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American Beacon Funds – ‘N-CSR/A’ for 10/31/13

On:  Thursday, 9/4/14, at 3:25pm ET   ·   Effective:  9/4/14   ·   For:  10/31/13   ·   Accession #:  1193125-14-331980   ·   File #:  811-04984

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/04/14  American Beacon Funds             N-CSR/A    10/31/13    4:12M                                    RR Donnelley/FAAmerican Beacon Balanced Fund A Class (ABFAX) — Advisor Class (ABLSX) — AMR Class (AABNX) — C Class (ABCCX) — Investor Class (AABPX) — R5 Class (AADBX) — Y Class (ACBYX)American Beacon Emerging Markets Fund A Class (AEMAX) — AMR Class (AAMRX) — C Class (AEMCX) — Institutional Class (AEMFX) — Investor Class (AAEPX) — Y Class (ACEYX)American Beacon High Yield Bond Fund A Class (ABHAX) — AMR Class (ABMRX) — C Class (AHBCX) — Institutional Class (AYBFX) — Investor Class (AHYPX) — Y Class (ACYYX)American Beacon Intermediate Bond Fund A Class (AITAX) — C Class (AIBCX) — Institutional Class (AABDX) — Investor Class (ABIPX) — Y Class (ACTYX)American Beacon International Equity Fund A Class (AIEAX) — Advisor Class (AAISX) — AMR Class (AAIAX) — C Class (AILCX) — Investor Class (AAIPX) — R5 Class (AAIEX) — Retirement Class (ABIRX) — Y Class (ABEYX)American Beacon Large Cap Value Fund A Class (ALVAX) — Advisor Class (AVASX) — AMR Class (AAGAX) — C Class (ALVCX) — Investor Class (AAGPX) — R5 Class (AADEX) — Retirement Class (ALCRX) — Y Class (ABLYX)American Beacon Mid-Cap Value Fund A Class (ABMAX) — Advisor Class (AMCSX) — AMR Class (AMDIX) — C Class (AMCCX) — Investor Class (AMPAX) — R5 Class (AACIX) — Y Class (ACMYX)American Beacon Retirement Income & Appreciation Fund A Class (AAPAX) — C Class (ABACX) — Investor Class (AANPX) — Y Class (ACRYX)American Beacon Short-Term Bond Fund A Class (ANSAX) — C Class (ATBCX) — Institutional Class (AASBX) — Investor Class (AALPX) — Y Class (ACOYX)American Beacon Small Cap Value Fund A Class (ABSAX) — Advisor Class (AASSX) — AMR Class (AASVX) — C Class (ASVCX) — Investor Class (AVPAX) — R5 Class (AVFIX) — Retirement Class (ASCVX) — Y Class (ABSYX)American Beacon Small Cap Value II Fund A Class (ABBAX) — C Class (ABBCX) — Institutional Class (ABBIX) — Investor Class (ABBVX) — Y Class (ABBYX)

Amendment to Certified Annual Shareholder Report of a Management Investment Company   —   Form N-CSR
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-CSR/A     Amendment to Certified Annual Shareholder Report    HTML   5.41M 
                          of a Management Investment Company                     
 4: EX-99.906CERT  Miscellaneous Exhibit                            HTML      8K 
 3: EX-99.CERT  Miscellaneous Exhibit                               HTML     17K 
 2: EX-99.CODE ETH  Miscellaneous Exhibit                           HTML     24K 


N-CSR/A   —   Amendment to Certified Annual Shareholder Report of a Management Investment Company
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"President's Message
"Market and Performance Overview
"Schedule of Investments
"Financial Statements
"Notes to the Financial Statements
"Financial Highlights
"Additional Information
"Market and Performance Overviews
"Emerging Markets Fund
"International Equity Fund
"Balanced Fund
"Schedules of Investments
"Mid-Cap Value Fund
"Small Cap Value II Fund
"High Yield Bond Fund
"Retirement Income and Appreciation Fund
"Intermediate Bond Fund
"Short-Term Bond Fund

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  N-CSR/A  

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-4984

 

 

AMERICAN BEACON FUNDS

(Exact name of registrant as specified in charter)

 

 

4151 Amon Carter Boulevard, MD 2450

Fort Worth, Texas 76155

(Address of principal executive offices)-(Zip code)

 

 

GENE L. NEEDLES, JR., PRESIDENT

4151 Amon Carter Boulevard, MD 2450

Fort Worth, Texas 76155

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (817) 391-6100

Date of fiscal year end: October 31, 2013

Date of reporting period: October 31, 2013

 

 

 


ITEM 1. REPORTS TO STOCKHOLDERS.


LOGO


About American Beacon Advisors

 

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

Contents

 

 

President’s Message

     1   

Market and Performance Overview

     2-4   

Schedule of Investments

     7   

Financial Statements

     11   

Notes to the Financial Statements

     15   

Financial Highlights

     26   

Additional Information

     Back Cover   
 

 

The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

 

American Beacon Funds    October 31, 2013


LOGO   

Dear Shareholders,

 

Most of the conventional measures people use to gauge the performance of the stock market as a whole are measures of large-cap stocks. The venerable Dow Jones Industrial Average, which has been around in one form or another since 1896, averages the performance of just 30 stocks. The S&P 500 Index has probably surpassed the Dow as the most common referent for the market as a whole; it contains 500 of the largest U.S. stocks.

 

So when people talk briefly about how the stock market is doing - for instance, the radio headlines in the evening’s rush hour - they’re generally talking about the performance of large caps. But these are hardly the full picture of the equity market, nor are they necessarily even a static benchmark to be measured against. These indexes are changing all the time.

On September 30, 2013, the Dow dropped three laggards - Hewlett-Packard, Bank of America and Alcoa - in favor of Nike, Visa and Goldman Sachs. The changes to the S&P 500 have been even more extensive. Just within the 12 months under review, there were 16 companies moving in and out of the index. There have been 241 changes to the 500 companies in that index since 1999.

That makes comparisons within the large-cap universe trickier than they might seem at first blush. That’s one reason we’re proud of our American Beacon Large Cap Value Fund. Rather than tracking an ever-changing index, our Fund is rooted in the judgment of experienced and respected large-cap managers.

 

    For the 12 months ended October 31, 2013, the American Beacon Large Cap Value Fund (Investor Class) returned 30.26%.

Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.

    Best Regards,

 

LOGO

    Gene L. Needles, Jr.

    President

    American Beacon Funds

 

1


Domestic Equity Market Overview

October 31, 2013 (Unaudited)

 

 

U.S. stocks posted strong results for the year ended October 31, 2013, with the S&P 500 Index rising 27.18% over those 12 months. An improving economy, low interest rates and recovering investor sentiment helped drive the market higher, as well as the Federal Reserve’s continued quantitative easing program. Equity markets shrugged off incessant political stalemates and climbed even when the government shut down for 16 days in October. Meanwhile, robust corporate earnings growth has kept valuations in check despite the appreciation in stock prices. At current prices, the S&P 500 Index’s price-to-earnings ratio based on consensus earnings is in line with its 15-year median, yet the 10-year Treasury yield is 2.6%, well below its 15-year median.

The 12-month period began with a rough patch. During the first two weeks of November 2012, the S&P 500 Index slipped by more than 5%, as the markets reacted nervously to negotiations over the fiscal cliff. But the index quickly rebounded and gained more than 8% between that point and the end of the year, setting the stage for its gains throughout 2013.

The early part of 2013 proved to be very strong. At the end of the first quarter, the S&P 500 Index finally surpassed its pre-crash high, closing at its highest mark since October 2007. The index gained 14.1% between the first of the year and May 21. On that day, though, Federal Reserve chairman Ben Bernanke indicated that the Fed’s asset-purchasing program would be coming to an end at some point. This first mention of the so-called taper sent shock waves through the market. The S&P 500 Index dropped more than 5% in the space of a month.

Subsequently, June broke a seven-month winning streak for both the S&P 500 and the Nasdaq indexes, but the market quickly found its footing and began to rally at that point. Even with the taper-induced drop-off, by the end of June, the S&P 500 Index had posted its best first half of any year since 1998.

This performance was bolstered by a U.S. economy that appears to have formed a sound foundation with no obvious signs of a contraction in the near term. For perspective, each recession in the past 50 years has been preceded by three conditions: 1) an inverted yield curve, 2) a tight labor market and 3) a positive output gap (actual gross domestic product [GDP] expressed as a percentage of potential GDP). None of these conditions are evident today. In fact, the yield curve is steep, there is considerable slack in the labor market, and the output gap is decidedly negative.

Coming off a disappointing fourth quarter of 2012, in which GDP grew at just 0.4%, GDP bounced back to 1.1% growth in the first quarter of 2013, 2.5% in the second quarter and 2.8% in the third quarter. Unemployment continued to drop in a slow but mostly steady fashion, from 7.8% in November 2012 to 7.3% in October 2013. Although this was good news for the larger economy, the falling unemployment rate made some investors nervous, because Chairman Bernanke has indicated that the economy would be healthy enough for him to end quantitative easing once the unemployment rate reached 7.0%.

For the 12 months that ended October 31, 2013, in addition to the robust performance of the S&P 500 Index, the rally was strong in all areas of market capitalization. The Russell Midcap® Index was up 33.79% and the Russell 2000® Index (which represents small-cap stocks) was up 36.28%.

 

 

2


American Beacon Large Cap Value FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Large Cap Value Fund (the “Fund”) returned 30.26% for the twelve months ended October 31, 2013. The Fund outperformed the Russell 1000® Value Index (the “Index”) return of 28.29% and the Lipper Large-Cap Value Funds Index return of 28.82% for the same period.

Comparison of Change in Value of a $10,000 Investment for the Period from 10/31/03 through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/2013

 

    1 Year     5 Years     10 Years     Value of
$10,000

10/31/03-
10/31/13
 

Institutional Class(1,8)

    30.70     15.47     8.76   $ 23,160   

Y Class (1, 2, 8)

    30.59     15.38     8.72     23,067   

Investor Class(1,8)

    30.26     15.05     8.43     22,464   

Advisor Class(1,3,8)

    30.05     14.89     8.26     22,112   

Retirement Class (1,4,8)

    29.68     14.58     8.11     21,810   

A Class with sales charge (1,5,8)

    22.52     13.59     7.74     21,069   

A Class without sales charge (1,5,8)

    30.03     14.94     8.38     22,357   

C Class with sales charge (1,6,8)

    28.00     14.36     8.11     21,801   

C Class without sales charge (1,6,8)

    29.00     14.36     8.11     21,801   

AMR Class(1,8)

    31.00     15.75     9.04     23,762   

Lipper Large-Cap Value Funds Index (7)

    28.82     13.90     7.04     19,736   

Russell 1000 Value Index (7)

    28.29     14.06     7.81     21,208   

 

1. Please note that recent growth in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 8/3/09, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
3. Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/03 up to 5/31/05, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/03. A portion of the fees charged to the Advisor Class of the Fund was waived in 2005. Performance prior to waiving fees was lower than the actual returns shown for 2005.
4. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 through 5/31/05 and the Advisor Class from 6/1/05 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/03.
5. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 through 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. A Class shares have a maximum sales charge of 5.75%.
6. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 through 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.
7. The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 1000 Value Index and Russell 1000 Index are registered trademarks of the Frank Russell Company. The Lipper Large-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Large-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
 

 

3


American Beacon Large Cap Value FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

8. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.60%, 0.70%, 0.97%, 1.09%, 1.43%, 1.13%, 1.89%, and 0.34%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund outperformed the Index as both stock selection and sector allocation added value relative to the Index.

From a stock selection standpoint, the Fund’s Financials and Energy sectors’ holdings added the most value to performance. In the Financials sector, companies that had the greatest impact on performance included Bank of America (up 51.5%), Lincoln National (up 86.6%) and Unum Group (up 60.2%). In the Energy sector, Exxon Mobil (up 0.5%) added the most relative value due to the Fund owning a much smaller position in the security compared to the Index. Chevron (up 12.4%) and Halliburton (up 66.8%) also contributed to the Fund’s returns. Poor stock selection in the Consumer Staples and Information Technology sectors, detracted relative value. Philip Morris International (up 4.6%), Imperial Tobacco Group (up 4.3%) and Wal-Mart (up 4.0%) hurt relative performance in the Consumer Staples sector. In the Information Technology sector, International Business Machines (down 8.1%) was the largest detractor. Not owning Yahoo, which was up 95.7% in the Index, also negatively impacted performance.

The Fund’s overweight position in Information Technology, the best performing sector in the Index, added relative value through sector allocation. Underweight positions in Utilities, the worst performing sector in the Index, and the Energy sector, also contributed to the Fund’s returns.

The sub-advisors continue to invest in a broadly diversified portfolio of companies that they believe have attractive valuations and above-average earnings growth potential. This approach should allow the Fund to benefit over the longer term.

Top Ten Holdings (% Net Assets)

 

JPMorgan Chase & Co.

        3.7   

Wells Fargo & Co.

        2.6   

Bank of America Corp.

        2.2   

Pfizer, Inc.

        2.1   

Microsoft Corp.

        2.1   

Johnson & Johnson

        1.8   

WellPoint, Inc.

        1.7   

Merck & Co., Inc.

        1.6   

BP plc

        1.9   

Citigroup

        1.9   

Total Fund Holdings

     184      

Sector Allocation (% Equities)

 

Financials

     25.4   

Health Care

     14.5   

Energy

     12.5   

Industrials

     10.7   

Information Technology

     10.1   

Consumer Discretionary

     10.1   

Consumer Staples

     7.8   

Utilities

     3.8   

Telecommunication Services

     3.7   

Materials

     1.0   

Manufacturing

     0.4   
 

 

4


American Beacon Large Cap Value FundSM

Fund Expenses

October 31, 2013 (Unaudited)

 

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.

Actual Expenses

The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,113.39       $ 3.09   

Hypothetical **

   $ 1,000.00       $ 1,022.28       $ 2.96   

Y Class

        

Actual

   $ 1,000.00       $ 1,113.09       $ 3.52   

Hypothetical **

   $ 1,000.00       $ 1,021.88       $ 3.36   

Investor Class

        

Actual

   $ 1,000.00       $ 1,111.53       $ 4.90   

Hypothetical **

   $ 1,000.00       $ 1,020.57       $ 4.69   

Advisor Class

        

Actual

   $ 1,000.00       $ 1,110.68       $ 5.64   

Hypothetical **

   $ 1,000.00       $ 1,019.86       $ 5.40   

Retirement Class

        

Actual

   $ 1,000.00       $ 1,109.27       $ 6.96   

Hypothetical **

   $ 1,000.00       $ 1,018.60       $ 6.67   

A Class

        

Actual

   $ 1,000.00       $ 1,110.49       $ 5.69   

Hypothetical **

   $ 1,000.00       $ 1,019.81       $ 5.45   

AMR Class

        

Actual

   $ 1,000.00       $ 1,114.68       $ 1.65   

Hypothetical **

   $ 1,000.00       $ 1,023.64       $ 1.58   

C Class

        

Actual

   $ 1,000.00       $ 1,105.83       $ 10.40   

Hypothetical **

   $ 1,000.00       $ 1,015.32       $ 9.96   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.58%, 0.66%, 0.92%, 1.06%, 1.31%, 1.07%, 1.96% and 0.31% for the Institutional, Y, Investor, Advisor, Retirement, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

5


American Beacon Large Cap Value FundSM

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Trustees of

American Beacon Large Cap Value Fund:

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Large Cap Value Fund (one of the funds constituting the American Beacon Funds) (the “Fund”), as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the, American Beacon Large Cap Value Fund at October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

December 30, 2013

 

6


American Beacon Large Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

    Shares     Fair Value  
          (000’s)  

COMMON STOCK - 94.95%

  

CONSUMER DISCRETIONARY - 9.65%

  

Auto Components - 1.66%

  

Delphi Automotive PLC F

    393,320      $ 22,498   

Johnson Controls, Inc.

    2,968,035        136,975   

Magna International, Inc., Class A

    186,000        15,754   
   

 

 

 
      175,227   
   

 

 

 

Automobiles - 2.83%

  

General Motors Co.A

    3,131,473        115,709   

Hertz Global Holdings, Inc.A

    3,417,800        78,473   

Toyota Motor Corp., ADR B

    806,800        104,416   
   

 

 

 
      298,598   
   

 

 

 

Hotels, Restaurants & Leisure - 0.66%

  

Carnival Corp.

    1,685,500        58,402   

McDonald’s Corp.

    110,025        10,620   
   

 

 

 
      69,022   
   

 

 

 

Household Durables - 0.39%

  

Stanley Black & Decker, Inc.

    518,604        41,016   
   

 

 

 

Leisure Equipment & Products - 0.05%

  

Hasbro, Inc.

    99,787        5,154   
   

 

 

 

Media - 1.86%

   

Comcast Corp., Class A

    883,000        42,013   

Comcast Corp. Special Class A

    583,710        27,026   

Interpublic Group of Cos., Inc.

    2,356,800        39,594   

McGraw-Hill Cos., Inc.

    76,660        5,342   

Omnicom Group, Inc.

    182,527        12,432   

Time Warner Cable, Inc.

    385,800        46,353   

Viacom, Inc., Class B

    110,180        9,177   

Walt Disney Co.

    204,955        14,058   
   

 

 

 
      195,995   
   

 

 

 

Multiline Retail - 1.89%

   

Dillard’s, Inc., Class A

    379,500        31,111   

Kohl’s Corp.

    49,542        2,814   

Target Corp.

    2,545,556        164,927   
   

 

 

 
      198,852   
   

 

 

 

Specialty Retail - 0.31%

   

Advance Auto Parts, Inc.

    65,486        6,495   

Lowe’s Cos., Inc.

    478,800        23,834   

Staples, Inc.

    142,537        2,298   
   

 

 

 
      32,627   
   

 

 

 

Total Consumer Discretionary

  

    1,016,491   
   

 

 

 

CONSUMER STAPLES - 7.49%

  

Beverages - 1.21%

   

Coca-Cola Enterprises, Inc.

    90,600        3,781   

Diageo PLC, ADR B

    679,616        86,712   

Dr Pepper Snapple Group, Inc.

    103,510        4,901   

Molson Coors Brewing Co., Class B

    299,900        16,195   

PepsiCo, Inc.

    184,800        15,540   
   

 

 

 
      127,129   
   

 

 

 

Food & Drug Retailing - 2.53%

  

CVS Caremark Corp.

    275,643        17,162   

Kroger Co.

    1,543,100        66,106   

Sysco Corp.

    1,520,900        49,186   

Wal-Mart Stores, Inc.

    1,748,060        134,163   
   

 

 

 
      266,617   
   

 

 

 

Food Products - 0.98%

   

Danone S.A., ADR B

    625,450        9,313   

General Mills, Inc.

    304,475        15,352   
    Shares     Fair Value  
          (000’s)  

Kellogg Co.

    440,139      $ 27,839   

Mondelez International, Inc., Class A

    939,700        31,611   

Nestle S.A., ADR B

    266,912        19,327   
   

 

 

 
      103,442   
   

 

 

 

Household Products - 0.06%

  

Procter & Gamble Co.

    72,999        5,895   
   

 

 

 

Tobacco - 2.71%

   

Altria Group, Inc.

    1,421,742        52,931   

Imperial Tobacco Group PLC, ADR B,F

    912,900        68,458   

Lorillard, Inc.

    249,840        12,744   

Philip Morris International, Inc.

    1,698,351        151,358   
   

 

 

 
      285,491   
   

 

 

 

Total Consumer Staples

  

    788,574   
   

 

 

 

ENERGY - 11.93%

  

Energy Equipment & Services - 0.80%

  

Halliburton Co.

    1,591,700        84,407   
   

 

 

 

Oil & Gas - 11.13%

   

Apache Corp.

    894,721        79,451   

BP PLC, ADR B

    4,300,940        199,995   

Chevron Corp.

    593,040        71,141   

Cobalt International Energy, Inc.A

    2,887,700        67,024   

ConocoPhillips

    1,207,340        88,498   

EOG Resources, Inc.

    23,306        4,158   

Exxon Mobil Corp.

    262,526        23,528   

Hess Corp.

    859,800        69,816   

Kosmos Energy Ltd.A

    837,000        8,922   

Marathon Oil Corp.

    798,600        28,159   

Marathon Petroleum Corp.

    453,150        32,473   

Murphy Oil Corp.

    301,500        18,186   

Occidental Petroleum Corp.

    1,612,378        154,917   

Phillips 66

    1,275,020        82,150   

Royal Dutch Shell PLC, Class B, ADR B,F

    1,339,000        93,087   

Seadrill Ltd.

    1,018,200        47,468   

Total S.A., ADR B

    1,685,800        103,137   
   

 

 

 
      1,172,110   
   

 

 

 

Total Energy

  

    1,256,517   
   

 

 

 

FINANCIALS - 24.11%

  

Banks - 4.49%

   

Bank of America Corp.

    16,942,590        236,518   

Bank of New York Mellon Corp.

    1,495,057        47,543   

PNC Financial Services Group, Inc.

    1,350,794        99,324   

SunTrust Banks, Inc.

    2,672,300        89,896   
   

 

 

 
      473,281   
   

 

 

 

Diversified Financials - 12.84%

  

American Express Co.

    1,212,500        99,183   

BlackRock, Inc., Class A

    33,245        10,000   

Blackstone Group LP C

    1,474,600        38,752   

Capital One Financial Corp.

    1,932,600        132,712   

Charles Schwab Corp.

    2,094,500        47,440   

Citigroup, Inc.

    4,163,776        203,109   

Franklin Resources, Inc.

    180,675        9,731   

Goldman Sachs Group, Inc.

    132,175        21,262   

JPMorgan Chase & Co.

    7,540,504        388,638   

KKR & Co., LP C

    1,815,500        39,850   

Moody’s Corp.

    71,320        5,039   

Morgan Stanley

    817,800        23,495   

Nasdaq OMX Group

    115,116        4,079   
 

 

See accompanying notes

 

7


American Beacon Large Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

    Shares     Fair Value  
          (000’s)  

SLM Corp.

    1,778,600      $ 45,123   

State Street Corp.

    147,714        10,350   

Wells Fargo & Co.

    6,406,571        273,497   
   

 

 

 
      1,352,260   
   

 

 

 

Insurance - 6.30%

  

ACE Ltd.

    431,396        41,172   

Allstate Corp.

    1,250,000        66,325   

American International Group, Inc.

    2,248,600        116,140   

Aon PLC F

    125,646        9,937   

Berkshire Hathaway, Inc., Class B A

    612,575        70,495   

Chubb Corp.

    76,500        7,044   

Hartford Financial Services Group, Inc.

    1,335,750        45,015   

Lincoln National Corp.

    1,018,400        46,246   

MetLife, Inc.

    2,961,741        140,119   

Prudential Financial, Inc.

    164,808        13,414   

Travelers Cos., Inc.

    172,209        14,862   

Unum Group

    1,697,500        53,879   

XL Group PLC F

    1,285,300        39,292   
   

 

 

 
      663,940   
   

 

 

 

Real Estate - 0.48%

  

Hatteras Financial Corp.D

    889,600        16,191   

Two Harbors Investment Corp.D

    3,640,959        33,970   
   

 

 

 
      50,161   
   

 

 

 

Total Financials

  

    2,539,642   
   

 

 

 

HEALTH CARE - 13.81%

  

Health Care Equipment & Supplies - 1.95%

  

Covidien PLC F

    545,280        34,958   

Medtronic, Inc.

    2,324,029        133,400   

St. Jude Medical, Inc.

    147,646        8,473   

Thermo Fisher Scientific, Inc.

    134,120        13,114   

Zimmer Holdings, Inc.

    179,900        15,736   
   

 

 

 
      205,681   
   

 

 

 

Health Care Providers & Services - 3.55%

  

Aetna, Inc.

    267,400        16,766   

Express Scripts Holding Co.A

    136,830        8,555   

Humana, Inc.

    845,200        77,885   

Quest Diagnostics, Inc.

    392,942        23,541   

UnitedHealth Group, Inc.

    997,700        68,103   

WellPoint, Inc.

    2,110,100        178,936   
   

 

 

 
      373,786   
   

 

 

 

Pharmaceuticals - 8.31%

  

Abbott Laboratories

    327,589        11,973   

AbbVie, Inc.

    44,029        2,133   

AstraZeneca PLC, ADR B,F

    906,700        47,928   

GlaxoSmithKline PLC, ADR B,F

    821,300        43,225   

Johnson & Johnson

    2,059,371        190,719   

Merck & Co., Inc.

    3,765,556        169,789   

Novartis AG, ADR B

    793,300        61,520   

Pfizer, Inc.

    7,110,607        218,154   

Roche Holding AG, ADR B

    92,631        6,423   

Sanofi, ADR B

    2,306,400        123,346   

Zoetis, Inc.

    9,850        312   
   

 

 

 
      875,522   
   

 

 

 

Total Health Care

  

    1,454,989   
   

 

 

 

INDUSTRIALS - 10.23%

  

Aerospace & Defense - 3.26%

  

Boeing Co.

    318,900        41,616   

General Dynamics Corp.

    712,600        61,733   

Lockheed Martin Corp.

    546,056        72,811   
    Shares     Fair Value  
          (000’s)  

Northrop Grumman Corp.

    277,287      $ 29,811   

Raytheon Co.

    1,401,600        115,450   

United Technologies Corp.

    198,085        21,047   
   

 

 

 
      342,468   
   

 

 

 

Air Freight & Couriers - 0.68%

  

FedEx Corp.

    414,100        54,247   

United Parcel Service, Inc., Class B

    177,100        17,398   
   

 

 

 
      71,645   
   

 

 

 

Commercial Services & Supplies - 0.01%

  

Dun & Bradstreet Corp.

    9,831        1,070   
   

 

 

 

Electrical Equipment - 0.83%

  

Emerson Electric Co.

    1,308,800        87,650   
   

 

 

 

Industrial Conglomerates - 2.21%

  

3M Co.

    164,383        20,688   

General Electric Co.

    3,248,500        84,916   

Honeywell International, Inc.

    1,335,368        115,816   

Tyco International Ltd.

    298,690        10,917   
   

 

 

 
      232,337   
   

 

 

 

Machinery - 3.18%

  

Caterpillar, Inc.

    552,400        46,048   

Cummins, Inc.

    559,800        71,106   

Danaher Corp.

    191,387        13,797   

Illinois Tool Works, Inc.

    453,550        35,735   

Joy Global, Inc.

    873,300        49,560   

PACCAR, Inc.

    703,600        39,120   

Pentair Ltd.

    66,968        4,493   

Reliance Steel & Aluminum Co.

    495,200        36,293   

Xylem, Inc.

    1,137,421        39,241   
   

 

 

 
      335,393   
   

 

 

 

Road & Rail - 0.06%

  

Canadian National Railway Co.

    61,488        6,759   
   

 

 

 

Total Industrials

  

    1,077,322   
   

 

 

 

INFORMATION TECHNOLOGY - 9.62%

  

Communications Equipment - 1.04%

  

Cisco Systems, Inc.

    822,700        18,511   

Corning, Inc.

    5,337,900        91,224   
   

 

 

 
      109,735   
   

 

 

 

Computers & Peripherals - 3.21%

  

Apple, Inc.

    136,130        71,108   

Hewlett-Packard Co.

    4,211,069        102,624   

International Business Machines Corp.

    336,415        60,289   

Seagate Technology PLC F

    1,353,025        65,865   

Western Digital Corp.

    542,600        37,781   
   

 

 

 
      337,667   
   

 

 

 

Electronic Equipment & Instruments - 0.31%

  

Eaton Corp PLC F

    134,154        9,466   

TE Connectivity Ltd.

    456,700        23,515   
   

 

 

 
      32,981   
   

 

 

 

IT Consulting & Services - 0.31%

  

Accenture PLC, Class A F

    283,978        20,872   

Fidelity National Information Services, Inc.

    59,020        2,877   

Fiserv, Inc.A

    53,430        5,596   

Western Union Co.

    188,754        3,213   
   

 

 

 
      32,558   
   

 

 

 
 

 

See accompanying notes

 

8


American Beacon Large Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

 

    Shares     Fair Value  
          (000’s)  

Semiconductor Equipment & Products - 0.86%

  

Applied Materials, Inc.

    1,919,700      $ 34,267   

Intel Corp.

    1,288,817        31,486   

Texas Instruments, Inc.

    583,800        24,566   
   

 

 

 
      90,319   
   

 

 

 

Software - 3.89%

  

Activision Blizzard, Inc.

    3,880,100        64,565   

Check Point Software Technologies Ltd.A

    578,300        33,553   

Microsoft Corp.

    6,152,000        217,474   

Oracle Corp.

    2,832,784        94,898   
   

 

 

 
      410,490   
   

 

 

 

Total Information Technology

  

    1,013,750   
   

 

 

 

MATERIALS - 0.98%

  

Chemicals - 0.95%

  

Air Products & Chemicals, Inc.

    38,278        4,173   

Dow Chemical Co.

    1,261,500        49,791   

EI du Pont de Nemours & Co.

    492,500        30,141   

PPG Industries, Inc.

    82,908        15,137   

Valspar Corp.

    14,390        1,007   
   

 

 

 
      100,249   
   

 

 

 

Containers & Packaging - 0.03%

  

Crown Holdings, Inc.A

    72,870        3,177   
   

 

 

 

Total Materials

  

    103,426   
   

 

 

 

TELECOMMUNICATION SERVICES - 3.55%

  

Diversified Telecommunication Services - 2.19%

  

AT&T, Inc.

    3,879,012        140,421   

Verizon Communications, Inc.

    1,796,376        90,735   
   

 

 

 
      231,156   
   

 

 

 

Wireless Telecommunication Services - 1.36%

  

China Mobile Ltd., ADR B

    535,100        27,836   

Vodafone Group PLC,
ADR B,F

    3,134,044        115,395   
   

 

 

 
      143,231   
   

 

 

 

Total Telecommunication Services

  

    374,387   
   

 

 

 

UTILITIES - 3.58%

  

CenterPoint Energy, Inc.

    2,704,700        66,536   

Duke Energy Corp.

    52,570        3,771   

Edison International

    391,800        19,210   

Entergy Corp.

    921,000        59,607   

Exelon Corp.

    2,538,500        72,449   

NRG Energy, Inc.

    1,546,300        44,116   

PPL Corp.

    86,176        2,640   

Public Service Enterprise Group, Inc.

    3,260,276        109,218   
   

 

 

 

Total Utilities

  

    377,547   
   

 

 

 

Total Common Stock (Cost $7,665,801)

  

    10,002,645   
   

 

 

 

PREFERRED STOCK - 0.47%

  

FINANCIALS - 0.13%

  

Insurance - 0.05%

   

Allstate Corp., 1.00%,
Due 1/15/2053

    207,930        5,024   
   

 

 

 

Real Estate Investment Trusts - 0.08%

  

Public Storage, Inc.,
5.75%, Due 12/31/2049

    402,584        8,800   
   

 

 

 

Total Financials

  

    13,824   
   

 

 

 
    Shares     Fair Value  
          (000’s)  

MANUFACTURING - 0.34%

  

Aerospace/Defense - 0.01%

  

United Technologies Corp., 7.50%, Due 8/1/2015

    14,770      $ 935   
   

 

 

 

Auto Manufacturing - 0.33%

  

General Motors Co., 4.75%, Due 12/1/2013

    677,125        34,750   
   

 

 

 

Total Manufacturing

  

    35,685   
   

 

 

 

Total Preferred Stock (Cost $46,266)

  

    49,509   
   

 

 

 

SHORT-TERM INVESTMENTS- 4.47%

  

American Beacon U.S. Government Money Market Select Fund, Select Class E

    45,000,000        45,000   

JPMorgan U.S. Government Money Market Fund, Capital Class

    425,863,603        425,864   
   

 

 

 

Total Short-Term Investments (Cost $470,864)

  

    470,864   
   

 

 

 

TOTAL INVESTMENTS - 99.89% (Cost $8,182,931)

   

    10,523,018   

OTHER ASSETS, NET OF LIABILITIES - 0.11%

   

    11,627   
   

 

 

 

TOTAL NET ASSETS - 100.00%

  

  $ 10,534,645   
   

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  ADR - American Depositary Receipt.
C  Limited Partnership.
D  REIT - Real Estate Investment Trust.
E  The Fund is affiliated by having the same investment advisor.
F  PLC - Public Limited Company.
 

 

See accompanying notes

 

9


American Beacon Large Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

Futures Contracts Open on October 31, 2013 (000’s):

 

Description

   Type      Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

S&P 500 Mini E Index Futures

     Long         3,637         December, 2013       $ 318,419      $ 8,852  
           

 

 

    

 

 

 
            $ 318,419      $ 8,852  
           

 

 

    

 

 

 

 

See accompanying notes

 

10


American Beacon Large Cap Value FundSM

Statement of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

Assets:

  

Investments in unaffiliated securities, at fair value A

   $ 10,478,018  

Investments in affiliated securities, at fair value B

     45,000  

Deposit with brokers for futures contracts

     14,919  

Receivable for investments sold

     1,316  

Dividends and interest receivable

     8,180  

Receivable for fund shares sold

     8,532  

Receivable for tax reclaims

     412  

Prepaid expenses

     221  
  

 

 

 

Total assets

     10,556,598  
  

 

 

 

Liabilities:

  

Payable for variation margin from open futures contracts

     1,746  

Payable for fund shares redeemed

     9,302  

Payable under excess expense reimbursement plan (Note 2)

     3  

Management and investment advisory fees payable

     6,918  

Administrative service and service fees payable

     3,235  

Transfer agent fees payable

     87  

Custody and fund accounting fees payable

     181  

Professional fees payable

     62  

Prospectus and shareholder reports fees payable

     192  

Trustee fees payable

     158  

Other liabilities

     69  
  

 

 

 

Total liabilities

     21,953  
  

 

 

 

Net assets

   $ 10,534,645  
  

 

 

 

Analysis of Net Assets:

  

Paid-in-capital

     8,681,713  

Undistributed net investment income

     128,250  

Accumulated net realized loss

     (624,258

Unrealized appreciation of investments

     2,340,088  

Unrealized appreciation of futures contracts

     8,852  
  

 

 

 

Net assets

   $ 10,534,645  
  

 

 

 

Shares outstanding at no par value (unlimited shares authorized):

  

Institutional Class

     196,772,491  
  

 

 

 

Y Class

     11,942,303  
  

 

 

 

Investor Class

     149,317,750  
  

 

 

 

Advisor Class

     4,964,117  
  

 

 

 

Retirement Class

     162,163  
  

 

 

 

A Class

     457,362  
  

 

 

 

C Class

     201,420  
  

 

 

 

AMR Class

     26,695,282  
  

 

 

 

Net assets (not in thousands):

  

Institutional Class

   $ 5,428,755,279  
  

 

 

 

Y Class

   $ 327,938,666  
  

 

 

 

Investor Class

   $ 3,899,010,929  
  

 

 

 

Advisor Class

   $ 128,528,036  
  

 

 

 

Retirement Class

   $ 4,132,109  
  

 

 

 

A Class

   $ 11,904,903  
  

 

 

 

C Class

   $ 5,199,605  
  

 

 

 

AMR Class

   $ 729,175,488  
  

 

 

 

 

See accompanying notes

 

11


American Beacon Large Cap Value FundSM

Statement of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

Net asset value, offering and redemption price per share:

  

Institutional Class

   $ 27.59   
  

 

 

 

Y Class

   $ 27.46   
  

 

 

 

Investor Class

   $ 26.11   
  

 

 

 

Advisor Class

   $ 25.89   
  

 

 

 

Retirement Class

   $ 25.48   
  

 

 

 

A Class (offering price $27.62)

   $ 26.03   
  

 

 

 

C Class

   $ 25.81   
  

 

 

 

AMR Class

   $ 27.31   
  

 

 

 

 

A        Cost of investments in unaffiliated securities

   $ 8,137,931  

B        Cost of investments in affiliated securities

   $ 45,000  

 

See accompanying notes

 

12


American Beacon Large Cap Value Fund

Statement of Operations

For the year ended October 31, 2013 (in thousands)

 

 

Investment Income:

  

Dividend income from unaffiliated securities (net of foreign taxes) A

   $ 241,379  

Dividend income from affiliated securities

     17  

Interest income

     8  

Other income

     2  
  

 

 

 

Total investment income

     241,406  
  

 

 

 

Expenses:

  

Management and investment advisory fees (Note 2)

     21,886  

Administrative service fees (Note 2):

  

Institutional Class

     14,003  

Y Class

     671  

Investor Class

     10,989  

Advisor Class

     346  

Retirement Class

     11  

A Class

     35  

C Class

     14  

AMR Class

     327  

Transfer agent fees:

  

Institutional Class

     696  

Y Class

     1  

Investor Class

     193  

Advisor Class

     7  

Retirement Class

     1  

A Class

     2  

C Class

     1  

AMR Class

     23  

Custody and fund accounting fees

     998  

Professional fees

     324  

Registration fees and expenses

     202  

Service fees (Note 2):

  

Y Class

     224  

Investor Class

     13,189  

Advisor Class

     289  

Retirement Class

     9  

A Class

     13  

C Class

     5  

Distribution fees (Note 2):

  

Advisor Class

     289  

Retirement Class

     18  

A Class

     22  

C Class

     36  

Prospectus and shareholder report expenses

     251  

Insurance fees

     58  

Trustee fees

     629  

Other expenses

     290  
  

 

 

 

Total expenses

     66,052  
  

 

 

 

Net fees recouped by Manager (Note 2)

     3  
  

 

 

 

Net expenses

     66,055  
  

 

 

 

Net investment income

     175,351  
  

 

 

 

Realized and unrealized gain (loss) on investments:

  

Net realized gain (loss) from:

  

Investments

     568,419  

Commission recapture (Note 3)

     225  

Futures contracts

     44,888  

Change in net unrealized appreciation or (depreciation) from:

  

Investments

     1,646,696  

Futures contracts

     14,133  
  

 

 

 

Net gain on investments

     2,274,361  
  

 

 

 

Net increase in net assets resulting from operations

   $ 2,449,712  
  

 

 

 

A        Foreign taxes

   $ 1,866  

 

See accompanying notes

 

13


American Beacon Large Cap Value Fund

Statement of Changes in Net Assets (in thousands)

 

 

     Year Ended
October 31,
2013
    Year Ended
October 31,
2012
 

Increase (Decrease) in Net Assets:

    

Operations:

    

Net investment income

   $ 175,351     $ 170,988  

Net realized gain from investments and futures contracts

     613,532       219,441  

Change in net unrealized appreciation from investments and futures contracts

     1,660,829       830,976  
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     2,449,712       1,221,405  
  

 

 

   

 

 

 

Distributions to Shareholders:

    

Net investment income:

    

Institutional Class

     (88,612     (82,469

Y Class

     (2,997     (3,555

Investor Class

     (64,236     (77,449

Advisor Class

     (1,759     (2,549

Retirement Class

     (57     (18

A Class

     (126     (88

C Class

     (35     (23

AMR Class

     (14,045     (14,457
  

 

 

   

 

 

 

Net distributions to shareholders

     (171,867     (180,608
  

 

 

   

 

 

 

Net (decrease) in net assets from capital share transactions

     (98,431     (667,940
  

 

 

   

 

 

 

Net increase in net assets

     2,179,414       372,857  
  

 

 

   

 

 

 

Net Assets:

    

Beginning of period

     8,355,231       7,982,374  
  

 

 

   

 

 

 

End of Period *

   $ 10,534,645     $ 8,355,231  
  

 

 

   

 

 

 

*  Includes undistributed net investment income of

   $ 128,250     $ 125,361  
  

 

 

   

 

 

 

 

See accompanying notes

 

14


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Large Cap Value Fund (the “Fund”), a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.

Class Disclosure

The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:

 

Class:

  

Offered to:

Institutional Class    Investors making an initial investment of $250,000
Y Class    Investors making an initial investment of $100,000
Investor Class    General public and investors investing through an intermediary
Advisor Class    Investors investing through an intermediary
Retirement Class    Investors investing through an intermediary
A Class    General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)
C Class    General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC
AMR Class    Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Fund believes the adoption of these ASUs will not have a material impact on its financial statement disclosures.

 

15


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. Investment assets of the Fund are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to unaffiliated investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):

 

Management Fee Rate     Management Fee     Amounts paid to
Investment Advisors
    Net Amounts Retained
by Manager
 
  0.23   $ 21,886      $ 17,215      $ 4,671   

Administrative Services Agreement

The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor, and Retirement Classes of the Fund, 0.40% of the average daily net assets of the A and C Classes of the Fund, and 0.05% of the average daily net assets of the AMR Class of the Fund.

Distribution Plans

The Fund, except for the Advisor, Retirement, A, and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.

Investment in Affiliated Funds

The Fund may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) and the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”), (collectively the “Select Funds”). The Select Funds and the Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of its average daily net assets of the Select Funds. During the year ended October 31, 2013, the Manager earned fees from the Select Funds totaling $46,532 on the Fund’s direct investment in the Select Funds.

 

16


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

Interfund Lending Program

Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended October 31, 2013, the Fund participated as a lender by loaning, on average, $7,157,824 for 4 days at an average rate of 0.76% with interest charges of $578. This amount is included as interest income on the Statement of Operations.

Expense Reimbursement Plan

The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. During the year ended October 31, 2013, the Manager recouped $2,821 of excess carryover expenses expiring in 2014 from the C Class. The carryover of excess expenses potentially reimbursable are $1,444 and $91, expiring in 2014 and 2015, respectively.

Sales Commissions

The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside collected $10,699 from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $688 in CDSC fees were collected for the Fund.

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”), for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.

 

17


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.

Valuation Inputs

Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1 -    Quoted prices in active markets for identical securities.
Level 2 -    Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Level 3 -    Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.

The Fund’s investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):

 

     Level 1      Level 2      Level 3      Total  

Common Stock*

   $ 10,002,645       $ —         $ —         $ 10,002,645   

Preferred Stock*

     49,509         —           —           49,509   

Short-Term Investments - Money Markets

     470,864         —           —           470,864   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 10,523,018       $ —         $ —         $ 10,523,018   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

           

Futures Contracts

   $ 8,852       $ —         $ —         $ 8,852   

 

* Refer to the Schedule of Investments for industry information.

 

18


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Commission Recapture

The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If the Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations.

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Other

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

 

19


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

4. Securities and Other Investments

Real Estate Investment Trusts

The Fund may own shares of real estate investment trusts (“REITS”) which report information on the source of their distributions annually. The Fund re-characterizes distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year. These re-characterizations are not recorded for financial statement purposes, but as an adjustment to the calculation of taxable income.

Other Investment Company Securities and Other Exchange Traded Products

The Fund may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Fund may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Financial Derivative Instruments

Futures Contracts

Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.

Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

For the six months ended October 31, 2013, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.

 

20


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.

 

     Average Futures Contracts Outstanding  

For the Quarter Ended

   April 30, 2013      October 31, 2013  

Large Cap Value Fund

     185         191   

The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure (in thousands) (1) (2):

Fair Values of derivative financial instruments as of October 31, 2013:

 

Statement of Assets and Liabilities

   Derivatives      Fair Value  

Unrealized appreciation of futures contracts

     Equity Contracts       $ 8,852   

The effect of derivative financial instruments during the year ended October 31, 2013:

 

Statement of Operations

   Derivatives      Total  

Net realized gain (loss) from futures contracts

     Equity Contracts       $ 44,888   

Change in net unrealized appreciation or (depreciation) from futures contracts

     Equity Contracts         14,133   

 

(1)  See Note 3 in the Notes to Financial Statements for additional information.
(2)  The volume of derivative activity described above is reflective of the derivative activity through the current period of operations.

6. Principal Risks

In the normal course of business the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

Market Risks

The Fund’s investments in financial derivatives and other financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency and equity risks.

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.

If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case

 

21


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.

The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.

7. Federal Income and Excise Taxes

It is the policy of the Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.

The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.

The tax character of distributions paid were as follows (in thousands):

 

     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
 

Distributions paid from:

     

Ordinary income*

     

Institutional Class

   $ 88,612       $ 82,469   

Y Class

     2,997         3,555   

Investor Class

     64,236         77,449   

Advisor Class

     1,759         2,549   

Retirement Class

     57         18   

A Class

     126         88   

C Class

     35         23   

AMR Class

     14,045         14,457   
  

 

 

    

 

 

 

Total distributions paid

   $ 171,867       $ 180,608   
  

 

 

    

 

 

 

 

* For tax purposes, short-term capital gains are considered ordinary income distributions.

 

22


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):

 

Cost basis of investments for federal income tax purposes

   $  8,368,666   

Unrealized appreciation

     2,458,818   

Unrealized depreciation

     (304,466
  

 

 

 

Net unrealized appreciation or (depreciation)

     2,154,352   

Undistributed ordinary income

     124,792   

Accumulated long-term gain or (loss)

     (435,082

Other temporary differences

     8,870   
  

 

 

 

Distributable earnings or (deficits)

   $ 1,852,932   
  

 

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains or losses on certain derivative instruments and reclassifications of income from real estate investment securities.

Due to inherent differences in the recognition of income, expenses and realized gains or losses under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences derived from Section 732 basis adjustments that have been reclassified as of October 31, 2013 (in thousands):

 

Paid-in-capital

   $ 8   

Undistributed net investment income (loss)

     (595

Accumulated net realized gain (loss)

     587   

Unrealized appreciation or (depreciation) of investments and futures contracts

     —     

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.

At October 31, 2013 the capital loss carry forward positions that may be applied against realized net taxable gains in each succeeding year or until the expiration date, whichever occurs first, prior to the RIC MOD provisions are $383,787 and $42,443 expiring in 2017 and 2018 respectively. The Fund utilized $527,690 of net capital loss carryovers for the year ended October 31, 2013 (in thousands).

 

23


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

8. Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2013, were $3,020,985 and $3,038,986, respectively (in thousands).

A summary of the Fund’s direct transactions in the USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):

 

Affiliate

   October 31, 2012
Shares/Fair Value
     Purchases      Sales      October 31, 2013
Shares/Fair Value
     Dividend
Income
 

USG Select Fund

   $ 35,000       $ 15,000       $ 5,000       $ 45,000       $ 17   

9. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):

For the Year Ended October 31, 2013

 

     Institutional Class     Y Class     Investor Class     Advisor Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     40,124     $ 983,383       9,020     $ 216,172       29,777     $ 691,666       1,229     $ 28,327  

Reinvestment of dividends

     3,850       84,356       131       2,860       2,959       61,550       83       1,708  

Shares redeemed

     (28,594     (694,960     (1,332     (33,146     (61,332     (1,380,588     (1,466     (33,539
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     15,380     $ 372,779       7,819     $ 185,886       (28,596   $ (627,372     (154   $ (3,504
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Retirement Class     A Class     C Class     AMR Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     97     $ 2,175       225     $ 5,373       104     $ 2,465       5,766     $ 143,403  

Reinvestment of dividends

     3       57       5       115       1       31       649       14,045  

Shares redeemed

     (49     (1,169     (78     (1,876     (25     (602     (7,928     (190,237
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     51     $ 1,063       152     $ 3,612       80     $ 1,894       (1,513   $ (32,789
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Totals  
     Shares     Amount  

Shares sold

     86,342     $ 2,072,964  

Reinvestment of dividends

     7,681       164,722  

Shares redeemed

     (100,804     (2,336,117
  

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (6,781   $ (98,431
  

 

 

   

 

 

 

For the Year Ended October 31, 2012

 

     Institutional Class     Y Class     Investor Class     Advisor Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     38,505     $ 784,522       2,764     $ 57,155       26,251     $ 506,078       1,041     $ 19,728  

Reinvestment of dividends

     4,077       75,537       192       3,547       4,246       74,766       143       2,499  

Shares redeemed

     (39,268     (795,028     (5,966     (126,980     (61,686     (1,177,109     (3,341     (65,045
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     3,314     $ 65,031       (3,010   $ (66,278     (31,189   $ (596,265     (2,157   $ (42,818
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

24


American Beacon Large Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

     Retirement Class     A Class     C Class     AMR Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     104     $ 1,982       171     $ 3,306       63     $ 1,219       11,216     $ 224,730  

Reinvestment of dividends

     1       18       4       79       1       20       789       14,457  

Shares redeemed

     (51     (943     (89     (1,684     (16     (317     (14,041     (270,477
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     54     $ 1,057       86     $ 1,701       48     $ 922       (2,036   $ (31,290
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Totals  
     Shares     Amount  

Shares sold

     80,115     $ 1,598,720  

Reinvestment of dividends

     9,453       170,923  

Shares redeemed

     (124,458     (2,437,583
  

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (34,890   $ (667,940
  

 

 

   

 

 

 

 

25


American Beacon Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
     Year Ended October 31,  
   2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 21.58      $ 18.99      $ 18.56      $ 16.32      $ 15.01   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.50        0.45        0.39        0.32        0.35   

Net gains (losses) from investments (both realized and unrealized)

     6.00        2.60        0.30        2.22        1.40   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     6.50        3.05        0.69        2.54        1.75   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.49     (0.46     (0.26     (0.30     (0.44

Distributions from net realized gains on securities

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.49     (0.46     (0.26     (0.30     (0.44
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 27.59      $ 21.58      $ 18.99      $ 18.56      $ 16.32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     30.70     16.48     3.69     15.68     12.41
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 5,428,755     $ 3,914,173     $ 3,380,918     $ 3,366,011     $ 2,221,162  

Ratios to average net assets (annualized):

          

Expenses, before reimbursements

     0.58     0.59     0.58     0.59     0.61

Expenses, net of reimbursements

     0.58     0.59     0.58     0.59     0.61

Net investment income (loss), before reimbursements

     1.99     2.23     1.96     1.73     2.36

Net investment income, net of reimbursements

     1.99     2.23     1.96     1.73     2.36

Portfolio turnover rate

     34     30     90     28     27

 

A On December 1, 2010, MFS Institutional Advisors, Inc. assumed management of the Large Cap Value Fund’s assets previously managed by Metropolitan West Capital Management, LLC.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Not annualized.
D Annualized.
E Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009.

 

26


American Beacon Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class  
Year Ended October 31,    

August 3

to

Oct. 31,

    Year Ended October 31,  
2013     2012     2011A     2010     2009     2013     2012     2011A     2010     2009  
$ 21.47      $ 18.92      $ 18.49      $ 16.32      $ 15.59      $ 20.43      $ 17.99      $ 17.61      $ 15.51      $ 14.29   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                           
  0.40        0.53        0.37        0.29        0.06        0.39        0.36        0.30        0.23        0.28   
  6.05        2.50        0.30        2.22        0.67        5.69        2.47        0.29        2.12        1.34   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  6.45        3.03        0.67        2.51        0.73        6.08        2.83        0.59        2.35        1.62   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                           
  (0.46     (0.48     (0.24     (0.34     —         (0.40     (0.39     (0.21     (0.25     (0.40
  —         —         —         —         —         —         —         —         —         —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.46     (0.48     (0.24     (0.34     —         (0.40     (0.39     (0.21     (0.25     (0.40

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 27.46      $ 21.47      $ 18.92      $ 18.49      $ 16.32      $ 26.11      $ 20.43      $ 17.99      $ 17.61      $ 15.51   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  30.59     16.43     3.58     15.50     4.68 %C      30.26     16.05     3.30     15.27     11.99

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                           
$ 327,939     $ 88,509     $ 134,968     $ 2,123     $ 1     $ 3,899,011     $ 3,635,333     $ 3,761,691     $ 4,140,584     $ 3,798,632  
                           
  0.66     0.69     0.69     0.70     0.68 %D      0.93     0.96     0.95     0.96     0.93
  0.66     0.69     0.69     0.70     0.68 %D      0.93     0.96     0.95     0.96     0.93
  1.78     2.12     1.88     1.51     1.58 %D      1.67     1.89     1.59     1.36  

 

 

 

2.05

 

  1.78     2.12     1.88     1.51     1.58 %D      1.67     1.89     1.59     1.36     2.05
  34     30     90     28     27 %E      34     30     90     28     27

 

27


American Beacon Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Advisor Class  
     Year Ended October 31,  
   2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 20.25      $ 17.83      $ 17.47      $ 15.39      $ 14.19   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     0.35        0.31        0.27        0.21        0.26   

Net gains (losses) from investments (both realized and unrealized)

     5.65        2.48        0.28        2.10        1.32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     6.00        2.79        0.55        2.31        1.58   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.36     (0.37     (0.19     (0.23     (0.38

Distributions from net realized gains on securities

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.36     (0.37     (0.19     (0.23     (0.38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 25.89      $ 20.25      $ 17.83      $ 17.47      $ 15.39   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     30.05     15.96     3.11     15.14     11.81
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 128,528     $ 103,629     $ 129,739     $ 128,080     $ 114,945  

Ratios to average net assets (annualized):

          

Expenses, before recoupments

     1.07     1.08     1.08     1.10     1.12

Expenses, net of recoupments

     1.07     1.08     1.08     1.10     1.10

Net investment income (loss), before recoupements

     1.52     1.78     1.46     1.23     1.84

Net investment income, net of recoupments

     1.52     1.78     1.46     1.23     1.86

Portfolio turnover rate

     34     30     90     28     27

 

A On December 1, 2010, MFS Institutional Advisors, Inc. assumed management of the Large Cap Value Fund’s assets previously managed by Metropolitan West Capital Management, LLC.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Not annualized.
D Annualized.
E Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009.
F Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

28


American Beacon Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Retirement Class     A Class     C Class  
Year Ended October 31,    

May 1

to

Oct. 31,

    Year Ended October 31,    

May 17

to

Oct. 31,

    Year Ended October 31,    

Sept. 1

to

Oct. 31,

 
2013     2012     2011A     2010     2009     2013     2012     2011A     2010     2013     2012     2011A     2010  
$ 20.07      $ 17.74      $ 17.32      $ 15.36      $ 12.66      $ 20.41      $ 18.01      $ 17.61      $ 16.93      $ 20.29      $ 17.95      $ 17.58      $ 16.17   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                 
  0.35        0.28        0.20        0.18        0.08        0.38        0.36        0.24        0.03        0.23        0.22        0.10        (0.01
  5.50        2.42        0.30        2.07        2.62        5.65        2.44        0.31        0.65        5.58        2.42        0.32        1.42   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  5.85        2.70        0.50        2.25        2.70        6.03        2.80        0.55        0.68        5.81        2.64        0.42        1.41   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                 
  (0.44     (0.37     (0.08     (0.29     —         (0.41     (0.40     (0.15     —         (0.29     (0.30     (0.05     —    
  —         —         —         —         —         —         —         —         —         —         —         —         —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.44     (0.37     (0.08     (0.29     —         (0.41     (0.40     (0.15     —         (0.29     (0.30     (0.05     —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 25.48      $ 20.07      $ 17.74      $ 17.32      $ 15.36      $ 26.03      $ 20.41      $ 18.01      $ 17.61      $ 25.81      $ 20.29      $ 17.95      $ 17.58   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  29.68     15.57     2.86     14.78     21.33 %C      30.03     15.91     3.12     4.02 %C      29.00     14.97     2.36     8.72 %C 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                 
$ 4,132     $ 2,230     $ 1,019     $ 2     $ 1     $ 11,905     $ 6,222     $ 3,942     $ 814     $ 5,200     $ 2,468     $ 1,329     $ 38  
                                 
  1.33     1.42     1.39     1.37     1.37 %D      1.08     1.12     1.16     1.06 %D      1.84     1.88     2.54     2.14 %D 
  1.33     1.42     1.39     1.37     1.37 %D      1.08     1.12     1.16     1.06 %D      1.92     1.87     1.84     1.87 %D 
  1.18     1.19     1.06     0.95     1.15 %D      1.44     1.66     1.37     1.09 %D      0.68     0.89     (0.01 )%      (0.76 )%D 
  1.18     1.19     1.06     0.95     1.15 %D      1.44     1.66     1.37     1.09 %D      0.60     0.89     0.68     (0.50 )%D 
  34     30     90     28     27 %E      34     30     90     28 %F      34     30     90     28 %F 

 

29


American Beacon Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     AMR Class  
     Year Ended October 31,  
   2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 21.36      $ 18.81      $ 18.37      $ 16.14      $ 14.88   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.57        0.52        0.41        0.34        0.37   

Net gains (losses) from investments (both realized and unrealized)

     5.92        2.54        0.32        2.22        1.38   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     6.49        3.06        0.73        2.56        1.75   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.54     (0.51     (0.29     (0.33     (0.49

Distributions from net realized gains on securities

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.54     (0.51     (0.29     (0.33     (0.49
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 27.31      $ 21.36      $ 18.81      $ 18.37      $ 16.14   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     31.05     16.75     3.94     16.04     12.59
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 729,175     $ 602,667     $ 568,768     $ 558,089     $ 520,799  

Ratios to average net assets (annualized):

          

Expenses, before reimbursements

     0.32     0.33     0.33     0.34     0.36

Expenses, net of reimbursements

     0.32     0.33     0.33     0.34     0.36

Net investment income (loss), before reimbursements

     2.26     2.51     2.21     1.98     2.62

Net investment income, net of reimbursements

     2.26     2.51     2.21     1.98     2.62

Portfolio turnover rate

     34     30     90     28     27

 

A On December 1, 2010, MFS Institutional Advisors, Inc. assumed management of the Large Cap Value Fund’s assets previously managed by Metropolitan West Capital Management, LLC.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

 

30


American Beacon Funds

Privacy Policy & Federal Tax Information

October 31, 2013 (Unaudited)

 

Privacy Policy

The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.

We may collect nonpublic personal information about you from one or more of the following sources:

 

    information we receive from you on applications or other forms;

 

    information about your transactions with us or our service providers; and

 

    information we receive from third parties.

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.

Federal Tax Information

Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2013.

The Fund designated the following items with regard to distributions paid during the fiscal year ended October 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

 

Corporate Dividends Received Deduction

     77.06

Qualified Dividend Income

     100.00

Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.

 

31


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.

 

    a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

 

    a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC;

 

    a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

 

    a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group;

 

    any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors;

 

    an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers;

 

    a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts;

 

    a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm;

 

    an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any;

 

    confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

 

    a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities;

 

    a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

 

    a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks;

 

    a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations;

 

    a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds;

 

    a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers;

 

    a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

 

    a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

 

    a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf;

 

    a description of trade allocation procedures among accounts managed by the firm;

 

    a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions;

 

    a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds;

 

32


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

    a certification by the firm regarding the reasonable design of its compliance program;

 

    a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review;

 

    confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds;

 

    a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt;

 

    information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

 

    a description of the firm’s affiliation with any broker-dealer;

 

    a discussion of any anticipated change in the firm’s controlling persons; and

 

    verification of the firm’s insurance coverage with regards to the services provided to the Funds.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

 

    a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average;

 

    a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

 

    a comparison of advisory fee rates and expense ratios for comparable mutual funds;

 

    a profit/loss analysis of the Manager;

 

    an analysis of any material complaints received from Fund shareholders;

 

    a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds;

 

    a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds;

 

    a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

 

    a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds;

 

    a description of the Manager’s securities lending practices and the fees received from such practices;

 

    a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

 

    a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund;

 

    a description of how expenses that are not readily identifiable to a particular Fund are allocated; and

 

    confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt.

In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.

The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.

 

33


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement

In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.

In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.

With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.

Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

 

34


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.

In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.

Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.

In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to Each Fund

The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.

The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.

Additional Considerations and Conclusions with Respect to the American Beacon Large Cap Value Fund

In considering the renewal of the Management Agreement for the American Beacon Large Cap Value Fund, the Trustees considered the following additional factors: (1) the American Beacon Large Cap Value Fund outperformed the Lipper performance universe median for the one-, three-, five-, and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one-, three- and five-year periods ended March 31, 2013; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and higher than the median of its Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.

In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, Mewhinney & Strauss, LLC (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”), Hotchkis and Wiley Capital Management, LLC (“Hotchkis”), and Massachusetts Financial Services Company (“MFS”), the Trustees considered the following additional factors: (1) Barrow outperformed the Lipper performance universe median for the three-, five- and ten-year periods ended March 31, 2013, but underperformed for the one-year period; (2) Brandywine outperformed the Lipper performance universe median for the one-, three- and ten-year periods ended March 31, 2013, but underperformed for the five-year period; (3) Hotchkis outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (4) MFS outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (5) the Manager’s explanation that Brandywine’s underperformance for some of the periods considered was due in part to underperformance in 2008, Brandywine’s defensive position in 2009, and a focus on high quality securities and large capitalization companies in 2011, when these types of investments generally underperformed; (6) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (7) the Manager’s recommendation to continue to retain each subadvisor.

 

35


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Large Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Large Cap Value Fund.

 

36


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES      
   Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
Gerard J. Arpey** (55)    Trustee since 2012    Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).
Alan D. Feld*** (76)    Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).

NON-INTERESTED

TRUSTEES

   Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
W. Humphrey Bogart (69)    Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Brenda A. Cline (52)    Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Eugene J. Duffy (59)    Trustee since 2008    Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Thomas M. Dunning (71)    Trustee since 2008    Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Richard A. Massman (70)   

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).

 

37


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Barbara J. McKenna, CFA (50)    Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).
R. Gerald Turner (67)    Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012)
Paul J. Zucconi, CPA (73)    Trustee since 2008    Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-Present); Director, Titanium Metals Corporation (producer of titanium melted and mill products) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
OFFICERS      
   Term   
   One Year   
Gene L. Needles, Jr. (58)   

President since 2009

Executive Vice President

since 2009

   President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors.
Rosemary K. Behan (54)   

VP, Secretary and

Chief Legal

Officer since 2006

   Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008 - present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present).
Brian E. Brett (53)    VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).
Wyatt L. Crumpler (47)    VP since 2007    Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc.
Erica Duncan (43)    VP Since 2011    Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM.
Michael W. Fields (59)    VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).
Melinda G. Heika (52)   

Treasurer since

2010

   Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 – Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present).
Terri L. McKinney (49)    VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.
Jeffrey K. Ringdahl (38)    VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007).

 

38


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Samuel J. Silver (50)    VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.
Christina E. Sears (42)   

Chief Compliance

Officer since 2004

and Asst. Secretary since 1999

   Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc.
John J. Okray (39)    Asst. Secretary since 2010    Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010).
Sonia L. Bates (56)    Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc.

 

* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the board may determine to grant one or more annual exemptions to this requirement.
** Mr. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager.
*** Mr. Feld is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to the Manager and one or more of the Trust’s sub-advisors.

 

39


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40


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41


 

LOGO

 

 

Delivery of Documents

eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

 

LOGO    LOGO

By E-mail:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

      
  
LOGO    LOGO

By Telephone:

Institutional, Y, Investor, Advisor, Retirement Classes

Call (800) 658-5811

AMR ClassSM

Call (800) 345-2345

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

      
  

Availability of Quarterly Portfolio Schedules

 

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, DC 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 202-551-8090. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month.

  

Availability of Proxy Voting Policy and Records

 

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and

Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING

FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.

 

American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon Large Cap Value Fund is a service mark of American Beacon Advisors, Inc.

AR 10/13


LOGO


About American Beacon Advisors

 

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

Contents

 

 

President’s Message

     1   

Market and Performance Overview

     2-4   

Schedule of Investments

     7   

Financial Statements

     14   

Notes to the Financial Statements

     18   

Financial Highlights

     30   

Additional Information

     Back Cover   
 

 

The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

 

American Beacon Funds    October 31, 2013


LOGO   

Dear Shareholders,

 

The past year has been a very strong period for small-cap stocks. Even though the larger-cap issues in the S&P 500 Index returned 27.18% in the 12 months under review, the Russell 2000 Index, which represents small-cap companies, beat that figure with room to spare, increasing by an impressive 36.28%.

 

Since much investing research suggests that, over the long term, small-cap stocks tend to outperform larger-cap stocks, it might be assumed that the past 12 months are the natural order of things. But recent history shows this isn’t the case. In fact, as recently as 2011, while the S&P 500 Index was nudging upward at 2.11%, the Russell 2000 Index was actually losing ground, declining in value by 4.18%.

That illustrates the fact that smaller stocks tend to be more volatile than larger ones. That’s just one reason that we at American Beacon Advisors believe in actively managed funds, where the judgment of seasoned investment professionals can be put to work for your portfolio. That sort of judgment can be even more critical in the realm of small-cap stocks.

 

    For the 12 months ended October 31, 2013, the American Beacon Small Cap Value Fund (Investor Class) returned 38.11%.

The Fund boasts six highly regarded sub-advisors, chosen to complement each other’s strategies. That manager diversification is also another factor helping mitigate the inherent volatility of the small-cap arena.

Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.

Best Regards,

 

LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

1


Domestic Equity Market Overview

October 31, 2013 (Unaudited)

 

 

U.S. stocks posted strong results for the year ended October 31, 2013, with the S&P 500 Index rising 27.18% over those 12 months. An improving economy, low interest rates and recovering investor sentiment helped drive the market higher, as well as the Federal Reserve’s continued quantitative easing program. Equity markets shrugged off incessant political stalemates and climbed even when the government shut down for 16 days in October. Meanwhile, robust corporate earnings growth has kept valuations in check despite the appreciation in stock prices. At current prices, the S&P 500 Index’s price-to-earnings ratio based on consensus earnings is in line with its 15-year median, yet the 10-year Treasury yield is 2.6%, well below its 15-year median.

The 12-month period began with a rough patch. During the first two weeks of November 2012, the S&P 500 Index slipped by more than 5%, as the markets reacted nervously to negotiations over the fiscal cliff. But the index quickly rebounded and gained more than 8% between that point and the end of the year, setting the stage for its gains throughout 2013.

The early part of 2013 proved to be very strong. At the end of the first quarter, the S&P 500 Index finally surpassed its pre-crash high, closing at its highest mark since October 2007. The index gained 14.1% between the first of the year and May 21. On that day, though, Federal Reserve chairman Ben Bernanke indicated that the Fed’s asset-purchasing program would be coming to an end at some point. This first mention of the so-called taper sent shock waves through the market. The S&P 500 Index dropped more than 5% in the space of a month.

Subsequently, June broke a seven-month winning streak for both the S&P 500 and the Nasdaq indexes, but the market quickly found its footing and began to rally at that point. Even with the taper-induced drop-off, by the end of June, the S&P 500 Index had posted its best first half of any year since 1998.

This performance was bolstered by a U.S. economy that appears to have formed a sound foundation with no obvious signs of a contraction in the near term. For perspective, each recession in the past 50 years has been preceded by three conditions: 1) an inverted yield curve, 2) a tight labor market and 3) a positive output gap (actual gross domestic product [GDP] expressed as a percentage of potential GDP). None of these conditions are evident today. In fact, the yield curve is steep, there is considerable slack in the labor market, and the output gap is decidedly negative.

Coming off a disappointing fourth quarter of 2012, in which GDP grew at just 0.4%, GDP bounced back to 1.1% growth in the first quarter of 2013, 2.5% in the second quarter and 2.8% in the third quarter. Unemployment continued to drop in a slow but mostly steady fashion, from 7.8% in November 2012 to 7.3% in October 2013. Although this was good news for the larger economy, the falling unemployment rate made some investors nervous, because Chairman Bernanke has indicated that the economy would be healthy enough for him to end quantitative easing once the unemployment rate reached 7.0%.

For the 12 months that ended October 31, 2013, in addition to the robust performance of the S&P 500 Index, the rally was strong in all areas of market capitalization. The Russell Midcap® Index was up 33.79% and the Russell 2000® Index (which represents small-cap stocks) was up 36.28%.

 

 

2


American Beacon Small Cap Value FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Small Cap Value Fund (the “Fund”) returned 38.11% for the twelve months ended October 31, 2013, outperforming the Russell 2000® Value Index (the “Index”) return of 32.83% and the Lipper Small-Cap Value Funds Index return of 33.56% for the same period.

Comparison of Change in Value of a $10,000 Investment

For the Period from 10/31/03 through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/2013

 

     1 Year     5 Years     10 Years     Value of
$10,000
10/31/03-
10/31/13
 

Institutional Class (1,8)

     38.59     19.19     10.05   $ 26,060   

Y Class (1,2,8)

     38.45     19.04     9.98     25,894   

Investor Class (1,8)

     38.11     18.77     9.72     25,285   

Advisor Class (1,3,8)

     37.86     18.60     9.50     24,773   

Retirement Class (1,4,8)

     37.47     18.31     9.36     24,468   

A Class with sales
charge (1,5,8)

     29.91     17.21     9.00     23,680   

A Class without sales
Charge (1,5,8)

     37.83     18.62     9.65     25,120   

C Class with sales
charge (1,6,8)

     35.88     18.03     9.38     24,510   

C Class without sales
charge (1,6,8)

     36.88     18.03     9.38     24,510   

AMR Class (1,8)

     38.90     19.49     10.33     26,727   

Lipper Small-Cap Value Funds Index (7)

     33.56     17.17     9.47     24,722   

Russell 2000 Value Index (7)

     32.83     14.84     8.78     23,207   

 

1. Please note the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 8/3/09, the inception date of the Y Class. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
3. A portion of the fees charged to the Advisor Class of the Fund was waived through 2004. Performance prior to waiving fees was lower than the actual returns shown for periods through 2004.
4. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Advisor Class from 10/31/03 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/03.
5. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 5.75%.
6. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
7. Russell 2000 Value Index is a registered trademark of Frank Russell Company. The Russell 2000 Value Index is an unmanaged index of those stocks in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 2000 Value Index and Russell 2000 Index are registered trademarks of the Frank Russell Company. The Lipper Small-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
8. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.92%, 1.01%, 1.28%, 1.42%, 1.73%, 1.54%, 2.31%, and 0.66%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
 

 

3


American Beacon Small Cap Value FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Fund outperformed the Index mostly through stock selection, although sector allocation also added significant value relative to the Index.

Most of the Fund’s excess performance was attributed to holdings in the Financials sector which contributed approximately 215 basis points (2.15%) to relative performance. In the Financials sector, E*Trade Financial (up 102.8%) and Avis Budget Group (up 87.5%) were the largest contributors. Not owning Armour Residential REIT, which was down 32.9% in the Index, also positively impacted performance. Holdings in the Consumer Discretionary, Health Care and Materials sectors, also added relative value. In the Consumer Discretionary sector, Brunswick (up 91.6%) and Quiksilver (up 170.7%) were the largest contributors. Health Management Associates (up 101.5%), HealthSouth (up 61.2%) and Covance (up 83.2%) added the most value to performance in the Health Care sector. In the Materials sector, US Silicia Holdings (up 196.0%) and PolyOne (up 60.3%) contributed most to the Fund’s returns. Not owning Hecla Mining, which was down 52.2% in the Index, also added relative value. Poor stock selection in the Information Technology sector detracted value relative to the Index. Ebix (down 38.7%) was the largest detractor in the Information Technology sector. Not owning MEMC Electronic Materials, also hurt performance.

An overweight in Industrials, one of the better performing sectors in the Index, added relative value through sector allocation. Underweight positions in the Utilities and Financials sectors also contributed to the Fund’s returns.

The sub-advisors continue to focus on uncovering investment opportunities through stock selection that should benefit the Fund’s performance over the longer term.

Top Ten Holdings (% Net Assets)

 

Oshkosh Corp.

        0.9   

LifePoint Hospitals, Inc.

        0.8   

First Horizon National Corp.

        0.8   

HealthSouth Corp.

        0.7   

Endurance Specialty Holdings Ltd.

        0.7   

Brunswick Corp.

        0.7   

Aspen Insurance Holdings Ltd.

        0.6   

E*Trade Financial Corp.

        0.6   

Rent-A-Center, Inc.

        0.6   

Con-way, Inc.

        0.6   

Total Fund Holdings

     511      

Sector Allocation (% Equities)

 

Financials

     28.9   

Industrials

     21.1   

Consumer Discretionary

     13.7   

Information Technology

     12.8   

Materials

     6.6   

Health Care

     6.6   

Energy

     6.2   

Utilities

     2.9   

Consumer Staples

     0.7   

Telecommunication Services

     0.4   
 

 

4


American Beacon Small Cap Value FundSM

Fund Expenses

October 31, 2013 (Unaudited)

 

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.

Actual Expense

The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,179.14       $ 4.45   

Hypothetical **

   $ 1,000.00       $ 1,021.12       $ 4.13   

Y Class

        

Actual

   $ 1,000.00       $ 1,178.39       $ 4.94   

Hypothetical **

   $ 1,000.00       $ 1,020.67       $ 4.58   

Investor Class

        

Actual

   $ 1,000.00       $ 1,176.95       $ 6.42   

Hypothetical **

   $ 1,000.00       $ 1,019.31       $ 5.96   

Advisor Class

        

Actual

   $ 1,000.00       $ 1,176.01       $ 7.13   

Hypothetical **

   $ 1,000.00       $ 1,018.65       $ 6.61   

Retirement Class

        

Actual

   $ 1,000.00       $ 1,173.73       $ 8.71   

Hypothetical **

   $ 1,000.00       $ 1,017.19       $ 8.08   

A Class

        

Actual

   $ 1,000.00       $ 1,175.72       $ 7.24   

Hypothetical **

   $ 1,000.00       $ 1,018.55       $ 6.72   

AMR Class

        

Actual

   $ 1,000.00       $ 1,180.09       $ 3.02   

Hypothetical **

   $ 1,000.00       $ 1,022.43       $ 2.80   

C Class

        

Actual

   $ 1,000.00       $ 1,171.28       $ 11.33   

Hypothetical **

   $ 1,000.00       $ 1,014.77       $ 10.51   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.81%, 0.90%, 1.17%, 1.30%, 1.59%, 1.32%, 2.07% and 0.55% for the Institutional, Y, Investor, Advisor, Retirement, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

5


American Beacon Small Cap Value FundSM

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Trustees of

American Beacon Small Cap Value Fund:

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Small Cap Value Fund (one of the funds constituting the American Beacon Funds) (the “Funds”), as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Small Cap Value Fund at October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

December 30, 2013

 

6


American Beacon Small Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK - 92.94%

  

CONSUMER DISCRETIONARY - 12.74%

  

Auto Components - 1.27%

  

American Axle & Manufacturing Holdings, Inc.A

     1,646,109       $ 30,634   

Dana Holding Corp.

     1,132,340         22,194   

Standard Motor Products, Inc.

     68,887         2,491   

Tenneco, Inc.A

     183,200         9,722   
     

 

 

 
        65,041   
     

 

 

 

Automobiles - 0.83%

  

Avis Budget Group, Inc.A

     932,400         29,212   

Hyster-Yale Materials Handling, Inc.

     54,452         4,271   

Thor Industries, Inc.

     157,570         9,141   
     

 

 

 
        42,624   
     

 

 

 

Hotels, Restaurants & Leisure - 0.69%

  

Brinker International, Inc.

     133,295         5,921   

CEC Entertainment, Inc.

     39,235         1,819   

International Speedway Corp., Class A

     79,434         2,598   

Lakes Entertainment, Inc.A

     150,800         632   

Orient-Express Hotels Ltd.,
Class AA

     581,940         7,746   

Ruby Tuesday, Inc.A

     500,100         2,966   

Speedway Motorsports, Inc.

     103,500         1,890   

The Cheesecake Factory, Inc.

     250,250         11,823   
     

 

 

 
        35,395   
     

 

 

 

Household Durables - 1.48%

  

Cavco Industries, Inc.A

     59,779         3,501   

Ethan Allen Interiors, Inc.

     290,070         7,727   

Helen of Troy Ltd.A

     185,189         8,652   

InvenSense, Inc.A B

     499,230         8,432   

Knoll, Inc.

     336,880         5,532   

M/I Homes, Inc.A

     305,676         6,257   

Matthews International Corp., Class A

     38,880         1,579   

Standard Pacific Corp.A

     1,085,420         8,607   

Whirlpool Corp.

     174,200         25,435   
     

 

 

 
        75,722   
     

 

 

 

Internet & Catalog Retail - 0.05%

  

Insight Enterprises, Inc.A

     116,389         2,452   
     

 

 

 

Leisure Equipment & Products - 0.86%

  

Brunswick Corp.

     781,590         35,274   

Callaway Golf Co.

     122,120         1,029   

LeapFrog Enterprises, Inc.A B

     191,800         1,642   

Smith & Wesson Holding
Corp.A B

     187,800         2,024   

Sturm Ruger & Co., Inc.B

     58,000         3,794   
     

 

 

 
        43,763   
     

 

 

 

Media - 1.66%

  

Banner Corp.

     29,600         1,132   

DreamWorks Animation SKG, Inc., Class AA B

     198,780         6,806   

EW Scripps Co., Class A A

     409,100         8,108   

John Wiley & Sons, Inc., Class A

     322,593         16,223   

Meredith Corp.

     179,247         9,195   

New York Times Co., Class A B

     1,077,920         14,908   

Valassis Communications, Inc.B

     1,031,430         28,221   
     

 

 

 
        84,593   
     

 

 

 

Multiline Retail - 0.39%

  

Big Lots, Inc.

     518,430         18,850   

Fred’s, Inc., Class A

     79,540         1,289   
     

 

 

 
        20,139   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Specialty Retail - 3.70%

  

Aaron’s, Inc.

     128,410       $ 3,643   

America’s Car-Mart, Inc.A

     252,750         11,561   

Asbury Automotive Group, Inc.A

     83,220         3,999   

Cato Corp., Class A

     226,500         6,788   

Children’s Place Retail Stores, Inc.A

     193,550         10,566   

Express, Inc.

     627,970         14,575   

Genesco, Inc.A

     65,500         4,461   

Jos A Bank Clothiers, Inc.A

     98,140         4,709   

Men’s Wearhouse, Inc.

     455,223         19,257   

OfficeMax, Inc.

     1,050,300         15,734   

Penske Automotive Group, Inc.

     164,700         6,525   

Pep Boys, Inc.A

     864,390         11,185   

Rent-A-Center, Inc.B

     949,718         32,519   

Rush Enterprises, Inc., Class AA

     485,000         13,881   

Sonic Automotive, Inc., Class A

     673,440         15,004   

Titan Machinery, Inc.A B

     410,000         7,232   

Zumiez, Inc.A

     223,050         6,611   
     

 

 

 
        188,250   
     

 

 

 

Textiles & Apparel - 1.81%

  

Deckers Outdoor Corp.A B

     251,280         17,296   

G-III Apparel Group Ltd.A

     50,200         2,847   

Guess?, Inc.

     969,970         30,311   

Jones Group, Inc.

     364,500         5,664   

Oxford Industries, Inc.

     96,430         6,921   

Quiksilver, Inc.A

     1,436,700         11,953   

Skechers U.S.A., Inc.,
Class AA

     392,340         11,433   

Vera Bradley, Inc.A B

     272,850         6,044   
     

 

 

 
        92,469   
     

 

 

 

Total Consumer Discretionary

  

     650,448   
     

 

 

 

CONSUMER STAPLES - 0.68%

  

Food & Drug Retailing - 0.30%

  

Andersons, Inc.

     46,640         3,460   

Casey’s General Stores, Inc.

     155,436         11,328   

Ingles Markets, Inc., Class A

     23,000         594   
     

 

 

 
        15,382   
     

 

 

 

Food Products - 0.31%

  

Dean Foods Co.

     455,620         8,885   

Fresh Del Monte Produce, Inc.

     150,480         4,001   

USANA Health Sciences, Inc.A

     37,900         2,586   
     

 

 

 
        15,472   
     

 

 

 

Personal Products - 0.01%

     

Steiner Leisure Ltd.A

     11,700         655   
     

 

 

 

Tobacco - 0.06%

     

Universal Corp.B

     58,400         3,097   
     

 

 

 

Total Consumer Staples

  

     34,606   
     

 

 

 

ENERGY - 5.77%

  

Energy Equipment & Services - 3.87%

  

Atwood Oceanics, Inc.A

     426,447         22,657   

Bristow Group, Inc.

     91,740         7,382   

Exterran Holdings, Inc.A

     197,300         5,633   

Gulf Island Fabrication, Inc.

     170,870         4,309   

Hercules Offshore, Inc.A

     398,670         2,711   

Key Energy Services, Inc.A

     2,603,510         20,359   

McDermott International, Inc.A

     802,000         5,670   

Newpark Resources, Inc.A

     1,373,100         17,507   

Parker Drilling Co.A

     362,400         2,609   
 

 

 

See accompanying notes

 

7


American Beacon Small Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Patterson-UTI Energy, Inc.

     441,800       $ 10,718   

PDC Energy, Inc.A

     58,320         3,955   

Precision Drilling Corp.B

     2,732,000         28,933   

RPC, Inc.B

     548,800         10,065   

SEACOR Holdings, Inc.

     58,710         5,742   

Superior Energy Services, Inc.A

     583,040         15,643   

Tesco Corp.A

     740,044         12,714   

Tidewater, Inc.

     148,490         8,942   

Unit Corp.A

     234,676         12,065   
     

 

 

 
        197,614   
     

 

 

 

Oil & Gas - 1.90%

  

Berry Petroleum Co., Class A

     353,800         16,894   

Bill Barrett Corp.A B

     146,000         4,040   

Cloud Peak Energy, Inc.

     582,150         9,087   

Comstock Resources, Inc.

     111,100         1,901   

EPL Oil & Gas, Inc.A

     363,500         11,588   

Helix Energy Solutions Group, Inc.A

     618,600         14,636   

Resolute Energy Corp.A

     174,800         1,640   

Stone Energy Corp.A

     149,900         5,226   

Synergy Resources Corp.A

     726,200         7,523   

Ultra Petroleum Corp.A B

     210,510         3,865   

Western Refining, Inc.B

     227,200         7,332   

WPX Energy, Inc.A

     601,500         13,317   
     

 

 

 
        97,049   
     

 

 

 

Total Energy

  

     294,663   
     

 

 

 

FINANCIALS - 26.90%

  

Banks - 11.67%

  

1st Source Corp.

     60,700         1,905   

Associated Banc-Corp.

     1,774,620         28,855   

Astoria Financial Corp.

     271,800         3,590   

Bancorp, Inc.A

     356,837         5,770   

BancorpSouth, Inc.

     458,497         10,133   

Bank of Hawaii Corp.

     52,100         3,021   

Bank of the Ozarks, Inc.

     426,250         21,091   

BankUnited, Inc.

     46,400         1,428   

BBCN Bancorp, Inc.

     195,100         2,893   

Berkshire Hills Bancorp, Inc.

     51,898         1,317   

BOK Financial Corp.

     77,570         4,750   

Boston Private Financial Holdings, Inc.

     587,110         6,687   

Brookline Bancorp, Inc.

     794,250         7,045   

Cardinal Financial Corp.

     265,500         4,381   

Cathay General Bancorp

     198,960         4,900   

Central Pacific Financial Corp.

     76,500         1,409   

Chemical Financial Corp.

     106,330         3,114   

City Holding Co.B

     35,710         1,625   

City National Corp.

     366,175         26,405   

CoBiz Financial, Inc.

     422,227         4,581   

Columbia Banking System, Inc.

     106,830         2,744   

Community Bank System, Inc.

     26,230         952   

Community Trust Bancorp, Inc.

     37,900         1,614   

CVB Financial Corp.

     844,593         12,280   

Dime Community Bancshares, Inc.

     86,255         1,411   

East West Bancorp, Inc.

     359,405         12,108   

First Commonwealth Financial Corp.

     283,600         2,464   

First Financial Bancorp

     167,800         2,604   

First Horizon National Corp.

     3,848,783         40,989   

First Interstate Bancsystem, Inc.

     214,000         5,374   

First Midwest Bancorp, Inc.

     827,542         13,762   

First Niagara Financial Group, Inc.

     1,270,477         14,013   

FirstMerit Corp.

     601,721         13,515   

Flushing Financial Corp.

     30,900         621   
     Shares      Fair Value  
            (000’s)  

FNB Corp.

     319,630       $ 3,999   

Fulton Financial Corp.

     878,365         10,725   

Glacier Bancorp, Inc.

     449,000         12,406   

Hancock Holding Co.

     427,813         14,024   

Hanmi Financial Corp.

     391,700         6,847   

Home Federal Bancorp, Inc.

     172,900         2,696   

Iberiabank Corp.

     360,270         21,051   

Independent Bank Corp.

     49,080         1,761   

International Bancshares Corp.

     229,017         5,233   

Lakeland Financial Corp.

     35,410         1,260   

MB Financial, Inc.

     465,230         13,817   

National Penn Bancshares, Inc.

     384,277         3,985   

NBT Bancorp, Inc.

     120,363         2,933   

Northwest Bancshares, Inc.

     282,190         3,948   

Old National Bancorp

     255,840         3,720   

Pinnacle Financial Partners, Inc.

     161,220         4,998   

Popular, Inc.A

     226,200         5,712   

PrivateBancorp, Inc.

     192,800         4,697   

Prosperity Bancshares, Inc.

     421,174         26,302   

Provident Financial Services, Inc.

     534,580         10,018   

Renasant Corp.

     62,900         1,804   

Republic Bancorp, Inc., Class A

     45,800         1,054   

S&T Bancorp, Inc.

     89,100         2,185   

Sandy Spring Bancorp, Inc.

     58,700         1,438   

State Bank Financial Corp.

     861,150         14,691   

Sterling Financial Corp.

     153,900         4,457   

Susquehanna Bancshares, Inc.

     466,320         5,496   

Synovus Financial Corp.

     8,992,870         29,227   

Taylor Capital Group, Inc.A

     27,000         621   

TCF Financial Corp.

     158,541         2,407   

UMB Financial Corp.

     121,240         7,143   

Umpqua Holdings Corp.B

     398,965         6,531   

United Community Banks, Inc.A

     326,990         5,098   

Valley National BancorpB

     1,067,170         10,405   

Washington Federal, Inc.

     476,260         10,849   

Washington Trust Bancorp, Inc.

     67,360         2,215   

Webster Financial Corp.

     900,016         25,101   

WesBanco, Inc.

     128,543         3,779   

Western Alliance BancorpA

     532,818         11,269   

Wintrust Financial Corp.

     462,140         20,108   
     

 

 

 
        595,361   
     

 

 

 

Diversified Financials - 4.02%

  

Capitol Federal Financial, Inc.

     411,650         5,216   

Cash America International, Inc.

     387,500         15,287   

CoreLogic, Inc.A

     542,540         18,050   

Credit Acceptance Corp.A

     69,268         8,194   

E*Trade Financial Corp.A

     1,928,890         32,619   

Encore Capital Group, Inc.A B

     244,800         11,958   

ExlService Holdings, Inc.A

     298,800         8,638   

EZCORP, Inc., Class AA

     1,010,150         15,890   

Federated Investors, Inc.,
Class BB

     238,942         6,480   

Global Cash Access Holdings,
Inc.A

     1,307,600         10,853   

Green Dot Corp., Class AA

     720,000         15,451   

Interactive Brokers Group, Inc., Class A

     142,421         2,938   

Janus Capital Group, Inc.B

     1,924,535         18,995   

Nelnet, Inc., Class A

     128,804         5,491   

NewStar Financial, Inc.A

     64,030         1,115   

Oritani Financial Corp.

     111,800         1,813   

Piper Jaffray Cos.A

     263,567         9,459   

Prospect Capital Corp.B

     120,967         1,372   

Stifel Financial Corp.A

     174,800         7,158   

Waddell & Reed Financial, Inc., Class A

     71,717         4,429   
 

 

See accompanying notes

 

8


American Beacon Small Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

World Acceptance Corp.A B

     39,580       $ 4,121   
     

 

 

 
        205,527   
     

 

 

 

Insurance - 7.09%

  

Allied World Assurance Co. Holdings AG

     141,445         15,317   

American Equity Investment Life Holding Co.

     180,670         3,765   

American Financial Group, Inc.

     204,535         11,507   

Amtrust Financial Services, Inc.B

     203,621         7,811   

Argo Group International Holdings Ltd.

     220,700         9,265   

Aspen Insurance Holdings Ltd.

     849,780         33,151   

Assurant, Inc.

     37,900         2,216   

Assured Guaranty Ltd.

     131,110         2,688   

CNO Financial Group, Inc.

     1,273,830         19,846   

Employers Holdings, Inc.

     111,360         3,349   

Endurance Specialty Holdings Ltd.

     650,670         35,977   

Enstar Group Ltd.A

     167,943         22,829   

FBL Financial Group, Inc., Class A

     38,700         1,731   

Global Indemnity PLCA,F

     434,123         10,692   

Hanover Insurance Group, Inc.

     197,220         11,545   

HCC Insurance Holdings, Inc.

     188,860         8,621   

Hilltop Holdings, Inc.A

     50,000         867   

Horace Mann Educators Corp.

     533,700         14,783   

Infinity Property & Casualty Corp.

     43,738         3,000   

Kemper Corp.

     153,190         5,671   

Maiden Capital Financing Trust

     166,160         1,819   

MBIA, Inc.A

     89,300         1,015   

Montpelier Re Holdings Ltd.

     239,613         6,616   

National Western Life Insurance Co., Class A

     7,730         1,608   

Navigators Group, Inc.A

     39,693         2,232   

Old Republic International Corp.

     431,500         7,245   

Platinum Underwriters Holdings Ltd.

     196,547         12,223   

Primerica, Inc.

     95,400         4,097   

ProAssurance Corp.

     285,910         12,957   

Protective Life Corp.

     493,650         22,748   

Renaissancere Holdings Ltd.

     51,000         4,779   

RLI Corp.

     97,800         9,240   

Safety Insurance Group, Inc.

     38,030         2,080   

Selective Insurance Group, Inc.

     123,290         3,239   

StanCorp Financial Group, Inc.

     31,020         1,827   

State Auto Financial Corp.

     61,949         1,177   

Stewart Information Services Corp.

     9,800         307   

Symetra Financial Corp.

     1,113,865         20,863   

United Fire Group, Inc.

     40,700         1,290   

Validus Holdings Ltd.

     249,130         9,836   

White Mountains Insurance Group Ltd.

     17,204         10,048   
     

 

 

 
        361,877   
     

 

 

 

Real Estate - 4.04%

  

Acadia Realty TrustC

     193,300         5,155   

Ashford Hospitality Trust, Inc.C

     173,130         2,261   

Associated Estates Realty Corp.C

     135,480         2,078   

Brandywine Realty TrustC

     410,555         5,842   

Campus Crest Communities, Inc.C

     1,268,950         12,702   

CapLease, Inc.C

     1,191,838         10,131   

CBL & Associates Properties, Inc.C

     203,115         4,024   

Chatham Lodging TrustC

     500,000         9,430   

Chesapeake Lodging TrustC

     535,100         12,612   

Colony Financial, Inc.C

     480,700         9,725   

Corporate Office Properties TrustC

     345,920         8,510   

EastGroup Properties, Inc.C

     129,520         8,245   

First Potomac Realty TrustC

     267,100         3,283   

Forestar Group, Inc.A

     86,800         1,938   
     Shares      Fair Value  
            (000’s)  

Getty Realty Corp.C

     347,460       $ 6,664   

Granite Real Estate Investment TrustC

     145,300         5,010   

HFF, Inc., Class A

     148,020         3,634   

Hospitality Properties TrustC

     139,733         4,105   

KKR Financial Holdings LLCB D G

     195,098         1,933   

LaSalle Hotel PropertiesC

     755,900         23,471   

Mack-Cali Realty Corp.C

     185,686         3,818   

National Health Investors, Inc.C

     146,910         9,185   

Pebblebrook Hotel TrustC

     338,244         10,215   

Pennsylvania Real Estate Investment TrustC

     204,845         3,714   

RLJ Lodging TrustC

     948,050         23,948   

Starwood Property Trust, Inc.C

     411,950         10,583   

Urstadt Biddle Properties, Inc., Class AC

     219,300         4,329   
     

 

 

 
        206,545   
     

 

 

 

Real Estate Investment Trusts - 0.08%

  

Omega Healthcare Investors, Inc.B C

     128,935         4,286   
     

 

 

 

Total Financials

  

     1,373,596   
     

 

 

 

HEALTH CARE - 6.12%

  

Biotechnology - 0.37%

  

Charles River Laboratories International, Inc.A

     118,794         5,846   

United Therapeutics Corp.A

     149,700         13,251   
     

 

 

 
        19,097   
     

 

 

 

Health Care Equipment & Supplies - 0.77%

  

Computer Programs and Systems, Inc.

     131,390         7,494   

CONMED Corp.

     59,220         2,148   

Fabrinet

     86,400         1,446   

Globus Medical, Inc., Class AA

     253,840         4,874   

Hillenbrand, Inc.

     78,720         2,221   

Hill-Rom Holdings, Inc.

     113,934         4,704   

ICU Medical, Inc.A

     85,820         5,304   

Integra LifeSciences Holdings Corp.A

     63,885         2,925   

Natus Medical, Inc.A

     417,720         8,242   
     

 

 

 
        39,358   
     

 

 

 

Health Care Providers & Services - 4.59%

  

Air Methods Corp.B

     228,930         10,009   

Allscripts Healthcare Solutions, Inc.

     904,060         12,503   

Amsurg Corp.A

     192,780         8,268   

Community Health Systems, Inc.

     227,300         9,917   

Covance, Inc.A

     182,300         16,272   

Ensign Group, Inc.

     481,249         20,492   

Gentiva Health Services, Inc.

     75,665         866   

Hanger Orthopedic Group, Inc.A

     477,840         17,537   

Health Management Associates, Inc., Class A

     405,600         5,200   

HealthSouth Corp.

     1,078,470         37,866   

Kindred Healthcare, Inc.

     308,800         4,286   

LifePoint Hospitals, Inc.A

     798,710         41,246   

Magellan Health Services, Inc.A

     76,510         4,491   

MAXIMUS, Inc.

     137,820         6,677   

Omnicell, Inc.A

     339,350         7,829   

Owens & Minor, Inc.

     152,420         5,704   

Select Medical Holdings Corp.

     172,770         1,465   

Triple-S Management Corp., Class BA

     126,961         2,261   

WellCare Health Plans, Inc.A

     318,000         21,204   
     

 

 

 
        234,093   
     

 

 

 

Pharmaceuticals - 0.39%

  

Jazz Pharmaceuticals PLCA,F

     107,400         9,745   
 

 

See accompanying notes

 

9


American Beacon Small Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Taro Pharmaceutical Industries Ltd.A

     132,800       $ 10,405   
     

 

 

 
        20,150   
     

 

 

 

Total Health Care

  

     312,698   
     

 

 

 

INDUSTRIALS - 19.63%

  

Aerospace & Defense - 2.63%

  

AAR Corp.

     222,186         6,506   

Aerovironment, Inc.A

     746,660         20,242   

Aircastle Ltd.

     584,586         11,031   

Alliant Techsystems, Inc.

     196,215         21,362   

Curtiss-Wright Corp.

     121,852         6,066   

Exelis, Inc.

     564,700         9,312   

Huntington Ingalls Industries, Inc.

     346,300         24,777   

Moog, Inc., Class AA

     270,700         16,169   

Triumph Group, Inc.

     265,700         19,037   
     

 

 

 
        134,502   
     

 

 

 

Building Products - 2.13%

  

American Woodmark Corp.A

     126,190         4,280   

Apogee Enterprises, Inc.

     207,617         6,494   

Armstrong World Industries, Inc.

     193,640         10,346   

Crane Co.

     417,304         26,500   

Drew Industries, Inc.

     107,430         5,399   

Masonite International Corp.

     421,400         20,585   

Simpson Manufacturing Co., Inc.

     381,325         13,518   

Trex Co., Inc.A

     281,800         19,788   

Universal Forest Products, Inc.

     40,100         2,122   
     

 

 

 
        109,032   
     

 

 

 

Commercial Services & Supplies - 5.96%

  

ABM Industries, Inc.

     117,930         3,244   

Aceto Corp.

     336,950         5,374   

Atlas Air Worldwide Holdings, Inc.A

     57,600         2,133   

Bridgepoint Education, Inc.A

     162,500         3,185   

Brink’s Co.

     178,310         5,599   

Convergys Corp.

     308,790         6,096   

Con-way, Inc.

     780,310         32,150   

CSG Systems International, Inc.

     326,380         9,093   

Deluxe Corp.

     138,960         6,544   

DeVry, Inc.

     204,600         7,345   

Dun & Bradstreet Corp.

     101,600         11,053   

Ennis, Inc.

     81,580         1,448   

Geo Group, Inc.C

     330,172         11,645   

Global Payments, Inc.

     139,100         8,274   

Heidrick & Struggles International, Inc.

     161,500         2,991   

Herman Miller, Inc.

     832,890         25,270   

Hudson Global, Inc.A

     630,300         2,048   

Interface, Inc.

     567,870         11,499   

ITT Educational Services, Inc.B

     70,000         2,808   

Kelly Services, Inc., Class A

     109,800         2,290   

Koppers Holdings, Inc.

     83,094         3,699   

Korn/Ferry InternationalA

     1,059,460         25,215   

McGrath Rentcorp

     221,688         7,908   

Mobile Mini, Inc.

     605,400         21,867   

Monotype Imaging Holdings, Inc.

     278,650         7,864   

Navigant Consulting, Inc.A

     213,443         3,703   

PHH Corp.A

     807,900         19,430   

PHI, Inc.A

     31,100         1,238   

Pitney Bowes, Inc.B

     605,200         12,915   

Quad Graphics, Inc.B

     81,800         2,856   

RR Donnelley & Sons Co.B

     544,900         10,119   

Steelcase, Inc., Class A

     514,492         8,433   

TAL International Group, Inc.B

     101,480         4,902   
     Shares      Fair Value  
            (000’s)  

TrueBlue, Inc.A

     346,940       $ 8,569   

United Stationers Supply Co.

     119,600         5,315   
     

 

 

 
        304,122   
     

 

 

 

Construction & Engineering - 1.94%

  

AECOM Technology Corp.A

     302,300         9,607   

Aegion Corp.A

     589,077         12,076   

Comfort Systems USA, Inc.

     912,715         17,004   

Dycom Industries, Inc.A

     650,550         19,289   

EMCOR Group, Inc.

     62,775         2,326   

MYR Group, Inc.A

     414,500         10,964   

Tutor Perini Corp.

     596,977         13,701   

URS Corp.

     259,760         14,084   
     

 

 

 
        99,051   
     

 

 

 

Diversified Manufacturing - 0.24%

  

Barnes Group, Inc.

     348,122         12,372   
     

 

 

 

Electrical Equipment - 1.53%

  

Brady Corp., Class A

     78,359         2,287   

Energy XXI Bermuda Ltd.

     173,860         5,052   

EnerSys, Inc.

     275,025         18,248   

General Cable Corp.

     275,964         9,087   

Geospace Technologies Corp.A

     122,121         11,897   

Global Power Equipment Group, Inc.

     160,210         3,262   

Regal-Beloit Corp.

     384,220         28,176   
     

 

 

 
        78,009   
     

 

 

 

Industrial Conglomerates - 0.22%

  

Carlisle Cos., Inc.

     42,992         3,125   

Chemed Corp.B

     96,100         6,517   

Standex International Corp.

     27,700         1,704   
     

 

 

 
        11,346   
     

 

 

 

Machinery - 3.15%

  

American Railcar Industries, Inc.B

     38,900         1,593   

Astec Industries, Inc.

     147,360         4,982   

CIRCOR International, Inc.

     120,900         8,919   

Esterline Technologies Corp.A

     124,191         9,955   

FreightCar America, Inc.

     187,660         4,174   

Greenbrier Cos., Inc.A

     68,000         1,805   

ITT Corp.

     128,700         5,113   

John Bean Technologies Corp.

     98,700         2,683   

L.B. Foster Co., Class A

     19,680         920   

Meritor, Inc.A

     1,249,000         8,581   

Miller Industries, Inc.

     231,100         4,331   

Oshkosh Corp.

     915,100         43,549   

SPX Corp.

     31,384         2,847   

Terex Corp.

     726,000         25,374   

Titan International, Inc.

     1,054,700         15,293   

Trinity Industries, Inc.

     361,431         18,299   

Wabash National Corp.A

     205,400         2,395   
     

 

 

 
        160,813   
     

 

 

 

Marine - 0.27%

  

Gulfmark Offshore, Inc., Class A

     66,700         3,320   

Matson, Inc.

     379,800         10,289   
     

 

 

 
        13,609   
     

 

 

 

Real Estate - 0.25%

  

Amerco, Inc.

     63,690         12,861   
     

 

 

 

Road & Rail - 0.77%

  

Forward Air Corp.

     380,009         15,383   

Landstar System, Inc.

     125,360         6,931   

Ryder System, Inc.

     260,615         17,156   
     

 

 

 
        39,470   
     

 

 

 
 

 

See accompanying notes

 

10


American Beacon Small Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Trading Companies & Distributors - 0.54%

  

Air Lease Corp.

     299,600       $ 8,808   

MRC Global, Inc.A

     388,400         10,856   

WESCO International, Inc.A B

     92,600         7,914   
     

 

 

 
        27,578   
     

 

 

 

Total Industrials

  

     1,002,765   
     

 

 

 

INFORMATION TECHNOLOGY - 11.93%

  

Communications Equipment - 1.87%

  

Anixter International, Inc.

     89,100         7,617   

ARRIS Group, Inc.A

     1,375,368         24,563   

Brocade Communications Systems, Inc.A

     2,841,092         22,786   

InterDigital, Inc.

     396,650         15,370   

IxiaA

     513,470         7,281   

Plantronics, Inc.

     122,550         5,262   

Symmetricom, Inc.A

     315,000         2,259   

Verint Systems, Inc.A

     286,490         10,463   
     

 

 

 
        95,601   
     

 

 

 

Computers & Peripherals - 0.24%

  

Lexmark International, Inc., Class A

     187,700         6,673   

Mercury Systems, Inc.A

     580,637         5,353   
     

 

 

 
        12,026   
     

 

 

 

Electronic Equipment & Instruments - 3.34%

  

Arrow Electronics, Inc.

     261,600         12,562   

AVX Corp.

     505,800         6,702   

Benchmark Electronics, Inc.A

     176,500         4,012   

Celestica, Inc.A

     171,185         1,876   

Ingram Micro, Inc.,
Class AA

     653,401         15,139   

Intersil Corp., Class A

     476,600         5,319   

Itron, Inc.A

     71,371         3,045   

Jabil Circuit, Inc.

     385,000         8,031   

Littelfuse, Inc.

     203,300         17,287   

Methode Electronics, Inc.

     774,500         19,812   

Plexus Corp.A

     624,825         23,918   

Sanmina Corp.A

     350,385         5,102   

Scansource, Inc.A

     69,700         2,681   

Tech Data Corp.A

     128,804         6,706   

TTM Technologies, Inc.A

     295,545         2,586   

Veeco Instruments, Inc.A

     139,320         4,070   

Vishay Intertechnology, Inc.A

     2,577,610         31,626   
     

 

 

 
        170,474   
     

 

 

 

Internet Software & Services - 0.38%

  

Netgear, Inc.A

     666,200         19,160   
     

 

 

 

IT Consulting & Services - 0.93%

  

Booz Allen Hamilton Holding Corp.

     414,100         8,199   

CACI International, Inc., Class AA

     75,500         5,434   

CIBER, Inc.A

     117,200         381   

InnerWorkings, Inc.A

     108,110         1,035   

Mantech International Corp., Class A

     128,625         3,594   

Sykes Enterprises, Inc.A

     198,120         3,709   

SYNNEX Corp.A

     362,260         22,206   

Unisys Corp.A

     120,000         3,162   
     

 

 

 
        47,720   
     

 

 

 

Semiconductor Equipment & Products - 3.93%

  

Advanced Energy Industries, Inc.A

     271,840         5,676   

ATMI, Inc.A

     271,220         7,415   

Brooks Automation, Inc.

     1,442,900         13,910   

Cirrus Logic, Inc.A B

     279,590         6,271   

Diodes, Inc.A

     670,500         16,240   

Entropic Communications, Inc.A

     1,730,300         7,406   
     Shares      Fair Value  
            (000’s)  

Fairchild Semiconductor International, Inc.A

     1,245,400       $ 15,779   

FEI Co.

     84,210         7,501   

GT Advanced Technologies, Inc.A B

     642,640         4,820   

International Rectifier Corp.A

     172,900         4,502   

Kulicke & Soffa Industries, Inc.A

     1,274,327         16,440   

Micrel, Inc.

     186,209         1,713   

Microsemi Corp.

     180,745         4,542   

MKS Instruments, Inc.

     267,390         7,925   

Omnivision Technologies, Inc.A

     839,500         11,761   

ON Semiconductor Corp.A

     1,742,500         12,302   

Photronics, Inc.A

     856,000         7,190   

PMC - Sierra, Inc.A

     755,340         4,434   

QLogic Corp.A

     923,940         11,411   

Semtech Corp.A

     303,800         9,451   

Teradyne, Inc.A B

     1,179,870         20,637   

TriQuint Semiconductor, Inc.A

     495,000         3,925   
     

 

 

 
        201,251   
     

 

 

 

Software - 1.24%

  

Cognex Corp.

     172,570         5,393   

Comverse, Inc.A

     192,280         6,072   

DST Systems, Inc.

     69,210         5,867   

Epiq Systems, Inc.

     70,329         1,052   

FARO Technologies, Inc.A

     364,010         17,290   

Mentor Graphics Corp.

     827,190         18,265   

Netscout Systems, Inc.A

     327,330         9,270   
     

 

 

 
        63,209   
     

 

 

 

Total Information Technology

  

     609,441   
     

 

 

 

MATERIALS - 6.15%

  

Chemicals - 2.49%

  

A. Schulman, Inc.

     50,690         1,679   

American Vanguard Corp.

     563,600         14,710   

Cabot Corp.

     119,003         5,547   

Cytec Industries, Inc.

     122,180         10,152   

Huntsman Corp.

     720,772         16,736   

Innophos Holdings, Inc.

     125,950         6,313   

Innospec, Inc.

     64,700         2,980   

Landec Corp.A

     521,850         6,111   

Olin Corp.B

     868,540         19,551   

PolyOne Corp.

     957,400         29,008   

Scotts Miracle-Gro Co., Class A

     247,900         14,557   
     

 

 

 
        127,344   
     

 

 

 

Containers & Packaging - 0.48%

  

KapStone Paper and Packaging Corp.

     255,872         13,295   

Owens-Illinois, Inc.A

     350,400         11,139   
     

 

 

 
        24,434   
     

 

 

 

Metals & Mining - 2.84%

  

Allegheny Technologies, Inc.

     300,450         9,945   

Allied Nevada Gold Corp.A B

     1,327,910         5,418   

AMCOL International Corp.

     255,908         8,210   

AuRico Gold, Inc.B

     2,389,600         9,821   

Carpenter Technology Corp.

     161,320         9,571   

Coeur d’Alene Mines Corp.

     179,969         2,197   

Gibraltar Industries, Inc.A

     468,139         7,495   

Haynes International, Inc.

     112,300         6,053   

Horsehead Holding Corp.A

     860,400         12,484   

Kaiser Aluminum Corp.

     219,770         14,823   

Materion Corp.

     687,200         20,485   

Noranda Aluminum Holding Corp.

     1,357,600         3,693   

Pan American Silver Corp.

     224,038         2,377   
 

 

See accompanying notes

 

11


American Beacon Small Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

RTI International Metals, Inc.A

     86,100       $ 2,919   

Steel Dynamics, Inc.

     240,998         4,331   

US Silica Holdings, Inc.B

     398,350         13,871   

Worthington Industries, Inc.

     280,810         11,384   
     

 

 

 
        145,077   
     

 

 

 

Paper & Forest Products - 0.34%

  

Louisiana-Pacific Corp.A

     476,540         8,106   

Resolute Forest Products, Inc.A

     278,900         4,460   

Schweitzer-Mauduit International, Inc.

     79,400         4,913   
     

 

 

 
        17,479   
     

 

 

 

Total Materials

  

     314,334   
     

 

 

 

TELECOMMUNICATION SERVICES - 0.36%

  

Diversified Telecommunication Services - 0.16%

  

EchoStar Corp., Class A A

     125,700         6,029   

Vonage Holdings Corp.A

     588,000         2,193   
     

 

 

 
        8,222   
     

 

 

 

Wireless Telecommunication Services - 0.20%

  

Iridium Communications, Inc. A,B

     143,600         866   

Telephone & Data Systems, Inc.

     303,263         9,455   
     

 

 

 
        10,321   
     

 

 

 

Total Telecommunication Services

  

     18,543   
     

 

 

 

UTILITIES - 2.66%

  

Electric - 1.96%

  

El Paso Electric Co.

     301,120         10,590   

Great Plains Energy, Inc.

     979,210         22,953   

Hawaiian Electric Industries, Inc.B

     423,590         11,255   

IDACORP, Inc.

     241,265         12,449   

NorthWestern Corp.

     174,450         7,997   

Ormat Technologies, Inc.B

     113,500         2,959   

PNM Resources, Inc.

     218,910         5,236   

Portland General Electric Co.

     920,464         26,418   

TECO Energy, Inc.

     20,935         359   
     

 

 

 
        100,216   
     

 

 

 

Gas - 0.35%

  

Laclede Group, Inc.

     158,030         7,438   

WGL Holdings, Inc.

     232,230         10,453   
     

 

 

 
        17,891   
     

 

 

 

Multi-Utilities - 0.35%

  

Avista Corp.

     146,030         4,058   

Westar Energy, Inc.

     431,690         13,646   
     

 

 

 
        17,704   
     

 

 

 

Total Utilities

  

     135,811   
     

 

 

 

Total Common Stock (Cost $3,576,495)

  

     4,746,905   
     

 

 

 

SHORT-TERM INVESTMENTS - 6.22%

  

American Beacon U.S. Government Money Market Select Fund, Select Class E

     20,000,000         20,000   

JPMorgan U.S. Government Money Market Fund, Capital Class

     297,502,677         297,503   
     

 

 

 

Total Short-Term Investments
(Cost $317,503)

        317,503   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

SECURITIES LENDING COLLATERAL - 5.87%

  

American Beacon U.S. Government Money Market Select Fund, Select Class E

     267,629,679       $ 267,629   

DWS Government and Agency Securities Portfolio, Institutional Class

     32,053,754         32,054   
     

 

 

 

Total Securities Lending Collateral (Cost $299,683)

        299,683   
     

 

 

 

TOTAL INVESTMENTS - 105.03%
(Cost $4,193,681)

   

     5,364,091   

LIABILITIES, NET OF OTHER ASSETS - (5.03%)

   

     (256,678
     

 

 

 

TOTAL NET ASSETS - 100.00%

  

   $ 5,107,413   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  All or a portion of this security is on loan at October 31, 2013.
C  REIT - Real Estate Investment Trust.
D  Limited Liability Company.
E  The Fund is affiliated by having the same investment advisor.
F  PLC - Public Limited Company.
G  Master Limited Partnership.
 

 

 

 

See accompanying notes

 

12


American Beacon Small Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

Futures Contracts Open on October 31, 2013 (000’s):

 

Description

   Type      Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

Russell 2000 Mini Index Future

     Long         2,748         December, 2013       $ 301,675      $ 8,081  
           

 

 

    

 

 

 
            $ 301,675      $ 8,081  
           

 

 

    

 

 

 

 

See accompanying notes

 

13


American Beacon Small Cap Value FundSM

Statement of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

Assets:

  

Investments in unaffiliated securities, at fair value A C

   $ 5,076,462   

Investments in affiliated securities, at fair value B

     287,629   

Deposit with brokers for futures contracts

     11,493   

Receivable for investments sold

     47,095   

Dividends and interest receivable

     1,188   

Receivable for fund shares sold

     8,443   

Prepaid expenses

     87   
  

 

 

 

Total assets

     5,432,397   
  

 

 

 

Liabilities:

  

Payable for investments purchased

     12,799   

Payable for variation margin from open futures contracts

     2,364   

Payable upon return of securities loaned

     299,683   

Payable for fund shares redeemed

     1,452   

Payable under excess expense reimbursement plan (Note 2)

     —     

Foreign currency, at fair value D

     6   

Management and investment advisory fees payable

     6,888   

Administrative service and service fees payable

     1,350   

Transfer agent fees payable

     67   

Custody and fund accounting fees payable

     58   

Professional fees payable

     41   

Prospectus and shareholder reports fees payable

     205   

Trustee fees payable

     40   

Other liabilities

     31   
  

 

 

 

Total liabilities

     324,984   
  

 

 

 

Net assets

   $ 5,107,413   
  

 

 

 

Analysis of Net Assets:

  

Paid-in-capital

     3,498,099   

Undistributed net investment income

     17,740   

Accumulated net realized gain

     413,084   

Unrealized appreciation of investments

     1,170,409   

Unrealized appreciation of futures contracts

     8,081   
  

 

 

 

Net assets

   $ 5,107,413   
  

 

 

 

Shares outstanding at no par value (unlimited shares authorized):

  

Institutional Class

     122,323,085   
  

 

 

 

Y Class

     4,417,308   
  

 

 

 

Investor Class

     34,251,856   
  

 

 

 

Advisor Class

     3,253,317   
  

 

 

 

Retirement Class

     392,283   
  

 

 

 

A Class

     496,345   
  

 

 

 

C Class

     240,446   
  

 

 

 

AMR Class

     17,942,253   
  

 

 

 

Net assets (not in thousands):

  

Institutional Class

   $ 3,430,107,382   
  

 

 

 

Y Class

   $ 122,849,739   
  

 

 

 

Investor Class

   $ 934,041,370   
  

 

 

 

Advisor Class

   $ 88,032,906   
  

 

 

 

Retirement Class

   $ 10,445,612   
  

 

 

 

A Class

   $ 13,417,645   
  

 

 

 

C Class

   $ 6,396,419   
  

 

 

 

AMR Class

   $ 502,121,807   
  

 

 

 

 

See accompanying notes

 

14


American Beacon Small Cap Value FundSM

Statement of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

Net asset value, offering and redemption price per share:

  

Institutional Class

   $ 28.04   
  

 

 

 

Y Class

   $ 27.81   
  

 

 

 

Investor Class

   $ 27.27   
  

 

 

 

Advisor Class

   $ 27.06   
  

 

 

 

Retirement Class

   $ 26.63   
  

 

 

 

A Class (offering price $28.68)

   $ 27.03   
  

 

 

 

C Class

   $ 26.60   
  

 

 

 

AMR Class

   $ 27.99   
  

 

 

 

 

A        Cost of investments in unaffiliated securities

   $ 3,906,052   

B        Cost of investments in affiliated securities

   $ 287,629   

C        Fair value of securities on loan

   $ 292,628   

D        Cost of foreign currency

   $ (6

 

See accompanying notes

 

15


American Beacon Small Cap Value FundSM

Statement of Operations

For the year ended October 31, 2013 (in thousands)

 

 

Investment Income:

  

Dividend income from unaffiliated securities (net of foreign taxes) A

   $ 74,376   

Dividend income from affiliated securities

     5   

Interest income

     5   

Income derived from securities lending, net

     2,261   
  

 

 

 

Total investment income

     76,647   
  

 

 

 

Expenses:

  

Management and investment advisory fees (Note 2)

     19,539   

Administrative service fees (Note 2):

  

Institutional Class

     8,399   

Y Class

     213   

Investor Class

     2,454   

Advisor Class

     187   

Retirement Class

     22   

A Class

     29   

C Class

     16   

AMR Class

     195   

Transfer agent fees:

  

Institutional Class

     350   

Y Class

     4   

Investor Class

     57   

Advisor Class

     5   

Retirement Class

     4   

A Class

     4   

C Class

     2   

AMR Class

     9   

Custody and fund accounting fees

     458   

Professional fees

     165   

Registration fees and expenses

     132   

Service fees (Note 2):

  

Y Class

     71   

Investor Class

     2,989   

Advisor Class

     156   

Retirement Class

     19   

A Class

     11   

C Class

     6   

Distribution fees (Note 2):

  

Advisor Class

     156   

Retirement Class

     37   

A Class

     18   

C Class

     40   

Prospectus and shareholder report expenses

     277   

Insurance fees

     14   

Trustee fees

     278   

Other expenses

     195   
  

 

 

 

Total expenses

     36,511   
  

 

 

 

Net fees waived and expenses (reimbursed) or recouped (Note 2)

     (3
  

 

 

 

Net expenses

     36,508   
  

 

 

 

Net investment income

     40,139   
  

 

 

 

Realized and unrealized gain (loss) on investments:

  

Net realized gain (loss) from:

  

Investments

     405,345   

Commission recapture (Note 3)

     121   

Foreign currency transactions

     6   

Futures contracts

     44,815   

Change in net unrealized appreciation or (depreciation) from:

  

Investments

     830,613   

Futures contracts

     11,445   
  

 

 

 

Net gain on investments

     1,292,345   
  

 

 

 

Net increase in net assets resulting from operations

   $ 1,332,484   
  

 

 

 

A       Foreign taxes

   $ 204   

 

See accompanying notes

 

16


American Beacon Small Cap Value FundSM

Statement of Changes of Net Assets (in thousands)

 

 

     Year Ended
October 31,
2013
    Year Ended
October 31,
2012
 

Increase (Decrease) in Net Assets:

    

Operations:

    

Net investment income

   $ 40,139     $ 26,394  

Net realized gain from investments, futures contracts, and foreign currency transactions

     450,287       231,741  

Change in net unrealized appreciation from investments, futures contracts, and foreign currency transactions

     842,058       125,094  
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

     1,332,484       383,229  
  

 

 

   

 

 

 

Distributions to Shareholders:

    

Net investment income:

    

Institutional Class

     (28,357     (8,493

Y Class

     (583     (185

Investor Class

     (6,427     (197

Advisor Class

     (423     —    

Retirement Class

     (46     (14

A Class

     (41     (4

C Class

     (11     —    

AMR Class

     (4,619     (2,114

Net realized gain on investments:

    

Institutional Class

     (61,004     —    

Y Class

     (1,275     —    

Investor Class

     (20,484     —    

Advisor Class

     (1,302     —    

Retirement Class

     (190     —    

A Class

     (120     —    

C Class

     (71     —    

AMR Class

     (8,358     —    
  

 

 

   

 

 

 

Net distributions to shareholders

     (133,311 )      (11,007 ) 
  

 

 

   

 

 

 

Net increase (decrease) in net assets from capital share transactions

     566,911       (123,312 ) 
  

 

 

   

 

 

 

Net increase in net assets

     1,766,084       248,910  
  

 

 

   

 

 

 

Net Assets:

    

Beginning of period

     3,341,329       3,092,419  
  

 

 

   

 

 

 

End of Period *

   $ 5,107,413     $ 3,341,329  
  

 

 

   

 

 

 

*  Includes undistributed net investment income of

   $ 17,740     $ 19,858  
  

 

 

   

 

 

 

 

See accompanying notes

 

17


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Small Cap Value Fund (the “Fund”), a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.

Class Disclosure

The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:

 

Class:

  

Offered to:

Institutional Class    Investors making an initial investment of $250,000
Y Class    Investors making an initial investment of $100,000
Investor Class    General public and investors investing through an intermediary
Advisor Class    Investors investing through an intermediary
Retirement Class    Investors investing through an intermediary
A Class    General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)
C Class    General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC
AMR Class    Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Fund believes the adoption of these ASUs will not have a material impact on its financial statement disclosures.

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. Investment assets of the Fund are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement,

 

18


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):

 

Management Fee Rate     Management Fee     Amounts paid to
Investment Advisors
    Net Amounts Retained by Manager  
  0.47   $ 19,539      $ 17,208      $ 2,331   

As compensation for services provided by the Manager in connection with securities lending activities, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 25% of such loan fees. This fee is included in Income derived from securities lending and Management and investment advisory fees on the Statement of Operations. During the year ended October 31, 2013, securities lending fees paid to the Manager were $260,101.

Administrative Services Agreement

The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor, and Retirement Classes of the Fund, 0.40% of the average daily net assets of the A and C Classes of the Fund, and 0.05% of the average daily net assets of the AMR Class of the Fund.

Distribution Plans

The Fund, except for the Advisor, Retirement, A, and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.

Brokerage Commissions

Affiliated entities of an investment advisor to the Fund received net commissions on purchases and sales of the Fund’s portfolio securities totaling $12,970 for the year ended October 31, 2013.

 

19


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

Investment in Affiliated Funds

The Fund may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) and the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”), (collectively the “Select Funds”). Cash collateral received by the Fund in connection with securities lending may be invested in the Select Funds. The Select Funds and the Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended October 31, 2013, the Manager earned fees from the Select Funds totaling $16,888 on the Fund’s direct investment in the Select Funds and $218,552 from the Fund’s securities lending collateral invested in the Select Funds.

Interfund Lending Program

Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended October 31, 2013, the Fund did not utilize the credit facility.

Expense Reimbursement Plan

The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. During the year ended October 31, 2013, the manager contractually reimbursed $2,549 for the A Class and $672 for the C Class. Of these amounts $251 was payable to the Manager at October 31, 2013. The reimbursed expenses will expire in 2016. The carryover of excess expenses potentially reimbursable to the Manager but not recorded as a liability is $5,000 expiring in 2015. The Manager recouped $1 of excess carryover expenses expiring in 2014 from the Y Class. The Fund did not record a liability for potential reimbursements due to the current assessment that a reimbursement is unlikely.

Sales Commissions

The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside collected $8,573 from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $1,562 in CDSC fees were collected for the Fund.

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

 

20


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.

Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.

Valuation Inputs

Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1 -    Quoted prices in active markets for identical securities.
Level 2 -    Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Level 3 -    Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.

The Fund’s investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):

 

21


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

     Level 1      Level 2      Level 3      Total  

Common Stock*

   $ 4,746,905       $ —         $ —         $ 4,746,905   

Short-Term Investments - Money Markets

     317,503         —           —           317,503   

Securities Lending Collateral invested in Money Market Funds

     299,683         —           —           299,683   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 5,364,091       $ —         $ —         $ 5,364,901   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

           

Futures Contracts

   $ 8,081       $ —         $ —         $ 8,081   

 

* Refer to the Schedule of Investments for industry information.

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Commission Recapture

The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If the Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations.

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Other

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

 

22


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

4. Securities and Other Investments

Real Estate Investment Trusts

The Fund may own shares of real estate investment trusts (“REITS”) which report information on the source of their distributions annually. The Fund re-characterizes distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year. These re-characterizations are not recorded for financial statement purposes, but as an adjustment to the calculation of taxable income.

Other Investment Company Securities and Other Exchange Traded Products

The Fund may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Fund may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Financial Derivative Instruments

Futures Contracts

Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.

Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

For the six months ended October 31, 2013, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.

 

23


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.

 

     Average Futures Contracts Outstanding  

For the Quarter Ended

   April 30, 2013      October 31, 2013  

Small Cap Value Fund

     99         119   

The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure (in thousands) (1) (2):

Fair Values of derivative financial instruments as of October 31, 2013:

 

Statement of Assets and Liabilities

   Derivatives    Fair
Value
 

Unrealized appreciation of futures contracts

   Equity Contracts    $ 8,081   

The effect of derivative financial instruments during the year ended October 31, 2013:

 

Statement of Operations

   Derivatives    Balance  

Net realized gain (loss) from futures contracts

   Equity Contracts    $ 44,815   

Change in net unrealized appreciation or (depreciation) from futures contracts

   Equity Contracts      11,445   

 

(1)  See Note 3 in the Notes to Financial Statements for additional information.
(2)  The volume of derivative activity described above is reflective of the derivative activity through the current period of operations.

6. Principal Risks

In the normal course of business the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

Market Risks

The Fund’s investments in financial derivatives and other financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency and equity risks.

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.

If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest

 

24


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.

The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.

7. Federal Income and Excise Taxes

It is the policy of the Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.

The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.

The tax character of distributions paid were as follows (in thousands):

 

     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
 

Distributions paid from:

     

Ordinary income*

     

Institutional Class

   $ 28,357       $ 8,493   

Y Class

     583         185   

Investor Class

     6,427         197   

Advisor Class

     423         —     

Retirement Class

     46         14   

A Class

     41         4   

C Class

     11         —     

AMR Class

     4,619         2,114   

Long-Term Capital gain

     

Institutional Class

     61,004         —     

Y Class

     1,275         —     

Investor Class

     20,484         —     

Advisor Class

     1,302         —     

Retirement Class

     190         —     

A Class

     120         —     

C Class

     71         —     

AMR Class

     8,358         —     
  

 

 

    

 

 

 

Total distributions paid

   $ 133,311       $ 11,007   
  

 

 

    

 

 

 

 

* For tax purposes, short-term capital gains are considered ordinary income distributions.

 

25


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):

 

Cost basis of investments for federal income tax purposes

   $ 4,229,436   

Unrealized appreciation

     1,225,683   

Unrealized depreciation

     (91,028
  

 

 

 

Net unrealized appreciation or (depreciation)

     1,134,655   

Undistributed ordinary income

     138,320   

Accumulated long-term gain or (loss)

     328,258   

Other temporary differences

     8,081   
  

 

 

 

Distributable earnings or (deficits)

   $ 1,609,314   
  

 

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains (losses) on certain derivative instruments and reclassifications of income from real estate investment securities.

Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences derived from reclassifications of foreign currency and income from real estate investment securities as of October 31, 2013 (in thousands):

 

Paid-in-capital

   $ (59

Undistributed net investment income (loss)

     (1,750

Accumulated net realized gain (loss)

     1,809   

Unrealized appreciation or (depreciation) of investments and futures contracts

     —     

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.

For the year ended October 31, 2013 the Fund did not have capital loss carryovers.

8. Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2013 were $2,213,166 and $1,906,487, respectively (in thousands).

 

26


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

A summary of the Fund’s transactions in the USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):

 

     Affiliate      October 31, 2012
Shares/Fair Value
     Purchases      Sales      October 31, 2013
Shares/Fair Value
     Dividend
Income
 

Direct

     USG Select Fund       $ 5,000       $ 15,000       $ —         $ 20,000       $ 5   

Securities Lending

     USG Select Fund         155,060         886,178         773,609         267,629         —     

9. Securities Lending

The Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark to market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.

To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds, and other short-term investments, provided the investments meet certain quality and diversification requirements. Securities purchased with cash collateral proceeds are listed in the Fund’s Schedule of Investments and the collateral is shown on the Statements of Assets and Liabilities as a payable.

Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retained 80%, 10% and 10%, respectively, of the income generated from securities lending.

While securities are on loan, the Fund continues to receive certain income associated with that security and any gain or loss in the market price that may occur during the term of the loan. In the case of domestic equities, the value of any dividend is received in the form of a substitute payment approximately equal to the dividend. In the case of foreign securities, a negotiated amount is received that is less than the actual dividend, but higher than the dividend amount minus the foreign tax that the Fund would be subject to on the dividend.

Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.

As of October 31, 2013, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):

 

Fair Value
of Securities on Loan
    Non-Cash Collateral     Cash Collateral
Posted by Borrower
 
$ 292,628      $ —        $ 299,683   

 

27


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

Cash collateral is listed in the Fund’s Schedule of Investments and is shown on the Statement of Assets and Liabilities. Income earned on these investments is included in Income derived from securities lending in the Statement of Operations.

Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Fund’s Schedule of Investments or Statement of Assets and Liabilities.

10. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):

For the Year Ended October 31, 2013

 

     Institutional Class     Y Class     Investor Class     Advisor Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     37,159     $ 902,916       3,218     $ 79,916       8,515     $ 204,966       1,651     $ 39,639  

Reinvestment of dividends

     4,074       87,155       76       1,609       1,280       26,702       83       1,725  

Shares redeemed

     (22,965     (558,334     (743     (18,501     (12,103     (280,730     (678     (15,889
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     18,268     $ 431,737       2,551     $ 63,024       (2,308   $ (49,062     1,056     $ 25,475  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Retirement Class     A Class     C Class     AMR Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     241     $ 5,651       379     $ 9,237       137     $ 3,248       6,574     $ 163,072  

Reinvestment of dividends

     12       236       8       151       4       80       609       12,977  

Shares redeemed

     (178     (3,948     (90     (2,136     (17     (396     (3,840     (92,435
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     75     $ 1,939       297     $ 7,252       124     $ 2,932       3,343     $ 83,614  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Totals  
     Shares     Amount  

Shares sold

     57,874     $ 1,408,645  

Reinvestment of dividends

     6,146       130,635  

Shares redeemed

     (40,614     (972,369
  

 

 

   

 

 

 

Net increase in shares outstanding

     23,406     $ 566,911  
  

 

 

   

 

 

 

For the Year Ended October 31, 2012

 

     Institutional Class     Y Class     Investor Class     Advisor Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     23,720     $ 479,712       849     $ 16,953       6,070     $ 119,765       1,164     $ 22,488  

Reinvestment of dividends

     434       8,287       10       185       10       194       —         —    

Shares redeemed

     (18,398     (371,650     (560     (11,286     (15,772     (310,055     (786     (15,262
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     5,756     $ 116,349       299     $ 5,852       (9,692   $ (190,096     378     $ 7,226  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Retirement Class     A Class     C Class     AMR Class  
     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     273     $ 5,134       157     $ 3,079       68     $ 1,319       7,278     $ 139,525  

Reinvestment of dividends

     1       14       —         4       —         —         111       2,114  

Shares redeemed

     (57     (1,121     (57     (1,158     (13     (260     (10,896     (211,293
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     217     $ 4,027       100     $ 1,925       55     $ 1,059       (3,507   $ (69,654
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


American Beacon Small Cap Value FundSM

Notes to Financial Statements

October 31, 2013

 

 

     Totals  
     Shares     Amount  

Shares sold

     39,579     $ 787,975  

Reinvestment of dividends

     566       10,798  

Shares redeemed

     (46,539     (922,085
  

 

 

   

 

 

 

Net decrease in shares outstanding

     (6,394   $ (123,312
  

 

 

   

 

 

 

 

29


American Beacon Small Cap Value Fund SM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class     Y Class  
     Year Ended October 31,     Year Ended October 31,    

August 3

to

Oct. 31,

 
     2013     2012     2011A     2010     2009     2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 21.04      $ 18.75      $ 17.84      $ 14.39      $ 12.53      $ 20.89      $ 18.66      $ 17.76      $ 14.37      $ 14.03   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                    

Net investment income (loss)

     0.25        0.17        0.08        0.08        0.10        0.22        0.15        0.06        0.14        0.00   

Net gains (losses) from investments (both realized and unrealized)

     7.60        2.20        0.92        3.46        1.96        7.55        2.19        0.92        3.36        0.34   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     7.85        2.37        1.00        3.54        2.06        7.77        2.34        0.98        3.50        0.34   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                    

Dividends from net investment income

     (0.27     (0.08     (0.09     (0.09     (0.20     (0.27     (0.11     (0.08     (0.11     —     

Distributions from net realized gains on securities

     (0.58     —         —         —         —         (0.58     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.85     (0.08     (0.09     (0.09     (0.20     (0.85     (0.11     (0.08     (0.11     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 28.04      $ 21.04      $ 18.75      $ 17.84      $ 14.39      $ 27.81      $ 20.89      $ 18.66      $ 17.76      $ 14.37   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     38.59     12.71     5.57     24.71     16.97     38.45     12.58     5.49     24.44     2.42 %E 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                    

Net assets, end of period (in thousands)

   $ 3,430,107     $ 2,189,761     $ 1,843,285     $ 1,470,084     $ 1,040,805     $ 122,850     $ 38,982     $ 29,234     $ 931     $ 1   

Ratios to average net assets:

                    

Expenses before (reimbursements) or recoupments

     0.82     0.82     0.82     0.81     0.84     0.91     0.91     0.94     0.91     1.11 %C 

Expenses, net of (reimbursements) or recoupments

     0.82     0.82     0.82     0.81     0.84     0.91     0.91     0.94     0.91     1.11 %C 

Net investment income (loss), before (reimbursements) or recoupments

     1.01     0.87     0.47     0.52     0.87     0.74     0.77     0.30     0.39     0.03 %C 

Net investment income (loss), net of (reimbursements) or recoupments

     1.01     0.87     0.47     0.52     0.87     0.74     0.77     0.30     0.39     0.03 %C 

Portfolio turnover rate

     48     51     59     59     61     48     51     59     59     61 %D 

 

A On November 30, 2010, Metropolitan West Capital Management LLC was terminated and ceased managing assets of the Small Cap Value Fund.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Annualized.
D Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009.
E Not annualized.

 

30


American Beacon Small Cap Value Fund SM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Investor Class     Advisor Class  
Year Ended October 31,     Year Ended October 31,  
2013     2012     2011A     2010     2009     2013     2012     2011A     2010     2009  
$ 20.47      $ 18.23      $ 17.40      $ 14.05      $ 12.22      $ 20.35      $ 18.15      $ 17.33      $ 13.97      $ 12.13   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
  0.18        0.11        0.02        0.03        0.08        0.14        0.06        (0.01     0.01        0.06   
  7.38        2.13        0.88        3.37        1.91        7.34        2.14        0.89        3.35        1.90   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  7.56        2.24        0.90        3.40        1.99        7.48        2.20        0.88        3.36        1.96   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
  (0.18     0.00        (0.07     (0.05     (0.16     (0.19     —         (0.06     —         (0.12
  (0.58     —         —         —         —         (0.58     —         —         —         —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.76     0.00        (0.07     (0.05     (0.16     (0.77     —         (0.06     —         (0.12

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 27.27      $ 20.47      $ 18.23      $ 17.40      $ 14.05      $ 27.06      $ 20.35      $ 18.15      $ 17.33      $ 13.97   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  38.11     12.31     5.20     24.21     16.59     37.93     12.12     5.07     24.05     16.41

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
$ 934,041     $ 748,550     $ 843,400     $ 911,737     $ 719,239     $ 88,033     $ 44,731     $ 33,032     $ 32,295     $ 28,333  
                 
  1.18     1.18     1.17     1.18     1.15     1.31     1.32     1.32     1.32     1.34
  1.18     1.18     1.17     1.18     1.15     1.31     1.32     1.32     1.32     1.31
  0.73     0.51     0.12     0.17     0.59     0.46     0.35     (0.02 )%      0.03     0.44
  0.73     0.51     0.12     0.17     0.59     0.46     0.35     (0.02 )%      0.03     0.48
  48     51     59     59     61     48     51     59     59     61

 

31


American Beacon Small Cap Value Fund SM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Retirement Class     A Class  
     Year Ended October 31,    

May 1

to

Oct. 31,

    Year Ended October 31,    

May 17

to

Oct. 31,

 
     2013     2012     2011A     2010     2009     2013     2012     2011A     2010  

Net asset value, beginning of period

   $ 20.05      $ 18.01      $ 17.23      $ 13.95      $ 11.58      $ 20.35      $ 18.19      $ 17.39      $ 17.33   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                  

Net investment income (loss)

     0.09        0.06        0.02        0.04        (0.02     0.16        0.08        0.03        0.00   

Net gains (losses) from investments (both realized and unrealized)

     7.21        2.05        0.81        3.28        2.39        7.30        2.12        0.83        0.06   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     7.30        2.11        0.83        3.32        2.37        7.46        2.20        0.86        0.06   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                  

Dividends from net investment income

     (0.14     (0.07     (0.05     (0.04     —         (0.20     (0.04     (0.06     —    

Distributions from net realized gains on securities

     (0.58     —         —         —         —         (0.58     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.72     (0.07     (0.05     (0.04     —         (0.78     (0.04     (0.06     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 26.63      $ 20.05      $ 18.01      $ 17.23      $ 13.95      $ 27.03      $ 20.35      $ 18.19      $ 17.39   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     37.52     11.77     4.79     23.82     20.47 %E      37.83     12.11     4.92     0.35 %E 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                  

Net assets, end of period (in thousands)

   $ 10,446     $ 6,366     $ 1,817     $ 360     $ 1      $ 13,418     $ 4,064     $ 1,822     $ 18   

Ratios to average net assets:

                  

Expenses before reimbursements

     1.60     1.63     1.62     1.54     1.53 %C      1.35     1.44     1.57     1.28 %C 

Expenses, net of reimbursements

     1.60     1.63     1.62     1.54     1.53 %C      1.32     1.34     1.57     1.28 %C 

Net investment income (loss), before reimbursements

     0.29     0.02     (0.35 )%      (0.20 )%      (0.28 )%C      0.30     0.21     (0.32 )%      0.01 %C 

Net investment income (loss), net of reimbursements

     0.29     0.02     (0.35 )%      (0.20 )%      (0.28 )%C      0.34     0.32     (0.32 )%      0.01 %C 

Portfolio turnover rate

     48     51     59     59     61 %D      48     51     59     59 %F 

 

A On November 30, 2010, Metropolitan West Capital Management LLC was terminated and ceased managing assets of the Small Cap Value Fund.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Annualized.
D Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009.
E Not annualized.
F Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

32


American Beacon Small Cap Value Fund SM

Financial Highlights

(For a share outstanding throughout the period)

 

 

C Class     AMR Class  
Year Ended October 31,    

Sept. 1

to

Oct. 31,

    Year Ended October 31,  
2013     2012     2011A     2010     2013     2012     2011A     2010     2009  
$ 20.07      $ 18.04      $ 17.37      $ 15.62      $ 21.00      $ 18.71      $ 17.76      $ 14.32      $ 12.48   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
  0.03        (0.03     (0.04     (0.01     0.23        0.34        0.13        0.18        0.11   
  7.17        2.06        0.74        1.76        7.66        2.08        0.92        3.38        1.97   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  7.20        2.03        0.70        1.75        7.89        2.42        1.05        3.56        2.08   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
  (0.09     —         (0.03     —         (0.32     (0.13     (0.10     (0.12     (0.24
  (0.58     —         —         —         (0.58     —         —         —         —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.67     —         (0.03     —         (0.90     (0.13     (0.10     (0.12     (0.24

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 26.60      $ 20.07      $ 18.04      $ 17.37      $ 27.99      $ 21.00      $ 18.71      $ 17.76      $ 14.32   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  36.88     11.25     4.06     11.20 %E      38.95     13.00     5.85     25.00     17.30

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
$ 6,396     $ 2,330     $ 1,106     $ 6      $ 502,122     $ 306,545     $ 338,723     $ 320,715     $ 271,066  
               
  2.09     2.21     2.60     2.69 %C      0.56     0.56     0.56     0.57     0.59
  2.07     2.10     2.60     2.10 %C      0.56     0.56     0.56     0.57     0.59
  (0.41 )%      (0.54 )%      (1.36 )%      (1.86 )%C      1.26     1.14     0.72     0.76     1.11
  (0.39 )%      (0.43 )%      (1.36 )%      (1.28 )%C      1.26     1.14     0.72     0.76     1.11
  48     51     59     59 %F      48     51     59     59     61

 

33


American Beacon Funds SM

Privacy Policy and Federal Tax Information

October 31, 2013 (Unaudited)

 

Privacy Policy

The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.

We may collect nonpublic personal information about you from one or more of the following sources:

 

    information we receive from you on applications or other forms;

 

    information about your transactions with us or our service providers; and

 

    information we receive from third parties.

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.

Federal Tax Information

Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2013.

The Fund designated the following items with regard to distributions paid during the fiscal year ended October 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

 

Corporate Dividends Received Deduction

     79.14

Qualified Dividend Income

     100.00

The Small Cap Value Fund designated $92,808,449 as long term capital gains distributions for the year ended October 31, 2013.

Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.

 

34


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.

 

    a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

 

    a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC;

 

    a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

 

    a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group;

 

    any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors;

 

    an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers;

 

    a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts;

 

    a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm;

 

    an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any;

 

    confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

 

    a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities;

 

    a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

 

    a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks;

 

    a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations;

 

    a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds;

 

    a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions;

 

    a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers;

 

    a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

 

    a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

 

    a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf;

 

35


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

    a description of trade allocation procedures among accounts managed by the firm;

 

    a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions;

 

    a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds;

 

    a certification by the firm regarding the reasonable design of its compliance program;

 

    a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review;

 

    confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds;

 

    a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt;

 

    information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

 

    a description of the firm’s affiliation with any broker-dealer;

 

    a discussion of any anticipated change in the firm’s controlling persons; and

 

    verification of the firm’s insurance coverage with regards to the services provided to the Funds.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

 

    a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average;

 

    a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

 

    a comparison of advisory fee rates and expense ratios for comparable mutual funds;

 

    a profit/loss analysis of the Manager;

 

    an analysis of any material complaints received from Fund shareholders;

 

    a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds;

 

    a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds;

 

    a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

 

    a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds;

 

    a description of the Manager’s securities lending practices and the fees received from such practices;

 

    a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

 

    a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund;

 

    a description of how expenses that are not readily identifiable to a particular Fund are allocated; and

 

    confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt.

In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.

 

36


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.

The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement

In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.

In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.

With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

 

37


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.

Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.

In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.

Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.

In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to Each Fund

The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.

The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.

Additional Considerations and Conclusions with Respect to the American Beacon Small Cap Value Fund

In considering the renewal of the Management Agreement for the American Beacon Small Cap Value Fund, the Trustees considered the following additional factors: (1) the American Beacon Small Cap Value Fund outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one- and three-year periods ended March 31, 2013 and had performance equal to the peer group median for the five-year period; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.

 

38


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, MeWhinney & Strauss, LLC (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”), Dreman Value Management, LLC (“Dreman”), Hotchkis and Wiley Capital Management LLC (“Hotchkis”), Opus Capital Group, LLC (“Opus”), and The Boston Company Asset Management, LLC (“TBC”) , the Trustees considered the following additional factors: (1) Barrow and TBC each outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (2) Brandywine outperformed the Lipper performance universe median for the one- and three-year periods ended March 31, 2013, but underperformed for the five- and ten-year periods; (3) Dreman underperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) Hotchkis outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (5) Opus underperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (6) the Manager’s explanation that Brandywine’s underperformance was due in part to its underperformance compared to its peers in 2009 when it focused on small capitalization companies with earnings which generally underperformed those with negative earnings or no earnings that year, and Brandywine’s underperformance in 2010 and 2012 significantly impacted period results; (7) the Manager’s explanation that Opus’ underperformance was due to the underperformance of its portfolio in 2009 when companies with negative earnings or no earnings performed better than companies with positive earnings and during 2012 when Opus’ high quality investment approach was not favored by the market, though this approach historically has provided long-term outperformance and downside protection and the Manager’s belief that the portfolio is currently well positioned to outperform when the strategy returns to favor; (8) the Manager’s explanation that Dreman’s underperformance was due primarily to its underperformance in 2012; (9) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (10) the Manager’s recommendation to continue to retain each subadvisor.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Small Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Small Cap Value Fund.

 

39


Trustees and Officers of the American Beacon Funds

(Unaudited)

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES      
   Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
Gerard J. Arpey** (55)    Trustee since 2012    Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).
Alan D. Feld*** (76)    Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).
NON-INTERESTED TRUSTEES    Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
W. Humphrey Bogart (69)    Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Brenda A. Cline (52)    Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Eugene J. Duffy (59)    Trustee since 2008    Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Thomas M. Dunning (71)    Trustee since 2008    Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Richard A. Massman (70)   

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).

 

40


Trustees and Officers of the American Beacon Funds SM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Barbara J. McKenna, CFA (50)    Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).
R. Gerald Turner (67)    Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012).
Paul J. Zucconi,CPA (73)    Trustee since 2008    Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-Present); Director, Titanium Metals Corporation (producer of titanium melted and mill products) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
OFFICERS      
   Term   
   One Year   
Gene L. Needles, Jr. (58)   

President since 2009

Executive Vice President

since 2009

   President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors.
Rosemary K. Behan (54)   

VP, Secretary and

Chief Legal

Officer since 2006

   Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008 – present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present).
Brian E. Brett (53)    VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).
Wyatt L. Crumpler (47)    VP since 2007    Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc.
Erica Duncan (43)    VP Since 2011    Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM.
Michael W. Fields (59)    VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).
Melinda G. Heika (52)   

Treasurer since

2010

   Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 – Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present).
Terri L. McKinney (49)    VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.
Jeffrey K. Ringdahl (38)    VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007).

 

41


Trustees and Officers of the American Beacon Funds SM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Samuel J. Silver (50)    VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.
Christina E. Sears (42)   

Chief Compliance

Officer since 2004

and Asst. Secretary since 1999

   Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc.
John J. Okray (39)    Asst. Secretary since 2010    Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010).
Sonia L. Bates (56)    Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc.

 

* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the board may determine to grant one or more annual exemptions to this requirement.
** Mr. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager.
*** Mr. Feld is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to the Manager and one or more of the Trust’s sub-advisors.

 

42


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43


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44


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45


LOGO

 

 

Delivery of Documents

eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

 

LOGO    LOGO

By E-mail:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

      
  
LOGO    LOGO

By Telephone:

Institutional, Y, Investor, Advisor and Retirement Classes

Call (800) 658-5811

AMR ClassSM

Call (800) 345-2345

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

      
  

Availability of Quarterly Portfolio Schedules

 

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 202-551-8090. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month.

  

Availability of Proxy Voting Policy and Records

 

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.

 

American Beacon Funds and American Beacon Small Cap Value Fund are service marks of American Beacon Advisors, Inc.

AR 10/13


LOGO


About American Beacon Advisors

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

Contents

 

President’s Message

     1   

Market and Performance Overviews

     2-8   

Schedules of Investments
Emerging Markets Fund

     11   

    International Equity Fund

     16   

Financial Statements

     20   

Notes to the Financial Statements

     24   

Financial Highlights

     40   

Additional Information

     Back Cover   
 

 

The Emerging Markets Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The risks of investing in foreign securities are heightened when investing in emerging markets. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

The International Equity Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

 

American Beacon Funds    October 31, 2013


LOGO   

Dear Shareholders,

 

The biggest single change in the life of the global stock markets over the past 12 months may have stemmed from a U.S. event: Ben Bernanke’s announcement in May that the Federal Reserve would begin considering how to end its monthly asset purchases. International stocks, particularly those in emerging markets, went into a prolonged sell-off, not just because of concerns about the strength of the U.S. stock market but concerns about rising interest rates as well.

 

But the recent changes in emerging markets go beyond the taper, and may simply reflect maturing economies. As Ruchir Sharma of Morgan Stanley Investment Management (a sub-advisor to the American Beacon Emerging Markets Fund) points out in his book Breakout Nations, boom economies begin to slow from 9% to 10% annual growth down to 5% or 6% when their per capita income reaches a middle-class level. Currently, a middle-class income in emerging markets is about $4,000 a year.

The economies of the BRIC countries – Brazil, Russia, India, China – may be slowing down now because of that middle-class barrier. Though these countries have been driving the emerging markets for the past decade, the global economy could be turning a corner now, with new economies stepping up to fuel the world’s growth.

We believe it takes a seasoned hand to navigate the complexities of an ever-changing global economy. That’s why we have some of the world’s most respected international asset managers as sub-advisors to the American Beacon International Equity Fund and the American Beacon Emerging Markets Fund.

For the 12 months ended October 31, 2013:

 

    The American Beacon Emerging Markets Fund (Investor Class) returned 7.89%.

 

    The American Beacon International Equity Fund (Investor Class) returned 27.73%.

Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.

 

Best Regards,
LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

1


Emerging Markets Overview

October 31, 2013 (Unaudited)

 

 

For the 12-month period that ended October 31, 2013, emerging markets trailed their developed market counterparts. However, starting in August, emerging markets outperformed developed-market equities for three months in a row, as measured by the MSCI Emerging Markets Index and the MSCI World Index, respectively. For the 12-month period as a whole, the MSCI Emerging Markets Index increased by 6.53% (in U.S. dollars).

Within emerging markets, a key contributor to performance at the end of 2012 had been the decidedly more positive tone of economic data from China, which alleviated concerns that the world’s second-largest economy would succumb to a sharp slowdown. The country’s manufacturing sector continued to expand, consumer confidence remained stable and both retail sales and electricity generation were on the rise, providing more evidence that China’s recovery would extend into 2013. Notable reforms also continued in India, where select industries were opened up to foreign investment, creating a more promising long-term market environment.

The rally carried through to the beginning of 2013, helped by news that reinforced the global economic recovery. Headlines from Europe were encouraging, but sentiment was later tempered when a hotly contested bailout of the Cypriot financial system added to fears that the eurozone’s debt crisis could be deepening. Meanwhile, China’s manufacturing sector extended its recovery, albeit at a mild pace, strengthening hopes for a more robust economy as the country completed a key leadership transition. By the end of the first quarter, India’s central bank cut rates and offered very dovish rhetoric for continued easing despite higher inflation, which negatively affected the market.

 

By the second quarter, volatility set in as investors pondered the end of the easy-money era. In May, when U.S. Federal Reserve chairman Ben Bernanke indicated that the central bank could begin winding down its bond-buying programs, the 10-year Treasury yield spiked. This caused the carry trade, which had supported emerging-market equities and currencies, to unwind quickly. Countries with sizable current account deficits and some dependency on foreign investment to fund such a profile were hit hardest – particularly India, Indonesia, Brazil, South Africa and Turkey.

Eventually, selling pressure abated toward the end of the summer due to a number of positive factors. Supportive signs included relatively consistent data supporting a reacceleration of China’s economy, fairly aggressive government policy responses in some of the markets with the weakest currencies, including India, Indonesia and Turkey, and the U.S. Federal Reserve stepping back from its plan to begin tapering its quantitative-easing policy. At the same time, the broader global economic outlook also improved, with economies in the U.S., Japan and Europe showing signs of growth.

 

 

2


American Beacon Emerging Markets FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Emerging Markets Fund (the “Fund”) returned 7.89% for the twelve months ended October 31, 2013. The Fund outperformed the MSCI Emerging Markets Index (the “Index”) return of 6.53% and the Lipper Emerging Markets Funds Index return of 7.83% for the period.

Comparison of Change in Value of a $10,000 Investment

For The Period From 10/31/03 Through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/13

 

    1 Year     5 Years     10 Years     Value of
$10,000
10/31/03-
10/31/13
 

Institutional Class (1,6)

    8.39     14.21     11.26   $ 29,058   

Y Class (1,2,6)

    8.22     14.09     11.20     28,911   

Investor Class (1,6)

    7.89     13.77     10.88     28,090   

A Class with sales
charge (1,3,6)

    1.72     12.41     10.22     28,064   

A Class without sales
charge (1,3,6)

    7.94     13.75     10.87     26,459   

C Class with sales
charge (1,4,6)

    6.06     13.21     10.61        27,403   

C Class without sales
charge (1,4,6)

    7.06     13.21     10.61     27,403   

AMR Class (1,6)

    8.34     14.29     11.44     29,542   

MSCI Emg Mkts
Index (5)

    6.53     15.34     12.41     32,228   

Lipper Emg Mkts Funds Index (5)

    7.83     15.39     11.99     31,029   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of the date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
3. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 5.75%.
4. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
5. The MSCI Emerging Markets Index is a market capitalization weighted index composed of companies that are representative of the market structure of developing countries in Latin America, Asia, Eastern Europe, the Middle East and Africa. The Lipper Emerging Markets Funds Index tracks the results of the 30 largest mutual funds in the Lipper Emerging Markets Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
6. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and AMR Class shares was 1.51%, 1.73%, 1.85%, 2.02%, 3.75%, and 1.25%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund outperformed the Index over the twelve-month period due to stock selection, as country allocation detracted from relative performance for the period.

Stock selections in China and Brazil added value during the period, offsetting the impact of poor selections in Mexico and India. In China, investments in Sinotrans Ltd. (up 64.0%) and Guangzhou Automobile Group (up 84.1%) benefited the Fund. In Brazil, the Fund added value through investment in TIM Participacoes S.A. (up 49.7%). Detractors in Mexico included Desarrolladora Homex SAB (down 91.4%) and Urbi Desarrollos Urbanos SAB (down 85.4%), both of which were held for less than the full twelve-month period. Detractors in India included Indian Oil Corp Ltd. (down 29.9%).

 

 

3


American Beacon Emerging Markets FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

Relative contribution from country allocation was negative for the twelve-month period, as a result of underweighting Taiwan (up 18.1%) and overweighting Brazil (down 1.5%). Underweighting Chile (down 14.6%) – the second-worst performing country in the Index – benefited relative performance during the period.

The Fund’s basic philosophy remains focused on investing in attractively valued companies with above-average earnings growth expectations.

Top Ten Holdings (% Net Assets)

 

Petroleo Brasileiro S.A.

        3.2   

Gazprom OAO

        2.0   

China Mobile Ltd.

        1.9   

KB Financial Group, Inc.

        1.7   

Banco Santander Brasil S.A.

        1.6   

POSCO

        1.5   

Erste Group Bank AG

        1.3   

Lukoil OAO

        1.2   

Samsung Electronics Co. Ltd.

        3.9   

Shinhan Financial Group Co. Ltd.

        1.5   

Total Fund Holdings

     299      

Sector Allocation (% Equities)

 

Financials

     25.8   

Information Technology

     11.9   

Consumer Discretionary

     10.2   

Energy

     10.2   

Industrials

     9.7   

Telecommunication Services

     9.3   

Materials

     8.8   

Consumer Staples

     7.8   

Utilities

     3.7   

Health Care

     2.2   

Private Placement

     0.4   

Country Allocation (% Equities)

 

Hong Kong/China

     19.0   

South Korea

     18.9   

Brazil

     15.4   

India

     9.4   

Taiwan

     6.0   

Russia

     5.5   

Mexico

     4.3   

Turkey

     2.4   

Thailand

     2.4   

Poland

     2.3   

South Africa

     2.2   

Austria

     1.6   

Malaysia

     1.6   

Philippines

     1.4   

Indonesia

     1.3   

Czech Republic

     1.2   

Hungary

     0.9   

United Kingdom

     0.6   

Singapore

     0.5   

Peru

     0.5   

Chile

     0.4   

Switzerland

     0.3   

Netherlands

     0.3   

Colombia

     0.3   

Egypt

     0.3   

Qatar

     0.2   

Argentina

     0.2   

Spain

     0.2   

Japan

     0.2   

United States

     0.1   

United Arab Emirates

     0.1   
 

 

4


American Beacon Emerging Markets FundSM

Fund Expenses

October 31, 2013 (Unaudited)

 

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as sales charges (loads) on purchase payments and redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.

Actual Expenses

The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional

 

Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as redemption fees. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,017.59       $ 6.87   

Hypothetical **

   $ 1,000.00       $ 1,018.40       $ 6.87   

Y Class

        

Actual

   $ 1,000.00       $ 1,016.64       $ 7.37   

Hypothetical **

   $ 1,000.00       $ 1,017.90       $ 7.38   

Investor Class

        

Actual

   $ 1,000.00       $ 1,015.32       $ 9.09   

Hypothetical **

   $ 1,000.00       $ 1,016.18       $ 9.10   

A Class

        

Actual

   $ 1,000.00       $ 1,015.35       $ 9.04   

Hypothetical **

   $ 1,000.00       $ 1,016.23       $ 9.05   

AMR Class

        

Actual

   $ 1,000.00       $ 1,017.44       $ 7.17   

Hypothetical **

   $ 1,000.00       $ 1,018.10       $ 7.17   

C Class

        

Actual

   $ 1,000.00       $ 1,011.11       $ 12.88   

Hypothetical **

   $ 1,000.00       $ 1,012.40       $ 12.88   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.35%, 1.45%, 1.79%, 1.78%, 2.54% and 1.41% for the Institutional, Y, Investor, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

5


International Equity Market Overview

October 31, 2013 (Unaudited)

 

 

The 12-month period through October 31, 2013, marked a time in which most international equity markets rose significantly. A number of macroeconomic events moved markets higher during the period as supportive monetary policy and improving investor sentiment overcame still-muted economic growth.

The beginning of the review period coincided with the onset of new political cycles in economies representing more than half of global economic output. U.S. president Barack Obama won a second term in the White House, senior Communist Party member Xi Jinping was tapped to lead China’s top decision-making body and Shinzo Abe won Japan’s general election, returning to the prime minister’s office.

In Japan, the newly elected prime minister vowed to tackle deflation and economic weakness, bolstering expectations. Japan’s stock market was the pacesetter for the rest of the developed world after Abe took office and the subsequent implementation of an aggressive monetary policy. The temporary resolution of the U.S. fiscal cliff – a combination of tax increases and spending cuts – also buoyed markets into the new year.

Later in 2013, the eurozone’s economy finally expanded after the longest recession since the adoption of the euro, and in Japan, equities were supported by quantitative easing policies coupled with efforts to devalue the yen and combat deflation. However, slowing growth in China and messaging from U.S. policymakers about tapering the bond-buying program were poorly received by markets during the latter part of the second quarter.

 

In the third quarter and through October, equities advanced globally, supported by better economic data in Europe and Asia. In the United States, the much-discussed quantitative easing taper did not occur, leading to strong stock market performance and better gross domestic product numbers. In Europe, German chancellor Angela Merkel won re-election in a show of support for the austerity and growth measures she has spearheaded in response to Europe’s sovereign debt crisis.

Despite tempered economic growth, it was a strong period for stock markets in the developed world. The MSCI EAFE Index rose by 26.9% in the 12 months ended October 31, 2013, as every country and region represented in the MSCI World Index was positive (when measured in U.S. dollars) for the period, with the exception of Israel, which fell 0.3%.

 

 

6


American Beacon International Equity FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the International Equity Fund (the “Fund”) returned 27.73% for the twelve months ended October 31, 2013. The Fund outperformed the MSCI EAFE Index (the “Index”) return of 26.88% and the Lipper International Funds Index return of 24.92% for the period.

Comparison of Change in Value of a $10,000 Investment

For The Period From 10/31/03 Through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/13

 

    1 Year     5 Years     10 Years     Value of
$10,000
10/31/03-
10/31/13
 

Institutional Class (1,8)

    28.14     13.22     8.41   $ 22,418   

Y Class (1,2,8)

    28.04     13.13     8.37     22,332   

Investor Class (1,8)

    27.73     12.83     8.08     21,751   

Advisor Class (1,3,8)

    27.51     12.57     7.82     21,224   

Retirement Class (1,4,8)

    27.22     12.45     7.76     21,114   

A Class with sales charge (1,5,8)

    20.16     11.38     7.38     20,383   

A Class without sales charge (1,5,8)

    27.51     12.71     8.02     21,632   

C Class with sales charge (1,6,8)

    25.56     12.15     7.75     21,099   

C Class without sales charge (1,6,8)

    26.56     12.15     7.75     21,099   

AMR Class (1,8)

    28.56     13.50     8.69     23,016   

Lipper Int’l. Funds Index (7)

    24.92     12.63     8.20     21,987   

MSCI EAFE Index (7)

    26.88     11.99     7.71     21,025   

 

1. Please note the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 8/3/09, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
3. A portion of the fees charged to the Advisor Class of the Fund was waived through 2007. Performance prior to waiving fees was lower than the actual returns shown for periods through 2007.
4. Fund performance for the five-year and ten-year periods represent the total returns achieved by Advisor Class from 10/31/03 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/03.
5. Fund performance for the five-year and ten-year periods represents the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 5.75%.
6. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
7. The Lipper International Funds Index tracks the results of the 30 largest mutual funds in the Lipper International Funds category. Lipper is an independent mutual fund research and ranking service. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. One cannot directly invest in an index.
8. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.73%, 0.81%, 1.10%, 1.32%, 6.41%, 1.30%, 2.13%, and 0.46%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund outperformed the Index over the twelve-month period due to stock selection, as country allocation detracted from relative performance.

 

 

7


American Beacon International Equity FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

Stock selections in the United Kingdom and the Netherlands contributed to the Fund’s relative outperformance. Within the United Kingdom, the Fund added value through investments in Lloyds Banking Group PLC (up 88.8%) and Aviva PLC (up 41.2%). In the Netherlands, Reed Elsevier NV (up 54.5%) and SBM Offshore NV (up 63.2%) benefited relative performance for the period. Stock selections in Japan lagged during the period, including Softbank Corp. (up 41.1%) and Sony Financial Holdings Inc. (down 24.7%). Both stocks were held for less than the full twelve-month period.

From a country allocation perspective, the Fund lost value through overweighting non-Index constituents South Korea and Canada (up 12.7% and 6.0%, respectively), and underweighting Japan (up 34.0%). Underweighting Australia (up 15.5%) contributed positively to relative performance for the year.

Although economic and market conditions vary from period to period, the Fund’s primary strategy of investing in undervalued companies with above-average earnings growth expectations remains consistent.

Top Ten Holdings (% Net Assets)

 

Novartis AG Reg

        2.5   

Sanofi

        2.5   

BNP Paribas

        2.3   

Lloyds Banking Group PLC

        2.0   

Bayer AG Reg

        2.0   

Royal Dutch Shell PLC

        1.9   

Akzo Nobel

        1.7   

Siemens AG Reg

        1.5   

Toyota Motor Corp.

        1.4   

British American Tobacco plc

        1.5   

Total Fund Holdings

     162      

Sector Allocation (% Equities)

 

Financials

     22.7   

Consumer Discretionary

     15.7   

Industrials

     12.7   

Health Care

     11.5   

Energy

     10.8   

Materials

     8.2   

Consumer Staples

     6.8   

Telecommunication Services

     5.4   

Information Technology

     4.9   

Utilities

     1.4   

Country Allocation (% Equities)

 

United Kingdom

     23.8   

France

     12.6   

Japan

     12.4   

Germany

     11.0   

Switzerland

     8.3   

Netherlands

     6.9   

Sweden

     3.4   

Spain

     2.8   

South Korea

     2.7   

Singapore

     2.5   

Italy

     2.4   

Canada

     2.3   

Hong Kong/China

     1.7   

Belgium

     1.3   

Norway

     1.3   

Ireland

     1.0   

Australia

     0.9   

Finland

     0.7   

Luxembourg

     0.6   

Portugal

     0.5   

Denmark

     0.4   

Austria

     0.3   

Greece

     0.2   
 

 

8


American Beacon International Equity FundSM

Fund Expenses

October 31, 2013 (Unaudited)

 

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as sales charges (loads) on purchase payments and redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.

Actual Expenses

The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as redemption fees. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,132.61       $ 3.92   

Hypothetical **

   $ 1,000.00       $ 1,021.53       $ 3.72   

Y Class

        

Actual

   $ 1,000.00       $ 1,132.21       $ 4.68   

Hypothetical **

   $ 1,000.00       $ 1,020.82       $ 4.43   

Investor Class

        

Actual

   $ 1,000.00       $ 1,130.98       $ 5.80   

Hypothetical **

   $ 1,000.00       $ 1,019.76       $ 5.50   

Advisor Class

        

Actual

   $ 1,000.00       $ 1,129.86       $ 6.50   

Hypothetical **

   $ 1,000.00       $ 1,019.11       $ 6.16   

Retirement Class

        

Actual

   $ 1,000.00       $ 1,128.71       $ 7.89   

Hypothetical **

   $ 1,000.00       $ 1,017.80       $ 7.48   

A Class

        

Actual

   $ 1,000.00       $ 1,129.89       $ 6.71   

Hypothetical **

   $ 1,000.00       $ 1,018.90       $ 6.36   

AMR Class

        

Actual

   $ 1,000.00       $ 1,134.81       $ 2.42   

Hypothetical **

   $ 1,000.00       $ 1,022.94       $ 2.29   

C Class

        

Actual

   $ 1,000.00       $ 1,125.42       $ 10.66   

Hypothetical **

   $ 1,000.00       $ 1,015.17       $ 10.11   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.73%, 0.87%, 1.08%, 1.21%, 1.47%, 1.25%, 1.99% and 0.45% for the Institutional, Y, Investor, Advisor, Retirement, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

9


American Beacon FundsSM

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Trustees of

American Beacon Emerging Markets Fund and American Beacon International Equity Fund:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon Emerging Markets Fund and American Beacon International Equity Fund (two of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2013, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Emerging Markets Fund and American Beacon International Equity Fund at October 31, 2013, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

December 30, 2013

 

10


American Beacon Emerging Markets FundSM

Schedule of Investments

October 31, 2013

 

 

    Shares     Fair Value  
          (000’s)  

Argentina - 0.21%

  

Preferred Stocks - (Cost $365)

  

Nortel Inversora S.A., Class B, ADR A

    12,460      $ 268   
   

 

 

 

Austria - 1.54%

   

Common Stocks - (Cost $1,945)

  

 

Erste Group Bank AG

    46,986        1,657   

Vienna Insurance Group AG

    5,774        306   
   

 

 

 

Total Austria

  

    1,963   
   

 

 

 

Brazil - 14.50%

   

Common Stocks - (Cost $18,390)

  

 

Banco Bradesco S.A.

    28,650        459   

Banco do Brasil S.A.

    81,190        1,078   

Banco Santander Brasil S.A., ADRA

    298,350        2,068   

Brasil Insurance Participacoes e Administracao S.A.

    31,600        288   

BRF - Brasil Foods S.A.

    36,674        861   

CCR S.A.

    33,651        280   

Centrais Eletricas Brasileiras S.A., ADRA B

    135,270        427   

Cia de Saneamento Basico do
Estado de Sao Paulo, ADRA

    28,260        300   

Diagnosticos da America S.A.

    55,600        285   

EDP - Energias do Brasil S.A.

    66,800        382   

Embraer S.A., ADRA

    34,580        1,016   

Gerdau S.A., ADRA

    19,150        152   

Grupo BTG Pactual

    10,400        139   

JBS S.A.

    114,900        413   

Magnesita Refratarios S.A.

    67,600        188   

Marfrig Alimentos S.A.

    172,800        351   

Petroleo Brasileiro S.A., ADRA B

    117,390        2,047   

Petroleo Brasileiro S.A., A Shares, ADRA B

    78,999        1,435   

Petroleo Brasileiro S.A.B

    24,160        211   

Raia Drogasil S.A.B

    15,025        110   

Sul America S.A.

    26,243        192   

Telefonica Brasil S.A., ADRA

    53,215        1,180   

TIM Participacoes S.A.

    233,300        1,189   

Ultrapar Participacoes S.A.

    10,372        276   

Vale S.A., ADRA

    27,860        446   

Viver Incorporadora e Construtora S.A.B

    431,588        58   
   

 

 

 

Total Common Stocks

  

    15,831   
   

 

 

 

Preferred Stocks - (Cost $2,154)

  

 

Banco Bradesco S.A.

    36,496        526   

Companhia de Bebidas, ADRA

    13,001        484   

Gerdau S.A.

    23,500        185   

Itau Unibanco Holding S.A.

    9,110        141   

Itau Unibanco Holding S.A., ADRA

    51,938        799   

Petroleo Brasileiro S.A.B

    42,625        389   
   

 

 

 

Total Preferred Stocks

  

    2,524   
   

 

 

 

Convertible Preferred Bond - (Cost $116)

  

Viver Incorporadora e Construtora S.A.B F

    270,118        145   
   

 

 

 

Total Brazil

  

    18,500   
   

 

 

 
    Shares     Fair Value  
          (000’s)  

Chile - 0.35%

  

 

Common Stocks - (Cost $476)

  

 

S.A.C.I. Falabella

    44,469      $ 443   
   

 

 

 

Colombia - 0.23%

  

 

Common Stocks - (Cost $212)

  

 

Grupo de Inversiones Suramericana S.A.

    10,467        207   

Preferred Stocks - (Cost $97)

  

 

Grupo de Inversiones Suramericana S.A.

    4,700        93   
   

 

 

 

Total Colombia

  

    300   
   

 

 

 

Czech Republic - 1.09%

  

 

Common Stocks - (Cost $1,391)

  

 

Komercni Banka A.S.

    1,868        464   

Telefonica Czech Republic A.S.

    56,930        928   
   

 

 

 

Total Czech Republic

  

    1,392   
   

 

 

 

Egypt - 0.31%

  

 

Common Stocks - (Cost $392)

  

 

Eastern Tobacco B

    26,280        393   
   

 

 

 

Hong Kong/China - 17.91%

  

 

Common Stocks - (Cost $22,817)

  

 

Ajisen China Holdings Ltd.

    384,000        403   

Anhui Conch Cement Co., Ltd. H

    153,000        535   

Asia Cement China Holdings Corp.

    91,500        50   

AsiaInfo-Linkage, Inc.B

    69,810        810   

Bank of China Ltd. H

    1,691,000        794   

Beijing Capital International Airport Co. Ltd. H

    562,000        395   

Beijing Enterprises Holdings Ltd.

    18,000        147   

Bosideng International Holdings Ltd.

    3,552,000        816   

Chaoda Modern Agriculture Holdings Ltd.F

    2,200,000        253   

China Communications Services Corp. Ltd. H

    338,000        209   

China Construction Bank H

    1,699,325        1,320   

China Life Insurance Co., Ltd. H

    136,000        361   

China Mengniu Dairy Co., Ltd.

    61,000        267   

China Mobile Ltd.

    233,500        2,452   

China Oilfield Services Ltd. H

    102,000        285   

China Overseas Grand Oceans Group Ltd.

    53,000        63   

China Overseas Land & Investment Ltd.

    64,000        198   

China Pacific Insurance Group Co., Ltd. H

    104,600        377   

China Petroleum & Chemical Corp. H

    202,800        166   

China Power International Development Ltd.

    272,800        107   

China Railway Group Ltd. H

    300,000        170   

China Resources Power Holdings Co., Ltd.

    98,000        257   

China Shenhua Energy Co., Ltd.

    105,000        319   

China Yuchai International Ltd.

    17,000        397   

Chongqing Changan Automobile Co., Ltd.

    31,600        58   

CNOOC Ltd.

    206,000        421   

Cosco International Holdings Ltd.

    1,036,000        448   
 

 

See accompanying notes

 

11


American Beacon Emerging Markets FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

COSCO Pacific Ltd.

     336,592       $ 489   

Dickson Concepts International Ltd.

     280,445         175   

Dongfang Electric Corp. H

     182,800         294   

Dongfeng Motor Group Co., Ltd. H

     244,000         344   

First Pacific Co., Ltd.

     917,874         1,044   

Global Bio-chem Technology Group Co., Ltd.B

     1,690,520         131   

Guangzhou Automobile Group Co., Ltd. H

     127,370         151   

Industrial & Commercial Bank of China Ltd. H

     901,555         630   

Lianhua Supermarket Holdings Co., Ltd. H

     480,000         308   

NetEase, Inc., ADRA

     700         47   

NWS Holdings Ltd.

     269,303         422   

Parkson Retail Group Ltd.B

     899,000         307   

People’s Food Holdings Ltd.

     911         1   

PICC Property and Casualty Co., Ltd. H

     239,380         365   

Qihoo 360 Technology Co., Ltd.B

     3,578         296   

Samsonite International S.A.

     155,400         424   

Shanghai Industrial Holdings Ltd.

     151,000         497   

Sihuan Pharmaceutical Holdings Group Ltd.

     184,000         137   

Sino Biopharmaceutical

     188,000         132   

Sinotrans Ltd. H

     6,043,058         1,488   

Sinotrans Shipping Ltd.

     2,868,000         943   

Tencent Holdings Ltd.

     14,400         786   

Tsingtao Brewery Co., Ltd. H

     24,000         196   

Uni-President China Holdings Ltd.

     141,000         141   

Weiqiao Textile Co., Ltd. H

     898,600         548   

Xinhua Winshare Publishing and Media Co., Ltd. H

     341,000         200   

Zhejiang Expressway Co., Ltd. H

     312,000         285   
     

 

 

 

Total Hong Kong/China

  

     22,859   
     

 

 

 

Hungary - 0.88%

  

Common Stocks - (Cost $1,306)

  

Magyar Telekom Telecommunications PLC

     284,733         391   

Richter Gedeon NyrtB

     38,160         726   
     

 

 

 

Total Hungary

  

     1,117   
     

 

 

 

India - 8.82%

     

Common Stocks - (Cost $12,350)

  

Asian Paints Ltd.B

     28,345         249   

Bharat Heavy Electricals Ltd.

     129,720         298   

Glenmark Pharmaceuticals Ltd.

     30,648         281   

Grasim Industries Ltd.

     870         40   

HCL Technologies Ltd.

     13,462         239   

HDFC Bank Ltd.

     34,590         382   

Hindustan Petroleum Corp., Ltd.

     86,120         283   

ICICI Bank Ltd., ADRA

     2,830         106   

ICICI Bank Ltd.

     15,530         284   

Idea Cellular Ltd.

     94,034         263   

India Cements Ltd.

     376,000         306   

Indian Oil Corp Ltd.

     233,370         770   

IndusInd Bank Ltd.

     27,113         197   

ING Bank Ltd.B

     15,352         147   

ITC Ltd.

     72,130         393   

Jubilant Life Sciences Ltd.

     64,530         105   

Maruti Suzuki India Ltd.

     6,030         161   
     Shares      Fair Value  
            (000’s)  

NMDC Ltd.

     195,450       $ 440   

Oriental Bank of Commerce

     47,910         141   

Power Grid Corp. of India Ltd.

     147,120         242   

Punjab National Bank Ltd.

     17,520         156   

Reliance Industries Ltd.

     61,520         917   

Reliance Infrastructure Ltd.

     185,525         1,307   

Rolta India Ltd.

     126,160         129   

Sesa Sterlite Ltd. ADRB

     4,332         56   

Sesa Sterlite Ltd.

     76,014         249   

State Bank of India

     12,120         354   

State Bank of India, GDRC

     2,380         139   

Steel Authority of India Ltd.

     279,710         283   

Sun PharmaceuticalB

     28,898         285   

Tata Chemicals Ltd.B

     144,820         632   

Tata Consultancy Services Ltd.

     13,193         453   

UPL Ltd.B

     274,087         732   

Zee Entertainment Enterprises Ltd.

     53,868         233   
     

 

 

 

Total India

  

     11,252   
     

 

 

 

Indonesia - 1.25%

  

Common Stocks - (Cost $1,898)

  

Aneka Tambang Persero Tbk PT

     407,500         58   

Bank Negara Indonesia Persero Tbk PT

     355,000         151   

Bank Rakyat Indonesia Persero Tbk PT

     80,500         56   

Bank Tabungan Negara Persero Tbk PT

     1,588,510         137   

Gudang Garam Tbk PT

     27,500         90   

Indosat Tbk PT

     467,500         182   

Kalbe Farma Tbk PT

     1,671,000         193   

Matahari Department Store Tbk PT

     189,500         207   

Semen Indonesia PerseroB

     110,500         141   

XL Axiata Tbk PTB

     960,603         381   
     

 

 

 

Total Indonesia

  

     1,596   
     

 

 

 

Japan - 0.22%

  

Common Stocks - (Cost $343)

  

Nexon Co., Ltd.

     24,100         281   
     

 

 

 

Malaysia - 1.48%

  

Common Stocks - (Cost $1,761)

  

Astro Malaysia Holdings BhdB

     226,800         208   

CIMB Group Holdings Bhd

     259,684         616   

Gamuda Bhd

     177,700         274   

Genting Bhd

     94,900         315   

IHH Healthcare Bhd

     149,100         195   

IJM Corp., Bhd

     154,600         284   
     

 

 

 

Total Malaysia

  

     1,892   
     

 

 

 

Mexico - 4.01%

  

Common Stocks - (Cost $6,129)

  

ALFA S.A.B.

     177,845         487   

Alpek SA de C.V.B

     18,000         39   

America Movil, S.A.B. de C.V., Series L, ADRA

     48,858         1,046   

Cemex, S.A.B. de C.V., Series L, ADRA

     130,172         1,378   

Consorcio ARA, S.A.B. de C.V.

     191,100         75   

Desarrolladora Homex, S.A.B. de C.V.B

     456,630         101   

Fomento Economico Mexicano, S.A.B. de C.V., Series B, ADRA

     3,892         363   

Grupo Financiero Banorte, S.A.B. de C.V.

     56,547         362   
 

 

See accompanying notes

 

12


American Beacon Emerging Markets FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Grupo Financiero Santander Mexico, S.A.B. de C.V., ADRA

     25,703       $  363   

Macquarie Mexico Real Estate NPVB

     100,000         184   

Mexichem, S.A.B. de C.V.

     49,316         205   

Urbi Desarrollos Urbanos, S.A.B. de C.V.B F

     1,452,850         119   

Wal-Mart de Mexico, S.A.B. de C.V.

     151,706         394   
     

 

 

 

Total Mexico

  

     5,116   
     

 

 

 

Netherlands - 0.28%

  

  

Common Stocks - (Cost $236)

  

  

Yandex N.V. B

     9,749         359   
     

 

 

 

Peru - 0.49%

  

  

Common Stocks - (Cost $610)

  

  

Credicorp Ltd.

     4,540         620   
     

 

 

 

Philippines - 1.29%

  

  

Common Stocks - (Cost $1,382)

  

  

BDO Unibank, Inc.B

     193,930         365   

Bloomberry Resorts Corp.B

     457,700         108   

DMCI Holdings, Inc.B

     211,340         253   

International Container Terminal Services, Inc.B

     115,250         277   

Lt Group, Inc.B

     247,900         95   

Metro Pacific Investments Corp.

     2,622,800         296   

SM Investments Corp.

     12,510         248   
     

 

 

 

Total Philippines

  

     1,642   
     

 

 

 

Poland - 2.14%

  

  

Common Stocks - (Cost $2,354)

  

  

Asseco Poland S.A.

     8,231         134   

Bank Pekao S.A.

     10,714         671   

Bank Zachodni WBK S.A.

     6,502         792   

PKO Bank Polski S.A.

     25,110         333   

Synthos S.A.B

     271,370         460   

Telekomunikacja Polska S.A.

     103,683         336   
     

 

 

 

Total Poland

  

     2,726   
     

 

 

 

Qatar - 0.16%

  

  

Common Stocks - (Cost $209)

  

  

Ooredoo QSC B

     5,439         208   
     

 

 

 

Russia - 5.19%

  

  

Common Stocks - (Cost $6,315)

  

  

Gazprom OAO, ADRA

     270,360         2,521   

Lukoil OAO, ADRA

     24,234         1,587   

Lukoil OAO, ADRA

     197         13   

Mail.ru Group Ltd., GDRB C

     8,370         309   

Megafon, GDRB C

     7,237         263   

Mobile TeleSystems OJSC, ADRA

     12,500         285   

NovaTek OAO, GDRC

     3,000         422   

Rosneft Oil Co., GDRC

     69,310         547   

RusHydro JSC, ADRA

     242,140         409   

Sberbank, ADRA B

     21,530         275   
     

 

 

 

Total Russia

  

     6,631   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Singapore - 0.47%

  

  

Common Stocks - (Cost $487)

  

  

Flextronics International Ltd.B

     21,260       $ 168   

Haw Par Corp., Ltd.

     72,957         436   
     

 

 

 

Total Singapore

  

     604   
     

 

 

 

South Africa - 2.10%

  

  

Common Stocks - (Cost $2,648)

  

  

AngloGold Ashanti Ltd.

     12,210         186   

Barclays Africa Group Ltd.

     28,270         435   

JD Group Ltd.

     73,390         226   

Life Healthcare Group Holdings Ltd.

     39,349         161   

Murray & Roberts Holdings Ltd.B

     63,260         193   

Naspers Ltd., N Shares

     5,341         500   

Pick n Pay Stores Ltd.

     34,271         162   

Sasol Ltd.

     5,978         305   

Standard Bank Group Ltd.

     31,701         403   

Telkom S.A. Ltd.B

     42,340         111   
     

 

 

 

Total South Africa

  

     2,682   
     

 

 

 

South Korea - 17.79%

  

  

Common Stocks - (Cost $18,625)

  

  

Cheil Worldwide, Inc.

     4,970         122   

Cosmax, Inc.B

     1,980         97   

Coway Co., Ltd.

     4,953         283   

Doosan Infracore Co., Ltd.B

     5,450         78   

GS Retail Co., Ltd.B

     3,600         99   

Hana Financial Group, Inc.

     6,050         233   

Hite Jinro Ltd.

     14,357         353   

Hotel Shilla Co., Ltd.B

     2,529         163   

Hyundai Department Store Co., Ltd.

     528         84   

Hyundai Development Co-Engineering & Construction

     11,540         257   

Hyundai Engineering & Construction Co., Ltd.

     5,849         336   

Hyundai Glovis Co., Ltd

     1,107         246   

Hyundai Mobis

     4,176         1,179   

Hyundai Motor Co.

     5,173         1,234   

Hyundai Rotem CompanyB

     120         4   

KB Financial Group, Inc.

     55,244         2,188   

Kia Motors Corp.

     7,970         464   

Korea Electric Power Corp.B

     26,735         715   

Korea Electric Power Corp., ADRA

     11,050         146   

KT Corp., ADRA

     14,860         247   

KT Corp.

     2,250         74   

KT Skylife Co., Ltd.B

     2,070         55   

LG Electronics, Inc.

     6,708         430   

LG Household & Health Care Ltd.

     337         175   

LG UPlus Corp.

     15,200         174   

Lotte Chilsung Beverage Co., Ltd.

     259         384   

Lotte Confectionery Co., Ltd.

     428         734   

Mirae Asset Securities Co., Ltd.

     6,870         232   

Naver Corp.

     166         93   

NCSoft Corp.

     1,208         234   

NongShim Co., Ltd.

     768         186   

Orion Corp.

     118         115   

Paradise Co. Ltd.B

     4,880         125   

POSCO

     6,253         1,866   

Samsung Electronics Co., Ltd.

     3,479         4,806   

Samsung Fire & Marine Insurance Co., Ltd.

     1,172         274   

Shinhan Financial Group Co., Ltd.

     43,412         1,897   
 

 

See accompanying notes

 

13


American Beacon Emerging Markets FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Shinsegae Co., Ltd.

     2,129       $ 537   

SK Hynix, Inc.B

     5,980         180   

SK Telecom Co., Ltd.

     1,146         245   

SK Telecom Co., Ltd., ADRA

     7,640         187   

Tong Yang Life Insurance

     14,260         151   
     

 

 

 

Total Common Stocks

  

     21,682   
     

 

 

 

Preferred Stocks - (Cost $563)

  

  

Hyundai Motor Co., Ltd.

     7,542         821   

Samsung Electronics Co., Ltd.

     213         206   
     

 

 

 

Total Preferred Stocks

  

     1,027   
     

 

 

 

Total South Korea

  

     22,709   
     

 

 

 

Spain - 0.15%

  

  

Common Stocks - (Cost $200)

  

  

Cemex Latam Holdings S.A. B

     25,491         195   
     

 

 

 

Switzerland - 0.32%

  

  

Common Stocks - (Cost $360)

  

  

Coca-Cola HBC AG B

     14,332         414   
     

 

 

 

Taiwan - 5.64%

  

  

Common Stocks - (Cost $6,725)

  

  

Advanced Semiconductor Engineering, Inc.

     150,000         147   

Chailease Holding Co., Ltd.

     96,250         234   

China Life Insurance Co., Ltd.B

     115,617         113   

Cleanaway Co., Ltd.

     16,000         100   

Compal Electronics, Inc.

     1,255,000         983   

CTBC Financial Holding Co., Ltd.

     225,785         153   

Delta Electronics, Inc.

     9,000         47   

Eclat Textile Co., Ltd.

     14,280         157   

First Financial Holding Co., Ltd.

     882,085         546   

Fubon Financial Holding Co., Ltd.

     142,000         208   

Ginko International Co., Ltd.

     12,000         229   

HON HAI Precision Industry Co., Ltd.

     237,964         603   

MediaTek, Inc.

     22,000         301   

Mega Financial Holding Co., Ltd.

     15,000         13   

Nan Ya Printed Circuit Board Corp.

     243,099         328   

Powertech Technology, Inc.

     28,400         51   

Siliconware Precision Industries Co.

     196,000         238   

Siliconware Precision Industries Co., ADRA

     15,000         90   

Simplo Technology Co., Ltd.B

     46,000         226   

Taiwan Cement Corp.

     83,000         121   

Taiwan Semiconductor Manufacturing Co., Ltd.

     390,385         1,456   

TPK Holding Co., Ltd.

     8,000         56   

Transcend Information, Inc.

     50,520         160   

Uni-President Enterprises Corp.

     160,669         306   

United Microelectronics Corp.

     649,226         275   

Young Fast Optoelectronics Co., Ltd.

     56,541         62   
     

 

 

 

Total Taiwan

  

     7,203   
     

 

 

 

Thailand - 2.24%

  

  

Common Stocks - (Cost $2,666)

  

  

Advanced Info Service PCL

     44,700         338   

Bangkok Bank PCL, NVDRD

     66,400         440   

Bangkok Bank PCL

     55,490         367   

Bank of AyudhyaB

     106,200         131   
     Shares      Fair Value  
            (000’s)  

Kasikornbank PCL, NVDRD

     22,500       $ 137   

Kasikornbank PCL

     43,700         272   

Land and Houses PCL, NVDRD

     919,100         325   

Minor International PCLB

     220,300         173   

Robinson Dept Store PLCB

     112,600         191   

Supalai PCL, NVDRD

     23,500         13   

Supalai Public Co., Ltd.B

     367,600         209   

Total Access Communication PCL

     40,400         146   

Total Access Communication PCL, NVDRD

     32,100         116   
     

 

 

 

Total Thailand

  

     2,858   
     

 

 

 

Turkey - 2.27%

  

  

Common Stocks - (Cost $2,765)

  

  

Anadolu Efes Biracilik Ve Malt Sanayii A.S.

     21,452         274   

Asya Katilim Bankasi A.S.

     124,810         127   

Aygaz A.S.

     94,590         433   

Turkcell Iletisim Hizmetleri A.S.B

     32,236         200   

Turkiye Garanti Bankasi A.S.

     200,910         809   

Turkiye Sise ve Cam Fabrikalari A.S.

     162,304         239   

Turkiye Vakiflar Bankasi Tao

     280,147         674   

Ulker Biskuvi Sanayi A.S.

     18,895         145   
     

 

 

 

Total Turkey

  

     2,901   
     

 

 

 

United Arab Emirates - 0.10%

  

  

Common Stocks - (Cost $128)

  

  

Emaar Properties PJSC B

     75,580         125   
     

 

 

 

United Kingdom - 0.60%

  

  

Common Stocks - (Cost $688)

  

  

Eurasia Drilling Co., Ltd., GDRC

     428         18   

JKX Oil & Gas PLCB E

     76,470         91   

Mondi PLC E

     20,750         368   

SABMiller PLC E

     5,676         295   
     

 

 

 

Total United Kingdom

  

     772   
     

 

 

 

United States - 0.11%

  

  

Common Stocks - (Cost $98)

  

  

Eurasia Drilling Co., Ltd., GDR C

     3,279         139   
     

 

 

 

SHORT-TERM INVESTMENTS - 5.25% (Cost $6,702)

   

  

JPMorgan U.S. Government Money Market Fund, Capital Class

     6,701,910         6,702   
     

 

 

 

TOTAL INVESTMENTS - 99.39% (Cost $125,903)

   

     126,862   

OTHER ASSETS, NET OF LIABILITIES - 0.61%

   

     783   
     

 

 

 

TOTAL NET ASSETS - 100.00%

  

   $ 127,645   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  ADR - American Depositary Receipt.
B  Non-income producing security.
C  GDR - Global Depositary Receipt.
D  NVDR - Non Voting Depositary Receipt
E  PLC – Public Limited Company.
F  Valued at fair value pursuant to procedures approved by the Board of Trustees.
 

 

See accompanying notes

 

14


American Beacon Emerging Markets FundSM

Schedule of Investments

October 31, 2013

 

 

Futures Contracts Open on October 31, 2013 (000’s):

 

Description

   Type    Number of
Contracts
   Expiration Date    Contract Value      Unrealized
Appreciation
(Depreciation)
 

Mini MSCI Emg Mkt Dec Futures

   Long    130    December, 2013    $ 6,655      $ 56  
           

 

 

    

 

 

 
            $ 6,655      $ 56  
           

 

 

    

 

 

 

Foreign Currency Contracts Open on October 31, 2013:

 

Type

   Currency      Principal Amount
Covered by Contract
     Settlement
Date
     Counterparty    Unrealized
Appreciation
     Unrealized
(Depreciation)
     Net Unrealized
Appreciation/
(Depreciation)
 

Sell

     JPY         121,344         11/27/2013       BOA    $ 1,060       $ —         $ 1,060   

Sell

     JPY         121,344         11/27/2013       SSB      1,045         —           1,045   
              

 

 

    

 

 

    

 

 

 
               $ 2,105       $ —         $ 2,105   
              

 

 

    

 

 

    

 

 

 

Glossary:

 

Counterparty Abbreviations:

BOA    Bank of America, N.A.
SSB    State Street Bank

Currency Abbreviations:

JPY    Japanese Yen

 

See accompanying notes

 

15


American Beacon International Equity FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Australia - 0.86%

  

Common Stocks - (Cost $14,521)

  

Ansell Ltd.A

     373,033       $ 6,872   

James Hardie Industries PLC, CDI I

     1,100,370         11,367   
     

 

 

 

Total Australia

  

     18,239   
     

 

 

 

Austria - 0.31%

  

Common Stocks - (Cost $5,930)

  

Uniqa Insurance Group AG A

     542,807         6,648   
     

 

 

 

Belgium - 1.18%

  

Common Stocks - (Cost $14,490)

  

Anheuser-Busch InBev N.V.

     187,012         19,450   

KBC Groep N.V.A

     102,483         5,587   
     

 

 

 

Total Belgium

  

     25,037   
     

 

 

 

Canada - 2.17%

  

Common Stocks - (Cost $42,642)

  

Imperial Oil Ltd.AB

     317,800         13,878   

MDA Corp.A B C

     116,600         8,896   

Rogers Communications, Inc., Class B

     218,100         9,898   

Suncor Energy, Inc.

     170,600         6,200   

Talisman Energy, Inc.

     578,700         7,215   
     

 

 

 

Total Canada

  

     46,087   
     

 

 

 

Denmark - 0.34%

  

Common Stocks - (Cost $7,635)

  

Carlsberg A.S. Class BA

     71,799         7,169   
     

 

 

 

Finland - 0.69%

  

Common Stocks - (Cost $8,935)

  

Sampo OYJ, Class A

     312,053         14,783   
     

 

 

 

France - 11.78%

  

Common Stocks - (Cost $184,338)

  

Alstom S.A.

     231,990         8,631   

AXA S.A.

     698,972         17,462   

BNP Paribas

     671,414         49,719   

Cap Gemini S.A.

     143,105         9,414   

Cie de St-Gobain

     157,400         8,280   

Cie Generale des Etablissements Michelin

     90,840         9,499   

France Telecom S.A.

     438,720         6,022   

GDF Suez

     266,014         6,624   

Legrand S.A.

     251,286         14,272   

Peugeot S.A.

     144,287         1,901   

Sanofi

     499,636         53,280   

Technip S.A.

     155,215         16,259   

Total S.A.

     353,909         21,751   

Valeo S.A.C

     165,540         16,442   

Vivendi S.A.

     442,753         11,238   
     

 

 

 

Total France

  

     250,794   
     

 

 

 

Germany - 10.30%

  

Common Stocks - (Cost $146,997)

  

Bayer AG Reg

     344,011         42,757   

Bayerische Motoren Werke AG

     125,228         14,204   

Commerzbank AGA

     401,960         5,168   
     Shares      Fair Value  
            (000’s)  

Daimler AG

     249,594       $ 20,482   

Deutsche Boerse AGA

     98,550         7,420   

Deutsche Post AG Reg

     230,310         7,794   

E.ON AG

     159,760         2,919   

HeidelbergCement AG

     133,810         10,548   

Infineon Technologies AG

     1,022,540         9,898   

Linde AG

     39,207         7,450   

Merck KGaA

     155,275         25,847   

METRO AG

     219,610         10,297   

Muenchener Rueckversicherungs AG Reg

     68,556         14,325   

SAP AG

     105,552         8,292   

Siemens AG Reg

     249,557         31,912   
     

 

 

 

Total Germany

  

     219,313   
     

 

 

 

Greece - 0.16%

  

Common Stocks - (Cost $3,831)

  

Piraeus Bank S.A. A

     1,655,581         3,439   
     

 

 

 

Hong Kong/China - 1.58%

  

Common Stocks - (Cost $26,848)

  

AIA Group Ltd.

     1,662,800         8,439   

Cheung Kong Holdings Ltd.

     7,826         123   

China Merchants Holdings Intl.

     1,320,000         4,673   

CNOOC Ltd.

     7,028,000         14,396   

Hutchison Whampoa Ltd.

     238,000         2,964   

The Link REITC

     10,512         53   

Yue Yuen Industrial Holdings Ltd.

     1,061,167         2,915   
     

 

 

 

Total Hong Kong/China

  

     33,563   
     

 

 

 

Ireland - 0.95%

  

Common Stocks - (Cost $15,891)

  

CRH PLC I

     608,660         14,863   

Smurfit Kappa Group PLC I

     217,948         5,312   
     

 

 

 

Total Ireland

  

     20,175   
     

 

 

 

Italy - 2.25%

  

Common Stocks - (Cost $38,756)

  

Atlantia SpA

     481,177         10,551   

ENI SpA

     877,966         22,231   

Intesa Sanpaolo SpA

     2,847,656         7,080   

Snam Rete Gas SpA

     753,324         3,883   

UniCredit SpA

     563,187         4,236   
     

 

 

 

Total Italy

  

     47,981   
     

 

 

 

Japan - 11.59%

  

Common Stocks - (Cost $187,967)

  

AEON Financial Service Co., Ltd.B

     210,700         6,439   

Asics Corp.

     615,280         10,806   

Daikin Industries Ltd.

     152,900         8,754   

Daiwa House Industry Co. Ltd.

     549,000         10,949   

Don Quijote Co., Ltd.

     263,100         17,445   

Hitachi Ltd.

     1,027,000         7,154   

ITOCHU Corp.

     523,400         6,270   

Japan Tobacco, Inc.

     309,100         11,159   

JGC Corp.

     338,000         12,873   

KDDI Corp.

     336,600         18,177   

Konica Minolta, Inc.

     1,253,500         10,351   

LIXIL Group Corp.

     468,700         10,954   

Nissan Motor Co., Ltd.

     1,060,100         10,587   

Seven & I Holdings Co., Ltd.

     306,700         11,291   

Shin-Etsu Chemical Co., Ltd.

     203,200         11,428   
 

 

See accompanying notes

 

16


American Beacon International Equity FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Sumitomo Mitsui Financial Group, Inc.

     552,900       $  26,513   

Tokyo Electron Ltd.

     133,700         7,302   

Toyota Motor Corp.

     459,000         29,689   

Trend Micro, Inc.A

     284,900         10,546   

Yahoo Japan Corp.

     1,741,500         8,094   
     

 

 

 

Total Japan

        246,781   
     

 

 

 

Luxembourg - 0.55%

     

Common Stocks - (Cost $8,147)

  

RTL Group S.A.

     107,460         11,672   
     

 

 

 

Netherlands - 6.50%

     

Common Stocks - (Cost $108,490)

  

Akzo Nobel

     494,073         35,929   

European Aeronautic Defence and Space Co., N.V.

     175,106         12,033   

ING Groep N.V. CVAA

     1,120,680         14,277   

Koninklijke Philips Electronics N.V.

     240,627         8,521   

PostNL N.V.

     1,768,987         9,276   

Randstad Holding N.V.

     49,730         3,069   

Reed Elsevier N.V.

     1,232,569         24,826   

SBM Offshore N.V.A D

     692,530         14,509   

TNT Express N.V.

     1,003,090         9,261   

Unilever N.V., GDRE

     170,393         6,749   
     

 

 

 

Total Netherlands

        138,450   
     

 

 

 

Norway - 1.18%

     

Common Stocks - (Cost $19,020)

  

Petroleum Geo-Services ASAA

     468,387         5,681   

Statoil ASA

     340,020         8,054   

Telenor ASA

     472,140         11,341   
     

 

 

 

Total Norway

        25,076   
     

 

 

 

Portugal - 0.45%

     

Common Stocks - (Cost $11,695)

  

Galp Energia SGPS S.A.A

     358,780         6,079   

Portugal Telecom SGPS S.A. RegB

     771,300         3,482   
     

 

 

 

Total Portugal

        9,561   
     

 

 

 

Singapore - 2.29%

     

Common Stocks - (Cost $36,088)

  

DBS Group Holdings Ltd.

     1,156,342         15,583   

Flextronics International Ltd.A

     1,277,170         10,077   

Sembcorp Industries Ltd.

     1,160,000         4,968   

Sembcorp Marine Ltd.

     2,058,000         7,455   

Singapore Telecommunications Ltd.

     3,526,000         10,730   
     

 

 

 

Total Singapore

        48,813   
     

 

 

 

South Korea - 2.56%

     

Common Stocks - (Cost $49,087)

  

Hyundai Mobis

     18,049         5,096   

KB Financial Group, Inc., ADRF

     182,978         7,101   

KT&G Corp.

     133,562         9,758   

LG Electronics, Inc.

     119,709         7,674   

POSCO

     34,148         10,190   

Samsung Electronics Co., Ltd.

     1,321         1,824   

Samsung Electronics Co., Ltd., GDRE

     9,122         6,335   

SK Telecom Co., Ltd.

     30,873         6,607   
     

 

 

 

Total South Korea

        54,585   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Spain - 2.64%

     

Common Stocks - (Cost $40,372)

  

Banco Bilbao Vizcaya Argentaria S.A.

     487,022       $ 5,706   

Mediaset Espana Comunicacion S.A.

     776,703         9,491   

Red Electrica Corporation S.A.A

     227,574         14,186   

Repsol S.A.

     312,385         8,389   

Tecnicas Reunidas S.A.

     141,301         7,281   

Telefonica S.A.

     637,086         11,232   
     

 

 

 

Total Spain

        56,285   
     

 

 

 

Sweden - 3.16%

     

Common Stocks - (Cost $48,501)

  

Assa Abloy AB, Class B

     324,195         16,095   

Autoliv, Inc.

     93,749         8,413   

Ericsson LM, Class B

     788,560         9,413   

Getinge AB, Class B

     313,520         9,943   

Skandinaviska Enskilda Banken AB, Class A

     1,011,052         12,247   

Swedbank AB, Class A

     424,858         11,080   
     

 

 

 

Total Sweden

        67,191   
     

 

 

 

Switzerland - 7.82%

     

Common Stocks - (Cost $121,978)

  

ABB Ltd.A

     275,570         7,037   

Credit Suisse Group AG Reg

     251,836         7,835   

GAM Holding AG

     558,826         10,470   

Givaudan S.A. Reg

     7,622         10,820   

Novartis AG Reg

     690,352         53,602   

Roche Holding AG Genusschein

     90,825         25,145   

Swatch Groug AGA

     16,583         10,609   

Swiss Re AG

     104,450         9,175   

UBS AG Reg

     1,150,959         22,275   

Zurich Insurance Group AG

     33,975         9,394   
     

 

 

 

Total Switzerland

        166,362   
     

 

 

 

Taiwan - 0.01%

     

Common Stocks - (Cost $221)

  

Noble Group Ltd.

     283,000         235   
     

 

 

 

United Kingdom - 22.38%

  

  

Common Stocks - (Cost $382,091)

  

Aviva PLC I

     3,338,669         24,042   

BAE Systems PLC I

     1,564,304         11,405   

Balfour Beatty PLC I

     1,430,406         6,553   

Barclays PLC I

     2,745,730         11,605   

BG Group PLC I

     1,000,144         20,422   

BP PLC I

     1,197,900         9,271   

British American Tobacco PLC I

     572,302         31,530   

Carnival PLCA I

     196,777         7,017   

Direct Line Insurance Group

     2,733,421         9,861   

GlaxoSmithKline PLC I

     450,970         11,884   

Glencore Xstrata PLCA I

     2,156,531         11,756   

HSBC Holdings PLC I

     2,236,606         24,622   

Informa PLC I

     1,865,264         16,733   

Kingfisher PLC I

     1,692,500         10,244   

Ladbrokes PLCA I

     1,281,071         3,925   

Lloyds Banking Group PLCA I

     34,898,063         43,382   

Marks & Spencer Group PLC I

     1,472,810         11,890   

Michael Page International PLC I

     776,247         6,031   

Prudential PLC I

     918,984         18,846   

Reed Elsevier PLC I

     745,924         10,453   

Rexam PLCA I

     3,056,344         25,458   
 

 

See accompanying notes

 

17


American Beacon International Equity FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Rio Tinto PLC I

     156,808       $ 7,940   

Rolls-Royce Holdings PLC I

     399,000         7,357   

Royal Dutch Shell PLC, Class A I

     956,362         31,842   

Royal Dutch Shell PLC, Class B I

     256,246         8,873   

Standard Chartered PLC I

     705,899         16,972   

Taylor Wimpey PLC I

     4,741,878         8,379   

Tesco PLC I

     4,505,929         26,313   

Unilever PLC I

     305,046         12,350   

Vodafone Group PLC I

     8,139,006         29,297   
     

 

 

 

Total Common Stocks

  

     476,253   
     

 

 

 

Preferred Stocks - (Cost $55)

  

Rolls-Royce Holdings PLCAG I

     34,314,000         55   
     

 

 

 

Total United Kingdom

  

     476,308   
     

 

 

 

SHORT-TERM INVESTMENTS- 5.02%

  

American Beacon U.S. Government Money Market Select Fund, Select ClassH

     10,000,000         10,000   

JPMorgan U.S. Government Money Market Fund, Capital Class

     96,787,806         96,788   
     

 

 

 

Total Short-Term Investments (Cost $106,788)

  

     106,788   
     

 

 

 

SECURITIES LENDING COLLATERAL - 1.14%

  

American Beacon U.S. Government Money Market Select Fund, Select ClassH

     19,596,044         19,596   

DWS Government and Agency Securities Portfolio, Institutional Class

     4,576,001         4,576   
     

 

 

 

Total Securities Lending Collateral
(Cost $24,172)

  

     24,172   
     

 

 

 

TOTAL INVESTMENTS - 99.86% (Cost $1,655,486)

   

     2,125,507   

OTHER ASSETS, NET OF LIABILITIES - 0.14%

   

     3,067   
     

 

 

 

TOTAL NET ASSETS - 100.00%

  

   $ 2,128,575   
     

 

 

 

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  All or a portion of this security is on loan at October 31, 2013.
C  REIT - Real Estate Investment Trust.
D  Private Placement.
E  GDR - Global Depositary Receipt.
F  ADR - American Depositary Receipt.
G  Valued at fair value pursuant to procedures approved by the Board of Trustees.
H  The Fund is affiliated by having the same investment advisor.
I  PLC - Public Limited Company.

 

See accompanying notes

 

18


American Beacon International Equity FundSM

Schedule of Investments

October 31, 2013

 

 

Futures Contracts Open on October 31, 2013 (000’s):

 

Description

   Type    Number of
Contracts
     Expiration Date    Contract
Value
     Unrealized
Appreciation
(Depreciation)
 

Amsterdam Index Future

   Long      34       November, 2013    $ 3,614      $ 84  

CAC 40 Index Futures

   Long      227       December, 2013      13,219        364  

DAX Index Futures

   Long      39       December, 2013      11,973        444  

FTSE 100 Index Futures

   Long      269       December, 2013      28,993        534  

FTSE MIB Index Futures

   Long      23       December, 2013      3,024        191  

Hang Seng Index Futures

   Long      26       November, 2013      3,897        73  

IBEX 35 Index Future

   Long      34       November, 2013      4,557        76  

OMX 30 Index Futures

   Long      212       November, 2013      4,203        31  

S&P TSX 60 Index Futures

   Long      84       December, 2013      12,342        507  

SPI 200 Futures

   Long      85       December, 2013      10,898        277  

TOPIX Index Futures

   Long      226       December, 2013      27,631        179  
           

 

 

    

 

 

 
            $ 124,351      $ 2,760  
           

 

 

    

 

 

 

Foreign Currency Contracts Open on October 31, 2013:

 

Type

   Currency    Principal
Amount
Covered by
Contract
     Settlement
Date
     Counterparty    Unrealized
Appreciation
     Unrealized
(Depreciation)
    Net Unrealized
Appreciation/
(Depreciation)
 

Buy

   AUD      6,017,212         12/9/2013       RBS    $ 275,908       $ —        $ 275,908   

Buy

   AUD      1,069,349         12/9/2013       BOA      4,104         —          4,104   

Buy

   AUD      1,059,920         12/9/2013       CBK      —           (3,042     (3,042

Sell

   AUD      383,796         12/9/2013       GLM      —           (12,531     (12,531

Buy

   CAD      7,904,045         12/9/2013       GLM      93,675         —          93,675   

Buy

   CAD      1,298,337         12/9/2013       BOA      —           (7,258     (7,258

Buy

   CAD      1,134,488         12/9/2013       CBK      4,241         —          4,241   

Sell

   CAD      491,547         12/9/2013       GLM      —           (3,631     (3,631

Buy

   CHF      8,467,732         12/9/2013       CBK      264,690         —          264,690   

Buy

   CHF      1,204,951         12/9/2013       RBS      —           (4,923     (4,923

Buy

   CHF      973,442         12/9/2013       BOA      —           (9,176     (9,176

Sell

   CHF      487,272         12/9/2013       BOA      —           (14,532     (14,532

Buy

   EUR      18,868,598         12/9/2013       CBK      573,819         —          573,819   

Buy

   EUR      3,300,918         12/9/2013       RBS      —           (282     (282

Buy

   EUR      3,439,418         12/9/2013       SOG      —           (42,747     (42,747

Sell

   EUR      1,098,496         12/9/2013       BOA      —           (29,170     (29,170

Buy

   GBP      17,297,742         12/9/2013       BRC      532,607         —          532,607   

Buy

   GBP      2,886,964         12/9/2013       RBS      —           (8,773     (8,773

Buy

   GBP      1,994,105         12/9/2013       SOG      —           (474     (474

Sell

   GBP      974,611         12/9/2013       BOA      —           (24,927     (24,927

Buy

   JPY      14,829,058         12/9/2013       UAG      165,317         —          165,317   

Buy

   JPY      2,663,145         12/9/2013       BOA      —           (38,669     (38,669

Buy

   JPY      3,365,012         12/9/2013       BOA      —           (6,209     (6,209

Sell

   JPY      828,963         12/9/2013       SOG      —           (11,479     (11,479

Buy

   SEK      2,172,075         12/9/2013       CBK      48,139         —          48,139   

Buy

   SEK      414,309         12/9/2013       RBS      —           (2,908     (2,908

Buy

   SEK      155,424         12/9/2013       BOA      —           (2,391     (2,391

Sell

   SEK      96,523         12/9/2013       RBS      —           (1,793     (1,793
              

 

 

    

 

 

   

 

 

 
               $ 1,962,500       $ (224,915   $ 1,737,585   
              

 

 

    

 

 

   

 

 

 

 

Glossary:

 

Counterparty Abbreviations:

        
BOA    Bank of America, N.A.    GLM    Goldman Sachs Bank    UAG    UBS AG
BRC    Barclays Bank PLC    RBS    Royal Bank of Scotland      
CBK    Citibank, N.A.    SOG    Societe Generale      

Currency Abbreviations:

           
AUD    Australian Dollar    EUR    Euro    SEK    Swedish Krona
CAD    Canadian Dollar    GBP    British Pound      
CHF    Swiss Franc    JPY    Japanese Yen      

 

See accompanying notes

 

19


American Beacon FundsSM

Statements of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

     Emerging
Markets Fund
    International
Equity Fund
 

Assets:

    

Investments in unaffiliated securities, at fair value A D

   $ 126,862     $ 2,095,911  

Investments in affiliated securities, at fair value B

     —         29,596  

Foreign currency, at fair value C

     628       130  

Foreign currency deposits with brokers, at fair value E

     —         14,063  

Cash

     —         6,333  

Deposit with brokers for futures contracts

     434       —    

Receivable for investments sold

     789       4,420  

Receivable for variation margin on open futures contracts

     —         2,760  

Dividends and interest receivable

     215       3,369  

Receivable for fund shares sold

     284       3,961  

Receivable for tax reclaims

     6       797  

Receivable for expense reimbursement (Note 2)

     1       6  

Unrealized appreciation from foreign currency contracts

     2       1,963  

Prepaid expenses

     16       56  

Other assets

     1       —    
  

 

 

   

 

 

 

Total assets

     129,238       2,163,365  
  

 

 

   

 

 

 

Liabilities:

    

Payable for investments purchased

     1,050       3,490  

Payable upon return of securities loaned

     —         24,172  

Payable for fund shares redeemed

     51       4,159  

Payable for variation margin from open futures contracts

     74       —    

Management and investment advisory fees payable

     298       1,820  

Administrative service and service fees payable

     10       607  

Transfer agent fees payable

     2       106  

Custody and fund accounting fees payable

     24       71  

Professional fees payable

     50       34  

Trustee fees payable

     3       24  

Payable for prospectus and shareholder reports

     10       71  

Unrealized depreciation from foreign currency contracts

     —         225  

Other liabilities

     21       11  
  

 

 

   

 

 

 

Total liabilities

     1,593       34,790  
  

 

 

   

 

 

 

Net Assets

   $ 127,645     $ 2,128,575  
  

 

 

   

 

 

 

Analysis of Net Assets:

    

Paid-in-capital

     129,271       1,773,726  

Undistributed net investment income

     903       31,437  

Accumulated net realized (loss)

     (3,546     (151,298

Unrealized appreciation of investments

     959       470,212  

Unrealized appreciation of foreign currency contracts

     2       1,738  

Unrealized appreciation of futures contracts

     56       2,760  
  

 

 

   

 

 

 

Net assets

   $ 127,645     $ 2,128,575  
  

 

 

   

 

 

 

Shares outstanding at no par value (unlimited shares authorized):

    

Institutional Class

     819,718       43,383,926  
  

 

 

   

 

 

 

Y Class

     160,514       21,239,570  
  

 

 

   

 

 

 

Investor Class

     559,459       16,994,193  
  

 

 

   

 

 

 

Advisor Class

     N/A        256,940  
  

 

 

   

 

 

 

Retirement Class

     N/A        35,426  
  

 

 

   

 

 

 

A Class

     41,249       206,529  
  

 

 

   

 

 

 

C Class

     5,198       62,643  
  

 

 

   

 

 

 

AMR Class

     8,858,855       23,217,272  
  

 

 

   

 

 

 

 

See accompanying notes

 

20


American Beacon FundsSM

Statements of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

     Emerging
Markets Fund
     International
Equity Fund
 

Net assets (not in thousands):

     

Institutional Class

   $ 9,961,512      $ 870,729,423  
  

 

 

    

 

 

 

Y Class

   $ 1,962,093      $ 441,945,876  
  

 

 

    

 

 

 

Investor Class

   $ 6,674,975      $ 337,424,064  
  

 

 

    

 

 

 

Advisor Class

   $ N/A       $ 5,231,812  
  

 

 

    

 

 

 

Retirement Class

   $ N/A       $ 754,850  
  

 

 

    

 

 

 

A Class

   $ 491,293      $ 4,113,299  
  

 

 

    

 

 

 

C Class

   $ 61,507      $ 1,219,537  
  

 

 

    

 

 

 

AMR Class

   $ 108,493,177      $ 467,156,090  
  

 

 

    

 

 

 

Net asset value, offering and redemption price per share:

     

Institutional Class

   $ 12.15       $ 20.07   
  

 

 

    

 

 

 

Y Class

   $ 12.22       $ 20.81   

Investor Class

   $ 11.93       $ 19.86   
  

 

 

    

 

 

 

Advisor Class

   $ N/A       $ 20.36   
  

 

 

    

 

 

 

Retirement Class

   $ N/A       $ 21.31   
  

 

 

    

 

 

 

A Class (offering price $12.64 and $21.14, respectively)

   $ 11.91       $ 19.92   
  

 

 

    

 

 

 

C Class

   $ 11.83       $ 19.47   
  

 

 

    

 

 

 

AMR Class

   $ 12.25       $ 20.12   
  

 

 

    

 

 

 

A        Cost of investments in unaffiliated securities

   $ 125,903      $ 1,625,890  

B        Cost of investments in affiliated securities

   $ —        $ 29,596  

C        Cost of foreign currency

   $ 630      $ 128  

D        Fair value of securities on loan

   $ —        $ 22,989  

E         Cost of foreign currency deposits with brokers

   $ —        $ 13,910  

 

See accompanying notes

 

21


American Beacon FundsSM

Statements of Operations

For the year ended October 31, 2013 (in thousands)

 

 

     Emerging
Markets
Fund
    International
Equity Fund
 

Investment Income:

    

Dividend income from unaffiliated securities (net of foreign taxes) A

   $ 2,672     $ 49,458  

Dividend income from affiliated securities

     —         4  

Interest income

     —          44  

Income derived from securities lending

     —          2,127  
  

 

 

   

 

 

 

Total investment income

     2,672       51,633  
  

 

 

   

 

 

 

Expenses:

    

Management and investment advisory fees (Note 2)

     951       5,433  

Administrative service fees (Note 2):

    

Institutional Class

     25       2,183  

Y Class

     6       736  

Investor Class

     22       1,118  

Advisor Class

     —          9  

Retirement Class

     —          2  

A Class

     3       11  

C Class

     —          3  

AMR Class

     49       206  

Transfer agent fees:

    

Institutional Class

     1       339  

Y Class

     —          156  

Investor Class

     5       96  

Advisor Class

     —          1  

A Class

     —          1  

AMR Class

     2       16  

Custody and fund accounting fees

     384       476  

Professional fees

     129       106  

Registration fees and expenses

     62       137  

Service fees (Note 2):

    

Y Class

     2       244  

Investor Class

     18       1,271  

Advisor Class

     —          7  

Retirement Class

     —          1  

A Class

     1       4  

C Class

     —          1  

Distribution fees (Note 2):

    

Advisor Class

     —          7  

Retirement Class

     —          2  

A Class

     2       7  

C Class

     —          7  

Prospectus and shareholder report expenses

     20       170  

Trustee fees

     8       120  

Other expenses

     17       259  
  

 

 

   

 

 

 

Total expenses

     1,707       13,129  
  

 

 

   

 

 

 

Net fees waived and expenses (reimbursed) or recouped (Note 2)

     (46     (88
  

 

 

   

 

 

 

Net expenses

     1,661       13,041  
  

 

 

   

 

 

 

Net investment income

     1,011       38,592  
  

 

 

   

 

 

 

Realized and unrealized gain (loss) from investments:

    

Net realized gain (loss) from: B

    

Investments

     4,224       63,873  

Commission recapture (Note 3)

     1       51  

Foreign currency transactions

     (1,806     (6,336

Futures contracts

     561       17,348  

Change in net unrealized appreciation or (depreciation) of:

    

Investments

     6,371       327,981  

Foreign currency transactions

     (1,130     (1,520

Futures contracts

     86       3,047  
  

 

 

   

 

 

 

Net gain from investments

     8,307       404,444  
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

   $ 9,318     $ 443,036  
  

 

 

   

 

 

 

A        Foreign taxes

   $ 316     $ 4,312  

B        Net of foreign withholding taxes on capital gains

   $ 3     $  —     

 

See accompanying notes

 

22


American Beacon FundsSM

Statements of Changes of Net Assets (in thousands)

 

 

     Emerging Markets Fund     International Equity Fund  
     Year Ended 
October 31,
2013
    Year Ended 
October 31,
2012
    Year Ended
October 31,
2013
    Year Ended
October 31,
2012
 

Increase (Decrease) in Net Assets:

        

Operations:

        

Net investment income

   $ 1,011     $ 1,410     $ 38,592     $ 37,716  

Net realized gain (loss) from investments, futures contracts, and foreign currency transactions

     2,980       (635     74,936       (69,509

Change in net unrealized appreciation or (depreciation) from investments, futures contracts, and foreign currency transactions

     5,327       2,709       329,508       152,378  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in net assets resulting from operations

     9,318       3,484       443,036       120,585  
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

        

Net investment income:

        

Institutional Class

     (92     (105     (16,101     (18,420

Y Class

     (21     (62     (55     (32

Investor Class

     (55     (71     (10,473     (12,396

Advisor Class

     —          —          (106     (28

A Class

     (5     (4     (40     (13

C Class

     —          —          (5     (3

AMR Class

     (1,078     (1,312     (10,213     (14,493

Net realized gain from investments:

        

Institutional Class

     —          (905     —          —     

Y Class

     —          (572     —          —     

Investor Class

     —          (1,012     —          —     

A Class

     —          (46     —          —     

C Class

     —          (1     —          —     

AMR Class

     —          (12,236     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (1,251     (16,326     (36,993     (45,385
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets from capital share transactions

     (2,995     (1,769     269,606       88,615  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets

     5,072       (14,611     675,649       163,815  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets:

        

Beginning of period

     122,573       137,184       1,452,926       1,289,111  
  

 

 

   

 

 

   

 

 

   

 

 

 

End of Period *

   $ 127,645     $ 122,573     $ 2,128,575     $ 1,452,926  
  

 

 

   

 

 

   

 

 

   

 

 

 

*    Includes undistributed net investment income (loss) of

   $ 903     $ 1,040     $ 31,437     $ 37,686  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes

 

23


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Emerging Markets Fund and the American Beacon International Equity Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.

Class Disclosure

Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:

 

Class:

  

Offered to:

Institutional Class   

Investors making an initial investment of $250,000

Y Class    Investors making an initial investment of $100,000
Investor Class    General public and investors investing through an intermediary
Advisor Class    Investors investing through an intermediary
Retirement Class    Investors investing through an intermediary
A Class    General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)
C Class    General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC
AMR Class    Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Funds believe the adoption of these ASUs will not have a material impact on its financial statement disclosures.

 

24


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. Investment assets of the Funds are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities of the Funds. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):

 

     Management
Fee Rate
    Management
Fee
     Amounts paid to
Investment Advisors
     Net Amounts
Retained by Manager
 

Emerging Markets

     0.81   $ 951       $ 893       $ 58   

International Equity

     0.32     5,433         4,315         1,118   

As compensation for services provided by the Manager in connection with securities lending activities, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 25% of such loan fees. This fee is netted against securities lending income in the Statements of Operations. During the year ended October 31, 2013, securities lending fees paid to the Manager on behalf of the International Equity Fund was $241,760.

Administrative Services Agreement

The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor and Retirement Classes, 0.40% of the average daily net assets of the A and C Classes, and 0.05% of the average daily net assets of the AMR Class of the Funds.

Distribution Plans

The Funds, except for the Advisor, Retirement, A, and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Funds shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.

 

25


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Brokerage Commissions

Affiliated entities of an investment advisor to the Emerging Markets Fund received net commissions on purchases and sales of the Fund’s portfolio securities totaling $1,753 for the year ended October 31, 2013.

Investment in Affiliated Funds

The Funds may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”)and the U.S. Government Money Market Fund (the “USG Select Fund”), (collectively the “Select Funds”). Cash collateral received by the Funds in connection with securities lending may be invested in the Select Funds. The Select Funds and the Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended October 31, 2013, fees earned by the Manager from the Select Funds were as follows:

 

     Direct
Investments in
Select Funds
     Securities Lending
Collateral Invested
in Select Funds
     Total  

International Equity

   $ 8,927       $ 30,495       $ 39,422   

Interfund Lending Program

Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the year ended October 31, 2013, the Funds did not utilize the credit facility.

Expense Reimbursement Plan

The Manager voluntary and contractually agreed to reimburse the following Funds to the extent that total operating expenses exceeded a Fund’s expense cap. For the year ended October 31, 2013, the Manager reimbursed expenses as follows:

 

          Expense Caps              

Fund

  

Class

   11/1/12 to
2/28/13
    3/1/13 to
10/31/13
    Reimbursed
(Recouped)
Expenses
    Expiration of
Reimbursements
 

Emerging Markets

   Institutional      1.35     1.35   $ 24,715        2016   

Emerging Markets

   Y      1.45     1.45     6,073        2016   

Emerging Markets

   Investor      1.79     1.79     12,067        2016   

Emerging Markets

   A      1.79     1.79     2,550        2016   

Emerging Markets

   C      2.54     2.54     288        2016   

International Equity

   Institutional*      0.72 %*      0.71 %*      88,916        2016   

International Equity

   Retirement      1.47     1.47     (38     2016   

International Equity

   A      1.25     1.25     (1,015     2016   

International Equity

   C      1.99     1.99     (266     2016   

 

* Voluntary Reimbursement

Of these amounts, $1,192 and $6,195 were a receivable from the Manager to the Emerging Markets and International Equity Funds respectively, at October 31, 2013. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The carryover of excess expenses potentially reimbursable to the Manager are as follows:

 

26


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Fund

   Recovered
Expenses
     Excess Expense
Carryover
     Expiration of
Reimbursed Expenses
 

Emerging Markets

   $ —           67,581         2014   

Emerging Markets

     —           28,833         2015   

International Equity

     1,312         2,051         2014   

International Equity

     7         19,484         2015   

The Manager recouped excess carryover expenses of $31 from the Retirement Class expiring in 2014 and $7 expiring in 2015, $1,015 from the A Class expiring in 2014, and $266 from the C Class expiring in 2014 from the International Equity Fund for the period ended October 31, 2013. The Funds did not record a liability for potential reimbursements, due to the current assessment that a reimbursement is unlikely.

Sales Commissions

The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside collected $424 and $5,192 for Emerging Markets and International Equity Funds, respectively from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $440 in CDSC fees were collected for the Emerging Markets Fund. There were no CDSC fees for the International Equity Fund

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.

Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.

 

27


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Fund determines that developments between the close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of its portfolio securities, the Fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A Fund may also fair value securities in other situations, such as when a particular foreign market is closed, but the Fund is open. The Fund uses outside pricing services to provide it with closing prices and information to evaluate and/or adjust those prices. The Fund cannot predict how often it will use closing prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the Fund routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices.

Valuation Inputs

Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

Level 1 – Quoted prices in active markets for identical securities.

Level 2 – Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.

Level 3 – Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.

Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers. Depending on the product and the terms of the transaction, the fair value of the financial derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation

 

28


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends, and exchange rates. Financial derivatives that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):

 

Emerging Markets*

   Level 1      Level 2      Level 3      Total  

Foreign Preferred Stocks

   $ 3,912       $  —         $  —         $ 3,912   

Foreign Common Stocks

     115,592         372         —           115,964   

Foreign Convertible Preferred Bonds

     —           145         —           145   

U.S. Common Stocks

     139         —           —           139   

Short-Term Investments – Money Markets

     6,702         —           —           6,702   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 126,345       $  517       $  —         $ 126,862   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments - Assets

           

Futures Contracts

   $ 56       $  —         $  —         $ 56   

Forward Currency Contracts

     2         —           —           2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Financial Derivative Instruments - Assets

   $ 58       $ —         $ —         $ 58   
  

 

 

    

 

 

    

 

 

    

 

 

 

International Equity*

   Level 1      Level 2      Level 3      Total  

Foreign Preferred Stocks

   $  —         $ 55       $  —         $ 55   

Foreign Common Stocks

     1,994,492         —           —           1,994,492   

Short-Term Investments – Money Markets

     106,788         —           —           106,788   

Securities Lending Collateral invested in Money Market Funds

     24,172         —           —           24,172   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 2,125,452       $ 55       $  —         $ 2,125,507   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments - Assets

           

Futures Contracts

   $ 2,760       $ —         $ —         $ 2,760   

Foreign Currency Contracts

     —           1,963         —           1,963   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Financial Derivative Instruments - Assets

   $ 2,760       $ 1,963       $ —         $ 4,723   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments - Liabilities

           

Futures Contracts

   $ —         $ —         $ —         $ —     

Foreign Currency Contracts

     —           225         —           225   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Financial Derivative Instruments - Liabilities

   $ —         $ 225       $ —         $ 225   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Refer to the Schedules of Investments for country information.

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

 

29


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Currency Translation

All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in fair values of securities held and is reported with all other foreign currency gains and losses in the Funds’ Statements of Operations.

Dividends to Shareholders

Dividends from net investment income of the Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Commission Recapture

The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations.

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Redemption Fees

The AMR Class of the International Equity Fund and all Classes of the Emerging Markets Fund impose a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Funds. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Funds pro-rata based on their respective net assets.

Other

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

 

30


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

4. Securities and Other Investments

Restricted Securities

Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the year ended October 31, 2013 are disclosed in the Notes to the Schedules of Investments.

Other Investment Company Securities and Other Exchange Traded Products

The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Financial Derivative Instruments

Forward Foreign Currency Contracts

The Funds may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Fund’s securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Funds bear the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Funds also bear the credit risk if the counterparty fails to perform under the contract.

For the six months ended October 31, 2013, the Funds entered into foreign currency exchange contracts primarily for return enhancement and hedging.

The Funds’ foreign currency contract notional dollar values outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following tables illustrate the quarterly volume of foreign currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD (in thousands).

 

     Outstanding Contract Amounts Bought  

For the Quarter Ended

   April 30 2013      October 31, 2013  

Emerging Markets

   $ —         $ —     

International Equity

     200,873         100,516   

 

     Outstanding Contract Amounts Sold  

For the Quarter Ended

   April 30 2013      October 31, 2013  

Emerging Markets

   $ 280       $ 243   

International Equity

     60,938         4,361   

 

31


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Futures Contracts

Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.

Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. A Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

For the six months ended October 31, 2013, the Funds entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.

The Funds’ average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.

 

     Average Futures Contracts Outstanding  

For the Quarter Ended

   April 30, 2013      October 31, 2013  

Emerging Markets

     10         9   

International Equity

     17         9   

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1) (2):

Fair Values of financial instruments on the Statement of Assets and Liabilities as of October 31, 2013:

 

Assets

   Derivative    Emerging
Markets
     International
Equity
 

Unrealized appreciation of foreign currency contracts

   Foreign Exchange Contract    $ 2       $ 1,963   

Unrealized appreciation of futures contracts

   Equity Contract      56         2,760   

Liabilities

   Derivative    Emerging
Markets
     International
Equity
 

Unrealized depreciation of foreign currency contracts

   Foreign Exchange Contract    $ —         $ 225   

Unrealized depreciation of futures contracts

   Equity Contract      —           —     

The effect of financial derivative instruments on the Statements of Operations for the year ended October 31, 2013:

 

Statements of Operations:

   Derivative    Emerging
Markets
    International
Equity
 

Net realized gain (loss) from foreign currency contracts

   Foreign Exchange Contract    $ (1,806   $ (6,336

Net realized gain (loss) from futures contracts

   Equity Contract      561        17,348   

 

32


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Statements of Operations:

   Derivative    Emerging
Markets
    International
Equity
 

Change in net unrealized appreciation or (depreciation) of foreign currency contracts

   Foreign Exchange Contract    $ (1,130   $ (1,520

Change in net unrealized appreciation or (depreciation) of futures contracts

   Equity Contract      86        3,047   

 

(1) See Note 3 in the Notes to Financial Statements for additional information.
(2) The volume of derivative activity described above is reflective of the derivative activity through the current period of operations.

6. Principal Risks

In the normal course of business the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

Market Risks

The Fund’s investments in financial derivatives and other financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency and equity risks.

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.

If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.

The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.

 

33


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

7. Federal Income and Excise Taxes

It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treaded as a single entity for the purpose of determining such qualification.

The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.

The tax character of distributions paid were as follows (in thousands):

 

     Emerging Markets      International Equity  
     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
 

Distributions paid from:

Ordinary income*

           

Institutional Class

   $ 92       $ 105       $ 16,101       $ 18,420   

Y Class

     21         62         55         32   

Investor Class

     55         71         10,473         12,396   

Advisor Class

     —           —           106         28   

A Class

     5         4         40         13   

C Class

     —           —           5         3   

AMR Class

     1,078         1,312         10,213         14,493   

Long-Term Capital gains

           

Institutional Class

     —           905         —           —     

Y Class

     —           572         —           —     

Investor Class

     —           1,012         —           —     

Advisor Class

     —           —           —           —     

A Class

     —           46         —           —     

C Class

     —           1         —           —     

AMR Class

     —           12,236         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 1,251       $ 16,326       $ 36,993       $ 45,385   
  

 

 

    

 

 

    

 

 

    

 

 

 
           

 

* For tax purposes, short-term capital gains are considered ordinary income distributions.

As of October 31, 2013, the components of distributable earnings or (deficit) on a tax basis were as follows (in thousands):

 

34


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

     Emerging
Markets
    International
Equity
 

Cost basis of investments for federal income tax purposes

   $ 129,724      $ 1,671,051   

Unrealized appreciation

     13,083        481,976   

Unrealized depreciation

     (15,945     (27,520
  

 

 

   

 

 

 

Net unrealized appreciation or (depreciation)

     (2,862     454,456   

Undistributed ordinary income

     1,259        34,912   

Accumulated long-term gain or (loss)

     (78     (137,319

Other temporary differences

     55        2,800   
  

 

 

   

 

 

 

Distributable earnings or (deficits)

   $ (1,626   $ 354,849   
  

 

 

   

 

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gain (losses) on certain derivative instruments, the realization for tax purposes of unrealized gain (losses) on investments in passive foreign investment companies, and Section 732 basis adjustments.

Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences derived from foreign currency, gains (losses) from sales of investments in passive foreign investment companies, and Section 732 basis adjustments that have been reclassified as of October 31, 2013 (in thousands):

 

     Emerging
Markets
    International
Equity
 

Paid-in-capital

   $ —        $ 883   

Undistributed net investment income (loss)

     103        (7,848

Accumulated net realized gain (loss)

     (103     6,965   

Unrealized appreciation or depreciation of investments, futures contracts, and foreign currency contracts

     —          —     

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.

 

35


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Losses incurred that will be carried forward under the provisions of the Act for the year ended October 31, 2013 are as follows (in thousands):

 

     Loss Carryforward Character         

Fund

   Short-Term      Long-Term      Total  

Emerging Markets

   $ —         $ 22       $ 22   

As of October 31, 2013 the capital loss carryforward positions of the Fund prior to the provisions of RIC MOD that may be applied against realized net taxable gains in each succeeding year or until their expiration dates, whichever occurs first, are as follows (in thousands):

 

Fund

   2017  

International Equity

   $ 134,561   

The Emerging Markets Fund utilized $1,606 of long-term losses under the provisions of the Act. The International Equity Fund utilized $33,010 of short-term losses and $43,716 of long-term losses under the provisions of the Act. The International Equity Fund utilized $8,584 of loss carryforwards position occurring prior to the provision of the Act (in thousands).

8. Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2013 were as follows (in thousands):

 

     Emerging
Markets
     International
Equity
 

Purchases

   $ 60,840       $ 704,605   

Sales and Maturities

     65,905         445,056   

A summary of the International Equity Fund’s transactions in the USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):

 

     Affiliated Fund    October 31, 2012
Shares/Fair Value
     Purchases      Sales      October 31, 2013
Shares/Fair Value
     Dividend
Income
 

Direct

   USG Select Fund    $ 10,000       $ 25,000       $ 25,000       $ 10,000       $ 4   

Securities Lending

   USG Select Fund      1,598         787,129         769,131         19,596         —     

9. Securities Lending

The International Equity Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark to market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.

To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds, and other short-term investments, provided the investments meet certain quality and diversification requirements. Securities purchased with cash collateral proceeds are listed in the Fund’s Schedule of Investments and the collateral is shown on the Statements of Assets and Liabilities as a payable.

 

36


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retained 80%, 10% and 10%, respectively, of the income generated from securities lending.

While securities are on loan, the Fund continues to receive certain income associated with that security and any gain or loss in the market price that may occur during the term of the loan. In the case of domestic equities, the value of any dividend is received in the form of a substitute payment approximately equal to the dividend. In the case of foreign securities, a negotiated amount is received that is less than the actual dividend, but higher than the dividend amount minus the foreign tax that the Fund would be subject to on the dividend.

Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.

At October 31, 2013, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):

 

Fair Value of

Securities on Loan

   Non-Cash
Collateral
   Cash Collateral
Posted by Borrower

$22,989

   $—      $24,172

Cash collateral is listed in the Fund’s Schedules of Investments and is shown on Statements of Assets and Liabilities. Income earned on these investments is included in Income derived from securities lending in the Statements of Operations.

Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Fund’s Schedules of Investments or Statements of Assets and Liabilities.

10. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Fund (shares and dollars in thousands):

For the Year ended October 31, 2013

 

     Institutional Class     Y Class     Investor Class     A Class  

Emerging Markets Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     167     $ 2,009       81     $ 933       117     $ 1,351       7     $ 75  

Redemption fees

     —         1       —          —          —          1       —          —     

Reinvestment of dividends

     8       92       2       20       5       54       —          2  

Shares redeemed

     (84     (1,000 )      (83     (978 )      (320     (3,650 )      (27     (292 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     91     $ 1,102       —       $ (25     (198   $ (2,244     (20   $ (215
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

37


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

     C Class     AMR Class     Totals  

Emerging Markets Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     9     $ 100       3,016     $ 35,188       3,397     $ 39,656  

Redemption fees

     —         —          —          16       —          18  

Reinvestment of dividends

     —          —          90       1,078       105       1,246  

Shares redeemed

     (4     (43 )      (3,285     (37,952 )      (3,803     (43,915 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     5     $ 57       (179   $ (1,670     (301   $ (2,995
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Institutional Class     Y Class     Investor Class     Advisor Class  

International Equity Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     13,571     $ 239,015       28,347     $ 506,048       7,619     $ 131,317       367     $ 6,480  

Redemption fees

     —          71       —          17       —          40       —          —     

Reinvestment of dividends

     811       13,572       3       42       625       10,387       6       106  

Shares redeemed

     (8,904     (157,386     (7,201     (129,986     (19,776     (337,332     (201     (3,475
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     5,478     $ 95,272       21,149     $ 376,121       (11,532   $ (195,588     172     $ 3,111  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Retirement Class     A Class     C Class     AMR Class  

International Equity Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     35     $ 650       159     $ 2,784       61     $ 1,045       6,551     $ 116,120  

Redemption fees

     —          —          —          —          —          —          —          40  

Reinvestment of dividends

     —          —          2       33       —          5       610       10,213  

Shares redeemed

     (3     (59     (33     (574     (6     (108     (8,018     (139,459
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     32     $ 591       128     $ 2,243       55     $ 942       (857   $ (13,086
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Totals  

International Equity Fund

   Shares     Amount  

Shares sold

     56,710     $ 1,003,459  

Redemption fees

     —          168  

Reinvestment of dividends

     2,057       34,358  

Shares redeemed

     (44,142     (768,043
  

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     14,625     $ 269,606  
  

 

 

   

 

 

 

For the Year Ended October 31, 2012

 

     Institutional Class     Y Class     Investor Class     A Class  

Emerging Markets Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     10     $ 113       115     $ 1,324       124     $ 1,394       33     $ 356  

Redemption fees

     —          1       —          —          —          1       —          —     

Reinvestment of dividends

     98       1,005       60       626       102       1,034       4       40  

Shares redeemed

     (52     (596 )      (429     (4,960 )      (195     (2,137 )      (10     (110 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     56     $ 523       (254   $ (3,010     31     $ 292       27     $ 286  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     C Class     AMR Class     Totals  

Emerging Markets Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     1     $ 4       2,982     $ 34,518       3,265     $ 37,709  

Redemption fees

     —          —          —          12       —          14  

Reinvestment of dividends

     —          1       1,304       13,548       1,568       16,254  

Shares redeemed

     (1     (7 )      (4,187     (47,936 )      (4,874     (55,746 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     —        $ (2     99     $ 142       (41   $ (1,769
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

38


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

     Institutional Class     Y Class     Investor Class     Advisor Class  

International Equity Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     12,127     $ 182,817       53     $ 806       10,041     $ 149,389       31     $ 479  

Redemption fees

     —          8       —          —          —          11       —          —     

Reinvestment of dividends

     1,161       16,128       2       32       886       12,231       2       28  

Shares redeemed

     (8,916     (134,303 )      (10     (150 )      (7,985     (118,644 )      (13     (195 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     4,372     $ 64,650       45     $ 688       2,942     $ 42,987       20     $ 312  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Retirement Class     A Class     C Class     AMR Class  

International Equity Fund

   Shares      Amount     Shares     Amount     Shares      Amount     Shares     Amount  

Shares sold

     3      $ 52       60     $ 920       2      $ 36       4,926     $ 74,189  

Redemption fees

     —           —          —          —          —           —          —          4  

Reinvestment of dividends

     —           —          —          7       —           3       1,043       14,493  

Shares redeemed

     —           (2 )      (12     (182 )      —           (4 )      (7,254     (109,538 ) 
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     3      $ 50       48     $ 745       2      $ 35       (1,285   $ (20,852
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

     Totals  

International Equity Fund

   Shares     Amount  

Shares sold

     27,243     $ 408,688   

Redemption fees

     —          23   

Reinvestment of dividends

     3,094       42,922   

Shares redeemed

     (24,190     (363,018 ) 
  

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     6,147     $ 88,615   
  

 

 

   

 

 

 

 

39


American Beacon Emerging Markets FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
     Year Ended October 31,  
     2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 11.33      $ 12.67      $ 14.55      $ 11.95      $ 9.00   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     0.09        0.12        0.16        0.13        0.05   

Net gains (losses) from investments (both realized and unrealized)

     0.86        0.11        (1.91     2.63        4.42   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     0.95        0.23        (1.75     2.76        4.47   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.13     (0.16     (0.13     (0.16     (0.21

Distributions from net realized gains on securities

     —         (1.41     —          —         (1.31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.13     (1.57     (0.13     (0.16     (1.52
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interests

     0.00 B      0.00 B      0.00 B      0.00 B      —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 12.15      $ 11.33      $ 12.67      $ 14.55      $ 11.95   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return C

     8.39     3.05     (12.18 )%      23.36     60.56
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 9,962      $ 8,256      $ 8,523      $ 9,023      $ 9,494   

Ratios to average net assets:

          

Expenses, before reimbursements

     1.64     1.50     1.55     1.58     1.66

Expenses, net of reimbursements

     1.35     1.33     1.24     1.39     1.66

Net investment income (loss), before reimbursements

     0.58     0.87     0.99     0.58     0.95

Net investment income (loss), net of reimbursements

     0.87     1.04     1.30     0.77     0.95

Portfolio turnover rate

     55     44     101     64     70

 

A  Brandes Investment Partners, LP was added as an investment manager to the Emerging Markets Fund on December 31, 2010.
B  Amounts represent less than $0.01 per share.
C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D  Not annualized.
E  Annualized.
F  Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

40


American Beacon Emerging Markets FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class     A Class  
Year Ended October 31,    

March 1

to

Oct. 31,

    Year Ended October 31,     Year Ended October 31,    

May 17

to

Oct. 31,

 
2013     2012     2011A     2010     2013     2012     2011A     2010     2009     2013     2012     2011A     2010  
  $11.41      $ 12.75      $ 14.53      $ 12.29      $ 11.13      $ 12.44      $ 14.29      $ 11.77      $ 8.85      $ 11.11      $ 12.47      $ 14.27      $ 12.10   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  0.11        0.06        0.13        0.04        0.04        0.08        0.13        0.04        0.04        0.06        0.10        0.06        0.02   
  0.83        0.16        (1.91     2.20        0.84        0.12        (1.93     2.63        4.35        0.82        0.09        (1.85     2.15   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.94        0.22        (1.78     2.24        0.88        0.20        (1.80     2.67        4.39        0.88        0.19        (1.79     2.17   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  (0.13     (0.15     —          —          (0.08     (0.10     (0.05     (0.15     (0.16     (0.08     (0.14     (0.01     —     
  —          (1.41     —          —          —          (1.41     —          —         (1.31     —          (1.41     —          —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.13     (1.56     —          —          (0.08     (1.51     (0.05     (0.15     (1.47     (0.08     (1.55     (0.01     —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.00B        0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      —          0.00 B      0.00 B      0.00 B      0.00 B 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $12.22      $ 11.41      $ 12.75      $ 14.53      $ 11.93      $ 11.13      $ 12.44      $ 14.29      $ 11.77      $ 11.91      $ 11.11      $ 12.47      $ 14.27   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  8.22     2.91     (12.25 )%      18.23 %D      7.89     2.72     (12.65 )%      22.85     60.24     7.94     2.64     (12.58 )%      17.93 %D 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  $1,962      $ 1,837      $ 5,296      $ 13      $ 6,675      $ 8,427      $ 9,030      $ 12,478      $ 10,208      $ 491      $ 685      $ 433      $ 2   
                       
  1.75     1.72     1.68     1.82 %E      1.95     1.84     1.84     1.86     1.96     2.19     2.01     2.97     2.26 %E 
  1.45     1.44     1.33     1.42 %E      1.79     1.75     1.70     1.77     1.96     1.79     1.78     1.46     1.78 %E 
  0.56     (0.05 )%      0.99     0.40 %E      0.26     0.56     0.77     0.29     0.65     0.11     0.46     (0.10 )%      (0.10 )%E 
  0.86     0.23     1.35     0.79 %E      0.42     0.65     0.91     0.37     0.65     0.51     0.69     1.41     0.39 %E 
  55     44     101     64 %F      55     44     101     64     70     55     44     101     64 %F 

 

41


American Beacon Emerging Markets FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     C Class     AMR Class  
     Year Ended October 31,    

Sept. 1

to

Oct. 31,

    Year Ended October 31,  
     2013     2012     2011A     2010     2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 11.05      $ 12.38      $ 14.26      $ 12.89      $ 11.44      $ 12.74      $ 14.62      $ 12.02      $ 9.06   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                  

Net investment income (loss)

     (0.05     0.03        0.09        (0.02     0.12        0.14        0.18        0.11        0.09   

Net gains (losses) from investments (both realized and unrealized)

     0.83        0.07        (1.97     1.39        0.83        0.12        (1.97     2.68        4.43   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     0.78        0.10        (1.88     1.37        0.95        0.26        (1.79     2.79        4.52   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                  

Dividends from net investment income

     —         (0.02     —          —          (0.14     (0.15     (0.09     (0.19     (0.25

Distributions from net realized gains on securities

     —          (1.41     —          —          —          (1.41     —          —          (1.31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     —          (1.43     —          —          (0.14     (1.56     (0.09     (0.19     (1.56
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interests

     0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 11.83      $ 11.05      $ 12.38      $ 14.26      $ 12.25      $ 11.44      $ 12.74      $ 14.62      $ 12.02   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return C

     7.06     1.83     (13.18 )%      10.63 %D      8.34     3.26     (12.30 )%      23.47     61.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                  

Net assets, end of period (in thousands)

   $ 62      $ 5      $ 8      $ 1      $ 108,493      $ 103,363      $ 113,894      $ 128,841      $ 109,985   

Ratios to average net assets:

                  

Expenses, before reimbursements

     3.26     3.74     26.96     4.49 %E      1.39     1.24     1.31     1.34     1.42

Expenses, net of reimbursements

     2.54     2.52     2.41     2.54 %E      1.39     1.24     1.31     1.34     1.42

Net investment income (loss), before reimbursements

     (0.55 )%      (1.19 )%      (23.86 )%      (2.91 )%E      0.90     1.15     1.29     0.79     1.27

Net investment income (loss), net of reimbursements

     0.18     0.03     0.69     (0.96 )%E      0.90     1.15     1.29     0.79     1.27

Portfolio turnover rate

     55     44     101     64 %F      55     44     101     64     70

 

A Brandes Investment Partners, LP was added as an investment manager to the Emerging Markets Fund on December 31, 2010.
B Amounts represent less than $0.01 per share.
C Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D Not annualized.
E Annualized.
F Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

42


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43


American Beacon International Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
     Year Ended October 31,  
   2013     2012A     2011     2010     2009  

Net asset value, beginning of period

   $ 16.05      $ 15.27      $ 16.67      $ 15.51      $ 13.13   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.36        0.41        0.46        0.35        0.54   

Net gains (losses) from investments (both realized and unrealized)

     4.07        0.92        (1.41     1.30        2.78   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     4.43        1.33        (0.95     1.65        3.32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.41     (0.55     (0.45     (0.49     (0.61

Distributions from net realized gains on securities

     —             —         (0.33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.41     (0.55     (0.45     (0.49     (0.94
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interest

     —         —         —         —         0.00 B 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 20.07      $ 16.05      $ 15.27      $ 16.67      $ 15.51   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return C

     28.14     9.25     (5.89 )%      10.81     27.44
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 870,729     $ 608,256     $ 512,093     $ 527,718     $ 489,837  

Ratios to average net assets:

          

Expenses, before reimbursements

     0.72     0.72     0.70     0.71     0.73

Expenses, net of reimbursements

     0.71     0.72     0.70     0.71     0.73

Net investment income (loss), before reimbursements

     2.16     2.85     2.90     2.21     2.76

Net investment income, net of reimbursements

     2.17     2.85     2.90     2.21     2.76

Portfolio turnover rate

     27     60     33     38     41

 

A The Boston Company Asset Management, LLC was added as an investment advisor to the International Equity Fund on December 31, 2011.
B Amount represents less than $0.01 per share.
C Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D Not annualized.
E Annualized.
F Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009.

 

44


American Beacon International Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class  
Year Ended October 31,    

Aug. 3

to

Oct. 31,

    Year Ended October 31,  
2013     2012A     2011     2010     2009     2013     2012A     2011     2010     2009  
$ 16.65      $ 15.82      $ 17.17      $ 15.52      $ 14.89      $ 15.88      $ 15.11      $ 16.42      $ 15.30      $ 12.95   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
  0.62        0.41        0.49        0.04        0.04        0.25        0.38        0.44        0.29        0.37   
  3.97        0.95        (1.50     1.61        0.59        4.09        0.87        (1.44     1.27        2.87   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  4.59        1.36        (1.01     1.65        0.63        4.34        1.25        (1.00     1.56        3.24   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
  (0.43     (0.53     (0.34     —         —          (0.36     (0.48     (0.31     (0.44     (0.56
  —             —         —          —             —         (0.33

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.43     (0.53     (0.34     —         —          (0.36     (0.48     (0.31     (0.44     (0.89

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —         —         —         —         0.00 B      —         —         —         —         0.00 B 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 20.81      $ 16.65      $ 15.82      $ 17.17      $ 15.52      $ 19.86      $ 15.88      $ 15.11      $ 16.42      $ 15.30   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
  28.04     9.15     (6.00 )%      10.63     4.23 %D      27.81     8.77     (6.21 )%      10.36     27.08

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 
$ 441,946     $ 1,512     $ 720     $ 245     $ 1      $ 337,424     $ 453,142     $ 386,560     $ 463,704     $ 445,596  
                 
  0.85     0.80     0.81     0.81     0.69 %E      1.04     1.09     1.07     1.07     1.05
  0.85     0.80     0.81     0.81     0.69 %E      1.04     1.09     1.07     1.07     1.05
  2.55     2.74     3.00     1.44     1.00 %E      1.67     2.50     2.55     1.83     2.45
  2.55     2.74     3.00     1.44     1.00 %E      1.67     2.50     2.55     1.83     2.45
  27     60     33     38     41 %F      27     60     33     38     41

 

45


American Beacon International Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Advisor Class  
     Year Ended October 31,  
     2013     2012A     2011     2010     2009  

Net asset value, beginning of period

   $ 16.36      $ 15.52      $ 16.74      $ 15.20      $ 12.86   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     (0.41     0.09        0.07        0.89        0.31   

Net gains (losses) from investments (both realized and unrealized)

     4.83        1.18        (1.12     0.65        2.86   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     4.42        1.27        (1.05     1.54        3.17   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.42     (0.43     (0.17     —         (0.50

Distributions from net realized gains on securities

     —              —          (0.33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.42     (0.43     (0.17     —          (0.83
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interest

     —          —          —          —          0.00 B 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 20.36      $ 16.36      $ 15.52      $ 16.74      $ 15.20   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return C

     27.51     8.59     (6.35 )%      10.13     26.58
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 5,232     $ 1,397     $ 1,015     $ 746     $ 1,722  

Ratios to average net assets:

          

Expenses, before (reimbursements) or recoupments

     1.20     1.31     1.24     1.26     1.45

Expenses, net of (reimbursements) or recoupments

     1.20     1.31     1.24     1.26     1.44

Net investment income (loss), before (reimbursements) or recoupments

     1.39     2.18     2.52     1.64     2.25

Net investment income, net of (reimbursements) or recoupments

     1.39     2.18     2.52     1.64     2.26

Portfolio turnover rate

     27     60     33     38     41

 

A The Boston Company Asset Management, LLC was added as an investment advisor to the International Equity Fund on December 31, 2011.
B Amount represents less than $0.01 per share.
C Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D Not annualized.
E Annualized.
F Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009.
G Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

46


American Beacon International Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Retirement Class     A Class     C Class  
Year Ended October 31,    

May 1

to

Oct. 31,

    Year Ended October 31,     May 17
to
Oct. 31,
    Year Ended October 31,    

Sept. 1

to

Oct. 31,

 
2013     2012A     2011     2010     2009     2013     2012A     2011     2010     2013     2012A     2011     2010  
$ 16.75      $ 15.44      $ 16.71      $ 15.20      $ 11.78      $ 16.02      $ 15.33      $ 16.40      $ 14.14      $ 15.70      $ 15.21      $ 16.39      $ 14.82   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  0.19        (0.45     0.39        0.22        0.12        0.43        0.48        0.12        0.03        0.52        0.40        0.07        (0.01
  4.37        1.76        (1.44     1.29        3.30        3.89        0.76        (1.14     2.23        3.59        0.71        (1.25     1.58   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  4.56        1.31        (1.05     1.51        3.42        4.32        1.24        (1.02     2.26        4.11        1.11        (1.18     1.57   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  —            (0.22     —          —          (0.42     (0.55     (0.05     —          (0.34     (0.62       —     
  —              —          —          —              —          —              —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —          —          (0.22     —          —          (0.42     (0.55     (0.05     —          (0.34     (0.62     —          —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —          —          —          —          0.00 B      —          —          —          —          —          —          —          —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 21.31      $ 16.75      $ 15.44      $ 16.71      $ 15.20      $ 19.92      $ 16.02      $ 15.33      $ 16.40      $ 19.47      $ 15.70      $ 15.21      $ 16.39   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  27.22     8.48     (6.37 )%      9.93     29.03 %D      27.51     8.62     (6.26 )%      15.98 %D      26.56     7.89     (7.20 )%      10.59 %D 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
$ 755     $ 52     $ 1     $ 1     $ 1      $ 4,113     $ 1,255     $ 461     $ 4      $ 1,220     $ 115     $ 76     $ 1   
                       
  1.46     6.40     3.43     1.66     1.48 %E      1.21     1.29     2.24     1.26 %E      1.95     2.12     7.39     2.60 %E 
  1.47     1.24     1.30     1.47     1.48 %E      1.25     1.26     1.22     1.25 %E      1.99     1.98     1.95     1.99 %E 
  1.78     (3.06 )%      0.17     1.25     1.72 %E      1.73     2.03     1.03     0.96 %E      1.13     1.56     (4.32 )%      (0.81 )%E 
  1.78     2.10     2.30     1.44     1.72 %E      1.69     2.07     2.05     0.98 %E      1.09     1.70     1.11     (0.20 )%E 
  27     60     33     38     41 %F      27     60     33     38 %G      27     60     33     38 %G 

 

47


American Beacon International Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     AMR Class  
     Year Ended October 31,  
   2013     2012A     2011     2010     2009  

Net asset value, beginning of period

   $ 16.08      $ 15.31      $ 16.78      $ 15.61      $ 13.25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.46        0.49        0.53        0.39        0.37   

Net gains (losses) from investments (both realized and unrealized)

     4.04        0.87        (1.44     1.30        2.99   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     4.50        1.36        (0.91     1.69        3.36   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.46     (0.59     (0.56     (0.52     (0.67

Distributions from net realized gains on securities

     —             —          (0.33
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.46     (0.59     (0.56     (0.52     (1.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interest

     —          —          —          —          0.00 B 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 20.12      $ 16.08      $ 15.31      $ 16.78      $ 15.61   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return C

     28.56     9.47     (5.62 )%      11.05     27.70
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 467,156     $ 387,197     $ 388,185     $ 469,414     $ 431,499  

Ratios to average net assets:

          

Expenses, before reimbursements

     0.43     0.45     0.45     0.46     0.48

Expenses, net of reimbursements

     0.43     0.45     0.45     0.46     0.48

Net investment income (loss), before reimbursements

     2.47     3.16     3.15     2.45     3.00

Net investment income, net of reimbursements

     2.47     3.16     3.15     2.45     3.00

Portfolio turnover rate

     27     60     33     38     41

 

A The Boston Company Asset Management, LLC was added as an investment advisor to the International Equity Fund on December 31, 2011.
B Amount represents less than $0.01 per share.
C Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

 

48


American Beacon FundsSM

Privacy Policy and Federal Tax Information

October 31, 2013 (Unaudited)

 

Privacy Policy

The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.

We may collect nonpublic personal information about you from one or more of the following sources:

 

    information we receive from you on applications or other forms;

 

    information about your transactions with us or our service providers; and

 

    information we receive from third parties.

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.

Federal Tax Information

Certain tax information regarding the Funds is required to be provided to shareholders based upon the Funds’ income and distributions for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2013.

The Funds designated the following items with regard to distributions paid during the fiscal year ended October 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Funds to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

 

     Emerging Markets     International Equity  

Corporate Dividends Received Deduction

     0.00     0.00

Qualified Dividend Income

     100.00     100.00

The International Equity Fund designated a foreign tax credit of $4,230,285.

Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.

 

49


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisor Agreements of the Funds (Unaudited)

 

At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.

 

    a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

 

    a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC;

 

    a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

 

    a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group;

 

    any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors;

 

    an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers;

 

    a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts;

 

    a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm;

 

    an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any;

 

    confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

 

    a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities;

 

    a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

 

    a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks;

 

    a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations;

 

    a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds;

 

    a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions;

 

    a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers;

 

    a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

 

    a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

 

    a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf;

 

50


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

    a description of trade allocation procedures among accounts managed by the firm;

 

    a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions;

 

    a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds;

 

    a certification by the firm regarding the reasonable design of its compliance program;

 

    a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review;

 

    confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds;

 

    a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt;

 

    information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

 

    a description of the firm’s affiliation with any broker-dealer;

 

    a discussion of any anticipated change in the firm’s controlling persons; and

 

    verification of the firm’s insurance coverage with regards to the services provided to the Funds.

In addition, the Manager provided the following information specific to the renewal of the Management Agreement:

 

    a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average;

 

    a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

 

    a comparison of advisory fee rates and expense ratios for comparable mutual funds;

 

    a profit/loss analysis of the Manager;

 

    an analysis of any material complaints received from Fund shareholders;

 

    a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds;

 

    a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds;

 

    a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

 

    a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds;

 

    a description of the Manager’s securities lending practices and the fees received from such practices;

 

    a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

 

    a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund;

 

    a description of how expenses that are not readily identifiable to a particular Fund are allocated; and

 

    confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt.

In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.

 

51


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements

The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to the Renewal of the Management Agreement and Each Investment Advisory Agreement

In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.

In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.

With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

 

52


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.

Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.

In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.

Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.

In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to Each Fund

The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.

The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.

Additional Considerations and Conclusions with Respect to the American Beacon Emerging Markets Fund

In considering the renewal of the Management Agreement for the American Beacon Emerging Markets Fund, the Trustees considered the following additional factors: (1) the American Beacon Emerging Markets Fund outperformed the Lipper performance universe median for the five-year period ended March 31, 2013, but underperformed for the one-, three-, and ten-year periods; (2) the

 

53


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

Fund’s performance was equal to the Lipper performance group median for the one-year period ended March 31, 2013, but underperformed for the three- and five-year periods; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having an average expense ratio.

In considering the renewal of the Investment Advisory Agreements with The Boston Company Asset Management, LLC (“TBC”), Morgan Stanley Investment Management Inc., including the MSIM subadvisors Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company (collectively, “MSIM”), and Brandes Investment Partners, L.P. (“Brandes”), the Trustees considered the following additional factors: (1) MSIM outperformed the Lipper performance universe median for the one-, three- and ten-year periods ended March 31, 2013, but underperformed for the five-year period; (2) TBC outperformed the Lipper performance universe median for the five-year period ended March 31, 2013 but underperformed for the one-, three- and ten-year periods; (3) Brandes was added as a subadvisor in December 2010 and outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) the Manager’s explanation that MSIM’s underperformance was due in part to over- and under-weightings of certain sectors and countries in 2008 and 2009; (5) the Manager’s explanation that TBC’s underperformance was due to the underperformance of its portfolio during 2011 and 2012 when TBC’s low valuation investment approach was not favored by the market, though this approach historically has provided long-term outperformance and downside protection and the Manager’s belief that the portfolio is currently well positioned to outperform when its strategy returns to favor; (6) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (7) the Manager’s recommendation to continue to retain each subadvisor.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Emerging Markets Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Emerging Markets Fund.

Additional Considerations and Conclusions with Respect to the American Beacon International Equity Fund

In considering the renewal of the Management Agreement for the American Beacon International Equity Fund, the Trustees considered the following additional factors: (1) the American Beacon International Equity Fund outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one- and five-year periods ended March 31, 2013, but underperformed for the three-year period; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.

In considering the renewal of the Investment Advisory Agreements with Causeway Capital Management LLC (“Causeway”), Lazard Asset Management LLC (“Lazard”), and Templeton Investment Counsel, LLC (“Templeton”), the Trustees considered the following additional factors: (1) Templeton and Causeway each outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) Lazard outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013, but underperformed for the ten-year period; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (4) the Manager’s recommendation to continue to retain each subadvisor.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon International Equity Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon International Equity Fund.

 

54


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES      
   Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
Gerard J. Arpey** (55)    Trustee since 2012    Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).
Alan D. Feld*** (76)    Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).
NON-INTERESTED TRUSTEES    Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
W. Humphrey Bogart (69)    Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Brenda A. Cline (52)    Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Eugene J. Duffy (59)    Trustee since 2008    Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Thomas M. Dunning (71)    Trustee since 2008    Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Richard A. Massman (70)   

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).

 

55


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Barbara J. McKenna, CFA (50)    Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).
R. Gerald Turner (67)    Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012).
Paul J. Zucconi,CPA (73)    Trustee since 2008    Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-Present); Director, Titanium Metals Corporation (producer of titanium melted and mill products) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
OFFICERS      
   Term   
   One Year   
Gene L. Needles, Jr. (58)   

President since 2009

Executive Vice President

since 2009

   President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors.
Rosemary K. Behan (54)   

VP, Secretary and

Chief Legal

Officer since 2006

   Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008 – present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present).
Brian E. Brett (53)    VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).
Wyatt L. Crumpler (47)    VP since 2007    Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc.
Erica Duncan (43)    VP Since 2011    Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM.
Michael W. Fields (59)    VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).
Melinda G. Heika (52)   

Treasurer since

2010

   Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 – Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present).
Terri L. McKinney (49)    VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.
Jeffrey K. Ringdahl (38)    VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007).

 

56


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Samuel J. Silver (50)    VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.
Christina E. Sears (42)   

Chief Compliance

Officer since 2004

and Asst. Secretary since 1999

   Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc.
John J. Okray (39)    Asst. Secretary since 2010    Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010).
Sonia L. Bates (56)    Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc.

 

* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the board may determine to grant one or more annual exemptions to this requirement.
** Mr. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager.
*** Mr. Feld is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to the Manager and one or more of the Trust’s sub-advisors.

 

57


 

LOGO

 

 

Delivery of Documents

eDelivery is NOW AVAILABLE – Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

 

LOGO    LOGO

By E-mail:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

      
  
LOGO    LOGO

By Telephone:

Institutional, Y, Investor, Advisor,

And Retirement Classes

Call (800) 658-5811

AMR ClassSM

Call (800) 345-2345

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

      
  

Availability of Quarterly Portfolio Schedules

 

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 202-551-8090. A complete schedule of each Fund’s portfolio holdings is also made available on the Funds’ website at www.americanbeaconfunds.com approximately twenty days after the end of each month.

  

Availability of Proxy Voting Policy and Records

 

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or summary prospectus.

 

American Beacon Funds, American Beacon Emerging Markets Fund, and American Beacon International Equity Fund are service marks of American Beacon Advisors, Inc.

AR 10/13


LOGO


About American Beacon Advisors

 

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

Contents

 

 

President’s Message

     1   

Market and Performance Overviews

     2-8   

Schedules of Investments:

  

Balanced Fund

     12   

Mid-Cap Value Fund

     20   

Small Cap Value II Fund

     23   

Financial Statements

     26   

Notes to the Financial Statements

     30   

Financial Highlights

     44   

Additional Information

     Back Cover   
 

 

The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

Duration is a measure of price sensitivity relative to changes in interest rates.

 

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

 

American Beacon Funds    October 31, 2013


 

LOGO   

Dear Shareholders,

 

The past 12 months has been a remarkable period for the stock market. It’s not just that the S&P 500 Index increased by 27.18%, although that is pretty remarkable in itself. The S&P 500 has not increased by that much in a single calendar year in a decade, not since 2003.

 

Maybe even more notable was how broad-based the rally was. In addition to the strong returns for the S&P 500 Index during the period under review, the Russell Midcap Index returned 33.79% and the Russell 2000 Index (which represents small-cap companies) returned 36.28%.

The consistency goes beyond asset classes. Among the 11 sectors identified by Morningstar, 10 increased by more than 10% over the 12-month period.

Everywhere you turn, there are opportunities to be had. Here at American Beacon, we’re pleased to have a wide range of funds that delve into nearly every area of the equity markets, giving open-minded investors a multitude of carefully managed choices.

For the 12-month period ended October 31, 2013:

 

    The American Beacon Balanced Fund (Investor Class) returned 18.65%.

 

    The American Beacon Mid-Cap Value Fund (Investor Class) returned 38.69%.

 

    The American Beacon Small Cap Value II Fund (Investor Class) returned 33.55%.

We’re proud to offer all these funds to our shareholders, as part of a broad menu of choices for investors.

Thank you for your continued investment in American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.

Best Regards,

 

LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

1


Domestic Equity Market Overview

October 31, 2013 (Unaudited)

 

 

U.S. stocks posted strong results for the year ended October 31, 2013, with the S&P 500 Index rising 27.18% over those 12 months. An improving economy, low interest rates and recovering investor sentiment helped drive the market higher, as well as the Federal Reserve’s continued quantitative easing program. Equity markets shrugged off incessant political stalemates and climbed even when the government shut down for 16 days in October. Meanwhile, robust corporate earnings growth has kept valuations in check despite the appreciation in stock prices. At current prices, the S&P 500 Index’s price-to-earnings ratio based on consensus earnings is in line with its 15-year median, yet the 10-year Treasury yield is 2.6%, well below its 15-year median.

The 12-month period began with a rough patch. During the first two weeks of November 2012, the S&P 500 Index slipped by more than 5%, as the markets reacted nervously to negotiations over the fiscal cliff. But the index quickly rebounded and gained more than 8% between that point and the end of the year, setting the stage for its gains throughout 2013.

The early part of 2013 proved to be very strong. At the end of the first quarter, the S&P 500 Index finally surpassed its pre-crash high, closing at its highest mark since October 2007. The index gained 14.1% between the first of the year and May 21. On that day, though, Federal Reserve chairman Ben Bernanke indicated that the Fed’s asset-purchasing program would be coming to an end at some point. This first mention of the so-called taper sent shock waves through the market. The S&P 500 Index dropped more than 5% in the space of a month.

Subsequently, June broke a seven-month winning streak for both the S&P 500 and the Nasdaq indexes, but the market quickly found its footing and began to rally at that point. Even with the taper-induced drop-off, by the end of June, the S&P 500 Index had posted its best first half of any year since 1998.

This performance was bolstered by a U.S. economy that appears to have formed a sound foundation with no obvious signs of a contraction in the near term. For perspective, each recession in the past 50 years has been preceded by three conditions: 1) an inverted yield curve, 2) a tight labor market and 3) a positive output gap (actual gross domestic product [GDP] expressed as a percentage of potential GDP). None of these conditions are evident today. In fact, the yield curve is steep, there is considerable slack in the labor market, and the output gap is decidedly negative.

Coming off a disappointing fourth quarter of 2012, in which GDP grew at just 0.4%, GDP bounced back to 1.1% growth in the first quarter of 2013, 2.5% in the second quarter and 2.8% in the third quarter. Unemployment continued to drop in a slow but mostly steady fashion, from 7.8% in November 2012 to 7.3% in October 2013. Although this was good news for the larger economy, the falling unemployment rate made some investors nervous, because Chairman Bernanke has indicated that the economy would be healthy enough for him to end quantitative easing once the unemployment rate reached 7.0%.

For the 12 months that ended October 31, 2013, in addition to the robust performance of the S&P 500 Index, the rally was strong in all areas of market capitalization. The Russell Midcap® Index was up 33.79% and the Russell 2000® Index (which represents small-cap stocks) was up 36.28%.

 

 

2


American Beacon Balanced FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Balanced Fund (the “Fund”) returned 18.65% for the twelve months ended October 31, 2013. The Fund outperformed the 60% Russell 1000® Value/40% Barclays Capital Aggregate Index benchmark return of 15.81% but trailed the Lipper Mixed-Asset Target Allocation Growth Funds Index return of 19.00%.

Comparison of Change in Value of a $10,000 Investment

For The Period from 10/31/03 through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/13

 

     1 Year     5 Years     10 Years     Value of
$10,000
10/31/03-
10/31/13
 

Institutional Class (1,8)

     19.04     13.15     7.50   $ 20,619   

Y Class (1,3,8)

     18.97     13.05     7.46     20,530   

Investor Class (1,8)

     18.65     12.77     7.17     19,984   

Advisor Class (1,2,8)

     18.52     12.59     6.97     19,612   

A Class with sales charge (1,4,8)

     11.66     11.35     6.48     18,742   

A Class without sales charge (1,4,8)

     18.45     12.67     7.12     19,891   

C Class with sales charge (1,5,8)

     16.50     12.10     6.85     19,400   

C Class without sales charge (1,5,8)

     17.50     12.10     6.85     19,400   

AMR Class (1,8)

     19.32     13.45     7.77     21,130   

Balanced Composite Index (6)

     15.81     11.25     6.91     19,508   

Russell 1000 Value Index (7)

     28.29     14.06     7.81     21,208   

Barclays Capital Aggregate Index (7)

     -1.08     6.09     4.78     15,945   

Lipper Mixed-Asset Target Allocation Growth Funds Index (7)

     19.00     12.88     6.96     19,595   

 

1. Please note that the recent growth in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the
  most recent month end, please visit our website at www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/03 up to 5/31/05, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/03. A portion of the fees charged to the Advisor Class of the Fund was waived in 2005. Performance prior to waiving fees was lower than actual returns shown for 2005.
3. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
4. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. A Class has a maximum sales charge of 5.75%.
5. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1% for shares redeemed within one year of the date of purchase.
6. To reflect the Fund’s allocation of its assets between investment grade fixed-income securities and equity securities, the returns of the Russell 1000 Value Index and the Barclays Capital Aggregate Index have been combined in a 60%/40% proportion.
7. The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted values. Russell 1000 Value Index and Russell 1000 Index are a registered trademarks of Frank Russell Company. The Barclays Capital Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Lipper Mixed-Asset Target Allocation Growth Funds Index tracks the results of the 30 largest mutual funds in the Lipper Mixed-Asset Target Allocation Growth Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
8. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, A, C, and AMR Class shares was 0.60%, 0.71%, 0.93%, 1.10%, 1.14%, 1.86%, and 0.33%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.
 

 

3


American Beacon Balanced FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

During the twelve-month period, the Fund’s assets on average were invested 66% in equities (including equitized cash) and 34% in fixed-income securities, ending the period with approximately 65% in equities and 35% in fixed-income securities.

The equity portion of the Fund (excluding equitized cash) returned 32.3%, outperforming the Russell 1000® Value Index (the “Index”) return of 28.3%. The Fund’s equities outperformed the Index as both security selection and sector allocation added value relative to the Index. The Fund’s Financials companies added over 185 basis points (1.85%) to performance. In the Financials sector, Bank of America (up 51.7%), Lincoln National (up 85.4%) and Unum Group (up 59.9%) were the largest contributors. The Fund’s Energy companies also contributed to the Fund’s excess performance. Not owning Exxon Mobil positively impacted performance in the Energy sector. Chevron (up 12.2%) and Halliburton (up 65.9%) also contributed to the Fund’s returns. Poor stock selection in the Consumer Staples sector detracted relative value. Philip Morris International (up 4.7%) and Wal-Mart Stores (up 3.4%) detracted from performance in the Consumer Staples sector.

A significant overweight position in Information Technology, the best performing sector in the Index, added relative value through sector allocation. Underweight positions in Utilities and Materials, two of the poorer performing sectors in the Index, also contributed to the Fund’s returns.

The fixed-income portion of the Fund returned
-0.5% for the twelve-month period, outperforming the Barclays Capital Aggregate Index (the “Barclays Index”) return of -1.1%. During the period, the Fund’s Corporate securities holdings outperformed the Barclays Index. Within Corporates, holdings in the manufacturing and finance sectors added the most relative value, as did a higher allocation in the finance sector. The Fund’s exposure to U.S. Treasuries also contributed to returns. The Fund’s shorter duration mostly had a positive impact on relative performance as rates generally rose over the course of the year.

The sub-advisors continue to focus on the disciplined selection of attractive securities that should allow the Fund to benefit long term.

Top Ten Holdings (% Net Assets)

   

JPMorgan Chase & Co.

      2.3   

Bank of America Corp.

      1.5   

Citigroup, Inc.

      1.3   

Wells Fargo & Co.

      1.5   

Microsoft Corp.

      1.4   

WellPoint, Inc.

      1.3   

Pfizer, Inc.

      1.2   

Merck & Co., Inc.

      1.0   

Johnson & Johnson

      1.0   

BP plc

      1.4   

Total Fund Holdings

    501     

Sector Allocation (% Equities)

  

Financials

      25.7   

Health Care

      14.7   

Energy

      13.5   

Information Technology

      10.3   

Consumer Discretionary

      9.8   

Industrials

      9.8   

Consumer Staples

      6.8   

Utilities

      4.0   

Telecommunication Services

      3.8   

Materials

      1.1   

Manufacturing

      0.4   

Service

      0.2   

Sector Allocation (% Fixed Income)

  

U.S. Treasury

      35.0   

Mortgage-Backed Obligations

      20.2   

Finance

      17.2   

Manufacturing

      5.9   

Agency

      5.3   

Service

      3.8   

Energy

      3.6   

Asset-Backed Obligations

      2.8   

Telecommunications

      1.9   

Utilities

      1.6   

Municipal Obligations

      0.9   

Consumer

      0.9   

Transportation

      0.9   

Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

 

4


American Beacon Mid-Cap Value FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Mid-Cap Value Fund (the “Fund”) returned 38.69% for the twelve months ended October 31, 2013. The Fund outperformed the Russell Midcap® Value Index (the “Index”) return of 33.45% and the Lipper Mid-Cap Value Funds Index return of 34.94% for the same period.

Comparison of Change in Value of a $10,000 Investment

For the Period from 6/30/04* through 10/31/13

 

LOGO

 

* Inception of Fund

 

Total Returns for the Period ended 10/31/13

  

     1 Year     5 Years     Since
Incep.
(6/30/04)
    Value of
$10,000
6/30/04-
10/31/13
 

Institutional Class (1,3,9)

     39.18     22.03     9.57   $ 23,465   

Y Class (1,4,9)

     38.99     21.96     9.53     23,394   

Investor Class (1,2,9)

     38.69     21.85     9.40     23,135   

Advisor Class (1,5,9)

     38.43     21.53     9.21     22,773   

A Class with sales charge (1,6,9)

     30.44     20.03     8.52     21,455   

A Class without sales charge (1,6,9)

     38.39     21.46     9.21     22,764   

C Class with sales charge (1,7,9)

     36.32     20.90     8.94     22,245   

C Class without sales charge (1,7,9)

     37.32     20.90     8.94     22,245   

AMR Class (1,9)

     39.43     22.20     9.72     23,775   

Russell Midcap Value Index(8)

     33.45     18.85     9.76     23,857   

Lipper Mid-Cap Value Funds Index(8)

     34.94     18.64     8.62     21,647   

 

1. Please note that the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the
  fees charged to the AMR Class of the Fund was waived through 2005. Performance prior to waiving fees was lower than the actual returns shown for periods through 2005.
2. Fund performance for the since inception period represents the total returns achieved by the AMR Class from 6/30/04 up to 3/1/06, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the AMR Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 6/30/04. A portion of the fees charged to the Investor Class of the Fund has been waived since 2006. Performance prior to waiving fees was lower than actual returns shown since 2006.
3. Fund performance for the since inception period represents the total returns achieved by the AMR Class from 6/30/04 up to 11/30/05, the inception date of the Institutional Class, and the returns of the Institutional Class since its inception. Expenses of the Institutional Class are higher than those of the AMR Class. As a result, total returns shown may be higher than they would have been had the Institutional Class been in existence since 6/30/04. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2007. Performance prior to waiving fees was lower than actual returns shown since 2007.
4. Fund performance for the five-year and since inception periods represent the total returns achieved by the AMR Class from 6/30/04 up to 11/30/05, the inception date of the Institutional Class, and the total returns of the Institutional Class from 11/30/05 up to 3/1/10, the inception date of the Y Class and the returns of the Y Class since its inception. Expenses of the AMR and Institutional Classes are lower than those of the Y Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 6/30/04.
5. Fund performance for the since inception period represents the total returns achieved by the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 6/29/07, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the AMR, Institutional, and Investor Classes are lower than those of the Advisor Class. As a result, total returns shown may be higher than they would have been had the Advisor Class been in existence since 6/30/04. A portion of the fees charged to the Advisor Class of the Fund has been waived since 2007. Performance prior to waiving fees was lower than the actual returns shown since 2007.
6. Fund performance for the five-year and since inception periods represent the total returns achieved by the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the AMR, Institutional, and Investor Classes are lower than those of the A Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 6/30/04. A Class shares has a maximum sales charge of 5.75%.
7. Fund performance for the five-year and since inception periods represent the total returns achieved by the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the AMR, Institutional, and Investor Classes
 

 

5


American Beacon Mid-Cap Value FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

  are lower than those of the C Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 6/30/04. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
8. The Russell Midcap Value Index is an unmanaged index of those stocks in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. Russell Midcap Value Index and Russell 1000 Index are registered trademarks of Frank Russell Company. The Lipper Mid-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Mid-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
9. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, A, C, and AMR Class shares was 1.07%, 1.29%, 1.45%, 2.00%, 1.62%, 2.47%, and 0.79%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund outperformed the Index as both stock selection and sector allocation added value relative to the Index.

Most of the Fund’s excess performance was attributed to holdings in the Financials sector which contributed over 270 basis points (2.70%) to performance. In the Financials sector, not owning American Capital Agency and HCP, which were down 22.8% and 0.9%, respectively, in the Index, added relative value. The Fund’s Consumer Discretionary sector companies also contributed to performance. In the Consumer Discretionary sector, Delphi Automotive (up 88.3%) and Hanesbrands (up 105.8%) were the largest contributors. The aforementioned good performance was slightly offset by poor stock selection in the Health Care and Utilities sectors. Not owning Boston Scientific and HCA, which were up 127.4% and 76.7%, respectively, in the Index, negatively impacted performance in the Health Care sector. Laboratory Corporation of America (up 18.2%) also detracted relative value. In the Utilities sector, Entergy (down 7.5%) and Great Plains Energy (up 8.9%) detracted from the Fund’s returns.

Significant overweight positions in the Industrials and Consumer Discretionary sectors added relative value through sector allocation. An underweight in Utilities, the worst performing sector in the Index, also contributed to the Fund’s performance.

 

The sub-advisors’ philosophy of investing in undervalued companies that exhibit improving profitability and earnings growth potential should allow the Fund to benefit longer term.

 

Top Ten Holdings (% Net Assets)

     

Parker Hannifin Corp.

        1.5   

Cigna Corp.

        1.5   

Avnet, Inc.

        1.5   

Interpublic Group of Cos., Inc.

        1.4   

Fifth Third Bancorp

        1.4   

Stanley Black & Decker, Inc.

        1.3   

Assurant, Inc.

        1.3   

Microchip Technology, Inc.

        1.2   

Willis Group Holdings plc

        1.9   

Delphi Automotive plc

        1.2   

Total Fund Holdings

     150      

Sector Allocation (% Equities)

  

Financials

        28.5   

Consumer Discretionary

        16.1   

Industrials

        14.8   

Information Technology

        10.5   

Health Care

        9.8   

Energy

        7.0   

Utilities

        4.7   

Materials

        4.5   

Consumer Staples

        4.2   

The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

 

6


American Beacon Small Cap Value II FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Small Cap Value II Fund (the “Fund”) returned 33.55% for the twelve months ended October 31, 2013, outperforming the Russell 2000® Value Index (the “Index”) return of 32.83%, but slightly trailing the Lipper Small-Cap Value Funds Index return of 33.56% for the same period.

Comparison of Change in Value of a $10,000 Investment

For the Period from 11/15/11* through 10/31/13

 

LOGO

 

* Inception of Fund

Total Returns for the Period ended 10/31/13

 

     1 Year     Since Incep.
(11/15/11)
    Value of
$10,000
11/15/11-
10/31/13
 

Y Class (1,3)

     33.55     19.86   $ 14,343   

Investor Class (1,3)

     33.55     19.86     14,266   

Russell 2000 Value Index (2)

     32.83     23.77     15,194   

Lipper Small-Cap Value Funds Index (2)

     33.56     21.97     14,765   

 

  Not annualized.
1. Please note the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. The Russell 2000 Value Index is an unmanaged index of those stocks in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 2000 Value Index and Russell 2000 Index are registered trademarks of Frank Russell Company. The Lipper Small-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
3. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Y and Investor Class shares was 4.52% and 4.88%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund outperformed the Index entirely through sector allocation, as stock selection detracted minimal value relative to the Index.

The Fund’s underweight position in the Utilities and Financials sectors added relative value to performance through sector allocation. A significant overweight in Industrials, the second best performing sector in the Index, also contributed to the Fund’s returns.

From a stock selection standpoint, holdings in the Information Technology, Industrials, Health Care and Consumer Discretionary sectors detracted relative value. In the Information Technology sector, Netgear (down 11.6%) and Polycom (up 2.2%) hurt performance. Titan International (down 33.7%) and Graftech International (down 19.8%) negatively impacted the Fund’s performance in the Industrials sector. In the Health Care sector, RTI Surgical (down 32.6%) was the largest detractor, while Ruby Tuesday (down 17.3%) hurt performance in the Consumer Discretionary sector. Not owning Fifth & Pacific, which was up 141.3% in the Index, also negatively impacted the Fund’s returns. The Fund benefited from good stock selection in the Financials sector, but not enough to offset the impact of the aforementioned sectors. In the Financials sector, Gain Capital Holdings (up 114.3%), Protective Life (up 71.8%) and American Equity Investment Life (up 83.7%) contributed most to performance relative to the Index.

The sub-advisors continue to focus on uncovering investment opportunities through stock selection that should benefit the Fund’s performance over the longer-term.

Top Ten Holdings (% Net Assets)

 

Photronics, Inc.

        2.1   

Protective Life Corp.

        1.5   

Bancorp, Inc.

        1.5   

Unit Corp.

        1.3   

Crane Co.

        1.3   

Barnes Group, Inc.

        1.2   

Stone Energy Corp.

        1.2   

Cabot Corp.

        1.1   

OM Group, Inc.

        1.1   

Kulicke & Soffa Industries, Inc.

        1.1   

Total Fund Holdings

     155      
 

 

7


American Beacon Small Cap Value II FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

Sector Allocation (% Equities)

 

Financials

     27.4   

Industrials

     20.4   

Information Technology

     13.5   

Consumer Discretionary

     11.0   

Energy

     9.5   

Materials

     7.2   

Consumer Staples

     6.1   

Health Care

     4.0   

Utilities

     0.8   

The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

 

8


American Beacon FundsSM

Fund Expenses

October 31, 2013 (Unaudited)

 

Fund Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.

Actual Expenses

The following tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

The following tables provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund, such as sales charges (loads) or redemption fees as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the following tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

 

9


American Beacon FundsSM

Fund Expenses

October 31, 2013 (Unaudited)

 

 

 

Balanced Fund

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,069.02       $ 3.02   

Hypothetical **

   $ 1,000.00       $ 1,022.28       $ 2.96   

Y Class

        

Actual

   $ 1,000.00       $ 1,069.14       $ 3.65   

Hypothetical **

   $ 1,000.00       $ 1,021.68       $ 3.57   

Investor Class

        

Actual

   $ 1,000.00       $ 1,067.80       $ 4.69   

Hypothetical **

   $ 1,000.00       $ 1,020.67       $ 4.58   

Advisor Class

        

Actual

   $ 1,000.00       $ 1,066.77       $ 5.52   

Hypothetical **

   $ 1,000.00       $ 1,019.86       $ 5.40   

A Class

        

Actual

   $ 1,000.00       $ 1,066.49       $ 5.73   

Hypothetical **

   $ 1,000.00       $ 1,019.66       $ 5.60   

AMR Class

        

Actual

   $ 1,000.00       $ 1,070.95       $ 1.67   

Hypothetical **

   $ 1,000.00       $ 1,023.59       $ 1.63   

C Class

        

Actual

   $ 1,000.00       $ 1,062.55       $ 9.67   

Hypothetical **

   $ 1,000.00       $ 1,015.83       $ 9.45   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.58%, 0.70%, 0.90%, 1.06%, 1.10%, 1.86%, and 0.32% for the Institutional, Y, Investor, Advisor, A, C, and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Mid-Cap Value Fund

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,161.26       $ 5.34   

Hypothetical **

   $ 1,000.00       $ 1,020.27       $ 4.99   

Y Class

        

Actual

   $ 1,000.00       $ 1,159.48       $ 5.88   

Hypothetical **

   $ 1,000.00       $ 1,019.76       $ 5.50   

Investor Class

        

Actual

   $ 1,000.00       $ 1,159.45       $ 6.69   

Hypothetical **

   $ 1,000.00       $ 1,019.00       $ 6.26   

Advisor Class

        

Actual

   $ 1,000.00       $ 1,158.02       $ 8.10   

Hypothetical **

   $ 1,000.00       $ 1,017.69       $ 7.58   

A Class

        

Actual

   $ 1,000.00       $ 1,157.76       $ 8.10   

Hypothetical **

   $ 1,000.00       $ 1,017.69       $ 7.58   

AMR Class

        

Actual

   $ 1,000.00       $ 1,161.94       $ 3.92   

Hypothetical **

   $ 1,000.00       $ 1,021.58       $ 3.67   

C Class

        

Actual

   $ 1,000.00       $ 1,152.75       $ 12.15   

Hypothetical **

   $ 1,000.00       $ 1,013.91       $ 11.37   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.98%, 1.08%, 1.23%, 1.49%, 1.49%, 2.24%, and 0.72% for the Institutional, Y, Investor, Advisor, A, C, and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Small Cap Value Fund II

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Y Class

        

Actual

   $ 1,000.00       $ 1,151.27       $ 5.91   

Hypothetical **

   $ 1,000.00       $ 1,019.71       $ 5.55   

Investor Class

        

Actual

   $ 1,000.00       $ 1,149.43       $ 7.42   

Hypothetical **

   $ 1,000.00       $ 1,018.30       $ 6.97   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.09% and 1.37% for the Y and Investor Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

10


American Beacon Funds

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Trustees of

American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund, and American Beacon Small Cap Value II Fund:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund, and American Beacon Small Cap Value II Fund (three of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2013, the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the, American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund, and American Beacon Small Cap Value II Fund at October 31, 2013, the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

December 30, 2013

 

11


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK - 58.16%

  

CONSUMER DISCRETIONARY - 5.75%

  

Auto Components - 1.01%

  

Delphi Automotive PLC

     14,000       $ 801   

Johnson Controls, Inc.

     149,400         6,895   

Magna International, Inc., Class A

     9,600         813   
     

 

 

 
        8,509   
     

 

 

 

Automobiles - 1.97%

  

General Motors Co.A

     157,600         5,823   

Hertz Global Holdings, Inc.A

     204,420         4,693   

Toyota Motor Corp., ADRB

     47,500         6,148   
     

 

 

 
        16,664   
     

 

 

 

Hotels, Restaurants & Leisure - 0.37%

  

Carnival Corp.

     89,700         3,108   
     

 

 

 

Household Durables - 0.20%

  

Stanley Black & Decker, Inc.

     21,300         1,685   
     

 

 

 

Media - 0.85%

  

Comcast Corp., Class A

     41,600         1,979   

Comcast Corp., Special Class A

     18,200         843   

Interpublic Group of Cos., Inc.

     119,000         1,999   

Time Warner Cable, Inc.

     19,400         2,331   
     

 

 

 
        7,152   
     

 

 

 

Multiline Retail - 1.20%

  

Dillard’s, Inc., Class A

     24,600         2,017   

Target Corp.

     124,500         8,066   
     

 

 

 
        10,083   
     

 

 

 

Specialty Retail - 0.15%

  

Lowe’s Cos., Inc.

     25,400         1,264   
     

 

 

 

Total Consumer Discretionary

  

     48,465   
     

 

 

 

CONSUMER STAPLES - 4.03%

  

Beverages - 0.67%

  

Diageo PLC, ADRB

     30,600         3,904   

Molson Coors Brewing Co., Class B

     15,900         859   

PepsiCo, Inc.

     10,000         841   
     

 

 

 
        5,604   
     

 

 

 

Food & Drug Retailing - 1.58%

  

Kroger Co.

     77,800         3,333   

Sysco Corp.

     84,500         2,733   

Wal-Mart Stores, Inc.

     93,700         7,192   
     

 

 

 
        13,258   
     

 

 

 

Food Products - 0.35%

  

Kellogg Co.

     19,800         1,252   

Mondelez International, Inc., Class A

     51,100         1,719   
     

 

 

 
        2,971   
     

 

 

 

Tobacco - 1.43%

  

Altria Group, Inc.

     66,100         2,461   

Imperial Tobacco Group PLC, ADRB

     47,000         3,525   

Philip Morris International, Inc.

     68,300         6,086   
     

 

 

 
        12,072   
     

 

 

 

Total Consumer Staples

  

     33,905   
     

 

 

 

ENERGY - 7.95%

  

Energy Equipment & Services - 1.00%

  

Cobalt International Energy, Inc.A

     152,400         3,537   

Halliburton Co.

     92,400         4,900   
     

 

 

 
        8,437   
     

 

 

 
     Shares      Fair Value  
               

Oil & Gas - 6.95%

  

Apache Corp.

     47,500       $ 4,218   

BP PLC, ADRB

     255,478         11,880   

Chevron Corp.

     26,828         3,218   

ConocoPhillips

     64,090         4,698   

Hess Corp.

     52,200         4,239   

Kosmos Energy Ltd.A

     45,700         487   

Marathon Oil Corp.

     41,500         1,463   

Marathon Petroleum Corp.

     24,850         1,781   

Murphy Oil Corp.

     16,800         1,013   

Occidental Petroleum Corp.

     81,600         7,840   

Phillips 66

     68,295         4,400   

Royal Dutch Shell PLC,
Class B, ADRB

     70,700         4,915   

Seadrill Ltd.

     63,700         2,970   

Total S.A., ADRB

     89,000         5,445   
     

 

 

 
        58,567   
     

 

 

 

Total Energy

  

     67,004   
     

 

 

 

FINANCIALS - 14.76%

  

Banks - 2.83%

  

Bank of America Corp.

     903,580         12,615   

Bank of New York Mellon Corp.

     53,000         1,685   

PNC Financial Services Group, Inc.

     63,825         4,693   

SunTrust Banks, Inc.

     144,600         4,864   
     

 

 

 
        23,857   
     

 

 

 

Diversified Financials - 7.81%

  

American Express Co.

     62,700         5,129   

Blackstone Group LPC

     89,800         2,360   

Capital One Financial Corp.

     101,100         6,943   

Charles Schwab Corp.

     96,700         2,190   

Citigroup, Inc.

     230,170         11,228   

JPMorgan Chase & Co.

     373,434         19,246   

KKR & Co., LPC

     110,600         2,428   

Morgan Stanley

     44,400         1,276   

SLM Corp.

     96,400         2,446   

Wells Fargo & Co.

     290,898         12,418   
     

 

 

 
        65,664   
     

 

 

 

Insurance - 4.01%

  

ACE Ltd.

     18,000         1,718   

Allstate Corp.

     62,000         3,290   

American International Group, Inc.

     123,500         6,379   

Berkshire Hathaway, Inc.,
Class BA

     34,081         3,922   

Hartford Financial Services Group, Inc.

     73,200         2,467   

Lincoln National Corp.

     75,100         3,410   

MetLife, Inc.

     159,400         7,540   

Unum Group

     92,300         2,930   

XL Group PLC

     70,100         2,143   
     

 

 

 
        33,799   
     

 

 

 

Real Estate - 0.11%

  

Two Harbors Investment Corp.D

     102,500         956   
     

 

 

 

Total Financials

  

     124,276   
     

 

 

 

HEALTH CARE - 8.64%

  

Health Care Equipment & Supplies - 1.14%

  

Covidien PLC

     26,300         1,686   

Medtronic, Inc.

     122,900         7,055   

Zimmer Holdings, Inc.

     9,400         822   
     

 

 

 
        9,563   
     

 

 

 

Health Care Providers & Services - 2.43%

  

Aetna, Inc.

     12,200         765   

Humana, Inc.

     45,500         4,193   
 

 

See accompanying notes

 

12


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

    Shares     Fair Value  

Quest Diagnostics, Inc.

    16,500      $ 989   

UnitedHealth Group, Inc.

    52,700        3,597   

WellPoint, Inc.

    129,200        10,956   
   

 

 

 
      20,500   
   

 

 

 

Pharmaceuticals - 5.07%

   

AstraZeneca PLC, ADRB

    46,800        2,474   

GlaxoSmithKline PLC, ADRB

    50,100        2,637   

Johnson & Johnson

    87,400        8,094   

Merck & Co., Inc.

    193,200        8,711   

Novartis AG, ADRB

    47,000        3,645   

Pfizer, Inc.

    331,654        10,174   

Sanofi, ADRB

    130,100        6,958   
   

 

 

 
      42,693   
   

 

 

 

Total Health Care

  

    72,756   
   

 

 

 

INDUSTRIALS - 5.75%

   

Aerospace & Defense - 1.72%

  

Boeing Co.

    16,800        2,192   

General Dynamics Corp.

    41,400        3,586   

Lockheed Martin Corp.

    16,000        2,133   

Northrop Grumman Corp.

    8,400        903   

Raytheon Co.

    68,700        5,660   
   

 

 

 
      14,474   
   

 

 

 

Air Freight & Couriers - 0.33%

  

FedEx Corp.

    21,100        2,764   
   

 

 

 

Electrical Equipment - 0.55%

   

Emerson Electric Co.

    68,600        4,594   
   

 

 

 

Industrial Conglomerates - 1.09%

  

General Electric Co.

    170,400        4,454   

Honeywell International, Inc.

    54,600        4,736   
   

 

 

 
      9,190   
   

 

 

 

Machinery - 2.06%

   

Caterpillar, Inc.

    33,800        2,818   

Cummins, Inc.

    29,300        3,721   

Illinois Tool Works, Inc.

    21,400        1,686   

Joy Global, Inc.

    53,600        3,042   

PACCAR, Inc.

    36,400        2,024   

Reliance Steel & Aluminum Co.

    31,100        2,279   

Xylem, Inc.

    53,700        1,853   
   

 

 

 
      17,423   
   

 

 

 

Total Industrials

  

    48,445   
   

 

 

 

INFORMATION TECHNOLOGY - 6.07%

  

Communications Equipment - 0.68%

  

Cisco Systems, Inc.

    37,700        848   

Corning, Inc.

    285,500        4,879   
   

 

 

 
      5,727   
   

 

 

 

Computers & Peripherals - 2.10%

  

Apple, Inc.

    7,710        4,027   

Hewlett-Packard Co.

    214,500        5,227   

International Business Machines Corp.

    11,800        2,115   

Seagate Technology PLC

    84,325        4,105   

Western Digital Corp.

    32,300        2,249   
   

 

 

 
      17,723   
   

 

 

 

Electronic Equipment & Instruments - 0.14%

  

TE Connectivity Ltd.

    23,225        1,196   
   

 

 

 

Semiconductor Equipment & Products - 0.56%

  

Applied Materials, Inc.

    116,400        2,078   

Intel Corp.

    55,400        1,353   
    Shares     Fair Value  

Texas Instruments, Inc.

    30,100      $ 1,267   
   

 

 

 
      4,698   
   

 

 

 

Software - 2.59%

   

Activision Blizzard, Inc.

    235,900        3,925   

Check Point Software Technologies Ltd.A

    32,900        1,909   

Microsoft Corp.

    332,200        11,744   

Oracle Corp.

    126,300        4,231   
   

 

 

 
      21,809   
   

 

 

 

Total Information Technology

  

    51,153   
   

 

 

 

MATERIALS - 0.64%

   

Dow Chemical Co.

    76,700        3,027   

EI du Pont de Nemours & Co.

    38,200        2,338   
   

 

 

 

Total Materials

  

    5,365   
   

 

 

 

TELECOMMUNICATION SERVICES - 2.21%

  

Diversified Telecommunication Services - 1.45%

  

AT&T, Inc.

    220,877        7,996   

Verizon Communications, Inc.

    84,408        4,263   
   

 

 

 
      12,259   
   

 

 

 

Wireless Telecommunication Services - 0.76%

  

China Mobile Ltd., ADRB

    34,600        1,800   

Vodafone Group PLC, ADRB

    124,200        4,573   
   

 

 

 
      6,373   
   

 

 

 

Total Telecommunication Services

  

    18,632   
   

 

 

 

UTILITIES - 2.36%

   

CenterPoint Energy, Inc.

    138,400        3,405   

Edison International

    22,000        1,079   

Entergy Corp.

    49,400        3,197   

Exelon Corp.

    133,800        3,819   

NRG Energy, Inc.

    83,700        2,388   

Public Service Enterprise Group, Inc.

    178,600        5,982   
   

 

 

 

Total Utilities

  

    19,870   
   

 

 

 

Total Common Stock
(Cost $358,178)

   

    489,871   
   

 

 

 

PREFERRED STOCK - 0.77%

  

FINANCIALS - 0.38%

   

Insurance - 0.20%

   

Allstate Corp., 1.00%, Due
1/15/2053

    68,300        1,650   
   

 

 

 

Real Estate - 0.18%

   

Public Storage, Inc., 5.75%, Due
12/31/2049 D

    68,900        1,506   
   

 

 

 

Total Financials

  

    3,156   
   

 

 

 

MANUFACTURING - 0.25%

  

General Motors Co., 4.75%, Due 12/1/2013

    41,700        2,140   
   

 

 

 

SERVICE - 0.14%

   

Comcast Corp., 5.00%, Due 12/15/2061

    52,500        1,182   
   

 

 

 

Total Preferred Stock (Cost $6,668)

  

    6,478   
   

 

 

 
    Par Amount        
    (000’s)        

CORPORATE OBLIGATIONS 12.58%

  

MANUFACTURING- 2.09%

  

ABB Finance USA, Inc.,

   

2.875%, Due 5/8/2022

  $ 175        170   
 

 

See accompanying notes

 

13


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

    Par Amount     Fair Value  
    (000’s)     (000’s)  

Altera Corp.,

   

1.75%, Due 5/15/2017

  $ 165      $ 164   

2.50%, Due 11/15/2018

    165        164   

American Honda Finance Corp.,

   

3.875%, Due 9/21/2020E

    250        264   

Analog Devices, Inc.,

   

3.00%, Due 4/15/2016

    225        235   

Apple, Inc.,

   

2.40%, Due 5/3/2023

    740        676   

Applied Materials, Inc.,

   

2.65%, Due 6/15/2016

    310        323   

BHP Billiton Finance USA Ltd.,

   

1.625%, Due 2/24/2017

    285        288   

CA, Inc.,

   

4.50%, Due 8/15/2023

    425        427   

Caterpillar Financial Services Corp.,

   

1.10%, Due 5/29/2015

    270        272   

1.625%, Due 6/1/2017

    480        485   

Cooper US, Inc.,

   

3.875%, Due 12/15/2020

    355        370   

Cummins, Inc.,

   

3.65%, Due 10/1/2023

    425        433   

Daimler Finance North America LLC,

   

3.00%, Due 3/28/2016E F

    160        167   

2.95%, Due 1/11/2017E F

    300        312   

2.40%, Due 4/10/2017E F

    550        560   

Dow Chemical Co.,

   

4.25%, Due 11/15/2020

    370        395   

4.125%, Due 11/15/2021

    300        310   

Eaton Corp., PLC,

   

5.60%, Due 5/15/2018

    205        234   

2.75%, Due 11/2/2022E

    200        188   

EMC Corp.,

   

1.875%, Due 6/1/2018

    560        562   

Ford Motor Credit Co. LLC,

   

4.25%, Due 2/3/2017F

    300        324   

5.875%, Due 8/2/2021F

    400        458   

Hewlett-Packard Co.,

   

2.20%, Due 12/1/2015

    325        331   

4.65%, Due 12/9/2021

    235        238   

4.05%, Due 9/15/2022

    300        292   

6.00%, Due 9/15/2041

    1,885        1,839   

Intel Corp.,

   

1.35%, Due 12/15/2017

    540        536   

3.30%, Due 10/1/2021

    315        318   

John Deere Capital Corp.,

   

1.05%, Due 10/11/2016

    315        316   

1.30%, Due 3/12/2018

    465        461   

Johnson Controls, Inc.,

   

5.00%, Due 3/30/2020

    320        353   

Koninklijke Philips Electronics N.V.,

   

5.75%, Due 3/11/2018

    270        314   

LYB International Finance BV,

   

4.00%, Due 7/15/2023

    220        222   

Northrop Grumman Corp.,

   

5.05%, Due 8/1/2019

    150        169   

Oracle Corp.,

   

1.20%, Due 10/15/2017

    445        439   

PACCAR Financial Corp.,

   

1.15%, Due 8/16/2016

    290        291   

Precision Castparts Corp.,

   

0.70%, Due 12/20/2015

    240        239   
    Par Amount     Fair Value  
    (000’s)     (000’s)  

Rio Tinto Finance USA Ltd.,

   

2.50%, Due 5/20/2016

  $ 405      $ 418   

Teck Resources Ltd.,

   

6.00%, Due 8/15/2040

    70        67   

Toyota Motor Credit Corp.,

   

2.05%, Due 1/12/2017

    265        272   

Tyco Electronics Group S.A.,

   

1.60%, Due 2/3/2015

    150        151   

6.55%, Due 10/1/2017

    175        203   

United Technologies Corp.,

   

1.80%, Due 6/1/2017

    980        1,000   

6.125%, Due 7/15/2038

    450        549   

Volkswagen International Finance N.V.,

   

1.625%, Due 3/22/2015E

    500        506   

Xerox Corp.,

   

8.25%, Due 5/15/2014

    160        166   

2.95%, Due 3/15/2017

    150        155   
   

 

 

 
      17,626   
   

 

 

 

FINANCE- 6.10%

   

AEGON Funding Co. LLC,

   

5.75%, Due 12/15/2020F

    350        399   

American Express Co.,

   

4.05%, Due 12/3/2042

    390        349   

American Express Credit Corp.,

   

1.75%, Due 6/12/2015

    370        377   

1.30%, Due 7/29/2016

    280        282   

American International Group, Inc.,

   

6.40%, Due 12/15/2020

    625        750   

4.875%, Due 6/1/2022

    600        657   

Bank of America Corp.,

   

6.50%, Due 8/1/2016

    1,340        1,522   

7.80%, Due 9/15/2016

    700        811   

2.60%, Due 1/15/2019

    395        398   

7.625%, Due 6/1/2019

    1,295        1,614   

Bank of New York Mellon Corp.,

   

2.30%, Due 7/28/2016

    505        524   

Bank of Nova Scotia,

   

0.75%, Due 10/9/2015

    335        335   

Bank One Corp.,

   

4.90%, Due 4/30/2015

    250        264   

Barclays Bank PLC,

   

3.90%, Due 4/7/2015

    330        345   

6.75%, Due 5/22/2019

    350        423   

Bear Stearns Cos. LLC,

   

7.25%, Due 2/1/2018F

    2,300        2,774   

Berkshire Hathaway Finance Corp.,

   

0.95%, Due 8/15/2016

    315        316   

BNP Paribas S.A.,

   

3.60%, Due 2/23/2016

    320        338   

Boston Properties LP,

   

3.125%, Due 9/1/2023C

    255        239   

Branch Banking & Trust Co.,

   

1.45%, Due 10/3/2016

    525        531   

Canadian Imperial Bank of Commerce,

   

2.35%, Due 12/11/2015

    465        480   

Capital One Financial Corp.,

   

2.15%, Due 3/23/2015

    345        351   

Citigroup, Inc.,

   

1.178%, Due 4/1/2014G

    6        6   

6.375%, Due 8/12/2014

    874        912   

0.546%, Due 11/5/2014G

    320        320   

1.70%, Due 7/25/2016

    380        384   

8.50%, Due 5/22/2019

    1,970        2,549   
 

 

See accompanying notes

 

14


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

    Par Amount     Fair Value  
    (000’s)     (000’s)  

CNA Financial Corp.,

   

7.35%, Due 11/15/2019

  $ 385      $ 475   

ERP Operating LP,

   

3.00%, Due 4/15/2023C

    205        195   

Fifth Third Bancorp,

   

3.625%, Due 1/25/2016

    325        343   

0.672%, Due 12/20/2016G

    1,000        988   

8.25%, Due 3/1/2038

    455        614   

General Electric Capital Corp.,

   

5.625%, Due 5/1/2018

    375        435   

6.00%, Due 8/7/2019

    350        414   

5.50%, Due 1/8/2020

    250        289   

5.30%, Due 2/11/2021

    205        228   

3.15%, Due 9/7/2022

    635        622   

5.875%, Due 1/14/2038

    280        316   

Goldman Sachs Group, Inc.,

   

5.35%, Due 1/15/2016

    725        792   

6.25%, Due 9/1/2017

    650        752   

5.95%, Due 1/18/2018

    590        677   

6.00%, Due 6/15/2020

    175        203   

5.75%, Due 1/24/2022

    400        454   

HCP, Inc.,

   

5.375%, Due 2/1/2021

    425        470   

Health Care REIT, Inc.,

   

4.125%, Due 4/1/2019D

    240        255   

5.25%, Due 1/15/2022D

    275        298   

Humana, Inc.,

   

3.15%, Due 12/1/2022

    480        453   

ING Bank N.V.,

   

5.125%, Due 5/1/2015E

    450        466   

0.937%, Due 5/23/2016G

    990        964   

3.75%, Due 3/7/2017E

    400        423   

JPMorgan Chase & Co.,

   

0.584%, Due 6/13/2016G

    1,000        991   

5.50%, Due 10/15/2040

    325        354   

KeyCorp,

   

5.10%, Due 3/24/2021

    255        283   

Liberty Mutual Group, Inc.,

   

5.00%, Due 6/1/2021E

    280        302   

Liberty Mutual Insurance Co.,

   

7.875%, Due 10/15/2026E

    1,500        1,844   

Lincoln National Corp.,

   

4.75%, Due 2/15/2014

    245        248   

Lloyds TSB Bank PLC,

   

4.375%, Due 1/12/2015E

    325        338   

Loews Corp.,

   

5.25%, Due 3/15/2016

    650        716   

Merrill Lynch & Co. Inc.,

   

6.40%, Due 8/28/2017

    705        819   

6.11%, Due 1/29/2037

    365        391   

MetLife, Inc.,

   

6.375%, Due 6/15/2034

    350        429   

Morgan Stanley,

   

0.724%, Due 10/15/2015G

    920        916   

5.375%, Due 10/15/2015

    1,400        1,511   

1.75%, Due 2/25/2016

    385        389   

7.30%, Due 5/13/2019

    350        427   

5.625%, Due 9/23/2019

    350        399   

3.75%, Due 2/25/2023

    385        380   

National Australia Bank Ltd.,

   

4.375%, Due 12/10/2020E

    325        352   

Nordea Bank AB,

   

4.875%, Due 1/27/2020E

    300        333   

PNC Funding Corp.,

   

4.25%, Due 9/21/2015

    335        357   
    Par Amount     Fair Value  
    (000’s)     (000’s)  

4.375%, Due 8/11/2020

  $ 330      $ 359   

3.30%, Due 3/8/2022

    425        420   

Prudential Financial, Inc.,

   

7.375%, Due 6/15/2019

    300        373   

Rabobank Nederland,

   

2.125%, Due 10/13/2015

    340        349   

Royal Bank of Canada,

   

1.15%, Due 3/13/2015

    285        288   

0.625%, Due 12/5/2016

    575        575   

Simon Property Group LP,

   

6.125%, Due 5/30/2018C

    550        649   

10.35%, Due 4/1/2019C

    325        446   

State Street Corp.,

   

2.875%, Due 3/7/2016

    510        535   

SunTrust Banks, Inc.,

   

3.50%, Due 1/20/2017

    345        366   

Toronto Dominion Bank,

   

2.625%, Due 9/10/2018

    160        165   

Trinity Acquisition PLC,

   

4.625%, Due 8/15/2023

    295        298   

UBS AG,

   

5.875%, Due 12/20/2017

    611        708   

UnitedHealth Group, Inc.,

   

1.625%, Due 3/15/2019

    330        321   

3.875%, Due 10/15/2020

    325        345   

3.95%, Due 10/15/2042

    215        188   

US Bancorp,

   

1.65%, Due 5/15/2017

    280        282   

Ventas Realty LP,

   

5.70%, Due 9/30/2043C

    175        184   

Wachovia Corp.,

   

0.576%, Due 10/28/2015G

    865        862   

0.614%, Due 10/15/2016G

    910        899   

5.75%, Due 2/1/2018

    695        811   

WellPoint, Inc.,

   

4.35%, Due 8/15/2020

    520        558   

Wells Fargo & Co.,

   

2.15%, Due 1/15/2019

    215        216   
   

 

 

 
      51,352   
   

 

 

 

CONSUMER- 0.32%

   

Altria Group, Inc.,

   

4.75%, Due 5/5/2021

    310        334   

Anheuser-Busch InBev Worldwide, Inc.,

   

5.00%, Due 4/15/2020

    330        375   

8.00%, Due 11/15/2039

    125        184   

ConAgra Foods, Inc.,

   

3.20%, Due 1/25/2023

    275        261   

Diageo Capital PLC,

   

1.50%, Due 5/11/2017

    880        885   

Kellogg Co.,

   

1.875%, Due 11/17/2016

    150        154   

Kraft Foods Group, Inc.,

   

1.625%, Due 6/4/2015

    170        173   

SABMiller Holdings, Inc.,

   

4.95%, Due 1/15/2042E

    300        307   
   

 

 

 
      2,673   
   

 

 

 

SERVICE- 1.36%

   

AbbVie, Inc.,

   

1.20%, Due 11/6/2015

    280        282   

2.90%, Due 11/6/2022

    420        401   

Baxter International, Inc.,

   

1.85%, Due 1/15/2017

    155        159   

Becton Dickinson and Co.,

   

3.25%, Due 11/12/2020

    290        297   
 

 

See accompanying notes

 

15


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

    Par Amount     Fair Value  
    (000’s)     (000’s)  

Cardinal Health, Inc.,

   

3.20%, Due 3/15/2023

  $ 445      $ 423   

CBS Corp.,

   

3.375%, Due 3/1/2022

    500        489   

Celgene Corp.,

   

5.25%, Due 8/15/2043

    185        186   

Comcast Corp.,

   

5.875%, Due 2/15/2018

    535        625   

6.55%, Due 7/1/2039

    450        555   

Covidien International Finance S.A.,

   

2.80%, Due 6/15/2015

    220        227   

CVS Caremark Corp.,

   

3.25%, Due 5/18/2015

    170        177   

DIRECTV Holdings LLC,

   

6.35%, Due 3/15/2040F

    155        160   

eBay, Inc.,

   

1.35%, Due 7/15/2017

    240        240   

Genzyme Corp.,

   

5.00%, Due 6/15/2020

    275        308   

Gilead Sciences, Inc.,

   

2.40%, Due 12/1/2014

    245        250   

GlaxoSmithKline Capital PLC,

   

1.50%, Due 5/8/2017

    725        731   

Home Depot, Inc.,

   

2.70%, Due 4/1/2023

    180        171   

Lowe’s Companies, Inc.,

   

3.875%, Due 9/15/2023

    770        792   

McKesson Corp.,

   

3.25%, Due 3/1/2016

    160        168   

Novartis Capital Corp.,

   

2.90%, Due 4/24/2015

    210        218   

Quest Diagnostics, Inc.,

   

4.75%, Due 1/30/2020

    150        160   

Sanofi,

   

1.25%, Due 4/10/2018

    560        551   

4.00%, Due 3/29/2021

    355        381   

St Jude Medical, Inc.,

   

2.50%, Due 1/15/2016

    395        406   

Teva Pharmaceutical Finance II,

   

3.00%, Due 6/15/2015

    220        228   

Thomson Reuters Corp.,

   

4.70%, Due 10/15/2019

    150        165   

Time Warner Cable, Inc.,

   

5.85%, Due 5/1/2017

    650        715   

6.75%, Due 7/1/2018

    95        107   

Time Warner, Inc.,

   

4.875%, Due 3/15/2020

    460        509   

4.75%, Due 3/29/2021

    325        353   

Viacom, Inc.,

   

4.50%, Due 2/27/2042

    450        394   

Walgreen Co.,

   

3.10%, Due 9/15/2022

    180        172   

Wal-Mart Stores, Inc.,

   

7.55%, Due 2/15/2030

    350        475   
   

 

 

 
      11,475   
   

 

 

 

UTILITIES- 0.55%

   

Commonwealth Edison Co.,

   

4.00%, Due 8/1/2020

    175        188   

Consolidated Edison Co. of New York, Inc.,

   

5.50%, Due 12/1/2039

    350        395   

Duke Energy Indiana, Inc.,

   

6.05%, Due 6/15/2016

    330        371   
    Par Amount     Fair Value  
    (000’s)     (000’s)  

EDF S.A.,

   

4.60%, Due 1/27/2020E

  $ 320      $ 353   

MidAmerican Energy Holdings Co.,

   

6.125%, Due 4/1/2036

    500        567   

National Rural Utilities Cooperative Finance Corp.,

   

5.45%, Due 4/10/2017

    315        357   

Pacific Gas & Electric Co.,

   

6.25%, Due 12/1/2013

    175        176   

Progress Energy, Inc.,

   

4.875%, Due 12/1/2019

    350        389   

Sempra Energy,

   

6.50%, Due 6/1/2016

    210        238   

Sierra Pacific Power Co.,

   

3.375%, Due 8/15/2023

    205        205   

Southwestern Electric Power Co.,

   

3.55%, Due 2/15/2022

    600        589   

Union Electric Co.,

   

6.70%, Due 2/1/2019

    260        314   

Xcel Energy, Inc.,

   

5.613%, Due 4/1/2017

    434        485   
   

 

 

 
      4,627   
   

 

 

 

ENERGY- 1.17%

   

Apache Corp.,

   

5.10%, Due 9/1/2040

    170        173   

BP Capital Markets PLC,

   

4.50%, Due 10/1/2020

    430        472   

2.50%, Due 11/6/2022

    540        499   

Cameron International Corp.,

   

6.375%, Due 7/15/2018

    330        389   

Canadian Natural Resources Ltd.,

   

3.45%, Due 11/15/2021

    430        432   

6.25%, Due 3/15/2038

    365        419   

ConocoPhillips,

   

6.65%, Due 7/15/2018

    460        556   

Devon Energy Corp.,

   

4.75%, Due 5/15/2042

    300        284   

Energy Transfer Partners LP,

   

8.50%, Due 4/15/2014C

    329        340   

9.00%, Due 4/15/2019C

    265        339   

Enterprise Products Operating LLC,

   

6.125%, Due 10/15/2039F

    450        504   

EOG Resources, Inc.,

   

2.50%, Due 2/1/2016

    325        337   

Halliburton Co.,

   

3.25%, Due 11/15/2021

    525        529   

Husky Energy, Inc.,

   

3.95%, Due 4/15/2022

    480        489   

Marathon Oil Corp.,

   

6.00%, Due 10/1/2017

    290        334   

Phillips 66,

   

1.95%, Due 3/5/2015

    200        203   

4.30%, Due 4/1/2022

    385        400   

Pride International, Inc.,

   

6.875%, Due 8/15/2020

    220        264   

Shell International Finance BV,

   

0.625%, Due 12/4/2015

    525        526   

Spectra Energy Capital LLC,

   

5.668%, Due 8/15/2014F

    315        327   

5.65%, Due 3/1/2020F

    455        499   

Spectra Energy Partners LP,

   

4.60%, Due 6/15/2021C

    175        185   

The Williams Cos., Inc.,

   
 

 

See accompanying notes

 

16


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

3.70%, Due 1/15/2023

   $ 180       $ 165   

TransCanada PipeLines Ltd.,

     

3.75%, Due 10/16/2023

     300         302   

7.625%, Due 1/15/2039

     335         454   

6.10%, Due 6/1/2040

     170         197   

Valero Energy Corp.,

     

9.375%, Due 3/15/2019

     190         248   
     

 

 

 
        9,866   
     

 

 

 

TRANSPORTATION- 0.30%

  

Burlington Northern Santa Fe LLC,

     

7.95%, Due 8/15/2030F

     235         312   

5.75%, Due 5/1/2040F

     170         188   

5.15%, Due 9/1/2043F

     200         206   

Canadian National Railway Co.,

     

5.55%, Due 5/15/2018

     350         405   

CSX Corp.,

     

3.70%, Due 11/1/2023

     485         484   

5.50%, Due 4/15/2041

     325         348   

Norfolk Southern Corp.,

     

5.75%, Due 4/1/2018

     425         491   

United Parcel Service, Inc.,

     

1.125%, Due 10/1/2017

     125         124   
     

 

 

 
        2,558   
     

 

 

 

TELECOMMUNICATIONS- 0.69%

  

America Movil SAB de CV,

     

6.375%, Due 3/1/2035

     350         383   

AT&T, Inc.,

     

0.80%, Due 12/1/2015

     370         370   

5.35%, Due 9/1/2040

     248         242   

4.35%, Due 6/15/2045

     341         282   

Cellco Partnership,

     

8.50%, Due 11/15/2018

     425         546   

Deutsche Telekom International Finance BV,

     

4.875%, Due 3/6/2042E

     300         290   

Oi S.A.,

     

5.75%, Due 2/10/2022E

     385         361   

Orange S.A.,

     

4.375%, Due 7/8/2014

     165         169   

2.125%, Due 9/16/2015

     150         153   

Verizon Communications, Inc.,

     

4.60%, Due 4/1/2021

     380         408   

3.50%, Due 11/1/2021

     200         200   

5.15%, Due 9/15/2023

     170         184   

6.40%, Due 9/15/2033

     350         396   

6.90%, Due 4/15/2038

     275         326   

6.55%, Due 9/15/2043

     600         695   

Vodafone Group PLC,

     

1.625%, Due 3/20/2017

     390         390   

6.15%, Due 2/27/2037

     365         409   
     

 

 

 
        5,804   
     

 

 

 

Total Corporate Obligations
(Cost
$100,596)

   

     105,981   
     

 

 

 

FOREIGN GOVERNMENT OBLIGATIONS 0.10%

  

Oil & Gas - 0.10%

  

Petrobras International Finance Co.,

     

3.875%, Due 1/27/2016

     200         207   

3.50%, Due 2/6/2017

     140         142   

6.875%, Due 1/20/2040

     150         150   

Petroleos Mexicanos,

     

6.00%, Due 3/5/2020

     325         365   
     Par Amount      Fair Value  
     (000’s)      (000’s)  

Total Foreign Government Obligations (Cost $809)

   

   $ 864   
     

 

 

 

COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 2.08%

   

Banc of America Commercial Mortgage Trust,

     

5.317%, Due 9/10/2047, 2006-5 A2

   $ 227         228   

5.633%, Due 4/10/2049, 2007-2 A2

     58         59   

Bear Stearns Commercial Mortgage Securities,

     

5.201%, Due 12/11/2038, 2006-PW14 A4

     665         733   

5.54%, Due 9/11/2041, 2006-PW13 A4

     420         460   

GNR Project Loans,

     

1.692%, Due 11/16/2035, 2010-148 A

     150         151   

2.174%, Due 7/16/2038, 2011-147 A

     1,913         1,936   

1.147%, Due 12/16/2038, 2013-139 A

     1,996         1,971   

2.989%, Due 3/16/2039, 2010-71 AC

     228         230   

1.624%, Due 7/16/2039, 2013-78 AB

     1,978         1,956   

1.367%, Due 11/16/2041, 2013 125 AB

     1,992         1,962   

2.543%, Due 9/16/2044, 2011-96 AC

     699         712   

3.20%, Due 11/16/2044, 2011-92 B

     2,400         2,496   

GS Mortgage Securities Corp II,

     

3.679%, Due 8/10/2043, 2010-C1 A1E

     327         347   

3.849%, Due 12/10/2043, 2010-C2 A1E

     510         540   

3.645%, Due 3/10/2044, 2011-GC3 A2E

     500         526   

JP Morgan Chase Commercial Mortgage Securities Corp.,

     

4.678%, Due 7/15/2042, 2005-LDP2 A3A

     101         101   

3.853%, Due 6/15/2043, 2010-C1 A1E

     650         674   

4.388%, Due 2/15/2046, 2011-C3 A3E

     550         600   

4.625%, Due 3/15/2046, 2005-LDP1 A2

     52         52   

5.706%, Due 2/12/2049, 2007-CB19 A4

     550         616   

5.629%, Due 2/12/2051, 2007-CB20 A2

     46         46   

JPMBB Commercial Mortgage Securities Trust 2013-C12,

     

3.157%, Due 7/15/2045, 2013 C12 ASB

     450         457   

LB-UBS Commercial Mortgage Trust,

     

5.424%, Due 2/15/2040, 2007-C1 A4

     500         555   

Wachovia Bank Commercial Mortgage Trust,

     

5.728%, Due 6/15/2049, 2007-C32 A2

     87         89   
     

 

 

 

Total Non-Agency Mortgage-Backed Obligations
(Cost $17,055)

    

     17,497   
     

 

 

 

ASSET-BACKED OBLIGATIONS - 0.98%

  

Capital Auto Receivables Asset Trust 2013-2,

     

0.92%, Due 9/20/2016, 2013-2 A2

     1,500         1,502   

Citibank Credit Card Issuance Trust,

     

1.11%, Due 7/23/2018, 2013 A3 A3

     880         885   
 

 

See accompanying notes

 

17


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

    Par Amount     Fair Value  
    (000’s)     (000’s)  

CNH Equipment Trust,

   

2.04%, Due 10/17/2016, 2011-A A4

  $ 380      $ 386   

0.94%, Due 5/15/2017, 2012 A A3

    381        382   

Ford Credit Auto Lease Trust,

   

0.60%, Due 3/15/2016, 2013-A A3

    240        240   

Ford Credit Floorplan Master Owner Trust,

   

1.50%, Due 9/15/2018, 2013-5 A1

    1,100        1,112   

National Credit Union Administration,

   

0.574%, Due 3/11/2020, 2011 R3 1AG

    1,797        1,798   

Nissan Auto Lease Trust,

   

0.58%, Due 11/16/2015, 2012 B A3

    415        415   

Nissan Master Owner Trust Receivables,

   

0.474%, Due 2/15/2018, 2013-A AG

    1,500        1,498   
   

 

 

 

Total Asset-Backed Obligations (Cost $8,200)

      8,218   
   

 

 

 

U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 5.08%

   

Federal Home Loan Mortgage Corporation

   

4.50%, Due 3/1/2019

    147        155   

5.00%, Due 10/1/2020

    61        64   

3.50%, Due 9/1/2028

    2,285        2,414   

5.00%, Due 8/1/2033

    318        345   

5.50%, Due 2/1/2034

    296        323   

5.00%, Due 3/1/2034

    225        243   

6.00%, Due 6/1/2034

    223        247   

6.00%, Due 8/1/2034

    178        196   

5.00%, Due 8/1/2035

    192        207   

5.00%, Due 9/1/2035

    138        149   

5.50%, Due 4/1/2037

    215        233   

5.50%, Due 5/1/2038

    115        124   

0.57%, Due 12/15/2040G

    579        580   

4.00%, Due 1/1/2041

    839        880   

4.50%, Due 2/1/2041

    702        750   

3.50%, Due 3/1/2042

    448        458   

3.50%, Due 6/1/2042

    2,267        2,319   

3.50%, Due 7/1/2042

    580        594   

3.00%, Due 8/1/2042

    928        913   
   

 

 

 
      11,194   
   

 

 

 

Federal National Mortgage Association

   

5.50%, Due 2/1/2014

    6        6   

6.00%, Due 4/1/2016

    37        39   

5.00%, Due 12/1/2017

    126        134   

4.50%, Due 9/1/2018

    93        99   

4.00%, Due 8/1/2020

    139        148   

3.50%, Due 1/1/2026

    187        197   

4.00%, Due 5/1/2026

    976        1,039   

4.00%, Due 6/1/2026

    1,234        1,321   

3.50%, Due 1/1/2028

    275        291   

5.00%, Due 3/1/2034

    351        382   

4.50%, Due 9/1/2034

    148        158   

5.50%, Due 12/1/2035

    94        103   

5.00%, Due 2/1/2036

    141        153   

5.50%, Due 4/1/2036

    182        198   

6.00%, Due 9/1/2036

    139        152   

5.50%, Due 2/1/2037

    210        229   

5.50%, Due 6/1/2038

    60        65   

4.50%, Due 1/1/2040

    779        833   

5.00%, Due 5/1/2040

    2,371        2,586   

4.00%, Due 9/1/2040

    603        636   

4.00%, Due 1/1/2041

    1,099        1,159   
    Par Amount     Fair Value  
    (000’s)     (000’s)  

4.00%, Due 2/1/2041

  $ 2,827      $ 2,986   

5.00%, Due 3/1/2041

    949        1,036   

4.00%, Due 4/1/2041

    846        895   

4.50%, Due 4/1/2041

    1,845        1,979   

4.50%, Due 5/1/2041

    485        522   

4.50%, Due 8/1/2041

    1,163        1,248   

4.50%, Due 10/1/2041

    703        755   

3.50%, Due 9/1/2042

    795        817   

4.50%, Due 1/1/2043

    2,098        2,249   

4.00%, Due 7/1/2043

    1,274        1,331   
   

 

 

 
      23,746   
   

 

 

 

Government National Mortgage Association

   

7.00%, Due 12/15/2025

    122        142   

6.50%, Due 8/15/2027

    122        140   

6.50%, Due 11/15/2027

    130        149   

7.50%, Due 12/15/2028

    113        134   

5.50%, Due 7/15/2033

    276        309   

6.00%, Due 12/15/2033

    309        350   

6.00%, Due 10/15/2038

    557        615   

5.00%, Due 10/15/2039

    1,902        2,120   

5.50%, Due 2/15/2040

    582        637   

4.00%, Due 5/15/2040

    632        675   

3.50%, Due 3/15/2043

    729        757   

5.50%, Due 2/20/2034

    396        442   

4.50%, Due 10/20/2040

    878        962   

6.00%, Due 5/20/2042

    352        394   
   

 

 

 
      7,826   

Total U.S. Agency Mortgage-Backed Obligations (Cost $41,939)

   

    42,766   
   

 

 

 

U.S. TREASURY OBLIGATIONS - 12.40%

  

0.25%, Due 12/15/2015

    3,650        3,643   

1.50%, Due 6/30/2016

    3,000        3,081   

3.125%, Due 10/31/2016

    3,000        3,224   

0.875%, Due 1/31/2017

    8,685        8,734   

0.75%, Due 12/31/2017

    800        790   

1.50%, Due 8/31/2018

    3,800        3,843   

1.375%, Due 9/30/2018

    1,000        1,004   

1.125%, Due 5/31/2019

    4,000        3,915   

1.25%, Due 2/29/2020

    2,600        2,519   

2.00%, Due 11/15/2021

    4,090        4,026   

2.00%, Due 2/15/2022

    4,985        4,883   

6.25%, Due 8/15/2023

    800        1,064   

6.875%, Due 8/15/2025

    580        822   

5.25%, Due 11/15/2028

    450        567   

4.75%, Due 2/15/2037

    130        157   

4.50%, Due 8/15/2039

    730        852   

3.125%, Due 11/15/2041

    3,230        2,946   

2.875%, Due 5/15/2043

    68,015        58,354   
   

 

 

 

Total U.S. Treasury Obligations
(Cost $103,675)

   

    104,424   
   

 

 

 

U.S. AGENCY OBLIGATIONS - 1.89%
(Cost- $15,026)

   

Federal Home Loan Mortgage Corp.,

   

4.50%, Due 1/15/2015

    15,140        15,919   
   

 

 

 

MUNICIPAL OBLIGATIONS - 0.33%

  

Municipal Electric Authority of Georgia,

   

6.64%, Due 4/1/2057

    70        74   
 

 

See accompanying notes

 

18


American Beacon Balanced FundSM

Schedule of Investments

October 31, 2013

 

 

    Par Amount     Fair Value  
    (000’s)     (000’s)  

6.66%, Due 4/1/2057

  $ 2,630      $ 2,738   
   

 

 

 

Total Municipal Obligations
(Cost $2,796)

   

    2,812   
   

 

 

 
    Shares        

SHORT-TERM INVESTMENTS - 5.30% (Cost $44,675)

 

JPMorgan U.S. Government Money Market Fund, Capital Class

    44,674,762        44,675   
   

 

 

 

TOTAL INVESTMENTS -99.67%
(Cost $699,617)

   

    839,505   

OTHER ASSETS, NET OF LIABILITIES - 0.33%

  

    2,801   
   

 

 

 

TOTAL NET ASSETS - 100.00%

  

  $ 842,306   
   

 

 

 

 

A  Non-income producing security.
B  ADR - American Depositary Receipt.
C  Limited Partnership.
D  REIT - Real Estate Investment Trust.
E  Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $10,053 or 1.19% of net assets. The Fund has no right to demand registration of these securities.
F  Limited Liability Company.
G  The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date.
 

 

Futures Contracts Open on October 31, 2013 (000’s):

 

Description

   Type    Number of
Contracts
     Expiration Date    Contract Value      Unrealized
Appreciation
(Depreciation)
 

S&P 500 Mini E Index Futures

   Long      409       December, 2013    $ 35,808       $ 1,295   
           

 

 

    

 

 

 
            $ 35,808       $ 1,295   
           

 

 

    

 

 

 

See accompanying notes

 

19


American Beacon Mid-Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK - 92.70%

  

CONSUMER DISCRETIONARY - 14.88%

  

Auto Components - 2.35%

  

Dana Holding Corp.

     61,275       $ 1,201   

Delphi Automotive PLC

     46,825         2,679   

TRW Automotive Holdings Corp.A

     17,925         1,346   
     

 

 

 
        5,226   
     

 

 

 

Automobiles - 0.37%

  

Harley-Davidson, Inc.

     12,696         813   
     

 

 

 

Hotels, Restaurants & Leisure - 2.08%

  

Darden Restaurants, Inc.

     18,955         977   

International Game Technology

     91,600         1,722   

Royal Caribbean Cruises Ltd.

     45,500         1,913   
     

 

 

 
        4,612   
     

 

 

 

Household Durables - 1.72%

  

Newell Rubbermaid, Inc.

     30,719         910   

Stanley Black & Decker, Inc.

     36,744         2,906   
     

 

 

 
        3,816   
     

 

 

 

Leisure Equipment & Products - 0.34%

  

Hasbro, Inc.

     14,591         754   
     

 

 

 

Media - 3.14%

  

Interpublic Group of Cos., Inc.

     188,461         3,166   

News Corp, Class AA

     21,875         385   

News Corp., Class BA

     53,200         954   

Omnicom Group, Inc.

     36,275         2,471   
     

 

 

 
        6,976   
     

 

 

 

Multiline Retail - 0.42%

  

Dollar General Corp.A

     16,198         936   
     

 

 

 

Specialty Retail - 4.46%

  

American Eagle Outfitters, Inc.

     61,651         955   

Hanesbrands, Inc.

     29,800         2,029   

L Brands, Inc.

     28,700         1,797   

Murphy USA, Inc.A

     26,100         1,059   

PetSmart, Inc.

     10,859         790   

Rent-A-Center, Inc.

     11,000         377   

Sally Beauty Holdings, Inc.A

     30,020         790   

Staples, Inc.

     130,125         2,097   
     

 

 

 
        9,894   
     

 

 

 

Total Consumer Discretionary

  

     33,027   
     

 

 

 

CONSUMER STAPLES - 3.90%

  

Beverages - 0.80%

  

Coca-Cola Enterprises, Inc.

     16,556         691   

Molson Coors Brewing Co., Class B

     20,246         1,093   
     

 

 

 
        1,784   
     

 

 

 

Food & Drug Retailing - 0.84%

  

Kroger Co.

     24,980         1,070   

Sysco Corp.

     24,431         790   
     

 

 

 
        1,860   
     

 

 

 

Food Products - 1.19%

  

Darling International, Inc.A

     43,950         1,023   

Ingredion, Inc.

     14,355         944   

JM Smucker Co.

     5,998         667   
     

 

 

 
        2,634   
     

 

 

 

Tobacco - 1.07%

  

Lorillard, Inc.

     24,300         1,240   
     Shares      Fair Value  
            (000’s)  

Reynolds American, Inc.

     22,000       $ 1,130   
     

 

 

 
        2,370   
     

 

 

 

Total Consumer Staples

        8,648   
     

 

 

 

ENERGY - 6.53%

     

Energy Equipment & Services - 3.07%

  

Baker Hughes, Inc.

     39,500         2,295   

Helmerich & Payne, Inc.

     18,200         1,411   

McDermott International, Inc.A

     62,224         440   

Nabors Industries Ltd.

     28,777         503   

Superior Energy Services, Inc.A

     81,025         2,174   
     

 

 

 
        6,823   
     

 

 

 

Gas - Pipelines - 0.50%

     

Spectra Energy Corp.

     31,028         1,104   
     

 

 

 

Oil & Gas - 2.96%

     

EQT Corp.

     10,386         889   

Murphy Oil Corp.

     35,200         2,123   

Newfield Exploration Co.A

     30,369         925   

Pioneer Natural Resources Co.

     4,577         937   

Range Resources Corp.

     6,536         495   

Seadrill Ltd.

     25,700         1,198   
     

 

 

 
        6,567   
     

 

 

 

Total Energy

        14,494   
     

 

 

 

FINANCIALS - 26.39%

     

Banks - 8.07%

     

CIT Group, Inc.

     41,300         1,989   

Comerica, Inc.

     37,050         1,604   

Fifth Third Bancorp

     157,822         3,004   

First Niagara Financial Group, Inc.

     134,000         1,478   

Hancock Holding Co.

     23,247         762   

KeyCorp

     140,250         1,757   

New York Community Bancorp, Inc.

     112,300         1,820   

People’s United Financial, Inc.

     114,500         1,652   

Regions Financial Corp.

     103,600         998   

SunTrust Banks, Inc.

     32,044         1,078   

TCF Financial Corp.

     45,972         698   

Zions Bancorporation

     37,853         1,074   
     

 

 

 
        17,914   
     

 

 

 

Diversified Financials - 5.22%

     

Ameriprise Financial, Inc.

     25,711         2,586   

Capital One Financial Corp.

     23,500         1,614   

Discover Financial Services

     35,900         1,862   

Invesco Ltd.

     42,550         1,436   

Legg Mason, Inc.

     38,275         1,472   

SLM Corp.

     69,800         1,771   

Towers Watson & Co., Class A

     7,396         849   
     

 

 

 
        11,590   
     

 

 

 

Insurance - 10.66%

     

Allstate Corp.

     14,424         765   

Assurant, Inc.

     48,425         2,832   

Axis Capital Holdings Ltd.

     29,250         1,387   

Endurance Specialty Holdings Ltd.

     16,237         898   

Genworth Financial, Inc., Class AA

     77,100         1,120   

Hartford Financial Services Group, Inc.

     32,869         1,108   

ING US, Inc.

     56,725         1,760   

PartnerRe Ltd.

     9,452         947   

Primerica, Inc.

     26,450         1,136   

Reinsurance Group of America, Inc.

     14,694         1,046   

Renaissancere Holdings Ltd.

     21,050         1,973   
 

 

See accompanying notes

 

20


American Beacon Mid-Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Torchmark Corp.

     16,287       $ 1,187   

Unum Group

     18,163         576   

Validus Holdings Ltd.

     34,493         1,362   

Willis Group Holdings PLC

     91,838         4,138   

XL Group PLC

     47,100         1,440   
     

 

 

 
        23,675   
     

 

 

 

Real Estate - 2.06%

     

Alexandria Real Estate Equities, Inc.C

     14,138         930   

Cole Real Estate Investment, Inc.C

     73,563         1,045   

Hospitality Properties TrustC

     55,350         1,626   

Host Hotels & Resorts, Inc. B

     51,757         960   
     

 

 

 
        4,561   
     

 

 

 

Residential - 0.38%

     

American Campus Communities, Inc.C

     24,423         844   
     

 

 

 

Total Financials

  

     58,584   
     

 

 

 

HEALTH CARE - 9.05%

     

Biotechnology - 0.36%

     

Charles River Laboratories International, Inc.A

     16,261         800   
     

 

 

 

Health Care Equipment & Supplies - 3.27%

  

Becton Dickinson and Co.

     17,350         1,824   

CareFusion Corp.A

     25,607         993   

Dentsply International, Inc.

     20,546         968   

Patterson Cos., Inc.

     27,689         1,177   

St. Jude Medical, Inc.

     40,000         2,295   
     

 

 

 
        7,257   
     

 

 

 

Health Care Providers & Services - 5.42%

  

AmerisourceBergen Corp.

     11,348         741   

Cardinal Health, Inc.

     38,000         2,229   

Cigna Corp.

     42,550         3,276   

Laboratory Corp. of America HoldingsA

     16,975         1,713   

Mednax, Inc.A

     9,383         1,023   

Omnicare, Inc.

     38,700         2,134   

Quest Diagnostics, Inc.

     15,299         917   
     

 

 

 
        12,033   
     

 

 

 

Total Health Care

  

     20,090   
     

 

 

 

INDUSTRIALS - 13.75%

  

Aerospace & Defense - 1.44%

  

Curtiss-Wright Corp.

     13,525         673   

L-3 Communications Holdings, Inc.

     25,025         2,514   
     

 

 

 
        3,187   
     

 

 

 

Building Products - 1.38%

     

Masco Corp.

     86,100         1,819   

Owens CorningA

     34,500         1,240   
     

 

 

 
        3,059   
     

 

 

 

Commercial Services & Supplies - 1.59%

  

Cintas Corp.

     17,386         935   

Clean Harbors, Inc.A

     16,996         1,050   

Con-way, Inc.

     37,325         1,537   
     

 

 

 
        3,522   
     

 

 

 

Construction & Engineering - 2.22%

  

AECOM Technology Corp.A

     65,325         2,076   

Fluor Corp.

     12,264         910   

URS Corp.

     35,650         1,933   
     

 

 

 
        4,919   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Electrical Equipment - 1.10%

  

Brady Corp., Class A

     49,175       $ 1,435   

Regal-Beloit Corp.

     13,699         1,005   
     

 

 

 
        2,440   
     

 

 

 

Industrial Conglomerates - 0.61%

  

KBR, Inc.

     39,000         1,347   
     

 

 

 

Machinery - 4.98%

     

Dover Corp.

     11,285         1,036   

Joy Global, Inc.

     19,500         1,107   

Parker Hannifin Corp.

     28,567         3,334   

Pentair Ltd.

     28,500         1,912   

SPX Corp.

     24,800         2,250   

Xylem, Inc.

     41,864         1,444   
     

 

 

 
        11,083   
     

 

 

 

Marine - 0.43%

     

Golar LNG Ltd.

     25,700         954   
     

 

 

 

Total Industrials

  

     30,511   
     

 

 

 

INFORMATION TECHNOLOGY - 9.70%

  

Communications Equipment - 1.11%

  

Anixter International, Inc.

     20,350         1,740   

Juniper Networks, Inc.A

     38,641         720   
     

 

 

 
        2,460   
     

 

 

 

Electronic Equipment & Instruments - 3.88%

  

Avnet, Inc.

     81,175         3,222   

Diebold, Inc.

     15,294         458   

Eaton Corp PLC

     20,600         1,454   

Ingram Micro, Inc., Class AA

     99,775         2,312   

TE Connectivity Ltd.

     22,775         1,173   
     

 

 

 
        8,619   
     

 

 

 

IT Consulting & Services - 1.33%

  

Fidelity National Information Services, Inc.

     24,072         1,174   

Total System Services, Inc.

     59,800         1,783   
     

 

 

 
        2,957   
     

 

 

 

Semiconductor Equipment & Products - 1.23%

  

Microchip Technology, Inc.

     63,562         2,731   
     

 

 

 

Software - 2.15%

     

CA, Inc.

     66,000         2,096   

Cadence Design Systems, Inc.A

     53,762         697   

Symantec Corp.

     40,973         932   

Synopsys, Inc.A

     28,442         1,037   
     

 

 

 
        4,762   
     

 

 

 

Total Information Technology

  

     21,529   
     

 

 

 

MATERIALS - 4.17%

     

Chemicals - 2.32%

     

Air Products & Chemicals, Inc.

     6,912         753   

Albemarle Corp.

     15,891         1,052   

Rockwood Holdings, Inc.

     39,829         2,520   

Scotts Miracle-Gro Co., Class A

     13,927         818   
     

 

 

 
        5,143   
     

 

 

 

Containers & Packaging - 1.06%

  

Greif, Inc., Class A

     17,085         914   

Owens-Illinois, Inc.A

     23,565         749   

Silgan Holdings, Inc.

     15,229         686   
     

 

 

 
        2,349   
     

 

 

 
 

 

See accompanying notes

 

21


American Beacon Mid-Cap Value FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Metals & Mining - 0.79%

     

Allegheny Technologies, Inc.

     31,446       $ 1,040   

Nucor Corp.

     13,745         712   
     

 

 

 
        1,752   
     

 

 

 

Total Materials

        9,244   
     

 

 

 

UTILITIES - 4.33%

     

Electric - 2.60%

     

CenterPoint Energy, Inc.

     32,500         800   

Edison International

     11,966         587   

Entergy Corp.

     23,625         1,528   

Great Plains Energy, Inc.

     48,153         1,128   

Pinnacle West Capital Corp.

     12,800         717   

Portland General Electric Co.

     35,320         1,014   
     

 

 

 
        5,774   
     

 

 

 

Gas - 0.70%

     

AGL Resources, Inc.

     22,518         1,078   

ONEOK, Inc.

     8,300         469   
     

 

 

 
        1,547   
     

 

 

 

Multi-Utilities - 1.03%

     

SCANA Corp.

     12,393         578   

Xcel Energy, Inc.

     59,349         1,713   
     

 

 

 
        2,291   
     

 

 

 

Total Utilities

        9,612   
     

 

 

 

Total Common Stock (Cost $169,578)

  

     205,739   
     

 

 

 

SHORT-TERM INVESTMENTS - 6.27%
(Cost $13,908)

  

JPMorgan U.S. Government Money Market Fund, Capital Class

     13,908,035         13,908   
     

 

 

 

TOTAL INVESTMENTS - 98.97%
(Cost $183,486)

   

     219,647   

OTHER ASSETS, NET OF LIABILITIES - 1.03%

   

     2,289   
     

 

 

 

TOTAL NET ASSETS - 100.00%

  

   $ 221,936   
     

 

 

 
 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  Limited Partnership.
C  REIT - Real Estate Investment Trust.

Futures Contracts Open on October 31, 2013 (000’s):

 

Description

   Type    Number of
Contracts
     Expiration Date    Contract Value      Unrealized
Appreciation
(Depreciation)
 

S&P 400 Midcap E Index Future

   Long      100       December, 2013    $ 12,864       $ 266   
           

 

 

    

 

 

 
            $ 12,864       $ 266   
           

 

 

    

 

 

 

See accompanying notes

 

22


American Beacon Small Cap Value II FundSM

Schedule of Investments

October 31, 2013

 

 

    Shares     Fair Value  
          (000’s)  

COMMON STOCK - 95.33%

  

CONSUMER DISCRETIONARY - 10.45%

  

Auto Components - 1.71%

  

Dana Holding Corp.

    1,775      $ 35   

Fuel Systems Solutions, Inc.A

    2,456        44   
   

 

 

 
      79   
   

 

 

 

Distributors - 0.76%

  

Core-Mark Holding Co., Inc.

    488        35   
   

 

 

 

Hotels, Restaurants & Leisure - 0.86%

  

CEC Entertainment, Inc.

    355        16   

Ruby Tuesday, Inc.A

    3,941        24   
   

 

 

 
      40   
   

 

 

 

Household Durables - 1.17%

  

ACCO Brands Corp.A

    3,500        20   

Helen of Troy Ltd.A

    720        34   
   

 

 

 
      54   
   

 

 

 

Media - 0.43%

  

John Wiley & Sons, Inc., Class A

    400        20   
   

 

 

 

Specialty Retail - 4.72%

  

Buckle, Inc.

    778        38   

Children’s Place Retail Stores, Inc.A

    717        39   

Citi Trends, Inc.A

    2,997        44   

Genesco, Inc.A

    405        28   

Men’s Wearhouse, Inc.

    1,098        46   

West Marine, Inc.A

    1,951        24   
   

 

 

 
      219   
   

 

 

 

Textiles & Apparel - 0.80%

  

R.G. Barry Corp.

    1,155        22   

Rocky Brands, Inc.

    1,012        15   
   

 

 

 
      37   
   

 

 

 

Total Consumer Discretionary

  

    484   
   

 

 

 

CONSUMER STAPLES - 5.81%

  

Beverages - 0.54%

  

National Beverage Corp.

    1,390        25   
   

 

 

 

Food & Drug Retailing - 2.40%

  

Andersons, Inc.

    676        51   

Casey’s General Stores, Inc.

    265        19   

CST Brands, Inc.

    1,270        41   
   

 

 

 
      111   
   

 

 

 

Food Products - 2.20%

  

Cal-Maine Foods, Inc.

    375        19   

Darling International, Inc.A

    1,931        45   

Inventure Foods, Inc.A

    3,360        38   
   

 

 

 
      102   
   

 

 

 

Personal Products - 0.67%

  

Elizabeth Arden, Inc.A

    863        31   
   

 

 

 

Total Consumer Staples

  

    269   
   

 

 

 

ENERGY - 9.09%

  

Energy Equipment & Services - 6.28%

  

Atwood Oceanics, Inc.A

    575        31   

C&J Energy Services, Inc.A

    1,080        25   

Cal Dive International, Inc.A

    11,493        23   

Hornbeck Offshore Services, Inc.A

    764        42   

Key Energy Services, Inc.A

    2,181        17   
    Shares     Fair Value  
          (000’s)  

Patterson-UTI Energy, Inc.

    1,922      $ 47   

Superior Energy Services, Inc.A

    1,456        39   

Tetra Technologies, Inc.A

    605        8   

Unit Corp.A

    1,176        59   
   

 

 

 
      291   
   

 

 

 

Oil & Gas - 2.81%

  

Natural Gas Services Group, Inc.A

    534        15   

Stone Energy Corp.A

    1,550        54   

Triangle Petroleum Corp.A

    3,774        40   

Vaalco Energy, Inc.

    3,926        21   
   

 

 

 
      130   
   

 

 

 

Total Energy

  

    421   
   

 

 

 

FINANCIALS - 26.12%

  

Banks - 9.71%

  

1st Source Corp.

    530        17   

Bancorp, Inc.A

    4,233        67   

BBCN Bancorp, Inc.

    830        12   

Boston Private Financial Holdings, Inc.

    1,715        20   

Bryn Mawr Bank Corp.

    825        23   

C&F Financial Statutory Trust I

    615        33   

Cardinal Financial Corp.

    1,850        31   

Center Bancorp, Inc.

    743        11   

Dime Community Bancshares, Inc.

    910        15   

Eagle Bancorp, Inc.A

    833        22   

First Financial Holdings, Inc.

    254        15   

FirstMerit Corp.

    755        17   

German American Bancorp, Inc.

    413        11   

Hanmi Financial Corp.

    798        14   

Horizon Bancorp

    1,433        31   

Investors Bancorp, Inc.

    1,005        24   

Prosperity Bancshares, Inc.

    589        36   

United Financial Bancorp, Inc.

    900        14   

ViewPoint Financial Group, Inc.

    719        16   

Washington Federal, Inc.

    901        21   
   

 

 

 
      450   
   

 

 

 

Diversified Financials - 3.97%

  

Cash America International, Inc.

    480        19   

CBIZ, Inc.A

    2,675        22   

ConnectOne Bancorp, Inc.A

    657        25   

Gain Capital Holdings, Inc.

    1,407        15   

GFI Group, Inc.

    4,291        15   

Nicholas Financial, Inc.

    1,200        19   

Pacific Continental Corp.

    1,536        21   

Piper Jaffray Cos.A

    823        30   

Texas Capital Bancshares, Inc.A

    351        18   
   

 

 

 
      184   
   

 

 

 

Insurance - 4.69%

  

American Equity Investment Life Holding Co.

    1,710        36   

Enstar Group Ltd.A

    105        14   

Horace Mann Educators Corp.

    1,087        30   

Investors Title Co.

    175        14   

Primerica, Inc.

    720        31   

ProAssurance Corp.

    454        21   

Protective Life Corp.

    1,555        71   
   

 

 

 
      217   
   

 

 

 

Real Estate - 7.75%

  

Alexander & Baldwin, Inc.

    690        26   

BioMed Realty Trust, Inc.B

    1,624        32   

Chatham Lodging TrustB

    1,250        24   
 

 

See accompanying notes

 

23


American Beacon Small Cap Value II FundSM

Schedule of Investments

October 31, 2013

 

 

    Shares     Fair Value  
          (000’s)  

Colony Financial, Inc.B

    1,279      $ 26   

DiamondRock Hospitality Co.B

    2,938        33   

Forestar Group, Inc.A

    806        18   

Franklin Street Properties Corp.B

    1,777        23   

KKR Financial Holdings LLCC

    3,255        32   

LaSalle Hotel PropertiesB

    858        27   

Newcastle Investment Corp.

    2,505        14   

Pebblebrook Hotel TrustB

    1,018        31   

PS Business Parks, Inc.B

    380        31   

Ryman Hospitality Properties, Inc.B

    450        17   

Summit Hotel Properties, Inc.B

    2,720        25   
   

 

 

 
    359   
   

 

 

 

Total Financials

  

    1,210   
   

 

 

 

HEALTH CARE - 3.87%

   

Biotechnology - 0.43%

   

RTI Biologics, Inc.A

    7,004        20   
   

 

 

 

Health Care Equipment & Supplies - 0.99%

  

CONMED Corp.

    858        31   

Hillenbrand, Inc.

    545        15   
   

 

 

 
    46   
   

 

 

 

Health Care Providers & Services - 2.45%

  

Ensign Group, Inc.

    735        31   

Health Net, Inc.A

    650        20   

Magellan Health Services, Inc.A

    525        31   

Select Medical Holdings Corp.

    1,645        14   

US Physical Therapy, Inc.

    530        17   
   

 

 

 
    113   
   

 

 

 

Total Health Care

  

    179   
   

 

 

 

INDUSTRIALS - 19.41%

  

Aerospace & Defense - 1.23%

  

Sparton Corp.

    1,450        38   

Triumph Group, Inc.

    265        19   
   

 

 

 
      57   
   

 

 

 

Building Products - 1.66%

  

Crane Co.

    933        60   

Universal Forest Products, Inc.

    327        17   
   

 

 

 
      77   
   

 

 

 

Commercial Services & Supplies - 3.43%

  

Brink’s Co.

    688        22   

Iconix Brand Group, Inc.A

    1,258        45   

Koppers Holdings, Inc.

    780        35   

Layne Christensen Co.A

    1,248        24   

United Stationers Supply Co.

    740        33   
   

 

 

 
      159   
   

 

 

 

Construction & Engineering - 3.56%

  

EMCOR Group, Inc.

    1,210        45   

Granite Construction, Inc.

    1,016        33   

MasTec, Inc.A

    1,583        50   

MYR Group, Inc.A

    275        7   

URS Corp.

    560        30   
   

 

 

 
      165   
   

 

 

 

Diversified Manufacturing - 1.19%

  

Barnes Group, Inc.

    1,550        55   
   

 

 

 

Electrical Equipment - 2.38%

  

AZZ, Inc.

    820        37   

GrafTech International Ltd.A

    3,544        32   

Houston Wire & Cable Co.

    1,110        15   
    Shares     Fair Value  
          (000’s)  

Powell Industries, Inc.

    411      $ 26   
   

 

 

 
    110   
   

 

 

 

Industrial Conglomerates - 1.23%

  

Teleflex, Inc.

    384        35   

US Ecology, Inc.

    610        22   
   

 

 

 
    57   
   

 

 

 

Machinery - 2.09%

   

Astec Industries, Inc.

    610        21   

CIRCOR International, Inc.

    368        27   

EnPro Industries, Inc.A

    523        31   

John Bean Technologies Corp.

    670        18   
   

 

 

 
      97   
   

 

 

 

Marine - 0.50%

   

CAI International, Inc.A

    1,040        23   
   

 

 

 

Road & Rail - 2.14%

   

Marten Transport Ltd.

    1,471        26   

Old Dominion Freight Line, Inc.A

    1,050        50   

Ryder System, Inc.

    220        14   

TravelCenters of America LLCA

    1,100        9   
   

 

 

 
    99   
   

 

 

 

Total Industrials

  

    899   
   

 

 

 

INFORMATION TECHNOLOGY - 12.89%

  

Communications Equipment - 3.37%

  

Anixter International, Inc.

    260        22   

ARRIS Group, Inc.A

    1,730        31   

NICE Systems Ltd., ADRD

    963        38   

Oplink Communications, Inc.A

    1,423        26   

Polycom, Inc.A

    3,749        39   
   

 

 

 
    156   
   

 

 

 

Computers & Peripherals - 0.45%

  

Mercury Systems, Inc.A

    2,281        21   
   

 

 

 

Electronic Equipment & Instruments - 4.30%

  

Electro Scientific Industries, Inc.

    3,774        44   

Itron, Inc.A

    655        28   

MTS Systems Corp.

    470        31   

Tech Data Corp.A

    530        28   

Tronox Ltd., Class A

    975        23   

Vishay Intertechnology, Inc.A

    3,663        45   
   

 

 

 
      199   
   

 

 

 

Semiconductor Equipment & Products - 4.77%

  

Entegris, Inc.A

    3,165        33   

Kulicke & Soffa Industries, Inc.A

    3,957        51   

LTX-Credence Corp.A

    2,678        16   

Omnivision Technologies, Inc.A

    1,645        23   

Photronics, Inc.A

    11,716        98   
   

 

 

 
    221   
   

 

 

 

Total Information Technology

  

    597   
   

 

 

 

MATERIALS - 6.89%

  

Chemicals - 4.96%

   

American Vanguard Corp.

    530        14   

Cabot Corp.

    1,141        54   

Innophos Holdings, Inc.

    775        39   

KMG Chemicals, Inc.

    735        15   

Olin Corp.

    510        11   

OM Group, Inc.A

    1,543        52   

Sensient Technologies Corp.

    405        21   
 

 

See accompanying notes

 

24


American Beacon Small Cap Value II FundSM

Schedule of Investments

October 31, 2013

 

 

    Shares     Fair Value  
          (000’s)  

Stepan Co.

    410      $ 24   
   

 

 

 
      230   
   

 

 

 

Metals & Mining - 1.04%

  

RTI International Metals, Inc.A

    868        29   

Stillwater Mining Co.A

    1,702        19   
   

 

 

 
      48   
   

 

 

 

Paper & Forest Products - 0.89%

  

Schweitzer-Mauduit International, Inc.

    670        41   
   

 

 

 

Total Materials

  

    319   
   

 

 

 

UTILITIES - 0.80%

  

Electric - 0.32%

  

Portland General Electric Co.

    540        15   
   

 

 

 

Gas - 0.48%

   

Laclede Group, Inc.

    455        22   
   

 

 

 

Total Utilities

  

    37   
   

 

 

 

Total Common Stock (Cost $3,556)

  

    4,415   
   

 

 

 

SHORT-TERM INVESTMENTS - 5.12% (Cost $237)

 

JPMorgan U.S. Government Money Market Fund, Capital Class

    237,140        237   
   

 

 

 

TOTAL INVESTMENTS - 100.45% (Cost $3,793)

  

    4,652   

LIABILITIES, NET OF OTHER
ASSETS - (0.45%)

   

    (20
   

 

 

 

TOTAL NET ASSETS - 100.00%

  

  $ 4,632   
   

 

 

 
 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  REIT - Real Estate Investment Trust.
C  Limited Liability Company.
D  ADR - American Depositary Receipt.

Futures Contracts Open on October 31, 2013 (000’s):

 

Description

   Type    Number of
Contracts
     Expiration Date    Contract Value      Unrealized
Appreciation
(Depreciation)
 

Russell 2000 Mini Index Future

   Long      2       December, 2013    $ 220       $ 7   
           

 

 

    

 

 

 
            $ 220       $ 7   
           

 

 

    

 

 

 

See accompanying notes

 

25


American Beacon FundsSM

Statements of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

     Balanced Fund      Mid-Cap Value
Fund
     Small Cap
Value II Fund
 

Assets:

        

Investments in unaffiliated securities, at fair value A

   $  839,505      $  219,647      $ 4,652  

Cash

     1        —           —     

Deposit with brokers for futures contracts

     1,755        446        9  

Receivable for investments sold

     —          479        9  

Dividends and interest receivable

     2,987        121        1  

Receivable for fund shares sold

     938        2,194        —     

Receivable for tax reclaims

     8        1        —     

Receivable for expense reimbursement (Note 2)

     —           —           3  

Prepaid expenses

     37        21        —     
  

 

 

    

 

 

    

 

 

 

Total assets

     845,231         222,909         4,674   
  

 

 

    

 

 

    

 

 

 

Liabilities:

        

Payable for investments purchased

     324        392        8  

Payable for fund shares redeemed

     1,613        119        —     

Payable for variation margin from open futures contracts

     194        52        2  

Payable under excess expense reimbursement plan (Note 2)

     2        6        —     

Management and investment advisory fees payable

     554        333        9  

Administrative service and service fees payable

     114        32        3  

Transfer agent fees payable

     10        2        —     

Custody and fund accounting fees payable

     15        3        —     

Professional fees payable

     34        24        19  

Trustee fees payable

     12        —           —     

Payable for prospectus and shareholder reports

     50        8        —     

Other liabilities

     3        2        1  
  

 

 

    

 

 

    

 

 

 

Total liabilities

     2,925         973         42   
  

 

 

    

 

 

    

 

 

 

Net Assets

   $ 842,306       $ 221,936       $ 4,632   
  

 

 

    

 

 

    

 

 

 
        

Analysis of Net Assets:

        

Paid-in-capital

     676,009        170,903        3,345  

Undistributed net investment income

     121         1,330        6  

Accumulated net realized gain

     24,993        13,276        416  

Unrealized appreciation of investments

     139,888        36,161        858  

Unrealized appreciation of futures contracts

     1,295        266        7  
  

 

 

    

 

 

    

 

 

 

Net assets

   $  842,306       $  221,936       $  4,632   
  

 

 

    

 

 

    

 

 

 
        

Shares outstanding at no par value (unlimited shares authorized):

        

Institutional Class

     3,734,443        5,040,230        N/A  
  

 

 

    

 

 

    

 

 

 

Y Class

     443,709        197,419        161,054  
  

 

 

    

 

 

    

 

 

 

Investor Class

     7,299,748        1,235,116        168,858  
  

 

 

    

 

 

    

 

 

 

Advisor Class

     406,039        51,726        N/A  
  

 

 

    

 

 

    

 

 

 

A Class

     419,714        118,298        N/A  
  

 

 

    

 

 

    

 

 

 

C Class

     764,763        65,495        N/A  
  

 

 

    

 

 

    

 

 

 

AMR Class

     41,487,795        8,764,470        N/A  
  

 

 

    

 

 

    

 

 

 
        

Net assets (not in thousands):

        

Institutional Class

   $ 60,916,035      $ 72,206,907      $ N/A  
  

 

 

    

 

 

    

 

 

 

Y Class

   $ 7,262,894      $ 2,813,712      $ 2,267,875  
  

 

 

    

 

 

    

 

 

 

Investor Class

   $ 109,336,889      $ 17,871,568      $ 2,363,999  
  

 

 

    

 

 

    

 

 

 

Advisor Class

   $ 6,352,890      $ 727,587      $ N/A  
  

 

 

    

 

 

    

 

 

 

A Class

   $ 6,284,539      $ 1,666,696      $ N/A  
  

 

 

    

 

 

    

 

 

 

C Class

   $ 11,573,900      $ 904,692      $ N/A  
  

 

 

    

 

 

    

 

 

 

AMR Class

   $ 640,578,862      $ 125,744,473      $ N/A  
  

 

 

    

 

 

    

 

 

 

See accompanying notes

 

26


American Beacon FundsSM

Statements of Assets and Liabilities

October 31, 2013 (in thousands, except share and per share amounts)

 

 

     Balanced Fund      Mid-Cap Value
Fund
     Small Cap
Value II Fund
 

Net asset value, offering and redemption price per share:

        

Institutional Class

   $ 16.31       $ 14.33       $ N/A  
  

 

 

    

 

 

    

 

 

 

Y Class

   $ 16.37       $ 14.25       $ 14.08   
  

 

 

    

 

 

    

 

 

 

Investor Class

   $ 14.98       $ 14.47       $ 14.00   
  

 

 

    

 

 

    

 

 

 

Advisor Class

   $ 15.65       $ 14.07       $ N/A  
  

 

 

    

 

 

    

 

 

 

A Class

   $ 14.97       $ 14.09       $ N/A  
  

 

 

    

 

 

    

 

 

 

A Class (offering price)

   $ 15.88       $ 14.95       $ N/A  
  

 

 

    

 

 

    

 

 

 

C Class

   $ 15.13       $ 13.81       $ N/A  
  

 

 

    

 

 

    

 

 

 

AMR Class

   $ 15.44       $ 14.35       $ N/A  
  

 

 

    

 

 

    

 

 

 

A    Cost of investments in unaffiliated securities

   $        699,617      $        183,486      $        3,793  

See accompanying notes

 

27


American Beacon Funds

Statements of Operations

For the year ended October 31, 2013 (in thousands)

 

 

     Balanced
Fund
     Mid-Cap
Value Fund
    Small Cap
Value II Fund
 

Investment Income:

       

Dividend income from unaffiliated securities (net of foreign taxes) A

   $  13,390      $  3,116     $ 57  

Dividend income from affiliated securities

     1        —          —     

Interest income

     7,613        —          —     
  

 

 

    

 

 

   

 

 

 

Total investment income

     21,004         3,116        57   
  

 

 

    

 

 

   

 

 

 

Expenses:

       

Management and investment advisory fees (Note 2)

     1,774        862       25  

Administrative service fees (Note 2):

       

Institutional Class

     152        142       —     

Y Class

     11        3       6  

Investor Class

     304        23       6  

Advisor Class

     15        2       —     

A Class

     19        2       —     

C Class

     25        2       —     

AMR Class

     319        47       —     

Transfer agent fees:

       

Institutional Class

     12        5       —     

Y Class

     —           —          —     

Investor Class

     10        3       1  

Advisor Class

     —           1       —     

A Class

     1        —          —     

C Class

     2        —          —     

AMR Class

     17        4       —     

Custody and fund accounting fees

     111        26       6  

Professional fees

     63        35       24  

Registration fees and expenses

     86        72       36  

Service fees (Note 2):

       

Y Class

     4        1       2  

Investor Class

     339        20       7  

Advisor Class

     12        1       —     

A Class

     7        1       —     

C Class

     9        1       —     

Distribution fees (Note 2):

       

Advisor Class

     12        1       —     

A Class

     12        2       —     

C Class

     63        4       —     

Prospectus and shareholder report expenses

     66        10       1  

Trustee fees

     57        10       —     

Other expenses

     67        21       4  
  

 

 

    

 

 

   

 

 

 

Total expenses

     3,569         1,301        118   
  

 

 

    

 

 

   

 

 

 

Net fees waived and expenses (reimbursed) or recouped by Manager (Note 2)

     2        (6     (69
  

 

 

    

 

 

   

 

 

 

Net expenses

     3,571         1,295        49   
  

 

 

    

 

 

   

 

 

 

Net investment income

     17,433         1,821        8   
  

 

 

    

 

 

   

 

 

 

Realized and unrealized gain (loss) from investments:

       

Net realized gain (loss) from:

       

Investments

     51,173        11,976       367  

Commission recapture (Note 3)

     57        21       —     

Futures contracts

     6,940        1,993       58  

Change in net unrealized appreciation or (depreciation) of:

       

Investments

     58,261        32,902       701  

Futures contracts

     1,886        300       9  
  

 

 

    

 

 

   

 

 

 

Net gain from investments

     118,317         47,192        1,135   
  

 

 

    

 

 

   

 

 

 

Net increase in net assets resulting from operations

   $ 135,750       $ 49,013      $ 1,143   
  

 

 

    

 

 

   

 

 

 

A    Foreign taxes

   $ 98      $ —        $ —     

See accompanying notes

 

28


American Beacon FundsSM

Statements of Changes in Net Assets (in thousands)

 

 

     Balanced Fund     Mid-Cap Value Fund     Small Cap Value II
Fund
 
     Year Ended
October 31,
2013
    Year Ended
October 31,
2012
    Year Ended
October 31,
2013
    Year Ended
October 31,
2012
    Year
Ended
Oct. 31,
2013
    From
Nov. 15
to
Oct. 31,
2012
 

Increase (Decrease) in Net Assets:

            

Operations:

            

Net investment income

   $ 17,433     $ 23,022     $ 1,821     $ 2,075     $ 8     $ 7  

Net realized gain from investments and futures contracts

     58,170       31,933       13,990       16,482       425       47  

Change in net unrealized appreciation or (depreciation) from investments and futures contracts

     60,147       56,120       33,202       (4,428     710       155  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in net assets resulting from operations

     135,750        111,075        49,013        14,129        1,143        209   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

            

Net investment income:

            

Institutional Class

     (1,020     (887     (657     (451     —          —     

Y Class

     (72     (71     (13     (1     (7     (1

Investor Class

     (1,894     (2,133     (35     (14     (7     (2

Advisor Class

     (93     (50     (8     —          —          —     

A Class

     (84     (52     (4     (1     —          —     

C Class

     (77     (41     (5     —          —          —     

AMR Class

     (14,207     (22,506     (1,435     (788     —          —     

Net realized gain from investments:

            

Institutional Class

     (909     —          (1,547     —          —          —     

Y Class

     (61     —          (29     —          (24     —     

Investor Class

     (2,087     —          (182     —          (24     —     

Advisor Class

     (56     —          (19     —          —          —     

A Class

     (85     —          (11     —          —          —     

C Class

     (94     —          (11     —          —          —     

AMR Class

     (12,494     —          (3,149     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (33,233 )      (25,740 )      (7,105 )      (1,255 )      (62 )      (3 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets from capital share transactions

     (112,932 )      (87,607 )      63,892        10,834        218        127   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets

     (10,415 )      (2,272 )      105,800        23,708        1,299        333   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets:

            

Beginning of period

     852,721       854,993       116,136       92,428       3,333       3,000  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of Period *

   $ 842,306      $ 852,721      $ 221,936      $ 116,136      $ 4,632      $ 3,333   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

*  Includes undistributed net investment income (loss) of

   $ 121     $ (955   $ 1,330     $ 1,685     $ 6     $ 3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes

 

29


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Balanced Fund, the American Beacon Mid-Cap Value Fund, and the American Beacon Small Cap Value II Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.

Class Disclosure

Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:

 

Class:

  

Offered to:

Institutional Class    

   Investors making an initial investment of $250,000

Y Class    

   Investors making an initial investment of $100,000

Investor Class    

   General public and investors investing through an intermediary

Advisor Class    

   Investors investing through an intermediary

A Class    

   General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)

C Class    

   General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC

AMR Class    

   Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Funds believe the adoption of these ASUs will not have a material impact on its financial statement disclosures.

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services.

 

30


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Investment assets of the Funds are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities for the Funds. Management fees paid by the Funds during the year ended October 31, 2013 were as follows (dollars in thousands):

 

     Management
Fee Rate
    Management
Fee
     Amounts paid
to Investment
Advisors
     Net Amounts
Retained by
Manager
 

Balanced

     0.22   $ 1,774       $ 1,369       $ 405   

Mid-Cap Value

     0.56     862         786         76   

Small Cap Value II

     0.61     25         23         2   

Administrative Services Agreement

The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, and Advisor Classes, 0.40% of the average daily net assets of the A and C Classes, and 0.05% of the average daily net assets of the AMR Class of each of the Funds.

Distribution Plans

The Funds, except for the Advisor, A, and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, A, and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor Class and up to 0.375% of the average daily net assets of the Investor Class of the Funds.

Investment in Affiliated Funds

The Funds may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) or the U.S. Government Money Market Select Fund (the “USG Select Fund”) (collectively, the “Select Funds”). The Select Funds and the Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of the average daily net assets of the Select Fund. During the year ended October 31, 2013, the Manager earned $2,669 from the Balanced Fund’s investment in the Select Funds.

 

31


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Interfund Lending Program

Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the year ended October 31, 2013, the Mid-Cap Value Fund borrowed on average $775,991 for one day at 0.73% with interest charges of $16. During the year ended October 31, 2013, the Balanced and Small Cap Value II Funds did not utilize the credit facility.

Expense Reimbursement Plan

The Manager agreed to reimburse the following Funds to the extent that total annual fund operating expenses exceeded a Fund’s expense cap. For the period ended October 31, 2013, the Manager waived or reimbursed expenses as follows:

 

         Expense Cap              

Fund

   Class   11/1/12
to
2/28/13
    3/1/13
to
10/31/13
    Reimbursed or
(Recouped)
Expenses
    Expiration  

Balanced

   Y     0.70     N/A      $ (826     2016   

Balanced

   A*     1.10 %*      1.10     (170     2016   

Balanced

   C     1.85     N/A        (593     2016   

Mid-Cap Value

   Institutional     0.98     0.98     3,598        2016   

Mid-Cap Value

   Y     1.08     1.08     259        2016   

Mid-Cap Value

   Investor     1.23     1.23     1,575        2016   

Mid-Cap Value

   Advisor     1.49     1.49     726        2016   

Mid-Cap Value

   A     1.49     1.49     (42     2016   

Mid-Cap Value

   C     2.24     2.24     25        2016   

Small Cap Value II

   Y     1.09     1.09     34,513        2016   

Small Cap Value II

   Investor     1.37     1.37     34,837        2016   

 

* Voluntary Reimbursement

Of these amounts, $2,712 was receivable from the Manager at October 31, 2013 Small Cap Value II Fund and $1,590 and $6,141 was payable to the Manager for the Balanced and Mid-Cap Value Funds, respectively. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The Funds did not record a liability for potential reimbursements, due to the current assessment that a reimbursement is unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:

 

Fund

   Recovered
Expenses
     Excess Expense Carryover      Expiration of
Reimbursed Expenses
 

Balanced

   $ 1,674       $ 4,186         2014   

Balanced

     —           1,232         2015   

Mid-Cap Value

     49         56,975         2014   

Mid-Cap Value

     —           36,006         2015   

Small Cap Value II

     —           118,169         2015   

The Manager recouped excess carryover expenses of $840 from the Y Class, $182 from the A Class, and $652 from the C Class of the Balanced Fund, expiring in 2014, and $49 from the A Class of the Mid-Cap Value Fund, expiring in 2014. During the year ended October 31, 2013, the Funds did not record a liability for potential reimbursement due to the current assessment that a reimbursement is unlikely.

Sales Commissions

The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside has collected $19,538 and $3,482 for the Balanced and Mid-Cap Value Funds, respectively from the sale of Class A Shares.

 

32


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares of the Funds.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $2,052 in CDSC fees were collected for the Balanced Fund.

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. Prices of debt securities may be determined using quotes obtained from brokers.

Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.

Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.

Other investments, including restricted securities, and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, established by the Fund’s Board.

Valuation Inputs

Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

33


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Level 1 -    Quoted prices in active markets for identical securities.
Level 2 -    Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 2 securities are fixed-income securities that are valued using observable inputs as stated above.
Level 3 -    Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates, and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date are categorized as Level 2 of the fair value hierarchy.

Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows, and market-based yield spreads for each tranche, and incorporates deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.

The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):

 

34


American Beacon FundsSM

Notes to Financial Statesments

October 31, 2013

 

 

Balanced Fund*

   Level 1      Level 2      Level 3      Total  

Common Stock

   $ 489,871       $ —         $ —         $ 489,871   

Preferred Stock

     6,478         —           —           6,478   

Corporate Obligations

     —           105,981         —           105,981   

Foreign Government Obligations

     —           864         —           864   

Commercial Mortgage-Backed Obligations

     —           17,497         —           17,497   

Asset-Backed Obligations

     —           8,218         —           8,218   

U.S. Agency Mortgage-Backed Obligations

     —           42,766         —           42,766   

U.S. Treasury Obligations

     —           104,424         —           104,424   

U.S. Agency Obligations

     —           15,919         —           15,919   

Municipal Obligations

     —           2,812         —           2,812   

Short-Term Investments - Money Markets

     44,675         —           —           44,675   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 541,024       $ 298,481       $ —         $ 839,505   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

                           

Futures Contracts

   $ 1,295       $ —         $ —         $ 1,295   

Mid-Cap Value Fund*

   Level 1      Level 2      Level 3      Total  

Common Stock

   $ 205,739       $ —         $ —         $ 205,739   

Short-Term Investments - Money Markets

     13,908         —           —           13,908   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 219,647       $ —         $ —         $ 219,647   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

                           

Futures Contracts

   $ 266       $ —         $ —         $ 266   

Small Cap Value II Fund*

   Level 1      Level 2      Level 3      Total  

Common Stock

   $ 4,415       $ —         $ —         $ 4,415   

Short-Term Investments - Money Markets

     237         —           —           237   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 4,652       $ —         $ —         $ 4,652   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

                           

Futures Contracts

   $ 7       $ —         $ —         $ 7   

 

* Refer to the Schedule of Investments for industry information.

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Balanced Fund normally will be declared and paid quarterly. Dividends from net investment income of the Mid-Cap Value and Small Cap Value II Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

 

35


American Beacon FundsSM

Notes to Financial Statesments

October 31, 2013

 

 

Commission Recapture

The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gains in the Fund’s Statement of Operations.

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Redemption Fees

The AMR Class of the Mid-Cap Value Fund imposes a 2% redemption fee on certain shares held for less than 180 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Funds. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of each Fund pro-rata based on their respective net assets.

Other

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

4. Securities and Other Investments

Real Estate Investment Trusts

The Funds may own shares of real estate investment trusts (“REITS”) which report information on the source of their distributions annually. The Funds re-characterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information, which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year. These re-characterizations are not recorded for financial statement purposes, but as an adjustment to the calculation of taxable income.

 

36


American Beacon FundsSM

Notes to Financial Statesments

October 31, 2013

 

 

Restricted Securities

Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the period ended October 31, 2013 are disclosed in the Notes to the Schedules of Investments.

Other Investment Company Securities and Other Exchange Traded Products

The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Financial Derivative Instruments

Futures Contracts

Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.

Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. A Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

For the six months ended October 31, 2013, the Funds entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.

The Funds’ average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.

 

37


American Beacon FundsSM

Notes to Financial Statesments

October 31, 2013

 

 

     Average Futures Contracts Outstanding  

For the Quarter Ended

   April 30, 2013      October 31, 2013  

Balanced

     40         31   

Mid-Cap Value

     8         9   

Small Cap Value II

     2         1   

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1) (2):

Fair Values of derivative financial instruments as of October 31, 2013:

 

Statements of Assets and Liabilities

   Derivative      Balanced      Mid-Cap
Value
     Small Cap
Value II
 

Unrealized appreciation of futures contracts

     Equity Contracts       $ 1,295       $ 266       $ 7   

The effect of derivative financial instruments during the year ended October 31, 2013:

 

Statements of Operations

                           

Net realized gain (loss) from futures contracts

     Equity Contracts         6,940         1,993         58   

Change in net unrealized appreciation or (depreciation) of futures contracts

     Equity Contracts         1,886         300         9   

 

(1)  See Note 3 in the Notes to Financial Statements for additional information.
(2)  The volume of derivative activity described above is reflective of the derivative activity through the current period of operations.

6. Principal Risks

In the normal course of business the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Funds’ income. Similar to credit risk, the Funds may be exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Funds’ investments may be illiquid and the Funds may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

Market Risks

The Funds’ investments in financial derivatives and other financial instruments expose the Funds to various risks such as, but not limited to, interest rate, foreign currency and equity risks.

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.

If the Funds invest directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Funds, or, in the case of hedging positions, that the Funds’ base currency will decline in value relative to the currency being hedged.

 

38


American Beacon FundsSM

Notes to Financial Statesments

October 31, 2013

 

 

Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Funds’ investments in foreign currency denominated securities may reduce the returns of the Fund.

The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.

7. Federal Income and Excise Taxes

It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.

The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.

 

39


American Beacon FundsSM

Notes to Financial Statesments

October 31, 2013

 

 

The tax character of distributions paid were as follows (in thousands):

 

     Balanced      Mid-Cap Value      Small Cap Value II  
     Year
Ended

October 31,
2013
     Year Ended
October 31,
2012
     Year
Ended

October 31,
2013
     Year Ended
October 31,
2012
     Year
Ended

October 31,
2013
     Year
Ended

October 31,
2012
 

Distributions paid from:

                 

Ordinary income*

                 

Institutional Class

   $ 1,020       $ 843       $ 657       $ 451       $ —         $ —     

Y Class

     72         67         13         1         28         1   

Investor Class

     1,894         2,026         35         14         28         2   

Advisor Class

     93         47         8         —           —           —     

A Class

     84         49         4         1         —           —     

C Class

     77         39         5         —           —           —     

AMR Class

     14,207         21,380         1,435         788         —           —     

Long-Term Capital Gains

                 

Institutional Class

     909         44         1,547         —           —           —     

Y Class

     61         4         29         —           3         —     

Investor Class

     2,087         107         182         —           3         —     

Advisor Class

     56         3         19         —           —           —     

A Class

     85         3         11         —           —           —     

C Class

     94         2         11         —           —           —     

AMR Class

     12,494         1,126         3,149         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 33,233       $ 25,740       $ 7,105       $ 1,255       $ 62       $ 3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* For tax purposes, short-term capital gains are considered ordinary income distributions.

As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):

 

     Balanced     Mid-Cap
Value
    Small Cap
Value II
 

Cost basis of investments for federal income tax purposes

   $ 718,450      $ 184,210      $ 3,794   

Unrealized appreciation

     134,141        36,543        907   

Unrealized depreciation

     (13,086     (1,106     (49
  

 

 

   

 

 

   

 

 

 

Net unrealized appreciation or (depreciation)

     121,055        35,437        858   

Undistributed ordinary income

     12,158        5,657        141   

Accumulated long-term gain or (loss)

     31,786        9,673        282   

Other temporary differences

     1,298        266        6   
  

 

 

   

 

 

   

 

 

 

Distributable earnings or (deficits)

   $ 166,297      $ 51,033      $ 1,287   
  

 

 

   

 

 

   

 

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains or losses on certain derivative instruments and book amortization of premiums.

Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.

 

40


American Beacon FundsSM

Notes to Financial Statesments

October 31, 2013

 

 

Accordingly, the following amounts represent current year permanent differences derived from book amortization of premium, pay down reclasses, Section 732 basis adjustments, non-deductible expenses, income from real estate investment securities, and dividend reclasses that have been reclassified as of October 31, 2013 (in thousands):

 

     Balanced     Mid-Cap
Value
    Small Cap
Value II
 

Paid-in-capital

   $ —        $ 1      $ —     

Undistributed net investment income

     1,090        (19     8   

Accumulated net realized gain (loss)

     (1,090     18        (8

Unrealized appreciation or (depreciation) of investments and futures contracts

     —          —          —     

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.

For the year ended October 31, 2013, the Funds did not have capital loss carryforwards.

8. Investment Transactions

The aggregate cost of purchases and proceeds from sales and maturities of long-term investments, other than short-term obligations, for the year ended October 31, 2013 were as follows (in thousands):

 

     Balanced      Mid-Cap
Value
     Small Cap
Value II
 

Purchases (excluding U.S. government securities)

   $ 412,690       $ 115,202       $ 2,815   

Sales and maturities (excluding U.S. government securities)

     550,364         69,249         2,674   

Purchases of U.S. government securities

     121,061         —           —     

Sales and maturities of U.S. government securities

     45,448         —           —     

A summary of the Balanced Fund’s transactions in USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):

 

     Affiliate      October 31, 2012
Shares/Fair Value
     Purchases      Sales      October 31, 2013
Shares/Fair Value
     Dividend
Income
 

Direct

     USG Select Fund       $ —         $ 5,000       $ 5,000       $ —         $ 1   

 

41


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

9. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):

For the Year Ended October 31, 2013

 

     Institutional Class     Y Class     Investor Class     Advisor Class  

Balanced Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     1,578     $ 24,033       379     $ 5,977       5,452     $ 76,643       340     $ 4,925  

Reinvestment of dividends

     128       1,905       8       118       284       3,855       11       149  

Shares redeemed

     (840     (12,662     (117     (1,822     (5,220     (73,411     (127     (1,870
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     866     $ 13,276       270     $ 4,273       516     $ 7,087       224     $ 3,204  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     AMR Class     Totals  

Balanced Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     251      $ 3,543        526      $ 7,634        10,401      $ 153,598        18,927      $ 276,353   

Reinvestment of dividends

     11       147       11       158       1,897       26,701       2,350       33,033  

Shares redeemed

     (80     (1,133     (41     (596     (23,319     (330,824     (29,744     (422,318
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     182     $ 2,557       496     $ 7,196       (11,021   $ (150,525     (8,467   $ (112,932
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Institutional Class     Y Class     Investor Class     Advisor Class  

Mid-Cap Value Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     2,446     $ 31,998       182     $ 2,464       1,154     $ 15,280       27     $ 331  

Redemption Fees

     —         20       —          —          —          3       —          —     

Reinvestment of dividends

     204       2,201       2       25       19       211       2       27  

Shares redeemed

     (733     (9,125 )      (34     (420 )      (317     (4,009 )      (20     (258 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     1,917     $ 25,094       150     $ 2,069       856     $ 11,485       9     $ 100  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     AMR Class     Totals  

Mid-Cap Value Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     115     $ 1,525       41     $ 529       5,497     $ 69,734       9,462     $ 121,861  

Redemption Fees

     —          —          —          —          —          41       —          64  

Reinvestment of dividends

     1       10       1       12       425       4,584       654       7,070  

Shares redeemed

     (22     (296     —          (1 )      (4,118     (50,994 )      (5,244     (65,103 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     94     $ 1,239       42     $ 540       1,804     $ 23,365       4,872     $ 63,892  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Y Class      Investor Class     Totals  

Small Cap Value II Fund

   Shares      Amount      Shares     Amount     Shares     Amount  

Shares sold

     —         $ —           13     $ 161       13     $ 161  

Reinvestment of dividends

     3        32        3       31       6       63  

Shares redeemed

     —           —           (1     (6     (1     (6
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     3      $ 32        15     $ 186       18      $ 218   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

For the Year Ended October 31, 2012

 

     Institutional Class     Y Class     Investor Class     Advisor Class  

Balanced Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     997     $ 13,684       404     $ 5,674       3,822     $ 48,716       58     $ 762  

Reinvestment of dividends

     62       875       5       70       160       2,070       3       50  

Shares redeemed

     (592     (8,159     (267     (3,728     (4,209     (53,423     (165     (2,181
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     467     $ 6,400       142     $ 2,016       (227   $ (2,637     (104   $ (1,369
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

42


American Beacon Funds

Notes to Financial Statements

October 31, 2013

 

 

     A Class     C Class     AMR Class     Totals  

Balanced Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     274      $ 3,506        213      $ 2,760        20,665      $ 267,520        26,433      $ 342,622   

Reinvestment of dividends

     3       41       3       36       1,694       22,506       1,930       25,648  

Shares redeemed

     (88     (1,159     (23     (296     (29,737     (386,931     (35,081     (455,877
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     189     $ 2,388       193     $ 2,500       (7,378   $ (96,905     (6,718   $ (87,607
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Institutional Class     Y Class     Investor Class     Advisor Class  

Mid-Cap Value Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     419     $ 4,378       43     $ 466       347     $ 3,608       40     $ 405  

Redemption Fees

     —         62       —          —          —          7       —          1  

Reinvestment of dividends

     46       450       —          1       1       13       —          —     

Shares redeemed

     (779     (8,141 )      (1     (9 )      (156     (1,671 )      (1     (13 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (314   $ (3,251     42     $ 458       192     $ 1,957       39     $ 393  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     AMR Class     Totals  

Mid-Cap Value Fund

   Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     18      $ 182        21      $ 222        10,775      $ 112,305        11,663      $ 121,566   

Redemption Fees

     —          1       —          —          —          214       —          285  

Reinvestment of dividends

     —          —          —          —          80       788       127       1,252  

Shares redeemed

     (4     (38 )      —          —          (9,748     (102,397 )      (10,689     (112,269 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     14     $ 145       21     $ 222       1,107     $ 10,910       1,101     $ 10,834  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Y Class     Investor Class     Totals  

Small Cap Value II Fund

   Shares      Amount     Shares      Amount     Shares      Amount  

Shares sold

     8      $ 85       4      $ 39       12      $ 124  

Reinvestment of dividends

     —           1       —           2       —           3  

Shares redeemed

     —           —          —           —          —           —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     8      $ 86       4      $ 41       12      $ 127  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

43


American Beacon Balanced FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

 

    Institutional Class     Y Class  
    Year Ended October 31,     Year Ended October 31,    

March 1

to

Oct. 31,

 
  2013     2012     2011     2010     2009     2013     2012     2011     2010  

Net asset value, beginning of period

  $ 14.27      $ 12.89      $ 12.62      $ 11.83      $ 10.63      $ 14.32      $ 12.93      $ 12.78      $ 12.20   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                 

Net investment income (loss)

    0.30        0.32        0.32        0.35        0.43        0.39        0.17        0.36        0.16   

Net gains (losses) from investments (both realized and unrealized)

    2.35        1.38        0.29        1.10        1.25        2.26        1.51        0.24        0.57   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

    2.65        1.70        0.61        1.45        1.68        2.65        1.68        0.60        0.73   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                 

Dividends from net investment income

    (0.30     (0.32     (0.34     (0.66     (0.48     (0.29     (0.29     (0.45     (0.15

Distributions from net realized gains on securities

    (0.31     —          —          —          —          (0.31     —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

    (0.61     (0.32     (0.34     (0.66     (0.48     (0.60     (0.29     (0.45     (0.15
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

  $ 16.31      $ 14.27      $ 12.89      $ 12.62      $ 11.83      $ 16.37      $ 14.32      $ 12.93      $ 12.78   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

    19.04     13.23     4.87     12.47     16.64     18.97     13.04     4.73     5.99 %B 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                 

Net assets, end of period (in thousands)

  $ 60,916      $ 40,938      $ 30,962      $ 33,405      $ 29,808      $ 7,263      $ 2,482      $ 401      $ 46   

Ratios to average net assets:

                 

Expenses, before reimbursements

    0.60     0.59     0.58     0.58     0.60     0.68     0.69     1.48     0.68 %C 

Expenses, net of reimbursements

    0.60     0.59     0.58     0.58     0.60     0.70     0.69     0.70     0.68 %C 

Net investment income, before (reimbursements) or recoupments

    1.86     2.27     2.49     2.67     3.60     1.71     2.08     1.55     2.54 %C 

Net investment income, net of (reimbursements) or recoupments

    1.86     2.27     2.49     2.67     3.60     1.69     2.08     2.34     2.54 %C 

Portfolio turnover rate

    56     58     47     40     57     56     58     47     40 %D 

 

A Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
B Not annualized.
C Annualized.
D Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

44


American Beacon Balanced FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Investor Class

    Advisor Class  

Year Ended October 31,

   

 

 

Year Ended October 31,

 

2013

   2012     2011     2010     2009     2013     2012     2011     2010     2009  

$    13.16

   $ 11.93      $ 11.66      $ 10.96      $ 9.91      $ 13.73      $ 12.36      $ 12.11      $ 11.35      $ 9.77   

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                  

0.26

     0.23        0.25        0.25        0.30        (0.12     0.42        0.41        0.32        0.37   

2.13

     1.30        0.28        1.04        1.23        2.60        1.14        0.11        1.01        1.21   

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2.39

     1.53        0.53        1.29        1.53        2.48        1.56        0.52        1.33        1.58   

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                  

(0.26)

     (0.30     (0.26     (0.59     (0.48     (0.25     (0.19     (0.27     (0.57     —    

(0.31)

     —         —         —         —         (0.31     —         —         —         —    

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(0.57)

     (0.30     (0.26     (0.59     (0.48     (0.56     (0.19     (0.27     (0.57     —    

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

$    14.98

   $ 13.16      $ 11.93      $ 11.66      $ 10.96      $ 15.65      $ 13.73      $ 12.36      $ 12.11      $ 11.35   

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

18.65%

     12.86     4.52     12.06     16.29     18.52     12.62     4.33     11.96     16.17

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                  

$109,337

   $ 89,272      $ 83,657      $ 84,500      $ 94,915      $ 6,353      $ 2,507      $ 3,536      $ 6,127      $ 6,812   
                  

0.92%

     0.92     0.92     0.93     0.89     1.07     1.09     1.09     1.09     1.09

0.92%

     0.92     0.92     0.93     0.89     1.07     1.09     1.09     1.09     1.09
                  

1.62%

     1.95     2.16     2.34     3.26     1.32     1.82     2.01     2.18     3.06
                  

1.62%

     1.95     2.16     2.34     3.26     1.32     1.82     2.01     2.18     3.06

56%

     58     47     40     57     56     58     47     40     57

 

45


American Beacon Balanced FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     A Class     C Class  
     Year Ended October 31,    

May 17

to

Oct. 31,

    Year Ended October 31,    

Sept. 1

to

Oct. 31,

 
   2013     2012     2011     2010     2013     2012     2011     2010  

Net asset value, beginning of period

   $ 13.16      $ 12.06      $ 11.94      $ 11.50      $ 13.33      $ 12.13      $ 11.92      $ 11.32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                

Net investment income

     0.22        0.33        0.38        0.02        0.17        0.15        0.20        0.01   

Net gains (losses) from investments (both realized and unrealized)

     2.14        1.17        0.14        0.43        2.11        1.29        0.22        0.59   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     2.36        1.50        0.52        0.45        2.28        1.44        0.42        0.60   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                

Dividends from net investment income

     (0.24     (0.40     (0.40     (0.01     (0.17     (0.24     (0.21     0.00   

Distributions from net realized gains on securities

     (0.31     —         —         —          (0.31     —         —         —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.55     (0.40     (0.40     (0.01     (0.48     (0.24     (0.21     0.00   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.97      $ 13.16      $ 12.06      $ 11.94      $ 15.13      $ 13.33      $ 12.13      $ 11.92   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     18.45     12.65     4.37     3.90 %B      17.50     11.86     3.56     5.33 %B 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                

Net assets, end of period (in thousands)

   $ 6,284      $ 3,127      $ 588      $ 47      $ 11,574      $ 3,579      $ 922      $ 1   

Ratios to average net assets:

                

Expenses, before (reimbursements) or recoupments

     1.10     1.13     1.59     1.08 %C      1.84     1.85     2.34     2.14 %C 

Expenses, net of (reimbursements) or recoupments

     1.10     1.09     1.10     1.08 %C      1.85     1.83     1.82     1.86 %C 

Net investment income, before (reimbursements) or recoupments

     1.31     1.62     1.47     1.51 %C      0.51     0.88     0.66     0.20 %C 

Net investment income, net of (reimbursements) or recoupments

     1.30     1.66     1.95     1.51 %C      0.50 %     0.90     1.18     0.48 %C 

Portfolio turnover rate

     56     58     47     40 %D      56     58     47     40 %D 

 

A Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
B Not annualized.
C Annualized.
D Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

46


American Beacon Balanced FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

AMR Class  
                           
                           
                           
Year Ended October 31,  
2013     2012     2011     2010     2009  
$ 13.54      $ 12.27      $ 12.02      $ 11.31      $ 10.19   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
       
  0.27        0.31        0.34        0.35        0.39   
       
       
  2.27       1.34        0.27        1.07        1.24   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
       
  2.54       1.65        0.61        1.42        1.63   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
       
       
  (0.33     (0.38     (0.36     (0.71     (0.51
       
  (0.31     —         —         —         —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.64     (0.38     (0.36     (0.71     (0.51

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 15.44     $ 13.54      $ 12.27      $ 12.02      $ 11.31   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  19.32     13.55     5.09     12.84     16.95

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
       
$ 640,579      $ 710,816      $ 734,927      $ 748,422      $ 681,197   
       
       
  0.33     0.32     0.33     0.33     0.35
       
  0.33     0.32     0.33     0.33     0.35
       
       
  2.29     2.57     2.75     2.92     3.75
       
       
  2.29     2.57     2.75     2.92     3.75
  56     58     47     40     57

 

 

47


American Beacon Mid-Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
                                
                                
     Year Ended October 31,  
   2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 10.95      $ 9.73      $ 9.27      $ 7.57      $ 5.94   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     0.13        0.14        0.09        0.08        0.10   

Net gains (losses) from investments (both realized and unrealized)

     3.93        1.21        0.48        1.67        1.65   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     4.06        1.35        0.57        1.75        1.75   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.20     (0.13     (0.11     (0.05     (0.12

Distributions from net realized gains on securities

     (0.48     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.68     (0.13     (0.11     (0.05     (0.12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interestsC

     0.00        0.00        0.00        0.00        0.00   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.33      $ 10.95      $ 9.73      $ 9.27      $ 7.57   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return D

     39.18     14.07     6.08     23.19     30.24
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 72,207      $ 34,208      $ 33,441      $ 2,778      $ 2,197   

Ratios to average net assets:

          

Expenses, before (reimbursements) or recoupments

     0.99     1.06     1.10     1.06     1.13

Expenses, net of (reimbursements) or recoupments

     0.98     0.98     0.97     0.98     0.98

Net investment income (loss), before (reimbursements) or recoupments

     1.05     1.17     0.91     0.90     1.14

Net investment income, net of reimbursements (recoupments)

     1.06     1.25     1.04     0.99     1.29

Portfolio turnover rate

     48     87     107     40     42

 

A Lee Munder Capital Group, LLC was added as an investment manager to the Mid-Cap Value Fund on July 1, 2011.
B Based on average shares outstanding.
C Amounts represent less than $0.01 per share.
D Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
E Not annualized.
F Annualized.
G Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

48


American Beacon Mid-Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class     Advisor Class  
Year Ended October 31,    

March 1

to

Oct. 31,

    Year Ended October 31,     Year Ended October 31,  
2013     2012     2011A     2010     2013     2012     2011A     2010     2009     2013     2012     2011A     2010     2009  
$ 10.92      $ 9.72      $ 9.27      $ 8.48      $ 10.98      $ 9.71      $ 9.20      $ 7.54      $ 5.92      $ 10.81      $ 9.56      $ 9.12      $ 7.49      $ 5.87   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                         
  0.17        0.13        0.08        0.06        0.23        0.34        (0.03 )B      0.06        0.07        0.11        0.05        0.07        0.07        0.15   
                         
  3.86        1.21        0.48        0.73        3.83        1.00        0.63        1.65        1.66        3.83        1.23        0.45        1.61        1.60   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  4.03        1.34        0.56        0.79        4.06        1.34        0.60        1.71        1.73        3.94        1.28        0.52        1.68        1.75   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                         
  (0.22     (0.14     (0.11     —          (0.09     (0.07     (0.09     (0.05     (0.11     (0.20     (0.03     (0.08     (0.05     (0.13
  (0.48     —         —         —          (0.48     —         —         —         —         (0.48     —         —         —         —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.70     (0.14     (0.11     —          (0.57     (0.07     (0.09     (0.05     (0.11     (0.68     (0.03     (0.08     (0.05     (0.13

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —         —         0.00        0.00        0.00       —         0.00        0.00        0.00        —         0.00        0.00        0.00        0.00   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 14.25      $ 10.92      $ 9.72      $ 9.27      $ 14.47      $ 10.98      $ 9.71      $ 9.20      $ 7.54      $ 14.07      $ 10.81      $ 9.56      $ 9.12      $ 7.49   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  38.99     13.97     5.98     9.32 %E      38.69     13.84     6.49     22.77     29.93     38.43     13.44     5.65     22.53     30.64

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                         
$ 2,814      $ 516      $ 52      $ 1      $ 17,871      $ 4,157      $ 1,812      $ 35,223      $ 23,369      $ 728      $ 465      $ 37      $ 78      $ 7   
                         
  1.11     1.28     11.62     1.05 %F      1.25     1.44     1.32     1.27     1.34     1.61     1.99     1.98     1.55     1.58
  1.08     1.06     1.06     1.01 %F      1.23     1.23     1.23     1.23     1.23     1.49     1.48     1.49     1.44     1.50
                         
  0.79     0.82     (9.44 )%      0.93 %F      0.68     0.75     1.33     0.70 %     0.87     0.46     0.10     0.21     0.36     0.14
  0.82     1.03     1.12     0.97 %F      0.70     0.96     1.42     0.75     0.98     0.58     0.61     0.69     0.47     0.22
  48     87     107     40 %G      48     87     107     40     42     48     87     107     40     42

 

49


American Beacon Mid-Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     A Class  
     Year Ended October 31,    

May 17

to

Oct. 31,

 
   2013     2012     2011A     2010  

Net asset value, beginning of period

   $ 10.82      $ 9.61      $ 9.18      $ 9.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

        

Net investment income (loss)

     0.14        0.09        0.11        0.01   

Net gains (losses) from investments (both realized and unrealized)

     3.80        1.20        0.40        0.17   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     3.94        1.29        0.51        0.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

        

Dividends from net investment income

     (0.19     (0.08     (0.08     —    

Distributions from net realized gains on securities

     (0.48     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.67     (0.08     (0.08     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interestsC

     —         0.00        0.00        0.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.09      $ 10.82      $ 9.61      $ 9.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return D

     38.39     13.56     5.49     2.00 %E 
  

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

        

Net assets, end of period (in thousands)

   $ 1,667      $ 264      $ 101      $ 18   

Ratios to average net assets:

        

Expenses, before (reimbursements) or recoupments

     1.48     1.61     3.44     1.51 %F 

Expenses, net of (reimbursements) or recoupments

     1.49     1.49     1.48     1.48 %F 

Net investment income (loss), before (reimbursements) or recoupments

     0.44     0.56     (1.36 )%      0.44 %F 

Net investment income (loss), net of (reimbursements) or recoupments

     0.43     0.68     0.60     0.47 %F 

Portfolio turnover rate

     48     87     107     40 %G 

 

A Lee Munder Capital Group, LLC was added as an investment manager to the Mid-Cap Value Fund on July 1, 2011.
B Based on average shares outstanding.
C Amounts represent less than $0.01 per share.
D Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
E Not annualized.
F Annualized.
G Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

50


American Beacon Mid-Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

C Class     AMR Class  
Year Ended October 31,    

Sept. 1

to

Oct. 31,

    Year Ended October 31,  

  2013  

    2012     2011A     2010     2013     2012     2011A     2010     2009  
$ 10.70      $ 9.56      $ 9.18      $ 8.30      $ 10.96      $ 9.73      $ 9.27      $ 7.59      $ 5.97   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
  0.11        0.06        0.05        (0.01     0.15        0.24        0.15        0.10        0.07   
  3.67        1.15        0.38        0.89        3.94        1.14        0.43        1.66        1.70   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  3.78        1.21        0.43        0.88        4.09        1.38        0.58        1.76        1.77   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
  (0.19     (0.07     (0.05     —         (0.22     (0.15     (0.12     (0.08     (0.15
  (0.48     —         —         —         (0.48     —         —         —         —    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.67     (0.07     (0.05     —         (0.70     (0.15     (0.12     (0.08     (0.15

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —         —         0.00        0.00        0.00       —         0.00        0.00        0.00   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 13.81      $ 10.70      $ 9.56      $ 9.18      $ 14.35      $ 10.96      $ 9.73      $ 9.27      $ 7.59   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  37.32     12.75     4.64     10.60 %E      39.43     14.34     6.20     23.28     30.56

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
$ 905      $ 254      $ 22      $ 1      $ 125,744      $ 76,273      $ 56,963      $ 64,012      $ 53,604   
               
  2.25     2.46     19.14     3.20 %F      0.73     0.78     0.83     0.77     0.82
  2.24     2.22     2.24     2.24 %F      0.73     0.78     0.83     0.77     0.83
  (0.27 )%      (0.40 )%      (16.96 )%      (1.32 )%F      1.32     1.46     1.34     1.19     1.38
  (0.26 )%      (0.15 )%      (0.06 )%      (0.36 )%F      1.32     1.46     1.34     1.19     1.38
  48     87     107     40 %G      48     87     107     40     42

 

51


American Beacon Small Cap Value II FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Y Class     Investor Class  
     Year
Ended
Oct. 31,
2013
    Nov. 15
to
Oct. 31,
2012
    Year
Ended
Oct. 31,
2013
    Nov. 15
to
Oct. 31,
2012
 

Net asset value, beginning of period

   $ 10.70      $ 10.00      $ 10.67      $ 10.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

        

Net investment income

     0.04        0.04        0.01        0.01   

Net gains from investments (both realized and unrealized)

     3.54        0.67        3.52        0.67   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income from investment operations

     3.58        0.71        3.53        0.68   
  

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

        

Dividends from net investment income

     (0.05     (0.01     (0.05     (0.01

Distributions from net realized gains on securities

     (0.15           (0.15      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.20     (0.01     (0.20     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interestsA

     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.08      $ 10.70      $ 14.00      $ 10.67   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     33.93     7.10     33.55     6.82
  

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

        

Net assets, end of period (in thousands)

   $ 2,268      $ 1,693      $ 2,364      $ 1,640   

Ratios to average net assets:

        

Expenses, before reimbursements

     2.82     4.44 %C      3.11     4.80 %C 

Expenses, net of reimbursements

     1.09     1.06 %C      1.37     1.33 %C 

Net investment (loss), before reimbursements

     (1.38 )%      (3.03 )%C      (1.68 )%      (3.39 )%C 

Net investment income, net of reimbursements

     0.35     0.35 %C      0.06     0.08 %C 

Portfolio turnover rate

     71     82     71     82

 

A Amounts represent less than $0.01 per share.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Annualized.

 

52


American Beacon FundsSM

Privacy Policy and Federal Tax Information

October 31, 2013 (Unaudited)

 

Privacy Policy

The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.

We may collect nonpublic personal information about you from one or more of the following sources:

 

    information we receive from you on applications or other forms;

 

    information about your transactions with us or our service providers; and

 

    information we receive from third parties.

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.

Federal Tax Information

Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2013.

The Funds designated the following items with regard to distributions paid during the year ended December 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

 

     Balanced     Mid-Cap Value     Small Cap Value II  

Corporate Dividends Received Deduction

     45.09     75.68     83.77

Qualified Dividend Income

     63.65     100.00     100.00

The Balanced Fund designated $15,786,450 as long-term capital gains distributions for the year ended October 31, 2013.

The Mid-Cap Value Fund designated $4,948,487 as long-term capital gains distributions for the year ended October 31, 2013.

The Small Cap Value II Fund designated $5,274 as long-term capital gains and $52,198 as short term capital gains distributions for the year ended October 31, 2013.

Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.

 

53


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.

 

    a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

 

    a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC;

 

    a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

 

    a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group;

 

    any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors;

 

    an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers;

 

    a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts;

 

    a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm;

 

    an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any;

 

    confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

 

    a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities;

 

    a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

 

    a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks;

 

    a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations;

 

    a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds;

 

    a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions;

 

    a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers;

 

    a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

 

    a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

 

54


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

    a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf;

 

    a description of trade allocation procedures among accounts managed by the firm;

 

    a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions;

 

    a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds;

 

    a certification by the firm regarding the reasonable design of its compliance program;

 

    a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review;

 

    confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds;

 

    a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt;

 

    information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

 

    a description of the firm’s affiliation with any broker-dealer;

 

    a discussion of any anticipated change in the firm’s controlling persons; and

 

    verification of the firm’s insurance coverage with regards to the services provided to the Funds.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

 

    a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average;

 

    a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

 

    a comparison of advisory fee rates and expense ratios for comparable mutual funds;

 

    a profit/loss analysis of the Manager;

 

    an analysis of any material complaints received from Fund shareholders;

 

    a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds;

 

    a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds;

 

    a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

 

    a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds;

 

    a description of the Manager’s securities lending practices and the fees received from such practices;

 

    a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

 

    a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund;

 

    a description of how expenses that are not readily identifiable to a particular Fund are allocated; and

 

    confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt.

In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.

 

55


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.

The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement

In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.

In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.

With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

 

56


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.

Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.

In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.

Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.

In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to Each Fund

The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.

The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.

 

57


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

Additional Considerations and Conclusions with Respect to the American Beacon Balanced Fund

In considering the renewal of the Management Agreement for the American Beacon Balanced Fund, the Trustees considered the following additional factors: (1) the American Beacon Balanced Fund outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one- and five-year periods ended March 31, 2013, and was equal to the Lipper performance group median for the three-year period; (3) the Manager outperformed its applicable benchmark index with respect to its portion of the Fund’s fixed income assets for the one-, three-, five- and ten-year periods ended March 31, 2013; (4) the expense ratio of the Institutional Class of Fund shares was lower than the median of its Lipper expense universe and Lipper expense group; and (5) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.

In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”) and Hotchkis and Wiley Capital Management, LLC (“Hotchkis”), the Trustees considered the following additional factors: (1) Barrow, Brandywine and Hotchkis each outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Manager’s explanation that, although the equity portion of the Brandywine portfolio underperformed its equity benchmark index for the five-year period ended March 31, 2013, Brandywine outperformed for the one-, three-, five- and ten-year periods ended March 31, 2013, and that Brandywine’s underperformance of its equity portion for the five-year period was due in part to over-and under-weightings of certain sectors during that period; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (4) the Manager’s recommendation to continue to retain each subadvisor.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Balanced Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Balanced Fund.

Additional Considerations and Conclusions with Respect to the American Beacon Mid-Cap Value Fund

In considering the renewal of the Management Agreement for the American Beacon Mid-Cap Value Fund, the Trustees considered the following additional factors: (1) the American Beacon Mid-Cap Value Fund outperformed its Lipper performance universe median and Lipper performance group median for the one-, three- and five-year periods ended March 31, 2013; (2) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe; (3) the expense ratio of the Institutional Class of the Fund was higher than the median of its Lipper expense group; (4) the Institutional Class of the Fund was categorized by Morningstar as having an average expense ratio; and (5) the expense ratio level is impacted by the smaller asset size of the Fund, and thus, is likely to decrease as the Fund grows.

In considering the renewal of the Investment Advisory Agreements with Barrow, Pzena Investment Management, LLC (“Pzena”) and Lee Munder Capital Group, LLC (“Lee Munder”), the Trustees considered the following additional factors: (1) Barrow outperformed the Lipper performance universe median for the three- and five-year periods ended March 31, 2013, but underperformed for the one-year period; (2) Pzena outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (3) Lee Munder outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (5) the Manager’s recommendation to continue to retain each subadvisor.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Mid-Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Mid-Cap Value Fund.

Additional Considerations and Conclusions with Respect to the American Beacon Small Cap Value II Fund

In considering the renewal of the Management Agreement for the American Beacon Small Cap Value II Fund, the Trustees considered the following additional factors: (1) the American Beacon Small Cap Value II Fund underperformed the Lipper performance universe median and Lipper performance group median for the one-year period ended March 31, 2013; (2) the expense ratio of the Y Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (3) the Y Class of the Fund was categorized by Morningstar as having an average expense ratio.

In considering the renewal of the Investment Advisory Agreements with Dean Capital Management, LLC (“Dean”), Fox Asset Management, LLC (“Fox”) and Signia Capital Management, LLC (“Signia”), the Trustees considered the following additional factors: (1) Dean outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (2) Fox and Signia each underperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (4) the Manager’s recommendation to continue to retain each subadvisor, based upon, among other factors, the relatively brief period that this Fund has been in operation.

 

58


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Small Cap Value II Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Small Cap Value II Fund.

 

59


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES      
   Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
Gerard J. Arpey** (55)    Trustee since 2012    Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).
Alan D. Feld*** (76)    Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).
NON-INTERESTED TRUSTEES    Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
W. Humphrey Bogart (69)    Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Brenda A. Cline (52)    Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Eugene J. Duffy (59)    Trustee since 2008    Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Thomas M. Dunning (71)    Trustee since 2008    Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Richard A. Massman (70)       

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).

 

60


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Barbara J. McKenna,

CFA (50)

   Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).
R. Gerald Turner (67)    Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012).
Paul J. Zucconi, CPA (73)    Trustee since 2008    Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-Present); Director, Titanium Metals Corporation (producer of titanium melted and mill products) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
OFFICERS      
   Term   
   One Year   
Gene L. Needles, Jr. (58)   

President since 2009

Executive Vice President

since 2009

   President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors.
Rosemary K. Behan (54)   

VP, Secretary and

Chief Legal

Officer since 2006

   Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008-present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present).
Brian E. Brett (53)    VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).
Wyatt L. Crumpler (47)    VP since 2007    Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc.
Erica Duncan (43)    VP Since 2011    Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM.
Michael W. Fields (59)    VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).
Melinda G. Heika (52)   

Treasurer since

2010

   Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 - Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present).
Terri L. McKinney (49)    VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.
Jeffrey K. Ringdahl (38)        VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007).

 

61


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

Samuel J. Silver (50)    VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.
Christina E. Sears (42)   

Chief Compliance

Officer since 2004

and Asst. Secretary since 1999

   Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc.
John J. Okray (39)    Asst. Secretary since 2010    Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010 - Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010).
Sonia L. Bates (56)    Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc.

 

* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the board may determine to grant one or more annual exemptions to this requirement.
** Mr. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager.
*** Mr. Feld is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to the Manager and one or more of the Trust’s sub-advisors.

 

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64


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65


 

LOGO

 

 

Delivery of Documents

eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

 

LOGO    LOGO

By E-mail:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

 
  
LOGO    LOGO

By Telephone:

Institutional, Y, Investor, and Advisor Classes

Call (800) 658-5811

AMR ClassSM

Call (800) 345-2345

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

    
 
  

Availability of Quarterly Portfolio Schedules

 

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month.

  

Availability of Proxy Voting Policy and Records

 

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

   

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

   

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

   

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

 

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus of Summary Prospectus.

 

American Beacon Funds, American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund and American Beacon Small Cap Value II Fund are service marks of American Beacon Advisors, Inc.

AR 10/13


 

LOGO


About American Beacon Advisors

 

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

Contents

 

 

President’s Message

     1   

Market and Performance Overviews

     2-11   

Schedules of Investments:

  

High Yield Bond Fund

     15   

Retirement Income and Appreciation Fund

     26   

Intermediate Bond Fund

     33   

Short-Term Bond Fund

     41   

Financial Statements

     44   

Notes to the Financial Statements

     49   

Financial Highlights

     64   

Additional Information

     Back Cover   
 

 

An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. An obligation rated ‘AA’ by Standard & Poor’s differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. An obligation rated ‘A’ by Standard & Poor’s is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. An obligation rated ‘BBB’ by Standard & Poor’s exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ by Standard & Poor’s are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

Duration is a measure of price sensitivity relative to changes in interest rates.

 

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

 

American Beacon Funds    October 31, 2013


  LOGO   

Dear Shareholders,

 

Maybe the most prominent story in the bond markets over the past year has been the fact that the 10-year Treasury note has finally started recovering after bottoming out at all-time lows in July 2012. While that’s a good sign for the bond market as a whole, those yields are still near historic lows.

 

Despite the Treasury note’s recovery, there’s no doubt that it was a challenging year for fixed-income investors. For the period under review, the Barclays U.S. Aggregate Bond Index – the benchmark for the broader bond market – declined by 1.08%. That’s a troubling scenario for what is often considered a relatively safe investment.

Other areas of the fixed-income market managed to prosper, though. The JPMorgan Global High Yield Index returned 8.93% for the period under review.

That helps highlight the potential advantage of having a nimble, active manager handling fixed-income investments.

For the 12 months ended October 31, 2013:

 

    The American Beacon High Yield Bond Fund (Investor Class) returned 8.73%.

 

    The American Beacon Retirement Income and Appreciation Fund (Investor Class) returned 3.14%.

 

    The American Beacon Intermediate Bond Fund (Investor Class) returned -1.58%.

 

    The American Beacon Short-Term Bond Fund (Investor Class) returned 0.03%.

Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.

 

Best Regards,
LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

1


Bond Market Overview

October 31, 2013 (Unaudited)

 

 

The U.S. Federal Reserve Bank (the “Fed”) and its quantitative easing program (QE) were the primary forces behind the domestic fixed-income market’s performance during the year ended October 31, 2013. The QE phase of the Fed’s monetary stimulus program, which began in September 2012 with the purchase of $85 billion per month of treasuries and mortgages, sent the 10-year Treasury note yield down to a record-low 1.60% shortly after this period began on October 31, 2012.

Given the Fed’s support, longer-term Treasury yields held below 2.00% until May 2013 when Fed chairman Ben Bernanke referred to a possible “tapering,” or reduction, of the QE program. Because the U.S. economic improvement had been only modest up to that point, Mr. Bernanke’s comments shocked the bond market and caused a sharp increase in interest rates. The 10-year Treasury note yield rose to 3.00% by September 2013.

Despite the Fed’s optimism, the economic data and the dysfunction in Washington D.C. in late 2013 prevented the Fed from tapering QE after all. Interest rates remained volatile, in a downward trend, through October 31, 2013 and ended the period at 2.50%.

During late 2013, the Fed changed course when the economic data confirmed that the economy was still struggling and had not reached a self-sustaining growth trajectory. In particular, employment and inflation were still below the Fed’s targeted objectives. The Fed indicated that a 7.0% unemployment rate was necessary for the tapering of QE, but the rate was 7.3% in October 2013. Likewise, inflation readings were struggling to remain above 1.00%.

Due to the low interest rates, the housing market received a much-needed boost and provided room for optimism about the overall economy. The relief, however, was short lived as the rate increase following the Fed’s tapering discussions sent a chill back into the market. Home sales remained firm through the summer but were beginning to slow as winter approached. The interaction between the Fed and the housing market will be a vital aspect of the economy’s ability to recover.

Long-term interest rates may have been volatile during the year, but yield spreads for corporate and mortgage bonds were fairly stable. On October 31, 2012, the Barclays Investment Grade Corporate Bond Index had a yield spread of 137 basis points (1.37%). At period end, on October 31, 2013, the yield spread was 131 basis points (1.31%). Yield spread measures the difference in yield between a corporate or mortgage bond and a similar-maturity Treasury bond.

For the first six months of the period, the Barclays Aggregate Index return was slightly positive at 0.90%. However, when the Fed’s taper talk began in mid-2013, interest rates rose and pushed the index into negative territory. For the last six months of the period, the index returned -1.97%. Overall, the index returned -1.08% for the year ended October 31, 2013.

 

 

2


High Yield Bond Market Overview

October 31, 2013 (Unaudited)

 

The high-yield fixed-income market posted another year of strong returns in the period under review, as the JPMorgan Global High-Yield Index returned 8.9% for the 12 months ended October 31, 2013. Once again, high-yield bonds were the best performing fixed-income asset class for the period due to the move higher in interest rates. The 10-year Treasury lost 4.6% in the time period, and the market saw emerging-market debt diverge from high-yield returns by losing more than 2.5%.

The high-yield market, as well as many other financial markets, experienced a sharp correction from late May through late June, as comments from the Federal Reserve led the market to worry that tapering from the quantitative easing (QE) program could end sooner than expected and caused interest rates to spike. However, the Fed managed to calm the markets by reiterating that any eventual tapering from QE would be data-dependent. This clarification from the Fed was followed by the nomination of Janet Yellen to succeed Ben Bernanke as Federal Reserve chair and the expectation that she would continue his easy money policies. As a result, interest rates stabilized, albeit at levels significantly higher than they were prior to May.

Aside from outflows related to the interest rate volatility in the early summer, money generally flowed into the high-yield asset class during the year, as investors continued to seek income-producing investments in an environment of low interest rates around the globe. While Treasury yields rose, the potential negative effect was mitigated by high-yield spreads that narrowed from 5.9% over Treasuries to 4.9%, and the yield-to-worst of the high-yield index actually declined from 6.7% to 6.0% over the 12 months under review. Despite a slowdown over the summer, the capital markets were wide open for most of the year, enabling issuers to access the high-yield market to refinance debt at lower rates and to extend maturities.

In the 12 months under review, new issuance exceeded $450 billion, representing 924 issues. By the end of the period, just over 50% of the new issuance was used to refinance debt with the balance split between acquisitions and general corporate activity. The market has also seen an increase in dividends and other shareholder-friendly decisions by management teams in the high-yield credit market.

The combination of corporations being able to issue debt and strong credit fundamentals were key drivers in maintaining a low default rate during the year. On a par-weighted basis, the 12 months experienced just 1.1% in defaults, while the issuer default rate was just 2.4%.

While the high-yield market’s relative returns were strong when compared to fixed-income, high-yield could not keep up with the equity markets. The S&P 500 Index returned 27.2% and the Russell 2000 Index returned 36.3% for the period under review. With the move higher in interest rates, BB-rated bonds lagged the overall market by returning 5.9%, single-B issues showed less rate sensitivity by achieving a 10.3% return and CCC-rated bonds did their best to keep up with the equity market by gaining 16.0%.

 

 

3


American Beacon High Yield Bond FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the High Yield Bond Fund (the “Fund”) returned 8.73% for the twelve months ended October 31, 2013. The Fund slightly trailed the JPMorgan Global High-Yield Index (the “Index”) return of 8.93% and the Lipper High Current Yield Funds Index return of 9.07% for the period.

Comparison of Change in Value of a $10,000 Investment

For the Period from 10/31/2003 through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/13

 

    1 Year     5 Years     10 Years     Value of
$10,000
10/31/03-
10/31/13
 

Institutional
Class (1,7)

    8.94     15.82     7.21   $ 20,067   

Y Class (1,3,7)

    8.74     15.64     7.13     19,911   

Investor Class (1,7)

    8.73     15.54     6.95     19,575   

A Class with sales charge (1,4,7)

    3.50     14.45     6.44     18,667   

A Class without sales charge (1,4,7)

    8.61     15.58     6.96     19,606   

C Class with sales charge (1,5,7)

    6.90     14.97     6.68     19,099   

C Class without sales charge (1,5,7)

    7.90     14.97     6.68     19,099   

AMR Class (1,2,7)

    9.25     16.13     7.39     20,405   

JPMorgan Global High-Yield
Index (6)

    8.93     18.27     9.12     23,940   

Lipper High Current Yield Funds Index (6)

    9.07     15.51     7.44     20,491   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Institutional Class of the Fund was waived through 2004.
  Performance prior to waiving fees was lower than the actual returns shown for periods through 2004.
2. Fund performance for the ten-year period represents the total return achieved by the Institutional Class from 10/31/03 up to 9/4/07, the inception date of the AMR Class, and the returns of the AMR Class since its inception. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 10/31/03.
3. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
4. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 4.75%.
5. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
6. The JPMorgan Global High-Yield Index (“JPMorgan Index”) is an unmanaged index of fixed income securities with a maximum credit rating of BB+ or Ba1. Issues must be publicly registered or issued under Rule 144A under the Securities Act of 1933, with a minimum issue size of $75 million (par amount). A maximum of two issues per issuer are included in the JPMorgan Index. Convertible bonds, preferred stock, and floating-rate bonds are excluded from the JPMorgan Index. The Lipper High Current Yield Funds Index tracks the results of the 30 largest mutual funds in the Lipper High Current Yield Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
7. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and AMR Class shares was 0.94%, 1.14%, 1.17%, 1.47%, 2.17%, and 0.63%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

Prior to the deduction of expenses, the Fund outperformed the Index. On a gross of fee basis, the Fund’s added value relative to the Index was largely driven by strong issue selection across sectors and credit quality categories.

 

 

4


American Beacon High Yield Bond FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

From a sector standpoint, issue selections in the Service, Manufacturing and Energy sectors benefited returns. The Fund’s holdings in these sectors not only outperformed the sector returns in the Index, but also outperformed the Index as a whole.

From a sector allocation perspective, the Fund’s modest cash position detracted given the strong absolute returns generated by the high yield asset class. The Fund’s relative weights among the remaining sectors had a minimal impact on results.

From a credit quality perspective, issue selections in the BB and B-rated categories had a positive impact on the Fund’s relative returns. The Fund’s holdings in the CCC-rated category trailed those of the Index and detracted from relative performance.

From a credit quality allocation perspective, the combination of underweighting BB-rated securities and overweighting CCC-rated securities benefited relative returns.

The sub-advisors’ “bottom-up,” research intensive investment process, which focuses on companies with strong cash flow and fundamental credit strength, remains in place.

Top Ten Holdings (% Net Assets)

 

Clear Channel Communications, Inc., 9.00%, Due 3/1/21

    0.9   

E*Trade Financial Corp., 6.375%, Due 11/15/19

    0.9   

Clear Channel Worldwide Holdings, Inc., 7.625%, Due 3/15/20

    0.6   

Sprint Nextel Corp., 11.500%, Due 11/15/21

    0.6   

Ally Financial, Inc., 7.500%, Due 9/15/2020

    0.6   

EPL Oil & Gas, Inc., 8.250%, Due 2/15/2018

    0.6   

Sabine Pass LNG LP, 7.500%, Due 11/30/16

    0.6   

ArcelorMittal, 6.000%, Due 3/1/2021

    0.5   

Equinix, Inc., 5.375%, Due 4/1/2023

    0.5   

Cumulus Media Holdings, Inc., 7.750%, Due 5/1/2019

    0.5   

Total Fund Holdings

    514                   

Sector Weightings (% Investments)

 

Service

                    27.9   

Manufacturing

    20.2   

Energy

    18.0   

Telecommunications

    11.4   

Finance

    10.8   

Consumer

    4.9   

Utilities

    3.2   

Transportation

    2.5   

Convertible Obligations

    0.6   

Equity

    0.5   

Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Investing in high yield securities involves additional risks when compared to investing in investment-grade securities. These include a greater risk of default or bankruptcy and an increased sensitivity to financial difficulties or changes in interest rates. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

 

5


American Beacon Retirement Income and Appreciation FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Retirement Income and Appreciation Fund (the “Fund”) returned 3.14% for the twelve months ended October 31, 2013. Its benchmark, a blend of 75% Barclays Capital Aggregate Index (the “Aggregate Index”) and 25% BofA Merrill Lynch All U.S. Convertibles Index (the “ML Index”) (combined the “Retirement Income and Appreciation Composite Index”), returned 4.74%. The Fund’s peer group, the Morningstar US OE Retirement Income Category, increased 7.29% for the same period.

Comparison of Change in Value of a $10,000 Investment

For the Period from 10/31/03 through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/13

 

    1 Year     5 Years     10 Years     Value of
$10,000
10/31/03 -
10/31/13
 

Y Class (1,2,7)

    3.43     8.33     4.92   $ 16,166   

Investor Class (1,7)

    3.14     8.13     4.82     16,020   

A Class with sales Charge (1,3,7)

    0.08     7.08     4.31     15,253   

A Class without sales Charge (1,3,7)

    3.18     8.13     4.82     16,019   

C Class with sales Charge (1,4,7)

    1.01     7.55     4.54     15,592   

C Class without sales Charge (1,4,7)

    2.01     7.55     4.54     15,592   

Retirement Income and Appreciation Composite
Index (6)

    4.74     9.06     5.34     16,826   

Barclays Capital Aggregate
Index (5)

    -1.08     6.09     4.78     15,549   

BofA Merrill Lynch All U.S. Convertibles Index (5)

    23.94     17.77     7.22     20,078   

Morningstar US OE Retirement Income (5)

    7.29     8.74     4.70     15,833   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. As a result, total returns shown may be lower than they would have been had the Y Class been in existence since 10/31/03.
3. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 2.50%.
4. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
5. The Barclays Capital Aggregate Index represents returns of the Barclays Capital Gov./Credit Intermediate Index (“Intermediate Index”) up to October 31, 2006 and the Barclays Capital Aggregate Index (“Aggregate Index”) thereafter. The Intermediate Index is an unmanaged index of investment grade corporate and government debt issues with maturities between one and ten years. The Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The BofA Merrill Lynch All U.S. Convertibles Index is an unmanaged index of domestic securities of all quality grades that are convertible into U.S. dollar-denominated common stock, ADRs or cash equivalents. The Morningstar US OE Retirement Income has replaced the Lipper Intermediate Investment Grade Index. The Morningstar US OE Retirement Income category includes funds that invest in a mix of stocks, bonds and cash for those investors already in or entering retirement. One cannot directly invest in an index
6. To reflect the Fund’s allocation of its assets between investment grade fixed-income securities and convertible securities, the returns of the Barclays Capital Aggregate Index and the BofA Merrill Lynch All U.S. Convertibles Index have been combined in a 75%/25% proportion.
7. The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Y, Investor, A, and C Class shares was 0.88%, 1.13%, 1.29%, and 2.05%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report.

The Fund’s assets have been allocated approximately 75% to American Beacon Advisors, Inc. (the “Manager”) that invests primarily in income producing, short and intermediate-term investment grade bonds and 25% to a sub-advisor that invests in securities including convertible bonds, convertible preferreds, high yield bonds and equities in order to try to enhance the return of the overall Fund.

 

 

6


American Beacon Retirement Income and Appreciation FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

 

During the twelve-month period, the investment grade bond portion of the Fund declined 0.5%, outperforming the 1.1% decline for the Aggregate Index. This segment of the Fund’s outperformance can be attributed to a combination of favorable allocation decisions and strong security selection among sectors and credit quality categories.

During the period, the overweight to the Financial sector was a positive as Financial securities were one of the best performing categories in the Aggregate Index (up 1.8%). In addition, maintaining an underweight allocation to Treasury securities also proved beneficial.

The performance from the Fund’s Treasury securities trailed those in the Aggregate Index and hampered relative returns offsetting some of the benefits from the underweight allocation. However, within the Financial sector, security selection was strong and complimented the benefit of the overweight allocation.

The Fund’s positioning and security selection among the various credit quality categories aided returns relative to the Aggregate Index. The combination of underweighting AA-rated securities and overweighting A-rated securities was a key driver. Strong security selection in the A category had a significant impact on the Fund’s relative returns. However, the Fund’s holdings in the BBB-rated category trailed those of the Aggregate Index and detracted from relative performance.

The remaining portion of the Fund, managed by the Fund’s sub-advisor, returned 18.7%. These results trailed the 23.9% return of the ML Index. Much of the underperformance for this segment of the Fund can be attributed to less favorable security selection in two particular economic sectors. The Fund’s holdings in the Information Technology and Healthcare sectors lagged those in the ML Index. While the Fund’s positions generated strong absolute returns and generated double-digit gains, these results did not keep pace with the holdings in the ML Index.

The Manager and the Fund’s sub-advisor remain focused on the Fund’s investment objectives of generating income and capital appreciation.

Top Ten Holdings (% Net Assets)

 

GNR Project Loans, 3.200%, Due 11/16/2044

    2.3   

GNR Project Loans, 2.170%, Due 4/16/2041

    2.2   

Freddie Mac Gold Pool, 3.50%, Due 6/1/42

    1.7   

GNR Project Loans, 2.700%, Due 4/16/2043

    1.7   

Ally Master Owner Trust, 1.21%, Due 6/15/17

    1.4   

GNR Project Loans, 2.543%, Due 9/16/2044

    1.3   

Fannie Mae Pool, 5.00%, Due 1/1/41

    1.3   

National Credit Union Administration, 0.674%, Due 10/7/20

    1.3   

GNR Project Loans, 2.210%, Due 12/16/2035

    1.3   

Citigroup, Inc., 8.50%, Due 5/22/2019

    1.2   

Total Fund Holdings

    250                   

Sector Weightings (% Fixed Income)

 

Mortgage-Backed Obligations

                    23.0   

Finance

    21.2   

U.S. Treasury

    15.0   

Manufacturing

    11.8   

Service

    11.5   

Asset-Backed Obligations

    6.2   

Telecommunications

    3.6   

Energy

    2.9   

Utilities

    2.4   

Consumer

    1.2   

Transportation

    1.2   

Sector Weightings (% Equity)

 

Finance

                    21.5   

Information Technology

    15.9   

Manufacturing

    13.9   

Financials

    13.8   

Energy

    12.6   

Transportation

    4.4   

Utilities

    4.1   

Health Care

    3.5   

Consumer Discretionary

    3.5   

Industrials

    3.4   

Telecommunications

    3.4   

Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

 

7


American Beacon Intermediate Bond FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Intermediate Bond Fund (the “Fund”) declined 1.58% for the twelve months ended October 31, 2013, trailing the Barclays Capital Aggregate Index (the “Index”) decline of 1.08% and the Lipper Core Bond Funds Index decline of 0.70% for the same period.

Comparison of Change in Value of a $10,000 Investment

For the Period from 10/31/03 through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/13

 

    1 Year     5 Years     10 Years     Value of
$10,000
10/31/03-
10/31/13
 

Institutional
Class(1,7)

    -1.04     6.33     4.86   $ 16,068   

Y Class(1,3,7)

    -1.42     6.18     4.78     15,957   

Investor Class (1,2,7)

    -1.58     5.86     4.62     15,713   

A Class with sales Charge(1,4,7)

    -6.35     4.70     4.05     14,874   

A Class without sales Charge(1,4,7)

    -1.69     5.72     4.56     15,615   

C Class with sales Charge(1,5,7)

    -3.51     5.23     4.31     15,256   

C Class without sales Charge(1,5,7)

    -2.51     5.23     4.31     15,256   

Barclays Capital Agg. Index (6)

    -1.08     6.09     4.78     15,942   

Lipper Core Bond Funds Index (6)

    -0.70     7.46     4.69     15,823   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares.
2. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class up to 3/2/09, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 10/31/03.
3. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns
  shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
4. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 through 3/2/09, the Investor Class from 3/2/09 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 4.75%.
5. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 through 3/2/09, the Investor Class from 3/2/09 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase.
6. The Barclays Capital Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Lipper Core Bond Funds Index tracks the results of the 30 largest mutual funds in the Lipper Core Bond Funds category. Lipper is an independent research and ranking service. One cannot directly invest in an index.
7. The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.34%, 1.00%, 0.85%, 1.13%, and 1.88%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report.

Prior to the deduction of expenses, the Fund outperformed the Index. On a gross of fee basis, the Fund’s added value relative to the Index was largely driven by advantageous weightings across sectors and credit quality categories.

During the period, the overweight to the Financial sector was a positive as Financial securities were one of the best performing categories in the market (up 1.8%). In addition, maintaining an underweight allocation to Treasury securities also proved beneficial.

The performance from the Fund’s Treasury securities trailed those in the Index and hampered relative returns offsetting some of the benefits from the underweight allocation. However, within the Financial sector, security selection was strong and complimented the benefit of the overweight allocation.

 

 

8


American Beacon Intermediate Bond FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Fund’s positioning within the various credit quality categories helped returns relative to the Index. The combination of underweighting AA-rated securities and overweighting A-rated securities was a key driver. Offsetting some of the positioning benefits, the Fund’s holdings in the BBB-rated category trailed those of the Index and detracted from relative performance.

The Fund’s duration positioning during the period remained similar to the duration profile of the Index. As interest rates rose in the maturity range in which the Fund has significant investments (3 – 7 years), the Fund benefited from strong issue selection that helped navigate the difficult interest rate environment.

The Fund’s investment managers remain focused on a conservative approach toward investing in the bond market and on issuer-specific opportunities.

Top Ten Holdings (% Net Assets)

 

GNR Project Loans, 2.170%, Due 4/16/2041

     1.7   

Fannie Mae Pool, 4.50%, Due 4/1/2041

     1.5   

Fannie Mae Pool, 4.00%, Due 12/1/2040

     1.3   

Freddie Mac Gold Pool, 3.50%, Due 6/1/2042

     1.1   

GNR Project Loans, 1.732%, Due 5/16/2042

     1.0   

Freddie Mac Gold Pool, 3.500%, Due 9/1/2028

     1.0   

Ally Master Owner Trust, 1.21%, Due 6/15/2017

     1.0   

Bear Stearns Cos. LLC, 7.250%, Due 2/1/2018

     1.0   

Citigroup, Inc., 8.50%, Due 5/22/2019

     0.9   

Fannie Mae Pool, 4.000%, Due 2/1/2041

     0.9   

Total Fund Holdings

     379                   

Sector Weightings (% Investments)

 

Mortgage-Backed Obligations

                     29.3   

U.S. Treasury

     20.3   

Finance

     19.9   

Manufacturing

     7.6   

Service

     5.4   

Asset-Backed Obligations

     4.8   

Energy

     4.6   

Telecommunications

     3.2   

Utilities

     2.8   

Consumer

     1.1   

Transportation

     1.0   

Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

 

9


American Beacon Short-Term Bond FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Investor Class of the Short-Term Bond Fund (the “Fund”) returned 0.47% for the twelve-month period ended October 31, 2013, which underperformed the BofA Merrill Lynch 1-3 Year Gov/Corp Index (the “Index”) return of 0.85% and the Lipper Short Investment Grade Bond Funds Index (the “Lipper”) return of 0.85%.

Comparison of Change in Value of a $10,000 Investment For the Period from 10/31/03 through 10/31/13

 

LOGO

Total Returns for the Period ended 10/31/13

 

     1 Year     5 Years     10 Years     Value of
$10,000
10/31/03-
10/31/13
 

Institutional
Class(1,6)

     0.47     2.71     2.93   $ 13,342   

Y Class(1,2,6)

     0.22     2.64     2.89     13,295   

Investor Class(1,6)

     0.03     2.34     2.46     12,748   

A Class with sales Charge(1,3,6)

     -2.55     1.77     2.17     12,395   

A Class without sales Charge(1,3,6)

     0.00     2.29     2.43     12,713   

C Class with sales Charge(1,4,6)

     -1.73     1.83     2.20     12,434   

C Class without sales Charge(1,4,6)

     -0.73     1.83     2.20     12,434   

Lipper Short Inv. Grade Bond Funds Index (5)

     0.85     4.10     2.87     13,275   

BofA Merrill Lynch 1-3Yr. Gov./Corp Index(5)

     0.85     2.56     2.97     13,393   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Investor Class of the Fund has been waived. Performance prior to waiving fees was lower than the actual returns shown.
2. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 through 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total
  returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03.
3. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 2.50%.
4. Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase.
5. The BofA Merrill Lynch 1-3 Yr. Gov./Corp. Index is a market value weighted performance benchmark for government and corporate fixed-rate debt securities with maturities between one and three years. The Lipper Short Investment Grade Bond Funds Index tracks the results of the 30 largest mutual funds in the Lipper Short Investment Grade Bond Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.
6. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.37%, 0.72%, 0.89%, 1.12%, and 1.90%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

Prior to the deduction of expenses, the Fund’s return was essentially equal to that of the Index. The Fund had overweight positions in the major credit sectors, including investment-grade Corporates and Asset-Backeds, which performed well as the economy improved and as the budget impasse in Washington was resolved. The Fund was also overweight Agency Mortgage-Backed securities which underperformed as spreads widened in response to slower prepayment speeds.

The Fund’s duration position detracted slightly from performance as interest rates ended the period nearly where they began. The Fund’s average duration of 1.2 was shorter than the Index duration of 1.8. Given the slope of the yield curve, the Fund earned slightly less income that it would have earned if its duration were neutral.

Given the unusually low levels of interest rates, we maintained a short duration to protect the Fund from an ultimate rise in rates. Although a rate increase does not appear to be imminent, the absolute low level of yields warrants a more defensive approach toward duration overall.

 

 

10


American Beacon Short-Term Bond FundSM

Performance Overview

October 31, 2013 (Unaudited)

 

 

The Lipper peer group continued to benefit from the outperformance of high-yield bonds. During the period, the BofA Merrill Lynch 1-3 Year US Cash Pay High Yield Index returned 7.83% versus 1.85% for the investment-grade BofA Merrill Lynch 1-3 Year US Corporate Index. The Fund, which is investment-grade only, often lags the Lipper Index during periods of strong high yield outperformance.

Given the macroeconomic backdrop, we will continue to look for opportunity in this low interest rate environment and strive to protect the Fund from volatility across the globe. We will maintain our conservative approach toward credit risk and seek to outperform over the long term on a risk-adjusted basis.

Top Ten Holdings (% Net Assets)

 

National Credit Union Administration, 0.674%, Due 1/8/2020

     3.1   

National Credit Union Administration, 0.625%, Due 3/11/20

     3.1   

Nissan Master Owner Trust Receivables, 0.503%, Due 2/15/18

     2.2   

Capital Auto Receivables Asset Trust 2013-1, 0.920%, Due 9/20/16

     2.2   

ING Bank N.V., 1.808%, Due 6/9/14, 144A

     1.9   

Volkswagen International Finance N.V., 1.15%, Due 11/20/15, 144A

     1.9   

Danske Bank A/S, 1.355%, Due 4/14/14, 144A

     1.9   

Morgan Stanley, 3.450%, Due 11/2/15

     1.9   

General Electric Capital Corp., 1.500%, Due 7/12/2016

     1.9   

AbbVie, Inc., 1.200%, Due 11/6/2015

     1.9   

Total Fund Holdings

     84                   

Sector Weightings (% Investments)

 

Asset-Backed Obligations

     25.1   

Finance

     24.0   

U.S. Treasury

     17.0   

Mortgage-Backed Obligations

     12.1   

Manufacturing

     9.4   

Service

     4.4   

Consumer

     3.1   

Telecommunications

     2.5   

Utilities

     1.1   

Transportation

     0.7   

Energy

                     0.6   

Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

 

11


American Beacon FundsSM

Fund Expenses

October 31, 2013 (Unaudited)

 

Fund Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees if applicable, and (2) ongoing costs, including sales charges (loads) on purchase payments including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.

Actual Expenses

The following tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

The following tables provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund, such as redemption fees as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the following tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

 

12


American Beacon FundsSM

Fund Expenses

October 31, 2013 (Unaudited)

 

 

High Yield Bond Fund

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,015.55       $ 4.52   

Hypothetical **

   $ 1,000.00       $ 1,020.72       $ 4.53   

Y Class

        

Actual

   $ 1,000.00       $ 1,014.00       $ 4.97   

Hypothetical **

   $ 1,000.00       $ 1,020.27       $ 4.99   

Investor Class

        

Actual

   $ 1,000.00       $ 1,013.59       $ 5.38   

Hypothetical **

   $ 1,000.00       $ 1,019.86       $ 5.40   

A Class

        

Actual

   $ 1,000.00       $ 1,013.48       $ 5.68   

Hypothetical **

   $ 1,000.00       $ 1,019.56       $ 5.70   

AMR Class

        

Actual

   $ 1,000.00       $ 1,015.88       $ 3.10   

Hypothetical **

   $ 1,000.00       $ 1,022.13       $ 3.11   

C Class

        

Actual

   $ 1,000.00       $ 1,009.46       $ 9.47   

Hypothetical **

   $ 1,000.00       $ 1,015.78       $ 9.50   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.89%, 0.98%, 1.06%, 1.12%, 1.87% and 0.61% for the Institutional, Y, Investor, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Retirement Income and Appreciation Fund

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Y Class

        

Actual

   $ 1,000.00       $ 1,007.38       $ 4.05   

Hypothetical **

   $ 1,000.00       $ 1,021.17       $ 4.08   

Investor Class

        

Actual

   $ 1,000.00       $ 1,005.76       $ 5.66   

Hypothetical **

   $ 1,000.00       $ 1,019.56       $ 5.70   

A Class

        

Actual

   $ 1,000.00       $ 1,005.57       $ 5.91   

Hypothetical **

   $ 1,000.00       $ 1,019.31       $ 5.96   

C Class

        

Actual

   $ 1,000.00       $ 1,000.63       $ 9.88   

Hypothetical **

   $ 1,000.00       $ 1,015.32       $ 9.96   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.80%, 1.12%, 1.17% and 1.96% for the Y, Investor, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Intermediate Bond Fund

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 982.35       $ 1.70   

Hypothetical **

   $ 1,000.00       $ 1,023.49       $ 1.73   

Y Class

        

Actual

   $ 1,000.00       $ 980.05       $ 3.24   

Hypothetical **

   $ 1,000.00       $ 1,021.93       $ 3.31   

Investor Class

        

Actual

   $ 1,000.00       $ 980.09       $ 3.94   

Hypothetical **

   $ 1,000.00       $ 1,021.22       $ 4.02   

A Class

        

Actual

   $ 1,000.00       $ 979.12       $ 4.94   

Hypothetical **

   $ 1,000.00       $ 1,020.21       $ 5.04   

C Class

        

Actual

   $ 1,000.00       $ 975.40       $ 8.66   

Hypothetical **

   $ 1,000.00       $ 1,016.43       $ 8.84   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.34%, 0.65%, 0.79%, 0.99% and 1.74% for the Institutional, Y, Investor, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Short-Term Bond Fund

 

     Beginning
Account
Value
5/1/13
     Ending
Account
Value
10/31/13
     Expenses Paid
During Period*
5/1/13-10/31/13
 

Institutional Class

        

Actual

   $ 1,000.00       $ 999.81       $ 1.92   

Hypothetical **

   $ 1,000.00       $ 1,023.29       $ 1.94   

Y Class

        

Actual

   $ 1,000.00       $ 998.54       $ 3.22   

Hypothetical **

   $ 1,000.00       $ 1,021.98       $ 3.26   

Investor Class

        

Actual

   $ 1,000.00       $ 997.75       $ 3.98   

Hypothetical **

   $ 1,000.00       $ 1,021.22       $ 4.02   

A Class

        

Actual

   $ 1,000.00       $ 998.61       $ 4.28   

Hypothetical **

   $ 1,000.00       $ 1,020.92       $ 4.33   

C Class

        

Actual

   $ 1,000.00       $ 994.90       $ 8.10   

Hypothetical **

   $ 1,000.00       $ 1,017.09       $ 8.19   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.38%, 0.64%, 0.79%, 0.85% and 1.61% for the Institutional, Y, Investor, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

13


American Beacon FundsSM

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Trustees of

American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund, American Beacon Retirement Income and Appreciation Fund, and American Beacon Short-Term Bond Fund:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund, American Beacon Retirement Income and Appreciation Fund, and American Beacon Short-Term Bond Fund (four of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2013, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund, American Beacon Retirement Income and Appreciation Fund, and American Beacon Short-Term Bond Fund at October 31, 2013, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

 

LOGO                                          

Dallas, Texas

December 30, 2013

 

14


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCKS - 0.19%

     

CONSUMER DISCRETIONARY- 0.12%

     

Automobiles - 0.12%

     

General Motors Co.C

     6,381       $ 235   
     

 

 

 

MANUFACTURING- 0.05%

     

Paper & Forest Products - 0.05%

     

Catalyst Paper Corp.C

     8,426         9   

NewPage Holdings, Inc.A C

     1,200         106   
     

 

 

 

Total Manufacturing

        115   
     

 

 

 

SERVICE- 0.01%

     

Other Service - 0.01%

     

Dex Media, Inc.C

     2,606         18   
     

 

 

 

TRANSPORTATION- 0.01%

     

Other Transportation - 0.01%

     

CEVA Holdings LLCA B C

     22         21   
     

 

 

 

Total Common Stocks (Cost $1,853)

        389   
     

 

 

 

RIGHTS - 0.09% (Cost $541)

     

TRANSPORTATION- 0.09%

     

Other Transportation - 0.09%

     

Horizon Lines, Inc., Exercise price $0.051, Expires 9/27/2036A C D

     3,581,642         182   
     

 

 

 

PREFERRED STOCKS - 0.18%

     

AGENCY- 0.03%

     

Federal Home Loan Mortgage Corporation - 0.03%

     

Federal Home Loan Mortgage Corp., 1.00%, Due 12/31/2049C E K

     10,000         71   
     

 

 

 

FINANCE- 0.15%

     

Banks - 0.15%

     

GMAC Capital Trust I, 1.00%, Due 2/15/2040E

     11,600         311   
     

 

 

 

Total Preferred Stocks (Cost $540)

        382   
     

 

 

 

CONVERTIBLE PREFERRED STOCKS - 0.02% (Cost $68)

     

TRANSPORTATION- 0.02%

     

Other Transportation - 0.02%

     

CEVA Holding LLC, Series A-2 A B C

     49         45   
     

 

 

 
     Par Amount         
     (000’s)         

CONVERTIBLE OBLIGATIONS - 0.56%

     

Consumer - 0.03%

     

CEDC Finance Corp International, Inc., 10.00%, Due 4/30/2018

   $ 78         68   
     

 

 

 

Finance - 0.19%

     

E*Trade Financial Corp., 0.01%, Due 8/31/2019

     240         393   
     

 

 

 

Manufacturing - 0.24%

     

Alpha Appalachia Holdings, Inc., 3.25%, Due 8/1/2015

     525         499   
     

 

 

 

Transportation - 0.10%

     

YRC Worldwide, Inc., 10.00%, Due 3/31/2015 F

     256         205   
     

 

 

 

Total Convertible Obligations (Cost $1,010)

        1,165   
     

 

 

 

CORPORATE OBLIGATIONS - 92.92%

     

Consumer - 4.60%

     

American Rock Salt Co. LLC, 8.25%, Due 5/1/2018B G

     335         325   

See accompanying notes

 

15


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

ARAMARK Corp., 5.75%, Due 3/15/2020G

   $ 280       $ 293   

CEDC Finance Corp International, Inc., 8.00%, Due 4/30/2018F J*

     173         162   

Del Monte Corp., 7.625%, Due 2/15/2019

     945         983   

Dole Food Co., Inc., 7.25%, Due 5/1/2019G

     100         101   

FAGE Dairy Industry S.A., 9.875%, Due 2/1/2020G

     425         460   

First Quality Finance Co. Inc., 4.625%, Due 5/15/2021G

     350         331   

Innovation Ventures LLC, 9.50%, Due 8/15/2019B G

     300         278   

JBS Investments GmbH, 7.75%, Due 10/28/2020G

     50         52   

JBS USA LLC,

     

8.25%, Due 2/1/2020B G

     400         429   

7.25%, Due 6/1/2021B G

     500         512   

Libbey Glass, Inc., 6.875%, Due 5/15/2020

     455         489   

Marfrig Holding Europe BV, 8.375%, Due 5/9/2018G

     200         189   

Motors Liquidation Co., 8.375%, Due 7/15/2049 A E

     1,570         —     

Pinnacle Operating Corp., 9.00%, Due 11/15/2020G

     295         308   

Post Holdings, Inc., 7.375%, Due 2/15/2022G

     400         427   

Prestige Brands, Inc.,

     

8.25%, Due 4/1/2018

     300         319   

8.125%, Due 2/1/2020

     205         228   

Revlon Consumer Products Corp., 5.75%, Due 2/15/2021G

     200         198   

Reynolds Group Issuer Inc.,

     

8.50%, Due 5/15/2018

     400         424   

9.00%, Due 4/15/2019

     685         732   

9.875%, Due 8/15/2019

     100         111   

5.75%, Due 10/15/2020

     605         624   

8.25%, Due 2/15/2021

     300         312   

Simmons Foods, Inc., 10.50%, Due 11/1/2017G

     350         367   

Smithfield Foods, Inc., 7.75%, Due 7/1/2017

     155         180   

Spectrum Brands Escrow Corp., 6.625%, Due 11/15/2022G

     470         501   

Sun Merger Sub, Inc., 5.875%, Due 8/1/2021G

     100         105   

Viskase Cos., Inc., 9.875%, Due 1/15/2018G

     150         159   
     

 

 

 
        9,599   
     

 

 

 

Energy - 16.82%

     

Access Midstream Partners LP, 6.125%, Due 7/15/2022H

     280         300   

Antero Resources Finance Corp.,

     

6.00%, Due 12/1/2020

     575         607   

5.375%, Due 11/1/2021G

     200         203   

Basic Energy Services, Inc., 7.75%, Due 10/15/2022

     290         293   

Bonanza Creek Energy, Inc., 6.75%, Due 4/15/2021

     180         191   

Calumet Specialty Products Partners LP, 9.375%, Due 5/1/2019H

     300         332   

Carrizo Oil & Gas, Inc.,

     

8.625%, Due 10/15/2018

     300         329   

7.50%, Due 9/15/2020

     100         109   

CGG S.A., 6.50%, Due 6/1/2021

     600         623   

Chaparral Energy, Inc.,

     

9.875%, Due 10/1/2020

     475         542   

8.25%, Due 9/1/2021

     100         110   

7.625%, Due 11/15/2022

     780         842   

Chesapeake Energy Corp.,

     

6.625%, Due 8/15/2020

     400         451   

6.875%, Due 11/15/2020

     485         548   

5.75%, Due 3/15/2023

     550         583   

Clayton Williams Energy, Inc., 7.75%, Due 4/1/2019

     500         511   

Comstock Resources, Inc.,

     

7.75%, Due 4/1/2019

     310         324   

9.50%, Due 6/15/2020

     155         172   

Continental Resources, Inc., 5.00%, Due 9/15/2022

     280         292   

Drill Rigs Holdings, Inc., 6.50%, Due 10/1/2017G

     840         883   

Eagle Rock Energy Partners LP, 8.375%, Due 6/1/2019H

     500         514   

Energy Transfer Equity LP, 7.50%, Due 10/15/2020H

     700         809   

EPL Oil & Gas, Inc., 8.25%, Due 2/15/2018

     1,225         1,313   

EV Energy Partner LP, 8.00%, Due 4/15/2019H

     430         430   

 

See accompanying notes

 

16


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Expro Finance Luxembourg SCA, 8.50%, Due 12/15/2016G

   $ 500       $ 524   

Forbes Energy Services Ltd., 9.00%, Due 6/15/2019

     365         369   

Genesis Energy LP,

     

7.875%, Due 12/15/2018H

     80         86   

5.75%, Due 2/15/2021H

     355         360   

Goodrich Petroleum Corp., 8.875%, Due 3/15/2019

     500         526   

Halcon Resources Corp.,

     

9.75%, Due 7/15/2020

     100         109   

8.875%, Due 5/15/2021

     400         417   

9.25%, Due 2/15/2022G

     100         106   

Hercules Offshore, Inc.,

     

10.25%, Due 4/1/2019G

     910         1,027   

8.75%, Due 7/15/2021G

     200         220   

7.50%, Due 10/1/2021G

     330         345   

Hilcorp Energy I LP, 7.625%, Due 4/15/2021G H

     295         320   

Holly Energy Partners LP, 6.50%, Due 3/1/2020H

     225         236   

Key Energy Services, Inc., 6.75%, Due 3/1/2021

     305         310   

Kinder Morgan Finance Co. LLC, 6.00%, Due 1/15/2018B G

     500         544   

Kinder Morgan, Inc., 5.00%, Due 2/15/2021G

     100         100   

Linn Energy LLC,

     

6.50%, Due 5/15/2019B

     155         155   

7.00%, Due 11/1/2019B G

     100         100   

8.625%, Due 4/15/2020B

     700         746   

7.75%, Due 2/1/2021B I

     820         847   

Magnum Hunter Resources Corp., 9.75%, Due 5/15/2020G

     700         742   

MarkWest Energy Partners LP, 4.50%, Due 7/15/2023H

     510         495   

MEG Energy Corp., 7.00%, Due 3/31/2024G

     105         107   

Memorial Production Partners LP, 7.625%, Due 5/1/2021H

     310         315   

Midstates Petroleum, Inc., 9.25%, Due 6/1/2021

     300         309   

Oasis Petroleum, Inc., 6.875%, Due 3/15/2022G

     585         632   

Offshore Group Investment Ltd.,

     

7.50%, Due 11/1/2019

     505         549   

7.125%, Due 4/1/2023

     400         407   

Pacific Drilling S.A., 5.375%, Due 6/1/2020G

     350         353   

Pacific Drilling V Ltd., 7.25%, Due 12/1/2017G

     300         326   

PBF Holding Co. LLC, 8.25%, Due 2/15/2020B

     500         523   

Penn Virginia Corp., 8.50%, Due 5/1/2020

     615         653   

Penn Virginia Resource Partners LP,

     

8.375%, Due 6/1/2020H

     200         222   

6.50%, Due 5/15/2021G H

     300         309   

PetroQuest Energy, Inc., 10.00%, Due 9/1/2017B

     415         427   

Pioneer Energy Services Corp., 9.875%, Due 3/15/2018

     220         237   

QEP Resources, Inc.,

     

5.375%, Due 10/1/2022

     300         293   

5.25%, Due 5/1/2023

     300         289   

QR Energy LP, 9.25%, Due 8/1/2020H

     670         702   

Quicksilver Resources, Inc.,

     

7.00%, Due 6/21/2019G

     100         97   

9.125%, Due 8/15/2019

     200         195   

Range Resources Corp., 5.00%, Due 3/15/2023

     270         269   

Regency Energy Partners LP, 6.50%, Due 7/15/2021H

     225         241   

Resolute Energy Corp., 8.50%, Due 5/1/2020

     750         788   

Rex Energy Corp., 8.875%, Due 12/1/2020

     305         329   

Rockies Express Pipeline LLC,

     

6.85%, Due 7/15/2018B G

     135         127   

6.00%, Due 1/15/2019B G

     170         151   

Sabine Pass Liquefaction LLC,

     

5.625%, Due 2/1/2021B G

     1,005         1,015   

5.625%, Due 4/15/2023B G

     430         421   

Samson Investment Co., 10.25%, Due 2/15/2020G

     815         880   

Sanchez Energy Corp., 7.75%, Due 6/15/2021G

     745         760   

SandRidge Energy, Inc.,

     

7.50%, Due 3/15/2021

     665         705   

 

See accompanying notes

 

17


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

8.125%, Due 10/15/2022

   $ 280       $ 298   

Talos Production LLC, 9.75%, Due 2/15/2018B G

     490         495   

Targa Resources Partners LP, 5.25%, Due 5/1/2023H

     460         460   

W&T Offshore, Inc., 8.50%, Due 6/15/2019

     595         641   

WPX Energy, Inc., 6.00%, Due 1/15/2022

     575         604   
     

 

 

 
        35,124   
     

 

 

 

Finance - 10.18%

     

Aircastle Ltd., 6.25%, Due 12/1/2019

     545         580   

Algeco Scotsman Global Finance PLC, 8.50%, Due 10/15/2018G

     500         536   

Ally Financial, Inc.,

     

5.50%, Due 2/15/2017

     120         130   

8.00%, Due 12/31/2018

     200         233   

7.50%, Due 9/15/2020

     1,035         1,210   

A-S Co-Issuer Subsidiary, Inc., 7.875%, Due 12/15/2020G

     450         466   

Aviv Healthcare Properties LP,

     

7.75%, Due 2/15/2019H

     200         216   

6.00%, Due 10/15/2021G H

     100         103   

Bank of America Corp., 8.125%, Due 12/31/2049E

     900         1,006   

Bank One Capital III, 8.75%, Due 9/1/2030

     275         358   

CIT Group, Inc.,

     

5.50%, Due 2/15/2019G

     100         108   

5.375%, Due 5/15/2020

     200         214   

5.00%, Due 8/15/2022

     800         810   

CNL Lifestyle Properties, Inc., 7.25%, Due 4/15/2019

     250         260   

Denali Borrower LLC, 5.625%, Due 10/15/2020B G

     170         168   

E*Trade Financial Corp.,

     

6.75%, Due 6/1/2016

     105         113   

6.00%, Due 11/15/2017

     360         382   

6.375%, Due 11/15/2019

     1,770         1,894   

Fidelity & Guaranty Life Holdings, Inc., 6.375%, Due 4/1/2021G

     200         209   

General Electric Capital Corp., 7.125%, Due 12/31/2049E

     200         223   

Genworth Financial, Inc., 6.15%, Due 11/15/2066E

     325         294   

Geo Group, Inc.,

     

6.625%, Due 2/15/2021

     275         291   

5.125%, Due 4/1/2023

     225         211   

Hockey Merger Sub 2, Inc., 7.875%, Due 10/1/2021G

     480         495   

Icahn Enterprises LP, 6.00%, Due 8/1/2020G H

     225         231   

iStar Financial, Inc., 9.00%, Due 6/1/2017

     570         663   

JPMorgan Chase & Co., 6.00%, Due 12/31/2049

     800         774   

MetLife, Inc., 10.75%, Due 8/1/2069

     150         224   

Nationwide Mutual Insurance Co., 9.375%, Due 8/15/2039G

     225         314   

Neuberger Berman Group LLC, 5.875%, Due 3/15/2022B G

     400         409   

Nielsen Co., LUX SARL, 5.50%, Due 10/1/2021G

     200         206   

Nuveen Investments, Inc.,

     

5.50%, Due 9/15/2015

     380         369   

9.125%, Due 10/15/2017G

     590         572   

9.50%, Due 10/15/2020G

     730         695   

Onex USI Acquisition Corp., 7.75%, Due 1/15/2021G

     300         306   

Oppenheimer Holdings, Inc., 8.75%, Due 4/15/2018

     400         430   

Provident Funding Associates LP,

     

10.125%, Due 2/15/2019G H

     255         284   

6.75%, Due 6/15/2021G H

     700         716   

Realogy Group LLC, 9.00%, Due 1/15/2020B G

     270         313   

ROC Finance LLC, 12.125%, Due 9/1/2018B G

     750         810   

Royal Bank of Scotland Group PLC, 6.125%, Due 12/15/2022

     800         827   

SLM Corp.,

     

8.45%, Due 6/15/2018

     300         350   

5.50%, Due 1/15/2019

     500         519   

Synovus Financial Corp.,

     

5.125%, Due 6/15/2017

     575         587   

7.875%, Due 2/15/2019

     540         614   

TMX Finance LLC, 8.50%, Due 9/15/2018B G

     225         239   

Western Alliance Bancorp, 10.00%, Due 9/1/2015

     270         291   
     

 

 

 
        21,253   
     

 

 

 

 

See accompanying notes

 

18


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Manufacturing - 18.99%

     

Abengoa Finance SAU, 8.875%, Due 11/1/2017G

   $ 400       $ 421   

Accudyne Industries Borrower / Accudyne Industries LLC, 7.75%, Due 12/15/2020G

     150         157   

Activision Blizzard, Inc., 5.625%, Due 9/15/2021G

     300         311   

Advanced Micro Devices, Inc., 7.50%, Due 8/15/2022

     650         630   

Ainsworth Lumber Co. Ltd, 7.50%, Due 12/15/2017G

     293         317   

Aleris International, Inc., 7.875%, Due 11/1/2020

     360         382   

Allison Transmission, Inc., 7.125%, Due 5/15/2019G

     600         647   

ArcelorMittal,

     

4.25%, Due 8/5/2015

     170         176   

6.00%, Due 3/1/2021E

     1,000         1,048   

6.75%, Due 2/25/2022E

     435         473   

Arch Coal, Inc.,

     

8.75%, Due 8/1/2016

     205         205   

9.875%, Due 6/15/2019

     160         136   

ARD Finance S.A., 11.125%, Due 6/1/2018F G

     518         570   

Ardagh Packaging Finance PLC,

     

7.00%, Due 11/15/2020G

     600         597   

4.875%, Due 11/15/2022G

     250         246   

ArvinMeritor, Inc., 10.625%, Due 3/15/2018

     200         216   

Ashland, Inc., 4.75%, Due 8/15/2022

     505         485   

Barminco Finance Property Ltd., 9.00%, Due 6/1/2018G

     300         284   

Blackboard, Inc., 7.75%, Due 11/15/2019G

     100         101   

BMC Software Finance, Inc., 8.125%, Due 7/15/2021G

     775         819   

BMC Software, Inc., 7.25%, Due 6/1/2018

     215         223   

Boart Longyear Management Property Ltd.,

     

10.00%, Due 10/1/2018G

     180         184   

7.00%, Due 4/1/2021G

     230         171   

Catalyst Paper Corp., 11.00%, Due 10/30/2017F K

     146         83   

CDW LLC, 8.50%, Due 4/1/2019B

     450         498   

Cemex Finance LLC, 9.375%, Due 10/12/2022B G

     200         225   

Cemex SAB de CV,

     

9.00%, Due 1/11/2018G

     500         544   

5.875%, Due 3/25/2019G

     200         196   

Chrysler Group LLC, 8.00%, Due 6/15/2019B

     270         299   

Consol Energy, Inc.,

     

8.00%, Due 4/1/2017

     100         106   

8.25%, Due 4/1/2020

     500         547   

Consolidated Container Co. LLC, 10.125%, Due 7/15/2020B G

     400         432   

CPG Merger Sub LLC, 8.00%, Due 10/1/2021B G

     295         305   

Eagle Spinco, Inc., 4.625%, Due 2/15/2021G

     535         517   

Eldorado Gold Corp., 6.125%, Due 12/15/2020G

     630         627   

Euramax International, Inc., 9.50%, Due 4/1/2016

     100         99   

Exopack Holding Corp., 10.00%, Due 6/1/2018

     300         324   

FMG Resources August 2006 Property Ltd.,

     

7.00%, Due 11/1/2015G

     210         218   

6.00%, Due 4/1/2017G

     575         601   

6.875%, Due 2/1/2018G

     500         530   

8.25%, Due 11/1/2019G

     780         865   

6.875%, Due 4/1/2022G

     35         37   

FQM Akubra, Inc., 7.50%, Due 6/1/2021G

     100         106   

Freescale Semiconductor, Inc.,

     

9.25%, Due 4/15/2018G

     64         69   

8.05%, Due 2/1/2020

     400         431   

10.75%, Due 8/1/2020

     200         228   

6.00%, Due 1/15/2022G

     100         101   

General Motors Financial Co. Inc., 3.25%, Due 5/15/2018G

     300         299   

Gibraltar Industries, Inc., 6.25%, Due 2/1/2021

     350         362   

Goodyear Tire & Rubber Co., 6.50%, Due 3/1/2021

     700         740   

Horsehead Holding Corp.,

     

10.50%, Due 6/1/2017G

     530         572   

 

See accompanying notes

 

19


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

INEOS Finance PLC, 8.375%, Due 2/15/2019G

   $ 200       $ 223   

INEOS Group Holdings S.A., 6.125%, Due 8/15/2018G

     400         404   

Inmet Mining Corp., 8.75%, Due 6/1/2020G

     500         553   

K Hovnanian Enterprises, Inc., 7.25%, Due 10/15/2020G

     230         245   

KB Home,

     

7.00%, Due 12/15/2021

     100         103   

7.50%, Due 9/15/2022

     500         524   

Liberty Tire Recycling LLC, 11.00%, Due 10/1/2016B G

     325         332   

Louisiana-Pacific Corp., 7.50%, Due 6/1/2020

     425         469   

M/I Homes, Inc., 8.625%, Due 11/15/2018

     200         217   

Manitowoc Co., Inc., 8.50%, Due 11/1/2020

     150         170   

Mcron Finance Sub LLC, 8.375%, Due 5/15/2019B G

     135         150   

MedAssets, Inc., 8.00%, Due 11/15/2018

     175         189   

Meritor, Inc., 6.75%, Due 6/15/2021

     200         202   

Midwest Vanadium Property Ltd., 11.50%, Due 2/15/2018G

     200         168   

Milacron LLC, 7.75%, Due 2/15/2021B G

     260         272   

Mueller Water Products, Inc., 7.375%, Due 6/1/2017

     290         298   

Murray Energy Corp., 8.625%, Due 6/15/2021G

     300         321   

Navistar International Corp., 8.25%, Due 11/1/2021

     200         204   

Norske Skogindustrier ASA, 6.125%, Due 10/15/2015G

     575         397   

Novelis, Inc., 8.75%, Due 12/15/2020

     500         556   

Nufarm Australia Ltd., 6.375%, Due 10/15/2019G

     290         299   

Olin Corp., 5.50%, Due 8/15/2022

     400         402   

Orion Engineered Carbons Bondco GmbH, 9.625%, Due 6/15/2018G

     200         222   

Orion Engineered Carbons Finance & Co. SCA, 9.25%, Due 8/1/2019F G

     200         209   

Peabody Energy Corp.,

     

7.375%, Due 11/1/2016

     600         675   

6.00%, Due 11/15/2018

     155         164   

6.25%, Due 11/15/2021

     510         527   

Perstorp Holding AB, 8.75%, Due 5/15/2017G

     500         522   

Pittsburgh Glass Works LLC,

     

8.50%, Due 4/15/2016B G

     300         314   

8.00%, Due 11/15/2018B G

     295         301   

Plastipak Holdings, Inc., 6.50%, Due 10/1/2021G

     230         239   

Rain CII Carbon LLC, 8.25%, Due 1/15/2021B G

     300         310   

Reliance Intermediate Holdings LP, 9.50%, Due 12/15/2019G H

     760         833   

Renaissance Acquisition Corp., 6.875%, Due 8/15/2021G

     505         514   

Rentech Nitrogen Partners LP, 6.50%, Due 4/15/2021G H

     950         921   

Rockwood Specialties Group, Inc., 4.625%, Due 10/15/2020

     310         319   

Sanmina Corp., 7.00%, Due 5/15/2019G

     435         462   

Schaeffler Finance BV, 8.50%, Due 2/15/2019G

     200         225   

SIWF Merger Sub, Inc., 6.25%, Due 6/1/2021G

     160         161   

Smurfit Kappa Treasury Funding Ltd., 7.50%, Due 11/20/2025

     550         605   

Sophia LP, 9.75%, Due 1/15/2019G H

     250         273   

SRA International, Inc., 11.00%, Due 10/1/2019

     100         104   

Stackpole International Intermediate Co., 7.75%, Due 10/15/2021G

     575         598   

Standard Pacific Corp., 6.25%, Due 12/15/2021

     300         309   

SunGard Data Systems, Inc., 6.625%, Due 11/1/2019

     295         308   

Taylor Morrison Communities, Inc.,

     

7.75%, Due 4/15/2020G

     754         833   

5.25%, Due 4/15/2021G

     210         205   

Terex Corp., 6.00%, Due 5/15/2021

     435         454   

Texas Industries, Inc., 9.25%, Due 8/15/2020

     340         376   

TPC Group, Inc., 8.75%, Due 12/15/2020G

     565         594   

TransDigm, Inc.,

     

7.75%, Due 12/15/2018

     145         156   

7.50%, Due 7/15/2021

     235         256   

Tronox Finance LLC, 6.375%, Due 8/15/2020B

     505         515   

UCI International, Inc., 8.625%, Due 2/15/2019

     235         242   

US Coatings Acquisition, Inc., 7.375%, Due 5/1/2021G

     300         319   

Viasystems, Inc., 7.875%, Due 5/1/2019G

     460         490   

Wolverine World Wide, Inc., 6.125%, Due 10/15/2020

     210         223   

Xerium Technologies, Inc., 8.875%, Due 6/15/2018

     95         99   

Zachry Holdings, Inc., 7.50%, Due 2/1/2020G

     310         322   
     

 

 

 
        39,657   
     

 

 

 

 

See accompanying notes

 

20


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Service - 26.22%

     

Acadia Healthcare Co., Inc., 12.875%, Due 11/1/2018

   $ 231       $ 279   

ACE Cash Express, Inc., 11.00%, Due 2/1/2019G

     220         196   

ADT Corp., 6.25%, Due 10/15/2021G

     145         154   

Ahern Rentals, Inc., 9.50%, Due 6/15/2018G

     560         600   

Alere, Inc.,

     

7.25%, Due 7/1/2018

     400         439   

6.50%, Due 6/15/2020

     725         742   

AMC Entertainment, Inc., 9.75%, Due 12/1/2020

     410         468   

Biomet, Inc.,

     

6.50%, Due 8/1/2020

     200         213   

6.50%, Due 10/1/2020

     500         520   

Boyd Gaming Corp., 9.125%, Due 12/1/2018

     380         413   

Burlington Coat Factory Warehouse Corp., 10.00%, Due 2/15/2019

     625         701   

Cablevision Systems Corp., 8.00%, Due 4/15/2020

     600         681   

Caesars Entertainment Operating Co., Inc.,

     

11.25%, Due 6/1/2017

     910         908   

12.75%, Due 4/15/2018

     625         369   

8.50%, Due 2/15/2020

     100         92   

9.00%, Due 2/15/2020

     525         492   

Caesars Entertainment Resort Properties LLC, 8.00%, Due 10/1/2020B G

     100         100   

Carmike Cinemas, Inc., 7.375%, Due 5/15/2019

     200         217   

Carrols Restaurant Group, Inc., 11.25%, Due 5/15/2018

     300         344   

CB OnCure Holdings, Inc., 11.75%, Due 5/15/2017

     325         —     

CCO Holdings LLC, 5.75%, Due 9/1/2023B G

     575         547   

Cengage Learning Acquisitions, Inc.,

     

12.00%, Due 6/30/2019G K

     400         54   

11.50%, Due 4/15/2020G K

     75         56   

Cenveo Corp., 8.875%, Due 2/1/2018

     950         956   

Chinos Intermediate Holdings A, Inc., 7.75%, Due 5/1/2019F G

     120         121   

CHS/Community Health Systems, Inc.,

     

5.125%, Due 8/15/2018

     100         104   

8.00%, Due 11/15/2019

     200         217   

7.125%, Due 7/15/2020

     300         316   

Clean Harbors, Inc., 5.125%, Due 6/1/2021

     275         279   

Clear Channel Communications, Inc., 9.00%, Due 3/1/2021

     1,920         1,934   

Clear Channel Worldwide Holdings, Inc.,

     

7.625%, Due 3/15/2020

     1,240         1,319   

6.50%, Due 11/15/2022

     350         365   

ClubCorp Club Operations, Inc., 10.00%, Due 12/1/2018

     195         216   

Columbus International, Inc., 11.50%, Due 11/20/2014G

     330         356   

Covanta Holding Corp., 6.375%, Due 10/1/2022

     250         258   

Crown Media Holdings, Inc., 10.50%, Due 7/15/2019

     520         585   

CSC Holdings LLC, 6.75%, Due 11/15/2021B

     900         981   

CST Brands, Inc., 5.00%, Due 5/1/2023G

     325         314   

Cumulus Media Holdings, Inc., 7.75%, Due 5/1/2019

     975         1,029   

CyrusOne LP, 6.375%, Due 11/15/2022H

     235         237   

Dave & Buster’s, Inc., 11.00%, Due 6/1/2018

     500         551   

DaVita, Inc., 5.75%, Due 8/15/2022

     200         205   

DISH DBS Corp.,

     

7.125%, Due 2/1/2016

     500         553   

4.25%, Due 4/1/2018

     285         289   

7.875%, Due 9/1/2019

     230         267   

5.125%, Due 5/1/2020

     230         233   

6.75%, Due 6/1/2021

     710         769   

5.875%, Due 7/15/2022

     200         205   

5.00%, Due 3/15/2023

     200         191   

DynCorp International, Inc., 10.375%, Due 7/1/2017

     430         453   

EnergySolutions Inc., 10.75%, Due 8/15/2018

     475         512   

Entercom Radio LLC, 10.50%, Due 12/1/2019B

     370         421   

 

See accompanying notes

 

21


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Envision Healthcare Corp., 8.125%, Due 6/1/2019

   $ 300       $ 326   

Equinix, Inc., 5.375%, Due 4/1/2023

     1,050         1,042   

Felcor Lodging LP, 5.625%, Due 3/1/2023H

     235         231   

First Data Corp.,

     

8.25%, Due 1/15/2021G

     800         852   

11.25%, Due 1/15/2021G

     100         110   

12.625%, Due 1/15/2021

     575         663   

Fontainebleau Las Vegas Holdings LLC, 10.25%, Due 6/15/2015B E G I K

     800         1   

Gannett Company, Inc.,

     

5.125%, Due 7/15/2020G

     100         102   

6.375%, Due 10/15/2023G

     400         422   

Gray Television, Inc., 7.50%, Due 10/1/2020

     905         948   

Hanger Orthopedic Group, Inc., 7.125%, Due 11/15/2018

     170         181   

Harron Communications LP, 9.125%, Due 4/1/2020G H

     175         194   

HCA Holdings, Inc.,

     

6.25%, Due 2/15/2021

     100         105   

7.75%, Due 5/15/2021

     500         548   

HCA, Inc.,

     

6.50%, Due 2/15/2020

     155         172   

7.50%, Due 2/15/2022

     400         450   

5.875%, Due 3/15/2022

     200         211   

4.75%, Due 5/1/2023

     675         650   

5.875%, Due 5/1/2023

     500         504   

Hertz Corp.,

     

6.75%, Due 4/15/2019

     400         432   

6.25%, Due 10/15/2022

     300         314   

Hilton Worldwide Finance LLC, 5.625%, Due 10/15/2021B G

     320         329   

Hologic, Inc., 6.25%, Due 8/1/2020

     300         319   

inVentiv Health, Inc., 9.00%, Due 1/15/2018G

     100         104   

iPayment Holdings, Inc., 7.50%, Due 11/15/2018F

     210         126   

iPayment, Inc., 10.25%, Due 5/15/2018

     375         289   

Isle of Capri Casinos, Inc.,

     

7.75%, Due 3/15/2019

     150         161   

8.875%, Due 6/15/2020

     245         261   

Jaguar Holding Co. I, 9.375%, Due 10/15/2017F G

     300         318   

Jaguar Holding Co. II, 9.50%, Due 12/1/2019G

     100         112   

JC Penney Corp, Inc., 6.875%, Due 10/15/2015

     775         662   

Jo-Ann Stores Holdings, Inc., 9.75%, Due 10/15/2019F G

     275         285   

L Brands, Inc., 5.625%, Due 10/15/2023

     320         327   

Landry’s, Inc., 9.375%, Due 5/1/2020G

     400         433   

LIN Television Corp.,

     

8.375%, Due 4/15/2018

     170         181   

6.375%, Due 1/15/2021

     200         204   

Marina District Finance Co., Inc., 9.50%, Due 10/15/2015

     387         406   

Mediacom LLC, 7.25%, Due 2/15/2022B

     220         232   

MGM Resorts International,

     

6.625%, Due 7/15/2015

     200         216   

11.375%, Due 3/1/2018

     300         385   

8.625%, Due 2/1/2019

     105         123   

6.75%, Due 10/1/2020

     335         365   

6.625%, Due 12/15/2021

     615         657   

Michaels Finco Holdings, Inc., 7.50%, Due 8/1/2018F G

     225         232   

Midcontinent Communications & Finance Corp., 6.25%, Due 8/1/2021G

     295         298   

Monitronics Escrow Corp., 9.125%, Due 4/1/2020G

     135         143   

Monitronics International, Inc., 9.125%, Due 4/1/2020

     295         313   

Nara Cable Funding Ltd., 8.875%, Due 12/1/2018G

     600         641   

National CineMedia LLC, 7.875%, Due 7/15/2021B

     100         111   

NBTY, Inc., 9.00%, Due 10/1/2018

     360         395   

NCL Corp Ltd., 5.00%, Due 2/15/2018G

     195         197   

Neiman Marcus Group, Inc., 8.75%, Due 10/15/2021F G

     335         344   

New Look Bondco I PLC, 8.375%, Due 5/14/2018G

     400         416   

Nexstar Broadcasting, Inc., 6.875%, Due 11/15/2020G

     495         517   

 

See accompanying notes

 

22


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Nord Anglia Education UK Holdings PLC, 10.25%, Due 4/1/2017G

   $ 200       $ 222   

Nord Anglia Education, Inc., 8.50%, Due 2/15/2018F G

     200         202   

NPC International, Inc., 10.50%, Due 1/15/2020

     350         403   

OnCure Holdings, Inc., 11.75%, Due 1/15/2017

     116         126   

Par Pharmaceutical Cos., Inc., 7.375%, Due 10/15/2020

     300         312   

Petco Holdings, Inc., 8.50%, Due 10/15/2017F G

     220         224   

PHH Corp., 6.375%, Due 8/15/2021

     275         272   

Pinnacle Entertainment, Inc., 7.75%, Due 4/1/2022

     355         388   

PNK Finance Corp., 6.375%, Due 8/1/2021G

     475         499   

Radio One, Inc., 6.00%, Due 5/24/2016F

     835         845   

Radio Systems Corp., 8.375%, Due 11/1/2019G

     200         221   

Regal Cinemas Corp., 8.625%, Due 7/15/2019

     400         432   

Rite Aid Corp., 8.00%, Due 8/15/2020

     290         325   

Safway Group Holding LLC, 7.00%, Due 5/15/2018B G

     300         311   

Serta Simmons Holdings LLC, 8.125%, Due 10/1/2020B G

     260         277   

Service Corp International, 7.50%, Due 4/1/2027

     350         375   

Sirius XM Radio, Inc., 5.25%, Due 8/15/2022G

     425         431   

Starz LLC, 5.00%, Due 9/15/2019B

     465         470   

Tenet Healthcare Corp.,

     

8.00%, Due 8/1/2020

     460         501   

8.125%, Due 4/1/2022G

     570         624   

6.875%, Due 11/15/2031

     250         220   

TransUnion LLC, 11.375%, Due 6/15/2018B

     100         111   

United Rentals North America, Inc.,

     

7.375%, Due 5/15/2020

     125         139   

7.625%, Due 4/15/2022

     470         526   

Universal Hospital Services, Inc., 7.625%, Due 8/15/2020

     410         431   

Univision Communications, Inc.,

     

7.875%, Due 11/1/2020G

     750         833   

6.75%, Due 9/15/2022G

     115         125   

5.125%, Due 5/15/2023G

     200         198   

Valeant Pharmaceuticals International,

     

7.50%, Due 7/15/2021G

     200         222   

6.75%, Due 8/15/2021G

     450         479   

Visant Corp., 10.00%, Due 10/1/2017

     590         543   

VPI Escrow Corp., 6.375%, Due 10/15/2020G

     920         982   

WideOpenWest Finance LLC, 10.25%, Due 7/15/2019B

     225         249   

WMG Acquisition Corp.,

     

11.50%, Due 10/1/2018

     285         330   

6.00%, Due 1/15/2021G

     325         341   

Wok Acquisition Corp., 10.25%, Due 6/30/2020G

     145         158   
     

 

 

 
        54,728   
     

 

 

 

Telecommunications - 10.73%

     

Avanti Communications Group PLC, 10.00%, Due 10/1/2019G

     300         314   

Avaya, Inc.,

     

9.00%, Due 4/1/2019G

     450         452   

10.50%, Due 3/1/2021G

     250         218   

Brightstar Corp., 9.50%, Due 12/1/2016G

     250         275   

CenturyLink, Inc., 5.80%, Due 3/15/2022

     300         297   

Cincinnati Bell, Inc.,

     

8.75%, Due 3/15/2018

     865         916   

8.375%, Due 10/15/2020

     300         320   

Clearwire Communications LLC, 12.00%, Due 12/1/2017B G

     208         244   

CommScope Holding Co. Inc., 6.625%, Due 6/1/2020F G

     200         205   

CommScope, Inc., 8.25%, Due 1/15/2019G

     294         323   

Consolidated Communications Finance Co., 10.875%, Due 6/1/2020

     195         226   

Cricket Communications, Inc., 7.75%, Due 10/15/2020

     400         457   

Crown Castle International Corp., 5.25%, Due 1/15/2023

     385         381   

Digicel Group Ltd., 8.25%, Due 9/30/2020G

     500         528   

Digicel Ltd., 6.00%, Due 4/15/2021G

     200         194   

eAccess Ltd., 8.25%, Due 4/1/2018G

     300         329   

EarthLink, Inc.,

     

8.875%, Due 5/15/2019

     510         504   

 

See accompanying notes

 

23


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

7.375%, Due 6/1/2020

   $ 480       $ 476   

Frontier Communications Corp.,

     

8.50%, Due 4/15/2020

     400         457   

8.75%, Due 4/15/2022

     200         229   

7.875%, Due 1/15/2027

     100         99   

Hughes Satellite Systems Corp., 7.625%, Due 6/15/2021

     375         411   

Intelsat Jackson Holdings S.A.,

     

7.25%, Due 10/15/2020

     550         597   

7.50%, Due 4/1/2021

     300         327   

6.625%, Due 12/15/2022G

     610         622   

Intelsat Luxembourg S.A.,

     

6.75%, Due 6/1/2018G

     65         68   

7.75%, Due 6/1/2021G

     410         433   

8.125%, Due 6/1/2023G

     615         650   

Level 3 Financing, Inc.,

     

10.00%, Due 2/1/2018

     70         75   

8.125%, Due 7/1/2019

     535         590   

8.625%, Due 7/15/2020

     630         712   

Millicom International Cellular S.A., 6.625%, Due 10/15/2021G

     200         206   

NII Capital Corp., 7.625%, Due 4/1/2021

     495         287   

Nokia OYJ, 6.625%, Due 5/15/2039

     665         655   

Oi S.A., 5.75%, Due 2/10/2022G

     425         398   

Sprint Capital Corp., 8.75%, Due 3/15/2032

     395         428   

Sprint Corp., 7.875%, Due 9/15/2023G

     580         629   

Sprint Nextel Corp.,

     

8.375%, Due 8/15/2017

     100         116   

9.00%, Due 11/15/2018G

     500         606   

7.00%, Due 3/1/2020G

     100         111   

7.00%, Due 8/15/2020

     515         552   

11.50%, Due 11/15/2021

     980         1,275   

6.00%, Due 11/15/2022

     500         493   

Syniverse Holdings, Inc., 9.125%, Due 1/15/2019

     290         314   

T-Mobile USA, Inc., 6.542%, Due 4/28/2020

     300         318   

UPCB Finance VI Ltd., 6.875%, Due 1/15/2022G

     650         700   

VimpelCom Holdings BV, 7.504%, Due 3/1/2022G

     200         215   

Virgin Media Finance PLC,

     

4.875%, Due 2/15/2022

     125         106   

6.375%, Due 4/15/2023G

     255         261   

Virgin Media Secured Finance PLC, 5.25%, Due 1/15/2021

     575         583   

WaveDivision Escrow LLC, 8.125%, Due 9/1/2020B G

     235         247   

Wind Acquisition Finance S.A.,

     

11.75%, Due 7/15/2017G

     650         691   

7.25%, Due 2/15/2018G

     325         342   

Wind Acquisition Holdings Finance S.A., 12.25%, Due 7/15/2017F G

     626         637   

Windstream Corp.,

     

7.50%, Due 6/1/2022

     225         236   

6.375%, Due 8/1/2023

     75         73   
     

 

 

 
        22,408   
     

 

 

 

Transportation - 2.39%

     

Bristow Group, Inc., 6.25%, Due 10/15/2022

     300         315   

CEVA Group PLC, 4.00%, Due 5/1/2018G

     100         87   

CHC Helicopter S.A.,

     

9.25%, Due 10/15/2020

     500         541   

9.375%, Due 6/1/2021

     100         101   

Florida East Coast Holdings Corp., 10.50%, Due 8/1/2017F

     290         302   

Florida East Coast Railway Corp., 8.125%, Due 2/1/2017

     300         315   

HD Supply, Inc.,

     

7.50%, Due 7/15/2020G

     590         623   

11.50%, Due 7/15/2020

     185         223   

Horizon Lines LLC,

     

11.00%, Due 10/15/2016B

     183         183   

13.00%, Due 10/15/2016B F

     231         208   

 

See accompanying notes

 

24


American Beacon High Yield Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Martin Midstream Partners LP,

     

8.875%, Due 4/1/2018H

   $ 437       $ 464   

7.25%, Due 2/15/2021H

     335         342   

Quality Distribution LLC, 9.875%, Due 11/1/2018B

     225         248   

Swift Services Holdings, Inc., 10.00%, Due 11/15/2018

     325         364   

Syncreon Group BV, 8.625%, Due 11/1/2021G

     400         405   

Watco Cos. LLC, 6.375%, Due 4/1/2023B G

     270         267   
     

 

 

 
        4,988   
     

 

 

 

Utilities - 2.99%

     

AES Corp., 9.75%, Due 4/15/2016

     210         248   

Calpine Corp.,

     

7.875%, Due 7/31/2020G

     90         98   

7.50%, Due 2/15/2021G

     650         702   

6.00%, Due 1/15/2022G

     100         104   

5.875%, Due 1/15/2024G

     100         100   

Elwood Energy LLC, 8.159%, Due 7/5/2026B

     257         272   

Enel S.p.A., 8.75%, Due 9/24/2073G

     230         249   

Energy Future Intermediate Holding Co. LLC, 10.00%, Due 12/1/2020B

     575         604   

InterGen N.V., 7.00%, Due 6/30/2023G

     400         413   

NRG Energy, Inc.,

     

7.625%, Due 1/15/2018

     450         511   

7.875%, Due 5/15/2021

     635         702   

Sabine Pass LNG LP,

     

7.50%, Due 11/30/2016H

     1,205         1,345   

6.50%, Due 11/1/2020H

     380         397   

Texas Competitive Electric Holdings Co. LLC, 11.50%, Due 10/1/2020B G

     700         499   
     

 

 

 
        6,244   
     

 

 

 

Total Corporate Obligations (Cost $189,575)

        194,001   
     

 

 

 

FOREIGN GOVERNMENT OBLIGATIONS - 0.07% (Cost $158)

     

Energy - 0.07%

     

Petrobras Global Finance BV, 4.375%, Due 5/20/2023

     160         148   
     

 

 

 
     Shares         
  

 

 

    

SHORT-TERM INVESTMENTS - 4.28% (Cost $8,940)

     

JPMorgan U.S. Government Money Market Fund, Capital Class

     8,940,111         8,940   
     

 

 

 

TOTAL INVESTMENTS - 98.31% (Cost $202,685)

        205,252   

OTHER ASSETS, NET OF LIABILITIES - 1.69%

  

     3,538   
     

 

 

 

TOTAL NET ASSETS - 100.00%

      $ 208,790   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Valued at fair value pursuant to procedures approved by the Board of Trustees.
B  Limited Liability Company.
C  Non-income producing security.
D  Call.
E  The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date.
F  Payment in Kind. See Note 4 in the Notes to Financial Statements.
G  Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $74,644 or 35.75% of net assets. The Fund has no right to demand registration of these securities.
J  Step Up/Down.
H  Limited Partnership.
I  Non-voting participating shares.
J  Step Up/Down - A scheduled increase in the exercise or conversion price at which a warrant, an option, or a convertible security may be used to acquire shares of common stock.
K  In default.

 

See accompanying notes

 

25


American Beacon Retirement Income and Appreciation FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCKS - 3.33% (Cost $3,829)

     

CONSUMER DISCRETIONARY- 0.27%

     

Household Durables - 0.27%

     

Lennar Corp., Class A

     10,100       $ 359   
     

 

 

 

ENERGY- 0.28%

     

Oil & Gas - 0.28%

     

Continental Resources, Inc.A

     3,240         369   
     

 

 

 

FINANCIALS- 1.05%

     

Diversified Financials - 1.05%

     

Citigroup, Inc.

     7,145         349   

Franklin Resources, Inc.

     6,855         369   

JPMorgan Chase & Co.

     6,545         337   

T. Rowe Price Group, Inc.

     4,525         350   
     

 

 

 

Total Financials

        1,405   
     

 

 

 

HEALTH CARE- 0.26%

     

Pharmaceuticals - 0.26%

     

Mylan, Inc.A

     9,310         353   
     

 

 

 

INDUSTRIALS- 0.26%

     

Construction & Engineering - 0.26%

     

Chicago Bridge & Iron Co. NV

     4,700         348   
     

 

 

 

INFORMATION TECHNOLOGY- 1.21%

     

Electronic Equipment & Instruments - 0.25%

     

Eaton Corp PLC

     4,770         337   
     

 

 

 

Internet Software & Services - 0.26%

     

eBay, Inc.A

     6,515         343   
     

 

 

 

Semiconductor Equipment & Products - 0.52%

     

Lam Research Corp.A

     6,140         333   

QUALCOMM, Inc.

     5,180         360   
     

 

 

 
        693   
     

 

 

 

Software - 0.18%

     

TIBCO Software, Inc.A

     9,625         236   
     

 

 

 

Total Common Stocks (Cost $3,829)

        4,443   
     

 

 

 

PREFERRED STOCKS - 4.29% (Cost $5,042)

     

ENERGY- 0.69%

     

Oil & Gas - 0.69%

     

Chesapeake Energy Corp., 5.75%, Due 12/31/2049B

     410         480   

Chesapeake Energy Corp., 5.75%, Due 12/31/2049B C

     369         437   
     

 

 

 

Total Energy

        917   
     

 

 

 

FINANCE- 1.62%

     

Banks - 0.26%

     

New York Community Capital Trust V, 6.00%, Due 11/01/2051

     7,070         345   
     

 

 

 

Insurance - 0.62%

     

Maiden Holdings Ltd., 7.25%, Due 9/15/2016

     3,260         153   

MetLife, Inc., 5.00%, Due 3/26/2014

     23,730         681   
     

 

 

 
        834   
     

 

 

 

Other Finance - 0.74%

     

AMG Capital Trust I, 5.10%, Due 4/15/2036

     14,880         1,000   
     

 

 

 

Total Finance

        1,834   
     

 

 

 

MANUFACTURING- 1.06%

     

Aerospace/Defense - 0.64%

     

United Technologies Corp., 7.50%, Due 8/1/2015

     13,620         863   
     

 

 

 

See accompanying notes

 

26


American Beacon Retirement Income and Appreciation FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

Machinery - 0.29%

     

Stanley Black & Decker, Inc., 4.75%, Due 11/17/2015

     3,010       $ 384   
     

 

 

 

Metals/Mining - 0.13%

     

Cliffs Natural Resources, Inc., 7.00%, Due 2/1/2016

     7,500         170   
     

 

 

 

Total Manufacturing

        1,417   
     

 

 

 

TELECOMMUNICATIONS- 0.26%

     

Telecom - 0.26%

     

Crown Castle International Corp., 4.50%, Due 11/01/2016

     3,340         342   
     

 

 

 

TRANSPORTATION- 0.34%

     

Other Transportation - 0.34%

     

Genesee & Wyoming, Inc., 5.00%, Due 10/01/2015

     3,360         449   
     

 

 

 

UTILITIES- 0.32%

     

Electric - 0.32%

     

NextEra Energy, Inc., 5.60%, Due 6/1/2015

     7,280         420   
     

 

 

 

Total Preferred Stocks (Cost $5,042)

        5,724   
     

 

 

 
     Par Amount         
     (000’s)         

CONVERTIBLE OBLIGATIONS - 16.56%

     

Consumer - 0.18%

     

Jarden Corp., 1.50%, Due 6/15/2019 B

   $ 205         234   
     

 

 

 

Energy - 0.93%

     

Hornbeck Offshore Services, Inc., 1.625%, Due 11/15/2026

     390         462   

Newpark Resources, Inc., 4.00%, Due 10/1/2017

     360         502   

SEACOR Holdings, Inc., 2.50%, Due 12/15/2027B

     220         283   
     

 

 

 
        1,247   
     

 

 

 

Finance - 1.81%

     

Ares Capital Corp., 4.75%, Due 1/15/2018B

     400         411   

Leucadia National Corp., 3.75%, Due 4/15/2014

     250         336   

Molina Healthcare, Inc., 1.125%, Due 1/15/2020B

     435         443   

Portfolio Recovery Associates, Inc., 3.00%, Due 8/1/2020B

     90         105   

Walter Investment Management Corp., 4.50%, Due 11/1/2019

     350         364   

WellPoint, Inc., 2.75%, Due 10/15/2042B

     585         760   
     

 

 

 
        2,419   
     

 

 

 

Manufacturing - 6.05%

     

Cemex SAB de CV, 4.875%, Due 3/15/2015

     300         347   

Cornerstone OnDemand, Inc., 1.50%, Due 7/1/2018B

     110         125   

Danaher Corp., 0.01%, Due 1/22/2021

     210         440   

Electronic Arts, Inc., 0.75%, Due 7/15/2016

     625         693   

Iconix Brand Group, Inc., 1.50%, Due 3/15/2018B

     530         680   

KB Home, 1.375%, Due 2/1/2019

     200         198   

Lam Research Corp., 0.50%, Due 5/15/2016

     290         338   

Linear Technology Corp., 3.00%, Due 5/1/2027

     400         428   

Medidata Solutions, Inc., 1.00%, Due 8/1/2018B

     170         206   

Micron Technology, Inc., 1.875%, Due 6/1/2014

     260         333   

NetSuite, Inc., 0.25%, Due 6/1/2018B

     210         231   

Nuance Communications, Inc., 2.75%, Due 8/15/2027

     220         231   

RTI International Metals, Inc., 3.00%, Due 12/1/2015

     300         347   

Salesforce.com, Inc., 0.25%, Due 4/1/2018B

     745         814   

SanDisk Corp., 0.50%, Due 10/15/2020B

     1,020         1,039   

Standard Pacific Corp., 1.25%, Due 8/1/2032

     300         373   

Take-Two Interactive Software, Inc.,

     

1.75%, Due 12/1/2016

     125         149   

1.00%, Due 7/1/2018

     160         177   

Trinity Industries, Inc., 3.875%, Due 6/1/2036

     525         681   

Workday, Inc., 0.75%, Due 7/15/2018B

     210         237   
     

 

 

 
        8,067   
     

 

 

 

 

See accompanying notes

 

27


American Beacon Retirement Income and Appreciation FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Service - 7.14%

     

BioMarin Pharmaceutical, Inc.,

     

0.75%, Due 10/15/2018

   $ 93       $ 96   

1.50%, Due 10/15/2020

     77         79   

Chemed Corp., 1.875%, Due 5/15/2014

     420         428   

Concur Technologies, Inc., 0.50%, Due 6/15/2018B

     210         248   

Ctrip.com International Ltd., 1.25%, Due 10/15/2018B

     325         338   

Cubist Pharmaceuticals, Inc.,

     

1.125%, Due 9/1/2018B

     360         389   

1.875%, Due 9/1/2020B

     90         97   

Dealertrack Technologies, Inc., 1.50%, Due 3/15/2017

     325         386   

Gilead Sciences, Inc., 1.625%, Due 5/1/2016

     385         1,205   

Healthways, Inc., 1.50%, Due 7/1/2018B

     28         22   

Hologic, Inc., 2.00%, Due 12/15/2037D

     580         681   

Illumina, Inc., 0.25%, Due 3/15/2016B

     560         697   

Integra LifeSciences Holdings Corp., 1.625%, Due 12/15/2016

     340         359   

International Game Technology, 3.25%, Due 5/1/2014

     615         680   

Liberty Interactive LLC, 0.75%, Due 3/30/2043B E

     360         430   

Merrimack Pharmaceuticals, Inc., 4.50%, Due 7/15/2020

     75         57   

MGM Resorts International, 4.25%, Due 4/15/2015

     529         648   

Omnicom Group, Inc., 0.01%, Due 7/31/2032

     570         726   

priceline.com, Inc., 1.00%, Due 3/15/2018

     515         682   

Salix Pharmaceuticals Ltd., 1.50%, Due 3/15/2019

     525         687   

Shutterfly, Inc., 0.25%, Due 5/15/2018B

     320         340   

TIBCO Software, Inc., 2.25%, Due 5/1/2032

     235         238   
     

 

 

 
        9,513   
     

 

 

 

Telecommunications - 0.45%

     

Ixia, 3.00%, Due 12/15/2015

     300         336   

JDS Uniphase Corp., 0.625%, Due 8/15/2033B

     257         270   
     

 

 

 
        606   
     

 

 

 

Total Convertible Obligations (Cost $19,504)

        22,086   
     

 

 

 

CORPORATE OBLIGATIONS - 33.59%

     

Consumer - 0.95%

     

Altria Group, Inc., 4.75%, Due 5/5/2021

     300         323   

Anheuser-Busch InBev Worldwide, Inc.,

     

5.00%, Due 4/15/2020

     290         329   

8.00%, Due 11/15/2039

     100         148   

Kellogg Co., 1.875%, Due 11/17/2016

     150         154   

SABMiller Holdings, Inc., 4.95%, Due 1/15/2042B

     300         307   
     

 

 

 
        1,261   
     

 

 

 

Energy - 1.31%

     

Apache Corp., 5.10%, Due 9/1/2040

     130         133   

BP Capital Markets PLC, 3.20%, Due 3/11/2016

     280         294   

Canadian Natural Resources Ltd., 6.25%, Due 3/15/2038

     275         316   

Devon Energy Corp., 4.75%, Due 5/15/2042

     300         284   

EOG Resources, Inc., 2.50%, Due 2/1/2016

     250         259   

TransCanada PipeLines Ltd.,

     

3.75%, Due 10/16/2023

     300         302   

6.10%, Due 6/1/2040

     140         162   
     

 

 

 
        1,750   
     

 

 

 

Finance - 17.45%

     

AEGON Funding Co. LLC, 5.75%, Due 12/15/2020E

     250         285   

American International Group, Inc.,

     

6.40%, Due 12/15/2020

     775         930   

4.875%, Due 6/1/2022

     400         438   

Bank of America Corp.,

     

7.80%, Due 9/15/2016

     600         695   

7.625%, Due 6/1/2019

     1,250         1,559   

Bank One Corp., 4.90%, Due 4/30/2015

     250         264   

Barclays Bank PLC,

     

3.90%, Due 4/7/2015

     290         303   

6.75%, Due 5/22/2019

     650         786   

Bear Stearns Cos. LLC, 7.25%, Due 2/1/2018E

     925         1,116   

BNP Paribas S.A., 3.60%, Due 2/23/2016

     280         296   

 

See accompanying notes

 

28


American Beacon Retirement Income and Appreciation FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Citigroup, Inc.,

     

1.178%, Due 4/1/2014D

   $ 6       $ 6   

0.546%, Due 11/5/2014D

     300         300   

8.50%, Due 5/22/2019

     1,250         1,618   

Deutsche Bank AG, 3.875%, Due 8/18/2014

     275         282   

Fifth Third Bancorp, 3.625%, Due 1/25/2016

     275         290   

General Electric Capital Corp.,

     

0.443%, Due 1/8/2016D

     1,145         1,142   

5.625%, Due 5/1/2018

     250         290   

6.00%, Due 8/7/2019

     300         355   

5.50%, Due 1/8/2020

     650         752   

Goldman Sachs Group, Inc.,

     

5.35%, Due 1/15/2016

     475         519   

6.25%, Due 9/1/2017

     550         636   

6.00%, Due 6/15/2020

     835         967   

ING Bank N.V.,

     

5.125%, Due 5/1/2015B

     300         310   

3.75%, Due 3/7/2017B

     1,100         1,164   

JPMorgan Chase & Co.,

     

0.584%, Due 6/13/2016D

     375         371   

5.50%, Due 10/15/2040

     350         381   

Lincoln National Corp., 4.75%, Due 2/15/2014

     105         106   

Lloyds TSB Bank PLC, 4.375%, Due 1/12/2015B

     300         312   

Merrill Lynch & Co. Inc., 6.11%, Due 1/29/2037

     275         294   

MetLife, Inc., 6.375%, Due 6/15/2034

     400         490   

Morgan Stanley,

     

0.724%, Due 10/15/2015D

     900         896   

7.30%, Due 5/13/2019

     530         647   

5.625%, Due 9/23/2019

     450         513   

National Australia Bank Ltd., 4.375%, Due 12/10/2020B

     250         271   

Nordea Bank AB, 4.875%, Due 1/27/2020B

     250         277   

PNC Funding Corp., 4.375%, Due 8/11/2020

     260         283   

Prudential Financial, Inc., 7.375%, Due 6/15/2019

     250         311   

Simon Property Group LP, 10.35%, Due 4/1/2019F G

     300         412   

Svenska Handelsbanken AB, 2.875%, Due 4/4/2017

     650         679   

UBS AG, 5.875%, Due 12/20/2017

     552         640   

UnitedHealth Group, Inc., 3.875%, Due 10/15/2020

     250         265   

Wachovia Corp., 0.614%, Due 10/15/2016D

     850         840   
     

 

 

 
        23,291   
     

 

 

 

Manufacturing - 4.62%

     

American Honda Finance Corp.,

     

2.125%, Due 2/28/2017B

     500         511   

3.875%, Due 9/21/2020B

     250         264   

Caterpillar Financial Services Corp., 2.75%, Due 6/24/2015

     280         290   

Daimler Finance North America LLC,

     

3.00%, Due 3/28/2016B E

     150         156   

0.945%, Due 8/1/2016B E

     500         501   

2.95%, Due 1/11/2017B E

     300         312   

2.40%, Due 4/10/2017B E

     450         458   

Dow Chemical Co., 4.125%, Due 11/15/2021

     300         310   

Ford Motor Credit Co. LLC,

     

4.25%, Due 2/3/2017E

     300         324   

5.875%, Due 8/2/2021E

     350         401   

Hewlett-Packard Co.,

     

2.20%, Due 12/1/2015

     250         254   

4.05%, Due 9/15/2022

     350         341   

Johnson Controls, Inc., 5.00%, Due 3/30/2020

     300         331   

Northrop Grumman Corp., 5.05%, Due 8/1/2019

     150         169   

United Technologies Corp., 6.125%, Due 7/15/2038

     450         550   

Volkswagen International Finance N.V., 1.625%, Due 3/22/2015B

     650         658   

Xerox Corp.,

     

8.25%, Due 5/15/2014

     150         156   

2.95%, Due 3/15/2017

     175         180   
     

 

 

 
        6,166   
     

 

 

 

 

See accompanying notes

 

29


American Beacon Retirement Income and Appreciation FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Service - 3.27%

     

AbbVie, Inc., 2.90%, Due 11/6/2022

   $ 300       $ 286   

CBS Corp., 3.375%, Due 3/1/2022

     500         489   

Comcast Corp., 6.55%, Due 7/1/2039

     400         493   

CVS Caremark Corp., 3.25%, Due 5/18/2015

     140         146   

McKesson Corp., 3.25%, Due 3/1/2016

     140         147   

Quest Diagnostics, Inc., 4.75%, Due 1/30/2020

     125         134   

Thomson Reuters Corp., 4.70%, Due 10/15/2019

     125         138   

Time Warner Cable, Inc., 5.85%, Due 5/1/2017

     650         715   

Time Warner, Inc.,

     

4.875%, Due 3/15/2020

     450         498   

4.75%, Due 3/29/2021

     325         353   

Viacom, Inc., 4.50%, Due 2/27/2042

     550         481   

Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030

     350         475   
     

 

 

 
        4,355   
     

 

 

 

Telecommunications - 2.80%

     

America Movil SAB de CV, 6.375%, Due 3/1/2035

     275         301   

AT&T, Inc., 4.35%, Due 6/15/2045

     473         391   

Deutsche Telekom International Finance BV, 4.875%, Due 3/6/2042B

     850         820   

Orange S.A., 2.125%, Due 9/16/2015

     125         127   

Verizon Communications, Inc.,

     

5.50%, Due 4/1/2017

     250         282   

4.60%, Due 4/1/2021

     340         365   

6.90%, Due 4/15/2038

     325         385   

6.55%, Due 9/15/2043

     550         638   

Vodafone Group PLC, 6.15%, Due 2/27/2037

     375         420   
     

 

 

 
        3,729   
     

 

 

 

Transportation - 1.05%

     

Burlington Northern Santa Fe LLC,

     

5.75%, Due 5/1/2040E

     140         155   

5.15%, Due 9/1/2043E

     300         309   

Canadian National Railway Co., 5.55%, Due 5/15/2018

     250         289   

CSX Corp., 5.50%, Due 4/15/2041

     250         268   

Norfolk Southern Corp., 5.75%, Due 4/1/2018

     325         376   
     

 

 

 
        1,397   
     

 

 

 

Utilities - 2.14%

     

Commonwealth Edison Co., 4.00%, Due 8/1/2020

     135         145   

Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039

     300         339   

EDF S.A., 4.60%, Due 1/27/2020B

     300         331   

MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036

     500         567   

Pacific Gas & Electric Co., 6.25%, Due 12/1/2013

     175         176   

Progress Energy, Inc., 4.875%, Due 12/1/2019

     350         389   

Southern Co., 1.95%, Due 9/1/2016

     310         316   

Southwestern Electric Power Co., 3.55%, Due 2/15/2022

     600         589   
     

 

 

 
        2,852   
     

 

 

 

Total Corporate Obligations (Cost $41,738)

        44,801   
     

 

 

 

FOREIGN GOVERNMENT OBLIGATIONS - 0.41%

     

Energy - 0.41%

     

Petrobras International Finance Co., 3.875%, Due 1/27/2016

     200         207   

Petroleos Mexicanos, 6.00%, Due 3/5/2020

     300         337   
     

 

 

 

Total Foreign Government Obligations (Cost $497)

        544   
     

 

 

 

ASSET-BACKED OBLIGATIONS - 5.58%

     

Ally Master Owner Trust, 1.21%, Due 6/15/2017, 2012 3 A2

     1,800         1,811   

Ford Credit Floorplan Master Owner Trust, 1.50%, Due 9/15/2018, 2013-5 A1

     1,200         1,213   

National Credit Union Administration,

     

0.574%, Due 3/11/2020, 2011 R3 1AD

     1,611         1,612   

0.624%, Due 10/7/2020, 2010 R1 1AD

     1,701         1,709   

Nissan Master Owner Trust Receivables, 0.644%, Due 5/15/2017, 2012 A AD

     1,100         1,102   
     

 

 

 

Total Asset-Backed Obligations (Cost $7,420)

        7,447   
     

 

 

 

 

See accompanying notes

 

30


American Beacon Retirement Income and Appreciation FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 12.02%

     

Banc of America Commercial Mortgage Trust,

     

5.317%, Due 9/10/2047, 2006-5 A2

   $ 175       $ 176   

5.633%, Due 4/10/2049, 2007-2 A2

     54         55   

GNR Project Loans,

     

1.692%, Due 11/16/2035, 2010-148 A

     134         135   

2.21%, Due 12/16/2035, 2011-31 A

     1,738         1,752   

2.989%, Due 3/16/2039, 2010-71 AC

     174         176   

2.17%, Due 4/16/2041, 2012 44 A

     2,910         2,922   

2.70%, Due 4/16/2043, 2011-109 AB

     2,202         2,254   

2.543%, Due 9/16/2044, 2011-96 AC

     1,715         1,747   

3.20%, Due 11/16/2044, 2011-92 B

     2,900         3,014   

GS Mortgage Securities Corp II,

     

3.849%, Due 12/10/2043, 2010-C2 A1B

     603         638   

3.645%, Due 3/10/2044, 2011-GC3 A2B

     750         789   

JP Morgan Chase Commercial Mortgage Securities Corp.,

     

4.678%, Due 7/15/2042, 2005-LDP2 A3A

     78         78   

3.853%, Due 6/15/2043, 2010-C1 A1B

     510         530   

4.388%, Due 2/15/2046, 2011-C3 A3B

     650         709   

5.706%, Due 2/12/2049, 2007-CB19 A4

     400         448   

5.629%, Due 2/12/2051, 2007-CB20 A2

     36         36   

LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040, 2007-C1 A4

     450         500   

Wachovia Bank Commercial Mortgage Trust, 5.728%, Due 6/15/2049, 2007-C32 A2

     68         70   
     

 

 

 

Total Non-Agency Mortgage-Backed Obligations (Cost $15,753)

        16,029   
     

 

 

 

U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.90%

     

Federal Home Loan Mortgage Corporation - 4.68%

     

5.00%, Due 2/1/2021

     160         170   

4.50%, Due 4/1/2021

     164         173   

5.00%, Due 9/1/2035

     414         447   

5.50%, Due 4/1/2037

     108         116   

5.00%, Due 3/1/2038

     194         209   

5.50%, Due 5/1/2038

     164         177   

0.574%, Due 12/15/2040 D

     579         580   

4.00%, Due 1/1/2041

     1,006         1,056   

4.50%, Due 2/1/2041

     937         1,000   

3.50%, Due 6/1/2042

     2,267         2,320   
     

 

 

 
        6,248   
     

 

 

 

Federal National Mortgage Association - 3.46%

     

3.50%, Due 1/1/2026

     233         247   

6.50%, Due 7/1/2032

     104         116   

5.50%, Due 6/1/2033

     164         180   

4.50%, Due 9/1/2034

     89         95   

5.50%, Due 12/1/2035

     175         191   

5.00%, Due 2/1/2036

     141         153   

5.50%, Due 4/1/2036

     243         265   

5.50%, Due 2/1/2037

     158         172   

6.00%, Due 9/1/2037

     97         106   

6.00%, Due 1/1/2038

     144         157   

4.50%, Due 1/1/2040

     637         682   

4.00%, Due 9/1/2040

     483         509   

4.00%, Due 1/1/2041

     1,649         1,737   
     

 

 

 
        4,610   
     

 

 

 

Government National Mortgage Association - 0.76%

     

6.00%, Due 2/15/2033

     310         351   

5.50%, Due 4/15/2033

     357         394   

5.00%, Due 5/15/2033

     244         268   
     

 

 

 
        1,013   
     

 

 

 

Total U.S. Agency Mortgage-Backed Obligations (Cost $11,364)

        11,871   
     

 

 

 

 

See accompanying notes

 

31


American Beacon Retirement Income and Appreciation FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

U.S. TREASURY OBLIGATIONS—13.61%

     

2.50%, Due 3/31/2015

   $ 500       $ 516   

0.25%, Due 12/15/2015

     1,000         998   

1.50%, Due 6/30/2016

     1,000         1,027   

3.125%, Due 10/31/2016

     1,000         1,075   

0.875%, Due 1/31/2017

     3,000         3,016   

0.75%, Due 12/31/2017

     1,000         988   

1.50%, Due 8/31/2018

     3,000         3,033   

1.125%, Due 5/31/2019

     3,000         2,936   

1.25%, Due 2/29/2020

     1,000         969   

2.00%, Due 2/15/2022

     1,000         980   

6.25%, Due 8/15/2023

     800         1,064   

6.875%, Due 8/15/2025

     250         354   

5.25%, Due 11/15/2028

     550         693   

4.75%, Due 2/15/2037

     420         506   
     

 

 

 

Total U.S. Treasury Obligations (Cost $17,866)

        18,155   
     

 

 

 
     Shares         

SHORT-TERM INVESTMENTS - 1.10% (Cost $1,471)

     

JPMorgan U.S. Government Money Market Fund, Capital Class

     1,470,560         1,471   
     

 

 

 

TOTAL INVESTMENTS - 99.39% (Cost $124,484)

        132,571   

OTHER ASSETS, NET OF LIABILITIES - 0.61%

  

     819   
     

 

 

 

TOTAL NET ASSETS - 100.00%

      $ 133,390   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $18,634 or 13.97% of net assets. The Fund has no right to demand registration of these securities.
C  Non-voting participating shares.
D  The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date.
E  Limited Liability Company.
F  Limited Partnership.
G  REIT – Real Estate Investment Trust.

 

See accompanying notes

 

32


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

CORPORATE OBLIGATIONS - 42.96%

     

Consumer - 1.02%

     

Altria Group, Inc., 4.75%, Due 5/5/2021

   $ 390       $ 420   

Anheuser-Busch InBev Worldwide, Inc.,

     

5.00%, Due 4/15/2020

     380         432   

8.00%, Due 11/15/2039

     175         258   

ConAgra Foods, Inc., 3.20%, Due 1/25/2023

     420         401   

Diageo Capital PLC, 1.50%, Due 5/11/2017

     1,075         1,080   

Kellogg Co., 1.875%, Due 11/17/2016

     200         205   

Kraft Foods Group, Inc., 1.625%, Due 6/4/2015

     275         279   

SABMiller Holdings, Inc., 4.95%, Due 1/15/2042A

     400         409   
     

 

 

 
        3,484   
     

 

 

 

Energy - 3.89%

     

Apache Corp., 5.10%, Due 9/1/2040

     200         204   

BP Capital Markets PLC,

     

3.20%, Due 3/11/2016

     400         421   

4.50%, Due 10/1/2020

     480         526   

2.50%, Due 11/6/2022

     665         615   

Cameron International Corp., 6.375%, Due 7/15/2018

     480         566   

Canadian Natural Resources Ltd.,

     

3.45%, Due 11/15/2021

     550         553   

6.25%, Due 3/15/2038

     360         414   

ConocoPhillips, 6.65%, Due 7/15/2018

     825         996   

Devon Energy Corp., 4.75%, Due 5/15/2042

     400         378   

Energy Transfer Partners LP,

     

8.50%, Due 4/15/2014B

     485         501   

9.00%, Due 4/15/2019B

     410         525   

Enterprise Products Operating LLC, 6.125%, Due 10/15/2039C

     390         437   

EOG Resources, Inc., 2.50%, Due 2/1/2016

     425         441   

Halliburton Co., 3.25%, Due 11/15/2021

     670         675   

Husky Energy, Inc., 3.95%, Due 4/15/2022

     690         703   

Marathon Oil Corp., 6.00%, Due 10/1/2017

     475         547   

Phillips 66,

     

1.95%, Due 3/5/2015

     355         361   

4.30%, Due 4/1/2022

     435         452   

Pride International, Inc., 6.875%, Due 8/15/2020

     295         354   

Shell International Finance BV, 0.625%, Due 12/4/2015

     730         730   

Spectra Energy Capital LLC,

     

5.668%, Due 8/15/2014C

     320         332   

5.65%, Due 3/1/2020C

     595         652   

Spectra Energy Partners LP, 4.60%, Due 6/15/2021B

     235         248   

The Williams Cos., Inc., 3.70%, Due 1/15/2023

     225         207   

TransCanada PipeLines Ltd.,

     

3.75%, Due 10/16/2023

     400         403   

7.625%, Due 1/15/2039

     395         535   

6.10%, Due 6/1/2040

     290         336   

Valero Energy Corp., 9.375%, Due 3/15/2019

     170         222   
     

 

 

 
        13,334   
     

 

 

 

Finance - 18.96%

     

AEGON Funding Co. LLC, 5.75%, Due 12/15/2020C

     400         456   

American Express Co., 4.05%, Due 12/3/2042

     438         392   

American Express Credit Corp.,

     

1.75%, Due 6/12/2015

     640         651   

1.30%, Due 7/29/2016

     455         459   

American International Group, Inc.,

     

6.40%, Due 12/15/2020

     800         960   

4.875%, Due 6/1/2022

     1,000         1,095   

Bank of America Corp.,

     

7.80%, Due 9/15/2016

     700         811   

2.60%, Due 1/15/2019

     520         524   

7.625%, Due 6/1/2019

     1,695         2,113   

5.70%, Due 1/24/2022

     2,000         2,296   

 

See accompanying notes

 

33


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Bank of New York Mellon Corp., 2.30%, Due 7/28/2016

   $ 800       $ 830   

Bank of Nova Scotia, 0.75%, Due 10/9/2015

     540         541   

Bank One Corp., 4.90%, Due 4/30/2015

     500         528   

Barclays Bank PLC,

     

3.90%, Due 4/7/2015

     380         397   

6.75%, Due 5/22/2019

     650         786   

Bear Stearns Cos. LLC, 7.25%, Due 2/1/2018C

     2,845         3,430   

Berkshire Hathaway Finance Corp., 0.95%, Due 8/15/2016

     450         451   

BNP Paribas S.A., 3.60%, Due 2/23/2016

     400         423   

Boston Properties LP, 3.125%, Due 9/1/2023B

     410         384   

Branch Banking & Trust Co., 1.45%, Due 10/3/2016

     675         683   

Canadian Imperial Bank of Commerce, 2.35%, Due 12/11/2015

     850         878   

Capital One Financial Corp., 2.15%, Due 3/23/2015

     635         646   

Citigroup, Inc.,

     

1.178%, Due 4/1/2014D

     8         8   

0.546%, Due 11/5/2014D

     380         380   

1.70%, Due 7/25/2016

     465         470   

4.45%, Due 1/10/2017

     1,000         1,087   

8.50%, Due 5/22/2019

     2,475         3,202   

5.875%, Due 1/30/2042

     500         574   

CNA Financial Corp., 7.35%, Due 11/15/2019

     480         592   

Deutsche Bank AG, 3.875%, Due 8/18/2014

     400         411   

ERP Operating LP, 3.00%, Due 4/15/2023B

     290         275   

Fifth Third Bancorp, 3.625%, Due 1/25/2016

     400         422   

General Electric Capital Corp.,

     

0.443%, Due 1/8/2016D

     1,300         1,297   

5.625%, Due 5/1/2018

     375         435   

6.00%, Due 8/7/2019

     350         414   

5.50%, Due 1/8/2020

     800         926   

5.30%, Due 2/11/2021

     250         278   

3.15%, Due 9/7/2022

     755         739   

5.875%, Due 1/14/2038

     365         412   

Goldman Sachs Group, Inc.,

     

5.35%, Due 1/15/2016

     800         874   

6.25%, Due 9/1/2017

     800         925   

5.95%, Due 1/18/2018

     665         763   

6.00%, Due 6/15/2020

     990         1,146   

5.75%, Due 1/24/2022

     500         567   

HCP, Inc., 5.375%, Due 2/1/2021

     500         553   

Health Care REIT, Inc.,

     

4.125%, Due 4/1/2019E

     350         372   

5.25%, Due 1/15/2022E

     340         368   

Humana, Inc., 3.15%, Due 12/1/2022

     595         561   

ING Bank N.V.,

     

5.125%, Due 5/1/2015A

     250         259   

3.75%, Due 3/7/2017A

     1,500         1,586   

JPMorgan Chase & Co.,

     

0.584%, Due 6/13/2016D

     480         475   

3.15%, Due 7/5/2016

     1,000         1,050   

5.50%, Due 10/15/2040

     425         463   

KeyCorp, 5.10%, Due 3/24/2021

     385         427   

Liberty Mutual Group, Inc., 5.00%, Due 6/1/2021A

     390         421   

Lincoln National Corp., 4.75%, Due 2/15/2014

     50         51   

Lloyds TSB Bank PLC, 4.375%, Due 1/12/2015A

     375         390   

Loews Corp., 5.25%, Due 3/15/2016

     1,145         1,261   

Merrill Lynch & Co. Inc.,

     

6.40%, Due 8/28/2017

     870         1,011   

6.11%, Due 1/29/2037

     360         385   

MetLife, Inc., 6.375%, Due 6/15/2034

     500         612   

Morgan Stanley,

     

0.724%, Due 10/15/2015D

     1,180         1,175   

1.75%, Due 2/25/2016

     480         485   

7.30%, Due 5/13/2019

     1,120         1,368   

 

See accompanying notes

 

34


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

5.625%, Due 9/23/2019

   $ 600       $ 685   

3.75%, Due 2/25/2023

     480         474   

National Australia Bank Ltd., 4.375%, Due 12/10/2020A

     425         460   

Nordea Bank AB, 4.875%, Due 1/27/2020A

     450         499   

PNC Funding Corp.,

     

4.25%, Due 9/21/2015

     525         559   

4.375%, Due 8/11/2020

     410         445   

3.30%, Due 3/8/2022

     515         509   

Prudential Financial, Inc., 7.375%, Due 6/15/2019

     450         560   

Rabobank Nederland, 2.125%, Due 10/13/2015

     225         231   

Royal Bank of Canada,

     

1.15%, Due 3/13/2015

     295         298   

0.625%, Due 12/5/2016

     515         515   

Simon Property Group LP,

     

6.125%, Due 5/30/2018B

     665         786   

10.35%, Due 4/1/2019B

     375         515   

State Street Corp., 2.875%, Due 3/7/2016

     770         808   

SunTrust Banks, Inc., 3.50%, Due 1/20/2017

     525         557   

Svenska Handelsbanken AB, 2.875%, Due 4/4/2017

     800         836   

Toronto Dominion Bank, 2.625%, Due 9/10/2018

     230         238   

Trinity Acquisition PLC, 4.625%, Due 8/15/2023

     345         349   

UBS AG, 5.875%, Due 12/20/2017

     1,163         1,349   

UnitedHealth Group, Inc.,

     

1.625%, Due 3/15/2019

     415         404   

3.875%, Due 10/15/2020

     425         451   

3.95%, Due 10/15/2042

     290         253   

US Bancorp, 1.65%, Due 5/15/2017

     595         600   

Ventas Realty LP, 5.70%, Due 9/30/2043B

     220         231   

Wachovia Corp.,

     

0.614%, Due 10/15/2016D

     1,300         1,284   

5.75%, Due 2/1/2018

     640         747   

WellPoint, Inc., 4.35%, Due 8/15/2020

     710         763   

Wells Fargo & Co., 2.15%, Due 1/15/2019

     305         306   
     

 

 

 
        64,916   
     

 

 

 

Manufacturing - 7.21%

     

ABB Finance USA, Inc., 2.875%, Due 5/8/2022

     320         312   

Altera Corp.,

     

1.75%, Due 5/15/2017

     260         258   

2.50%, Due 11/15/2018

     230         229   

American Honda Finance Corp.,

     

2.125%, Due 2/28/2017A

     1,000         1,023   

3.875%, Due 9/21/2020A

     500         528   

Analog Devices, Inc., 3.00%, Due 4/15/2016

     425         445   

Apple, Inc., 2.40%, Due 5/3/2023

     915         837   

Applied Materials, Inc., 2.65%, Due 6/15/2016

     545         567   

BHP Billiton Finance USA Ltd., 1.625%, Due 2/24/2017

     435         440   

CA, Inc., 4.50%, Due 8/15/2023

     480         482   

Caterpillar Financial Services Corp.,

     

1.10%, Due 5/29/2015

     495         499   

2.75%, Due 6/24/2015

     380         393   

1.625%, Due 6/1/2017

     570         576   

Cooper US, Inc., 3.875%, Due 12/15/2020

     505         526   

Cummins, Inc., 3.65%, Due 10/1/2023

     540         550   

Daimler Finance North America LLC,

     

3.00%, Due 3/28/2016A C

     190         198   

2.95%, Due 1/11/2017A C

     2,400         2,494   

Dow Chemical Co.,

     

4.25%, Due 11/15/2020

     255         272   

4.125%, Due 11/15/2021

     400         413   

Eaton Corp., PLC,

     

5.60%, Due 5/15/2018

     380         434   

2.75%, Due 11/2/2022A

     255         239   

EMC Corp., 1.875%, Due 6/1/2018

     750         753   

 

See accompanying notes

 

35


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Ford Motor Credit Co. LLC,

     

4.25%, Due 2/3/2017C

   $ 700       $ 756   

5.875%, Due 8/2/2021C

     600         687   

Hewlett-Packard Co.,

     

2.20%, Due 12/1/2015

     425         433   

4.05%, Due 9/15/2022

     350         340   

Intel Corp.,

     

1.35%, Due 12/15/2017

     745         741   

3.30%, Due 10/1/2021

     340         343   

John Deere Capital Corp.,

     

1.05%, Due 10/11/2016

     450         452   

1.30%, Due 3/12/2018

     550         545   

Johnson Controls, Inc., 5.00%, Due 3/30/2020

     480         530   

Koninklijke Philips Electronics N.V., 5.75%, Due 3/11/2018

     535         621   

LYB International Finance BV, 4.00%, Due 7/15/2023

     250         252   

Northrop Grumman Corp., 5.05%, Due 8/1/2019

     200         226   

Oracle Corp., 1.20%, Due 10/15/2017

     550         543   

PACCAR Financial Corp., 1.15%, Due 8/16/2016

     480         482   

Precision Castparts Corp., 0.70%, Due 12/20/2015

     340         339   

Rio Tinto Finance USA Ltd., 2.50%, Due 5/20/2016

     505         522   

Teck Resources Ltd., 6.00%, Due 8/15/2040

     160         153   

Toyota Motor Credit Corp., 2.05%, Due 1/12/2017

     480         492   

Tyco Electronics Group S.A.,

     

1.60%, Due 2/3/2015

     320         323   

6.55%, Due 10/1/2017

     365         423   

United Technologies Corp.,

     

1.80%, Due 6/1/2017

     1,030         1,049   

6.125%, Due 7/15/2038

     600         733   

Volkswagen International Finance N.V., 1.625%, Due 3/22/2015A

     850         860   

Xerox Corp.,

     

8.25%, Due 5/15/2014

     190         197   

2.95%, Due 3/15/2017

     175         180   
     

 

 

 
        24,690   
     

 

 

 

Service - 5.18%

     

AbbVie, Inc.,

     

1.20%, Due 11/6/2015

     455         458   

2.90%, Due 11/6/2022

     815         777   

Baxter International, Inc., 1.85%, Due 1/15/2017

     375         385   

Becton Dickinson and Co., 3.25%, Due 11/12/2020

     480         491   

Cardinal Health, Inc., 3.20%, Due 3/15/2023

     590         560   

CBS Corp., 3.375%, Due 3/1/2022

     1,000         977   

Celgene Corp., 5.25%, Due 8/15/2043

     240         242   

Comcast Corp.,

     

5.875%, Due 2/15/2018

     740         865   

6.55%, Due 7/1/2039

     800         987   

Covidien International Finance S.A., 2.80%, Due 6/15/2015

     340         351   

CVS Caremark Corp., 3.25%, Due 5/18/2015

     190         197   

DIRECTV Holdings LLC, 6.35%, Due 3/15/2040C

     225         232   

eBay, Inc., 1.35%, Due 7/15/2017

     435         434   

Genzyme Corp., 5.00%, Due 6/15/2020

     235         263   

Gilead Sciences, Inc., 2.40%, Due 12/1/2014

     475         484   

GlaxoSmithKline Capital PLC, 1.50%, Due 5/8/2017

     710         717   

Home Depot, Inc., 2.70%, Due 4/1/2023

     225         213   

Lowe’s Companies, Inc., 3.875%, Due 9/15/2023

     990         1,020   

McKesson Corp., 3.25%, Due 3/1/2016

     200         210   

Novartis Capital Corp., 2.90%, Due 4/24/2015

     340         353   

Quest Diagnostics, Inc., 4.75%, Due 1/30/2020

     225         241   

Sanofi,

     

1.25%, Due 4/10/2018

     730         719   

4.00%, Due 3/29/2021

     320         343   

St Jude Medical, Inc., 2.50%, Due 1/15/2016

     595         611   

Teva Pharmaceutical Finance II, 3.00%, Due 6/15/2015

     550         569   

 

See accompanying notes

 

36


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Thomson Reuters Corp., 4.70%, Due 10/15/2019

   $ 225       $ 248   

Time Warner Cable, Inc.,

     

5.85%, Due 5/1/2017

     1,300         1,432   

6.75%, Due 7/1/2018

     125         141   

4.50%, Due 9/15/2042

     500         375   

Time Warner, Inc.,

     

4.875%, Due 3/15/2020

     1,090         1,206   

4.75%, Due 3/29/2021

     350         380   

Viacom, Inc., 4.50%, Due 2/27/2042

     500         437   

Walgreen Co., 3.10%, Due 9/15/2022

     300         286   

Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030

     400         544   
     

 

 

 
        17,748   
     

 

 

 

Telecommunications - 3.07%

     

America Movil SAB de CV, 6.375%, Due 3/1/2035

     375         410   

AT&T, Inc.,

     

0.80%, Due 12/1/2015

     640         639   

5.35%, Due 9/1/2040

     338         329   

5.55%, Due 8/15/2041

     1,000         1,000   

4.35%, Due 6/15/2045

     448         370   

Cellco Partnership, 8.50%, Due 11/15/2018

     580         746   

Deutsche Telekom International Finance BV, 4.875%, Due 3/6/2042A

     850         821   

Orange S.A.,

     

4.375%, Due 7/8/2014

     385         394   

2.125%, Due 9/16/2015

     225         229   

Verizon Communications, Inc.,

     

5.50%, Due 4/1/2017

     500         564   

4.60%, Due 4/1/2021

     780         838   

3.50%, Due 11/1/2021

     350         349   

5.15%, Due 9/15/2023

     240         260   

6.40%, Due 9/15/2033

     450         509   

6.90%, Due 4/15/2038

     500         592   

6.55%, Due 9/15/2043

     850         986   

Vodafone Group PLC,

     

1.625%, Due 3/20/2017

     640         641   

6.15%, Due 2/27/2037

     760         851   
     

 

 

 
        10,528   
     

 

 

 

Transportation - 0.98%

     

Burlington Northern Santa Fe LLC,

     

7.95%, Due 8/15/2030C

     320         424   

5.75%, Due 5/1/2040C

     190         210   

5.15%, Due 9/1/2043C

     500         515   

Canadian National Railway Co., 5.55%, Due 5/15/2018

     400         463   

CSX Corp.,

     

3.70%, Due 11/1/2023

     685         684   

5.50%, Due 4/15/2041

     425         455   

Norfolk Southern Corp., 5.75%, Due 4/1/2018

     300         347   

United Parcel Service, Inc., 1.125%, Due 10/1/2017

     265         263   
     

 

 

 
        3,361   
     

 

 

 

Utilities - 2.65%

     

Commonwealth Edison Co., 4.00%, Due 8/1/2020

     190         205   

Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039

     350         395   

Duke Energy Indiana, Inc., 6.05%, Due 6/15/2016

     450         506   

EDF S.A., 4.60%, Due 1/27/2020A

     580         640   

MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036

     1,000         1,133   

National Rural Utilities Cooperative Finance Corp., 5.45%, Due 4/10/2017

     505         573   

Pacific Gas & Electric Co., 6.25%, Due 12/1/2013

     150         151   

Progress Energy, Inc.,

     

4.875%, Due 12/1/2019

     450         501   

4.40%, Due 1/15/2021

     1,000         1,072   

Sempra Energy, 6.50%, Due 6/1/2016

     340         385   

Sierra Pacific Power Co., 3.375%, Due 8/15/2023

     240         240   

Southern Co., 1.95%, Due 9/1/2016

     380         388   

Southwestern Electric Power Co., 3.55%, Due 2/15/2022

     800         785   

 

See accompanying notes

 

37


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Union Electric Co., 6.70%, Due 2/1/2019

   $ 510       $ 616   

Xcel Energy, Inc., 5.613%, Due 4/1/2017

     1,321         1,474   
     

 

 

 
        9,064   
     

 

 

 

Total Corporate Obligations (Cost $141,472)

        147,125   
     

 

 

 

FOREIGN GOVERNMENT OBLIGATIONS - 0.53%

     

Energy - 0.53%

     

Petrobras International Finance Co.,

     

3.875%, Due 1/27/2016

     300         310   

3.50%, Due 2/6/2017

     340         345   

5.375%, Due 1/27/2021

     500         509   

6.875%, Due 1/20/2040

     245         245   

Petroleos Mexicanos, 6.00%, Due 3/5/2020

     375         421   
     

 

 

 

Total Foreign Government Obligations (Cost $1,807)

        1,830   
     

 

 

 

ASSET-BACKED OBLIGATIONS - 4.63%

     

Ally Master Owner Trust, 1.21%, Due 6/15/2017, 2012 3 A2

     3,500         3,523   

Citibank Credit Card Issuance Trust, 1.11%, Due 7/23/2018, 2013 A3 A3

     1,650         1,659   

CNH Equipment Trust,

     

2.04%, Due 10/17/2016, 2011-A A4

     470         477   

0.94%, Due 5/15/2017, 2012 A A3

     719         721   

Ford Credit Auto Lease Trust, 0.60%, Due 3/15/2016, 2013-A A3

     550         550   

Ford Credit Floorplan Master Owner Trust, 1.50%, Due 9/15/2018, 2013-5 A1

     1,700         1,718   

National Credit Union Administration,

     

0.574%, Due 3/11/2020, 2011 R3 1AD

     2,519         2,520   

0.624%, Due 10/7/2020, 2010 R1 1AD

     1,815         1,823   

Nissan Auto Lease Trust, 0.58%, Due 11/16/2015, 2012 B A3

     1,155         1,154   

Nissan Master Owner Trust Receivables, 0.644%, Due 5/15/2017, 2012 A AD

     1,700         1,703   
     

 

 

 

Total Asset-Backed Obligations (Cost $15,794)

        15,848   
     

 

 

 

COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 8.58%

     

Banc of America Commercial Mortgage Trust,

     

5.317%, Due 9/10/2047, 2006-5 A2

     247         248   

5.633%, Due 4/10/2049, 2007-2 A2

     70         71   

Bear Stearns Commercial Mortgage Securities,

     

5.201%, Due 12/11/2038, 2006-PW14 A4

     790         870   

5.54%, Due 9/11/2041, 2006-PW13 A4

     1,285         1,407   

GNR Project Loans,

     

2.012%, Due 7/16/2035, 2011-144 AB

     1,566         1,576   

1.692%, Due 11/16/2035, 2010-148 A

     193         194   

2.174%, Due 7/16/2038, 2011-147 A

     2,870         2,904   

2.989%, Due 3/16/2039, 2010-71 AC

     250         252   

2.17%, Due 4/16/2041, 2012 44 A

     5,819         5,844   

1.732%, Due 5/16/2042, 2012 70 A

     3,396         3,369   

2.70%, Due 4/16/2043, 2011-109 AB

     2,202         2,254   

2.543%, Due 9/16/2044, 2011-96 AC

     1,397         1,423   

3.20%, Due 11/16/2044, 2011-92 B

     2,700         2,807   

GS Mortgage Securities Corp II,

     

3.679%, Due 8/10/2043, 2010-C1 A1A

     490         520   

3.849%, Due 12/10/2043, 2010-C2 A1A

     742         785   

3.645%, Due 3/10/2044, 2011-GC3 A2A

     750         788   

JP Morgan Chase Commercial Mortgage Securities Corp.,

     

4.678%, Due 7/15/2042, 2005-LDP2 A3A

     110         110   

3.853%, Due 6/15/2043, 2010-C1 A1A

     696         722   

4.388%, Due 2/15/2046, 2011-C3 A3A

     800         873   

4.625%, Due 3/15/2046, 2005-LDP1 A2

     40         40   

5.706%, Due 2/12/2049, 2007-CB19 A4

     550         616   

5.629%, Due 2/12/2051, 2007-CB20 A2

     50         50   

 

See accompanying notes

 

38


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

JPMBB Commercial Mortgage Securities Trust 2013-C12, 3.157%, Due 7/15/2045, 2013 C12 ASB

   $ 935       $ 949   

LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040, 2007-C1 A4

     550         611   

Wachovia Bank Commercial Mortgage Trust, 5.728%, Due 6/15/2049, 2007-C32 A2

     108         111   
     

 

 

 

Total Non-Agency Mortgage-Backed Obligations (Cost $28,838)

        29,394   
     

 

 

 

U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 19.29%

     

Federal Home Loan Mortgage Corporation - 4.26%

     

4.50%, Due 3/1/2019

     98         103   

5.00%, Due 10/1/2020

     243         258   

3.50%, Due 9/1/2028

     3,156         3,334   

5.00%, Due 8/1/2033

     145         157   

5.50%, Due 2/1/2034

     197         215   

6.00%, Due 8/1/2034

     104         116   

5.00%, Due 8/1/2035

     82         89   

5.00%, Due 9/1/2035

     207         224   

5.50%, Due 4/1/2037

     108         116   

5.00%, Due 3/1/2038

     143         154   

5.50%, Due 5/1/2038

     205         222   

5.50%, Due 6/1/2038

     132         143   

5.00%, Due 4/1/2040

     2,069         2,239   

0.574%, Due 12/15/2040 D

     772         773   

4.00%, Due 1/1/2041

     950         998   

4.50%, Due 2/1/2041

     702         750   

3.50%, Due 3/1/2042

     820         839   

3.50%, Due 6/1/2042

     3,778         3,863   
     

 

 

 
        14,593   
     

 

 

 

Federal National Mortgage Association - 13.63%

     

6.50%, Due 2/1/2017

     38         40   

5.00%, Due 12/1/2017

     126         134   

4.50%, Due 9/1/2018

     278         296   

4.00%, Due 8/1/2020

     60         63   

3.50%, Due 1/1/2026

     280         296   

4.00%, Due 5/1/2026

     199         211   

4.00%, Due 6/1/2026

     2,271         2,431   

3.00%, Due 8/1/2027

     716         744   

3.00%, Due 11/1/2027

     1,397         1,453   

3.50%, Due 1/1/2028

     2,947         3,114   

5.00%, Due 3/1/2034

     193         211   

5.50%, Due 6/1/2034

     122         133   

4.50%, Due 9/1/2034

     59         63   

5.50%, Due 2/1/2035

     220         240   

5.00%, Due 5/1/2035

     2,750         2,988   

5.00%, Due 11/1/2035

     178         194   

5.50%, Due 12/1/2035

     134         147   

5.00%, Due 2/1/2036

     141         153   

5.50%, Due 4/1/2036

     303         331   

6.00%, Due 9/1/2036

     59         65   

6.50%, Due 12/1/2036

     144         161   

5.50%, Due 2/1/2037

     158         172   

6.00%, Due 9/1/2037

     146         160   

6.00%, Due 1/1/2038

     230         251   

5.50%, Due 3/1/2038

     332         362   

5.00%, Due 4/1/2038

     140         152   

5.50%, Due 6/1/2038

     103         112   

4.50%, Due 1/1/2040

     1,416         1,515   

5.00%, Due 5/1/2040

     1,948         2,125   

4.00%, Due 9/1/2040

     925         975   

4.00%, Due 12/1/2040

     4,139         4,364   

4.00%, Due 1/1/2041

     1,099         1,159   

4.00%, Due 2/1/2041

     3,063         3,234   

5.00%, Due 3/1/2041

     1,214         1,326   

4.50%, Due 4/1/2041

     4,659         4,998   

4.50%, Due 5/1/2041

     1,298         1,396   

 

See accompanying notes

 

39


American Beacon Intermediate Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

4.50%, Due 8/1/2041

   $ 1,444       $ 1,550   

4.00%, Due 9/1/2041

     2,442         2,574   

4.00%, Due 10/1/2041

     2,589         2,729   

4.50%, Due 10/1/2041

     1,047         1,124   

4.00%, Due 11/1/2041

     806         850   

3.50%, Due 9/1/2042

     972         999   

4.00%, Due 11/1/2042

     350         369   

4.50%, Due 1/1/2043

     681         729   
     

 

 

 
        46,693   
     

 

 

 

Government National Mortgage Association - 1.40%

     

6.50%, Due 3/15/2028

     137         154   

6.00%, Due 4/15/2031

     159         177   

6.00%, Due 10/15/2038

     693         764   

5.50%, Due 2/15/2040

     531         581   

3.50%, Due 3/15/2043

     1,681         1,745   

5.50%, Due 2/20/2034

     170         190   

4.50%, Due 10/20/2040

     1,082         1,186   
     

 

 

 
        4,797   
     

 

 

 

Total U.S. Agency Mortgage-Backed Obligations (Cost $65,443)

        66,083   
     

 

 

 

U.S. TREASURY OBLIGATIONS - 19.41%

     

0.25%, Due 12/15/2015

     2,000         1,996   

2.00%, Due 4/30/2016

     3,945         4,098   

1.50%, Due 6/30/2016

     3,500         3,594   

3.125%, Due 10/31/2016

     4,400         4,729   

0.875%, Due 1/31/2017

     9,355         9,408   

0.75%, Due 12/31/2017

     5,600         5,532   

1.50%, Due 8/31/2018

     1,000         1,011   

1.375%, Due 9/30/2018

     4,000         4,016   

1.125%, Due 5/31/2019

     3,000         2,936   

1.25%, Due 2/29/2020

     600         581   

2.00%, Due 11/15/2021

     9,550         9,401   

2.00%, Due 2/15/2022

     10,465         10,250   

6.25%, Due 8/15/2023

     900         1,197   

6.875%, Due 8/15/2025

     770         1,091   

5.25%, Due 11/15/2028

     750         944   

4.75%, Due 2/15/2037

     800         966   

3.125%, Due 11/15/2041

     5,195         4,738   
     

 

 

 

Total U.S. Treasury Obligations (Cost $66,507)

        66,488   
     

 

 

 
     Shares         

SHORT-TERM INVESTMENTS - 4.30% (Cost $14,727)

     

JPMorgan U.S. Government Money Market Fund, Capital Class

     14,726,742         14,727   
     

 

 

 

TOTAL INVESTMENTS - 99.70% (Cost $334,588)

        341,495   

OTHER ASSETS, NET OF LIABILITIES - 0.30%

  

     1,007   
     

 

 

 

TOTAL NET ASSETS - 100.00%

      $ 342,502   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $14,515 or 4.24% of net assets. The Fund has no right to demand registration of these securities.
B  Limited Partnership.
C  Limited Liability Company.
D  The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date.
E  REIT - Real Estate Investment Trust.

 

See accompanying notes

 

40


American Beacon Short-Term Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

CORPORATE OBLIGATIONS - 45.37%

     

Consumer - 3.07%

     

Kellogg Co., 1.125%, Due 5/15/2015

   $ 2,000       $ 2,016   

SABMiller Holdings, Inc., 1.85%, Due 1/15/2015A

     1,000         1,013   

SABMiller PLC, 6.50%, Due 7/1/2016A

     1,725         1,959   
     

 

 

 
        4,988   
     

 

 

 

Energy - 0.63%

     

EOG Resources Canada, Inc., 4.75%, Due 3/15/2014 A

     1,000         1,016   
     

 

 

 

Finance - 23.77%

     

ABN AMRO Bank N.V.,

     

2.035%, Due 1/30/2014A B

     2,000         2,007   

1.375%, Due 1/22/2016A

     1,000         1,007   

American Express Co., 7.25%, Due 5/20/2014

     1,000         1,037   

American International Group, Inc., 4.25%, Due 9/15/2014

     600         618   

Bank of America Corp., 1.070%, Due 3/22/2016

     2,000         2,010   

Bear Stearns Cos. LLC, 0.653%, Due 11/21/2016C

     3,000         2,978   

Citigroup, Inc.,

     

1.178%, Due 4/1/2014B

     19         19   

0.546%, Due 11/5/2014B

     2,573         2,570   

1.198%, Due 7/25/2016

     1,000         1,009   

Danske Bank A/S, 1.294%, Due 4/14/2014A B

     3,000         3,009   

General Electric Capital Corp., 1.50%, Due 7/12/2016

     3,000         3,036   

Goldman Sachs Group, Inc.,

     

5.125%, Due 1/15/2015

     1,000         1,051   

5.35%, Due 1/15/2016

     1,000         1,093   

ING Bank N.V., 1.658%, Due 6/9/2014A D

     3,000         3,020   

Lloyds TSB Bank PLC, 2.588%, Due 1/24/2014B

     2,000         2,010   

Monumental Global Funding III, 0.444%, Due 1/15/2014A B

     1,000         1,001   

Morgan Stanley, 3.45%, Due 11/2/2015

     3,000         3,120   

Societe Generale S.A., 1.296%, Due 4/11/2014A B

     2,000         2,008   

Svenska Handelsbanken AB, 0.721%, Due 9/23/2016B

     3,000         3,006   

Wachovia Corp., 0.614%, Due 10/15/2016B

     3,000         2,963   
     

 

 

 
        38,572   
     

 

 

 

Manufacturing - 9.33%

     

American Honda Finance Corp.,

     

1.00%, Due 8/11/2015A

     2,000         2,011   

0.744%, Due 10/7/2016

     1,000         1,004   

Daimler Finance North America LLC,

     

2.30%, Due 1/9/2015A C

     1,000         1,017   

0.945%, Due 8/1/2016A C

     2,500         2,505   

Ford Motor Credit Co. LLC, 4.25%, Due 2/3/2017C

     1,000         1,080   

Hewlett-Packard Co., 0.661%, Due 5/30/2014B

     1,000         1,000   

Johnson Controls, Inc., 1.75%, Due 3/1/2014

     500         502   

Nissan Motor Acceptance Corp., 0.950%, Due 9/26/2016A B

     3,000         3,005   

Volkswagen International Finance N.V., 1.15%, Due 11/20/2015A

     3,000         3,018   
     

 

 

 
        15,142   
     

 

 

 

Service - 4.33%

     

AbbVie, Inc., 1.20%, Due 11/6/2015

     3,000         3,021   

McKesson Corp., 0.95%, Due 12/4/2015

     1,000         1,000   

Quest Diagnostics, Inc., 1.100%, Due 3/24/2014B

     1,000         1,003   

Viacom, Inc., 1.25%, Due 2/27/2015

     2,000         2,012   
     

 

 

 
        7,036   
     

 

 

 

Telecommunications - 2.52%

     

British Telecommunications PLC, 1.625%, Due 6/28/2016

     1,000         1,013   

Orange S.A., 4.375%, Due 7/8/2014

     1,000         1,024   

Verizon Communications, Inc., 1.782%, Due 9/15/2016

     2,000         2,051   
     

 

 

 
        4,088   
     

 

 

 

Transportation - 0.65%

     

Burlington Northern Santa Fe Corp., 4.875%, Due 1/15/2015

     1,000         1,051   
     

 

 

 

 

See accompanying notes

 

41


American Beacon Short-Term Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Utilities—1.07%

     

EDF S.A., 5.50%, Due 1/26/2014A

   $ 1,000       $ 1,011   

Pacific Gas & Electric Co., 6.25%, Due 12/1/2013

     730         733   
     

 

 

 
        1,744   
     

 

 

 

Total Corporate Obligations (Cost $73,037)

        73,637   
     

 

 

 

ASSET-BACKED OBLIGATIONS - 24.75%

     

Ally Master Owner Trust, 0.804%, Due 5/15/2016, 2011-3 A1B

     2,000         2,003   

BMW Vehicle Lease Trust, 0.75%, Due 2/20/2015, 2012-1 A3

     2,124         2,126   

Capital Auto Receivables Asset Trust 2013-2, 0.92%, Due 9/20/2016, 2013-2 A2

     3,500         3,506   

Chrysler Capital Auto ReceivablesTrust, 0.91%, Due 4/16/2018, 2013-AA A3A

     2,000         2,002   

Ford Credit Auto Owner Trust, 0.84%, Due 8/15/2016, 2012-1A A3

     1,486         1,489   

Ford Credit Floorplan Master Owner Trust, 0.85%, Due 1/15/2018, 2013-1 A1

     3,000         2,998   

GE Dealer Floorplan Master Note Trust, 0.773%, Due 7/20/2016, 2011-1 AB

     2,500         2,505   

GE Equipment Small Ticket LLC, 1.45%, Due 1/21/2018, 2011-1A A3A C

     148         149   

GE Equipment Transportation LLC, 0.62%, Due 7/25/2016, 2012-2 A3C

     2,500         2,499   

Golden Credit Card Trust, 0.636%, Due 9/15/2018, 2013-2A AA B

     3,000         3,000   

National Credit Union Administration,

     

0.624%, Due 1/8/2020, 2011 R1 1AB

     4,967         4,951   

0.574%, Due 2/6/2020, 2011 R2 1AB

     1,326         1,332   

0.574%, Due 3/11/2020, 2011 R3 1AB

     4,994         4,997   

1.84%, Due 10/7/2020, 2010-R1 2A

     284         287   

Nissan Master Owner Trust Receivables, 0.474%, Due 2/15/2018, 2013-A AB

     3,500         3,496   

Volkswagen Auto Loan Enhanced Trust,

     

0.87%, Due 7/20/2015, 2012 A A3

     1,000         1,003   

0.85%, Due 8/22/2016, 2012-1 A3

     1,826         1,832   
     

 

 

 

Total Asset-Backed Obligations (Cost $40,187)

        40,175   
     

 

 

 

COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 11.92%

     

Banc of America Commercial Mortgage Trust, 5.633%, Due 4/10/2049, 2007-2 A2

     66         67   

GNR Project Loans,

     

1.864%, Due 8/16/2031, 2010-141 A

     1,054         1,058   

2.239%, Due 12/16/2031, 2011-1 A

     757         760   

2.45%, Due 7/16/2032, 2011-109 A

     2,008         2,022   

2.25%, Due 5/16/2033, 2011-92 A

     2,204         2,217   

2.25%, Due 8/16/2034, 2011-78 A

     1,684         1,698   

2.21%, Due 11/16/2034, 2011-16 A

     1,416         1,423   

1.692%, Due 11/16/2035, 2010-148 A

     1,288         1,294   

2.21%, Due 12/16/2035, 2011-31 A

     1,862         1,877   

2.782%, Due 6/16/2036, 2010-13 AD

     974         995   

3.069%, Due 6/16/2036, 2010-52 A

     611         620   

2.161%, Due 11/16/2036, 2011-96 AB

     1,329         1,338   

2.45%, Due 7/16/2038, 2011-49 A

     2,186         2,219   

2.989%, Due 3/16/2039, 2010-71 AC

     434         439   

3.210%, Due 10/16/2039, 2010-22 AB

     345         350   

JP Morgan Chase Commercial Mortgage Securities Corp., 3.853%, Due 6/15/2043, 2010-C1 A1A

     928         963   
     

 

 

 

Total Non-Agency Mortgage-Backed Obligations (Cost $19,343)

        19,340   
     

 

 

 

U.S. TREASURY OBLIGATIONS - 16.85%

     

2.125%, Due 11/30/2014

     1,000         1,021   

4.00%, Due 2/15/2015

     2,000         2,097   

0.25%, Due 3/31/2015

     4,000         4,002   

0.125%, Due 4/30/2015

     4,000         3,994   

0.25%, Due 7/15/2015

     6,000         6,000   

2.00%, Due 1/31/2016

     2,000         2,073   

1.75%, Due 5/31/2016

     3,000         3,099   

1.00%, Due 10/31/2016

     5,000         5,058   
     

 

 

 

Total U.S. Treasury Obligations (Cost $27,308)

        27,344   
     

 

 

 

 

See accompanying notes

 

42


American Beacon Short-Term Bond FundSM

Schedule of Investments

October 31, 2013

 

 

     Shares      Fair Value  
            (000’s)  

SHORT-TERM INVESTMENTS - 0.88% (Cost $1,430)

     

JPMorgan U.S. Government Money Market Fund, Capital Class

     1,429,636       $ 1,430   
     

 

 

 

TOTAL INVESTMENTS - 99.77% (Cost $161,305)

        161,926   

OTHER ASSETS, NET OF LIABILITIES - 0.23%

  

     387   
     

 

 

 

TOTAL NET ASSETS - 100.00%

      $ 162,313   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $34,721 or 21.39% of net assets. The Fund has no right to demand registration of these securities.
B  The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date.
C  Limited Liability Company.
D  Variable rate.

 

See accompanying notes

 

43


American Beacon FundsSM

Statements of Assets and Liabilities

October 31, 2013 (in thousands except share and per share amounts)

 

 

     High Yield Bond
Fund
     Retirement
Income and
Appreciation
Fund
     Intermediate
Bond Fund
     Short-Term
Bond Fund
 

Assets:

           

Investments in unaffiliated securities, at fair value A

   $ 205,252      $ 132,571      $ 341,495      $ 161,926  

Cash

     3        —          —           —     

Receivable for investments sold

     1,966        589        —           —     

Dividends and interest receivable

     3,752        815        2,155        483  

Receivable for fund shares sold

     967        143        4,553        116  

Receivable for tax reclaims

     16        4        8        1  

Receivable for expense reimbursement (Note 2)

     4        —           1        2  

Prepaid expenses

     17        17        23        21  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     211,977        134,139        348,235        162,549  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Payable for investments purchased

     2,606        416        5,591        —     

Payable for fund shares redeemed

     239        107        7        142  

Dividends payable

     27        1        —           1  

Payable under excess expense reimbursement plan (Note 2)

     —           9        —           —     

Management and investment advisory fees payable

     240        125        51        27  

Administrative service and service fees payable

     27        49        14        13  

Transfer agent fees payable

     3        1        4        12  

Custody and fund accounting fees payable

     9        4        7        3  

Professional fees payable

     32        29        26        30  

Trustee fees payable

     2        1        9        4  

Payable for prospectus and shareholder reports

     1        6        23        4  

Other liabilities

     1        1        1        —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     3,187        749        5,733        236  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Assets

   $ 208,790      $ 133,390      $ 342,502      $ 162,313  
  

 

 

    

 

 

    

 

 

    

 

 

 

Analysis of Net Assets:

           

Paid-in-capital

     205,518        120,917        333,520        170,270  

Undistributed net investment income (loss)

     154        110        2,002        (426

Accumulated net realized gain (loss)

     550        4,276        73        (8,152

Unrealized appreciation of investments

     2,568        8,087        6,907        621  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net assets

   $ 208,790      $ 133,390      $ 342,502      $ 162,313  
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares outstanding at no par value (unlimited shares authorized):

           

Institutional Class

     6,750,666        N/A         31,629,003        17,296,377  
  

 

 

    

 

 

    

 

 

    

 

 

 

Y Class

     215,158        54,315        16,949        134,549  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investor Class

     816,976        11,616,544        163,307        861,316  
  

 

 

    

 

 

    

 

 

    

 

 

 

A Class

     104,188        75,805        39,181        260,992  
  

 

 

    

 

 

    

 

 

    

 

 

 

C Class

     199,781        170,572        68,547        99,115  
  

 

 

    

 

 

    

 

 

    

 

 

 

AMR Class

     14,339,544        N/A         N/A         N/A   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net assets (not in thousands):

           

Institutional Class

   $ 62,836,353      $ N/A       $ 339,416,266      $ 150,508,693  
  

 

 

    

 

 

    

 

 

    

 

 

 

Y Class

   $ 2,005,216      $ 607,796      $ 182,514      $ 1,172,887  
  

 

 

    

 

 

    

 

 

    

 

 

 

Investor Class

   $ 7,608,753      $ 130,012,890      $ 1,749,389      $ 7,497,575  
  

 

 

    

 

 

    

 

 

    

 

 

 

A Class

   $ 971,277      $ 851,036      $ 419,576      $ 2,270,653  
  

 

 

    

 

 

    

 

 

    

 

 

 

C Class

   $ 1,858,323      $ 1,917,889      $ 734,309      $ 862,736  
  

 

 

    

 

 

    

 

 

    

 

 

 

AMR Class

   $ 133,510,143      $ N/A       $ N/A       $ N/A   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

See accompanying notes

 

44


American Beacon FundsSM

Statements of Assets and Liabilities

October 31, 2013 (in thousands except share and per share amounts)

 

 

     High Yield Bond
Fund
     Retirement
Income and
Appreciation
Fund
     Intermediate
Bond Fund
     Short-Term
Bond Fund
 

Net asset value, offering and redemption price per share:

           

Institutional Class

   $ 9 .31         N/A       $ 10 .73       $ 8 .70   
  

 

 

    

 

 

    

 

 

    

 

 

 

Y Class

   $ 9 .32       $ 11 .19       $ 10 .77       $ 8 .72   
  

 

 

    

 

 

    

 

 

    

 

 

 

Investor Class

   $ 9 .31       $ 11 .19       $ 10 .71       $ 8 .70   
  

 

 

    

 

 

    

 

 

    

 

 

 

A Class

   $ 9 .32       $ 11 .23       $ 10 .71       $ 8 .70   
  

 

 

    

 

 

    

 

 

    

 

 

 

A Class (offering price)

   $ 9 .78       $ 11 .52       $ 11 .24       $ 8 .92   
  

 

 

    

 

 

    

 

 

    

 

 

 

C Class

   $ 9 .30       $ 11 .24       $ 10 .71       $ 8 .70   
  

 

 

    

 

 

    

 

 

    

 

 

 

AMR Class

   $ 9 .31       $ N/A       $ N/A       $ N/A   
  

 

 

    

 

 

    

 

 

    

 

 

 

A Cost of investments in unaffiliated securities

   $ 202,685       $ 124,484       $ 334,588       $ 161,305   

 

See accompanying notes

 

45


American Beacon FundsSM

Statements of Operations

For the year ended October 31, 2013 (in thousands)

 

 

     High Yield
Bond Fund
    Retirement
Income and
Appreciation
Fund
    Intermediate
Bond Fund
    Short-Term
Bond Fund
 

Investment Income:

        

Dividend income from unaffiliated securities (net of foreign taxes) A

   $ 138     $ 451     $ 1     $ 1  

Interest income

     12,154       3,627       9,556       2,205  

Miscellaneous Income

     66       —          —          1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     12,358       4,078       9,557       2,207  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Management and investment advisory fees (Note 2)

     735       478       727       347  

Administrative service fees (Note 2):

        

Institutional Class

     160       —          178       79  

Y Class

     4       4       5       4  

Investor Class

     24       435       12       32  

A Class

     4       8       2       9  

C Class

     9       8       4       2  

AMR Class

     53       —          —          —     

Transfer agent fees:

        

Institutional Class

     28       —          17       26  

Y Class

     1       —          —          —     

Investor Class

     3       8       2       4  

C Class

     —          1       1       —     

AMR Class

     4       —          —          —     

Custody and fund accounting fees

     48       26       49       25  

Professional fees

     54       48       49       52  

Registration fees and expenses

     62       61       66       71  

Service fees (Note 2):

        

Y Class

     1       1       2       1  

Investor Class

     20       543       10       27  

A Class

     1       3       1       4  

C Class

     3       3       2       1  

Distribution fees (Note 2):

        

A Class

     2       5       1       6  

C Class

     21       20       10       5  

Prospectus and shareholder report expenses

     35       9       49       26  

Trustee fees

     13       8       30       9  

Other expenses

     10       11       33       7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     1,295       1,680       1,250       737  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net fees waived and expenses (reimbursed)/recouped by Manager (Note 2)

     (21     6       (6     (21
  

 

 

   

 

 

   

 

 

   

 

 

 

Net expenses

     1,274       1,686       1,244       716  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

     11,084       2,392       8,313       1,491  
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) from investments:

        

Net realized gain (loss) from:

        

Investments

     3,233       5,348       1,150       727  

Change in net unrealized appreciation or (depreciation) of:

        

Investments

     (16     (3,139     (14,948     (1,288
  

 

 

   

 

 

   

 

 

   

 

 

 

Net gain (loss) from investments

     3,217       2,209       (13,798     (561
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ 14,301     $ 4,601     $ (5,485   $ 930  
  

 

 

   

 

 

   

 

 

   

 

 

 

A     Foreign taxes

   $  —        $ 1     $  —        $  —     

 

See accompanying notes

 

46


American Beacon FundsSM

Statements of Changes in Net Assets (in thousands)

 

 

     High Yield Bond Fund     Retirement Income and
Appreciation Fund
 
     Year Ended
October 31,
2013
    Year Ended
October 31,
2012
    Year Ended
October 31,
2013
    Year Ended
October 31,
2012
 

Increase (Decrease) in Net Assets:

        

Operations:

        

Net investment income

   $ 11,084     $ 10,389     $ 2,392     $ 3,095  

Net realized gain (loss) from investments

     3,233       (160     5,348       1,443  

Change in net unrealized appreciation or (depreciation) from investments

     (16     5,699       (3,139     4,158  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in net assets resulting from operations

     14,301       15,928       4,601       8,696  
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

        

Net investment income:

        

Institutional Class

     (3,331     (3,258     —          —     

Y Class

     (72     (5     (34     (35

Investor Class

     (489     (611     (3,039     (3,447

A Class

     (57     (26     (40     (24

C Class

     (114     (91     (21     (22

AMR Class

     (7,002     (6,414     —          —     

Net realized gain from investments:

        

Y Class

     —          —          (14     (4

Investor Class

     —          —          (969     (745

A Class

     —          —          (8     (5

C Class

     —          —          (12     (9
  

 

 

   

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (11,065     (10,405     (4,137     (4,291
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets from capital share transactions

     65,191       12,358       (36,304     14,514  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets

     68,427       17,881       (35,840     18,919  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets:

        

Beginning of period

     140,363       122,482       169,230       150,311  
  

 

 

   

 

 

   

 

 

   

 

 

 

End of Period *

   $ 208,790     $ 140,363     $ 133,390     $ 169,230  
  

 

 

   

 

 

   

 

 

   

 

 

 

*  Includes undistributed net investment income (loss) of

   $ 154     $ 135     $ 110     $ (248
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes

 

47


American Beacon FundsSM

Statements of Changes in Net Assets (in thousands)

 

 

     Intermediate Bond Fund     Short-Term Bond Fund  
     Year Ended
October 31,
2013
    Year Ended
October 31,
2012
    Year Ended
October 31,
2013
    Year Ended
October 31,
2012
 

Increase (Decrease) in Net Assets:

        

Operations:

        

Net investment income

   $ 8,313     $ 9,894     $ 1,491     $ 2,585  

Net realized gain from investments

     1,150       7,693       727       281  

Change in net unrealized appreciation or (depreciation) from investments

     (14,948     8,819       (1,288     1,785  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     (5,485     26,406       930       4,651  
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

        

Net investment income:

        

Institutional Class

     (9,213     (10,971     (2,250     (2,943

Y Class

     (40     (2     (14     (5

Investor Class

     (83     (218     (116     (273

A Class

     (11     (17     (21     (49

C Class

     (11     (8     (1     (3

Net realized gain from investments:

        

Institutional Class

     (4,740     (2,259     —          —     

Y Class

     (55     —          —          —     

Investor Class

     (75     (16     —          —     

A Class

     (7     (3     —          —     

C Class

     (14     (2     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (14,249     (13,496     (2,402     (3,273
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets from capital share transactions

     (39,485     108,918       (71,563     48,333  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets

     (59,219     121,828       (73,035     49,711  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets:

        

Beginning of period

     401,721       279,893       235,348       185,637  
  

 

 

   

 

 

   

 

 

   

 

 

 

End of Period *

   $ 342,502     $ 401,721     $ 162,313     $ 235,348  
  

 

 

   

 

 

   

 

 

   

 

 

 

*  Includes undistributed net investment income (loss) of

   $ 2,002     $ 478     $ (426   $ (510
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes

 

48


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon High Yield Bond Fund, the American Beacon Retirement Income and Appreciation Fund, the American Beacon Intermediate Bond Fund, and the American Beacon Short-Term Bond Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.

Class Disclosure

Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:

 

Class:

  

Offered to:

Institutional Class    Investors making an initial investment of $250,000
Y Class    Investors making an initial investment of $100,000
Investor Class    General public and investors investing through an intermediary
A Class    General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)
C Class    General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC
AMR Class    Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Funds believe the adoption of these ASUs will not have a material impact on its financial statement disclosures.

 

49


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory and fund management. Investment assets of the High Yield Bond, Retirement Income and Appreciation, and Intermediate Bond Funds are managed by one or more investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the High Yield Bond and Retirement Income and Appreciation Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Funds. The Manager receives an annualized fee of 0.20% of the average daily net assets of the Intermediate Bond Fund and pays a portion of its fee to an investment advisor hired by the Manager to direct investment activities of a portion of the Fund. The Manager is one of the investment advisors of the Retirement Income and Appreciation Fund and receives an annualized fee of 0.15% on the portion of assets managed by the Manager. The Manager serves as the sole investment advisor to the Short-Term Bond Fund. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):

 

     Management
Fee Rate
    Management
Fee
     Amounts paid
to Investment
Advisors
     Net Amounts
Retained by
Manager
 

High Yield Bond

     0.43     735         649         86   

Retirement Income and Appreciation

     0.32     478         402         76   

Intermediate Bond

     0.20     727         294         433   

Short-Term Bond

     0.20     347         —           347   

Administrative Services Agreement

The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, and Investor Classes of each Fund, 0.40% of the average daily net assets of the A and C Classes of each Fund, and 0.05% of the average daily net assets of the AMR Class, except for the Institutional Class of the Intermediate and Short-Term Bond Funds from which the Manager receives a fee of 0.05% of average daily net assets.

Distribution Plans

The Funds, except for the A and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of each A Class and 1.00% of the average daily net assets of each C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of each Fund.

 

50


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Interfund Lending Program

Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from or lend to other participating Funds. During the year ended October 31, 2013, the High Yield Bond Fund borrowed $2,173,597 for one day at 0.73% with interest charges of $43, the Retirement Income and Appreciation Fund borrowed on average $1,213,623 for nine days at an average rate of 0.80% with total interest charges of $238 and the Short-Term Bond Fund loaned on average $776,094 for 33 days at an average rate of 0.77% with interest charges of $530. These amounts are included as interest income on the Statements of Operations.

Expense Reimbursement Plan

The Manager voluntarily and contractually agreed to reimburse the following Funds to the extent that total operating expenses exceeded the Fund’s expense cap. For the period ended October 31, 2013, the Manager reimbursed expenses as follows:

 

         Expense Caps     Reimbursed      

Fund

   Class   11/1/12 to
2/28/13
    3/1/13 to
10/31/13
    (Recouped)
Expenses
    Expiration of
Reimbursements

High Yield Bond

   Institutional1     0.93     0.93   $ 8,827      2016

High Yield Bond

   Y     0.98     0.98     474      2016

High Yield Bond

   Investor     N/A        1.09     3,592      2016

High Yield Bond

   A     1.12     1.12     2,477      2016

High Yield Bond

   C     1.87     1.87     5,380      2016

Retirement Income and Appreciation

   Y     0.80     0.80     401      2016

Retirement Income and Appreciation

   Investor2     1.12     N/A        (8,500   2016

Retirement Income and Appreciation

   A     1.14     1.14     1,903      2016

Retirement Income and Appreciation

   C     1.96     1.96     695      2016

Intermediate Bond

   Y     0.65     0.65     367      2016

Intermediate Bond

   Investor     0.79     0.79     3,110      2016

Intermediate Bond

   A     0.99     0.99     639      2016

Intermediate Bond

   C     1.74     1.74     2,032      2016

Short-Term Bond

   Y     0.64     0.64     1,109      2016

Short-Term Bond

   Investor     0.79     0.79     11,472      2016

Short-Term Bond

   A     0.85     0.85     6,530      2016

Short Term Bond

   C     1.60     1.60     1,576      2016

 

1  Voluntary reimbursement.
2  Expense recoupment.

Of these amounts, $3,546, $585, and $1,736 were a receivable from the Manager at October 31, 2013 for the High Yield Bond, Intermediate Bond, and Short-Term Bond Funds, respectively and $8,807 was payable to the Manager from the Retirement Income and Appreciation Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The carryover of excess expenses potentially reimbursable to the Manager are as follows:

 

Fund

   Recovered Expenses      Excess Expense Carryover      Expiration of
Reimbursed Expenses
 

High Yield Bond

   $ —         $ 5,574         2014   

High Yield Bond

     —           7,197         2015   

Retirement Income and Appreciation

     —           9,426         2014   

Retirement Income and Appreciation

     8,500         3,661         2015   

Intermediate Bond

     —           3,532         2014   

Intermediate Bond

     —           7,592         2015   

Short-Term Bond

     —           47,110         2014   

Short-Term Bond

     —           29,140         2015   

 

51


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

The Manager recouped $8,500 of excess carryover expenses expiring in 2015 from the Investor Class of the Retirement Income and Appreciation Fund during the year ended October 31, 2013. The Funds did not record a liability for potential reimbursement due to the current assessment that a reimbursement is unlikely.

Sales Commissions

The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside has collected $1,811, $77, $1, and $181 for the High Yield Bond, Retirement Income and Appreciation, Intermediate Bond, and Short-Term Bond Funds, respectively from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares of the Retirement Income and Appreciation and Short-Term Bond Funds on certain purchases of $250,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. A CDSC of 0.50% will be deducted with respect to Class A Shares of the High Yield Bond and Intermediate Bond Funds on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013 there were no CDSC fees collected on Class A Shares.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $188, $0, $295, and $813 in CDSC fees were collected for the High Yield Bond, Retirement Income and Appreciation, Intermediate Bond, and Short-Term Bond Funds, respectively.

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The prices of debt securities may be determined using quotes obtained from brokers.

Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.

Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).

Other investments, including restricted securities, and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, established by the Fund’s Board.

 

52


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Valuation Inputs

Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

Level 1 – Quoted prices in active markets for identical securities.

Level 2 – Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 2 securities include fixed-income securities that are valued using observable inputs as stated above.

Level 3 – Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates, and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date are categorized as Level 2 of the fair value hierarchy.

Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows, and market-based yield spreads for each tranche, and incorporates deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Common stocks, exchange-traded funds and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.

 

53


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Level 3 trading assets and trading liabilities, at fair value

The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows:

Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and are categorized as Level 3 of the fair value hierarchy.

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.

The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.

When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the Trust cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in and out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for each respective Fund.

 

54


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. GAAP also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. As of October 31, 2013, the investments were classified as described below (in thousands):

 

High Yield Bond Fund*

   Level 1      Level 2      Level 3      Total  

Common Stocks

   $ 262       $ —         $ 127       $ 389   

Rights

     —           182         —           182   

Convertible Preferred Stock

     —           —           45         45   

Preferred Stocks

     382         —           —           382   

Convertible Obligations

     —           1,165         —           1,165   

Corporate Obligations

     —           194,001         —           194,001   

Foreign Government Obligations

     —           148         —           148   

Short-Term Investments – Money Markets

     8,940         —           —           8,940   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 9,584       $ 195,496       $ 172       $ 205,252   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Retirement Income and Appreciation Fund*

   Level 1      Level 2      Level 3      Total  

Common Stock

   $ 4,443       $ —         $ —         $ 4,443   

Preferred Stock

     4,807         917         —           5,724   

Convertible Obligations

     —           22,086         —           22,086   

Corporate Obligations

     —           44,801         —           44,801   

Foreign Government Obligations

     —           544         —           544   

Asset-Backed Obligations

     —           7,447         —           7,447   

Non-Agency Mortgage-Backed Obligations

     —           16,029         —           16,029   

U.S. Agency Mortgage-Backed Obligations

     —           11,871         —           11,871   

U.S. Treasury Obligations

     —           18,155         —           18,155   

Short-Term Investments – Money Markets

     1,471         —           —           1,471   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 10,721       $ 121,850       $ —         $ 132,571   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Intermediate Bond Fund*

   Level 1      Level 2      Level 3      Total  

Corporate Obligations

   $ —         $ 147,125       $ —         $ 147,125   

Foreign Government Obligations

     —           1,830         —           1,830   

Asset-Backed Obligations

     —           15,848         —           15,848   

Non-Agency Mortgage-Backed Obligations

     —           29,394         —           29,394   

U.S. Agency Mortgage-Backed Obligations

     —           66,083         —           66,083   

U.S. Treasury Obligations

     —           66,488         —           66,488   

Short-Term Investments – Money Markets

     14,727         —           —           14,727   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 14,727       $ 326,768       $ —         $ 341,495   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Short-Term Bond Fund*

   Level 1      Level 2      Level 3      Total  

Corporate Obligations

   $ —         $ 73,637       $ —         $ 73,637   

Asset-Backed Obligations

     —           40,175         —           40,175   

Non-Agency Mortgage-Backed Obligations

     —           19,340         —           19,340   

U.S. Treasury Obligations

     —           27,344         —           27,344   

Short-Term Investments – Money Markets

     1,430         —           —           1,430   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 1,430       $ 160,496       $ —         $ 161,926   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Refer to the Schedules of Investments for Sector and Industry information.

As of October 31, 2013, there were no transfers between levels for the Retirement Income and Appreciation, Intermediate Bond, and Short-Term Bond Funds. The High Yield Bond Fund transferred $8 from Level 2 to Level 1 (in thousands).

 

55


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

The following is a reconciliation of Level 3 assets of the High Yield Bond Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period (in thousands):

 

     Common
Stocks
    Rights      Preferred
Stocks
    Convertible
Preferred
Stocks
     Convertible
Obligations
     Corporate
Obligations
     Foreign
Government
Obligations
     Short Term
Investments
     Totals  

Balance as of October 31, 2012

   $ —        $ —         $ —        $ —         $ —         $ —         $ —         $ —         $ —     

Realized gain (loss)

     —          —           —          —           —           —           —           —           —     

Change in unrealized appreciation or (depreciation)

     (160     —           (23     —           —           —           —           —           (183

Purchases

     287        —           68        —           —           —           —           —           355   

Sales

     —          —           —          —           —           —           —           —           —     

Transfer into Level 3

     —          —           —          —           —           —           —           —           —     

Transfer out of Level 3

     —          —           —          —           —           —           —           —           —     
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of October 31, 2013

     127        —           45        —           —           —           —           —           172   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Change in unrealized at period end*

   $ (160   $ —         $ (23   $ —         $ —         $ —         $ —         $ —         $ (183
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

    

Common Stocks

  

Common Stocks

  

Convertible

Preferred Stock

Ending Balance as of 10/31/2013

   $   106    $  21    $  45

Valuation Technique

   Mean of bid/ask quote    Indicative bid quote    Indicative bid quote

Unobservable Inputs

   Broker Quote    Broker Quote    Broker Quote

Input Value(s)

   $88.50    $925    $925

 

* Change in unrealized appreciation or (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation or (depreciation) on the Statements of Operations.

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Funds generally will be declared daily and paid monthly. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Commission Recapture

The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. These amounts are reported with the net realized gains in the Fund’s Statement of Operations.

 

56


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Redemption Fees

The High Yield Bond Fund imposes a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Fund. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Fund pro-rata based on their respective net assets.

Other

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

4. Securities and Other Investments

Payment In-Kind Securities

Certain Funds may invest in payment in-kind securities. Payment in-kind securities give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the unrealized appreciation or depreciation on investment to interest receivable in the Statements of Assets and Liabilities.

Restricted Securities

Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the period ended October 31, 2013 are disclosed in the Notes to the Schedules of Investments.

 

57


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

High-Yield Securities

Non-investment-grade securities are rated below the four highest credit grades by at least one of the public rating agencies (or are unrated if not publicly rated). Participation in high-yielding securities transactions generally involves greater returns in the form of higher average yields. However, participation in such transactions involves greater risks, including sensitivity to economic changes, solvency, and relative liquidity in the secondary trading market. Lower ratings may reflect a greater possibility that the financial condition of the issuer, or adverse changes in general economic conditions, or both, may impair the ability of the issuer to make payments of interest and principal. The prices and yields of lower-rated securities generally fluctuate more than higher-quality securities, and such prices may decline significantly in periods of general economic difficulty or rising interest rates.

Other Investment Company Securities and Other Exchange Traded Products

The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Federal Income and Excise Taxes

It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.

The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.

 

58


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

The tax character of distributions paid were as follows (in thousands):

 

     High Yield Bond      Retirement Income and
Appreciation
 
     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
 

Distributions paid from:

           

Ordinary income*

           

Institutional Class

   $ 3,331       $ 3,258       $ —         $ —     

Y Class

     72         5         34         35   

Investor Class

     489         611         3,039         3,447   

A Class

     57         26         40         24   

C Class

     114         91         21         22   

AMR Class

     7,002         6,414         —           —     

Long-Term Capital Gains

           

Institutional Class

     —           —           —           —     

Y Class

     —           —           14         4   

Investor Class

     —           —           969         745   

A Class

     —           —           8         5   

C Class

     —           —           12         9   

AMR Class

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 11,065       $ 10,405       $ 4,137       $ 4,291   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* For tax purposes, short-term capital gains are considered ordinary income distributions.

 

     Intermediate Bond      Short-Term Bond  
     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
     Year Ended
October 31,
2013
     Year Ended
October 31,
2012
 

Distributions paid from:

           

Ordinary income*

           

Institutional Class

   $ 11,487       $ 10,971       $ 2,250       $ 2,943   

Y Class

     66         2         14         5   

Investor Class

     119         218         116         273   

A Class

     14         17         21         49   

C Class

     18         8         1         3   

Long-Term Capital Gains

           

Institutional Class

     2,466         2,259         —           —     

Y Class

     29         —           —           —     

Investor Class

     39         16         —           —     

A Class

     4         3         —           —     

C Class

     7         2         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 14,249       $ 13,496       $ 2,402       $ 3,273   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* For tax purposes, short-term capital gains are considered ordinary income distributions.

As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):

 

     High Yield
Bond
    Retirement
Income and
Appreciation
    Intermediate
Bond
    Short-Term
Bond
 

Cost basis of investments for federal income tax purposes

   $ 203,384      $ 125,832      $ 336,564      $ 162,177   

Unrealized appreciation

     7,158        8,188        9,388        602   

Unrealized depreciation

     (5,290     (1,449     (4,457     (853
  

 

 

   

 

 

   

 

 

   

 

 

 

Net unrealized appreciation

     1,868        6,739        4,931        (251

Undistributed ordinary income

     702        2,702        3,599        447   

Accumulated long-term gain or (loss)

     728        3,033        451        (8,152

Other temporary differences

     (26     (1     1        (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributable earnings or(deficits)

   $ 3,272      $ 12,473      $ 8,982      $ (7,957
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, book amortization for premiums and income adjustments associated with contingent payment debt instruments.

 

59


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences derived from book amortization of premium, pay down reclasses, income adjustments associated with contingent payment debt instruments, and dividend reclasses as of October 31, 2013 (in thousands):

 

     High Yield
Bond
    Retirement
Income and
Appreciation
    Intermediate
Bond
    Short-Term
Bond
 

Paid-in-capital

   $ (1   $ (31   $ —        $ —     

Undistributed net investment income

     —          1,100        2,569        995   

Accumulated net realized gain (loss)

     —          (1,068     (2,568     (995

Unrealized appreciation or (depreciation) of investments

     1        (1     (1     —     

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.

Capital losses incurred that will be carried forward under the provisions of the Act for the year October 31, 2013 were as follows (in thousands):

 

     Loss Carryforward Character         

Fund

   Short-Term      Long Term      Total  

Short-Term Bond

   $ 81       $ 392       $ 473   

As of October 31, 2013 the capital loss carryforward positions prior to the provisions of the Act that may be applied against any realized net taxable gains in each succeeding year or until their expiration dates, whichever occurs first, were as follows (in thousands):

 

Fund    2014      2015      2016      2017      Total  

Short-Term Bond

   $ 2,015       $ 467       $ 5,198       $ —         $ 7,680   

The High Yield Bond Fund utilized $205 of long-term losses and the Short-Term Bond Fund utilized $19 of short term losses under the provisions of the Act. The High Yield Bond Fund utilized $1,970 of loss carryforward positions occurring prior to the provisions of the Act.

 

60


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

6. Investment Transactions

The aggregate cost of purchases and proceeds from sales and maturities of long-term investments, other than short-term obligations, for the year ended October 31, 2013 were as follows (in thousands):

 

     High Yield
Bond
     Retirement
Income and
Appreciation
     Intermediate
Bond
     Short-Term
Bond
 

Purchases (excluding U.S. government securities)

   $ 197,501       $ 78,092       $ 177,718       $ 174,886   

Sales and maturities (excluding U.S. government securities)

     133,737         113,751         220,926         178,851   

Purchases of U.S. government securities

     —           31,651         99,577         107,517   

Sales and maturities of U.S. government securities

     —           35,774         86,961         87,975   

7. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):

For the Year Ended October 31, 2013

 

     Institutional Class     Y Class     Investor Class  

High Yield Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     2,942     $ 27,146       259     $ 2,378       290     $ 2,667  

Redemption Fees

     —         16       —         1       —         2  

Reinvestment of dividends

     338       3,118       3       30       44       409  

Shares redeemed

     (1,149     (10,615     (95     (882     (498     (4,593
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     2,131     $ 19,665       167     $ 1,527       (164   $ (1,515
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     AMR Class  

High Yield Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     75     $ 692       78     $ 719       10,040     $ 92,791  

Redemption Fees

     —         —         —         1       —         32  

Reinvestment of dividends

     5       46       7       68       758       7,002  

Shares redeemed

     (50     (463     (134     (1,237     (5,914     (54,137
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     30     $ 275       (49   $ (449     4,884     $ 45,688  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Total  

High Yield Bond Fund

   Shares     Amount  

Shares sold

     13,684     $ 126,393  

Redemption Fees

     —         52  

Reinvestment of dividends

     1,155       10,673  

Shares redeemed

     (7,840     (71,927
  

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     6,999     $ 65,191  
  

 

 

   

 

 

 

 

     Y Class     Investor Class     A Class  

Retirement Income and Appreciation Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     43     $ 476       1,930     $ 21,371       590     $ 6,551  

Reinvestment of dividends

     4       47       361       3,992       4       45  

Shares redeemed

     (198     (2,196     (5,373     (59,482     (630     (7,038
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) in shares outstanding

     (151   $ (1,673     (3,082   $ (34,119     (36   $ (442
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     C Class     Total  

Retirement Income and Appreciation Fund

   Shares     Amount     Shares     Amount  

Shares sold

     20     $ 223       2,583     $ 28,621  

Reinvestment of dividends

     3       27       372       4,111  

Shares redeemed

     (29     (320     (6,230     (69,036
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) in shares outstanding

     (6   $ (70     (3,275   $ (36,304
  

 

 

   

 

 

   

 

 

   

 

 

 

 

61


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

     Institutional Class     Y Class     Investor Class  

Intermediate Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     11,814     $ 128,547       440     $ 4,951       100     $ 1,109  

Reinvestment of dividends

     1,274       13,948       —         3       13       140  

Shares redeemed

     (15,949     (172,224     (433     (4,809     (929     (10,282
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (2,861   $ (29,729     7     $ 145       (816   $ (9,033
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     Total  

Intermediate Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     4     $ 40       4     $ 39       12,362     $ 134,686  

Reinvestment of dividends

     1       9       2       19       1,290       14,119  

Shares redeemed

     (31     (336     (59     (639     (17,401     (188,290
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) in shares outstanding

     (26   $ (287     (53   $ (581     (3,749   $ (39,485
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Institutional Class     Y Class     Investor Class  

Short-Term Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     10,396     $ 90,945       302     $ 2,652       264     $ 2,313  

Reinvestment of dividends

     257       2,247       1       7       12       106  

Shares redeemed

     (18,129     (158,900     (199     (1,746     (1,030     (9,019
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (7,476   $ (65,708     104     $ 913       (754   $ (6,600
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     Total  

Short-Term Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     133     $ 1,161       88     $ 770       11,183     $ 97,841  

Reinvestment of dividends

     1       8       —         1       271       2,369  

Shares redeemed

     (209     (1,827     (32     (281     (19,599     (171,773
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (75   $ (658     56     $ 490       (8,145   $ (71,563
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the Year Ended October 31, 2012

 

            
     Institutional Class     Y Class     Investor Class  

High Yield Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     1,461     $ 12,916       50     $ 459       572     $ 5,059  

Redemption Fees

     —         16       —         —         —         3  

Reinvestment of dividends

     322       2,850       1       4       51       448  

Shares redeemed

     (1,898     (16,860 )      (4     (37 )      (512     (4,470 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (115   $ (1,078     47     $ 426       111     $ 1,040  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     AMR Class  

High Yield Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     63     $ 562       222     $ 1,945       4,952     $ 43,887  

Redemption Fees

     —         —         —         —         —         28  

Reinvestment of dividends

     2       18       4       37       725       6,414  

Shares redeemed

     (4     (37 )      (24     (205 )      (4,666     (40,679 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     61     $ 543       202     $ 1,777       1,011     $ 9,650  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Total  

High Yield Bond Fund

   Shares     Amount  

Shares sold

     7,320     $ 64,828  

Redemption Fees

     —         47  

Reinvestment of dividends

     1,105       9,771  

Shares redeemed

     (7,108     (62,288 ) 
  

 

 

   

 

 

 

Net increase in shares outstanding

     1,317     $ 12,358  
  

 

 

   

 

 

 

 

62


American Beacon FundsSM

Notes to Financial Statements

October 31, 2013

 

 

     Y Class     Investor Class     A Class  

Retirement Income and Appreciation Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     204     $ 2,217       3,449     $ 37,658       60     $ 648  

Reinvestment of dividends

     4       38       385       4,169       2       26  

Shares redeemed

     (52     (571     (2,740     (29,774     (21     (232
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     156     $ 1,684       1,094     $ 12,053       41     $ 442  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     C Class     Total  

Retirement Income and Appreciation Fund

   Shares     Amount     Shares     Amount  

Shares sold

     40     $ 434       3,753     $ 40,957  

Reinvestment of dividends

     3       27       394       4,260  

Shares redeemed

     (12     (126     (2,825     (30,703
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     31     $ 335       1,322     $ 14,514  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Intermediate Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     42,148     $ 463,192       7     $ 77       1,267     $ 13,949  

Reinvestment of dividends

     1,196       13,226       —         2       15       165  

Shares redeemed

     (33,908     (375,696     (2     (27     (643     (7,161
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     9,436     $ 100,722       5     $ 52       639     $ 6,953  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     Total  

Intermediate Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     95     $ 1,037       97     $ 1,080       43,614     $ 479,335  

Reinvestment of dividends

     1       8       1       6       1,213       13,407  

Shares redeemed

     (84     (917     (2     (23     (34,639     (383,824
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     12     $ 128       96     $ 1,063       10,188     $ 108,918  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Institutional Class     Y Class     Investor Class  

Short-Term Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     11,980     $ 104,985       7     $ 59       740     $ 6,452  

Reinvestment of dividends

     336       2,936       1       5       29       250  

Shares redeemed

     (5,553     (48,539     (16     (137     (1,969     (17,178
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     6,763     $ 59,382       (8   $ (73     (1,200   $ (10,476
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     A Class     C Class     Total  

Short-Term Bond Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     102     $ 890       8     $ 72       12,837     $ 112,458  

Reinvestment of dividends

     2       19       —         2       368       3,212  

Shares redeemed

     (161     (1,411     (8     (72     (7,707     (67,337
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (57   $ (502     —       $ 2       5,498     $ 48,333
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

63


American Beacon High Yield Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class     Y Class  
     Year Ended October 31,     Year Ended October 31,     March 1
to
Oct. 31,
2010
 
   2013     2012     2011A     2010     2009     2013     2012     2011A    

Net asset value, beginning of period

   $ 9.10      $ 8.68      $ 9.05      $ 8.42      $ 6.77      $ 9.12      $ 8.69      $ 9.06      $ 8.63   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                  

Net investment income

     0.58        0.67        0.71        0.75        0.79        0.58        0.64        0.68        0.50   

Net gains (losses) from investments (both realized and unrealized)

     0.21        0.42        (0.37     0.63        1.66        0.20        0.43        (0.37     0.43   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income from investment operations

     0.79        1.09        0.34        1.38        2.45        0.78        1.07        0.31        0.93   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                  

Dividends from net investment income

     (0.58     (0.67     (0.71     (0.75     (0.80     (0.58     (0.64     (0.68     (0.50

Distributions from net realized gains on securities

     —           —         —         —         —           —         —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.58     (0.67     (0.71     (0.75     (0.80     (0.58     (0.64     (0.68     (0.50
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interests

     0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 9.31      $ 9.10      $ 8.68      $ 9.05      $ 8.42      $ 9.32      $ 9.12      $ 8.69      $ 9.06   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return C

     8.94     13.12     3.79     17.17     39.06     8.74     12.74     3.36     11.17 %D 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                  

Net assets, end of period (in thousands)

   $ 62,836      $ 42,026      $ 41,093      $ 41,459      $ 47,254      $ 2,005      $ 437      $ 11      $ 1   

Ratios to average net assets:

                  

Expenses, before reimbursements

     0.91     0.93     0.88     0.79     0.79     1.02     1.13     27.02     0.82 %E 

Expenses, net of reimbursements

     0.89     0.93     0.88     0.79     0.79     0.98     1.01     1.61     0.82 %E 

Net investment income (loss), before reimbursements

     6.25     7.61     7.90     8.69     11.46     6.06     7.08     (18.29 )%      8.53 %E 

Net investment income, net of reimbursements

     6.26     7.62     7.90     8.69     11.46     6.10     7.20     7.11     8.53 %E 

Portfolio turnover rate

     82     100     149     176     212     82     100     149     176 %F 

 

A PENN Capital Management Company, Inc. was added as an investment manager to the High Yield Bond Fund on September 15, 2011.
B Amounts represent less than $0.01 per share.
C Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D Not annualized.
E Annualized.
F Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

64


American Beacon High Yield Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Investor Class     A Class     C Class  
Year Ended October 31,     Year Ended October 31,    

May 17

to

Oct. 31,

    Year Ended October 31,    

Sept. 1

to

Oct. 31,

 
2013     2012     2011A     2010     2009     2013     2012     2011A     2010     2013     2012     2011A     2010  
$ 9.10      $ 8.68      $ 9.06      $ 8.42      $ 6.77      $ 9.11      $ 8.69      $ 9.08      $ 8.67      $ 9.09      $ 8.67      $ 9.05      $ 8.68   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  0.56        0.65        0.69        0.73        0.78        0.56        0.66        0.69        0.32        0.49        0.59        0.63        0.09   
  0.21        0.42        (0.38     0.64        1.65        0.21        0.42        (0.39     0.41        0.21        0.42        (0.39     0.37   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.77        1.07        0.31        1.37        2.43        0.77        1.08        0.30        0.73        0.70        1.01        0.24        0.46   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  (0.56     (0.65     (0.69     (0.73     (0.78     (0.56     (0.66     (0.69     (0.32     (0.49     (0.59     (0.62     (0.09
  —           —         —         —         —           —         —          —           —         —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.56     (0.65     (0.69     (0.73     (0.78     (0.56     (0.66     (0.69     (0.32     (0.49     (0.59     (0.62     (0.09

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B      0.00 B 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 9.31      $ 9.10      $ 8.68      $ 9.06      $ 8.42      $ 9.32      $ 9.11      $ 8.69      $ 9.08      $ 9.30      $ 9.09      $ 8.67      $ 9.05   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  8.73     12.86     3.41     17.00     38.70     8.72     12.88     3.31     8.66 %D      7.90     12.06     2.67     5.31 %D 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
$ 7,609      $ 8,930      $ 7,560      $ 54,142      $ 90,736      $ 972      $ 678      $ 117      $ 40      $ 1,858      $ 2,262      $ 403      $ 37   
                       
  1.13     1.16     1.09     1.04     1.01     1.38     1.46     3.93     1.30 %E      2.12     2.16     3.15     2.29 %E 
  1.09     1.16     1.09     1.04     1.01     1.12     1.11     1.11     1.12 %E      1.87     1.86     1.85     1.87 %E 
  6.08     7.37     7.75     8.48     9.36     5.78     6.97     4.74     6.93 %E      5.11     6.29     5.53     4.97 %E 
  6.12     7.37     7.75     8.48     9.36     6.04     7.32     7.56     7.11 %E      5.36     6.60     6.82     5.40 %E 
  82     100     149     176     212     82     100     149     176 %F      82     100     149     176 %F 

 

65


American Beacon High Yield Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

 

     AMR Class  
     Year Ended October 31,  
   2013     2012     2011A     2010     2009  

Net asset value, beginning of period

   $ 9.10      $ 8.68      $ 9.06      $ 8.42      $ 6.77   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.61        0.70        0.74        0.78        0.81   

Net gains (losses) from investments (both realized and unrealized)

     0.21        0.42        (0.38     0.63        1.65   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income from investment operations

     0.82        1.12        0.36        1.41        2.46   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.61     (0.70     (0.74     (0.77     (0.81

Distributions from net realized gains on securities

     —           —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.61     (0.70     (0.74     (0.77     (0.81
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interests

     0.00 B      0.00 B      0.00 B      0.00 B      0.00 B 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 9.31      $ 9.10      $ 8.68      $ 9.06      $ 8.42   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return C

     9.25     13.46     3.96     17.59     39.41
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 133,510      $ 86,030      $ 73,298      $ 89,992      $ 92,659   

Ratios to average net assets:

          

Expenses, before reimbursements

     0.61     0.62     0.60     0.54     0.53

Expenses, net of reimbursements

     0.61     0.62     0.60     0.54     0.53

Net investment income (loss), before reimbursements

     6.55     7.91     8.18     8.91     10.34

Net investment income, net of reimbursements

     6.55     7.91     8.18     8.91     10.34

Portfolio turnover rate

     82     100     149     176     212

 

A PENN Capital Management Company, Inc. was added as an investment manager to the High Yield Bond Fund on September 15, 2011.
B Amounts represent less than $0.01 per share.
C Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D Not annualized.
E Annualized.
F Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

66


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67


American Beacon Retirement Income and Appreciation FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Y Class  
     Year Ended October 31,     March 1
to
Oct. 31,
2010
 
   2013     2012     2011    

Net asset value, beginning of period

   $ 11.14      $ 10.83      $ 10.80      $ 10.31   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

        

Net investment income

     0.06        0.28        0.26        0.20   

Net gains from investments (both realized and unrealized)

     0.32        0.37        0.05        0.49   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income from investment operations

     0.38        0.65        0.31        0.69   
  

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

        

Dividends from net investment income

     (0.26     (0.28     (0.28     (0.20

Distributions from net realized gains on securities

     (0.07     (0.06     —         —     

Return of capital

     —          —          —         —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.33     (0.34     (0.28     (0.20
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 11.19      $ 11.14      $ 10.83      $ 10.80   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     3.43     6.10     2.96     6.78 %B 
  

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

        

Net assets, end of period (in thousands)

   $ 608      $ 2,287      $ 539      $ 367   

Ratios to average net assets:

        

Expenses, before reimbursements

     0.83     0.87     1.80     0.80 %C 

Expenses, net of reimbursements

     0.80     0.81     0.84     0.80 %C 

Net investment income, before reimbursements

     1.95     2.20     1.45     2.74 %C 

Net investment income, net of reimbursements

     1.99     2.26     2.41     2.74 %C 

Portfolio turnover rate

     53     42     54     51 %D 

 

A Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
B Not annualized.
C Annualized.
D Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.
E The tax return of capital is based upon shares at the time of this distribution. Amounts are less than $0.01 per share.

 

68


American Beacon Retirement Income and Appreciation FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Investor Class     A Class     C Class  
Year Ended October 31,     Year Ended October 31,    

May 17

to

Oct. 31,

    Year Ended October 31,    

Sept. 1

to

Oct. 31,

 
2013     2012     2011     2010     2009     2013     2012     2011     2010     2013     2012     2011     2010  
$ 11.14      $ 10.84      $ 10.81      $ 10.25      $ 8.80      $ 11.17      $ 10.85      $ 10.81      $ 10.37      $ 11.17      $ 10.85      $ 10.82      $ 10.61   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  0.10        0.24        0.27        0.36        0.32        0.12        0.22        0.23        0.13        0.08        0.13        0.15        0.03   
  0.25        0.37        0.02        0.51        1.53        0.23        0.39        0.05        0.44        0.18        0.39        0.04        0.20   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.35        0.61        0.29        0.87        1.85        0.35        0.61        0.28        0.57        0.26        0.52        0.19        0.23   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  (0.23     (0.25     (0.26     (0.31     (0.40     (0.22     (0.23     (0.24     (0.13     (0.12     (0.14     (0.16     (0.02
  (0.07     (0.06     —         —         —         (0.07     (0.06     —         —          (0.07     (0.06     —         —     
  —          —          —         —         —   E      —          —          —         —          —          —          —         —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.30     (0.31     (0.26     (0.31     (0.40     (0.29     (0.29     (0.24     (0.13     (0.19     (0.20     (0.16     (0.02

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 11.19      $ 11.14      $ 10.84      $ 10.81      $ 10.25      $ 11.23      $ 11.17      $ 10.85      $ 10.81      $ 11.24      $ 11.17      $ 10.85      $ 10.82   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  3.14     5.75     2.71     8.60     21.50     3.18     5.78     2.61     5.52 %B      2.28     4.87     1.75     2.19 %B 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
$ 130,013      $ 163,713      $ 147,415      $ 126,022      $ 93,727      $ 851      $ 1,253      $ 770      $ 166      $ 1,918      $ 1,977      $ 1,587      $ 1,035   
                       
  1.11     1.12     1.10     1.08     1.01     1.23     1.28     2.00     1.20 %C      1.99     2.04     1.99     2.33 %C 
  1.11     1.12     1.10     1.08     1.01     1.14     1.14     1.15     1.14 %C      1.96     1.97     1.94     1.96 %C 
  1.61     1.98     2.15     2.79     3.86     1.48     1.82     1.21     2.03 %C      0.71     1.06     1.25     1.40 %C 
  1.60     1.98     2.15     2.79     3.86     1.57     1.95     2.06     2.10 %C      0.75     1.13     1.30     1.77 %C 
  53     42     54     51     53     53     42     54     51 %D      53     42     54     51 %D 

 

69


American Beacon Intermediate Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class     Y Class  
     Year Ended October 31,     Year Ended October 31,    

March 1

to

Oct. 31,

 
     2013     2012     2011     2010     2009     2013     2012     2011     2010  

Net asset value, beginning of period

   $ 11.26      $ 10.99      $ 11.10      $ 10.69      $ 9.61      $ 11.31      $ 11.03      $ 11.10      $ 10.69   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                  

Net investment income (loss)

     0.24        0.27        0.33        0.39        0.46        (0.04     0.26        0.27        0.23   

Net gains (losses) from investments (both realized and unrealized)

     (0.36     0.34        0.10        0.40        1.07        (0.12     0.32        0.17        0.41   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.12     0.61        0.43        0.79        1.53        (0.16     0.58        0.44        0.64   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                  

Dividends from net investment income

     (0.28     (0.29     (0.35     (0.38     (0.45     (0.25     (0.25     (0.32     (0.23

Distributions from net realized gains on securities

     (0.13     (0.05     (0.19     —         —         (0.13     (0.05     (0.19     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.41     (0.34     (0.54     (0.38     (0.45     (0.38     (0.30     (0.51     (0.23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 10.73      $ 11.26      $ 10.99      $ 11.10      $ 10.69      $ 10.77      $ 11.31      $ 11.03      $ 11.10   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     (1.04 )%      5.59     4.11     7.56     16.17     (1.42 )%      5.34     4.19     6.03 %B 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                  

Net assets, end of period (in thousands)

   $ 339,416      $ 388,491      $ 275,234      $ 290,734      $ 210,983      $ 183      $ 113      $ 60      $ 382   

Ratios to average net assets:

                  

Expenses, before reimbursements

     0.33     0.33     0.35     0.33     0.32     0.67     0.99     0.73     0.67 %C 

Expenses, net of reimbursements

     0.33     0.33     0.35     0.33     0.32     0.65     0.64     0.65     0.64 %C 

Net investment income, before reimbursements

     2.30     2.25     3.12     3.39     4.31     1.91     1.65     2.74     2.58 %C 

Net investment income, net of reimbursements

     2.30     2.25     3.12     3.39     4.32     1.93     2.00     2.82     2.60 %C 

Portfolio turnover rate

     50     144     75     96     157     50     144     75     96 %D 

 

A Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
B Not annualized.
C Annualized.
D Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.
E Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009.

 

70


American Beacon Intermediate Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Investor Class     A Class     C Class  
Year Ended October 31,    

March 2

to

Oct. 31,

    Year Ended October 31,    

May 17

to

Oct. 31,

    Year Ended October 31,    

Sept. 1

to

Oct. 31,

 
2013     2012     2011     2010     2009     2013     2012     2011     2010     2013     2012     2011     2010  
$ 11.25      $ 10.97      $ 11.08      $ 10.68      $ 10.14      $ 11.24      $ 10.96      $ 11.07      $ 10.74      $ 11.25      $ 10.97      $ 11.08      $ 11.05   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  (0.04     0.22        0.29        0.33        0.27        0.14        0.18        0.28        0.13        0.07        0.13        0.19        0.03   
  (0.14     0.35        0.10        0.41        0.54        (0.33     0.36        0.09        0.33        (0.35     0.33        0.10        0.03   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.18     0.57        0.39        0.74        0.81        (0.19     0.54        0.37        0.46        (0.28     0.46        0.29        0.06   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  (0.23     (0.24     (0.31     (0.34     (0.27     (0.21     (0.21     (0.29     (0.13     (0.13     (0.13     (0.21     (0.03
  (0.13     (0.05     (0.19     —         —          (0.13     (0.05     (0.19     —          (0.13     (0.05     (0.19     —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.36     (0.29     (0.50     (0.34     (0.27     (0.34     (0.26     (0.48     (0.13     (0.26     (0.18     (0.40     (0.03

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 10.71      $ 11.25      $ 10.97      $ 11.08      $ 10.68      $ 10.71      $ 11.24      $ 10.96      $ 11.07      $ 10.71      $ 11.25      $ 10.97      $ 11.08   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (1.58 )%      5.20     3.65     7.01     8.05 %B      (1.69 )%      4.99     3.45     4.31 %B      (2.51 )%      4.21     2.70     0.56 %B 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
$ 1,749      $ 11,011      $ 3,729      $ 3,829      $ 2,213      $ 420      $ 734      $ 584      $ 46      $ 734      $ 1,372      $ 286      $ 325   
                       
  0.87     0.84     0.86     0.83     1.22 %C      1.11     1.12     1.13     1.05 %C      1.94     1.87     1.86     2.09 %C 
  0.79     0.79     0.79     0.76     0.81 %C      0.99     0.99     0.99     0.95 %C      1.74     1.73     1.72     1.74 %C 
  1.74     1.80     2.59     2.88     3.33 %C      1.52     1.48     2.31     2.15 %C      0.69     0.75     1.61     0.88 %C 
  1.82     1.86     2.66     2.95     3.74 %C      1.64     1.61     2.46     2.25 %C      0.89     0.89     1.75     1.23 %C 
  50     144     75     96     157 %E      50     144     75     96 %D      50     144     75     96 %D 

 

71


American Beacon Short-Term Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class     Y Class  
     Year Ended October 31,     Year Ended October 31,    

March 1

to

Oct. 31,

 
   2013     2012     2011     2010     2009     2013     2012     2011     2010  

Net asset value, beginning of period

   $ 8.78      $ 8.71      $ 8.89      $ 8.83      $ 8.58      $ 8.77      $ 8.73      $ 8.90      $ 8.84   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                  

Net investment income (loss)

     (0.09     0.28        0.26        0.23        0.22 A      0.13        0.10        0.15        0.15   

Net gains (losses) from investments (both realized and unrealized)

     0.13        (0.05     (0.25     0.10        0.33        (0.08     0.11        (0.15     0.08   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     0.04        0.23        0.01        0.33        0.55        0.05        0.21        0.00        0.23   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                  

Dividends from net investment income

     (0.12     (0.16     (0.19     (0.27     (0.30     (0.10     (0.17     (0.17     (0.17

Distributions from net realized gains on securities

     —         —         —         —         —         —         —         —         —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.12     (0.16     (0.19     (0.27     (0.30     (0.10     (0.17     (0.17     (0.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 8.70      $ 8.78      $ 8.71      $ 8.89      $ 8.83      $ 8.72      $ 8.77      $ 8.73      $ 8.90   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     0.47     2.72     0.17     3.78     6.56     0.56     2.77     0.04     2.55 %C 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                  

Net assets, end of period (in thousands)

   $ 150,509      $ 217,545      $ 156,937      $ 131,314      $ 124,791      $ 1,173      $ 272      $ 344      $ 51   

Ratios to average net assets:

                  

Expenses, before reimbursements

     0.38     0.37     0.37     0.35     0.33     0.72     0.72     1.43     0.65 %D 

Expenses, net of reimbursements

     0.38     0.37     0.37     0.35     0.33     0.64     0.64     0.60     0.64 %D 

Net investment income (loss), before reimbursements

     0.90     1.50     1.73     2.27     2.61     0.58     1.16     0.57     1.45 %D 

Net investment income (loss), net of reimbursements

     0.90     1.50     1.73     2.27     2.62     0.66     1.24     1.40     1.47 %D 

Portfolio turnover rate

     105     18     65     60     140     105     18     65     60 %E 

 

A For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Not annualized.
D Annualized.
E Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010.

 

72


American Beacon Short-Term Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Investor Class     A Class     C Class  
Year Ended October 31,     Year Ended October 31,    

May 17

to

Oct. 31,

    Year Ended October 31,    

Sept. 1

to

Oct. 31,

 
2013     2012     2011     2010     2009     2013     2012     2011     2010     2013     2012     2011     2010  
$ 8.79      $ 8.72      $ 8.89      $ 8.84      $ 8.59      $ 8.78      $ 8.71      $ 8.89      $ 8.84      $ 8.79      $ 8.72      $ 8.90      $ 8.88   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  (0.58     (0.19     0.14        0.08        0.20 A      0.02        0.08        0.15        0.09        0.03        0.02        0.12        (0.04
  0.58        0.39        (0.15     0.21        0.34        (0.02     0.11        (0.18     0.07        (0.10     0.11        (0.21     0.08   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.00        0.20        (0.01     0.29        0.54        0.00        0.19        (0.03     0.16        (0.07     0.13        (0.09     0.04   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
  (0.09     (0.13     (0.16     (0.24     (0.29     (0.08     (0.12     (0.15     (0.11     (0.02     (0.06     (0.09     (0.02
  —         —         —         —         —         —         —         —         —          —         —         —         —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.09     (0.13     (0.16     (0.24     (0.29     (0.08     (0.12     (0.15     (0.11     (0.02     (0.06     (0.09     (0.02

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 8.70      $ 8.79      $ 8.72      $ 8.89      $ 8.84      $ 8.70      $ 8.78      $ 8.71      $ 8.89      $ 8.70      $ 8.79      $ 8.72      $ 8.90   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.03     2.28     (0.12 )%      3.33     6.34     0.00     2.22     (0.33 )%      1.78 %C      (0.85 )%      1.46     (1.00 )%      0.48 %C 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       
$ 7,497      $ 14,203      $ 24,557      $ 23,175      $ 30,402      $ 2,271      $ 2,951      $ 3,428      $ 44      $ 863      $ 377      $ 371      $ 1   
                       
  0.90     0.89     0.90     0.86     0.85     1.13     1.12     1.38     1.02 %D      1.89     1.90     2.47     2.28 %D 
  0.79     0.79     0.78     0.67     0.54     0.85     0.85     0.84     0.81 %D      1.60     1.59     1.55     1.60 %D 
  0.39     0.99     1.18     1.75     1.89     0.15     0.75     0.49     0.49 %D      (0.65 )%      (0.03 )%      (0.43 )%      (3.57 )%D 
  0.50     1.09     1.30     1.94     2.20     0.43     1.03     1.03     0.69 %D      (0.36 )%      0.28     0.49     (2.88 )%D 
  105     18     65     60     140     105     18     65     60 %E      105     18     65     60 %E 

 

73


American Beacon FundsSM

Privacy Policy and Federal Tax Information

October 31, 2013 (Unaudited)

 

Privacy Policy

The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.

We may collect nonpublic personal information about you from one or more of the following sources:

 

    information we receive from you on applications or other forms;

 

    information about your transactions with us or our service providers; and

 

    information we receive from third parties.

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.

Federal Tax Information

Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2013.

The Funds designated the following items with regard to distributions paid during the year ended December 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

 

     High Yield Bond     Retirement Income and
Appreciation
 

Corporate Dividends Received Deduction

     1.26     4.93

Qualified Dividend Income

     1.36     8.41

Long-term capital gain distributions for the year ended October 31, 2013 were designated for the following Funds:

 

Retirement Income and Appreciation

   $  1,003,533   

Intermediate Bond

     2,543,250   

The Intermediate Bond Fund made $3,847,081 in short-term capital gain distributions.

Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.

 

74


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.

 

    a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

 

    a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC;

 

    a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

 

    a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group;

 

    any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors;

 

    an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers;

 

    a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts;

 

    a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm;

 

    an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any;

 

    confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

 

    a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities;

 

    a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

 

    a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks;

 

    a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations;

 

    a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds;

 

    a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions;

 

    a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers;

 

    a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

 

    a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

 

 

75


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

    a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf;

 

    a description of trade allocation procedures among accounts managed by the firm;

 

    a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions;

 

    a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds;

 

    a certification by the firm regarding the reasonable design of its compliance program;

 

    a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review;

 

    confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds;

 

    a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt;

 

    information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

 

    a description of the firm’s affiliation with any broker-dealer;

 

    a discussion of any anticipated change in the firm’s controlling persons; and

 

    verification of the firm’s insurance coverage with regards to the services provided to the Funds.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

 

    a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average;

 

    a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

 

    a comparison of advisory fee rates and expense ratios for comparable mutual funds;

 

    a profit/loss analysis of the Manager;

 

    an analysis of any material complaints received from Fund shareholders;

 

    a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds;

 

    a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds;

 

    a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

 

    a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds;

 

    a description of the Manager’s securities lending practices and the fees received from such practices;

 

    a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

 

    a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund;

 

    a description of how expenses that are not readily identifiable to a particular Fund are allocated; and

 

    confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt.

In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.

 

76


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.

The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement

In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.

In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.

With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to

 

77


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.

Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.

In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.

Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.

In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to Each Fund

The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.

The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.

 

78


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

Additional Considerations and Conclusions with Respect to the American Beacon High Yield Bond Fund

In considering the renewal of the Management Agreement for the American Beacon High Yield Bond Fund, the Trustees considered the following additional factors: (1) the American Beacon High Yield Bond Fund outperformed the Lipper performance universe median for the one- and three-year periods ended March 31, 2013, but underperformed for the five- and ten-year periods; (2) the Fund’s performance was equal to the Lipper performance group median for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (3) the Manager’s explanation that the Fund’s longer-term performance, relative to the performance universe, was adversely impacted by overweighting in certain sectors; (4) the expense ratio of the Institutional Class of the Fund was higher than the median of its Lipper expense universe and Lipper expense group; (5) the Institutional Class of the Fund was categorized by Morningstar as having a high expense ratio; (6) PENN Capital Management Company, Inc. (“PENN”) is relatively new to the Fund; and (7) the level of the Fund’s expense ratio is likely to decrease as the Fund grows.

In considering the renewal of the Investment Advisory Agreement with Franklin Advisors, Inc. (“Franklin”), Logan Circle Partners, L.P. (“Logan Circle”) and PENN, the Trustees considered the following additional factors: (1) Franklin outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (2) Logan Circle outperformed the Lipper performance universe median for the one- and three-year periods ended March 31, 2013; (3) PENN outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (5) the Manager’s recommendation to continue to retain each subadvisor.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon High Yield Bond Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon High Yield Bond Fund.

Additional Considerations and Conclusions with Respect to the American Beacon Retirement Income and Appreciation Fund

In considering the renewal of the Management Agreement for the American Beacon Retirement Income and Appreciation Fund, the Trustees considered the following additional factors: (1) the American Beacon Retirement Income and Appreciation Fund outperformed the Lipper performance universe median for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (2) the Fund outperformed the Lipper performance group median for the one- and five-year periods ended March 31, 2013, but underperformed for the three-year period; (3) the Manager’s representation that, due to the diverse nature of the Lipper performance universe and group, the Fund’s performance relative to its benchmark index may be more appropriate than a comparison to the Fund’s performance universe or group; (4) the Fund outperformed its benchmark index for the one-year period ended March 31, 2013, but underperformed for the three- and five-year periods; (5) the Fund’s investment strategy includes a fixed allocation between investment grade bonds and a convertibles strategy and is appropriate for investors desiring this type of investment exposure; (6) the Manager outperformed the Lipper performance universe median with respect to its allocated portion of the Fund’s assets for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (7) the Manager outperformed its applicable benchmark index for the one-, three- and five-year periods ended March 31, 2013; (8) the expense ratio of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (9) the Investor Class of the Fund was categorized by Morningstar as having a high expense ratio.

In considering the renewal of the Investment Advisory Agreement with Calamos Advisors LLC (“Calamos”), the Trustees considered the following additional factors: (1) Calamos outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (2) Calamos underperformed its applicable benchmark index for the one-, three- and five-year periods ended March 31, 2013; (3) representations by Calamos that, for fee rate comparison purposes, it does not manage other accounts comparable to the Fund; and (4) the Manager’s recommendation to continue to retain Calamos.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and Calamos under the Agreements are fair and reasonable; (2) determined that the American Beacon Retirement Income and Appreciation Fund and its shareholders would benefit from the Manager’s and Calamos’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Retirement Income and Appreciation Fund.

Additional Considerations and Conclusions with Respect to the American Beacon Intermediate Bond Fund

In considering the renewal of the Management Agreement for the American Beacon Intermediate Bond Fund, the Trustees considered the following additional factors: (1) the American Beacon Intermediate Bond Fund outperformed the Lipper performance universe median for the ten-year period ended March 31, 2013, but underperformed for the one-, three- and five-year periods; (2) the Fund underperformed the Lipper performance group median for the one-, three- and five-year periods ended March 31, 2013; (3) the Manager’s representation that the Fund’s performance relative to its benchmark index may be more appropriate as compared to the Lipper performance universe or group because the Lipper performance universe and group include certain funds that invest a portion of their assets in high yield securities, whereas the American Beacon Intermediate Bond Fund invests only in investment-grade securities; (4) the Fund outperformed its benchmark index for the one- and ten-year periods ended March 31, 2013, but underperformed its benchmark index for the three- and five-year periods; (5) the Manager outperformed the Lipper performance universe median with respect to its allocated portion of the Fund’s assets for the ten-year period ended March 31, 2013, but underperformed for the one-, three- and five-year periods; (6) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (7) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.

 

79


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Funds (Unaudited)

 

 

In considering the renewal of the Investment Advisory Agreement with Barrow, Hanley, MeWhinney & Strauss, LLC (“Barrow”), the Trustees considered the following additional factors: (1) Barrow outperformed the Lipper performance universe median with respect to its allocated portion of the Fund’s assets for the five- and ten-year periods ended March 31, 2013, but underperformed for the one- and three-year periods; (2) representations by Barrow regarding the fee rates it charges other comparable clients; (3) the Manager’s recommendation to continue to retain Barrow.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and Barrow under the Agreements are fair and reasonable; (2) determined that the American Beacon Intermediate Bond Fund and its shareholders would benefit from the Manager’s and the subadvisor’s continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Intermediate Bond Fund.

Additional Considerations and Conclusions with Respect to the American Beacon Short-Term Bond Fund

In considering the renewal of the Management Agreement for the American Beacon Short-Term Bond Fund, the Trustees considered the following additional factors: (1) the American Beacon Short-Term Bond Fund underperformed the Lipper performance universe median for the one-, three-, and five-year periods ended March 31, 2013, but outperformed for the ten-year period; (2) the Fund outperformed the Lipper performance group median for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (3) the Manager’s representation that the Fund’s performance relative to its benchmark index may be more appropriate as compared to the Lipper performance universe or group because the Lipper performance universe and group include certain funds that invest a portion of their assets in high yield securities, whereas the American Beacon Short-Term Bond Fund may invest only in investment-grade securities; (4) the Fund outperformed its benchmark index for the one-, three-, five- and ten-year periods ended March 31, 2013; (5) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (6) the Institutional Class of the Fund was categorized by Morningstar as having a below average expense ratio.

Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable; (2) determined that the American Beacon Short-Term Bond Fund and its shareholders would benefit from the Manager’s continued management of the Fund; and (3) approved the renewal of the Management Agreement with respect to the American Beacon Short-Term Bond Fund.

 

80


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

 

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES     
  Term   
 

Lifetime of Trust

until removal,

resignation or

retirement*

  
Gerard Arpey (55)   Trustee since 2012    Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).
Alan D. Feld** (76)   Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).
NON-INTERESTED TRUSTEES   Term   
 

Lifetime of Trust

until removal,

resignation or

retirement*

  
W. Humphrey Bogart (69)   Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Brenda A. Cline (52)   Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Eugene J. Duffy (59)   Trustee since 2008    Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Thomas M. Dunning (71)   Trustee since 2008    Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Richard A. Massman (70)  

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Barbara J. McKenna, CFA (50)   Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).

 

81


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

NON-INTERESTED TRUSTEES   Term   
 

Lifetime of Trust

until removal,

resignation or

retirement*

  

R. Gerald Turner (67)

225 Perkins Admin. Bldg.

Southern Methodist Univ.

Dallas, Texas 75275

  Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012).
Paul J. Zucconi,CPA (73)   Trustee since 2008    Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-Present); Director, Titanium Metals Corporation (producer of titanium melted and mill products) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).

Name, Age and Address

 

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

OFFICERS   Term   
  One Year   
Gene L. Needles, Jr. (58)  

President since 2009

Executive Vice President

since 2009

   President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2012), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors.
Rosemary K. Behan (54)  

VP, Secretary and

Chief Legal

Officer since 2006

   Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Secretary (2008-Present), Lighthouse Holdings Parent, Inc.
Brian E. Brett (53)   VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).
Wyatt Crumpler (47)   VP since 2007    Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc.
Erica Duncan (43)   VP Since 2011    Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM.
Michael W. Fields (59)   VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).
Melinda G. Heika (52)   Treasurer since 2010    Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer (2010-Present), Lighthouse Holdings, Inc.; Treasurer (2010-Present), Lighthouse Holdings Parent, Inc.
Terri L. McKinney (49)   VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.

 

82


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

 

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

OFFICERS   Term   
  One Year   
Jeffrey K. Ringdahl (38)   VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007).
Samuel J. Silver (50)   VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.
Christina E. Sears (42)  

Chief Compliance

Officer since 2004

and Asst. Secretary since1999

   Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc.
John J. Okray (39)   Asst. Secretary since 2010    Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010).
Sonia L. Bates (56)   Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011—Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, Inc.

 

* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the board may determine to grant one or more annual exemptions to this requirement.
** Mr. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager.
*** Mr. Feld is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to the Manager and one or more of the Trust’s sub-advisors.

 

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LOGO

 

 

Delivery of Documents

eDelivery is NOW AVAILABLE – Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

 

LOGO    LOGO

By E-mail:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

      
  
LOGO    LOGO

By Telephone:

Institutional, Y, and Investor Classes

Call (800) 658-5811

AMR ClassSM

Call (800) 345-2345

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

      
  

Availability of Quarterly Portfolio Schedules

 

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of each Fund’s portfolio holdings is also made available on the Funds’ website at www.americanbeaconfunds.com approximately twenty days after the end of each month.

  

Availability of Proxy Voting Policy and Records

 

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.

 

American Beacon Funds, American Beacon High Yield Bond Fund, American Beacon Enhanced Income Fund, American Beacon Intermediate Bond Fund and American Beacon Short-Term Bond Fund are service marks of American Beacon Advisors, Inc.

AR 10/13


ITEM 2. CODE OF ETHICS.

The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the “Code”). The Trust amended its code November 12, 2013 to disclose the removal of terminated Investment Companies. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE.ETH.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The Trust’s Board of Trustees has determined that Mr. Paul Zucconi, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Mr. Paul Zucconi is “independent” as defined in Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

(a)

 

Audit Fees

   Fiscal Year
Ended
 

$27,203

     6/30/2012

$203,016

     8/31/2012

$372,284

     10/31/2012

$54,406

     11/30/2012

$163,393

     12/31/2012

$209,783

     8/31/2013   

$384,699

     10/31/2013   

$168,847

     12/31/2013   

$105,556

     1/31/2014   

 

(b)

 

Audit-Related Fees

   Fiscal Year
Ended
 

$0

     6/30/2012   

$0

     8/31/2012   

$0

     10/31/2012   

$0

     11/30/2012   

$0

     12/31/2012   

$0

     8/31/2013   

$0

     10/31/2013   

$0

     12/31/2013   

 

* Change from previous reporting.

 

(c)

 

Tax Fees

   Fiscal Year
Ended
 

$8,250

     6/30/2012

$34,250

     8/31/2012

$69,963

     10/31/2012

$15,000

     11/30/2012

$22,250

     12/31/2012

$36,250

     8/31/2013   

$70,713

     10/31/2013   

$20,000

     12/31/2013   

$10,500

     1/31/2014   

 

* Change from previous reporting.

 

(d)

 

All Other Fees

   Fiscal Year
Ended
 

$0

     6/30/2012   

$0

     8/31/2012   

$0

     10/31/2012   

$0

     11/30/2012   

$0

     12/31/2012   

$0

     8/31/2013   

$0

     10/31/2013   

$0

     12/31/2013   

(e) (1) Pursuant to its charter, the Trust’s Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust’s principal accountant:

 

    to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts’ financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors;

 

    to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser (“adviser affiliate”) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts;

 

    to consider whether the non-audit services provided by a Trust’s auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor’s independence;

 

    to review the arrangements for and scope of the annual audit and any special audits; and

 

    to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service.

The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting.

(e) (2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not applicable.

(g)

Aggregate Non-Audit Fees for Services Rendered to the:

 

Registrant

   Adviser    Adviser’s Affiliates Providing
Ongoing Services to
Registrant
   Fiscal Year Ended  

$8,250

   $0    N/A      6/30/2012

$34,250

   $0    N/A      8/31/2012

$69,963

   $0    N/A      10/31/2012

$15,000

   $0    N/A      11/30/2012

$22,500

   $0    N/A      12/31/2012

$36,250

   $0    N/A      8/31/2013   

$70,713

   $0    N/A      10/31/2013   

$20,000

   $0    N/A      12/31/2013   

$10,500

   $0    N/A      1/31/2014   

* Change from previous reporting.

(h) Not applicable.


ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

The schedules of investments for each series of the Trust are included in the shareholder reports presented in Item 1.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.

ITEM 11. CONTROLS AND PROCEDURES.

(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.

(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

ITEM 12. EXHIBITS.

(a) (1) Filed herewith as EX-99.CODE ETH.

(a) (2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.

(a) (3) Not applicable.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant): American Beacon Funds

 

By

 

/s/ Gene L. Needles, Jr.

Gene L. Needles, Jr.

President

American Beacon Funds

Date: September 4, 2014

 

By

 

/s/ Melinda G. Heika

Melinda G. Heika

Treasurer

American Beacon Funds

Date: September 4, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By

 

/s/ Gene L. Needles, Jr.

Gene L. Needles, Jr.

President

American Beacon Funds

Date: September 4, 2014

 

By

 

/s/ Melinda G. Heika

Melinda G. Heika

Treasurer

American Beacon Funds

Date: September 4, 2014


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-CSR/A’ Filing    Date    Other Filings
Filed on / Effective on:9/4/14485BPOS,  NSAR-B/A
12/31/1324F-2NT,  497,  497J,  N-CSR,  N-Q,  NSAR-B
12/30/13497K,  NSAR-B
11/12/13
For Period End:10/31/1324F-2NT,  40-17G/A,  N-CSR,  N-Q,  NSAR-B
9/30/13N-Q
5/29/13
5/10/13
5/1/13497K
4/30/13485BPOS,  497K,  N-CSRS,  NSAR-A
3/31/13N-Q
1/1/13
12/31/1224F-2NT,  485BPOS,  N-CSR,  NSAR-B
10/31/1224F-2NT,  497J,  497K,  N-CSR,  NSAR-B
12/31/1124F-2NT,  N-CSR,  N-CSR/A,  NSAR-B
9/15/11
7/1/11485BPOS,  497K
12/31/10N-CSR,  NSAR-B
12/22/10
12/1/10
11/30/10485APOS,  N-Q,  N-Q/A
10/31/1024F-2NT,  N-CSR,  NSAR-B
11/1/09
10/31/0924F-2NT,  N-CSR,  N-CSR/A,  NSAR-B
11/1/08
10/31/0624F-2NT,  N-CSR,  NSAR-B
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Filing Submission 0001193125-14-331980   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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