.50 | % | 1.50 | % | 1.45 | % | 1.49 | % | 1.49 | %G | 1.49 | %G | 2.20 | % | 2.24 | % | 2.24 | %G | 2.24 | %G | |||||||||||||||||||||||||||
(0.77 | )% | (0.98 | )% | 0.94 | %G | (1.04 | )% | (1.35 | )% | (2.06 | )% | (0.94 | )% | (1.16 | )% | 0.86 | %G | (1.04 | )%G | (1.69 | )% | (1.87 | )% | 0.15 | %G | (13.65 | )%G | |||||||||||||||||||||||||||
(0.88 | )% | (0.97 | )% | 1.26 | %G | (0.76 | )% | (0.94 | )% | (1.04 | )% | (0.94 | )% | (1.09 | )% | 1.18 | %G | (0.70 | )%G | (1.68 | )% | (1.84 | )% | 0.59 | %G | (1.36 | )%G | |||||||||||||||||||||||||||
37 | % | 25 | % | 1 | %F | 27 | % | 30 | % | 20 | % | 37 | % | 25 | % | 1 | %F | 27 | %I | 37 | % | 25 | % | 1 | %F | 27 | %I |
79 |
American Beacon FundSM
Affirmation of the Commodity Pool Operator
December 31, 2014 (Unaudited)
To the best of my knowledge and belief, the information contained in the attached financial statements for the period from August 19, 2014 to December 31, 2014, is accurate and complete.
Melinda G. Heika, Treasurer
American Beacon Advisors, Inc.
Commodity Pool Operator for the American Beacon AHL Managed Futures Strategy Fund
80 |
American Beacon FundSM
Privacy Policy and Federal Tax Information
December 31, 2014 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
| information we receive from you on applications or other forms; |
| information about your transactions with us or our service providers; and |
| information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Funds is required to be provided to shareholders based upon the Funds income and distribution for the taxable year ended December 31, 2014. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2014.
The Funds designated the following items with regard to distributions paid during the fiscal year ended December 31, 2014. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
AHL Managed Futures |
Bahl & Gaynor Small Cap Growth |
Bridgeway Large Cap Value |
Holland Large Cap Growth |
Stephens Small Cap Growth |
Stephens Mid-Cap Growth |
|||||||||||||||||||
Corporate Dividends Received Deduction |
0.0 | % | 94.4 | % | 93.6 | % | 95.8 | % | 23.8 | % | 67.1 | % | ||||||||||||
Qualified Dividend Income |
0.0 | % | 100.0 | % | 100.0 | % | 0.0 | % | 0.0 | % | 0.0 | % |
The Funds designated the following as short-term capital gain distributions for the year ended December 31, 2014:
AHL Managed Futures Strategy Fund |
$ | 123,428 | ||
Bridgeway Large Cap Value Fund |
8,423,627 | |||
Holland Large Cap Growth Fund |
22,514 |
The Funds designated the following as long-term capital gain distributions for the year ended December 31, 2014:
AHL Managed Futures Strategy Fund |
$ | 167,258 | ||
Bridgeway Large Cap Value Fund |
10,051,326 | |||
Holland Large Cap Growth Fund |
9,474,250 | |||
Stephens Small Cap Growth Fund |
28,816,987 | |||
Stephens Mid-Cap Growth Fund |
7,860,125 |
Shareholders will receive notification in January 2015 of the appropriate tax information necessary to prepare their 2014 income tax returns.
81 |
Disclosure Regarding the Board of Trustees Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
At its February 18, 2014 meeting, the Board of Trustees (Board) considered: (1) the approval of the Management Agreement between American Beacon Advisors, Inc. (Manager) and the American Beacon Funds (Trust) on behalf of American Beacon Bahl & Gaynor Small Cap Growth Fund, a new series of the Trust (Bahl & Gaynor Fund); and (2) the approval of a new investment advisory agreement among the Manager, Bahl & Gaynor Inc. (Bahl & Gaynor) and the Trust with respect to the Bahl & Gaynor Fund (Bahl & Gaynor Agreement).
Approval of Management Agreement on Behalf of the Bahl & Gaynor 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 Bahl & Gaynor 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 Bahl & Gaynor Fund; identification of the professional personnel who are proposed to be assigned primary responsibility for managing the Bahl & Gaynor 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 Boards 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 or its committees considered at its February 18, 2014 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 these 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 (6) any other benefits derived or anticipated to be derived by the Manager from its relationship with the Bahl & Gaynor 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. 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 interest of the Bahl & Gaynor 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 Managers key investment personnel. At the May meeting, the Board also considered the Managers investment approach and goal to provide consistent above average long-term performance at a low cost on behalf of the Existing Funds and the Managers culture of compliance and support for compliance operations that reduces risks to the Existing Funds. The Board noted the Managers representation that the advisory and related services proposed to be provided to the Bahl & Gaynor Fund will be consistent with the services provided to 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 Bahl & Gaynor 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 Bahl & Gaynor Fund.
Investment Performance. The Board noted that the Bahl & Gaynor 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 Bahl & Gaynor in connection with their consideration of the Bahl & Gaynor Agreement.
Costs of the Services Provided to the Bahl & Gaynor Fund and the Projected Profits or Losses to be Realized by the Manager from its Relationship with the Bahl & Gaynor 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 Bahl & Gaynor Fund. The Board noted the Managers 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. The Board then noted that the Manager was projected to incur a loss from its first year of rendering services to the Bahl & Gaynor Fund.
Comparisons of the amounts to be paid to the Manager under the Management Agreement and other funds in the relevant Morningstar category. In evaluating the Management Agreement, the Board reviewed the Managers proposed management fee schedule. 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 that the Manager provides comparable services to the Existing Funds at the same rate as proposed for the Bahl & Gaynor Fund. The Board also noted that the management fee rate proposed by the Manager for the Bahl & Gaynor Fund, both on a stand-alone basis and combined with the proposed advisory fee rate to be paid to Bahl & Gaynor, is lower than the average advisory fee rate paid by funds in the Morningstar, Inc. (Morningstar) category of actively-managed small cap growth funds. The Board also considered that the Manager has agreed to contractually limit the expenses of the Bahl & Gaynor Fund for at least
82 |
Disclosure Regarding the Board of Trustees Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
one year following the inception date of the Bahl & Gaynor Fund. 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 Bahl & Gaynor Fund, in light of all the factors considered.
Economies of Scale. The Board considered that breakpoints were not included in the proposed management fee, but were included in the proposed advisory fee. Accordingly, the Board noted the Managers representation that the combined management and advisory fee rate would reflect economies of scale for the benefit of Bahl & Gaynor Fund shareholders.
Benefits Derived from the Relationship with the Bahl & Gaynor Fund. The Board considered the Managers representation that it does not anticipate any material fall-out benefits resulting from its proposed relationship with the Bahl & Gaynor Fund. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationship with the Bahl & Gaynor Fund appear to be fair and reasonable.
Boards Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not interested persons of the Bahl & Gaynor Fund or the Manager, as that term is defined in the Investment Company Act of 1940, as amended, (1940 Act): (1) concluded that the proposed management fee is fair and reasonable; (2) determined that the Bahl & Gaynor Fund and its shareholders would benefit from the Managers management of the Bahl & Gaynor Fund; and (3) approved the Management Agreement.
Approval of Investment Advisory Agreement with Bahl & Gaynor
In advance of the meeting, the Board requested and reviewed information provided by Bahl & Gaynor in connection with its consideration of the Bahl & Gaynor Agreement, and the Investment Committee of the Board met with representatives of Bahl & Gaynor. The Board considered, among other materials, responses by Bahl & Gaynor to inquiries requesting: a description of the advisory and related services proposed to be provided to the Bahl & Gaynor Fund; identification of the professional personnel to perform services for the Bahl & Gaynor Fund and their education, experience and responsibilities; a comparison of investment performance of Bahl & Gaynors Small Cap Growth Composite 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 Bahl & Gaynors compliance program and any material compliance matters, as well as its trading activities; a discussion of Bahl & Gaynors financial condition and confirmation that Bahl & Gaynors financial condition would not impair its ability to provide high-quality services to the Bahl & Gaynor Fund; and any other information that Bahl & Gaynor believed would be material to the Boards consideration of the Bahl & Gaynor Agreement.
Provided below is an overview of the primary factors the Board or its committees considered at its February 18, 2014 meetings at which the Board considered the approval of the Bahl & Gaynor Agreement. In determining whether to approve the Bahl & Gaynor 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 Bahl & Gaynor; (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 these economies of scale, if any, for the benefit of investors; (5) comparisons of services and fees with contracts entered into by the Bahl & Gaynor with other clients; and (6) any other benefits anticipated to be derived by Bahl & Gaynor from its relationship with the Bahl & Gaynor Fund.
The Board did not identify any particular information that was most relevant to its consideration of the Bahl & Gaynor Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of Bahl & Gaynor 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 Bahl & Gaynor Agreement. Based on its evaluation, the Board unanimously concluded that the terms of the Bahl & Gaynor Agreement were reasonable and fair and that the approval of the Bahl & Gaynor Agreement was in the best interests of the Bahl & Gaynor Fund.
Nature, extent and quality of the services to be provided by Bahl & Gaynor. The Board considered information regarding Bahl & Gaynors principal business activities, its reputation, financial condition and overall capabilities to perform the services under the Bahl & Gaynor Agreement. The Board also considered Bahl & Gaynors investment resources, infrastructure and the adequacy of its compliance program. In addition, the Board considered the background and experience of the portfolio management personnel who will be assigned responsibility for managing the Bahl & Gaynor Fund. The Board considered Bahl & Gaynors representation that its financial condition is adequate to support the provision by Bahl & Gaynor of high quality advisory services to the Bahl & Gaynor Fund and that current staffing levels were adequate to service the Bahl & Gaynor Fund. In addition, the Board took into consideration the Managers recommendation of Bahl & Gaynor. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by Bahl & Gaynor were appropriate for the Bahl & Gaynor Fund in light of its investment objective and, thus, supported a decision to approve the Bahl & Gaynor Agreement.
Performance of Bahl & Gaynor. The Board evaluated the performance information provided by Bahl & Gaynor and the Manager regarding the performance of Bahl & Gaynors Small Cap Growth Composite (Composite), gross of fees, as compared to the Russell 2000 Growth Index (Benchmark), Morningstar small cap growth category average (Morningstar Average) and PSN Small Cap Growth Universe median (PSN Median). The Board considered that the annualized performance of the Composite outperformed the Benchmark and Morningstar Average for the one-, three-, five-year and since inception periods ended December 31, 2013, while it outperformed the PSN Median for the three-year and since-inception periods ended December 31, 2013 and underperformed the PSN Median for all other relevant time periods. The Board also considered how the Composite would have ranked in the Morningstar small cap growth category. Based on the foregoing information, the Board concluded that the historical investment performance record of Bahl & Gaynor supported approval of the Bahl & Gaynor Agreement.
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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 under the Agreement with those under contracts between Bahl & Gaynor and its other clients. In evaluating the Bahl & Gaynor Agreement, the Board reviewed the proposed advisory fee rate for services to be performed by Bahl & Gaynor on behalf of and paid by the Bahl & Gaynor Fund. The Board considered Bahl & Gaynors representation that the proposed fee rate is lower than its standard separate account fee schedule. In this regard, the Board also noted the Managers representation that the combined management and advisory fee rate to be paid to the Manager and Bahl & Gaynor was lower than the average for the Bahl & Gaynor Funds Morningstar peer group. After evaluating this information, the Board concluded that Bahl & Gaynors advisory fee rate under the Bahl & Gaynor Agreement was reasonable in light of the services to be provided to the Bahl & Gaynor Fund.
Costs of the services to be provided and profits to be realized by Bahl & Gaynor and its affiliates from its relationship with the Bahl & Gaynor Fund. The Board did not consider the costs of the services to be provided and profits to be realized by Bahl & Gaynor from its relationship with the Bahl & Gaynor Fund, noting instead the arms-length nature of the relationship between the Manager and Bahl & Gaynor with respect to the negotiation of the advisory fee rate on behalf of the Bahl & Gaynor Fund.
Economies of Scale. The Board considered Bahl & Gaynors representation that the proposed fee rate includes breakpoints, which anticipate any economies of scale in connection with the services that it will provide to the Bahl & Gaynor Fund. Based on the foregoing information, the Board concluded that the breakpoint under the proposed fee schedule reflect economies of scale associated with the services to be provided to the Bahl & Gaynor Fund by Bahl & Gaynor.
Benefits to be derived by Bahl & Gaynor from the relationship with the Bahl & Gaynor Fund. The Board considered the fall-out or ancillary benefits that might accrue to Bahl & Gaynor as a result of its relationship with the Bahl & Gaynor Fund, including greater exposure in the marketplace with respect to Bahl & Gaynors investment process and expanding the level of assets under management by Bahl & Gaynor. The Board also noted Bahl & Gaynors representation that it utilizes soft dollars to obtain proprietary research from broker-dealers and may receive elevated service levels from brokers as the Funds assets grow. Based on the foregoing information, the Board concluded that the potential benefits accruing to Bahl & Gaynor by virtue of its relationship with the Bahl & Gaynor Fund appear to be fair and reasonable.
Boards Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not interested persons of the Bahl & Gaynor Fund, the Manager or Bahl & Gaynor, as that term is defined in the 1940 Act, concluded that the proposed advisory fee rate is fair and reasonable and that the approval of the Bahl & Gaynor Agreement is in the best interests of the Bahl & Gaynor Fund and approved the Bahl & Gaynor Agreement.
At its June 5, 2014 meeting, the Board of Trustees (Board) considered: (1) the approval of the Management Agreement between the Manager and the Trust on behalf of American Beacon AHL Managed Futures Fund, a new series of the Trust (AHL Fund) and (2) the approval of a new investment advisory agreement among the Manager, AHL Partners LLP (AHL) and the Trust with respect to the AHL Fund (AHL Agreement).
Approval of Management Agreement on Behalf of the AHL 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 AHL 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 AHL Fund; identification of the professional personnel who are proposed to be assigned primary responsibility for managing the AHL 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 Boards consideration of the Management Agreement. The Board also considered information that had been provided by the Manager to the Board at the May 15 and June 5, 2014 meetings in connection with the Boards consideration of the renewal of the Management Agreement between the Manager and the Trust as it related to the Existing Funds.
Provided below is an overview of the primary factors the Board or its committees considered at its June 5, 2014 meetings at which the Board considered the approval of the Management Agreement with respect to the AHL Fund. 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 these 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 (6) any other benefits derived or anticipated to be derived by the Manager from its relationship with the AHL 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. 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 interest of the AHL 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 15, 2014 meeting and would formally vote on the renewal
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Disclosure Regarding the Board of Trustees Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
of that agreement at the June 5, 2014 meeting. At those meetings, 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 Managers key investment personnel. At the May 15 and June 5, 2014 meetings, the Board also considered the Managers investment approach and goal to provide consistent above average long-term performance at below average costs on behalf of the Existing Funds and the Managers culture of compliance and support for compliance operations that reduces risks to the Existing Funds. The Board noted the Managers representation that the advisory and related services proposed to be provided to the AHL Fund will be consistent with the services provided to the Existing Funds, and that the Manager will provide certain additional tax and legal services to the AHL Fund attendant to the AHL Funds investment in its wholly-owned subsidiary. The Board considered the background and experience of key investment personnel who will have primary responsibility for the day-to-day oversight of the AHL 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 AHL Fund.
Investment Performance. The Board noted that the AHL 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 AHL in connection with their consideration of the AHL Agreement.
Costs of the Services Provided to the AHL Fund and the Projected Profits or Losses to be Realized by the Manager from its Relationship with the AHL 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 because the Manager will provide services to the AHL Funds subsidiary at no additional cost, the Managers fee with respect to the AHL Fund will be calculated based on the combined assets of the AHL Fund and its subsidiary. Additionally, the Board considered that the Manager will receive administrative service fees to compensate the Manager for providing shareholder and administrative services to the AHL Fund and the AHL Funds subsidiary. The Board noted the Managers 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 to be spent by its employees on non-distribution related business. The Board then noted that the Manager was projected to incur losses from its first year of rendering services to the AHL Fund.
Comparisons of the amounts to be paid to the Manager under the Management Agreement and other funds in the relevant Morningstar category. In evaluating the Management Agreement, the Board reviewed the Managers proposed management fee schedule. 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 that the Manager provides comparable services to the Existing Funds at the same rate as proposed for the AHL Fund. The Board also noted that the management fee rate proposed by the Manager for the AHL Fund, both on a stand-alone basis and combined with the proposed advisory fee rate to be paid to AHL, is lower than the average advisory fee rate paid by peer group funds in each Funds Morningstar, Inc. (Morningstar) category. The Board also considered that the Manager has agreed to contractually limit the expenses of the AHL Fund for at least one year following each Funds inception date. 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 AHL Fund, in light of all the factors considered.
Economies of Scale. The Board considered that breakpoints were not included in the proposed management fee and noted the Managers representation that the proposed management fee rate for the Fund reflects economies of scale for the benefit of AHL Fund shareholders.
Benefits Derived from the Relationship with the AHL Fund. The Board considered the Managers representation that it does not anticipate any material fall-out benefits resulting from its proposed relationship with the AHL Fund. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationship with the AHL Fund appear to be fair and reasonable.
Boards Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not interested persons of the AHL 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 AHL Fund and its shareholders would benefit from the Managers management of the AHL Fund; and (3) approved the Management Agreement on behalf of the AHL Fund.
Approval of Investment Advisory Agreement with AHL
In advance of the meeting, the Board requested and reviewed information provided by AHL in connection with its consideration of the AHL Agreement, and the Investment Committee of the Board met with representatives of AHL. The Board considered, among other materials, responses by AHL to inquiries requesting: a description of the advisory and related services proposed to be provided to the AHL Fund; identification of the professional personnel to perform services for the AHL Fund and their education, experience and responsibilities; a comparison of investment performance of AHLs private funds 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 AHLs compliance program and any material compliance matters, as well as its trading activities; a discussion of the financial condition of AHLs parent company; and any other information that AHL believed would be material to the Boards consideration of the AHL Agreement.
Provided below is an overview of the primary factors the Board or its committees considered at its June 5, 2014 meetings at which the Board considered the approval of the AHL Agreement. In determining whether to approve the AHL Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services to be provided; (2) the investment
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Disclosure Regarding the Board of Trustees Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
performance of AHL; (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 these economies of scale, if any, for the benefit of investors; (5) comparisons of services and fees with contracts entered into by the AHL with other clients; and (6) any other benefits anticipated to be derived by AHL from its relationship with the AHL Fund.
The Board did not identify any particular information that was most relevant to its consideration of the AHL Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of the Manager and AHL 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 AHL Agreement. Based on its evaluation, the Board unanimously concluded that the terms of the AHL Agreement were reasonable and fair and that the approval of the AHL Agreement was in the best interests of the AHL Fund.
Nature, extent and quality of the services to be provided by AHL. The Board considered information regarding AHLs principal business activities, reputation financial condition and overall capabilities to perform the services under the AHL Agreement. The Board considered that, as a newly organized investment adviser, AHL would be supported by the investment resources and infrastructure of its parent company. The Board also considered the adequacy of AHLs 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 AHL Fund. The Board considered AHLs representation that the financial condition of its parent company would support the provision of high quality advisory services to the AHL Fund and that current staffing levels were adequate to service the AHL Fund. In addition, the Board took into consideration the Managers recommendation of AHL. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by AHL were appropriate for the AHL Fund in light of its investment objective and, thus, supported a decision to approve the AHL Agreement.
Performance of AHL. The Board evaluated the performance information provided by AHL regarding the annualized performance of AHLs private funds, net of fees (Private Funds), relative to the Barclay BTOP50 Index (Barclay Index) as of April 30, 2014. The Board also evaluated the simulated performance information provided by the Manager for the AHL Liquid Trend Following Strategy (AHL Strategy), net of fees, compared to the BofA Merrill Lynch 3-Month Treasury Bill Index (BofA Index) and the Morningstar managed futures category average for mutual funds (Morningstar Category) as of December 31, 2013. The Board considered that the Private Funds outperformed the Barclay Index for the 3-year, 5-year and 10-year periods, but underperformed the Barclays Index for the 1-year period ended April 30, 2014. The Board also considered that the AHL Strategy outperformed the BofA Index for the 3-year, 5-year and 10-year periods and the Morningstar Category for the 3-year and 5-year periods, but underperformed the BofA Index and the Morningstar Category for the 1-year period ended December 31, 2013. In addition, the Board considered how the AHL Strategy would have ranked in the Morningstar Category. Based on the foregoing information, the Board concluded that the historical investment performance record of AHL supported approval of the AHL Agreement.
Comparisons of the amounts to be paid under the Agreement with those under contracts between AHL and its other clients. In evaluating the AHL Agreement, the Board reviewed the proposed advisory fee rate for services to be performed by AHL on behalf of and paid by the AHL Fund. The Board considered AHLs representation that AHL does not have any other subadvisory relationships or manage funds with the same investment mandate. The Board also considered that, because AHL will provide services to the AHL Funds subsidiary at no cost, AHLs fee with respect to the AHL Fund will be calculated based on the combined assets of the AHL Fund and its subsidiary. Additionally, the Board noted the Managers representation that the combined management and advisory fee rate to be paid to the Manager and AHL was lower than the average for the AHL Funds Morningstar Category. After evaluating this information, the Board concluded that AHLs advisory fee rate under the AHL Agreement was reasonable in light of the services to be provided to the AHL Fund.
Costs of the services to be provided and profits to be realized by AHL and its affiliates from its relationship with the AHL Fund. The Board did not consider the costs of the services to be provided and profits to be realized by AHL from its relationship with the AHL Fund, noting instead the arms-length nature of the relationship between the Manager and AHL with respect to the negotiation of the advisory fee rate on behalf of the AHL Fund.
Economies of Scale. The Board considered AHLs representation that the proposed fee rate reflects anticipated economies of scale in connection with the services that it will provide to the AHL Fund. Based on the foregoing information, the Board concluded that the proposed fee schedule would likely reflect economies of scale associated with the services to be provided to the AHL Fund by AHL.
Benefits to be derived by AHL from the relationship with the AHL Fund. The Board considered the fall-out or ancillary benefits that might accrue to AHL as a result of its relationship with the AHL Fund, including greater exposure in the marketplace with respect to AHLs investment process and expanding the level of assets under management by AHL. Based on the foregoing information, the Board concluded that the potential benefits accruing to AHL by virtue of its relationship with the AHL Fund appear to be fair and reasonable.
Boards Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not interested persons of the AHL Fund, the Manager or AHL, as that term is defined in the 1940 Act, concluded that the proposed advisory fee rate is fair and reasonable and that the approval of the AHL Agreement is in the best interests of the AHL Fund and approved the AHL Agreement.
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Trustees and Officers of the American Beacon FundSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the Trust) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees thirty-three funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trusts Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address |
Position, Term of Office and Length of Time Served with the Trust |
Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* |
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Alan D. Feld** (78) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* |
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Gerard J. Arpey (56) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
W. Humphrey Bogart (70) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (54) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (60) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (72) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (71) | Trustee since 2004 Chairman since 2008 |
Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (68) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas75275 |
Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). |
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Trustees and Officers of the American Beacon FundSM
(Unaudited)
Name, Age and Address |
Position, Term of Office and Length of Time Served with the Trust |
Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
One Year | ||||
Gene L. Needles, Jr. (60) | President since 2009 Executive Vice President since 2009 |
President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-2012), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 |
General Counsel, Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Secretary (2008-Present), Lighthouse Holdings Parent, Inc. | ||
Brian E. Brett (53) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (48) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (44) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (60) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (53) | Treasurer since 2010 |
Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer (2010-Present), Lighthouse Holdings, Inc.; Treasurer (2010-Present), Lighthouse Holdings Parent, Inc. | ||
Terri L. McKinney (51) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (39) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Samuel J. Silver (51) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (43) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 |
Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
Sonia L. Bates (58) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011-Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc. |
* | As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75. |
** | Mr. Feld is deemed to be an interested person of the Trusts, as defined by the 1940 Act. Mr. Felds law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trusts sub-advisors. |
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Delivery of Documents
eDelivery is NOW AVAILABLE- Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Funds regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institutions name or contact your financial institution directly.
To obtain more information about the Fund:
By E-mail: american_beacon.funds@ambeacon.com |
On the Internet: Visit our website at www.americanbeaconfunds.com | |||||
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By Telephone: Institutional, Y and Investor Call (800) 658-5811 |
By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 | |||||
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Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (SEC) on Form N-Q as of the first and third fiscal quarters. The Funds Forms N-Q are available on the SECs website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SECs Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SECs Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Funds portfolio holdings is also available on www.americanbeaconfunds.com, approximately twenty days after the end of each month. |
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Funds Statement of Additional Information, is available free of charge on the www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SECs website at www.sec.gov. The Funds proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Funds Forms N-PX are available on the SECs website at www.sec.gov. The Funds proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
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 AHL Managed Futures Strategy Fund, American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Small Cap Growth Fund, and American Beacon Stephens Mid-Cap Growth Fund are service marks of American Beacon Advisors, Inc.
AR 12/14
S&P 500 Index Fund: Investing in derivative instruments involves liquidity, credit, interest rate and market risks. Small Cap Index Fund: Investing in small-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. The Fund may participate in a securities lending program. International Equity Index Fund: Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. The Fund may participate in a securities lending program. 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. Each advisors strategies and each 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 | December 31, 2014 |
2014 was a good year for domestic equity investors; the markets were calm and stocks ended the year above average following two modest pullbacks. The S&P 500 Index, a U.S. large-cap stock bellwether, gained 13.69% - buoyed by accelerated economic growth and increased earnings. The Russell Midcap Index, a barometer of mid-cap stocks, gained 13.22%. And the Russell 2000 Index, which generally represents the small-cap segment, gained 4.89%.
In contrast, international equity investments declined. Many of the worlds economies struggled throughout the year and the stronger U.S. dollar lowered the value of foreign investments. The MSCI EAFE Index, which measures the worlds developed market, closed down at -4.90%. |
Although American Beacon Advisors specializes in actively managed funds, we also provide index fund options for investors who prefer passive alternatives. Our index funds are overseen by world-class financial institutions, so that we may provide you with the kind of exemplary service you have come to expect from American Beacon.
For the 12 months ended December 31, 2014:
| American Beacon S&P 500 Index Fund (Investor Class) returned 13.02%. |
| American Beacon Small Cap Index Fund (Institutional Class) returned 4.86%. |
| American Beacon International Equity Index Fund (Institutional Class) returned -6.11%. |
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 S&P 500 Index Fund
Performance Overview
December 31, 2014 (Unaudited)
2
American Beacon S&P 500 Index Fund
Performance Overview
December 31, 2014 (Unaudited)
3
American Beacon Small Cap Index FundSM
Performance Overview
December 31, 2014 (unaudited)
4
American Beacon Small Cap Index FundSM
Performance Overview
December 31, 2014 (unaudited)
5
American Beacon International Equity Index FundSM
Performance Overview
December 31, 2014 (unaudited)
6
American Beacon International Equity Index FundSM
Performance Overview
December 31, 2014 (unaudited)
7
American Beacon FundsSM
Fund Expenses
December 31, 2014 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2014 through December 31, 2014.
Actual Expenses
The following table provides information about actual account values and actual expenses. You may use the information in this table, 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 Expenses Paid During Period row to estimate the expenses you paid on your account during this period. Shareholders that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Actual
Institutional Class |
S&P 500 Index |
Small Cap Index |
International Equity Index |
Investor Class |
S&P 500 Index |
|||||||||||||||
Beginning Account Value 7/1/14 |
$ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | Beginning Account Value 7/1/14 | $ | 1,000.00 | |||||||||||
Ending Account Value 12/31/14 |
$ | 1,160.68 | $ | 1,016.86 | $ | 896.49 | Ending Account Value 12/31/14 | $ | 1,157.81 | |||||||||||
Expenses Paid During Period* 7/1/14 - 12/31/14 |
$ | 0.62 | $ | 1.17 | $ | 0.91 | Expenses Paid During Period* 7/1/14 - 12/31/14 |
$ | 2.96 | |||||||||||
Annualized Expense Ratio |
0.12 | % | 0.23 | % | 0.19 | % | Annualized Expense Ratio | 0.57 | % |
Hypothetical Example for Comparison Purposes
The following table provides information about hypothetical account values and hypothetical expenses based on a Funds actual expense ratio and an assumed 5% per year rate of return before expenses (not the Funds actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund. 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 Expenses Paid During Period line of the table is 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.
Hypothetical
Institutional Class |
S&P 500 Index |
Small Cap Index |
International Equity Index |
Investor Class |
S&P 500 Index |
|||||||||||||||
Beginning Account Value 7/1/14 |
$ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | Beginning Account Value 7/1/14 | $ | 1,000.00 | |||||||||||
Ending Account Value 12/31/14 |
$ | 1,024.60 | $ | 1,024.05 | $ | 1,024.25 | Ending Account Value 12/31/14 | $ | 1,022.33 | |||||||||||
Expenses Paid During Period* 7/1/14 - 12/31/14 |
$ | 0.61 | $ | 1.17 | $ | 0.97 | Expenses Paid During Period* 7/1/14 -12/31/14 |
$ | 2.91 | |||||||||||
Annualized Expense Ratio |
0.12 | % | 0.23 | % | 0.19 | % | Annualized Expense Ratio | 0.57 | % |
* | Expenses are equal to each Funds annualized expense ratio for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
8
American Beacon Funds
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon S&P 500 Index Fund, American Beacon Small Cap Index Fund and American Beacon International Equity Index Fund:
We have audited the accompanying statements of assets and liabilities of the American Beacon International Equity Index Fund, the American Beacon S&P 500 Index Fund, and the American Beacon Small Cap Index Fund (three of the funds constituting the American Beacon Funds) (collectively, the Funds), as of December 31, 2014, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the State Street Equity 500 Index Portfolio, the Master International Index Series, and the Master Small Cap Index Series. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon International Equity Index Fund, the American Beacon S&P 500 Index Fund, and the American Beacon Small Cap Index Fund at December 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
March 2, 2015
9
Statements of Assets and Liabilities
December 31, 2014 (in thousands, except share and per share amounts)
S&P 500 Index Fund |
Small Cap Index Fund |
International Equity Index Fund |
||||||||||
Assets: |
||||||||||||
Investment in Portfolio, at fair value |
$ | 1,305,918 | $ | 146,861 | $ | 564,985 | ||||||
Receivable for fund shares sold |
1,443 | 385 | 2,290 | |||||||||
Prepaid expenses |
20 | 4 | 18 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
1,307,381 | 147,250 | 567,293 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities: |
||||||||||||
Payable for fund shares redeemed |
38 | 3 | 9,675 | |||||||||
Dividends payable |
| | 20 | |||||||||
Administrative service and service fees payable (Note 2) |
67 | 6 | 23 | |||||||||
Printing fees payable |
30 | 15 | 18 | |||||||||
Professional fees payable |
20 | 12 | 15 | |||||||||
Sub-administration fees payable |
| 16 | 173 | |||||||||
Transfer agent fees payable |
6 | 1 | 5 | |||||||||
Trustee fees payable |
13 | | 1 | |||||||||
Other liabilities |
9 | 6 | 10 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
183 | 59 | 9,940 | |||||||||
|
|
|
|
|
|
|||||||
Net Assets |
$ | 1,307,198 | $ | 147,191 | $ | 557,353 | ||||||
|
|
|
|
|
|
|||||||
Analysis of Net Assets: |
||||||||||||
Paid-in-capital |
915,773 | 97,903 | 572,923 | |||||||||
Undistributed (or over distribution of) net investment income |
619 | (56 | ) | (1,487 | ) | |||||||
Accumulated net realized gain (loss) |
(47,951 | ) | 318 | (88,115 | ) | |||||||
Unrealized net appreciation (depreciation) of investments |
438,611 | 48,963 | 73,229 | |||||||||
Unrealized net appreciation (depreciation) of foreign currency contracts |
| | (24 | ) | ||||||||
Unrealized net appreciation (depreciation) of futures contracts |
146 | 63 | 827 | |||||||||
|
|
|
|
|
|
|||||||
Net assets |
$ | 1,307,198 | $ | 147,191 | $ | 557,353 | ||||||
|
|
|
|
|
|
|||||||
Shares outstanding at no par value (unlimited shares authorized): |
||||||||||||
Institutional Class |
45,344,004 | 8,321,348 | 54,067,163 | |||||||||
|
|
|
|
|
|
|||||||
Investor Class |
1,371,717 | N/A | N/A | |||||||||
|
|
|
|
|
|
|||||||
Net assets (not in thousands): |
||||||||||||
Institutional Class |
$ | 1,269,143,517 | $ | 147,191,446 | $ | 557,352,647 | ||||||
|
|
|
|
|
|
|||||||
Investor Class |
$ | 38,054,811 | $ | N/A | $ | N/A | ||||||
|
|
|
|
|
|
|||||||
Net asset value, offering and redemption price per share: |
||||||||||||
Institutional Class |
$ | 27.99 | $ | 17.69 | $ | 10.31 | ||||||
|
|
|
|
|
|
|||||||
Investor Class |
$ | 27.74 | $ | N/A | $ | N/A | ||||||
|
|
|
|
|
|
See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios attached
10
Statements of Operations
For the year ended December 31, 2014 (in thousands)
S&P 500 Index Fund |
Small Cap Index Fund |
International Equity Index Fund |
||||||||||
Investment Income (expense) Allocated From Portfolio: |
||||||||||||
Dividend income (net of foreign taxes)A |
$ | 22,284 | $ | 2,372 | $ | 22,993 | ||||||
Interest income |
19 | 2 | 3 | |||||||||
Securities lending income |
| 383 | 36 | |||||||||
Portfolio expenses (net of fees waived)B |
(500 | ) | (156 | ) | (400 | ) | ||||||
Other income |
| | 1 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income allocated from Portfolio |
21,803 | 2,601 | 22,633 | |||||||||
|
|
|
|
|
|
|||||||
Fund Expenses: |
||||||||||||
Administrative service fees (Note 2): |
||||||||||||
Institutional Class |
532 | 104 | 316 | |||||||||
Investor Class |
82 | | | |||||||||
Sub-administrative service fees: |
||||||||||||
Institutional Class |
| 36 | 244 | |||||||||
Transfer agent fees: |
||||||||||||
Institutional Class |
34 | 6 | 41 | |||||||||
Investor Class |
3 | | | |||||||||
Custody and accounting fees |
12 | 12 | 12 | |||||||||
Professional fees |
43 | 28 | 39 | |||||||||
Registration fees |
34 | 12 | 31 | |||||||||
Service fees - Investor Class (Note 2) |
82 | | | |||||||||
Printing expense |
104 | 37 | 80 | |||||||||
Trustee fees |
67 | 10 | 33 | |||||||||
Insurance expense |
14 | 3 | 9 | |||||||||
Other expenses |
30 | 9 | 52 | |||||||||
|
|
|
|
|
|
|||||||
Total fund expenses |
1,037 | 257 | 857 | |||||||||
|
|
|
|
|
|
|||||||
Net investment income |
20,766 | 2,344 | 21,776 | |||||||||
|
|
|
|
|
|
|||||||
Realized and unrealized gain (loss) allocated from master portfolio |
||||||||||||
Net realized gain (loss) from: |
||||||||||||
Investments |
3,960 | 10,717 | (4,523 | ) | ||||||||
Foreign currency transactions |
| | (1,133 | ) | ||||||||
Futures contracts |
3,068 | 676 | 476 | |||||||||
Change in net unrealized appreciation or (depreciation) of: |
||||||||||||
Investments |
113,766 | (8,497 | ) | (52,952 | ) | |||||||
Foreign currency transactions |
| | (138 | ) | ||||||||
Futures contracts |
404 | (232 | ) | 510 | ||||||||
|
|
|
|
|
|
|||||||
Net gain (loss) on investments |
121,198 | 2,664 | (57,760 | ) | ||||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in net assets resulting from operations |
$ | 141,964 | $ | 5,008 | $ | (35,984 | ) | |||||
|
|
|
|
|
|
|||||||
A Foreign taxes |
$ | 52 | $ | 2 | $ | 1,905 | ||||||
B Fees waived by Master Portfolio |
$ | | $ | 3 | $ | 4 |
See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios attached
11
Statements of Changes in Net Assets (in thousands)
S&P 500 Index Fund | Small Cap Index Fund | International Equity Index Fund |
||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||
Increase (Decrease) in Net Assets: |
||||||||||||||||||||||||
Operations: |
||||||||||||||||||||||||
Net investment income |
$ | 20,766 | $ | 15,985 | $ | 2,344 | $ | 2,969 | $ | 21,776 | $ | 15,493 | ||||||||||||
Net realized gain (loss) on investments, foreign currency contracts, and futures contracts |
7,028 | 9,149 | 11,393 | 11,666 | (5,180 | ) | (5,561 | ) | ||||||||||||||||
Change in net unrealized appreciation or depreciation of investments, foreign currency contracts, and futures contracts |
114,170 | 202,048 | (8,729 | ) | 56,569 | (52,580 | ) | 96,462 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets resulting from operations |
141,964 | 227,182 | 5,008 | 71,204 | (35,984 | ) | 106,394 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Distributions to Shareholders: |
||||||||||||||||||||||||
Net investment income: |
||||||||||||||||||||||||
Institutional Class |
(20,038 | ) | (15,320 | ) | (2,348 | ) | (3,043 | ) | (22,032 | ) | (16,049 | ) | ||||||||||||
Investor Class |
(494 | ) | (353 | ) | | | | | ||||||||||||||||
Net realized gain on investments: |
||||||||||||||||||||||||
Institutional Class |
| | (11,017 | ) | | | | |||||||||||||||||
Investor Class |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total distributions to shareholders |
(20,532 | ) | (15,673 | ) | (13,365 | ) | (3,043 | ) | (22,032 | ) | (16,049 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Capital Share Transactions: |
||||||||||||||||||||||||
Proceeds from sales of shares |
292,446 | 182,996 | 50,423 | 103,919 | 140,139 | 182,715 | ||||||||||||||||||
Reinvestment of dividends and distributions |
20,303 | 15,523 | 13,365 | 3,043 | 21,268 | 15,707 | ||||||||||||||||||
Cost of shares redeemed |
(97,222 | ) | (107,420 | ) | (193,795 | ) | (76,228 | ) | (175,775 | ) | (139,930 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets from capital share transactions |
215,527 | 91,099 | (130,007 | ) | 30,734 | (14,368 | ) | 58,492 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in net assets |
336,959 | 302,608 | (138,364 | ) | 98,895 | (72,384 | ) | 148,837 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net Assets: |
||||||||||||||||||||||||
Beginning of period |
970,239 | 667,631 | 285,555 | 186,660 | 629,737 | 480,900 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
End of Period * |
$ | 1,307,198 | $ | 970,239 | $ | 147,191 | $ | 285,555 | $ | 557,353 | $ | 629,737 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
* Includes undistributed (or overdistribution of) net investment income of |
$ | 619 | $ | 551 | $ | (56 | ) | $ | (60 | ) | $ | (1,487 | ) | $ | (1,307 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
See accompanying Financial Statements of the respective Master Portfolios attached
12
Notes to Financial Statements
December 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the Trust) which is comprised of thirty-one Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the Act) as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund (closed to new investors), and the American Beacon International Equity Index Fund (each a Fund and collectively, the Funds), each a series of the Trust.
American Beacon Advisors, Inc. (the Manager) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
Each Fund invests all of its investable assets in a corresponding portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index Series and the Master International Index Series (each a Portfolio and collectively the Portfolios) are open-ended management investment companies registered under the Act. The value of such investment reflects each Funds proportionate interest in the net assets of the corresponding Portfolio.
American Beacon: |
Portfolios: |
% of Portfolio Held by Fund at December 31, 2014 |
||||
S&P 500 Index Fund |
State Street Equity 500 Index Portfolio | 45.51 | % | |||
Small Cap Index Fund |
Master Small Cap Index Series | 21.01 | % | |||
International Equity Index Fund |
Master International Index Series | 20.88 | % |
The financial statements of the Portfolios are included elsewhere in this report and should be read in conjunction with the Funds financial statements.
The Manager is conducting a review of its passively-managed product offerings. While the American Beacon S&P 500 Index and the American Beacon International Equity Index Funds future growth opportunities are explored, the Funds were closed to new shareholders as of the close of business on December 31, 2014. Existing shareholders as of that date may continue to purchase, redeem or exchange shares of the Funds on any business day, which is any day the New York Stock Exchange is open for business.
Class Disclosure
The S&P 500 Index Fund has two classes of shares designed to meet the needs of different groups of investors. The Small Cap Index and the International Equity Index Funds offer one class to investors. The following table sets forth the differences amongst the classes:
Class: |
Offered to: | |
Institutional Class |
Investors making an initial investment of $250,000 | |
Investor Class |
General public and investors investing through an intermediary |
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, and service fees, and vary amongst the classes as described more fully in Note 2.
13
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
New Accounting Pronouncements
In June 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, which amends the criteria that define an investment company and clarifies the measurement guidance and requires new disclosures for investment companies. Under the ASU, an entity that is registered under the Investment Company Act of 1940 automatically qualifies as an investment company. The ASU was effective for interim and annual reporting periods ending after December 31, 2013. Management has evaluated the implications of the ASU and determined that adoption thereof will not have a material impact on the financial statements.
2. Transactions with Affiliates
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 0.05% of the average daily net assets of the Institutional Class of the S&P 500 Index Fund, International Equity Index Fund and the Small Cap Index Fund and 0.25% of the average daily net assets of the Investor Class of the S&P 500 Index Fund.
Service Plans
The Manager and the Trust entered into a Service Plan that obligates the Manager to oversee additional shareholder servicing of the Investor Class of S&P 500 Index Fund. As compensation for performing the duties required under the Service Plan, the Manager receives up to 0.375% of the average daily net assets of the Investor Class of the S&P 500 Index Fund.
Sub-administration Agreement
The Trust, the Manager and BlackRock Advisors, LLC (BlackRock) entered into a Sub-administration Agreement that obligates BlackRock to provide certain other administrative services to the Small Cap Index Fund and the International Equity Index Fund. As compensation for performing these services, BlackRock receives an annualized fee of 0.08% of the average daily net assets of the Small Cap Index Fund and 0.12% of the average daily net assets of the International Equity Index Fund; however, the fee of each is reduced by the total expense ratio of its corresponding Portfolio, net of any fee waivers.
3. Security Valuation and Fair Value Measurements
U.S. Generally Accepted Accounting Principles (U.S. GAAP) defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds policy is to value its financial instruments in the Portfolios at fair value based on the Funds apportionate interest in the net assets of the Portfolios. Valuation of securities held by the Portfolios is discussed in the accompanying Notes to the Financial Statements of the respective Portfolios attached.
Investment Income
Each Fund records its share of net investment income and realized and unrealized gains and losses from the security transactions of its corresponding Portfolio each day. All net investment income and realized and unrealized gains (losses) of each Portfolio are allocated pro rata among the investors in that Portfolio at the time of such determination.
14
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
Dividends to Shareholders
Dividends from net investment income of the Small Cap Index and International Equity Index Funds normally will be declared and paid annually. The S&P 500 Index Fund normally will declare and pay dividends quarterly. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date.
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.
Valuation of Shares
The price per share is calculated on each day on which shares are offered for sale. Net asset value (NAV) per share is computed by dividing the value of each Funds total assets (which includes the value of the Funds investments in its Portfolio) less liabilities, by the number of Fund shares outstanding.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trusts organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trusts maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
4. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company (RIC), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 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 International Equity Index Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued
15
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded.
The tax character of distributions paid were as follows (in thousands):
S&P 500 Index Fund | Small Cap Index Fund | International Equity Index Fund |
||||||||||||||||||||||
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||||||||||||||||||
Distributions paid from: |
||||||||||||||||||||||||
Ordinary income |
||||||||||||||||||||||||
Institutional Class |
$ | 20,038 | $ | 15,320 | $ | 2,348 | $ | 3,043 | $ | 22,032 | $ | 16,049 | ||||||||||||
Investor Class |
494 | 353 | | | | | ||||||||||||||||||
Long term capital gains |
||||||||||||||||||||||||
Institutional Class |
| | 11,017 | | | | ||||||||||||||||||
Investor Class |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total paid distributions |
$ | 20,532 | $ | 15,673 | $ | 13,365 | $ | 3,043 | $ | 22,032 | $ | 16,049 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
S&P 500 Index Fund |
Small Cap Index Fund |
Intl Equity Index Fund |
||||||||||
Cost basis of investments for federal income tax purposes |
$ | 883,401 | $ | 99,978 | $ | 500,859 | ||||||
Unrealized appreciation |
427,000 | 54,906 | 103,952 | |||||||||
Unrealized depreciation |
(4,483 | ) | (8,023 | ) | (39,826 | ) | ||||||
|
|
|
|
|
|
|||||||
Net unrealized appreciation or (depreciation) |
422,517 | 46,883 | 64,126 | |||||||||
Undistributed ordinary income |
175 | 27 | 419 | |||||||||
Accumulated long-term gain or (loss) |
(31,267 | ) | 2,378 | (80,125 | ) | |||||||
Other temporary differences |
| | 10 | |||||||||
|
|
|
|
|
|
|||||||
Distributable earnings or (deficits) |
$ | 391,425 | $ | 49,288 | $ | (15,570 | ) | |||||
|
|
|
|
|
|
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 wash sales, the realization for tax purposes of unrealized gains (losses) on certain derivative instruments, reclassifications of income from real estate investment securities, and the realization for tax purposes on unrealized gains (losses) on investments in passive foreign investment companies.
Due to the inherent differences in the recognition of income, expenses and realized gains (losses) under the 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 reclassifications of income from real estate investment securities, foreign currency, sales of investments in passive foreign investment companies, partnership transactions, and return of capital distributions that have been reclassified as of December 31, 2014 (in thousands):
S&P 500 Index Fund |
Small Cap Index Fund |
Intl Equity Index Fund |
||||||||||
Paid-in-capital |
$ | 3,028 | $ | (3,477 | ) | $ | (1,872 | ) | ||||
Undistributed net investment income |
(166 | ) | 8 | 76 | ||||||||
Accumulated net realized gain(loss) |
(2,861 | ) | 3,469 | 1,796 | ||||||||
Unrealized appreciation or (depreciation) of investments, futures contracts, and foreign currency contracts |
(1 | ) | | |
16
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
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.
Losses that will be carried forward under the provisions of RIC MOD are as follows:
Loss Carryforward Character | ||||||||||||
Fund |
Short term | Long term | Total | |||||||||
International Equity Index Fund |
$ | 178 | $ | 49,469 | $ | 49,647 |
Capital losses prior to the provisions of RIC MOD which may be applied against any realized net taxable gains in each succeeding year or until their expiration dates, whichever occurs first (in thousands) are as follows:
Fund |
2016 | 2017 | 2018 | Total | ||||||||||||
S&P 500 Index Fund |
$ | | 25,544 | $ | 4,955 | $ | 30,499 | |||||||||
International Equity Index Fund |
9,746 | 13,890 | 5,259 | 28,895 |
The S&P 500 Index and Small Cap Index Funds utilized $4,079 and $1,060, respectively, of net capital loss carryforwards for the year ended December 31, 2014 (in thousands).
5. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):
For the Year ended December 31, 2014
Institutional Class | Investor Class | |||||||||||||||
S&P 500 Index Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
10,214 | $ | 271,013 | 825 | $ | 21,433 | ||||||||||
Reinvestment of dividends |
739 | 19,827 | 18 | 476 | ||||||||||||
Shares redeemed |
(3,133 | ) | (81,566 | ) | (608 | ) | (15,656 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
7,820 | $ | 209,274 | 235 | $ | 6,253 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | ||||||||
Small Cap Index Fund |
Shares | Amount | ||||||
Shares sold |
2,731 | $ | 50,423 | |||||
Reinvestment of dividends |
758 | 13,365 | ||||||
Shares redeemed |
(10,546 | ) | (193,795 | ) | ||||
|
|
|
|
|||||
Net (decrease) in shares outstanding |
(7,057 | ) | $ | (130,007 | ) | |||
|
|
|
|
Institutional Class | ||||||||
International Equity Index Fund |
Shares | Amount | ||||||
Shares sold |
12,331 | $ | 140,139 | |||||
Reinvestment of dividends |
2,029 | 21,268 | ||||||
Shares redeemed |
(15,392 | ) | (175,775 | ) | ||||
|
|
|
|
|||||
Net (decrease) in shares outstanding |
(1,032 | ) | $ | (14,368 | ) | |||
|
|
|
|
17
American Beacon FundsSM
Notes to Financial Statements
December 31, 2014
For the Year ended December 31, 2013
Institutional Class | Investor Class | |||||||||||||||
S&P 500 Index Fund |
Shares | Amount | Shares | Amount | ||||||||||||
Shares sold |
7,589 | $ | 168,981 | 639 | $ | 14,015 | ||||||||||
Reinvestment of dividends |
668 | 15,185 | 15 | 338 | ||||||||||||
Shares redeemed |
(4,301 | ) | (97,139 | ) | (464 | ) | (10,281 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
3,956 | $ | 87,027 | 190 | $ | 4,072 | ||||||||||
|
|
|
|
|
|
|
|
Institutional Class | ||||||||
Small Cap Index Fund |
Shares | Amount | ||||||
Shares sold |
6,352 | $ | 103,919 | |||||
Reinvestment of dividends |
166 | 3,043 | ||||||
Shares redeemed |
(4,942 | ) | (76,228 | ) | ||||
|
|
|
|
|||||
Net increase in shares outstanding |
1,576 | $ | 30,734 | |||||
|
|
|
|
Institutional Class | ||||||||
International Equity Index Fund |
Shares | Amount | ||||||
Shares sold |
17,486 | $ | 182,715 | |||||
Reinvestment of dividends |
1,413 | 15,707 | ||||||
Shares redeemed |
(13,620 | ) | (139,930 | ) | ||||
|
|
|
|
|||||
Net increase in shares outstanding |
5,279 | $ | 58,492 | |||||
|
|
|
|
6. Subsequent Event
Agreement and Plan of Merger
On November 20, 2014, Lighthouse Holdings Parent, Inc. (LHPI), the indirect parent company of American Beacon Advisors, Inc., the Trusts investment manager, entered into an Agreement and Plan of Merger pursuant to which LHPI agreed to be acquired by investment funds managed by Kelso & Company, L.P. and Estancia Capital Management, LLC, both of which are private equity firms (Transaction). The Transaction is expected to close in the second calendar quarter of 2015, subject to customary closing conditions, including obtaining necessary client consents and approval from the Funds shareholders. There can be no assurance that the Transaction will be consummated as contemplated or that necessary conditions will be satisfied.
This change in control is deemed to be an assignment under the Investment Company Act of 1940 (the 1940 Act) of the Trusts existing investment management agreement with the Manager and will result in automatic termination of the agreement. A new investment management agreement has been submitted to the Funds shareholders for approval under substantially the same terms as the current agreement.
The Transaction is not expected to result in any change in the portfolio management of the Fund or in the Funds investment objectives or policies.
18
This page intentionally left blank.
19
American Beacon S&P 500 Index Fund
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period |
$ | 25.10 | $ | 19.35 | $ | 17.05 | $ | 17.07 | $ | 15.15 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income:A |
0.49 | 0.43 | 0.39 | 0.34 | 0.29 | |||||||||||||||
Net gain (loss) from investments (both realized and unrealized) |
2.88 | 5.74 | 2.31 | (0.02 | ) | 1.95 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total income from investment operations |
3.37 | 6.17 | 2.70 | 0.32 | 2.24 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
(0.48 | ) | (0.42 | ) | (0.40 | ) | (0.34 | ) | (0.32 | ) | ||||||||||
Tax return of capital |
| | | 0.00 | B | | ||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Total distributions |
(0.48 | ) | (0.42 | ) | (0.40 | ) | (0.34 | ) | (0.32 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net asset value, end of period |
$ | 27.99 | $ | 25.10 | $ | 19.35 | $ | 17.05 | $ | 17.07 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total returnC |
13.55 | % | 32.15 | % | 15.87 | % | 1.92 | % | 14.96 | % | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Ratios and supplemental data: |
||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 1,269,143 | $ | 941,930 | $ | 649,457 | $ | 422,337 | $ | 381,592 | ||||||||||
Ratios to average net assets:A |
||||||||||||||||||||
Net investment income |
1.90 | % | 1.95 | % | 2.19 | % | 1.95 | % | 1.90 | % | ||||||||||
Expenses, including expenses allocated from the master portfolio |
0.13 | % | 0.14 | % | 0.15 | % | 0.16 | % | 0.13 | % |
A | The per share amounts and ratios reflect income and expenses assuming inclusion of the Funds proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. |
B | The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share. |
C | May include adjustments with accounting principles generally accepted in the United States of America and as such, the net assets for financial reporting purposes and the returns based upon those net asset value may differ from the net asset value and returns for shareholder transactions. |
20
American Beacon S&P 500 Index Fund
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||
$ | 24.89 | $ | 19.19 | $ | 16.82 | $ | 16.88 | $ | 15.00 | |||||||||
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|
|
|
|
|||||||||
0.40 | 0.37 | 0.31 | 0.22 | 0.15 | ||||||||||||||
2.82 | 5.65 | 2.25 | 0.02 | 1.99 | ||||||||||||||
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|
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|
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|
|||||||||
3.22 | 6.02 | 2.56 | 0.24 | 2.14 | ||||||||||||||
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|
|
|
|
|
|||||||||
(0.37 | ) | (0.32 | ) | (0.19 | ) | (0.30 | ) | (0.26 | ) | |||||||||
| | | 0.00 | B | | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||
(0.37 | ) | (0.32 | ) | (0.19 | ) | (0.30 | ) | (0.26 | ) | |||||||||
|
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|
|
|
|
|
|
|
|
|||||||||
$ | 27.74 | $ | 24.89 | $ | 19.19 | $ | 16.82 | $ | 16.88 | |||||||||
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|
|
|
|
|
|
|
|||||||||
13.02 | % | 31.56 | % | 15.25 | % | 1.44 | % | 14.43 | % | |||||||||
|
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|
|
|
|
|
|
|
|
|||||||||
$ | 38,055 | $ | 28,309 | $ | 18,174 | $ | 16,154 | $ | 17,707 | |||||||||
1.43 | % | 1.48 | % | 1.67 | % | 1.44 | % | 1.42 | % | |||||||||
|
0.58 |
% |
0.60 | % | 0.63 | % | 0.64 | % | 0.60 | % |
21
American Beacon Small Cap Index FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period |
$ | 18.57 | $ | 13.52 | $ | 11.86 | $ | 12.64 | $ | 10.06 | ||||||||||
|
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|
|
|
|
|||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment incomeA |
0.23 | 0.22 | 0.21 | 0.19 | 0.13 | |||||||||||||||
Net gain (loss) on investments and futures transactions (both realized and unrealized) |
0.66 | 5.05 | 1.73 | (0.76 | ) | 2.59 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total income (loss) from investment operations |
0.89 | 5.27 | 1.94 | (0.57 | ) | 2.72 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
(0.31 | ) | (0.22 | ) | (0.18 | ) | (0.21 | ) | (0.13 | ) | ||||||||||
Distributions from net realized gains on investments |
(1.46 | ) | | | | | ||||||||||||||
Tax return of capital |
| | (0.10 | )B | (0.00 | )B,C | (0.01 | )B | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total distributions |
(1.77 | ) | (0.22 | ) | (0.28 | ) | (0.21 | ) | (0.14 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net asset value, end of period |
$ | 17.69 | $ | 18.57 | $ | 13.52 | $ | 11.86 | $ | 12.64 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total returnD |
4.86 | % | 38.98 | % | 16.36 | % | (4.54 | )% | 27.05 | % | ||||||||||
|
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|
|
|
|
|
|
|
|||||||||||
Ratios and supplemental data: |
||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 147,191 | $ | 285,555 | $ | 186,660 | $ | 43,157 | $ | 93,138 | ||||||||||
Ratios to average net assets:A |
||||||||||||||||||||
Net investment income |
1.13 | % | 1.34 | % | 2.23 | % | 1.04 | % | 1.21 | % | ||||||||||
Expenses, including expenses allocated from the master portfolio |
0.20 | % | 0.17 | % | 0.21 | % | 0.26 | % | 0.18 | % |
A | The per share amounts and ratios reflect income and expenses assuming inclusion of the Funds proportionate share of the income and expenses of the Master Small Cap Index Series. |
B | The tax return of capital is calculated based upon outstanding shares at the time of distribution. |
C | Amount is less than $0.01 per share |
D | May include adjustments with accounting principles generally accepted in the United States of America and as such, the net assets for financial reporting purposes and the returns based upon those net asset value may differ from the net asset value and returns for shareholder transactions. |
22
American Beacon International Equity Index FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period |
$ | 11.43 | $ | 9.65 | $ | 8.36 | $ | 9.87 | $ | 9.38 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment incomeA |
0.41 | 0.29 | 0.25 | 0.29 | 0.22 | |||||||||||||||
Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) |
(1.11 | ) | 1.79 | 1.29 | (1.51 | ) | 0.49 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total income (loss) from investment operations |
(0.70 | ) | 2.08 | 1.54 | (1.22 | ) | 0.71 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
(0.42 | ) | (0.30 | ) | (0.25 | ) | (0.29 | ) | (0.22 | ) | ||||||||||
Tax return of capital |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total distributions |
(0.42 | ) | (0.30 | ) | (0.25 | ) | (0.29 | ) | (0.22 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net asset value, end of period |
$ | 10.31 | $ | 11.43 | $ | 9.65 | $ | 8.36 | $ | 9.87 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total returnB |
(6.19 | )% | 21.66 | % | 18.42 | % | (12.29 | )% | 7.57 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratios and supplemental data: |
||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 557,353 | $ | 629,737 | $ | 480,900 | $ | 321,592 | $ | 326,055 | ||||||||||
Ratios to average net assets:A |
||||||||||||||||||||
Net investment income |
3.45 | % | 2.80 | % | 3.28 | % | 3.26 | % | 2.66 | % | ||||||||||
Expenses, including expenses allocated from the master portfolio |
0.20 | % | 0.26 | % | 0.19 | % | 0.24 | % | 0.21 | % |
A | The per share amounts and ratios reflect income and expenses assuming inclusion of the Funds proportionate share of the income and expenses of the Master International Index Series. |
B | May include adjustments with accounting principles generally accepted in the United States of America and as such, the net assets for financial reporting purposes and the returns based upon those net asset value may differ from the net asset value and returns for shareholder transactions. |
23
American Beacon FundsSM
Privacy Policy and Federal Tax Information
December 31, 2014 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
| information we receive from you on applications or other forms; |
| information about your transactions with us or our service providers; and |
| information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Funds is required to be provided to shareholders upon the distribution of the Funds income for the taxable year ended December 31, 2014. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2014.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2014. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
S&P 500 Index Fund |
Small Cap Index Fund |
International Equity Index Fund |
||||||||||
Corporate Dividends Received Deduction |
97.43 | % | 67.10 | % | 0.00 | % | ||||||
Qualified Dividend Income |
100.00 | % | 77.46 | % | 98.41 | % |
Small Cap Index Fund paid $11,017,237 in long term capital gain distributions for the year ended December 31, 2014.
Shareholders will receive notification in January 2015 of the applicable tax information necessary to prepare their 2014 income tax returns.
25
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the Trust) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039. Each Trustee oversees thirty-three funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trusts Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address |
Position, Term of Office and Length of Time Served with the Trust |
Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | Term Lifetime of Trust until removal, resignation or retirement* |
|||
Alan D. Feld** (78) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term Lifetime of Trust until removal, resignation or retirement* |
|||
Gerard J. Arpey (56) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
W. Humphrey Bogart (70) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (54) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (60) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (72) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (71) | Trustee since 2004 Chairman since 2008 |
Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (69) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas75275 |
Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). |
25
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address |
Position, Term of Office and Length of Time Served with the Trust |
Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
One Year | ||||
Gene L. Needles, Jr. (60) | President since 2009 Executive Vice President 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2012), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 | General Counsel, Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Secretary (2008-Present), Lighthouse Holdings Parent, Inc. | ||
Brian E. Brett (54) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (48) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (44) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (60) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (53) | Treasurer since 2010 | Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer (2010-Present), Lighthouse Holdings, Inc.; Treasurer (2010-Present), Lighthouse Holdings Parent, Inc. | ||
Terri L. McKinney (51) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (39) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Samuel J. Silver (51) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (43) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
Sonia L. Bates (58) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011-Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc. |
* | As of 11/12/2014, the Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75. |
** | Mr. Feld is deemed to be an interested person of the Trust, as defined by the 1940 Act. Mr. Felds law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trusts sub-advisors. |
26
State Street Equity 500 Index Portfolio
Annual Report
December 31, 2014
State Street Equity 500 Index Portfolio
Portfolio of Investments
December 31, 2014
Shares | Market Value |
|||||||
COMMON STOCKS 96.9% |
|
|||||||
Consumer Discretionary 11.7% |
|
|||||||
Amazon.com, Inc.(a) |
58,102 | $ | 18,031,956 | |||||
AutoNation, Inc.(a) |
12,469 | 753,252 | ||||||
AutoZone, Inc.(a) |
4,988 | 3,088,121 | ||||||
Bed Bath & Beyond, Inc.(a) |
31,630 | 2,409,257 | ||||||
Best Buy Co., Inc. |
44,213 | 1,723,423 | ||||||
BorgWarner, Inc. |
36,423 | 2,001,444 | ||||||
Cablevision Systems Corp. Class A |
30,812 | 635,960 | ||||||
CarMax, Inc.(a) |
32,197 | 2,143,676 | ||||||
Carnival Corp. |
69,149 | 3,134,524 | ||||||
CBS Corp. Class B |
72,993 | 4,039,433 | ||||||
Chipotle Mexican Grill, Inc.(a) |
4,614 | 3,158,329 | ||||||
Coach, Inc. |
38,800 | 1,457,328 | ||||||
Comcast Corp. Class A |
391,565 | 22,714,686 | ||||||
D.R. Horton, Inc. |
50,179 | 1,269,027 | ||||||
Darden Restaurants, Inc. |
20,917 | 1,226,364 | ||||||
Delphi Automotive PLC |
43,681 | 3,176,482 | ||||||
DIRECTV(a) |
76,375 | 6,621,712 | ||||||
Discovery Communications, Inc. Class A(a) |
21,597 | 744,017 | ||||||
Discovery Communications, Inc. Class C(a) |
39,797 | 1,341,955 | ||||||
Dollar General Corp.(a) |
44,487 | 3,145,231 | ||||||
Dollar Tree, Inc.(a) |
30,293 | 2,132,021 | ||||||
Expedia, Inc. |
15,023 | 1,282,363 | ||||||
Family Dollar Stores, Inc. |
13,465 | 1,066,563 | ||||||
Ford Motor Co. |
589,560 | 9,138,180 | ||||||
Fossil Group, Inc.(a) |
7,617 | 843,506 | ||||||
GameStop Corp. Class A |
16,878 | 570,476 | ||||||
Gannett Co., Inc. |
34,252 | 1,093,666 | ||||||
Gap, Inc. |
44,764 | 1,885,012 | ||||||
Garmin Ltd. |
19,560 | 1,033,355 | ||||||
General Motors Co. |
206,677 | 7,215,094 | ||||||
Genuine Parts Co. |
24,420 | 2,602,439 | ||||||
Goodyear Tire & Rubber Co. |
40,813 | 1,166,027 | ||||||
H&R Block, Inc. |
45,551 | 1,534,158 | ||||||
Harley-Davidson, Inc. |
33,585 | 2,213,587 | ||||||
Harman International Industries, Inc. |
10,405 | 1,110,317 | ||||||
Hasbro, Inc. |
15,428 | 848,386 | ||||||
Home Depot, Inc. |
201,910 | 21,194,493 | ||||||
Interpublic Group of Cos., Inc. |
62,228 | 1,292,475 | ||||||
Johnson Controls, Inc. |
102,206 | 4,940,638 | ||||||
Kohls Corp. |
29,888 | 1,824,363 | ||||||
L Brands, Inc. |
36,546 | 3,163,056 | ||||||
Leggett & Platt, Inc. |
20,944 | 892,424 | ||||||
Lennar Corp. Class A |
26,425 | 1,184,104 | ||||||
Lowes Cos., Inc. |
150,012 | 10,320,826 | ||||||
Macys, Inc. |
53,161 | 3,495,336 | ||||||
Marriott International, Inc. Class A |
33,797 | 2,637,180 | ||||||
Mattel, Inc. |
47,843 | 1,480,502 | ||||||
McDonalds Corp. |
147,715 | 13,840,895 | ||||||
Michael Kors Holdings, Ltd.(a) |
29,886 | 2,244,439 | ||||||
Mohawk Industries, Inc.(a) |
9,669 | 1,502,176 | ||||||
Netflix, Inc.(a) |
8,828 | 3,015,733 | ||||||
Newell Rubbermaid, Inc. |
41,451 | 1,578,869 | ||||||
News Corp. Class A(a) |
69,414 | 1,089,106 | ||||||
NIKE, Inc. Class B |
105,051 | 10,100,654 | ||||||
Nordstrom, Inc. |
20,456 | 1,624,002 | ||||||
OReilly Automotive, Inc.(a) |
15,320 | 2,950,938 | ||||||
Omnicom Group, Inc. |
38,550 | 2,986,468 | ||||||
PetSmart, Inc. |
14,973 | 1,217,230 | ||||||
Priceline Group, Inc.(a) |
7,908 | 9,016,781 | ||||||
PulteGroup, Inc. |
47,343 | 1,015,981 | ||||||
PVH Corp. |
12,451 | 1,595,845 | ||||||
Ralph Lauren Corp. |
9,236 | 1,710,138 | ||||||
Ross Stores, Inc. |
31,072 | 2,928,847 | ||||||
Royal Caribbean Cruises, Ltd. |
25,100 | 2,068,993 | ||||||
Scripps Networks Interactive, Inc. Class A |
15,263 | 1,148,846 | ||||||
Staples, Inc. |
95,234 | 1,725,640 | ||||||
Starbucks Corp. |
114,546 | 9,398,499 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. |
29,944 | 2,427,560 | ||||||
Target Corp. |
95,444 | 7,245,154 | ||||||
Tiffany & Co. |
16,081 | 1,718,416 | ||||||
Time Warner Cable, Inc. |
42,574 | 6,473,802 | ||||||
Time Warner, Inc. |
127,580 | 10,897,884 | ||||||
TJX Cos., Inc. |
105,275 | 7,219,759 | ||||||
Tractor Supply Co. |
19,474 | 1,534,941 | ||||||
TripAdvisor, Inc.(a) |
15,715 | 1,173,282 | ||||||
Twenty-First Century Fox, Inc. Class A |
285,609 | 10,968,814 | ||||||
Under Armour, Inc. Class A(a) |
25,076 | 1,702,660 | ||||||
Urban Outfitters, Inc.(a) |
15,839 | 556,424 | ||||||
V.F. Corp. |
53,528 | 4,009,247 | ||||||
Viacom, Inc. Class B |
57,541 | 4,329,960 | ||||||
Walt Disney Co. |
236,793 | 22,303,533 | ||||||
Whirlpool Corp. |
12,459 | 2,413,807 | ||||||
Wyndham Worldwide Corp. |
19,646 | 1,684,841 | ||||||
Wynn Resorts, Ltd. |
11,859 | 1,764,145 | ||||||
Yum! Brands, Inc. |
67,990 | 4,953,071 | ||||||
|
|
|||||||
337,114,104 | ||||||||
|
|
|||||||
Consumer Staples 9.5% |
||||||||
Altria Group, Inc. |
303,870 | 14,971,675 | ||||||
Archer-Daniels-Midland Co. |
97,392 | 5,064,384 | ||||||
Avon Products, Inc. |
58,558 | 549,860 | ||||||
Brown-Forman Corp. Class B |
24,161 | 2,122,302 | ||||||
Campbell Soup Co. |
24,983 | 1,099,252 | ||||||
Clorox Co. |
19,379 | 2,019,486 | ||||||
Coca-Cola Co. |
599,122 | 25,294,931 | ||||||
Coca-Cola Enterprises, Inc. |
35,313 | 1,561,541 | ||||||
Colgate-Palmolive Co. |
130,379 | 9,020,923 | ||||||
ConAgra Foods, Inc. |
66,051 | 2,396,330 | ||||||
Constellation Brands, Inc. Class A(a) |
24,776 | 2,432,260 | ||||||
Costco Wholesale Corp. |
66,834 | 9,473,719 | ||||||
CVS Health Corp. |
174,027 | 16,760,540 | ||||||
Dr. Pepper Snapple Group, Inc. |
28,303 | 2,028,759 | ||||||
Estee Lauder Cos., Inc. Class A |
32,763 | 2,496,541 | ||||||
General Mills, Inc. |
94,522 | 5,040,858 | ||||||
Hershey Co. |
23,615 | 2,454,307 | ||||||
Hormel Foods Corp. |
18,349 | 955,983 | ||||||
J.M. Smucker Co. |
14,855 | 1,500,058 | ||||||
Kellogg Co. |
40,207 | 2,631,146 | ||||||
Keurig Green Mountain, Inc. |
18,089 | 2,394,893 | ||||||
Kimberly-Clark Corp. |
57,473 | 6,640,430 | ||||||
Kraft Foods Group, Inc. |
90,751 | 5,686,458 |
See Notes to Financial Statements.
28
State Street Equity 500 Index Portfolio
Portfolio of Investments (continued)
December 31, 2014
Shares | Market Value |
|||||||
COMMON STOCKS (continued) |
|
|||||||
Consumer Staples (continued) |
||||||||
Kroger Co. |
76,955 | $ | 4,941,281 | |||||
Lorillard, Inc. |
53,128 | 3,343,876 | ||||||
McCormick & Co., Inc. |
20,261 | 1,505,392 | ||||||
Mead Johnson Nutrition Co. |
30,568 | 3,073,307 | ||||||
Molson Coors Brewing Co. Class B |
23,509 | 1,751,891 | ||||||
Mondelez International, Inc. Class A |
255,894 | 9,295,350 | ||||||
Monster Beverage Corp.(a) |
21,547 | 2,334,617 | ||||||
PepsiCo, Inc. |
226,738 | 21,440,345 | ||||||
Philip Morris International, Inc. |
237,687 | 19,359,606 | ||||||
Procter & Gamble Co. |
411,961 | 37,525,527 | ||||||
Reynolds American, Inc. |
45,070 | 2,896,649 | ||||||
Safeway, Inc. |
32,165 | 1,129,635 | ||||||
Sysco Corp. |
87,335 | 3,466,326 | ||||||
Tyson Foods, Inc. Class A |
44,691 | 1,791,662 | ||||||
Wal-Mart Stores, Inc. |
241,499 | 20,739,934 | ||||||
Walgreens Boots Alliance, Inc. |
133,713 | 10,188,931 | ||||||
Whole Foods Market, Inc. |
55,587 | 2,802,697 | ||||||
|
|
|||||||
272,183,662 | ||||||||
|
|
|||||||
Energy 8.2% |
||||||||
Anadarko Petroleum Corp. |
77,544 | 6,397,380 | ||||||
Apache Corp. |
56,370 | 3,532,708 | ||||||
Baker Hughes, Inc. |
64,694 | 3,627,393 | ||||||
Cabot Oil & Gas Corp. |
65,622 | 1,943,067 | ||||||
Cameron International Corp.(a) |
30,467 | 1,521,827 | ||||||
Chesapeake Energy Corp. |
78,594 | 1,538,085 | ||||||
Chevron Corp.(b) |
287,334 | 32,233,128 | ||||||
Cimarex Energy Co. |
13,242 | 1,403,652 | ||||||
ConocoPhillips |
187,103 | 12,921,333 | ||||||
CONSOL Energy, Inc. |
32,173 | 1,087,769 | ||||||
Denbury Resources, Inc. |
53,229 | 432,752 | ||||||
Devon Energy Corp. |
59,550 | 3,645,056 | ||||||
Diamond Offshore Drilling, Inc. |
9,954 | 365,411 | ||||||
Ensco PLC Class A |
32,889 | 985,026 | ||||||
EOG Resources, Inc. |
83,263 | 7,666,024 | ||||||
EQT Corp. |
22,243 | 1,683,795 | ||||||
ExxonMobil Corp.(b) |
644,672 | 59,599,926 | ||||||
FMC Technologies, Inc.(a) |
33,409 | 1,564,878 | ||||||
Halliburton Co. |
130,167 | 5,119,468 | ||||||
Helmerich & Payne, Inc. |
14,974 | 1,009,547 | ||||||
Hess Corp. |
38,344 | 2,830,554 | ||||||
Kinder Morgan, Inc. |
258,176 | 10,923,427 | ||||||
Marathon Oil Corp. |
99,689 | 2,820,202 | ||||||
Marathon Petroleum Corp. |
43,801 | 3,953,478 | ||||||
Murphy Oil Corp. |
24,962 | 1,261,080 | ||||||
Nabors Industries, Ltd. |
41,720 | 541,526 | ||||||
National Oilwell Varco, Inc. |
66,641 | 4,366,985 | ||||||
Newfield Exploration Co.(a) |
20,685 | 560,977 | ||||||
Noble Corp. PLC |
37,996 | 629,594 | ||||||
Noble Energy, Inc. |
54,795 | 2,598,927 | ||||||
Occidental Petroleum Corp. |
117,635 | 9,482,557 | ||||||
ONEOK, Inc. |
31,504 | 1,568,584 | ||||||
Phillips 66 |
85,692 | 6,144,116 | ||||||
Pioneer Natural Resources Co. |
23,524 | 3,501,547 | ||||||
QEP Resources, Inc. |
27,323 | 552,471 | ||||||
Range Resources Corp. |
24,841 | 1,327,751 | ||||||
Schlumberger, Ltd. |
195,272 | 16,678,182 | ||||||
Southwestern Energy Co.(a) |
51,844 | 1,414,823 | ||||||
Spectra Energy Corp. |
104,141 | 3,780,318 | ||||||
Tesoro Corp. |
20,049 | 1,490,643 | ||||||
Transocean, Ltd. |
47,690 | 874,158 | ||||||
Valero Energy Corp. |
78,586 | 3,890,007 | ||||||
Williams Cos., Inc. (The) |
102,610 | 4,611,293 | ||||||
|
|
|||||||
234,081,425 | ||||||||
|
|
|||||||
Financials 16.1% |
||||||||
ACE, Ltd. |
49,767 | 5,717,233 | ||||||
Affiliated Managers Group, Inc.(a) |
8,476 | 1,798,946 | ||||||
Aflac, Inc. |
69,737 | 4,260,233 | ||||||
Allstate Corp. |
63,967 | 4,493,682 | ||||||
American Express Co. |
136,052 | 12,658,278 | ||||||
American International Group, Inc. |
215,932 | 12,094,351 | ||||||
American Tower Corp. REIT |
59,682 | 5,899,566 | ||||||
Ameriprise Financial, Inc. |
27,963 | 3,698,107 | ||||||
Aon PLC |
42,882 | 4,066,500 | ||||||
Apartment Investment & Management Co. Class A REIT |
19,865 | 737,985 | ||||||
Assurant, Inc. |
10,846 | 742,192 | ||||||
AvalonBay Communities, Inc. REIT |
19,529 | 3,190,843 | ||||||
Bank of America Corp. |
1,598,166 | 28,591,190 | ||||||
Bank of New York Mellon Corp. |
172,691 | 7,006,074 | ||||||
BB&T Corp. |
109,439 | 4,256,083 | ||||||
Berkshire Hathaway, Inc. Class B(a) |
277,919 | 41,729,538 | ||||||
BlackRock, Inc. |
19,418 | 6,943,100 | ||||||
Boston Properties, Inc. REIT |
22,821 | 2,936,835 | ||||||
Capital One Financial Corp. |
85,268 | 7,038,873 | ||||||
CBRE Group, Inc.(a) |
42,908 | 1,469,599 | ||||||
Charles Schwab Corp. |
172,289 | 5,201,405 | ||||||
Chubb Corp. |
35,896 | 3,714,159 | ||||||
Cincinnati Financial Corp. |
23,305 | 1,207,898 | ||||||
Citigroup, Inc. |
462,693 | 25,036,318 | ||||||
CME Group, Inc. |
49,092 | 4,352,006 | ||||||
Comerica, Inc. |
25,917 | 1,213,952 | ||||||
Crown Castle International Corp. REIT |
51,842 | 4,079,965 | ||||||
Discover Financial Services |
68,377 | 4,478,010 | ||||||
E*TRADE Financial Corp.(a) |
43,889 | 1,064,528 | ||||||
Equity Residential REIT |
56,238 | 4,040,138 | ||||||
Essex Property Trust, Inc. REIT |
9,555 | 1,974,063 | ||||||
Fifth Third Bancorp |
122,654 | 2,499,075 | ||||||
Franklin Resources, Inc. |
57,851 | 3,203,210 | ||||||
General Growth Properties, Inc. REIT |
91,342 | 2,569,450 | ||||||
Genworth Financial, Inc. Class A(a) |
71,189 | 605,107 | ||||||
Goldman Sachs Group, Inc. |
62,188 | 12,053,900 | ||||||
Hartford Financial Services Group, Inc. |
70,630 | 2,944,565 | ||||||
HCP, Inc. REIT |
69,777 | 3,072,281 | ||||||
Health Care REIT, Inc. |
49,581 | 3,751,794 | ||||||
Host Hotels & Resorts, Inc. REIT |
113,659 | 2,701,674 |
See Notes to Financial Statements.
29
State Street Equity 500 Index Portfolio
Portfolio of Investments (continued)
December 31, 2014
Shares | Market Value |
|||||||
COMMON STOCKS (continued) |
|
|||||||
Financials (continued) |
||||||||
Hudson City Bancorp, Inc. |
66,376 | $ | 671,725 | |||||
Huntington Bancshares, Inc. |
122,865 | 1,292,540 | ||||||
Intercontinental Exchange, Inc. |
17,525 | 3,843,057 | ||||||
Invesco Ltd. |
65,489 | 2,588,125 | ||||||
Iron Mountain, Inc. REIT |
33,274 | 1,286,373 | ||||||
J.P. Morgan Chase & Co. |
571,672 | 35,775,234 | ||||||
KeyCorp |
128,679 | 1,788,638 | ||||||
Kimco Realty Corp. REIT |
64,016 | 1,609,362 | ||||||
Legg Mason, Inc. |
15,615 | 833,373 | ||||||
Leucadia National Corp. |
47,809 | 1,071,878 | ||||||
Lincoln National Corp. |
40,310 | 2,324,678 | ||||||
Loews Corp. |
48,012 | 2,017,464 | ||||||
M&T Bank Corp. |
19,334 | 2,428,737 | ||||||
Marsh & McLennan Cos., Inc. |
82,934 | 4,747,142 | ||||||
McGraw Hill Financial, Inc. |
40,298 | 3,585,716 | ||||||
MetLife, Inc. |
175,626 | 9,499,610 | ||||||
Moodys Corp. |
27,234 | 2,609,290 | ||||||
Morgan Stanley |
231,955 | 8,999,854 | ||||||
NASDAQ OMX Group, Inc. |
15,925 | 763,763 | ||||||
Navient Corp. |
59,941 | 1,295,325 | ||||||
Northern Trust Corp. |
35,310 | 2,379,894 | ||||||
Peoples United Financial, Inc. |
49,334 | 748,890 | ||||||
Plum Creek Timber Co., Inc. REIT |
27,186 | 1,163,289 | ||||||
PNC Financial Services Group, Inc. |
82,842 | 7,557,676 | ||||||
Principal Financial Group, Inc. |
40,326 | 2,094,532 | ||||||
Progressive Corp. |
85,852 | 2,317,146 | ||||||
ProLogis, Inc. REIT |
74,347 | 3,199,151 | ||||||
Prudential Financial, Inc. |
70,037 | 6,335,547 | ||||||
Public Storage, Inc. REIT |
21,452 | 3,965,402 | ||||||
Regions Financial Corp. |
213,143 | 2,250,790 | ||||||
Simon Property Group, Inc. REIT |
47,435 | 8,638,388 | ||||||
State Street Corp.(c) |
62,947 | 4,941,340 | ||||||
SunTrust Banks, Inc. |
78,882 | 3,305,156 | ||||||
T. Rowe Price Group, Inc. |
38,320 | 3,290,155 | ||||||
The Macerich Co. REIT |
20,945 | 1,747,022 | ||||||
Torchmark Corp. |
19,384 | 1,050,031 | ||||||
Travelers Cos., Inc. |
51,098 | 5,408,723 | ||||||
U.S. Bancorp |
271,630 | 12,209,769 | ||||||
Unum Group |
35,424 | 1,235,589 | ||||||
Ventas, Inc. REIT |
44,703 | 3,205,205 | ||||||
Vornado Realty Trust REIT |
27,746 | 3,265,982 | ||||||
Wells Fargo & Co. |
721,646 | 39,560,634 | ||||||
Weyerhaeuser Co. REIT |
81,681 | 2,931,531 | ||||||
XL Group PLC |
38,920 | 1,337,680 | ||||||
Zions Bancorporation |
31,258 | 891,166 | ||||||
|
|
|||||||
463,155,278 | ||||||||
|
|
|||||||
Health Care 13.8% |
||||||||
Abbott Laboratories |
227,959 | 10,262,714 | ||||||
AbbVie, Inc. |
241,063 | 15,775,163 | ||||||
Actavis PLC(a) |
40,969 | 10,545,830 | ||||||
Aetna, Inc. |
52,415 | 4,656,024 | ||||||
Agilent Technologies, Inc. |
52,075 | 2,131,951 | ||||||
Alexion Pharmaceuticals, Inc.(a) |
30,127 | 5,574,399 | ||||||
Allergan, Inc. |
45,014 | 9,569,526 | ||||||
AmerisourceBergen Corp. |
33,552 | 3,025,048 | ||||||
Amgen, Inc. |
116,391 | 18,539,922 | ||||||
Anthem, Inc. |
42,119 | 5,293,095 | ||||||
Baxter International, Inc. |
82,545 | 6,049,723 | ||||||
Becton Dickinson and Co. |
28,992 | 4,034,527 | ||||||
Biogen Idec, Inc.(a) |
35,847 | 12,168,264 | ||||||
Boston Scientific Corp.(a) |
208,377 | 2,760,995 | ||||||
Bristol-Myers Squibb Co. |
251,212 | 14,829,044 | ||||||
C.R. Bard, Inc. |
11,162 | 1,859,812 | ||||||
Cardinal Health, Inc. |
52,424 | 4,232,190 | ||||||
CareFusion Corp.(a) |
29,322 | 1,739,968 | ||||||
Celgene Corp.(a) |
122,865 | 13,743,679 | ||||||
Cerner Corp.(a) |
47,263 | 3,056,026 | ||||||
CIGNA Corp. |
39,811 | 4,096,950 | ||||||
Covidien PLC |
68,613 | 7,017,738 | ||||||
DaVita HealthCare Partners, Inc.(a) |
26,572 | 2,012,563 | ||||||
DENTSPLY International, Inc. |
20,166 | 1,074,243 | ||||||
Edwards Lifesciences Corp.(a) |
16,445 | 2,094,764 | ||||||
Eli Lilly & Co. |
149,057 | 10,283,442 | ||||||
Express Scripts Holding Co.(a) |
111,647 | 9,453,152 | ||||||
Gilead Sciences, Inc.(a) |
228,746 | 21,561,598 | ||||||
Hospira, Inc.(a) |
25,017 | 1,532,291 | ||||||
Humana, Inc. |
22,917 | 3,291,569 | ||||||
Intuitive Surgical, Inc.(a) |
5,452 | 2,883,781 | ||||||
Johnson & Johnson |
427,741 | 44,728,876 | ||||||
Laboratory Corp. of America Holdings(a) |
13,347 | 1,440,141 | ||||||
Mallinckrodt PLC(a) |
17,700 | 1,752,831 | ||||||
McKesson Corp. |
36,031 | 7,479,315 | ||||||
Medtronic, Inc. |
148,410 | 10,715,202 | ||||||
Merck & Co., Inc. |
435,198 | 24,714,894 | ||||||
Mylan, Inc.(a) |
56,907 | 3,207,848 | ||||||
Patterson Cos., Inc. |
11,159 | 536,748 | ||||||
PerkinElmer, Inc. |
16,632 | 727,317 | ||||||
Perrigo Co. PLC |
20,814 | 3,479,268 | ||||||
Pfizer, Inc. |
958,648 | 29,861,885 | ||||||
Quest Diagnostics, Inc. |
22,158 | 1,485,915 | ||||||
Regeneron Pharmaceuticals, Inc.(a) |
11,458 | 4,700,645 | ||||||
St. Jude Medical, Inc. |
44,053 | 2,864,767 | ||||||
Stryker Corp. |
45,595 | 4,300,976 | ||||||
Tenet Healthcare Corp.(a) |
13,452 | 681,613 | ||||||
Thermo Fisher Scientific, Inc. |
60,512 | 7,581,549 | ||||||
UnitedHealth Group, Inc. |
146,122 | 14,771,473 | ||||||
Universal Health Services, Inc. |
13,300 | 1,479,758 | ||||||
Varian Medical Systems, Inc.(a) |
15,631 | 1,352,238 | ||||||
Vertex Pharmaceuticals, Inc.(a) |
36,648 | 4,353,782 | ||||||
Waters Corp.(a) |
11,915 | 1,343,059 | ||||||
Zimmer Holdings, Inc. |
25,727 | 2,917,956 | ||||||
Zoetis, Inc. |
76,228 | 3,280,091 | ||||||
|
|
|||||||
394,908,138 | ||||||||
|
|
|||||||
Industrials 10.1% |
||||||||
3M Co. |
97,443 | 16,011,834 | ||||||
ADT Corp. |
25,056 | 907,779 | ||||||
Allegion PLC |
12,837 | 711,940 | ||||||
AMETEK, Inc. |
37,101 | 1,952,626 | ||||||
Boeing Co. |
100,924 | 13,118,102 | ||||||
C.H. Robinson Worldwide, Inc. |
22,382 | 1,676,188 | ||||||
Caterpillar, Inc. |
93,855 | 8,590,548 | ||||||
Cintas Corp. |
15,222 | 1,194,014 |
See Notes to Financial Statements.
30
State Street Equity 500 Index Portfolio
Portfolio of Investments (continued)
December 31, 2014
Shares | Market Value |
|||||||
COMMON STOCKS (continued) |
|
|||||||
Industrials (continued) |
||||||||
CSX Corp. |
148,359 | $ | 5,375,047 | |||||
Cummins, Inc. |
26,444 | 3,812,431 | ||||||
Danaher Corp. |
93,178 | 7,986,286 | ||||||
Deere & Co. |
53,954 | 4,773,310 | ||||||
Delta Air Lines, Inc. |
125,066 | 6,151,997 | ||||||
Dover Corp. |
24,145 | 1,731,679 | ||||||
Dun & Bradstreet Corp. |
6,145 | 743,299 | ||||||
Eaton Corp. PLC |
72,099 | 4,899,848 | ||||||
Emerson Electric Co. |
105,369 | 6,504,428 | ||||||
Equifax, Inc. |
17,295 | 1,398,647 | ||||||
Expeditors International of Washington, Inc. |
29,444 | 1,313,497 | ||||||
Fastenal Co. |
44,042 | 2,094,638 | ||||||
FedEx Corp. |
40,350 | 7,007,181 | ||||||
Flowserve Corp. |
18,955 | 1,134,078 | ||||||
Fluor Corp. |
22,556 | 1,367,570 | ||||||
General Dynamics Corp. |
48,689 | 6,700,580 | ||||||
General Electric Co. |
1,530,863 | 38,684,908 | ||||||
Honeywell International, Inc. |
120,603 | 12,050,652 | ||||||
Illinois Tool Works, Inc. |
56,071 | 5,309,924 | ||||||
Ingersoll-Rand PLC |
41,116 | 2,606,343 | ||||||
Jacobs Engineering Group, Inc.(a) |
20,157 | 900,816 | ||||||
Joy Global, Inc. |
14,887 | 692,543 | ||||||
Kansas City Southern |
16,704 | 2,038,389 | ||||||
L-3 Communications Holdings, Inc. |
12,465 | 1,573,208 | ||||||
Lockheed Martin Corp. |
41,249 | 7,943,320 | ||||||
Masco Corp. |
54,139 | 1,364,303 | ||||||
Nielsen NV |
52,275 | 2,338,261 | ||||||
Norfolk Southern Corp. |
47,268 | 5,181,045 | ||||||
Northrop Grumman Corp. |
31,686 | 4,670,200 | ||||||
PACCAR, Inc. |
54,235 | 3,688,522 | ||||||
Pall Corp. |
16,107 | 1,630,189 | ||||||
Parker-Hannifin Corp. |
21,814 | 2,812,915 | ||||||
Pentair PLC |
28,991 | 1,925,582 | ||||||
Pitney Bowes, Inc. |
30,921 | 753,545 | ||||||
Precision Castparts Corp. |
21,978 | 5,294,061 | ||||||
Quanta Services, Inc.(a) |
30,293 | 860,018 | ||||||
Raytheon Co. |
47,736 | 5,163,603 | ||||||
Republic Services, Inc. |
41,114 | 1,654,839 | ||||||
Robert Half International, Inc. |
20,374 | 1,189,434 | ||||||
Rockwell Automation, Inc. |
21,779 | 2,421,825 | ||||||
Rockwell Collins, Inc. |
19,500 | 1,647,360 | ||||||
Roper Industries, Inc. |
14,835 | 2,319,452 | ||||||
Ryder System, Inc. |
6,855 | 636,487 | ||||||
Snap-on, Inc. |
8,872 | 1,213,157 | ||||||
Southwest Airlines Co. |
105,927 | 4,482,831 | ||||||
Stanley Black & Decker, Inc. |
24,950 | 2,397,196 | ||||||
Stericycle, Inc.(a) |
12,204 | 1,599,700 | ||||||
Textron, Inc. |
44,906 | 1,890,992 | ||||||
Tyco International PLC |
67,336 | 2,953,357 | ||||||
Union Pacific Corp. |
134,838 | 16,063,251 | ||||||
United Parcel Service, Inc. Class B |
106,455 | 11,834,602 | ||||||
United Rentals, Inc.(a) |
15,200 | 1,550,552 | ||||||
United Technologies Corp. |
130,327 | 14,987,605 | ||||||
W.W. Grainger, Inc. |
9,412 | 2,399,025 | ||||||
Waste Management, Inc. |
63,304 | 3,248,761 | ||||||
Xylem, Inc. |
24,834 | 945,430 | ||||||
|
|
|||||||
290,075,750 | ||||||||
|
|
|||||||
Information Technology 19.1% |
|
|||||||
Accenture PLC Class A |
96,082 | 8,581,083 | ||||||
Adobe Systems, Inc.(a) |
73,813 | 5,366,205 | ||||||
Akamai Technologies, Inc.(a) |
27,734 | 1,746,133 | ||||||
Alliance Data Systems Corp.(a) |
10,204 | 2,918,854 | ||||||
Altera Corp. |
43,754 | 1,616,273 | ||||||
Amphenol Corp. Class A |
45,180 | 2,431,136 | ||||||
Analog Devices, Inc. |
46,018 | 2,554,919 | ||||||
Apple, Inc. |
894,664 | 98,753,012 | ||||||
Applied Materials, Inc. |
190,653 | 4,751,073 | ||||||
Autodesk, Inc.(a) |
34,170 | 2,052,250 | ||||||
Automatic Data Processing, Inc. |
73,365 | 6,116,440 | ||||||
Avago Technologies, Ltd. |
38,718 | 3,894,644 | ||||||
Broadcom Corp. Class A |
81,235 | 3,519,913 | ||||||
CA, Inc. |
45,959 | 1,399,452 | ||||||
Cisco Systems, Inc. |
781,729 | 21,743,792 | ||||||
Citrix Systems, Inc.(a) |
25,678 | 1,638,256 | ||||||
Cognizant Technology Solutions Corp. Class A(a) |
93,627 | 4,930,398 | ||||||
Computer Sciences Corp. |
22,732 | 1,433,253 | ||||||
Corning, Inc. |
191,950 | 4,401,413 | ||||||
eBay, Inc.(a) |
172,158 | 9,661,507 | ||||||
Electronic Arts, Inc.(a) |
50,121 | 2,356,439 | ||||||
EMC Corp. |
306,874 | 9,126,433 | ||||||
F5 Networks, Inc.(a) |
10,559 | 1,377,580 | ||||||
Facebook, Inc. Class A(a) |
319,407 | 24,920,134 | ||||||
Fidelity National Information Services, Inc. |
44,886 | 2,791,909 | ||||||
First Solar, Inc.(a) |
11,749 | 523,947 | ||||||
Fiserv, Inc.(a) |
36,442 | 2,586,289 | ||||||
FLIR Systems, Inc. |
20,339 | 657,153 | ||||||
Google, Inc. Class A(a) |
43,323 | 22,989,783 | ||||||
Google, Inc. Class C(a) |
43,523 | 22,910,507 | ||||||
Harris Corp. |
16,098 | 1,156,158 | ||||||
Hewlett-Packard Co. |
282,863 | 11,351,292 | ||||||
Intel Corp. |
746,920 | 27,105,727 | ||||||
International Business Machines Corp. |
139,847 | 22,437,053 | ||||||
Intuit, Inc. |
43,326 | 3,994,224 | ||||||
Juniper Networks, Inc. |
58,444 | 1,304,470 | ||||||
KLA-Tencor Corp. |
26,573 | 1,868,613 | ||||||
Lam Research Corp. |
24,281 | 1,926,454 | ||||||
Linear Technology Corp. |
35,021 | 1,596,958 | ||||||
Mastercard, Inc. Class A |
148,349 | 12,781,750 | ||||||
Microchip Technology, Inc. |
28,206 | 1,272,373 | ||||||
Micron Technology, Inc.(a) |
163,528 | 5,725,115 | ||||||
Microsoft Corp.(b) |
1,254,977 | 58,293,682 | ||||||
Motorola Solutions, Inc. |
33,022 | 2,215,116 | ||||||
NetApp, Inc. |
49,643 | 2,057,702 | ||||||
NVIDIA Corp. |
75,012 | 1,503,991 | ||||||
Oracle Corp. |
493,470 | 22,191,346 | ||||||
Paychex, Inc. |
49,131 | 2,268,378 | ||||||
QUALCOMM, Inc. |
255,185 | 18,967,901 | ||||||
Red Hat, Inc.(a) |
28,130 | 1,944,908 | ||||||
Salesforce.com, Inc.(a) |
89,205 | 5,290,749 | ||||||
SanDisk Corp. |
33,206 | 3,253,524 | ||||||
Seagate Technology PLC |
49,776 | 3,310,104 | ||||||
Symantec Corp. |
108,203 | 2,775,948 |
See Notes to Financial Statements.
31
State Street Equity 500 Index Portfolio
Portfolio of Investments (continued)
December 31, 2014
Shares | Market Value |
|||||||
COMMON STOCKS (continued) |
|
|||||||
Information Technology (continued) |
|
|||||||
TE Connectivity, Ltd. |
60,849 | $ | 3,848,699 | |||||
Teradata Corp.(a) |
21,913 | 957,160 | ||||||
Texas Instruments, Inc. |
158,906 | 8,495,909 | ||||||
Total System Services, Inc. |
22,999 | 781,046 | ||||||
VeriSign, Inc.(a) |
19,320 | 1,101,240 | ||||||
Visa, Inc. Class A |
74,910 | 19,641,402 | ||||||
Western Digital Corp. |
33,647 | 3,724,723 | ||||||
Western Union Co. |
74,940 | 1,342,175 | ||||||
Xerox Corp. |
161,592 | 2,239,665 | ||||||
Xilinx, Inc. |
39,642 | 1,716,102 | ||||||
Yahoo!, Inc.(a) |
137,637 | 6,952,045 | ||||||
|
|
|||||||
547,143,882 | ||||||||
|
|
|||||||
Materials 3.1% |
| |||||||
Air Products & Chemicals, Inc. |
29,807 | 4,299,064 | ||||||
Airgas, Inc. |
10,040 | 1,156,407 | ||||||
Alcoa, Inc. |
183,889 | 2,903,607 | ||||||
Allegheny Technologies, Inc. |
14,911 | 518,455 | ||||||
Avery Dennison Corp. |
13,318 | 690,938 | ||||||
Ball Corp. |
21,658 | 1,476,426 | ||||||
C.F. Industries Holdings, Inc. |
8,006 | 2,181,955 | ||||||
Dow Chemical Co. |
168,090 | 7,666,585 | ||||||
E.I. du Pont de Nemours & Co. |
138,794 | 10,262,428 | ||||||
Eastman Chemical Co. |
21,472 | 1,628,866 | ||||||
Ecolab, Inc. |
41,565 | 4,344,374 | ||||||
FMC Corp. |
18,522 | 1,056,310 | ||||||
Freeport-McMoRan, Inc. |
157,964 | 3,690,039 | ||||||
International Flavors & Fragrances, Inc. |
11,280 | 1,143,341 | ||||||
International Paper Co. |
66,808 | 3,579,573 | ||||||
LyondellBasell Industries NV Class A |
62,952 | 4,997,759 | ||||||
Martin Marietta Materials, Inc. |
8,655 | 954,820 | ||||||
MeadWestvaco Corp. |
24,943 | 1,107,220 | ||||||
Monsanto Co. |
72,794 | 8,696,699 | ||||||
Mosaic Co. |
47,516 | 2,169,105 | ||||||
Newmont Mining Corp. |
73,573 | 1,390,530 | ||||||
Nucor Corp. |
47,306 | 2,320,359 | ||||||
Owens-Illinois, Inc.(a) |
22,763 | 614,373 | ||||||
PPG Industries, Inc. |
21,444 | 4,956,781 | ||||||
Praxair, Inc. |
45,000 | 5,830,200 | ||||||
Sealed Air Corp. |
32,469 | 1,377,660 | ||||||
Sherwin-Williams Co. |
12,287 | 3,231,972 | ||||||
Sigma-Aldrich Corp. |
17,761 | 2,438,052 | ||||||
Vulcan Materials Co. |
18,490 | 1,215,348 | ||||||
|
|
|||||||
87,899,246 | ||||||||
|
|
|||||||
Telecommunication Services 2.2% |
| |||||||
AT&T, Inc. |
788,273 | 26,478,090 | ||||||
CenturyLink, Inc. |
86,173 | 3,410,727 | ||||||
Frontier Communications Corp. |
143,538 | 957,399 | ||||||
Level 3 Communications, Inc.(a) |
41,500 | 2,049,270 | ||||||
Verizon Communications, Inc. |
633,251 | 29,623,482 | ||||||
Windstream Holdings, Inc. |
85,867 | 707,544 | ||||||
|
|
|||||||
63,226,512 | ||||||||
|
|
|||||||
Utilities 3.1% |
| |||||||
AES Corp. |
98,059 | 1,350,272 | ||||||
AGL Resources, Inc. |
18,002 | 981,289 | ||||||
Ameren Corp. |
36,056 | 1,663,263 | ||||||
American Electric Power Co., Inc. |
75,043 | 4,556,611 | ||||||
CenterPoint Energy, Inc. |
65,335 | 1,530,799 | ||||||
CMS Energy Corp. |
42,001 | 1,459,535 | ||||||
Consolidated Edison, Inc. |
43,500 | 2,871,435 | ||||||
Dominion Resources, Inc. |
87,668 | 6,741,669 | ||||||
DTE Energy Co. |
26,039 | 2,248,988 | ||||||
Duke Energy Corp. |
107,391 | 8,971,444 | ||||||
Edison International |
49,505 | 3,241,587 | ||||||
Entergy Corp. |
27,000 | 2,361,960 | ||||||
Exelon Corp. |
131,659 | 4,881,916 | ||||||
FirstEnergy Corp. |
61,729 | 2,406,814 | ||||||
Integrys Energy Group, Inc. |
11,180 | 870,363 | ||||||
NextEra Energy, Inc. |
66,357 | 7,053,086 | ||||||
NiSource, Inc. |
47,478 | 2,014,017 | ||||||
Northeast Utilities |
46,443 | 2,485,629 | ||||||
NRG Energy, Inc. |
51,498 | 1,387,871 | ||||||
Pepco Holdings, Inc. |
35,659 | 960,297 | ||||||
PG&E Corp. |
72,012 | 3,833,919 | ||||||
Pinnacle West Capital Corp. |
15,456 | 1,055,799 | ||||||
PPL Corp. |
98,256 | 3,569,641 | ||||||
Public Service Enterprise Group, Inc. |
76,936 | 3,185,920 | ||||||
SCANA Corp. |
23,801 | 1,437,580 | ||||||
Sempra Energy |
35,624 | 3,967,089 | ||||||
Southern Co. |
139,484 | 6,850,059 | ||||||
TECO Energy, Inc. |
30,250 | 619,823 | ||||||
Wisconsin Energy Corp. |
32,976 | 1,739,154 | ||||||
Xcel Energy, Inc. |
80,800 | 2,902,336 | ||||||
|
|
|||||||
89,200,165 | ||||||||
|
|
|||||||
TOTAL COMMON STOCKS |
|
2,778,988,162 | ||||||
|
|
|||||||
Par Amount |
||||||||
U.S. GOVERNMENT SECURITIES 0.2% |
| |||||||
U.S. Treasury Bill(b)(d)(e) |
$ 2,000,000 | 1,999,992 | ||||||
U.S. Treasury Bill(b)(d)(e) |
3,760,000 | 3,760,000 | ||||||
U.S. Treasury Bill(b)(d)(e) |
400,000 | 400,000 | ||||||
|
|
|||||||
TOTAL U.S. GOVERNMENT SECURITIES |
|
6,159,992 | ||||||
|
|
|||||||
Shares | ||||||||
MONEY MARKET FUND 3.2% |
| |||||||
State Street Institutional Liquid Reserves Fund, Premier Class 0.07%(c)(f) |
91,116,189 | 91,116,189 | ||||||
|
|
|||||||
TOTAL MONEY MARKET FUND |
|
91,116,189 | ||||||
|
|
|||||||
TOTAL INVESTMENTS 100.3% |
|
2,876,264,343 | ||||||
Liabilities in Excess of |
|
(6,941,471 | ) | |||||
|
|
|||||||
NET ASSETS 100.0% |
$ | 2,869,322,872 | ||||||
|
|
See Notes to Financial Statements.
32
State Street Equity 500 Index Portfolio
Portfolio of Investments (continued)
December 31, 2014
(a) | Non-income producing security |
(b) | All or part of this security has been designated as collateral for futures contracts |
(c) | Affiliated issuer. See table that follows for more information. |
(d) | Rate represents annualized yield at date of purchase |
(e) | Securities are valued in accordance with procedures approved by the Board of Trustees. Securities values are determined based on Level 2 inputs. |
(f) | The rate shown is the annualized seven-day yield at period end. |
PLC | Public Limited Company |
REIT Real | Estate Investment Trust |
Schedule of |
Number of Contracts |
Notional Value |
Unrealized Appreciation |
|||||||||
S&P 500 Financial Futures Contracts (long) Expiration Date 03/2015 |
875 | $ | 89,792,500 | $ | 2,382,058 | |||||||
|
|
|||||||||||
Total unrealized appreciation on open futures contracts purchased |
$ | 2,382,058 | ||||||||||
|
|
Affiliates Table
Certain investments made by the Portfolio were made in securities affiliated with State Street and SSGA FM. Investments in State Street Corp., the holding company of State Street, were made according to its representative portion of the S&P 500® Index. The Portfolio also invested in the State Street Institutional Liquid Reserves Fund. Transactions in all affiliates for the period ending December 31, 2014 were as follows:
Security Description |
Number of shares held at 12/31/13 |
Shares purchased for the year ended 12/31/14 |
Shares sold for the year ended 12/31/14 |
Number of shares held at 12/31/14 |
Value at 12/31/14 |
Income earned for the year ended 12/31/14 |
Realized gain/loss on shares sold |
|||||||||||||||||||||
State Street Corp. |
72,725 | | 9,778 | * | 62,947 | $ | 4,941,340 | $ | 78,494 | $ | | |||||||||||||||||
State Street Institutional Liquid Reserves Fund, Premier Class |
41,178,491 | 407,287,719 | 357,350,021 | 91,116,189 | 91,116,189 | 45,460 | |
* | Shares of State Street Corp. were disposed of in a tax-free redemption in-kind (Note 7). |
See Notes to Financial Statements.
33
State Street Equity 500 Index Portfolio
Statement of Assets and Liabilities
December 31, 2014
Assets |
||||
Investments in unaffiliated issuers at market value |
$ | 2,780,206,814 | ||
Investments in non-controlled affiliates at market value |
96,057,529 | |||
|
|
|||
Total investments at market value (identified cost $1,377,110,434) |
2,876,264,343 | |||
Dividends and interest receivable |
3,680,254 | |||
Dividend receivable from non-controlled affiliates (Note 4) |
18,884 | |||
|
|
|||
Total assets |
2,879,963,481 | |||
|
|
|||
Liabilities |
||||
Investment securities purchased |
4,649,775 | |||
Due to custodian |
4,769,756 | |||
Daily variation margin on futures contracts |
1,063,125 | |||
Management fees payable (Note 4) |
157,953 | |||
|
|
|||
Total liabilities |
10,640,609 | |||
|
|
|||
Net Assets |
$ | 2,869,322,872 | ||
|
|
See Notes to Financial Statements.
34
State Street Equity 500 Index Portfolio
Statement of Operations
Year Ended December 31, 2014
Investment Income |
||||
Dividend income unaffiliated issuers (net of foreign taxes withheld of $132,666) |
$ | 55,933,764 | ||
Dividend income non-controlled affiliated issuer |
123,954 | |||
Interest |
46,355 | |||
|
|
|||
Total investment income |
56,104,073 | |||
|
|
|||
Expenses |
||||
Management fees (Note 4) |
1,246,586 | |||
Other expenses |
12,081 | |||
|
|
|||
Total expenses |
1,258,667 | |||
|
|
|||
Net Investment Income |
54,845,406 | |||
|
|
|||
Realized and Unrealized Gain (Loss) |
||||
Net realized gain (loss) on: |
||||
Investments unaffiliated issuers |
10,063,213 | |||
Futures contracts |
7,781,141 | |||
|
|
|||
17,844,354 | ||||
|
|
|||
Net change in net unrealized appreciation (depreciation) on: |
||||
Investments |
278,443,408 | |||
Futures contracts |
664,091 | |||
|
|
|||
279,107,499 | ||||
|
|
|||
Net realized and unrealized gain |
296,951,853 | |||
|
|
|||
Net Increase in Net Assets Resulting from Operations |
$ | 351,797,259 | ||
|
|
See Notes to Financial Statements.
35
State Street Equity 500 Index Portfolio
Statements of Changes in Net Assets
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||||||
Increase (Decrease) in Net Assets From Operations: |
||||||||
Net investment income |
$ | 54,845,406 | $ | 49,096,073 | ||||
Net realized gain on investments and futures contracts |
17,844,354 | 26,611,003 | ||||||
Net change in net unrealized appreciation on investments and futures contracts |
279,107,499 | 590,532,985 | ||||||
|
|
|
|
|||||
Net increase in net assets from operations |
351,797,259 | 666,240,061 | ||||||
|
|
|
|
|||||
Capital Transactions: |
||||||||
Contributions |
353,779,321 | 235,748,437 | ||||||
Withdrawals |
(185,039,609 | ) | (217,635,806 | ) | ||||
In-kind redemptions (Note 7) |
(390,808,177 | ) | | |||||
|
|
|
|
|||||
Net increase (decrease) in net assets from capital transactions |
(222,068,465 | ) | 18,112,631 | |||||
|
|
|
|
|||||
Net Increase in Net Assets |
129,728,794 | 684,352,692 | ||||||
Net Assets |
||||||||
Beginning of year |
2,739,594,078 | 2,055,241,386 | ||||||
|
|
|
|
|||||
End of year |
$ | 2,869,322,872 | $ | 2,739,594,078 | ||||
|
|
|
|
See Notes to Financial Statements.
36
State Street Equity 500 Index Portfolio
Financial Highlights
The following table includes selected supplemental data and ratios to average net assets:
Year Ended 12/31/14 |
Year Ended 12/31/13 |
Year Ended 12/31/12 |
Year Ended 12/31/11 |
Year Ended 12/31/10 |
||||||||||||||||
Supplemental Data and Ratios: |
||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 2,869,323 | $ | 2,739,594 | $ | 2,055,241 | $ | 1,825,528 | $ | 2,098,137 | ||||||||||
Ratios to average net assets: |
||||||||||||||||||||
Expenses |
0.045 | % | 0.045 | % | 0.045 | % | 0.045 | % | 0.045 | % | ||||||||||
Net investment income |
1.98 | % | 2.05 | % | 2.26 | % | 2.04 | % | 1.99 | % | ||||||||||
Portfolio turnover rate(a) |
2 | % | 4 | % | 9 | % | 15 | % | 12 | % | ||||||||||
Total return(b) |
13.62 | % | 32.30 | % | 15.97 | % | 2.03 | % | 15.08 | % |
(a) | The portfolio turnover rate excludes in-kind security transactions (Note 7). |
(b) | Results represent past performance and are not indicative of future results. |
See Notes to Financial Statements.
37
State Street Equity 500 Index Portfolio
Notes to Financial Statements
December 31, 2014
1. | Organization |
State Street Master Funds (the Trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company, and was organized as a business trust under the laws of the Commonwealth of Massachusetts on July 27, 1999. The Trust consists of ten investment portfolios: State Street Equity 500 Index Portfolio, State Street Equity 400 Index Portfolio, State Street Equity 2000 Index Portfolio, State Street Aggregate Bond Index Portfolio, State Street Money Market Portfolio, State Street Tax Free Money Market Portfolio, State Street Limited Duration Bond Portfolio, State Street Treasury Money Market Portfolio, State Street Treasury Plus Money Market Portfolio and State Street U.S. Government Money Market Portfolio. Information presented in these financial statements pertains only to the State Street Equity 500 Index Portfolio (the Portfolio).
At December 31, 2014, the following Portfolios were operational: State Street Money Market Portfolio, State Street Tax Free Money Market Portfolio, State Street U.S. Government Money Market Portfolio, State Street Treasury Money Market Portfolio and State Street Treasury Plus Money Market Portfolio. The Portfolio is authorized to issue an unlimited number of non-transferable beneficial interests.
The Portfolios investment objective is to replicate, as closely as possible, before expenses, the performance of the Standard & Poors 500 Index (the S&P 500® Index). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500® Index. The S&P 500® Index is a well-known, unmanaged, stock index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the U.S. There is no assurance that the Portfolio will achieve its objective.
The Portfolio is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services Investment Companies.
2. | Significant Accounting Policies |
The following is a summary of the significant accounting policies consistently followed by the Portfolio in the preparation of its financial statements.
Security valuation The Portfolios investments are valued each business day by independent pricing services. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed income securities and options are valued on the basis of the closing bid price. Futures contracts are valued at the quoted daily settlement price at the end of each day on the exchange upon which they are traded. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. Investments in other mutual funds are valued at the net asset value per share. The Portfolio may value securities for which market quotations are not readily available at fair value, as determined in good faith pursuant to procedures established by the Board of Trustees.
38
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
December 31, 2014
The Portfolio adopted provisions surrounding fair value measurements and disclosures that define fair value, establish a framework for measuring fair value in generally accepted accounting principles and expand disclosures about fair value measurements. This applies to fair value measurements that are already required or permitted by other accounting standards and is intended to increase consistency of those measurements and apply broadly to securities and other types of assets and liabilities. In accordance with these provisions, fair value is defined as the price that the Portfolio would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. Various inputs are used in determining the value of the Portfolios investments.
The three tier hierarchy of inputs is summarized below:
| Level 1 quoted prices in active markets for identical securities |
| Level 2 other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) |
| Level 3 significant unobservable inputs (including the Portfolios own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of December 31, 2014, in valuing the Portfolios assets carried at fair value:
Description |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total | ||||||||||||
ASSETS: |
||||||||||||||||
INVESTMENTS: |
||||||||||||||||
Common Stocks |
$ | 2,778,988,162 | $ | | $ | | $ | 2,778,988,162 | ||||||||
U.S. Government Securities |
| 6,159,992 | | 6,159,992 | ||||||||||||
Money Market Fund |
91,116,189 | | | 91,116,189 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
TOTAL INVESTMENTS |
2,870,104,351 | 6,159,992 | | 2,876,264,343 | ||||||||||||
OTHER ASSETS: |
||||||||||||||||
Futures contracts* |
2,382,058 | | | 2,382,058 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
TOTAL ASSETS |
$ | 2,872,486,409 | $ | 6,159,992 | $ | | $ | 2,878,646,401 | ||||||||
|
|
|
|
|
|
|
|
* | Only unsettled receivable/payable for variation margin is reported within Statement of Assets and Liabilities. |
For the year ended December 31, 2014, there were no transfers between levels.
Securities transactions, investment income and expenses Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis and includes amortization of premium and accretion of discount on investments. Realized gains and losses from securities transactions are recorded on the basis of identified cost. Expenses are accrued daily based on average daily net assets.
39
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
December 31, 2014
All of the net investment income and realized and unrealized gains and losses from the security transactions of the Portfolio are allocated pro rata among the partners in the Portfolio on a daily basis based on each partners daily ownership percentage.
Federal income taxes The Portfolio is not required to pay federal income taxes on its net investment income and net capital gains because it is treated as a partnership for federal income tax purposes. All interest, dividends, gains and losses of the Portfolio are deemed to have been passed through to the Portfolios partners in proportion to their holdings in the Portfolio, regardless of whether such items have been distributed by the Portfolio. Each partner is responsible for tax liability based on its distributive share; therefore, no provision has been made for federal income taxes.
The Portfolio has reviewed the tax positions for open years as of and during the year ended December 31, 2014, and determined it did not have a liability for any unrecognized tax expenses. The Portfolio recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2014, tax years 2011 through 2013 remain subject to examination by the Portfolios major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
At December 31, 2014, the tax cost of investments was $1,377,110,434 on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $1,513,888,774 and $14,734,865, respectively, resulting in net appreciation of $1,499,153,909 for all securities as computed on a federal income tax basis.
Futures The Portfolio may enter into financial futures contracts as part of its strategy to track the performance of the S&P 500® Index. Upon entering into a futures contract, the Portfolio is required to deposit with the broker cash or securities in an amount equal to a certain percentage of the contract amount. Variation margin payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security or index, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio, which is recorded on the Statement of Assets and Liabilities. The Portfolio recognizes a realized gain or loss when the contract is closed, which is recorded on the Statement of Operations. The Portfolio voluntarily segregates securities in an amount equal to the outstanding value of the open futures contracts in accordance with Securities and Exchange Commission requirements.
The primary risks associated with the use of futures contracts are an imperfect correlation between the change in market value of the benchmark and the prices of futures contracts and the possibility of an illiquid market. To the extent permitted by the investment objective, restrictions and policies set forth in the Portfolios Prospectus and Statement of Additional Information, the Portfolio may participate in various derivative-based transactions. Derivative securities are instruments or agreements whose value is derived from an underlying security or index. The Portfolios use of derivatives includes futures. These instruments offer unique characteristics and risks that assist the Portfolio in meeting its investment objective. The Portfolio typically uses derivatives in two ways: cash equitization and return enhancement. Cash equitization is a technique that may be used by the Portfolio through the use of options and futures to earn market-like returns with the Portfolios excess and liquidity reserve cash balances and receivables. Return enhancement can be accomplished through the use of derivatives in the Portfolio. By purchasing certain instruments, the Portfolio may more effectively achieve the desired portfolio characteristics that assist in meeting the Portfolios investment objectives. Depending on how
40
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
December 31, 2014
the derivatives are structured and utilized, the risks associated with them may vary widely. These risks are generally categorized as market risk, liquidity risk and counterparty or credit risk.
The following table, grouped into appropriate risk categories, discloses the amounts related to the Portfolios use of derivative instruments and hedging activities at December 31, 2014:
Asset Derivatives(1)
Equity Contracts Risk |
Total | |||||||
Futures Contracts |
$ | 2,382,058 | $ | 2,382,058 |
Transactions in derivative instruments during the year ended December 31, 2014, were as follows:
Realized Gain (Loss)(2)
Equity Contracts Risk |
Total | |||||||
Futures Contracts |
$ | 7,781,141 | $ | 7,781,141 |
Change in Appreciation (Depreciation)(3)
Equity Contracts Risk |
Total | |||||||
Futures Contracts |
$ | 664,091 | $ | 664,091 |
(1) | Portfolio of Investments: Unrealized appreciation of futures contracts. Only unsettled receivable/payable for variation margin is reported within Statement of Assets and Liabilities. |
(2) | Statement of Operations location: Net realized gain (loss) on: Futures contracts |
(3) | Statement of Operations location: Net change in unrealized appreciation (depreciation) on: Futures contracts |
The average notional of futures outstanding during the year ended December 31, 2014 was $66,568,250.
Use of estimates The Portfolios financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require the use of management estimates. Actual results could differ from those estimates. It is reasonably possible that these differences could be material.
3. | Securities Transactions |
For the year ended December 31, 2014, purchases and sales of investment securities, excluding short-term investments, and futures contracts, aggregated to $253,957,017 and $65,856,635, respectively.
4. | Related Party Fees and Transactions |
The Portfolio has entered into an investment advisory agreement with SSGA Funds Management, Inc. (SSGA FM or the Adviser), a subsidiary of State Street Corporation and an affiliate of State Street Bank and Trust Company (State Street), under which SSGA FM directs the investments of the Portfolio in accordance with its investment objective, policies, and limitations. The Trust has contracted with State Street to provide custody, administration and transfer agent services to the Portfolio. In compensation for SSGA FMs services as investment adviser and for State Streets services as
41
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
December 31, 2014
administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Portfolio, including ordinary legal, audit and trustees expense), State Street receives a unitary fee, calculated daily, at the annual rate of 0.045% of the Portfolios average daily net assets.
Certain investments made by the Portfolio were made in securities affiliated with State Street and SSGA FM. Investments in State Street Corporation, the holding company of State Street, were made according to its representative portion of the S&P 500® Index. The market value of this investment at December 31, 2014 is listed in the Portfolio of Investments.
5. | Trustees Fees |
Independent Trustees are compensated on a calendar year basis. Any Trustee who is deemed to be an interested person (as defined in the 1940 Act) of the Funds does not receive compensation from the Funds for his or her service as a Trustee.
Each Independent Trustee receives for his or her services to the State Street Master Funds, State Street Institutional Investment Trust and SSGA Funds, a $141,500 annual base retainer in addition to $18,000 for each in-person meeting and $2,000 for each telephonic meeting from the Trust. The Trust will bear a pro rata allocation based on the Trusts average monthly assets. The Co-Chairmen each receive an additional $44,000 annual retainer. The Independent Trustees are reimbursed for travel and other out-of-pocket expenses in connection with meeting attendance. As of the date of this Report, the Trustees were not paid pension or retirement benefits as part of the Trusts expenses.
The Trusts officers are compensated by the Adviser and its affiliates.
6. | Indemnifications |
The Trusts organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trusts maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. Management does not expect any significant claims.
7. | In-Kind Redemptions |
On August 11, 2014, the State Street Equity 500 Index Fund redeemed its interest in the Portfolio in connection with a transfer of net assets to the State Street Equity 500 Index II Portfolio, a series of State Street Institutional Investment Trust. The transfer consisted of five hundred and three (503) securities totaling $387,955,841 at market value or 13% of the Portfolio and $2,852,336 in cash, and is disclosed in the Statement of Changes in Net Assets.
8. | Line of Credit |
The Portfolio and other affiliated funds (each a Participant and, collectively, the Participants) share in a $300 million revolving credit facility provided by a syndication of banks. The Participants may borrow for the purpose of meeting shareholder redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is
42
State Street Equity 500 Index Portfolio
Notes to Financial Statements (continued)
December 31, 2014
calculated based on the unused portion of the shared credit line. Commitment fees are allocated among each of the Participants based on net assets. Commitment fees are ordinary fund operating expenses and are paid by the Adviser. A Participant incurs and pays the interest expense related to its borrowing. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1%. The Portfolio may borrow up to a maximum of 33 percent of its assets. The Portfolio had no outstanding loans during the period ended December 31, 2014.
43
State Street Equity 500 Index Portfolio
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Owners of Beneficial Interest of
State Street Master Funds:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of State Street Equity 500 Index Portfolio (one of the portfolios constituting State Street Master Funds) (the Portfolio) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolios management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Portfolios internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolios internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Equity 500 Index Portfolio (one of the portfolios constituting State Street Master Funds) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
February 27, 2015
44
State Street Equity 500 Index Portfolio
General Information
December 31, 2014
Proxy Voting Policies and Procedures
Information regarding the Funds proxy voting policies and procedures, as well as information regarding how the Fund voted proxies, if any, during the most recent 12-month period ended June 30 is available by August 31 of each year without charge (1) by calling 1-877-521-4083 (toll free), or (2) on the website of the Securities and Exchange Commission (SEC) at www.sec.gov.
Quarterly Portfolio Schedule
The Fund
files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on
Form N-Q. The Funds Forms N-Q are available on the SECs website at
www.sec.gov and may be reviewed and copied at the SECs Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The information on Form N-Q is available upon request, without charge, by calling
1-877-521-4083 (toll-free).
45
State Street Equity 500 Index Portfolio
Trustees and Officers Information
December 31, 2014
Name, Address, and Year of Birth |
Position(s) Held |
Term of Office |
Principal Occupation |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorships | |||||
Independent Trustees |
||||||||||
Michael F. Holland State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1944 |
Trustee and Co-Chairman of the Board | Term: Indefinite Elected: 7/99 |
Chairman, Holland & Company L.L.C. (investment adviser) (1995 present). | 59 | Trustee, State Street Institutional Investment Trust; Trustee SSGA Funds; Director, the Holland Series Fund, Inc.; Director, The China Fund, Inc.; Director, The Taiwan Fund, Inc.; Director, Reaves Utility Income Fund, Inc.; and Director, Blackstone/GSO Loan Funds. | |||||
Patrick J. Riley State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1948 |
Trustee and Co-Chairman of the Board | Term: Indefinite Elected: 1/14 |
2002 to May 2010, Associate Justice of the Superior Court, Commonwealth of Massachusetts; 1985 to 2002, Partner, Riley, Burke & Donahue, L.L.P. (law firm); 1998 to Present, Independent Director, State Street Global Advisers Ireland, Ltd. (investment company); 1998 to Present, Independent Director, SSGA Liquidity plc (formerly, SSGA Cash Management Fund plc); January 2009 to Present, Independent Director, SSGA Fixed Income plc; and January 2009 to Present, Independent Director, SSGA Qualified Funds PLC. | 59 | Trustee, State Street Institutional Investment Trust; Trustee SSGA Funds; Board Director and Chairman, SPDR Europe 1PLC Board (2011 Present); Board Director and Chairman, SPDR Europe II, PLC (2013 Present). | |||||
William L. Boyan State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1937 |
Trustee and Co-Chairman of the Valuation Committee | Term: Indefinite Elected: 7/99 | President and Chief Operations Officer, John Hancock Financial Services (1959 1999). Mr. Boyan retired in 1999. Chairman Emeritus, Childrens Hospital, Boston, MA (1984 2011); Former Chairman, Boston Plan For Excellence, Boston Public Schools (1995 2010); Member of Advisory Board of Florida Atlantic University Lifelong Learning Society. | 59 | Trustee, State Street Institutional Investment Trust; Trustee SSGA Funds; Former Trustee of Old Mutual South Africa Master Trust; Trustee, Childrens Hospital, Boston, MA. |
46
Name, Address, and Year of Birth |
Position(s) Held |
Term of Office |
Principal Occupation |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorships | |||||
Independent Trustees (continued) |
||||||||||
William L. Marshall State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1942 |
Trustee and Co-Chairman of the Audit Committee | Term: Indefinite Elected: 1/14 |
April 2011 to Present, Chairman (until April 2011, Chief Executive Officer and President), Wm. L. Marshall Associates, Inc., Wm. L. Marshall Companies, Inc. and the Marshall Financial Group, Inc. (a registered investment adviser and provider of financial and related consulting services); Certified Financial Planner; Member, Financial Planners Association; Director, (2008 2014) Doylestown Health Foundation Board; and the Ann Silverman Community Clinic of Doylestown, PA. | 59 | Trustee, State Street Institutional Investment Trust; Trustee SSGA Funds; Director, Marshall Financial Group, Inc. | |||||
Richard D. Shirk State Street Financial Center One Lincoln Street Boston,
YOB: 1945 |
Trustee and Co-Chairman of the Qualified Legal and Compliance Committee | Term: Indefinite Elected: 1/14 |
March 2001 to April 2002, Chairman (1996 to March 2001, President and Chief Executive Officer), Cerulean Companies, Inc. (holding company) (Retired); 1992 to March 2001, President and Chief Executive Officer, Blue Cross Blue Shield of Georgia (health insurer, managed healthcare); 1998 to December 2008, Chairman, Board Member and December 2008 to Present, Investment Committee Member, Healthcare Georgia Foundation (private foundation); September 2002 to Present, Lead Director and Board Member, Amerigroup Corp. (managed health care); 1999 to Present, Board Member and (since 2001) Investment Committee Member, Woodruff Arts Center; and 2003 to 2009, Trustee, Gettysburg College. | 59 | Trustee, State Street Institutional Investment Trust; Trustee SSGA Funds; Board member, AeroCare Holdings (privately held healthcare services company) (February 2003 Present); Board member, Regenesis Biomedical (health care services) (April 2012 Present). | |||||
Rina K. Spence State Street Financial Center One Lincoln Street Boston,
YOB: 1948 |
Trustee and Co-Chairman of the Qualified Legal and Compliance Committee and Co-Chairman of the Governance Committee | Term: Indefinite Elected: 7/99 | President of SpenceCare International LLC (international healthcare consulting) (1999 present); Chief Executive Officer, IEmily.com (health internet company) (2000 2001); Chief Executive Officer of Consensus Pharmaceutical, Inc. (1998 1999); Founder, President and Chief Executive Officer of Spence Center for Womens Health (1994 1998); President and CEO Emerson Hospital (1984 1994); Trustee, Eastern Enterprise (utilities) (1988 2000). | 59 | Trustee, State Street Institutional Investment Trust; Trustee SSGA Funds; Director, Berkshire Life Insurance Company of America (1993 2009); Director, IEmily.com, Inc. (2000 2010); and Trustee, National Osteoporosis Foundation (2005 2008). |
47
Name, Address, and Year of Birth |
Position(s) Held |
Term of Office |
Principal Occupation |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorships | |||||
Independent Trustees (continued) | ||||||||||
Bruce D. Taber State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1943 |
Trustee and Co-Chairman of the Valuation Committee and Co-Chairman of the Governance Committee | Term: Indefinite Elected: 1/14 |
1999 to Present, Partner, Zenergy LLC (a technology company providing Computer Modeling and System Analysis to the General Electric Power Generation Division); Until December 2008, Independent Director, SSGA Cash Management Fund plc; Until December 2008, Independent Director, State Street Global Advisers Ireland, Ltd. (investment companies); and Until August 1994, President, Alonzo B. Reed, Inc., (a Boston architect-engineering firm). | 59 | Trustee, State Street Institutional Trust; Trustee SSGA Funds. | |||||
Douglas T. Williams State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1940 |
Trustee and Co-Chairman of the Audit Committee | Term: Indefinite Elected: 7/99 | President, Oakmont Homeowners Association (2012 2013); President, Mariner Sands Chapel; Executive Vice President and member of Executive Committee, Chase Manhattan Bank (1987 1999); President, Boston Stock Exchange Depository Trust Company, 1981 1982. | 59 | Trustee, State Street Institutional Investment Trust; Trustee SSGA Funds; Treasurer, Nantucket Educational Trust, (2002 2007). | |||||
Interested Trustees(1) | ||||||||||
Scott F. Powers State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1959 |
Trustee | Term: Indefinite Elected Trustee: 1/14 |
May 2008 to Present, President and Chief Executive Officer of State Street Global Advisors; 2001 2008, Chief Executive Officer of Old Mutual Asset Management; Board of Directors, United Way of Massachusetts Bay; Board of Directors of Middlesex School; Incorporator, Cardigan Mountain School | 59 | ||||||
James E. Ross SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1965 |
Trustee | Term: Indefinite Elected Trustee: 2/07 |
Chairman and Director, SSGA Funds Management, Inc. (2012 present); President, SSGA Funds Management, Inc. (2005 2012); Executive Vice President and Senior Managing Director, State Street Global Advisors (2006 present); and Principal, State Street Global Advisors (2006 present). | 254 |
(1) | Mr. Powers and Mr. Ross are Interested Trustees because of their employment by SSGA Funds Management, Inc., an affiliate of the Trust. |
48
Name, Address, and Year of Birth |
Position(s) Held with Trust |
Term of Office and Length of Time Served |
Principal Occupation During Past Five Years | |||
Officers: |
||||||
Ellen M. Needham SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1967 |
President | Term: Indefinite Elected: 10/12 |
President and Director, SSGA Funds Management, Inc. (June 2012 present); Chief Operating Officer, SSGA Funds Management, Inc. (May 2010 June 2012); Senior Managing Director, SSGA Funds Management, Inc. (1992 2012) and Senior Managing Director, State Street Global Advisors (1992 present).* | |||
Ann M. Carpenter SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1966 |
Vice President | Term: Indefinite Elected: 10/12 |
Chief Operating Officer, SSGA Funds Management, Inc. (April 2014 present); Vice President, SSGA Funds Management, Inc. (2008 present); Principal, State Street Global Advisors (2005 2008 present).* | |||
Laura F. Dell State Street Bank and Trust 100 Huntington Avenue Boston, MA 02116
YOB: 1964 |
Treasurer | Term: Indefinite Elected: 11/10 |
Vice President, State Street Bank and Trust Company (2002 present).* | |||
Chad C. Hallett SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111-2900
YOB: 1969 |
Assistant Treasurer | Term: Indefinite Elected: 09/11 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (November 2014 present); Vice President, State Street Bank and Trust Company (2001 November 2014).* | |||
Caroline M. Connolly State Street Bank and
Trust 100 Huntington Avenue Boston, MA 02116
YOB: 1975 |
Assistant Treasurer | Term: Indefinite Elected: 09/11 |
Assistant Vice President, State Street Bank and Trust Company (2007 present). | |||
Brian Harris SSGA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111
YOB: 1973 |
Chief Compliance Officer |
Term: Indefinite Elected: 11/13 |
Vice President, State Street Global Advisors and SSGA Funds Management, Inc. (June 2013 Present); Senior Vice President and Global Head of Investment Compliance, BofA Global Capital Management (September 2010 to May 2013); Director of Compliance, AARP Financial Inc. (July 2008 to August 2010). | |||
David K. James State Street Bank and
Trust 100 Huntington Avenue Boston, MA 02116
YOB: 1970 |
Secretary | Term: Indefinite Elected: 4/13 |
Managing Director and Managing Counsel, State Street Bank and Trust Company (2009 present); Vice President and Counsel, PNC Global Investment Servicing (US), Inc. (2006 2009). | |||
Kristin Schantz State Street Bank and
Trust 100 Huntington Avenue Boston, MA 02116
YOB: 1979 |
Assistant Secretary | Term: Indefinite Elected: 2/14 |
Vice President and Counsel, State Street Bank and Trust Company (2013 present); Vice President, Citi Fund Services Ohio, Inc. (2008 2013). |
* | Served in various capacities and/or with various affiliated entities during noted time period. |
The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling (toll free) 877-521-4083.
49
Schedule of Investments December 31, 2014 | Master International Index Series | |
(Percentages shown are based on Net Assets) |
Portfolio Abbreviations
ADR | American Depositary Receipts |
CLP | Chilean Peso |
CVA | Certificaten Van Aandelen (Dutch Certificate) |
FTSE | Financial Times Stock Exchange |
NOK | Norwegian Krone |
REIT | Real Estate Investment Trust |
EUR | Euro |
USD | U.S. Dollar |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 51 |
Schedule of Investments (continued) | Master International Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
52 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master International Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 53 |
Schedule of Investments (continued) | Master International Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
54 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master International Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 55 |
Schedule of Investments (continued) | Master International Index Series | |
(Percentages shown are based on Net Assets) |
|
See Notes to Financial Statements.
56 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master International Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 57 |
Schedule of Investments (continued) | Master International Index Series | |
(Percentages shown are based on Net Assets) |
Notes to Schedule of Investments
(a) | Non-income producing security. |
(b) | Security, or a portion of security, is on loan. |
(c) | Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors. |
(d) | Represents the current yield as of report date. |
(e) | During the year ended December 31, 2014 investments in issuers considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
Affiliate |
Shares/Beneficial Interest Held at December 31, 2013 |
Net Activity |
Shares/Beneficial Interest Held at December 31, 2014 |
Income | ||||||||||||
BlackRock Liquidity Funds, TempFund, Institutional Class |
587,542 | 3,285,243 | 1 | 3,872,785 | $ | 10,577 | ||||||||||
BlackRock Liquidity Series, LLC, Money Market Series |
528,856 | 3,578,491 | 1 | 4,107,347 | $ | 81,222 |
1 | Represents net shares/beneficial interest purchased. |
See Notes to Financial Statements.
58 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master International Index Series | |
(f) | Security was purchased with the cash collateral from loaned securities. The Series may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day. |
| As of December 31, 2014, financial futures contracts outstanding were as follows: |
Contracts |
Issue |
Exchange |
Expiration | Notional Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||||
86 | SPI 200 Index | Australian Securities Exchange | March 2015 | USD | $ | 9,448,563 | $ | 365,339 | ||||||||||||||
200 | FTSE 100 Index | Euronext Life | March 2015 | USD | $ | 20,331,951 | 899,087 | |||||||||||||||
242 | Nikkei 225 Index | Singapore Exchange | March 2015 | USD | $ | 17,557,021 | (407,203 | ) | ||||||||||||||
598 | Euro Stoxx 50 Index | Eurex Mercantile | March 2015 | USD | $ | 22,670,702 | 803,476 | |||||||||||||||
|
|
|||||||||||||||||||||
Total | $ | 1,660,699 | ||||||||||||||||||||
|
|
| Fair Value Measurements Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows: |
| Level 1 unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that the Series has the ability to access |
| Level 2 other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Level 3 unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Series own assumptions used in determining the fair value of investments and derivative financial instruments) |
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Series policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. For information about the Series policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.
As of December 31, 2014 the following tables summarize the Series investments and derivative financial instruments categorized in the disclosure hierarchy:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Investments: |
||||||||||||||||
Common Stocks: |
||||||||||||||||
Australia |
$ | 2,603,529 | $ | 191,485,323 | $ | 9 | $ | 194,088,861 | ||||||||
Austria |
| 5,193,384 | | 5,193,384 | ||||||||||||
Belgium |
| 33,739,188 | | 33,739,188 | ||||||||||||
Denmark |
386,157 | 39,230,170 | | 39,616,327 | ||||||||||||
Finland |
617,181 | 22,752,140 | | 23,369,321 | ||||||||||||
France |
5,413,214 | 246,037,740 | | 251,450,954 | ||||||||||||
Germany |
661,215 | 237,744,828 | | 238,406,043 | ||||||||||||
Hong Kong |
5,254,967 | 75,710,288 | | 80,965,255 | ||||||||||||
Ireland |
315,940 | 21,733,608 | | 22,049,548 | ||||||||||||
Israel |
| 15,169,548 | | 15,169,548 | ||||||||||||
Italy |
| 55,274,250 | | 55,274,250 | ||||||||||||
Japan |
824,244 | 549,588,445 | | 550,412,689 | ||||||||||||
Luxembourg |
1,425,291 | 856,107 | | 2,281,398 | ||||||||||||
Netherlands |
| 118,532,370 | | 118,532,370 | ||||||||||||
New Zealand |
| 4,291,061 | | 4,291,061 | ||||||||||||
Norway |
| 17,166,780 | | 17,166,780 | ||||||||||||
Portugal |
| 3,860,962 | | 3,860,962 | ||||||||||||
Singapore |
| 40,641,465 | | 40,641,465 | ||||||||||||
Spain |
| 90,198,161 | | 90,198,161 | ||||||||||||
Sweden |
788,284 | 79,987,824 | | 80,776,108 | ||||||||||||
Switzerland |
15,661,916 | 239,494,604 | | 255,156,520 | ||||||||||||
United Kingdom |
1,428,696 | 479,473,578 | | 480,902,274 | ||||||||||||
Rights |
239,358 | | | 239,358 | ||||||||||||
Short-Term Securities |
3,872,785 | 4,107,347 | | 7,980,132 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 39,492,777 | $ | 2,572,269,171 | $ | 9 | $ | 2,611,761,957 | ||||||||
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 59 |
Schedule of Investments (concluded) | Master International Index Series | |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative Financial Instruments1 |
||||||||||||||||
Assets: |
||||||||||||||||
Equity contracts |
$ | 2,067,902 | | | $ | 2,067,902 | ||||||||||
Liabilities: |
||||||||||||||||
Equity contracts |
$ | (407,203 | ) | | | $ | (407,203 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 1,660,699 | | | $ | 1,660,699 | ||||||||||
|
|
|
|
|
|
|
|
1 | Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
The Series may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Cash |
$ | 200 | $ | 200 | ||||||||||||
Cash pledged for financial futures contracts |
3,900,000 | | | 3,900,000 | ||||||||||||
Foreign currency at value |
62,016,065 | | | 62,016,065 | ||||||||||||
Liabilities: |
||||||||||||||||
Collateral on securities loaned at value |
| $ | (4,107,347 | ) | | (4,107,347 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 65,916,265 | $ | (4,107,347 | ) | | $ | 61,808,918 | ||||||||
|
|
|
|
|
|
|
|
During the year ended December 31, 2014, there were no transfers between levels.
See Notes to Financial Statements.
60 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments December 31, 2014 | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 61 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
62 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 63 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
64 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 65 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets)
|
See Notes to Financial Statements.
66 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets)
|
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 67 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
68 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 69 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
70 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 71 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
72 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 73 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
74 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 75 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
76 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 77 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
See Notes to Financial Statements.
78 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Schedule of Investments (continued) | Master Small Cap Index Series | |
(Percentages shown are based on Net Assets) |
Notes to Schedule of Investments
(a) | Non-income producing security. |
(b) | Security, or a portion of security, is on loan. |
(c) | During the year ended December 31, 2014 investments in issuers considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
Affiliate |
Shares/ Beneficial Interest Held at December 31, 2013 |
Shares/ Beneficial Interest Purchased |
Shares/ Beneficial Interest Sold |
Shares/ Beneficial Interest Held at December 31, 2014 |
Value at December 31, 2014 |
Income | Realized Loss |
|||||||||||||||||||||
BlackRock Kelso Capital Corp.1 |
37,065 | 2,009 | (39,074 | ) | | | $ | 17,111 | $ | (620 | ) | |||||||||||||||||
BlackRock Liquidity Funds, TempFund, Institutional Class |
48,629,247 | | (34,573,434 | )2 | 14,055,813 | $ | 14,055,813 | $ | 5,797 | | ||||||||||||||||||
BlackRock Liquidity Series, LLC, Money Market Series |
$ | 45,115,062 | | $ | (26,762,660 | )2 | $ | 18,352,402 | $ | 18,352,402 | $ | 1,546,926 | | |||||||||||||||
PennyMac Financial Services, Inc |
5,912 | | | 5,912 | $ | 102,278 | | | ||||||||||||||||||||
PennyMac Mortgage Investment Trust |
28,588 | 8,169 | (7,940 | ) | 28,817 | $ | 607,751 | $ | 94,190 | $ | (24,758 | ) |
1 | No longer held by the Series as of report date. |
2 | Represents net shares/beneficial interest sold. |
(d) | Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities. |
(e) | Warrants entitle the Series to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any. |
(f) | Represents the current yield as of report date. |
(g) | Security was purchased with the cash collateral from loaned securities. The Series may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day. |
| As of December 31, 2014, financial futures contracts outstanding were as follows: |
Contracts |
Issue |
Exchange |
Expiration |
Notional |
Unrealized | |||||
151 | Russell 2000 Mini Index | ICE Futures U.S. Indices | March 2015 | $18,130,570 | $340,563 |
| Fair Value Measurements Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows: |
| Level 1 unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that the Series has the ability to access |
| Level 2 other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Level 3 unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Series own assumptions used in determining the fair value of investments and derivative financial instruments) |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 79 |
Schedule of Investments (concluded) | Master Small Cap Index Series | |
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Series policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. For information about the Series policy regarding valuation of investments and derivative financial instruments, refer to Note 2 of the Notes to Financial Statements.
As of December 31, 2014, the following tables summarize the Series investments and derivative financial instruments categorized in the disclosure hierarchy:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Investments: |
||||||||||||||||
Long-Term Investments1 |
||||||||||||||||
Common Stocks |
$ | 684,361,204 | | $ | 30,030 | $ | 684,391,234 | |||||||||
Other Interests |
| | 129 | 129 | ||||||||||||
Rights |
| | 71,064 | 71,064 | ||||||||||||
Short-Term Securities |
14,055,813 | $ | 18,352,402 | | 32,408,215 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 698,417,017 | $ | 18,352,402 | $ | 101,223 | $ | 716,870,642 | ||||||||
|
|
|
|
|
|
|
|
1 | See above Schedule of Investments for values in each industry. |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative Financial Instruments2 |
||||||||||||||||
Assets: |
||||||||||||||||
Equity contracts |
$ | 340,563 | | | $ | 340,563 | ||||||||||
|
|
|
|
|
|
|
|
2 | Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
The Series may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of December 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Cash |
$ | 979 | | | $ | 979 | ||||||||||
Cash pledged for financial futures contracts |
628,000 | | | 628,000 | ||||||||||||
Liabilities: |
||||||||||||||||
Collateral on securities loaned at value |
| $ | (18,352,402 | ) | | (18,352,402 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 628,979 | $ | (18,352,402 | ) | | $ | (17,723,423 | ) | |||||||
|
|
|
|
|
|
|
|
During the year ended December 31, 2014, there were no transfers between levels.
See Notes to Financial Statements.
80 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Statements of Assets and Liabilities | ||
December 31, 2014 |
Master International Index Series |
Master Small Cap Index Series |
||||||
Assets |
||||||||
Investments at value unaffiliated1,2 |
$ | 2,603,781,825 | $ | 683,752,398 | ||||
Investments at value affiliated3 |
7,980,132 | 33,118,244 | ||||||
Cash |
200 | 979 | ||||||
Cash pledged for financial futures contracts |
3,900,000 | 628,000 | ||||||
Foreign currency at value4 |
62,016,065 | | ||||||
Investments sold receivable |
27,506 | 20,780,001 | ||||||
Dividends receivable unaffiliated |
4,102,800 | 835,846 | ||||||
Securities lending income receivable affiliated |
28,645 | 133,046 | ||||||
Dividends receivable affiliated |
| 18,248 | ||||||
Income receivable affiliated |
| 261 | ||||||
Prepaid expenses |
5,362 | 3,725 | ||||||
Other assets |
14,612 | | ||||||
|
|
|
|
|||||
Total assets |
2,681,857,147 | 739,270,748 | ||||||
|
|
|
|
|||||
Liabilities |
||||||||
Collateral on securities loaned at value |
4,107,347 | 18,352,402 | ||||||
Variation margin payable on financial futures contracts |
1,039,495 | 123,744 | ||||||
Investments purchased payable |
| 233,984 | ||||||
Professional fees payable |
45,560 | | ||||||
Directors fees payable |
11,433 | 5,630 | ||||||
Investment advisory fees payable |
13,081 | 3,420 | ||||||
Other affiliates payable |
7,593 | 4,027 | ||||||
Withdrawals payable to investors |
6,062,063 | 19,457,778 | ||||||
Other accrued expenses payable |
209,336 | 154,857 | ||||||
|
|
|
|
|||||
Total liabilities |
11,495,908 | 38,335,842 | ||||||
|
|
|
|
|||||
Net Assets |
$ | 2,670,361,239 | $ | 700,934,906 | ||||
|
|
|
|
|||||
Net Assets Consist of |
||||||||
Investors capital |
$ | 2,521,660,758 | $ | 435,335,387 | ||||
Net unrealized appreciation/depreciation |
148,700,481 | 265,599,923 | ||||||
|
|
|
|
|||||
Net Assets |
$ | 2,670,361,239 | $ | 700,934,906 | ||||
|
|
|
|
|||||
1 Investments at cost unaffiliated |
$ | 2,456,264,285 | $ | 418,516,529 | ||||
2 Securities loaned at value |
$ | 3,871,237 | $ | 17,267,756 | ||||
3 Investments at cost affiliated |
$ | 7,980,132 | $ | 33,094,753 | ||||
4 Foreign currency at cost |
$ | 62,490,064 | |
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 81 |
Statements of Operations | ||
Year Ended December 31, 2014 |
Master International Index Series |
Master Small Cap Index Series |
||||||
Investment Income |
||||||||
Dividends unaffiliated |
$ | 43,904,393 | $ | 9,294,295 | ||||
Securities lending affiliated net |
81,222 | 1,546,926 | ||||||
Dividends affiliated |
10,577 | 117,098 | ||||||
Foreign taxes withheld |
(3,572,572 | ) | (9,030 | ) | ||||
|
|
|
|
|||||
Total income |
40,423,620 | 10,949,289 | ||||||
|
|
|
|
|||||
Expenses |
||||||||
Investment advisory |
123,905 | 78,122 | ||||||
Accounting services |
266,900 | 187,068 | ||||||
Custodian |
233,866 | 219,743 | ||||||
Professional |
79,166 | 73,638 | ||||||
Directors |
35,433 | 25,877 | ||||||
Printing |
18,124 | 11,221 | ||||||
Miscellaneous |
91,788 | 43,315 | ||||||
|
|
|
|
|||||
Total expenses |
849,182 | 638,984 | ||||||
Less fees waived and/or reimbursed by Manager |
(18,747 | ) | (43,702 | ) | ||||
|
|
|
|
|||||
Total expenses after fees waived and/or reimbursed |
830,435 | 595,282 | ||||||
|
|
|
|
|||||
Net investment income |
39,593,185 | 10,354,007 | ||||||
|
|
|
|
|||||
Realized and Unrealized Gain (Loss) |
||||||||
Net realized gain (loss) from: |
||||||||
Investments |
(7,953,570 | ) | 50,876,239 | |||||
Investments affiliated |
| (25,378 | ) | |||||
Financial futures contracts |
29,542 | 2,527,898 | ||||||
Foreign currency transactions |
(2,092,089 | ) | | |||||
|
|
|
|
|||||
(10,016,117 | ) | 53,378,759 | ||||||
|
|
|
|
|||||
Net change in unrealized appreciation/depreciation on: |
||||||||
Investments |
(154,591,003 | ) | (28,620,736 | ) | ||||
Financial futures contracts |
901,984 | (1,170,914 | ) | |||||
Foreign currency translations |
(750,854 | ) | | |||||
|
|
|
|
|||||
(154,439,873 | ) | (29,791,650 | ) | |||||
|
|
|
|
|||||
Net realized and unrealized gain (loss) |
(164,455,990 | ) | 23,587,109 | |||||
|
|
|
|
|||||
Net Increase (Decrease) in Net Assets Resulting from Operations |
$ | (124,862,805 | ) | $ | 33,941,116 | |||
|
|
|
|
See Notes to Financial Statements.
82 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Statements of Changes in Net Assets | ||
Master International Index Series | Master Small Cap Index Series | |||||||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||
Increase (Decrease) in Net Assets: |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Operations |
||||||||||||||||
Net investment income |
$ | 39,593,185 | $ | 26,032,478 | $ | 10,354,007 | $ | 10,262,296 | ||||||||
Net realized gain (loss) |
(10,016,117 | ) | (8,862,796 | ) | 53,378,759 | 37,795,072 | ||||||||||
Net change in unrealized appreciation/depreciation |
(154,439,873 | ) | 155,441,911 | (29,791,650 | ) | 181,146,437 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in net assets resulting from operations |
(124,862,805 | ) | 172,611,593 | 33,941,116 | 229,203,805 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Capital Transactions |
||||||||||||||||
Proceeds from contributions |
2,104,755,673 | 274,848,943 | 181,052,493 | 223,976,607 | ||||||||||||
Value of withdrawals |
(322,345,637 | ) | (192,790,156 | ) | (373,456,979 | ) | (175,553,424 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in net assets derived from capital transactions |
1,782,410,035 | 82,058,787 | (192,404,490 | ) | 48,423,183 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Assets |
||||||||||||||||
Total increase (decrease) in net assets |
1,657,547,230 | 254,670,380 | (158,463,374 | ) | 277,626,988 | |||||||||||
Beginning of year |
1,012,814,009 | 758,143,629 | 859,398,280 | 581,771,292 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
End of year |
$ | 2,670,361,239 | $ | 1,012,814,009 | $ | 700,934,906 | $ | 859,398,280 | ||||||||
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 83 |
Financial Highlights | Master International Index Series | |
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Total Return |
||||||||||||||||||||
Total return |
(6.02 | )% | 21.94 | % | 19.01 | % | (12.34 | )% | 7.66 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratios to Average Net Assets |
||||||||||||||||||||
Total expenses |
0.07 | % | 0.07 | % | 0.06 | % | 0.08 | % | 0.11 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total expenses after fees waived and paid indirectly |
0.07 | % | 0.07 | % | 0.06 | % | 0.08 | % | 0.10 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net investment income |
3.20 | % | 2.97 | % | 3.36 | % | 3.38 | % | 2.73 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Supplemental Data |
||||||||||||||||||||
Net assets, end of year (000) |
$ | 2,670,361 | $ | 1,012,814 | $ | 758,144 | $ | 855,781 | $ | 922,700 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Portfolio turnover rate |
6 | % | 8 | % | 21 | % | 6 | % | 8 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Master Small Cap Index Series | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Total Return |
||||||||||||||||||||
Total return |
5.05 | % | 39.11 | % | 16.52 | % | (4.30 | )% | 27.19 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ratios to Average Net Assets |
||||||||||||||||||||
Total expenses |
0.09 | % | 0.07 | % | 0.14 | % | 0.09 | % | 0.12 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total expenses after fees waived and/or reimbursed |
0.08 | % | 0.06 | % | 0.08 | % | 0.07 | % | 0.08 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net investment income |
1.45 | % | 1.46 | % | 2.13 | % | 1.46 | % | 1.27 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Supplemental Data |
||||||||||||||||||||
Net assets, end of year (000) |
$ | 700,935 | $ | 859,398 | $ | 581,771 | $ | 529,054 | $ | 338,172 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Portfolio turnover rate |
21 | % | 22 | % | 68 | % | 31 | % | 42 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
84 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Notes to Financial Statements | Quantitative Master Series LLC |
1. Organization:
Master International Index Series (Master International Index) and Master Small Cap Index Series (Master Small Cap Index) (collectively, the Series, or individually, a Series) are series of Quantitative Master Series LLC (the Master LLC) which is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified open-end management investment company. The Series is organized as a Delaware statutory trust. The Master LLCs Limited Liability Company Agreement permits the Board of Directors of the Master LLC (the Board) to issue non-transferable interests, subject to certain limitations.
The Series, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the Manager) or its affiliates, is a complex of open-end funds referred to as the Equity-Liquidity Complex.
2. Significant Accounting Policies:
The Series financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Series is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Series:
Valuation: The Series investments are valued at fair value as of the close of trading on the New York Stock Exchange (NYSE) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Series determine the fair value of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the Global Valuation Committee) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Series for all financial instruments.
Equity investments traded on a recognized securities exchange are valued at the official close each day, if available. For equity investments traded on more than one exchange, the official close price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price.
Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of business on the NYSE. Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.
The Series values its investment in BlackRock Liquidity Series, LLC, Money Market Series (the Money Market Series) at fair value, which is ordinarily based upon its pro rata ownership in the underlying funds net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments will follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act. The Series may withdraw up to 25% of its investment daily, although the manager of the Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.
In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (Fair Value Investments). When determining the price for Fair Value Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Series might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arms-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Series pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 85 |
Notes to Financial Statements (continued) | Quantitative Master Series LLC |
Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Series net assets. If events (e.g., a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such instruments, those instruments may be Fair Value Investments and be valued at their fair value, as determined in good faith by the Global Valuation Committee, or its delegate, using a pricing service and/or policies approved by the Board. Each business day, the Series uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and OTC options (the Systematic Fair Value Price). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.
Foreign Currency: The Series books and records are maintained in U.S. dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the Series investments denominated in that currency will lose value because that currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value.
The Series does not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments but are included as a component of net realized and unrealized gain (loss) from investments. The Series reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.
Segregation and Collateralization: In cases where a Series enters into certain investments (e.g., financial futures contracts and forward foreign currency exchange contracts) that would be senior securities for 1940 Act purposes, the Series may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Series future obligations under such investments. Doing so allows the investment to be excluded from treatment as a senior security. Furthermore, if required by an exchange or counterparty agreement, the Series may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain.
Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Series financial statement disclosures.
Other: Expenses directly related to a Series are charged to that Series. Other operating expenses shared by several funds are prorated among those funds on the basis of relative net assets or other appropriate methods.
The Series have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.
3. Securities and Other Investments:
Preferred Stock: The Series may invest in preferred stock. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuers board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
Securities Lending: The Series may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Series collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by
86 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Notes to Financial Statements (continued) | Quantitative Master Series LLC |
the U.S. government. The initial collateral received by each Series is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Series and any additional required collateral is delivered to the Series on the next business day. During the term of the loan, the Series is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The market value of securities on loan and the value of the related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value-unaffiliated, and collateral on securities loaned at value, respectively. As of December 31, 2014, any securities on loan were collateralized by cash. The cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (BIM), if any, is disclosed in the Schedules of Investments.
Securities lending transactions are entered into by the Series under Master Securities Lending Agreements (each, an MSLA) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Series, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterpartys bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Series can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.
As of December 31, 2014, the following table is a summary of the Series securities lending agreements by counterparty, which are subject to offset under an MSLA:
Master International Index
Counterparty |
Securities Loaned at Value |
Cash Collateral Received1 |
Net Amount |
|||||||||
CitiGroup Global Markets Inc. |
$ | 153,459 | $ | (153,459 | ) | | ||||||
Credit Suisse Securities (USA) LLC |
445,869 | (445,869 | ) | | ||||||||
JP Morgan Clearing Corp. |
508,217 | (508,217 | ) | | ||||||||
Merrill Lynch, Pierce, Fenner & Smith |
1,492,834 | (1,492,834 | ) | | ||||||||
Morgan Stanley & Co. LLC |
1,090,319 | (1,090,319 | ) | | ||||||||
SG Americas Securities LLC |
180,539 | (180,539 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 3,871,237 | $ | (3,871,237 | ) | | ||||||
|
|
|
|
|
|
1 | Collateral with a value of $4,107,347 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. |
Master Small Cap Index
Counterparty |
Securities Loaned at Value |
Cash Collateral Received2 |
Net Amount |
|||||||||
Barclays Capital, Inc. |
$ | 1,674,414 | $ | (1,674,414 | ) | | ||||||
BNP Paribas Prime Brokerage, Inc. |
482,856 | (482,856 | ) | | ||||||||
Citigroup Global Markets, Inc. |
280,710 | (280,710 | ) | | ||||||||
Credit Suisse Securities (USA) LLC |
135,239 | (135,239 | ) | | ||||||||
Deutsche Bank Securities, Inc |
905,370 | (905,370 | ) | | ||||||||
Goldman Sachs & Co. |
3,926,709 | (3,926,709 | ) | | ||||||||
JP Morgan Clearing Corp. |
2,367,436 | (2,367,436 | ) | | ||||||||
Merrill Lynch, Pierce, Fenner & Smith, Inc. |
1,776,714 | (1,776,714 | ) | | ||||||||
Morgan Stanley & Co. LLC |
4,990,757 | (4,990,757 | ) | | ||||||||
National Financial Services LLC |
85,373 | (85,373 | ) | | ||||||||
SG Americas Securities LLC |
95,913 | (95,913 | ) | | ||||||||
UBS Securities LLC |
546,265 | (546,265 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 17,267,756 | $ | (17,267,756 | ) | | ||||||
|
|
|
|
|
|
2 | Collateral with a value of $18,352,402 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks the Series benefits from a borrower default indemnity provided by BIM. BIMs indemnity allows for full replacement of the securities lent if the collateral received does not cover the value on the securities loaned in the event of borrower default. The Series could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 87 |
Notes to Financial Statements (continued) | Quantitative Master Series LLC |
4. Derivative Financial Instruments:
The Series engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Series and/or to economically hedge their exposure to certain risks such as equity risk or foreign currency exchange rate risk. These contracts may be transacted on an exchange or over-the-counter (OTC).
Financial Futures Contracts: The Series purchase and/or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Series and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.
Upon entering into a financial futures contract, the Series are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contracts size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedules of Investments and cash deposited, if any, is recorded on the Statements of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Series agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Series as unrealized appreciation or depreciation and, if applicable, as a receivable or payable for variation margin in the Statements of Assets and Liabilities.
When the contract is closed, the Series record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.
The following is a summary of the Series derivative financial instruments categorized by risk exposure:
Fair Values of Derivative Financial Instruments Year Ended December 31, 2014 |
||||||||||||||
Value | ||||||||||||||
Master International Index |
Master Small Cap Index |
|||||||||||||
Statement of Assets and Liabilities Location |
Derivative Assets |
Derivative Liabilities |
Derivative Assets |
|||||||||||
Equity contracts |
Net unrealized appreciation/depreciation1 | $2,067,902 | $407,203 | 340,563 | ||||||||||
|
|
|
|
|
|
1 | Includes cumulative appreciation/depreciation on financial futures as reported in the Schedules of Investments. Only current days variation margin is reported within the Statements of Assets and Liabilities. |
The Effect of Derivative Financial Instruments in the Statements of
Operations |
||||||||||||||||
Net Realized Gain From | Net Change in Unrealized Appreciation/Depreciation on |
|||||||||||||||
Master International Index |
Master Small Cap Index |
Master International Index |
Master Small Cap Index |
|||||||||||||
Equity Contracts: |
||||||||||||||||
Financial futures contracts |
$29,542 | $2,527,898 | $901,984 | $(1,170,914) | ||||||||||||
|
|
|
|
|
|
|
|
For the year ended December 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:
Master International Index |
Master Small Cap Index |
|||||||
Financial futures contracts: |
||||||||
Average notional value of contracts purchased |
$36,294,523 | $19,409,645 | ||||||
|
|
|
|
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 Series 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, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Series 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 brokers 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
88 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Notes to Financial Statements (continued) | Quantitative Master Series LLC |
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 brokers customers, potentially resulting in losses to the Series.
5. Investment Advisory Agreement and Other Transactions with Affiliates:
The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate, for 1940 Act purposes of BlackRock, Inc. (BlackRock).
The Master LLC, on behalf of the Series, entered into an Investment Advisory Agreement with the Manager, the Series investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Series portfolios and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays the Manager a monthly fee at an annual rate of 0.01% of the Series average daily net assets.
The Manager contractually agreed to waive or reimburse fees or expenses, in order to limit expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other Series expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Series business. The expense limitation as a percentage of average daily net assets is 0.12% for Master International Index and 0.08% for Master Small Cap Index.
The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2015 unless approved by the Board, including a majority of the Independent Directors. For the year ended December 31, 2014, the Manager waived $7,283 and $32,284 with respect to Master International Index and Master Small Cap Index, respectively, which is included in fees waived by manager in the Statements of Operations.
The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Series pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Series investment in other affiliated investment companies, if any. These amounts are included in fees waived and/or reimbursed by Manager in the Statements of Operations. For the year ended December 31, 2014 the amounts waived for Master International Index and Master Small Cap Index were $11,464 and $11,418, respectively.
Prior to July 1, 2014, BIM, an affiliate of the Manager, served as a sub-advisor to each Series pursuant to sub-advisory agreements with the Manager, and received for its services a monthly fee from the Manager at an annual rate equal to a percentage of the investment advisory fees paid by each Series to the Manager under the Investment Advisory Agreement. Effective July 1, 2014, the sub-advisory agreements between the Manager and BIM, with respect to each Series, expired.
For the year ended December 31, 2014, the Series reimbursed the Manager for certain accounting services, which is included in accounting services in the Statements of Operations.
The U.S. Securities and Exchange Commission has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Series subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Series are responsible for expenses in connection with the investment of cash collateral received for securities on loan (the collateral investment expenses). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment advisor to the private investment company will not charge any advisory fees with respect to shares purchased by the Series.
Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Series retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent. Pursuant to a securities lending agreement effective February 1, 2014, BIM may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the specials only securities).
Pursuant to such agreement, each Series retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, each Series, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014 each Series retained 65% of securities lending income and paid a fee to BIM equal to 35% of such income. The share of securities lending income earned by each Series is shown as securities lending affiliated net in the Statements of Operations. For the year ended December 31, 2014, each Series paid BIM the following amounts for securities lending agent services:
Master International Index |
$ | 18,165 | ||
Master Small Cap Index |
$ | 366,193 |
Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock or its affiliates.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 89 |
Notes to Financial Statements (continued) | Quantitative Master Series LLC |
The Series may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees.
6. Purchases and Sales:
For the year ended December 31, 2014, purchases and sales of investments, excluding short-term securities, were as follows:
Purchases | Sales | |||||||
Master International Index |
$ | 1,855,870,783 | $ | 76,632,340 | ||||
Master Small Cap Index |
$ | 156,571,896 | $ | 317,309,448 |
7. Income Tax Information:
The Series are classified as partnerships for federal income tax purposes. As such, each investor in the Series is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. It is intended that the Series assets will be managed so the owner of the Series can satisfy the requirements of subchapter M of the Internal Revenue Code of 1986, as amended.
The Series files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Series U.S. federal tax returns remains open for each of the four years ended December 31, 2014. The statutes of limitations on the Series state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Series facts and circumstances and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
As of December 31, 2014, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purpose were as follows:
Master International Index |
Master Small Cap Index |
|||||||
Tax cost |
$ | 2,509,080,004 | $ | 469,633,898 | ||||
|
|
|
|
|||||
Gross unrealized appreciation |
166,452,542 | $ | 275,685,225 | |||||
Gross unrealized depreciation |
(63,770,589 | ) | (28,448,481 | ) | ||||
|
|
|
|
|||||
Net unrealized appreciation |
$ | 102,681,953 | $ | 247,236,744 | ||||
|
|
|
|
8. Bank Borrowings:
The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates (Participating Funds), was a party to a 364-day, $1.1 billion credit agreement with a group of lenders, under which the Series may borrow to fund shareholder redemptions. Excluding commitments designated for a certain individual fund, the Participating Funds, including the Series, could borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. Effective November 25, 2014, the credit agreement was amended to an aggregate commitment amount of $2.1 billion, of which, the Participating Funds, including the Series, can borrow up to $1.6 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The agreement terminates on April 23, 2015, unless otherwise extended to November 24, 2015 or renewed for a period of 364 days from April 23, 2015. The amended agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one month LIBOR (but in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations, and along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2014, the Series did not borrow under the credit agreement.
9. Principal Risks:
In the normal course of business, the Series invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Series may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Series; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Series may be exposed to counterparty credit risk, or the risk that an entity with which the Series have unsettled or open transactions may fail to or be unable to perform on its commitments. The Series manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Series to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counter-
90 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Notes to Financial Statements (concluded) | Quantitative Master Series LLC |
parties. The extent of the Series exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Series.
Master International Index invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Series concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in U.S. securities. Investment percentages in specific countries are presented in the Schedules of Investments.
Master International Index invests a significant portion of its assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of, several European countries. These events may spread to other countries in Europe and may affect the value and liquidity of certain of the Series investments.
As of December 31, 2014, Master Small Cap Index invested a significant portion of its assets in securities in the financial sector. Changes in economic conditions affecting such sectors would have a greater impact on the Series and could affect the value, income and/or liquidity of positions in such securities.
As of December 31, 2014, the Series investments had the following industry classifications:
Master International Index
Industry |
Percent of Long-Term Investments | |||
Banks |
13 | % | ||
Pharmaceuticals |
10 | |||
Insurance |
6 | |||
Oil, Gas & Consumable Fuels |
5 | |||
Other |
66 |
Master Small Cap Index
Industry |
Percent of Long-Term Investments | |||
Computer Services Software & Systems |
9 | % | ||
Real Estate Investment Trusts |
9 | |||
Banks |
8 | |||
Biotechnology |
6 | |||
Other |
68 |
10. Subsequent Events:
Management has evaluated the impact of all subsequent events on the Series through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 91 |
Report of Independent Registered Public Accounting Firm | Quantitative Master Series LLC |
92 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Officers and Directors |
Name, Address1 |
Position(s) |
Length |
Principal Occupation(s) During Past Five Years |
Number of BlackRock- |
Public | |||||
Independent Directors2 | ||||||||||
Ronald W. Forbes 1940 |
Co-Chairman of the Board and Director | Since 2007 | Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000. | 33 RICs consisting of 153 Portfolios | None | |||||
Rodney D. Johnson 1941 |
Co-Chairman of the Board and Director | Since 2007 | President, Fairmount Capital Advisors, Inc. from 1987 to 2013; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia from 2004 to 2012; Director, The Committee of Seventy (civic) from 2006 to 2012; Director, Fox Chase Cancer Center from 2004 to 2011. | 33 RICs consisting of 153 Portfolios | None | |||||
David O. Beim 1940 |
Director | Since 2007 | Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy from 2002 to 2012; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006. | 33 RICs consisting of 153 Portfolios | None | |||||
Frank J. Fabozzi 1948 |
Director | Since 2014 | Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006. | 112 RICs consisting of 232 Portfolios | None | |||||
Dr. Matina S. Horner 1939 |
Director | Since 2007 | Executive Vice President, Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003. | 33 RICs consisting of 153 Portfolios | NSTAR (electric and gas utility) | |||||
Herbert I. London 1939 |
Director | Since 2007 | Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President Emeritus, Hudson Institute (policy research organization) from 2011 to 2012, President thereof from 1997 to 2011 and Trustee from 1980 to 2012; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (global internet services) since 2005; Director, Cerego, LLC (educational software) since 2005; Director, Cybersettle (online adjudication) since 2009; Director, AIMS Worldwide, Inc. (marketing) from 2007 to 2012. | 33 RICs consisting of 153 Portfolios | None | |||||
Ian A. MacKinnon 1948 |
Director | Since 2012 | Director, Kennett Capital, Inc. (investments) since 2006; Director, Free Library of Philadelphia from 1998 to 2008. | 33 RICs consisting of 153 Portfolios | None | |||||
Cynthia A. Montgomery 1952 |
Director | Since 2007 | Professor, Harvard Business School since 1989; Director, McLean Hospital from 2005 to 2012; Director, Harvard Business School Publishing from 2005 to 2010. | 33 RICs consisting of 153 Portfolios | Newell Rubbermaid, Inc. (manufacturing) | |||||
Joseph P. Platt 1947 |
Director | Since 2007 | Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Director, The West Penn Allegheny Health System (a not-for-profit health system) from 2008 to 2013; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008. | 33 RICs consisting of 153 Portfolios | Greenlight Capital Re, Ltd. (reinsurance company) | |||||
Robert C. Robb, Jr. 1945 |
Director | Since 2007 | Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981. | 33 RICs consisting of 153 Portfolios | None | |||||
Toby Rosenblatt 1938 |
Director | Since 2007 | President, Founders Investments Ltd. (private investments) since 1999; Director, Forward Management, LLC since 2007; Director, College Futures Foundation (philanthropic foundation) since 2009; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008. | 33 RICs consisting of 153 Portfolios | None |
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 93 |
Officers and Directors (continued) |
Name, Address1 |
Position(s) |
Length |
Principal Occupation(s) During Past Five Years |
Number of BlackRock- |
Public | |||||
Independent Directors2 (concluded) | ||||||||||
Kenneth L. Urish 1951 | Director | Since 2007 | Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Immediate past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007. | 33 RICs consisting of 153 Portfolios | None | |||||
Frederick W. Winter 1945 | Director | Since 2007 | Director, Alkon Corporation (pneumatics) since 1992; Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh from 2005 to 2013 and Dean thereof from 1997 to 2005; Director, Tippman Sports (recreation) from 2005 to 2013; Director, Indotronix International (IT services) from 2004 to 2008. | 33 RICs consisting of 153 Portfolios | None |
1 | The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055. |
2 | Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate. |
3 | Date shown is the earliest date a person has served for the Master LLC covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (MLIM) and BlackRock, Inc. (BlackRock) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Directors as joining the Master LLCs board in 2007, those Directors first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999. Frank Fabozzi first became a member of the board of other funds advised by BlackRock Advisors, LLC or its affiliates in 1988. |
Interested Directors4 | ||||||||||
Paul L. Audet 1953 | Director | Since 2011 | Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRocks Real Estate business from 2008 to 2011; Member of BlackRocks Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRocks Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005. | 141 RICs consisting of 329 Portfolios | None | |||||
Henry Gabbay 1947 | Director | Since 2007 | Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Allocation Target Shares (formerly BlackRock Bond Allocation Target Shares) from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006. | 29 RICs consisting of 97 Portfolios | None |
4 | Mr. Audet is an interested person, as defined in the 1940 Act, of the Master LLC based on his position with BlackRock and its affiliates. Mr. Gabbay is an interested person of the Master LLC based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 75. The Board has determined to extend the terms of Directors on a case-by-case basis, as appropriate. |
94 | QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 |
Officers and Directors (concluded) |
Name, Address1 |
Position(s) Held with Master LLC |
Length of Time Served |
Principal Occupation(s) During Past Five Years | |||
Officers2 | ||||||
John M. Perlowski 1964 |
President and Chief Executive Officer |
Since 2010 |
Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009. | |||
Jennifer McGovern 1977 |
Vice President | Since 2014 |
Director of BlackRock since 2011; Head of Product Structure and Oversight for BlackRocks U.S. Wealth Advisory Group since 2013; Vice President of BlackRock, Inc. from 2008 to 2010. | |||
Neal Andrews 1966 |
Chief Financial Officer |
Since 2007 |
Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006. | |||
Jay Fife 1970 |
Treasurer | Since 2007 |
Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006. | |||
Charles Park 1967 |
Chief Compliance Officer and Anti-Money Laundering Officer |
Since 2014 |
Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (BFA) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012. | |||
Benjamin Archibald 1975 |
Secretary | Since 2012 |
Managing Director of BlackRock since 2014; Director of BlackRock from 2010 to 2013; Assistant Secretary of the BlackRock-advised funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009. | |||
1 The address of each Officer is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.
2 Officers of the Master LLC serve at the pleasure of the Board. | ||||||
Further information about the Officers and Directors is available in the Master LLCs Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762. |
Effective September 10, 2014, Brendan Kyne resigned as a Vice President of the Master LLC and Jennifer McGovern became a Vice President of the Master LLC.
Effective December 31, 2014, Paul L. Audet and Henry Gabbay resigned as a Director of the Master LLC and Ronald W. Forbes resigned as a Director of the Master LLC and Co-Chair of the Board.
Effective January 1, 2015, Collette Chilton, Barbara G. Novick and Mark Stalnecker was appointed to serve as a Director of the Master LLC.
Investment Advisor | Custodian | Accounting Agent | Distributor | Address of the Master LLC | ||||
BlackRock Advisors, LLC Wilmington, DE 19809 |
State Street Bank and Trust Company Boston, MA 02110 |
State Street Bank and Trust Company Boston, MA 02110 |
BlackRock Investments, LLC New York, NY 10022 |
100 Bellevue Parkway Wilmington, DE 19809 | ||||
Transfer Agent | Independent Registered Public Accounting Firm | Legal Counsel | ||||||
BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809 | Deloitte & Touche LLP Boston, MA 02116 | Sidley Austin LLP New York, NY 10019 |
QUANTITATIVE MASTER SERIES LLC | DECEMBER 31, 2014 | 95 |
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| |
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, each Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (SEC) on Form N-Q as of the first and third fiscal quarters. The Funds Forms N-Q are available on the SECs website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SECs Public Reference Section, 100 F Street, NE, Washington, DC 20549-1520. Information regarding the operation of the SECs Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Funds portfolio holdings is also available on www.americanbeaconfunds.com approximately twenty days after the end of each month. |
Availability of Proxy Voting Policy and Records
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available in each Funds Statement of Additional Information, which may be obtained free of charge on www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SECs website at www.sec.gov. Each Funds proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Funds Forms N-PX are available on the SECs website at www.sec.gov. The Funds proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts |
TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas |
DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds, American Beacon Small Cap Index Fund and American Beacon International Equity Index Fund are service marks of American Beacon Advisors, Inc.
AR 12/14
U.S. Treasury securities are guaranteed only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. They are also subject to credit and interest rate risks. In a period of sustained deflation, inflation-indexed securities may not pay any income and may suffer a loss. Please see the prospectus for a complete discussion of the Funds risks. There can be no assurances that the investment objectives of this Fund will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each 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 | December 31, 2014 |
The U.S. Treasury has been issuing Treasury Inflation-Protected Securities (TIPS) since 1997. Backed by the full faith and credit of the U.S. government, the principal of these securities is tied to the Consumer Price Index. With a rise in the index, or inflation, the principal increases. With a fall in the index, or deflation, the principal decreases. And, at maturity, the U.S. Treasury pays the original or adjusted principal, whichever is greater.
In 2014, the U.S. economy - fueled by cheap gas, record stock prices, healthy job growth and reductions in unemployment - showed steady improvement. Yet, despite the countrys economic gains, an uneven housing market and slow wage growth continued throughout the year and inflationary pressure helped drive yields to historically | ||
depressed levels. For TIPS, the average interest rate for the period was 0.92%, down from 1.05% a year ago. |
Unlike many other funds in its class, the American Beacon Treasury Inflation Protected Securities Fund seeks to provide inflation protection and income by investing primarily in TIPS. This strategy provides inflation protection without unnecessary exposure to the risks associated with other instruments. By benchmarking against the lower duration Barclays Capital 1-10 Year U.S. TIPS Index, the Fund strives to be less sensitive to changes in real interest rates.
For the year ended December 31, 2014, the American Beacon Treasury Inflation Protected Securities Fund (Investor Class) returned 0.14%.
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
December 31, 2014 (Unaudited)
2
American Beacon Treasury Inflation Protected Securities FundSM
Performance Overview
December 31, 2014 (Unaudited)
3
American Beacon Treasury Inflation Protected Securities FundSM
Performance Overview
December 31, 2014 (Unaudited)
4
American Beacon Treasury Inflation Protected Securities FundSM
Fund Expenses
December 31, 2014 (Unaudited)
5
American Beacon Treasury Inflation Protected Securities FundSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Treasury Inflation Protected Securities Fund:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon Treasury Inflation Protected Securities Fund (one of the funds constituting the American Beacon Funds) (the Fund), as of December 31, 2014, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Treasury Inflation Protected Securities Fund at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
March 2, 2015
6
American Beacon Treasury Inflation Protected Securities FundSM
December 31, 2014
Par Amount | Fair Value | |||||||
(000s) | (000s) | |||||||
U.S. TREASURY OBLIGATIONS - 98.97% |
||||||||
0.50%, Due 4/15/2015 A |
$ | 625 | $ | 616 | ||||
2.00%, Due 1/15/2016 A |
10,205 | 10,356 | ||||||
0.125%, Due 4/15/2016 A |
21,768 | 21,702 | ||||||
2.50%, Due 7/15/2016 A |
4,199 | 4,377 | ||||||
0.125%, Due 4/15/2017 A |
28,013 | 28,035 | ||||||
1.625%, Due 1/15/2018 A |
1,422 | 1,489 | ||||||
0.125%, Due 4/15/2018 A |
13,909 | 13,856 | ||||||
1.375%, Due 7/15/2018 A |
4,168 | 4,366 | ||||||
2.125%, Due 1/15/2019 A |
10,086 | 10,838 | ||||||
0.125%, Due 4/15/2019 A |
12,630 | 12,491 | ||||||
1.875%, Due 7/15/2019 A |
4,220 | 4,530 | ||||||
1.375%, Due 1/15/2020 A |
3,470 | 3,642 | ||||||
1.25%, Due 7/15/2020 A |
15,249 | 16,004 | ||||||
1.125%, Due 1/15/2021 A |
6,502 | 6,754 | ||||||
0.625%, Due 7/15/2021 A |
12,816 | 12,977 | ||||||
0.125%, Due 1/15/2022 A |
25,210 | 24,521 | ||||||
0.125%, Due 7/15/2022 A |
22,376 | 21,801 | ||||||
0.125%, Due 1/15/2023 A |
13,534 | 13,086 | ||||||
0.375%, Due 7/15/2023 A |
13,060 | 12,912 | ||||||
0.625%, Due 1/15/2024 A |
12,608 | 12,663 | ||||||
0.125%, Due 7/15/2024 A |
7,925 | 7,632 | ||||||
2.375%, Due 1/15/2025 A |
567 | 666 | ||||||
|
|
|||||||
Total U.S. Treasury Obligations (Cost $251,175) |
245,314 | |||||||
|
|
|||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 0.83% (Cost $2,060) |
||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class |
2,059,512 | 2,060 | ||||||
|
|
|||||||
TOTAL INVESTMENTS - 99.80% (Cost $253,235) |
247,374 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 0.20% |
|
495 | ||||||
|
|
|||||||
TOTAL NET ASSETS - 100.00% |
$ | 247,869 | ||||||
|
|
|||||||
Percentages are stated as a percent of net assets. |
A | Inflation-Indexed Note. |
See accompanying notes
7
American Beacon Treasury Inflation Protected Securities FundSM
Statement of Assets and Liabilities
December 31, 2014 (in thousands, except share and per share amounts)
Assets: |
||||
Investments in unaffiliated securities, at fair value A |
$ | 247,374 | ||
Receivable for investments sold |
3,566 | |||
Receivable for fund shares sold |
670 | |||
Dividends and interest receivable |
623 | |||
Receivable for expense reimbursement (Note 2) |
21 | |||
Prepaid expenses |
22 | |||
|
|
|||
Total assets |
252,276 | |||
|
|
|||
Liabilities: |
||||
Payable for investments purchased |
4,224 | |||
Payable for fund shares redeemed |
80 | |||
Management and investment advisory fees payable |
24 | |||
Administrative service and service fees payable |
32 | |||
Transfer agent fees payable |
7 | |||
Custody and fund accounting fees payable |
3 | |||
Professional fees payable |
19 | |||
Prospectus and shareholder reports fees payable |
11 | |||
Trustee fees payable |
1 | |||
Other liabilities |
6 | |||
|
|
|||
Total liabilities |
4,407 | |||
|
|
|||
Net assets |
$ | 247,869 | ||
|
|
|||
Analysis of Net Assets: |
||||
Paid-in-capital |
259,931 | |||
Accumulated net realized (loss) |
(6,201 | ) | ||
Unrealized depreciation of investments |
(5,861 | ) | ||
|
|
|||
Net assets |
$ | 247,869 | ||
|
|
|||
Shares outstanding at no par value (unlimited shares authorized): |
||||
Institutional Class |
23,678,249 | |||
|
|
|||
Y Class |
57,299 | |||
|
|
|||
Investor Class |
226,445 | |||
|
|
|||
A Class |
64,767 | |||
|
|
|||
C Class |
10,828 | |||
|
|
|||
Net assets (not in thousands): |
||||
Institutional Class |
$ | 244,192,347 | ||
|
|
|||
Y Class |
$ | 592,886 | ||
|
|
|||
Investor Class |
$ | 2,314,913 | ||
|
|
|||
A Class |
$ | 661,604 | ||
|
|
|||
C Class |
$ | 107,408 | ||
|
|
|||
Net asset value, offering and redemption price per share: |
||||
Institutional Class |
$ | 10.31 | ||
|
|
|||
Y Class |
$ | 10.35 | ||
|
|
|||
Investor Class |
$ | 10.22 | ||
|
|
|||
A Class |
$ | 10.22 | ||
|
|
|||
A Class (offering price) |
$ | 10.73 | ||
|
|
|||
C Class |
$ | 9.92 | ||
|
|
|||
A Cost of investments in unaffiliated securities |
$ | 253,235 |
See accompanying notes
8
American Beacon Treasury Inflation Protected Securities FundSM
Statement of Operations
For the year ended December 31, 2014 (in thousands)
Investment Income: |
||||
Interest income |
$ | 2,588 | ||
|
|
|||
Total investment income |
2,588 | |||
|
|
|||
Expenses: |
||||
Management and investment advisory fees (Note 2) |
265 | |||
Administrative service fees (Note 2): |
||||
Institutional Class |
343 | |||
Y Class |
2 | |||
Investor Class |
9 | |||
A Class |
3 | |||
C Class |
1 | |||
Transfer agent fees: |
||||
Institutional Class |
64 | |||
Investor Class |
1 | |||
Custody and fund accounting fees |
37 | |||
Professional fees |
52 | |||
Registration fees and expenses |
90 | |||
Service fees (Note 2): |
||||
Y Class |
1 | |||
Investor Class |
8 | |||
A Class |
1 | |||
Distribution fees (Note 2): |
||||
A Class |
2 | |||
C Class |
3 | |||
Prospectus and shareholder report expenses |
35 | |||
Trustee fees |
11 | |||
Other expenses |
21 | |||
|
|
|||
Total expenses |
949 | |||
|
|
|||
Net fees waived and expenses reimbursed (Note 2) |
(233 | ) | ||
|
|
|||
Net expenses |
716 | |||
|
|
|||
Net investment income |
1,872 | |||
|
|
|||
Realized and unrealized gain (loss) from investments: |
||||
Net realized gain (loss) from: |
||||
Investments |
(758 | ) | ||
Change in net unrealized appreciation or (depreciation) of: |
||||
Investments |
(609 | ) | ||
|
|
|||
Net (loss) from investments |
(1,367 | ) | ||
|
|
|||
Net increase in net assets resulting from operations |
$ | 505 | ||
|
|
See accompanying notes
9
American Beacon Treasury Inflation Protected Securities FundSM
Statement of Changes in Net Assets (in thousands)
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||||||
Increase (Decrease) in Net Assets: |
||||||||
Operations: |
||||||||
Net investment income (loss) |
$ | 1,872 | $ | (528 | ) | |||
Net realized (loss) from investments |
(758 | ) | (5,176 | ) | ||||
Change in net unrealized appreciation or (depreciation) from investments |
(609 | ) | (7,869 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in net assets resulting from operations |
505 | (13,573 | ) | |||||
|
|
|
|
|||||
Distributions to Shareholders: |
||||||||
Net investment income: |
||||||||
Institutional Class |
(1,861 | ) | | |||||
Y Class |
(3 | ) | | |||||
Investor Class |
(7 | ) | | |||||
A Class |
(1 | ) | | |||||
Tax Return of Capital: |
||||||||
Net investment income: |
||||||||
Institutional Class |
(248 | ) | | |||||
Y Class |
| | ||||||
Investor Class |
(1 | ) | | |||||
A Class |
| | ||||||
|
|
|
|
|||||
Net distributions to shareholders |
(2,121 | ) | | |||||
|
|
|
|
|||||
Capital Share Transactions: |
||||||||
Proceeds from sales of shares |
85,648 | 119,052 | ||||||
Reinvestment of dividends and distributions |
2,119 | (121,698 | ) | |||||
Cost of shares redeemed |
(45,874 | ) | | |||||
|
|
|
|
|||||
Net increase (decrease) in net assets from capital share transactions |
41,893 | (2,646 | ) | |||||
|
|
|
|
|||||
Net increase (decrease) in net assets |
40,277 | (16,219 | ) | |||||
|
|
|
|
|||||
Net Assets: |
||||||||
Beginning of period |
207,592 | 223,811 | ||||||
|
|
|
|
|||||
End of Period * |
$ | 247,869 | $ | 207,592 | ||||
|
|
|
|
|||||
* Includes undistributed (or overdistribution of) net investment income of |
$ | | $ | (1 | ) | |||
|
|
|
|
See accompanying notes
10
American Beacon Treasury Inflation Protected Securities FundSM
December 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the Trust) which is comprised of thirty-one Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the Act), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Treasury Inflation Protected Securities Fund (the Fund), a series of the Trust.
American Beacon Advisors, Inc. (the Manager) is a wholly-owned subsidiary of Lighthouse Holdings, Inc., and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
Class Disclosure
The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class |
Investors making an initial investment of $250,000 | |
Y Class |
Investors making an initial investment of $100,000 | |
Investor Class |
General public and investors investing through an intermediary | |
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 Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
New Accounting Pronouncements
In June 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements, which amends the criteria that define an investment company and clarifies the measurement guidance and requires new disclosures for investment companies. Under the ASU, an entity that is registered under the Investment Company Act of 1940 automatically qualifies as an investment company. The ASU was effective for periods ending after December 31, 2013. Management has evaluated the implications of the ASU and determined that adoption thereof will not have a material impact on the financial statements.
2. Transactions with Affiliates
Management Agreement
The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory and portfolio management services. Investment assets of the Fund may be managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager and the Trust. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets. The Fund pays the unaffiliated investment advisors hired to direct
11
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
investment activities of the Fund. Management fees paid during the year ended December 31, 2014 were as follows (dollars in thousands):
Management Fee Rate |
Management Fee |
Amount paid to Investment Sub-Advisor |
Amounts Paid to Manager | |||
0.11% |
$265 | $148 | $117 |
Administration Agreement
The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.15% of the average daily net assets of the Institutional Class, 0.30% of the average daily net assets of the Y and Investor Classes. Prior to July 1, 2014, the Manager received an annualized fee of 0.40% of the average daily net assets of the A and C Classes of the Fund. Beginning July 1, 2014, the Manager received 0.30% of the average daily net assets of the A and C Class of the Fund.
Distribution Plans
The Trust, except for the A and C Classes of the Fund, has adopted a defensive Distribution Plan (the Plan) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees will be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to 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 Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class of the Fund. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expense incurred in a particular month by the Manager for distribution assistance.
Service Plan
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 of the Fund. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (the SEC), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended December 31, 2014, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
The Manager contractually agreed to reimburse a portion of its Administrative Service fee for the Institutional Class and other expenses of the Y, Investor, A, and C Classes. Of these amounts $21,171 was
12
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
receivable from the Manager at December 31, 2014. During the year ended December 31, 2014, the Manager reimbursed expenses as follows:
Expense Cap and Limits | ||||||||||||||||
Class |
1/1/14 to 6/30/14 |
7/1/14 to 12/31/14 |
Reimbursed Expenses | Expiration of Reimbursements |
||||||||||||
Institutional |
0.10 | %* | 0.10 | %* | $ | 228,793 | 2017 | |||||||||
Y |
0.61 | % | 0.61 | % | 120 | 2017 | ||||||||||
Investor |
0.69 | % | 0.69 | % | 3,643 | 2017 | ||||||||||
A |
1.00 | % | 0.90 | % | 247 | 2017 | ||||||||||
C |
1.78 | % | 1.68 | % | 11 | 2017 |
* | The Manager has agreed to reduce the Administrative Service Fee of the Institutional Class in an amount equal to 0.10% of the average daily net assets of the class. |
The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Classs 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, but not recorded as a liability is $246,503 and $207,574 which will expire in 2015 and 2016, respectively. The Fund did not record a liability for these potential reimbursements due to the current assessment that reimbursements are unlikely.
Sales Commissions
The Funds distributor, Foreside Fund Services, LLC (Foreside) may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended December 31, 2014, Foreside collected $929 from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended December 31, 2014, there were no CDSC fees collected for Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended December 31, 2014, there were no CDSC fees for the Fund.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the Exchange), normally 4 p.m. ET, each day that the Exchange is open for business.
Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing net asset value (NAV) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.
13
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the Board).
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 | Quoted prices in active markets for identical securities. | |
Level 2 | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 2 securities are fixed-income securities that are valued using observable inputs as stated above. | |
Level 3 | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Fixed income securities including corporate, U.S. government agencies, and U.S. treasury obligations, 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.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
The Funds investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (U.S. GAAP) also requires all significant transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfer between levels of the Funds assets and liabilities. During the year ended December 31, 2014, there were no transfers between levels. As of December 31, 2014, the investments were classified as described below (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
U.S. Treasury Obligations |
$ | | $ | 245,314 | $ | | $ | 245,314 | ||||||||
Short-term Investments - Money Market Funds |
2,060 | | | 2,060 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 2,060 | $ | 245,314 | $ | | $ | 247,374 | ||||||||
|
|
|
|
|
|
|
|
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a
14
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
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 is recorded on the ex-dividend date. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
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 up on the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trusts organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trusts maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
4. Securities and Other Investments
U.S. Treasury Inflation Protected Securities
Treasury Inflation Protected securities (TIPs) are inflation-indexed bonds issued by the U.S. Treasury. The principal amount is adjusted daily to the rate of inflation. Interest is accrued based on the adjusted principal amount. The adjustments to the principal due to inflation are reflected as increases or decreases to interest income in the accompanying Statement of Operations, even though principal is not received until maturity. Such adjustments may have a significant impact on the Funds distributions.
Other Investment Company Securities and Other Exchange Traded Products
The Fund may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, unit investment trusts, and other investment companies of the Trust. The Fund may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Funds proportionate share of the
15
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
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 Funds 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 issuers portfolio securities.
5. Principal Risks
In the normal course of business the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuers 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.
6. Federal Income and Excise Taxes
It is the policy of the Fund to qualify as a regulated investment company (RIC), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.
The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in Other expense on the Statement of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
16
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
The tax character of distributions paid was as follows (in thousands):
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||||||
Distributions paid from: |
||||||||
Ordinary income* |
||||||||
Institutional Class |
$ | 1,861 | $ | | ||||
Y Class |
3 | | ||||||
Investor Class |
7 | | ||||||
A Class |
1 | | ||||||
C Class |
| | ||||||
Tax Return of Capital |
||||||||
Institutional Class |
248 | | ||||||
Y Class |
| | ||||||
Investor Class |
1 | | ||||||
A Class |
| | ||||||
C Class |
| | ||||||
|
|
|
|
|||||
Total distributions paid |
$ | 2,121 | $ | | ||||
|
|
|
|
* | For tax purposes, short-term capital gains distributions are considered ordinary income distributions. |
As of December 31, 2014, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes |
$ | 255,630 | ||
Unrealized appreciation |
| |||
Unrealized depreciation |
(8,256 | ) | ||
|
|
|||
Net unrealized appreciation or (depreciation) |
(8,256 | ) | ||
Undistributed ordinary income |
| |||
Accumulated long-term gain or (loss) |
(3,806 | ) | ||
Other temporary differences |
| |||
|
|
|||
Distributable earnings or (deficits) |
$ | (12,062 | ) | |
|
|
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.
Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from return of capital distributions as of December 31, 2014 (in thousands):
Paid-in-capital |
$ | | ||
Undistributed net investment income |
| |||
Accumulated net realized gain (loss) |
| |||
Unrealized appreciation or (depreciation) of investments |
|
Under the Regulated Investment Company Modernization Act of 2010 (the RIC MOD), net capital losses recognized by the Fund 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 Fund was 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.
17
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
As of December 31, 2014, the Fund has $2,792 of short-term and $1,014 of long-term post enactment capital loss carryforwards (in thousands).
7. Investment Transactions
Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2014 were $276,023,310 and $236,521,448, respectively. These amounts also represent purchases and sales of U.S. Government securities.
8. Capital Share Transactions
The tables below summarize the activity in capital shares (dollars and shares in thousands):
For the Year Ended December 31, 2014
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold |
8,046 | $ | 84,971 | 22 | $ | 229 | 17 | $ | 176 | |||||||||||||||
Reinvestment of dividends |
204 | 2,108 | | 3 | 1 | 8 | ||||||||||||||||||
Shares redeemed |
(4,045 | ) | (42,621 | ) | (25 | ) | (264 | ) | (221 | ) | (2,294 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in shares outstanding |
4,205 | $ | 44,458 | (3 | ) | $ | (32 | ) | (203 | ) | $ | (2,110 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A Class | C Class | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold |
14 | $ | 142 | 13 | $ | 130 | ||||||||||
Reinvestment of dividends |
| | | | ||||||||||||
Shares redeemed |
(27 | ) | (276 | ) | (42 | ) | (419 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (decrease) in shares outstanding |
(13 | ) | $ | (134 | ) | (29 | ) | $ | (289 | ) | ||||||
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2013
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold |
10,712 | $ | 114,681 | 34 | $ | 373 | 311 | $ | 3,303 | |||||||||||||||
Reinvestment of dividends |
| | | | | | ||||||||||||||||||
Shares redeemed |
(9,674 | ) | (103,003 | ) | (69 | ) | (733 | ) | (1,665 | ) | (17,492 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase (decrease) in shares outstanding |
1,038 | $ | 11,678 | (35 | ) | $ | (360 | ) | (1,354 | ) | $ | (14,189 | ) | |||||||||||
|
|
|
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|
|
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|
|
|
|
|
A Class | C Class | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold |
53 | $ | 563 | 12 | $ | 132 | ||||||||||
Reinvestment of dividends |
| | | | ||||||||||||
Shares redeemed |
(43 | ) | (458 | ) | (1 | ) | (12 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in shares outstanding |
10 | $ | 105 | 11 | $ | 120 | ||||||||||
|
|
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|
|
|
|
|
18
American Beacon Treasury Inflation Protected Securities FundSM
Notes to Financial Statements
December 31, 2014
9. Subsequent Event
Agreement and Plan of Merger
On November 20, 2014, Lighthouse Holdings Parent, Inc. (LHPI), the indirect parent company of American Beacon Advisors, Inc., the Trusts investment manager, entered into an Agreement and Plan of Merger pursuant to which LHPI agreed to be acquired by investment funds managed by Kelso & Company, L.P. and Estancia Capital Management, LLC, both of which are private equity firms (Transaction). The Transaction is expected to close in the second calendar quarter of 2015, subject to customary closing conditions, including obtaining necessary client consents and approval from the Funds shareholders. There can be no assurance that the Transaction will be consummated as contemplated or that necessary conditions will be satisfied.
This change in control is deemed to be an assignment under the Investment Company Act of 1940 (the 1940 Act) of the Trusts existing investment management agreement with the Manager and the sub-advisory agreements between the Trusts, the Manager, and each sub-advisor to the Funds and will result in automatic termination of each agreement. A new investment management agreement has been submitted to the Funds shareholders for approval and the Funds Board of Trustees approved new agreements with each sub-advisor under substantially the same terms as the current agreements.
The Transaction is not expected to result in any change in the portfolio management of the Fund or in the Funds investment objectives or policies.
19
American Beacon Treasury Inflation Protected Securities FundSM
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period |
$ | 10.34 | $ | 10.97 | $ | 11.16 | $ | 10.51 | $ | 10.16 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income (loss) |
0.09 | (0.02 | ) | 0.04 | 0.28 | 0.16 | ||||||||||||||
Net gains (losses) from investments (both realized and unrealized) |
(0.03 | ) | (0.61 | ) | 0.49 | 0.67 | 0.35 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total income (loss) from investment operations |
0.06 | (0.63 | ) | 0.53 | 0.95 | 0.51 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
(0.08 | ) | | (0.07 | ) | (0.29 | ) | (0.16 | ) | |||||||||||
Distributions from net realized gains |
| | (0.49 | ) | | | ||||||||||||||
Tax return of capital |
(0.01 | )A | | (0.16 | )A | (0.01 | )A | | ||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||
Total distributions |
(0.09 | ) | | (0.72 | ) | (0.30 | ) | (0.16 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net asset value, end of period |
$ | 10.31 | $ | 10.34 | $ | 10.97 | $ | 11.16 | $ | 10.51 | ||||||||||
|
|
|
|
|
|
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|
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|
|||||||||||
Total return B |
0.58 | % | (5.74 | )% | 4.80 | % | 9.14 | % | 5.03 | % | ||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Ratios and supplemental data: |
||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 244,192 | $ | 201,381 | $ | 202,274 | $ | 206,864 | $ | 157,195 | ||||||||||
Ratios to average net assets (annualized): |
||||||||||||||||||||
Expenses, before reimbursements |
0.40 | % | 0.39 | % | 0.37 | % | 0.36 | % | 0.35 | % | ||||||||||
Expenses, net of reimbursements |
0.30 | % | 0.30 | % | 0.27 | % | 0.26 | % | 0.25 | % | ||||||||||
Net investment income (loss), before reimbursements |
0.71 | % | (0.31 | )% | 0.64 | % | 2.24 | % | 1.40 | % | ||||||||||
Net investment income (loss), net of reimbursements |
0.81 | % | (0.21 | )% | 0.74 | % | 2.34 | % | 1.50 | % | ||||||||||
Portfolio turnover rate |
102 | % | 252 | % | 286 | % | 381 | % | 214 | % |
A | The tax return of capital is calculated based on outstanding shares at the time of distribution. |
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 January 1 through December 31, 2010. |
F | Amounts are less than $0.01 per share. |
20
American Beacon Treasury Inflation Protected Securities FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | A Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | March 1 to Dec. 31, |
Year Ended December 31, | Year Ended December 31, | May 17 to Dec. 31, |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||
$ | 10.37 | $ | 11.03 | $ | 11.24 | $ | 10.60 | $ | 10.25 | $ | 10.24 | $ | 10.90 | $ | 11.12 | $ | 10.48 | $ | 10.13 | $ | 10.23 | $ | 10.93 | $ | 11.15 | $ | 10.54 | $ | 10.35 | |||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||
0.05 | (0.07 | ) | 0.09 | 0.26 | 0.05 | (0.05 | ) | (0.13 | ) | 0.06 | 0.24 | 0.06 | (0.01 | ) | (0.07 | ) | 0.00 | F | 0.10 | 0.04 | ||||||||||||||||||||||||||||||||||||||
(0.02 | ) | (0.59 | ) | 0.41 | 0.65 | 0.35 | 0.06 | (0.53 | ) | 0.42 | 0.66 | 0.41 | 0.01 | (0.63 | ) | 0.45 | 0.76 | 0.19 | ||||||||||||||||||||||||||||||||||||||||
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0.03 | (0.66 | ) | 0.50 | 0.91 | 0.40 | 0.01 | (0.66 | ) | 0.48 | 0.90 | 0.47 | 0.00 | (0.70 | ) | 0.45 | 0.86 | 0.23 | |||||||||||||||||||||||||||||||||||||||||
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(0.04 | ) | | (0.06 | ) | (0.26 | ) | (0.05 | ) | (0.03 | ) | | (0.05 | ) | (0.25 | ) | (0.12 | ) | (0.01 | ) | | (0.02 | ) | (0.24 | ) | (0.04 | ) | ||||||||||||||||||||||||||||||||
| | (0.49 | ) | | | | | (0.49 | ) | | | | | (0.49 | ) | | | |||||||||||||||||||||||||||||||||||||||||
(0.01 | )A | | (0.16 | )A | (0.01 | )A | | (0.00 | )AF | | (0.16 | )A | (0.01 | )A | | (0.00 | )AF | | (0.16 | )A | (0.01 | )A | | |||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||
(0.05 | ) | | (0.71 | ) | (0.27 | ) | (0.05 | ) | (0.03 | ) | | (0.70 | ) | (0.26 | ) | (0.12 | ) | (0.01 | ) | | (0.67 | ) | (0.25 | ) | (0.04 | ) | ||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||
$ | 10.35 | $ | 10.37 | $ | 11.03 | $ | 11.24 | $ | 10.60 | $ | 10.22 | $ | 10.24 | $ | 10.90 | $ | 11.12 | $ | 10.48 | $ | 10.22 | $ | 10.23 | $ | 10.93 | $ | 11.15 | $ | 10.54 | |||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||
0.32 | % | (5.98 | )% | 4.42 | % | 8.66 | % | 3.89 | %C | 0.14 | % | (6.06 | )% | 4.32 | % | 8.67 | % | 4.62 | % | 0.03 | % | (6.40 | )% | 4.07 | % | 8.17 | % | 2.23 | %C | |||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||
$ | 593 | $ | 627 | $ | 1,051 | $ | 501 | $ | 365 | $ | 2,315 | $ | 4,395 | $ | 19,438 | $ | 19,920 | $ | 15,262 | $ | 662 | $ | 793 | $ | 741 | $ | 855 | $ | 155 | |||||||||||||||||||||||||||||
0.63 | % | 0.63 | % | 0.62 | % | 1.04 | % | 0.60 | %D | 0.81 | % | 0.79 | % | 0.77 | % | 0.77 | % | 0.75 | % | 0.99 | % | 1.06 | % | 1.07 | % | 1.32 | % | 0.99 | %D | |||||||||||||||||||||||||||||
0.61 | % | 0.61 | % | 0.61 | % | 0.63 | % | 0.60 | %D | 0.69 | % | 0.69 | % | 0.69 | % | 0.68 | % | 0.64 | % | 0.95 | % | 1.00 | % | 1.01 | % | 1.03 | % | 0.99 | %D | |||||||||||||||||||||||||||||
0.46 | % | (0.59 | )% | 0.81 | % | 1.80 | % | 0.85 | %D | 0.25 | % | (0.66 | )% | 0.44 | % | 2.24 | % | 1.06 | % | 0.25 | % | (0.93 | )% | 0.07 | % | 0.88 | % | 0.55 | %D | |||||||||||||||||||||||||||||
0.47 | % | (0.57 | )% | 0.82 | % | 2.21 | % | 0.85 | %D | 0.37 | % | (0.56 | )% | 0.53 | % | 2.32 | % | 1.17 | % | 0.29 | % | (0.86 | )% | 0.13 | % | 1.17 | % | 0.55 | %D | |||||||||||||||||||||||||||||
102 | % | 252 | % | 286 | % | 381 | % | 214 | %E | 102 | % | 252 | % | 286 | % | 381 | % | 214 | % | 102 | % | 252 | % | 286 | % | 381 | % | 214 | %E |
21
American Beacon Treasury Inflation Protected Securities FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||
Sept. 1 | ||||||||||||||||||||
Year Ended December 31, | to Dec. 31, |
|||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period |
$ | 10.00 | $ | 10.77 | $ | 11.06 | $ | 10.46 | $ | 10.38 | ||||||||||
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|||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income (loss) |
(0.76 | ) | (0.15 | ) | (0.05 | ) | 0.13 | 0.00 | F | |||||||||||
Net gains (losses) from investments (both realized and unrealized) |
0.68 | (0.62 | ) | 0.41 | 0.65 | 0.08 | ||||||||||||||
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|||||||||||
Total income (loss) from investment operations |
(0.08 | ) | (0.77 | ) | 0.36 | 0.78 | 0.08 | |||||||||||||
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|||||||||||
Less distributions: |
||||||||||||||||||||
Dividends from net investment income |
| | | (0.17 | ) | | ||||||||||||||
Distributions from net realized gains |
| | (0.49 | ) | | | ||||||||||||||
Tax return of capital |
| | (0.16 | )A | (0.01 | )A | | |||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||
Total distributions |
| | (0.65 | ) | (0.18 | ) | | |||||||||||||
|
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|
|
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Net asset value, end of period |
$ | 9.92 | $ | 10.00 | $ | 10.77 | $ | 11.06 | $ | 10.46 | ||||||||||
|
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Total return B |
(0.80 | )% | (7.15 | )% | 3.26 | % | 7.47 | % | 0.77 | %C | ||||||||||
|
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Ratios and supplemental data: |
||||||||||||||||||||
Net assets, end of period (in thousands) |
$ | 107 | $ | 396 | $ | 307 | $ | 266 | $ | 153 | ||||||||||
Ratios to average net assets (annualized): |
||||||||||||||||||||
Expenses, before reimbursements |
1.74 | % | 1.79 | % | 1.79 | % | 2.62 | % | 1.77 | %D | ||||||||||
Expenses, net of reimbursements |
1.74 | % | 1.78 | % | 1.77 | % | 1.79 | % | 1.77 | %D | ||||||||||
Net investment income (loss), before reimbursements |
(0.43 | )% | (1.71 | )% | (0.61 | )% | 0.25 | % | (0.05 | )%D | ||||||||||
Net investment income (loss), net of reimbursements |
(0.42 | )% | (1.69 | )% | (0.59 | )% | 1.08 | % | (0.05 | )%D | ||||||||||
Portfolio turnover rate |
102 | % | 252 | % | 286 | % | 381 | % | 214 | %E |
A | The tax return of capital is calculated based on outstanding shares at the time of distribution. |
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 January 1 through December 31, 2010. |
F | Amounts are less than $0.01 per share. |
22
American Beacon Treasury Inflation Protected Securities Fund
Privacy Policy and Federal Tax Information
December 31, 2014 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
| information we receive from you on applications or other forms; |
| information about your transactions with us or our service providers; and |
| information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Fund is required to be provided to shareholders relating to the Funds income and distributions for the taxable year ended December 31, 2014. The information and distributions reported herein may differ from information and distributions taxable to the shareholder for the calendar year ended December 31, 2014.
Of the ordinary dividends paid to shareholders during the tax year ended December 31, 2014, 99.99% were derived from U.S. Treasury Obligations.
Shareholders will receive notification in January 2015 of the applicable tax information necessary to prepare their 2014 income tax returns.
23
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the Trust) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039. Each Trustee oversees thirty-three funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trusts Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address |
Position, Term of Office and Length of Time Served with the Trust |
Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* |
||||
Alan D. Feld** (78) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED | Term | |||
TRUSTEES |
Lifetime of Trust until removal, resignation or retirement* |
|||
Gerard J. Arpey (56) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
W. Humphrey Bogart (70) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (54) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (60) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (72) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (71) | Trustee since 2004 Chairman since 2008 |
Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (69) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). |
24
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address |
Position, Term of Office and Length of Time Served with the Trust |
Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS |
Term | |||
One Year | ||||
Gene L. Needles, Jr. (60) | President since 2009 Executive Vice President since 2009 |
President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-2012), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 |
General Counsel, Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Secretary (2008-Present), Lighthouse Holdings Parent, Inc. | ||
Brian E. Brett (54) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (48) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (44) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (60) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (53) | Treasurer since 2010 |
Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer (2010-Present), Lighthouse Holdings, Inc.; Treasurer (2010-Present), Lighthouse Holdings Parent, Inc. | ||
Terri L. McKinney (51) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (39) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Samuel J. Silver (51) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (43) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 |
Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
Sonia L. Bates (58) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011-Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc. |
* | As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in they reach the age of 75. |
** | Mr. Feld is deemed to be an interested person of the Trust, as defined by the 1940 Act. Mr. Felds law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trusts sub-advisors. |
25
eDelivery is NOW AVAILABLE Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Funds regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institutions name or contact your financial institution directly.
To obtain more information about the Fund:
By E-mail: american_beacon.funds@ambeacon.com |
On the Internet: Visit our website at www.americanbeaconfunds.com |
|||||
By Telephone: Institutional, Y and Investor Classes Call (800) 658-5811 |
By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 |
|||||
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (SEC) on Form N-Q as of the first and third fiscal quarters. The Funds Forms N-Q are available on the SECs website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SECs Public Reference Section, 100 F Street, NE, Washington, DC 20549-1520. Information regarding the operation of the SECs Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Funds portfolio holdings is also available on www.americanbeaconfunds.com approximately twenty days after the end of each month. |
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Funds Statement of Additional Information, is available free of charge on the Funds website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SECs website at www.sec.gov. The Funds proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Funds Forms N-PX are available on the SECs website at www.sec.gov. The Funds proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts |
TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas |
DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds and the American Beacon Treasury Inflation Protected Securities Fund are service marks of American Beacon Advisors, Inc.
AR 12/14
ITEM 2. | CODE OF ETHICS. |
The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the Code). The Trust amended its code November 12, 2013 to disclose the removal of terminated Investment Companies. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE ETH.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Trusts Board of Trustees has determined that Ms. Brenda Cline, a member of the Trusts Audit and Compliance Committee, is an audit committee financial expert as defined in Form N-CSR. Ms. Brenda Cline is independent as defined in Form N-CSR.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
(a)
Audit Fees |
Fiscal Year Ended |
|||
$168,847 |
12/31/2013 | |||
$236,768 |
12/31/2014 |
(b)
Audit-Related Fees |
Fiscal Year Ended |
|||
$0 |
12/31/2013 | |||
$0 |
12/31/2014 |
(c)
Tax Fees |
Fiscal Year Ended |
|||
$18,750 |
12/31/2013 | |||
$37,000 |
12/31/2014 |
(d)
All Other Fees |
Fiscal Year Ended |
|||
$0 |
12/31/2013 | |||
$0 |
12/31/2014 |
(e)(1) Pursuant to its charter, the Trusts Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trusts principal accountant:
- to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors;
- to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser (adviser affiliate) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts;
- to consider whether the non-audit services provided by a Trusts auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditors independence;
- to review the arrangements for and scope of the annual audit and any special audits; and
- to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) | Not applicable. |
(g) |
Aggregate Non-Audit Fees for Services Rendered to the:
Registrant |
Adviser | Advisers Affiliates Providing Ongoing Services to Registrant |
Fiscal Year Ended | |||||||
$20,000 |
$50,950 | N/A | 12/31/2013 | |||||||
$44,750 |
$34,905 | N/A | 12/31/2014 |
(h) | Not applicable. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trusts Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trusts internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trusts internal control over financial reporting.
ITEM 12. | EXHIBITS. |
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds | ||
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President | ||
Date: | March 9, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President | ||
Date: | March 9, 2015 |
By | /s/ Melinda G. Heika | |
Melinda G. Heika | ||
Treasurer | ||
Date: | March 9, 2015 |
For period ended 12/31/14
Registrant Name: American Beacon Funds
File Number: 811-4984
EXHIBIT 99.CODE ETH
AMERICAN BEACON FUNDS
AMERICAN BEACON SELECT FUNDS
Code of Ethics for Principal Executive and Financial Officers
Dated: November 12, 2013
Purpose
The American Beacon Funds and the American Beacon Select Funds (collectively, the Trusts) have adopted this Code of Ethics for Principal Executive and Financial Officers (the Code), which applies to the Trusts Principal Executive Officer and Principal Financial Officer (the Covered Officers as set forth in Exhibit A), for the purpose of promoting:
| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| full, fair, accurate, timely, and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission (the SEC) and in other public communications made by the registrant; |
| compliance with applicable governmental laws, rules, and regulations; |
| the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and |
| accountability for adherence to the Code. |
Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
Conflicts of Interest
For purposes of this Code, a conflict of interest occurs when a Covered Officers personal interests interfere with the interests of, or his/her service to, the Trusts. For example, a conflict of interest would arise if a Covered Officer, or a member of his/her family, receives improper personal benefits as a result of his/her position with the Trusts.
Certain conflicts of interest arise out of the relationship between Covered Officers and the Trusts and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (Investment Company Act) and the Investment Advisers Act of 1940 (Investment Advisers Act). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trusts because of their status as affiliated persons of the Trusts.
Conflicts also may arise from a Covered Officers position or employment at American Beacon Advisors, Inc. (AmBeacon), the Trusts manager, and his/her position with each Trust. This Code recognizes that the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on AmBeacon and the Trusts. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trusts and AmBeacon and is consistent with the performance by the Covered Officers of their duties as officers of the Trusts. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trusts.
Each Covered Officer should not:
| use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trusts whereby the Covered Officer would benefit personally to the detriment of the Trusts; or |
| cause the Trusts to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of the Trusts. |
At times, certain situations may arise that may, or may not, be considered conflicts of interest under this Code. Covered Officers are encouraged to discuss such situations with the Trusts Chief Legal Officer (CLO). Examples of these types of situations include:
| service as a director on the board of any public or private company; |
| the receipt of any non-nominal gifts in excess of $150; |
| the receipt of any entertainment from any company with which the Trusts have current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; |
| any ownership interest in, or any consulting or employment relationship with, any of the Trusts service providers, other than AmBeacon, the distributor for the Trusts shares, or any affiliated person thereof; |
| a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trusts for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officers employment, such as compensation or equity ownership. |
2
Disclosure and Compliance
Each Covered Officer:
| should familiarize himself/herself with the disclosure requirements generally applicable to the Trusts; |
| should not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts Trustees and auditors, and to governmental regulators and self-regulatory organizations; |
| should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Trusts and AmBeacon with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and |
| is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. |
Reporting and Accountability
Each Covered Officer must:
| upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands the Code; |
| annual thereafter affirm to the Board that he/she has complied with the requirements of the Code; |
| complete at least annually the Officer Questionnaire by detailing any directorships with public or private companies and/or material relationships or transactions with affiliated persons of any Trust or its series; |
| not retaliate against any other Covered Officer or any employee of the Trusts or their affiliated persons for reports of potential violations that are made in good faith; and |
| notify the Legal Officer promptly if he/she knows of any violations of this Code. Failure to do so is itself a violation of this Code. |
The CLO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. In addition, the CLO is authorized and encouraged to consult with counsel to the Trusts and counsel to the Independent Trustees of the Trusts Boards of Trustees. However, any approvals or waivers sought by the Covered Officers will be considered by the Independent Trustees.
The Trusts will follow these procedures in investigating and enforcing this Code:
3
| the CLO will take all appropriate action to investigate any potential violations reported to him; |
| if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action; |
| any matter that the CLO believes is a violation will be reported to the Independent Trustees; |
| if the Independent Trustees concur that a violation has occurred, they will inform and make a recommendation to the applicable Trusts Board of Trustees, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of AmBeacon or its board; or a recommendation to dismiss the Covered Officer; |
| the Independent Trustees will be responsible for granting waivers, as appropriate; and |
| any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. |
Other Policies and Procedures
This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, AmBeacon, the distributor for the Trusts shares, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts and AmBeacon codes of ethics under Rule 17j-1 under the Investment Company Act and the more detailed policies and procedures set forth in the Trusts Statement of Policy on Material Non-Public Information are separate requirements applying to the Covered Officers and others, and are not part of nor replaced by this Code.
Amendments
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of Independent Trustees.
Confidentiality
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board of Trustees, its counsel and AmBeacon.
Internal Use
This Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion.
4
EXHIBIT A
Persons Covered by this Code of Ethics
Position with each Trust |
Name | |||
Principal Executive Officer | President | Gene L. Needles, Jr. | ||
Principal Financial Officer | Treasurer | Melinda G. Heika |
5
For period ended 12/31/2014
Registrant Name: American Beacon Funds
File Number: 811-4984
EXHIBIT 99.CERT
I, Melinda G. Heika, certify that:
1. I have reviewed this report on Form N-CSR of American Beacon Funds;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 9, 2015 | /s/ Melinda G. Heika |
|||||
Melinda G. Heika | ||||||
Treasurer | ||||||
American Beacon Funds |
I, Gene L. Needles, Jr., certify that:
1. I have reviewed this report on Form N-CSR of American Beacon Funds;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 9, 2015 |
/s/ Gene L. Needles, Jr. |
|||||
Gene L. Needles, Jr. | ||||||
President | ||||||
American Beacon Funds |
For period ended 12/31/2014
Registrant Name: American Beacon Funds
File Number: 811-4984
EXHIBIT 99.906CERT
Gene L. Needles, Jr. and Melinda G. Heika, respectively, the President and Treasurer of the American Beacon Funds (the Registrant), each certify to the best of his or her knowledge and belief that:
1. the Registrants report on Form N-CSR for the period ended December 31, 2014 (the Form N-CSR) fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
/s/ Gene L. Needles, Jr. |
/s/ Melinda G. Heika |
|||||
Gene L. Needles, Jr. | Melinda G. Heika | |||||
President | Treasurer | |||||
American Beacon Funds | American Beacon Funds |
Date: March 9, 2015
A signed original of this written statement required by Section 906 has been provided to American Beacon Funds and will be retained by American Beacon Funds and furnished to the Securities and Exchange Commission or its staff.
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