|
|
Ticker | ||||||
Share
Class |
A |
C |
Y |
R6 |
Advisor |
R5 |
Investor |
American
Beacon Balanced Fund |
ABFAX |
ABCCX |
ACBYX |
|
ABLSX |
AADBX |
AABPX |
American
Beacon Garcia Hamilton Quality Bond Fund |
|
|
GHQYX |
GHQRX |
|
GHQIX |
GHQPX |
American
Beacon International Equity Fund |
AIEAX |
AILCX |
ABEYX |
AAERX |
AAISX |
AAIEX |
AAIPX |
American
Beacon Large Cap Value Fund |
ALVAX |
ALVCX |
ABLYX |
AALRX |
AVASX |
AADEX |
AAGPX |
American
Beacon Small Cap Value Fund |
ABSAX |
ASVCX |
ABSYX |
AASRX |
AASSX |
AVFIX |
AVPAX |
Strategy/Risk |
American
Beacon
Balanced
Fund |
American
Beacon
Garcia
Hamilton
Quality
Bond Fund |
American
Beacon
International
Equity
Fund |
American
Beacon
Large Cap
Value Fund |
American
Beacon
Small Cap
Value Fund |
Asset-Backed
Securities |
X |
||||
Borrowing
Risks |
X |
X |
X |
X |
X |
Callable
Securities |
X |
X |
|||
Cash
Equivalents and Other Short-Term Investments |
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
|
X |
X |
X |
X |
X |
Collateralized
Bond Obligations, Collateralized Debt Obligations, and Collateralized
Loan Obligations |
X |
||||
Contingent
Convertible Securities (“CoCos”) |
X |
||||
Convertible
Securities |
X |
X |
X |
||
Corporate
Actions |
X |
X |
X |
X |
X |
Cover
and Asset Segregation |
X |
X |
X |
X |
X |
Currencies
Risk |
X |
||||
Cybersecurity
and Operational Risk |
X |
X |
X |
X |
X |
Debentures |
X |
X |
|||
Derivatives |
X |
X |
X |
X | |
|
X |
||||
|
X |
||||
|
X |
X |
X |
X | |
|
X |
X |
X |
||
|
X |
||||
|
X |
||||
|
X |
X |
X | ||
Equity
Investments |
X |
X |
X |
X |
Strategy/Risk |
American
Beacon
Balanced
Fund |
American
Beacon
Garcia
Hamilton
Quality
Bond Fund |
American
Beacon
International
Equity
Fund |
American
Beacon
Large Cap
Value Fund |
American
Beacon
Small Cap
Value Fund |
|
X |
X |
X |
X | |
|
X |
X |
X |
X | |
|
X |
X |
X |
X | |
|
X |
X |
|||
|
X |
X |
X |
||
|
X |
||||
|
X |
||||
|
X |
||||
|
X |
X |
X |
X | |
|
X |
X |
X |
X | |
ESG
Considerations |
X |
X |
X |
X |
X |
Expense
Risk |
X |
X |
X |
X |
X |
Fixed
Income Investments |
X |
X |
|||
|
X |
X |
|||
|
X |
||||
Foreign
Securities |
X |
X |
X |
||
|
X |
||||
|
X |
||||
|
X |
||||
Growth
Companies |
X |
X |
X |
X | |
Illiquid
and Restricted Securities |
X |
X |
X |
X |
X |
Inflation-Indexed
Securities |
X |
X |
|||
Interfund
Lending |
X |
X |
X |
X |
X |
Investment
Grade Securities |
X |
X |
|||
Issuer
Risk |
X |
X |
X |
X |
X |
Large-Capitalization
Companies Risk |
X |
X |
X |
X |
|
Loan
Interests, Participations and Assignments |
X |
||||
Micro-Capitalization
Companies Risk |
X |
X |
X |
X | |
Mid-Capitalization
Companies Risk |
X |
X |
X |
X | |
Model
and Data Risk |
X |
X |
X |
X | |
Mortgage-Backed
Securities |
X |
X |
|||
|
X |
||||
|
X |
||||
|
X |
||||
|
X |
X |
|||
|
X |
||||
Municipal
Securities |
X |
X |
|||
|
X |
||||
|
X |
X |
|||
|
X |
||||
Other
Investment Company Securities and Exchange-Traded Products |
X |
X |
X |
X |
X |
|
X |
||||
|
X |
X | |||
|
X |
X |
X |
X |
X |
Strategy/Risk |
American
Beacon
Balanced
Fund |
American
Beacon
Garcia
Hamilton
Quality
Bond Fund |
American
Beacon
International
Equity
Fund |
American
Beacon
Large Cap
Value Fund |
American
Beacon
Small Cap
Value Fund |
Pay-in-Kind
Securities |
X |
X |
|||
Preferred
Stock |
X |
X |
X |
||
Quantitative
Strategy Risk |
X |
||||
Real
Estate Related Investments |
X |
X |
X |
X | |
Separately
Traded Registered Interest and Principal Securities and Zero Coupon
Obligations |
X |
X |
|||
Small-Capitalization
Companies Risk |
X |
X |
X |
X | |
Sovereign
and Quasi-Sovereign Government and Supranational Debt |
X |
||||
Supranational
Risk |
X |
||||
Trust
Preferred Securities |
X |
X |
|||
U.S.
Government Agency Securities |
X |
X |
X |
X |
X |
U.S.
Treasury Obligations |
X |
X |
X |
X |
X |
Valuation
Risk |
X |
X |
|||
Value
Companies Risk |
X |
X |
X |
X | |
Variable
or Floating Rate Obligations |
X |
X |
|||
When-Issued
and Forward Commitment Transactions |
X |
■ |
Bank
Deposit Notes.
Bank deposit notes are obligations of a bank that provide an alternative
to certificates of deposit. Similar to certificates of deposit,
deposit notes represent bank level investment and, therefore, are senior
to all holding company corporate debt. Bank deposit notes rank
junior
to domestic deposit liabilities of the bank and pari passu with other
senior, unsecured obligations of the bank. Typically, bank deposit notes
are not
insured by the Federal Deposit Insurance Corporation or any other
insurer. |
■ |
Bankers’
Acceptances.
Bankers’ acceptances are short-term credit instruments designed to enable
businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by
an exporter or an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then “accepted” by a bank that,
in effect, unconditionally guarantees to pay the face value of the
instrument
on its maturity date. The acceptance may then be held by the accepting
bank as an earning asset or it may be sold in the secondary market
at the going rate of discount for a specific maturity. Most acceptances
have maturities of six months or less. Bankers’ acceptances rank junior
to
domestic deposit liabilities of the bank and pari passu with other senior,
unsecured obligations of the bank.
|
■ |
Bearer
Deposit
Notes.
Bearer deposit notes, or bearer bonds, are bonds or debt securities that
entitle the holder of the document to ownership or title
in the deposit. Such notes are typically unregistered, and whoever
physically holds the bond is presumed to be the owner of the instrument.
Recovery
of the value of a bearer bond in the event of its loss or destruction
usually is impossible. Interest is typically paid upon presentment of an
interest
coupon for payment. |
■ |
CDs.
CDs are negotiable certificates issued against funds deposited in an
eligible bank (including its domestic and foreign branches, subsidiaries
and agencies)
for a definite period of time and earning a specified rate of return. U.S.
dollar denominated CDs issued by banks abroad are known as Eurodollar
CDs. CDs issued by foreign branches of U.S. banks are known as Yankee
CDs. |
■ |
Commercial
Paper.
Commercial paper is a short-term debt security issued by a corporation,
bank, municipality, or other issuer, usually for purposes such
as financing current operations. A Fund may invest in commercial paper
that cannot be resold to the public without an effective registration
statement
under the Securities Act. While some restricted commercial paper normally
is deemed illiquid, in certain cases it may be deemed
liquid. |
■ |
Eurodollar
and Yankee CD Obligations.
Eurodollar obligations are U.S. dollar obligations issued outside the
United States by domestic or foreign entities,
while Yankee CDs are U.S. dollar obligations issued inside the United
States by foreign entities. There is generally less publicly available
information
about foreign issuers and there may be less governmental regulation and
supervision of foreign stock exchanges, brokers and listed companies.
Foreign issuers may use different accounting and financial standards, and
the addition of foreign governmental restrictions may affect adversely
the payment of principal and interest on foreign investments. In addition,
not all foreign branches of United States banks are supervised or
examined
by regulatory authorities as are United States banks, and such branches
may not be subject to reserve requirements. Eurodollar (and, to a
limited
extent, Yankee dollar) obligations are subject to certain sovereign risks.
One such risk is the possibility that a sovereign country might prevent
capital,
in the form of dollars, from flowing across its borders. Other risks
include adverse political and economic developments; the extent and
quality
of government regulation of financial markets and institutions; the
imposition of foreign withholding taxes; and the expropriation or
nationalization
of foreign issuers. |
■ |
Government
Money Market Funds. A
Fund may invest cash balances in money market funds that are registered as
investment companies under the
Investment Company Act, including money market funds that are advised by
the Manager. Money market funds invest in highly-liquid, short-term
instruments, which include cash and cash equivalents, and debt securities
with high credit ratings and short-term maturities, such as U.S.
Treasuries.
A
“government money market fund” is required to invest at least 99.5% of its
total assets in cash, U.S. government securities, and/or repurchase
agreements that are fully collateralized by government securities or cash.
Government securities include any security issued or guaranteed
as to principal or interest by the U.S. government and its agencies or
instrumentalities. By investing in a money market fund, a Fund
becomes
a shareholder of that money market fund. As a result, Fund shareholders
indirectly
bear their proportionate share of the expenses of the money
market funds in which a Fund invests
in addition to any fees and expenses Fund shareholders directly bear in
connection with a Fund’s own operations.
These expenses may include, for example, advisory and administrative fees,
including advisory fees charged by the Manager to any applicable
money market funds advised by the Manager. These
other fees and expenses are reflected in the Fees and Expenses Table for a
Fund in its Prospectus,
if applicable. Shareholders
also would be exposed to the risks associated with money market funds and
the portfolio investments of such money
market funds, including that a money market fund’s yield will be lower
than the return that a Fund would have derived from other investments
that would provide liquidity. Although a money market fund is designed to
be a relatively low risk investment, it is not free of risk.
|
Despite
the short maturities and high credit quality of a money market fund’s
investments, increases in interest rates and deteriorations in the credit
quality
of the instruments the money market fund has purchased can cause the price
of a money market security to decrease and may reduce the money
market fund’s yield. In addition, a money market fund is subject to the
risk that the value of an investment may be eroded over time by
inflation.
Factors that could adversely affect the value of a money market fund’s
shares include, among other things, a sharp rise in interest rates, an
illiquid
market for the securities held by the money market fund, a high volume of
redemption activity in a money market fund’s shares, and a credit
event
or credit rating downgrade affecting one or more of the issuers of
securities held by the money market fund. There can be no assurance that a
money
market fund will maintain a $1.00 per share net asset value (“NAV”) at all
times. The
failure of an unrelated money market fund to maintain a
stable NAV could create a widespread risk of increased redemption
pressures on all money market funds, potentially jeopardizing the
stability of their
NAVs. Certain money market funds have in the past failed to maintain
stable NAVs, and there can be no assurance that such failures and
resulting
redemption pressures will not impact money market funds in the future. In
the event of negative gross yields as a result of persistent negative
interest rates, government money market funds may consider various options
including but not limited to (1) the implementation of a reverse
distribution or share cancellation mechanism (that would periodically
reduce the number of the fund’s outstanding shares) to maintain a
stable
net asset value per share or (2) the potential conversion to a floating
net asset value per share money market fund. Certain money market
funds
may impose a fee upon sale of shares or may temporarily suspend the
ability to sell shares of the money market fund if the money market
fund’s
liquidity falls below required minimums because of market conditions or
other factors, at the determination of the money market fund’s
board.
Such a determination may conflict with the interest of a Fund. Government
money market funds are generally not permitted to impose liquidity
fees or temporarily suspend redemptions. However, government money market
funds typically offer materially lower yields than other money
market funds. Money market funds and the securities they invest in are
subject to comprehensive regulations. The enactment of new legislation
or regulations, as well as changes in interpretation and enforcement of
current laws, may affect the manner of operation, performance and/or
yield of money market funds. An investment in a money market fund is
not a bank deposit and is not insured or guaranteed by any bank, the
FDIC
or any other government agency. |
■ |
Government
Obligations.
Government obligations may include U.S. Treasury securities, Treasury
inflation-protected securities, and other debt instruments
backed by the full faith and credit of the United States, or debt
obligations of U.S. Government-sponsored
entities. |
■ |
Repurchase
Agreements.
Repurchase agreements are agreements pursuant to which a Fund purchases
securities from a bank that is a member of the
Federal Reserve System (or a foreign bank or U.S. branch or agency of a
foreign bank), or from a securities dealer, that agrees to repurchase the
securities
from a Fund at a higher price on a designated future date. Repurchase
agreements generally are for a short period of time, usually less
than
a week. Costs, delays, or losses could result if the selling party to a
repurchase agreement becomes bankrupt or otherwise
defaults. |
■ |
Short-term
Corporate
Debt Securities.
Short-term corporate debt securities are securities and bonds issued by
corporations with shorter terms to maturity.
Corporate securities generally bear a higher risk than U.S. government
bonds. |
■ |
Time
Deposits.
Time deposits, also referred to as “fixed time deposits,” are
non-negotiable deposits maintained at a banking institution for a
specified
period of time at a specified interest rate. Time deposits may be
withdrawn on demand by the investor, but may be subject to early
withdrawal
penalties which vary depending upon market conditions and the remaining
maturity of the obligation. There are no contractual restrictions
on the right to transfer a beneficial interest in a time deposit to a
third party, although there is no market for such deposits.
|
■ |
Forward
Contracts. A
Fund may enter into forward contracts. Forward contracts are a type of
derivative instrument that obligate the purchaser to take
delivery of, or cash settle a specific amount of, a commodity, security or
obligation underlying the contract at a specified time in the future for a
specified
price. Likewise, the seller incurs an obligation to deliver the specified
amount of the underlying asset against receipt of the specified price.
Generally,
forward contracts are traded through financial institutions acting as
market-makers, on certain securities exchanges, or over-the-counter,
and
the protections afforded to investors may vary depending on the trading
environment. This is distinguishable from futures contracts, which are
traded
on U.S. and foreign commodities exchanges. Forward contracts are often negotiated on an individual basis and are not standardized. The market for forward contracts is substantially unregulated, as there is no limit on daily price movements and speculative position limits are not applicable. The principals who deal in certain forward contract markets are not required to continue to make markets in the underlying reference assets in which they trade and these markets can experience periods of illiquidity, sometimes of significant duration. There have been periods during which certain participants in forward contract markets have refused to quote prices for certain underlying references or have quoted prices with an unusually wide spread between the price at which they were prepared to buy and that at which they were prepared to sell. At or prior to maturity of a forward contract, a Fund may enter into an offsetting contract and may incur a loss to the extent there has been adverse movement in forward contract prices. The liquidity of the markets for forward contracts depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants make or take delivery, liquidity in the market for forwards could be reduced. A relatively small price movement in a forward contract may result in substantial losses to a Fund, exceeding the amount of the margin paid. Forward contracts can increase a Fund’s risk exposure to underlying reference assets and their attendant risks. A Fund bears the risk of loss of the amount expected to be received under a forward contract in the event of the default or bankruptcy of a counterparty. If such a default occurs, a Fund may have contractual remedies pursuant to the forward contract, but such remedies may be subject to bankruptcy and insolvency laws which could affect a Fund’s rights as a creditor. |
■ |
Forward
Foreign Currency Contracts. A
Fund may enter into forward foreign currency contracts (“forward currency
contracts”), which are a type of
derivative instrument, for a variety of reasons. A forward currency
contract involves an obligation to purchase or sell a specified currency
at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties at a price set at the time of the contract.
Because these forward currency contracts normally are settled through an
exchange of currencies, they are traded in the interbank market
directly
between currency traders (usually large commercial banks) and their
customers. |
Forward
currency contracts may serve as long hedges. For example, a Fund may
purchase a forward currency contract to lock in the U.S. dollar price
of
a security denominated in a foreign currency that it intends to acquire.
Forward currency contract transactions also may serve as short hedges. For
example,
a Fund may sell a forward currency contract to lock in the U.S. dollar
equivalent of the proceeds from the anticipated sale of a security or
from
a dividend or interest payment on a security denominated in a foreign
currency. |
A Fund
may enter into forward currency contracts to sell a foreign currency for a
fixed U.S. dollar amount approximating the value of some or all of
its
respective portfolio securities denominated in such foreign currency. In
addition, a Fund may use forward currency contracts when a sub-advisor
wishes
to “lock in” the U.S. dollar price of a security when a Fund is purchasing
or selling a security denominated in a foreign currency or anticipates
receiving
a dividend or interest payment denominated in a foreign
currency. |
A Fund
may enter into forward currency contracts for the purchase or sale of a
specified currency at a specified future date either with respect to
specific
transactions or with respect to portfolio positions in order to minimize
the risk to a Fund from adverse changes in the relationship between
the
U.S. dollar and foreign currencies. |
A Fund
may use forward currency contracts to seek to hedge against, or profit
from, changes in the value of a particular currency by using forward
currency
contracts on another foreign currency or a basket of currencies, the value
of which a sub-advisor believes will have a positive correlation to
the
values of the currency being hedged. When hedging, use of a different
foreign currency magnifies the risk that movements in the price of the
forward
contract will not correlate or will correlate unfavorably with the foreign
currency being hedged. |
In
addition, a Fund may use forward currency contracts to shift exposure to
foreign currency fluctuations from one country to another. For example,
if
a Fund owned securities denominated in a foreign currency that a
sub-advisor believed would decline relative to another currency, it might
enter into
a forward currency contract to sell an appropriate amount of the first
foreign currency, with payment to be made in the second currency.
Transactions
that involve two foreign currencies are sometimes referred to as “cross
hedging.” Use of a different foreign currency magnifies a Fund’s
exposure
to foreign currency exchange rate
fluctuations. |
A
Fund also may enter into forward currency contracts for non-hedging
purposes if a foreign currency is anticipated to appreciate or depreciate
in value,
but securities denominated in that currency do not present attractive
investment opportunities and are not held in a Fund’s investment
portfolio. |
The
cost to a Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period
and the
market conditions then prevailing. Because forward currency contracts
usually are entered into on a principal basis, no fees or commissions are
involved.
When a Fund enters into a forward currency contract, it relies on the
counterparty to make or take delivery of the underlying currency at
the
maturity of the contract. Failure by the counterparty to do so would
result in the loss of any expected benefit of the
transaction. |
Sellers
or purchasers of forward currency contracts can enter into offsetting
closing transactions, similar to closing transactions on futures, by
purchasing
or selling, respectively, an instrument identical to the instrument sold
or bought, respectively. Secondary markets generally do not exist
for
forward currency contracts, however, with the result that closing
transactions generally can be made for forward currency contracts only by
negotiating
directly with the counterparty. Thus, there can be no assurance that a
Fund will in fact be able to close out a forward currency contract
at
a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, a Fund might be unable to close out a
forward currency
contract at any time prior to maturity. In either event, a Fund would
continue to be subject to market risk with respect to the position, and
would
continue to be required to maintain a position in the securities or
currencies that are the subject of the hedge or to maintain cash or
securities. |
The
precise matching of forward currency contract amounts and the value of
securities whose U.S. dollar value is being hedged by those contracts
involved
generally will not be possible because the value of such securities,
measured in the foreign currency, will change after the forward currency
contract
has been established. Thus, a Fund might need to purchase or sell foreign
currencies in the spot (cash) market to the extent such foreign
currencies
are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful
execution
of a short-term hedging strategy is highly
uncertain. |
A Fund
bears the risk of loss of the amount expected to be received under a
forward currency contract in the event of the default or bankruptcy of a
counterparty.
If such a default occurs, a Fund may have contractual remedies pursuant to
the forward currency contract, but such remedies may be subject
to bankruptcy and insolvency laws which could affect a Fund’s rights as a
creditor. |
At
the maturity of a forward contract, a Fund may sell the portfolio security
and make delivery of the foreign currency, or it may retain the security
and
either extend the maturity of the forward contract (by “rolling” that
contract forward) or may initiate a new forward contract. If a Fund
retains the
portfolio security and engages in an offsetting transaction, a Fund will
incur a gain or a loss (as described below) to the extent that there has
been
movement in forward contract prices. If a Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to
sell
the foreign currency. |
Should
forward prices decline during the period between a Fund’s entering into a
forward contract for the sale of a foreign currency and the date it
enters
into an offsetting contract for the purchase of the foreign currency, a
Fund will realize a gain to the extent the price of the currency it has
agreed
to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, a Fund will suffer a loss to the extent
the price
of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. |
Forward
currency contracts in which a Fund may engage include foreign exchange
forwards. The consummation of a foreign exchange forward requires
the actual exchange of the principal amounts of the two currencies in the
contract (i.e., settlement on a physical basis). Because foreign
exchange
forwards are physically settled through an exchange of currencies, they
are traded in the interbank market directly between currency traders
(usually large commercial banks) and their customers. A foreign exchange
forward generally has no deposit requirement, and no commissions
are charged at any stage for trades; foreign exchange dealers realize a
profit based on the difference (the spread) between the prices at
which
they are buying and the prices at which they are selling various
currencies. When a Fund enters into a foreign exchange forward, it
relies on the
counterparty to make or take delivery of the underlying currency at the
maturity of the contract. Failure by the counterparty to do so would
result
in the loss of any expected benefit of the
transaction. |
A
Fund may be required to obtain the currency that it must deliver under the
foreign exchange forward through the sale of portfolio securities
denominated
in such currency or through conversion of other assets of a Fund into such
currency. When a Fund engages in foreign currency transactions
for hedging purposes, it will not enter into foreign exchange forwards to
sell currency or maintain a net exposure to such contracts if their
consummation would obligate a Fund to deliver an amount of foreign
currency materially in excess of the value of its portfolio securities or
other
assets denominated in that currency. |
■ |
Futures
Contracts. A
Fund may enter into futures contracts. Futures contracts are a type of
derivative instrument that obligate the purchaser to take
delivery of, or cash settle a specific amount of, a commodity, security or
other obligation underlying the contract at a specified time in the
future
for a specified price. Likewise, the seller incurs an obligation to
deliver the specified amount of the underlying obligation against receipt
of the specified
price. Futures are traded on both U.S. and foreign commodities exchanges.
The purchase of futures can serve as a long hedge, and the sale
of
futures can serve as a short hedge. No price is paid upon entering into a futures contract. Instead, at the inception of a futures contract, a Fund is required to deposit “initial margin” consisting of cash, U.S. Government securities, suitable money market instruments, or liquid, high-grade debt securities in an amount set by the exchange on which the contract is traded and varying based on the volatility of the underlying asset. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Unlike margin in securities transactions, initial margin on |
futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to a Fund
at
the termination of the transaction if all contractual obligations have
been satisfied. Under certain circumstances, such as periods of high
volatility, a
Fund may be required by a futures exchange to increase the level of its
initial margin payment, and initial margin requirements might be increased
generally
in the future by regulatory action. Subsequent “variation margin” payments
(sometimes referred to as “maintenance margin” payments) are
made to and from the futures broker daily as the value of the futures
position varies, a process known as “marking-to-market.” Variation margin
does
not involve borrowing, but rather represents a daily settlement of a
Fund’s obligations to or from a futures broker. When a Fund purchases or
sells
a futures contract, it is subject to daily, or even intraday, variation
margin calls that could be substantial in the event of adverse price
movements.
If a Fund has insufficient cash to meet daily or intraday variation margin
requirements, it might need to sell securities at a time when such
sales are disadvantageous. Purchasers and sellers of futures contracts can enter into offsetting closing transactions, by selling or purchasing, respectively, an instrument identical to the instrument purchased or sold. Positions in futures contracts may be closed only on a futures exchange or board of trade that trades that contract. A Fund intends to enter into futures contracts only on exchanges or boards of trade where there appears to be a liquid secondary market. However, there can be no assurance that such a market will exist for a particular contract at a particular time. In such event, it may not be possible to close a futures contract. Although many futures contracts by their terms call for the actual delivery or acquisition of the underlying asset, in most cases the contractual obligation is fulfilled before the date of the contract without having to make or take delivery of the securities or currency. The offsetting of a contractual obligation is accomplished by buying (or selling, as appropriate) on a commodities exchange an identical futures contract calling for delivery in the same month. Such a transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the securities or currency. Since all transactions in the futures market are made, offset or fulfilled through a clearinghouse associated with the exchange on which the contracts are traded, a Fund will incur brokerage fees when it purchases or sells futures contracts. If an offsetting purchase price is less than the original sale price, a Fund realizes a capital gain, or if it is more, a Fund realizes a capital loss. Conversely, if an offsetting sell price is more than the original purchase price, a Fund realizes a capital gain, or if it is less, a Fund realizes a capital loss. The Funds has no current intent to accept physical delivery in connection with the settlement of futures contracts. Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day’s settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions. If a Fund were unable to liquidate a futures contract due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. A Fund would continue to be subject to market risk with respect to the position. In addition, a Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the futures contract or option thereon or to maintain cash or securities in a segregated account. The ordinary spreads between prices in the cash and futures markets, due to differences in the nature of those markets, are subject to distortions. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin deposit requirements, investors may close futures contracts through offsetting transactions that could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the margin deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of distortion, a correct forecast of securities price or currency exchange rate trends by a sub-advisor may still not result in a successful transaction. Futures contracts also entail other risks. Although the use of such contracts may benefit a Fund, if investment judgment about the general direction of, for example, an index is incorrect, a Fund’s overall performance would be worse than if it had not entered into any such contract. There are differences between the securities and futures markets that could result in an imperfect correlation between the markets, causing a given transaction not to achieve its objectives. The degree of imperfection of correlation depends on circumstances such as variations in speculative market demand for futures, including technical influences in futures trading, and differences between the financial instruments being hedged and the instruments underlying the standard contracts available for trading in such respects as interest rate levels, maturities, and creditworthiness of issuers. A decision as to whether, when and how to hedge involves the exercise of skill and judgment, and even a well-conceived hedge may be unsuccessful to some degree because of market behavior or unexpected interest rate trends. |
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Rights.
Rights are options to purchase an issuer’s securities at a stated price
during a stated term, usually at a price below the initial offering price
of the
securities and before the securities are offered to the general public.
Rights are similar to warrants but typically have a shorter duration.
Rights are
usually freely transferable, but may not be as liquid as exchange-traded
options. In addition, the terms of a right may limit a Fund’s ability to
exercise
the right at such time, or in such quantities, as a Fund would otherwise
wish. Rights usually have no voting rights, pay no dividends and
have
no rights with respect to the assets of the corporation issuing them. A
right ceases to have value if it is not exercised prior to its expiration
date. As
a result, rights may be considered more speculative than certain other
types of investments. |
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Swap
Agreements.
A swap is a transaction in which a Fund and a counterparty agree to pay or
receive payments at specified dates based upon or calculated
by reference to changes in specified prices or rates (e.g., interest rates
in the case of interest rate swaps) or the performance of specified
securities
or indices based on a specified amount (the “notional” amount). Nearly any
type of derivative, including forward contracts, can be structured
as a swap. See “Derivatives” for a further discussion of derivatives
risks. Swap agreements can be structured to provide exposure to a
variety
of different types of investments or market factors. For example, in an
interest rate swap, fixed-rate payments may be exchanged for floating
rate
payments; in a currency swap, U.S. dollar-denominated payments may be
exchanged for payments denominated in a foreign currency; and in a
total
return swap, payments tied to the investment return on a particular asset,
group of assets or index may be exchanged for payments that are
effectively
equivalent to interest payments or for payments tied to the return on
another asset, group of assets, or index. Swaps may have a leverage
component,
and adverse changes in the value or level of the underlying asset,
reference rate or index can result in gains or losses that are
substantially
greater than the amount invested in the swap itself. Some swaps currently
are, and more in the future will be, centrally cleared. Swaps
|
that
are centrally-cleared are exposed to the creditworthiness of the clearing
organizations (and, consequently, that of their members - generally,
banks
and broker-dealers) involved in the transaction. For example, an investor
could lose margin payments it has deposited with the clearing organization
as well as the net amount of gains not yet paid by the clearing
organization if it breaches its agreement with the investor or becomes
insolvent
or goes into bankruptcy. In the event of bankruptcy of the clearing
organization, the investor may be able to recover only a portion of the
net
amount of gains on its transactions and of the margin owed to it,
potentially resulting in losses to the investor. Swaps that are not
centrally cleared
involve the risk that a loss may be sustained as a result of the
insolvency or bankruptcy of the counterparty or the failure of the
counterparty to
make required payments or otherwise comply with the terms of the
agreement. If a counterparty’s creditworthiness declines, the value of the
swap
might decline, potentially resulting in losses to a Fund. Changing
conditions in a particular market area, whether or not directly related to
the referenced
assets that underlie the swap agreement, may have an adverse impact on the
creditworthiness of a counterparty. To mitigate this risk, a Fund
will only enter into swap agreements with counterparties considered by a
sub-advisor to present minimum risk of default, and a Fund normally
obtains
collateral to secure its exposure. Swaps involve the risk that, if the
swap declines in value, additional margin would be required to maintain
the
margin level. The seller may require a Fund to deposit additional sums to
cover this, and this may be at short notice. If additional margin is not
provided
in time, the seller may liquidate the positions at a loss, which may cause
a Fund to owe money to the seller. The centrally cleared and OTC
swap
agreements into which a Fund enters normally provide for the obligations
of a Fund and its counterparty in the event of a default or other
early
termination to be determined on a net basis. Similarly, periodic payments
on a swap transaction that are due by each party on the same day
normally
are netted. The use of swap agreements requires special skills, knowledge
and investment techniques that differ from those required for normal
portfolio management. Swaps may be considered illiquid investments,
and a Fund may be unable to sell a swap agreement to a third party
at a
favorable price; see “Illiquid and Restricted Securities” for a
description of liquidity risk. |
■ |
Currency
Swaps.
A currency swap involves the exchange of payments denominated in one
currency for payments denominated in another. Payments
are based on a notional principal amount, the value of which is fixed in
exchange rate terms at the swap’s inception. Currency swap agreements
may be entered into on a net basis or may involve the delivery of the
entire principal value of one designated currency in exchange for
the
entire principal value of another designated currency. In such cases, the
entire principal value of a currency swap is subject to the risk that the
counterparty
will default on its contractual delivery obligations. Currency swaps are
subject to currency risk. |
■ |
Warrants.
Warrants are options to purchase an issuer’s securities at a stated price
during a stated term, usually at a price below the initial offering
price
of the securities and before the securities are offered to the general
public. If the market price of the underlying common stock does not
exceed
the warrant’s exercise price during the life of the warrant, the warrant
will expire worthless. As a result, warrants may be considered more
speculative
than certain other types of investments. Warrants usually have no voting
rights, pay no dividends and have no rights with respect to the
assets
of the corporation issuing them. The percentage increase or decrease in
the value of a warrant may be greater than the percentage increase
or
decrease in the value of the underlying common stock. Warrants may be
purchased with values that vary depending on the change in value of
one
or more specified indices (“index warrants”). Index warrants are generally
issued by banks or other financial institutions and give the holder the
right,
at any time during the term of the warrant, to receive upon exercise of
the warrant a cash payment from the issuer based on the value of the
underlying
index at the time of the exercise. Warrants
may also be linked to the performance of oil and/or the GDP of specific
emerging markets.
Warrants
are usually freely transferable, but may not be as liquid as
exchange-traded options, and the market for warrants may be very limited
and it may
be difficult to sell them promptly at an acceptable
price. |
■ |
Common
Stock.
Common stock generally takes the form of shares in a corporation which
represent an ownership interest. It ranks below preferred stock
and debt securities in claims for dividends and for assets of the company
in a liquidation or bankruptcy. The value of a company’s common
stock
may fall as a result of factors directly relating to that company, such as
decisions made by its management or decreased demand for the company’s
products or services. A stock’s value may also decline because of factors
affecting not just the company, but also companies in the same
industry
or sector. The price of a company’s stock may also be affected by changes
in financial markets that are relatively unrelated to the company,
such
as changes in interest rates, currency exchange rates or industry
regulation. Companies that elect to pay dividends on their common stock
generally
only do so after they invest in their own business and make required
payments to bondholders and on other debt and preferred stock.
Therefore,
the value of a company’s common stock will usually be more volatile than
its bonds, other debt and preferred stock. Common stock may be
exchange-traded or traded over-the-counter. OTC stock may be less liquid
than exchange-traded stock. |
■ |
Depositary
Receipts. A
Fund may invest in depositary receipts, which represent ownership
interests in securities of foreign companies (an “underlying
issuer”) that have been deposited with a bank or trust and that trade on
an exchange or OTC. Depositary receipts may not be denominated
in the same currency as the securities into which they may be converted,
and they are subject to the risk of fluctuation in the currency
exchange
rate. Investing in depositary receipts entails substantially the same
risks as direct investment in foreign securities. There is generally less
publicly
available information about foreign companies and there may be less
governmental regulation and supervision of foreign stock exchanges,
brokers,
and listed companies. In addition, such companies may use different
accounting and financial standards (and certain currencies may become
unavailable
for transfer from a foreign currency), resulting in a Fund’s possible
inability to convert immediately into U.S. currency proceeds realized
upon
the sale of portfolio securities of the affected foreign companies. In
addition, the issuers of unsponsored depositary receipts are not obligated
to
disclose material information about the underlying securities to investors
in the United States. Ownership of unsponsored depositary receipts may
not
entitle a Fund to the same benefits and rights as ownership of a sponsored
depositary receipt or the underlying security. Please see “Foreign
Securities”
below for a description of the risks associated with investments in
foreign securities. A Fund may invest in the following type of
depositary
receipts: |
■ |
ADRs.
ADRs are depositary receipts for foreign issuers in registered form,
typically issued by a U.S. financial institution, traded in U.S.
securities markets. |
■ |
EDRs.
EDRs, which are sometimes called Continental Depositary Receipts, are
issued in Europe in bearer form and are traded in European securities
markets. |
■ |
GDRs.
GDRs are in bearer form and traded in both the U.S. and European
securities markets. |
■ |
NVDRs.
NVDRs represent financial interests in an issuer but the holder is not
entitled to any voting rights. |
■ |
Income
Deposit Securities.
A
Fund may purchase IDSs. Each IDS represents two separate securities,
shares of common stock and subordinated notes
issued by the same company, that are combined into one unit that trades
like a stock on an exchange. Holders of IDSs receive dividends on the
common
shares and interest at a fixed rate on the subordinated notes to produce a
blended yield. An IDS is typically listed on a stock exchange, but
the
underlying securities typically are not listed on the exchange until a
period of time after the listing of the IDS or upon the occurrence of
certain events
(e.g., a change of control of the issuer of the IDS). When the underlying
securities are listed, the holders of IDSs generally have the right to
separate
the components of the IDSs and trade them
separately. |
There
may be a thinner and less active market for IDSs than that available for
other securities. The value of an IDS will be affected by factors
generally
affecting common stock and subordinated debt securities, including the
issuer’s actual or perceived ability to pay interest and principal on
the
notes and pay dividends on the stock. |
The
federal income tax treatment of IDSs is not entirely clear and there is no
authority that directly addresses the tax treatment of securities with
terms
substantially similar to IDSs. Among other things, although it is expected
that the subordinated notes portion of an IDS will be treated as debt,
if
it is characterized as equity rather than debt, then interest paid on the
notes could be treated as dividends (to the extent paid out of the
issuer’s earnings
and profits). |
■ |
Income
Trusts. A
Fund may invest in shares of income trusts, including Canadian royalty
trusts. An income trust is an investment trust which holds income-producing
assets and generally distributes the income generated by such assets on to
its security holders. Income trusts also may include royalty
trusts, a particular type of income trust whose securities are listed on a
stock exchange and which controls an underlying company whose business
relates to, without limitation, the acquisition, exploitation, production
and sale of oil and natural gas. The main attraction of an income
trust
is its ability to generate constant cash flows. Income trusts have the
potential to deliver higher yields than bonds. During periods of low
interest rates,
income trusts may achieve higher yields compared with cash investments.
During periods of increasing rates, the opposite may be true. Income
trusts
may experience losses during periods of both low and high interest
rates. |
Income
trusts generally are structured to avoid income taxes at the entity level.
In a traditional corporate tax structure, net income is taxed at the
corporate
level and again when distributed as dividends to its shareholders. Under
current law, an income trust, if properly structured, should not be
subject
to federal income tax. This flow-through structure means that the
distributions to income trust investors are generally higher than
dividends from
an equivalent corporate entity. |
Despite
the potential for attractive regular payments, income trusts are equity
investments, not fixed-income securities, and they share many of the
risks
inherent in stock ownership, including operating risk based on the income
trusts’ underlying assets and their respective businesses. Such risks
may
include lack of, or limited, operating histories. In addition, an income
trust may lack diversification and potential growth may be sacrificed
because
revenue is passed on to security holders, rather than reinvested in the
business. Because income trusts may pay out more than their net
income,
the unitholder equity (capital) may decline over time. Income trusts often
grow through acquisition of additional assets, funded through the
issuance
of additional equity or, where the trust is able, additional debt. Income
trusts do not guarantee minimum distributions or even return of
capital;
therefore, if the business of a trust starts to lose money, the trust can
reduce or even eliminate distributions. The tax structure of income
trusts
described above, which would allow income to flow through to investors and
be taxed only at the investor level, could be challenged under
existing
law, or the tax laws could change. Royalty trusts and income trusts
frequently are found in Canada, and an investment in a Canadian trust
will
be subject to certain additional risks of investing in foreign
securities. |
■ |
Initial
Public Offerings. A
Fund can invest in IPOs. By definition, securities issued in IPOs have not
traded publicly until the time of their offerings. Special
risks associated with IPOs may include, among others, the fact that there
may only be a limited number of shares available for trading. The
market
for those securities may be unseasoned. The issuer may have a limited
operating history. These factors may contribute to price volatility. The
limited
number of shares available for trading in some IPOs may also make it more
difficult for a Fund to buy or sell significant amounts of shares
without
an unfavorable impact on prevailing prices. In addition, some companies
initially offering their shares publicly are involved in relatively new
industries
or lines of business, which may not be widely understood by investors.
Some of the companies involved in new industries may be regarded
as
developmental state companies, without revenues or operating income, or
the near-term prospects of them. Many IPOs are by small- or micro-cap
companies
that are undercapitalized. IPOs may adversely impact a Fund’s performance.
However, the impact of IPOs on a Fund’s performance will likely
decrease as a Fund’s asset size
increases. |
■ |
Master
Limited Partnerships. A
Fund may invest in publicly traded partnerships such as MLPs. MLPs issue
units that are registered with the SEC and
are freely tradable on a securities exchange or in the OTC market. An MLP
may have one or more general partners, who conduct the business,
and
one or more limited partners, who contribute capital. The general partner
or partners are jointly and severally responsible for the liabilities of
the MLP.
An MLP also may be an entity similar to a limited partnership, such as an
LLC, which has one or more managers or managing members and non-managing
members (who are like limited partners). A Fund will invest in an MLP as a
limited partner, and normally would not be liable for the debts
of an MLP beyond the amount that a Fund has invested therein. However, as
a limited partner, a Fund would not be shielded to the same extent
that a stockholder of a corporation would be. In certain instances,
creditors of an MLP would have the right to seek a return of capital that
had
been distributed to a limited partner. This right of an MLP’s creditors
would continue even after a Fund had sold its investment in the
partnership.
Holders of MLP units have more limited rights to vote on matters affecting
the partnership than owners of common stock. MLPs typically
invest in real estate and oil and gas equipment leasing assets, but they
also finance entertainment, research and development, and other
projects. |
■ |
Corporate
Debt and Other Fixed-Income Securities.
Typically, the values of fixed income securities change inversely with
prevailing interest rates. Therefore,
a fundamental risk of fixed income securities is interest rate risk, which
is the risk that their value generally will decline as prevailing
interest
rates rise, which may cause a Fund’s NAV to likewise decrease, and vice
versa. How specific fixed income securities may react to changes in
interest
rates will depend on the specific characteristics of each security. For
example, while securities with longer maturities tend to produce higher
yields,
they also tend to be more sensitive to changes in prevailing interest
rates. They are therefore more volatile than shorter-term securities and
are subject
to greater market fluctuations as a result of changes in interest rates.
Fixed income securities are also subject to credit risk, which is the risk
that
the credit strength of an issuer of a fixed income security will weaken
and/or that the issuer will be unable to make timely principal and
interest payments,
and that the security may go into
default. |
■ |
Master
Demand Notes.
Master demand notes are direct arrangements, between a lender and a
corporate borrower, that permit the investment of fluctuating
amounts of money at varying rates of interest. They permit daily changes
in the amounts borrowed. The lender has the right to increase or
decrease the amount it lends under the note at any time, up to the full
amount provided by the note agreement. The borrower may prepay up to
the
full amount of the note without penalty. These notes may or may not be
backed by bank letters of credit. These notes are direct lending arrangements between the lender and borrower, and there is no secondary market for them. The principal plus accrued interest is redeemable at any time, however. This right to redeem the notes depends on the ability of the borrower to make the specified payment on demand. The sub-advisors will consider the earning power, cash flow and other liquidity ratios of an issuer, and its ability to pay principal and interest on demand, including a situation in which all holders of such notes make demand simultaneously. Investments in master demand notes may be subject to limited liquidity. |
■ |
Emerging
Market Securities. A
Fund may invest in emerging market securities. A Fund may consider a
country to be an emerging market country based
on a number of factors including, but not limited to, if the country is
classified as an emerging or developing economy by any supranational
organization
such as the World Bank, International Finance Corporation or the United
Nations, or related entities, or if the country is considered an
emerging
market country for purposes of constructing emerging markets indices.
Investments in emerging market country securities involve special
risks.
The economies, markets and political structures of a number of the
emerging market countries in which a Fund can invest do not compare
favorably
with the United States and other mature economies in terms of wealth and
stability. Therefore, investments in these countries may be riskier,
and will be subject to erratic and abrupt price movements. These risks are
discussed below. Economies: The economies of emerging market countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, reliable access to capital, capital reinvestment, resource self-sufficiency, balance of payments and trade difficulties. Some economies are less well developed and less diverse (for example, Latin America, Eastern Europe and certain Asian countries), and may be heavily dependent upon international trade, as well as the economic conditions in the countries with which they trade. Such economies accordingly have been, and may continue to be, adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist or retaliatory measures imposed or negotiated by the countries with which they trade. Similarly, many of these countries have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of national and external debt, severe recession, and extreme poverty and unemployment. The economies of emerging market countries may be based predominately on only a few industries or may be dependent on revenues from participating commodities or on international aid or developmental assistance. Emerging market economies may develop unevenly or may never fully develop. Investments in countries that have recently begun moving away from central planning and state-owned industries toward free markets, such as the Eastern European, Russian or Chinese economies, should be regarded as speculative. Governments: Emerging markets may have uncertain national policies and social, political and economic instability. While government involvement in the private sector varies in degree among emerging market countries, such involvement may in some cases include government ownership of companies in certain sectors, wage and price controls or imposition of trade barriers and other protectionist measures. In the past, governments of such nations have expropriated substantial amounts of private property, and most claims of the property owners have never been fully settled. There is no assurance that such expropriations will not reoccur. In addition, there is no guarantee that some future economic or political crisis will not lead to price controls, forced mergers of companies, confiscatory taxation or creation of government monopolies to the possible detriment of a Fund’s investments. In such event, it is possible that a Fund could lose the entire value of its investments in the affected markets. Emerging market countries may have national policies that limit a Fund’s investment opportunities such as restrictions on investment in issuers or industries deemed sensitive to national interests. Repatriation of investment income, capital and the proceeds of sales by foreign investors may require governmental registration and/or approval in some emerging market countries. In addition, if a Fund invests in a market where restrictions are considered acceptable, a country could impose new or additional repatriation restrictions after investment that are unacceptable. This might require, among other things, applying to the appropriate authorities for a waiver of the restrictions or engaging in transactions in other markets designed to offset the risks of decline in that country. Further, some attractive securities may not be available, or may require a premium for purchase, due to foreign shareholders already holding the maximum amount legally permissible. In addition to withholding taxes on investment income, some countries with emerging capital markets may impose differential capital gain taxes on foreign investors. An issuer or governmental authority that controls the repayment of an emerging market country’s debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. A debtor’s willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation, and, in the case of a government debtor, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a |
whole
and the political constraints to which a government debtor may be subject.
Government debtors may default on their debt and may also be dependent
on expected disbursements from foreign governments, multilateral agencies
and others abroad to reduce principal and interest arrearages
on their debt. Holders of government debt may be requested to participate
in the rescheduling of such debt and to extend further loans to
government debtors. There may be limited legal recourse against the issuer
and/or guarantor. Remedies must, in some cases, be pursued in the
courts
of the defaulting party itself, and the ability of the holder of foreign
government fixed-income securities to obtain recourse may be subject to
the
political climate in the relevant country. In addition, no assurance can
be given that the holders of commercial bank debt will not contest
payments
to the holders of other foreign government debt obligations in the event
of default under their commercial bank loan agreements. Capital Markets: The capital markets in emerging market countries may be underdeveloped. They may have low or non-existent trading volume, resulting in a lack of liquidity and increased volatility in prices for such securities, as compared to securities from more developed capital markets. Emerging market securities may be substantially less liquid and more volatile than those of mature markets, and securities may be held by a limited number of investors. This may adversely affect the timing and pricing of a Fund’s acquisition or disposal of securities. There may be less publicly available information about emerging markets than would be available in more developed capital markets, and such issuers may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which U.S. companies are subject. In certain countries with emerging capital markets, reporting standards vary widely. As a result, traditional investment measurements used in the U.S., may not be applicable. Investing in certain countries with emerging capital markets may entail purchasing securities issued by or on behalf of entities that are insolvent, bankrupt, in default or otherwise engaged in an attempt to reorganize or reschedule their obligations, and in entities that have little or no proven credit rating or credit history. In any such case, the issuer’s poor or deteriorating financial condition may increase the likelihood that the investing Fund will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud. There may also be custodial restrictions or other non-U.S. or U.S. governmental laws or restrictions applicable to investments in emerging market countries. Practices in relation to settlement of securities transactions in emerging markets involve higher risks than those in developed markets, in part because a Fund may use brokers and counterparties that are less well capitalized, and custody and registration of assets in some countries may be unreliable. Supervisory authorities also may be unable to apply standards comparable to those in developed markets. Thus, there may be risks that settlement may be delayed and that cash or securities belonging to a Fund may be in jeopardy because of failures of or defects in the systems. In particular, market practice may require that payment be made before receipt of the security being purchased or that delivery of a security be made before payment is received. In such cases, default by a broker or bank (the “counterparty”) through whom the transaction is effected might cause a Fund to suffer a loss. There can be no certainty that a Fund will be successful in eliminating counterparty risk, particularly as counterparties operating in emerging market countries frequently lack the substance or financial resources of those in developed countries. There may also be a danger that, because of uncertainties in the operation of settlement systems in individual markets, competing claims may arise with respect to securities held by or to be transferred to a Fund. Regulatory authorities in some emerging markets currently do not provide the Public Company Accounting Oversight Board with the ability to inspect public accounting firms as required by U.S. law, including sufficient access to inspect audit work papers and practices, or otherwise do not cooperate with U.S. regulators, which potentially could expose investors to significant risks. Legal Systems: Investments in emerging market countries may be affected by the lack, or relatively early development, of legal structures governing private and foreign investments and private property. Such capital markets are emerging in a dynamic political and economic environment brought about by events over recent years that have reshaped political boundaries and traditional ideologies. Many emerging market countries have little experience with the corporate form of business organization and may not have well-developed corporation and business laws or concepts of fiduciary duty in the business context. The organizational structures of certain issuers in emerging markets may limit investor rights and recourse. A Fund may encounter substantial difficulties in obtaining and enforcing judgments against individuals and companies located in certain emerging market countries, either individually or in combination with other shareholders. It may be difficult or impossible to obtain or enforce legislation or remedies against governments, their agencies and sponsored entities. Additionally, in certain emerging market countries, fraud, corruption and attempts at market manipulation may be more prevalent than in developed market countries. Shareholder claims that are common in the U.S. and are generally viewed as determining misconduct, including class action securities law and fraud claims, generally are difficult or impossible to pursue as a matter of law or practicality in many emerging markets. The laws in certain countries with emerging capital markets may be based upon or be highly influenced by religious codes or rules. The interpretation of how these laws apply to certain investments may change over time, which could have a negative impact on those investments and a Fund. Russia launched a large-scale invasion of Ukraine on February 24, 2022. The extent and duration of the military action, resulting sanctions and resulting future market disruptions, including declines in its stock markets and the value of the ruble against the U.S. dollar, are impossible to predict, but could be significant. Any such disruptions caused by Russian military action or other actions (including cyberattacks and espionage) or resulting actual and threatened responses to such activity, including purchasing and financing restrictions, boycotts or changes in consumer or purchaser preferences, sanctions, tariffs or cyberattacks on the Russian government, Russian companies or Russian individuals, including politicians, may impact Russia’s economy and Russian issuers of securities in which a Fund invests. Actual and threatened responses to such activity, including purchasing restrictions, sanctions, tariffs or cyberattacks on the Russian government or Russian companies, may impact Russia’s economy and Russian issuers of securities in which a Fund invests. Actual and threatened responses to such military action may also impact the markets for certain Russian commodities, such as oil and natural gas, as well as other sectors of the Russian economy, and may likely have collateral impacts on such sectors globally, and may negatively affect global supply chains, inflation and global growth. These and any related events could significantly impact a Fund’s performance and the value of an investment in a Fund, even if a Fund does not have direct exposure to Russian issuers or issuers in other countries affected by the invasion. Governments in the United States and many other countries (collectively, the “Sanctioning Bodies”) have imposed economic sanctions, which can consist of prohibiting certain securities trades, certain private transactions in the energy sector, asset freezes and prohibition of all business, against certain Russian individuals, including politicians, and Russian corporate and banking entities. The Sanctioning Bodies, or others, could also institute broader sanctions on Russia, including banning Russia from global payments systems that facilitate cross-border payments. These sanctions, or even the threat of further sanctions, may result in the decline of the value and liquidity of Russian securities, a weakening of the ruble or other adverse |
consequences
to the Russian economy. These sanctions could also result in the immediate
freeze of Russian securities and/or funds invested in prohibited
assets, impairing the ability of a Fund to buy, sell, receive or deliver
those securities and/or assets. Sanctions could also result in Russia
taking
counter measures or retaliatory actions which may further impair the value
and liquidity of Russian securities. |
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European
Securities.
A Fund’s performance may be affected by political, social and economic
conditions in Europe, such as growth of economic output
(the gross national product of the countries in the region), the rate of
inflation, the rate at which capital is reinvested into European
economies,
the success of governmental actions to reduce budget deficits, the
resource self-sufficiency of European countries, interest rates in
European
countries, monetary exchange rates between European countries, and
conflict between European countries. Most developed countries in
Western
Europe are members of the European Union (“EU”), and many are also members
of the European Economic and Monetary Union (“EMU” or
“Eurozone”). The EMU is comprised of EU members that have adopted the Euro
currency. As part of EMU membership, member states relinquish control
of their own monetary policies to the European Central Bank. The EMU
requires Eurozone countries to comply with restrictions on interest
rates,
deficits, debt levels, and inflation rates; fiscal and monetary controls;
and other factors. Although the EMU has adopted a common currency
and
central bank, there is no fiscal union; therefore, money does not
automatically flow from countries with surpluses to those with deficits.
These restrictions
and characteristics may limit the ability of EMU member countries to
implement monetary policy to address regional economic conditions
and
significantly impact every European country and their economic partners,
including those countries that are not members of the EMU. In addition,
those EU member states that are not currently in the Eurozone (except
Denmark) are required to seek to comply with convergence criteria
to
permit entry to the Eurozone. The economies and markets of European
countries are often closely connected and interdependent, and events in
one
country in Europe can have an adverse impact on other European countries.
Changes in imports or exports, changes in governmental or European
regulations on trade, changes in the exchange rate of the Euro, the threat
of default or actual default by one or more European countries
on
its sovereign debt, and/or an economic recession in one or more European
countries may have a significant adverse effect on the economies of
other
European countries and their trading partners. The European financial markets have experienced and may continue to experience volatility and adverse trends due to concerns relating to economic downturns; national unemployment; ageing populations; rising government debt levels and the possible default on government debt in several European countries; public health crises; political unrest; economic sanctions; inflation; energy crises; the future of the Euro as a common currency; and war and military conflict, such as the Russian invasion of Ukraine. These events have affected the exchange rate of the Euro and may continue to significantly affect European countries. Responses to financial problems by European governments, central banks, and others, including austerity measures and other reforms, may not produce the desired results, may result in social unrest and may limit future growth and economic recovery or may have unintended consequences. In order to prevent further economic deterioration, certain countries, without prior warning, can institute “capital controls.” Countries may use these controls to restrict volatile movements of capital entering and exiting their country. Such controls may negatively affect a Fund’s investments. In addition, one or more countries may abandon the Euro and/or withdraw from the EU. The impact of these actions, especially if they occur in a disorderly fashion, could be significant and far-reaching. Many European nations are susceptible to economic risks associated with high levels of debt. Non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts, and other issuers have faced difficulties obtaining credit or refinancing existing obligations. A default or debt restructuring by any European country could adversely impact holders of that country’s debt and sellers of credit default swaps linked to that country’s creditworthiness, which may be located in other countries. Such a default or debt restructuring could affect exposures to other European countries and their companies as well. Further defaults on, or restructurings of, the debt of governments or other entities could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition, issuers have faced difficulties obtaining credit or refinancing existing obligations; financial institutions have in some cases required government or central bank support, have needed to raise capital and/or have been impaired in their ability to extend credit; and financial markets in Europe and elsewhere have experienced extreme volatility and declines in asset values and liquidity. Furthermore, certain European countries have had to accept assistance from supranational agencies such as the International Monetary Fund, the European Stability Mechanism or others. The European Central Bank has also intervened to purchase Eurozone debt in an attempt to stabilize markets and reduce borrowing costs. There can be no assurance that any creditors or supranational agencies will continue to intervene or provide further assistance, and markets may react adversely to any expected reduction in the financial support provided by these creditors. Certain European countries have experienced negative interest rates on certain fixed-income instruments. A negative interest rate is an unconventional central bank monetary policy tool where nominal target interest rates are set with a negative value (i.e., below zero percent) intended to help create self-sustaining growth in the local economy. Negative interest rates may result in heightened market volatility and may detract from a Fund’s performance to the extent a Fund is exposed to such interest rates. Certain European countries have also developed increasingly strained relationships with the U.S., and if these relationships were to worsen, they could adversely affect European issuers that rely on the U.S. for trade. In addition, the national politics of European countries have been unpredictable and subject to influence by disruptive political groups and ideologies. Secessionist movements, as well as government or other responses to such movements, may create instability and uncertainty in a country or region. European governments may be subject to change and such countries may experience social and political unrest. Unanticipated or sudden political or social developments may result in sudden and significant investment losses. The occurrence of terrorist incidents throughout Europe also could impact financial markets, as could military conflicts. The impact of these or other events is not clear but could be significant and far-reaching and materially impact the value and liquidity of a Fund’s investments. Russia’s war with Ukraine has negatively impacted European economic activity. The Russia/Ukraine war and Russia’s response to sanctions imposed by the U.S., EU, UK and others have and could continue to severely impact the performance of the economies of European and other countries, including adverse effects to global financial and energy markets, global supply chains and global growth, and inflation. Certain countries have applied to become new member countries of the EU, and these candidate countries’ accessions may become more controversial to the existing EU members. Some member states may repudiate certain candidate countries joining the EU due to concerns about the possible economic, immigration and cultural implications. Also, Russia may be opposed to the expansion of the EU to members of the former Eastern Bloc (i.e. ex-Soviet Union-controlled countries in Europe) and may, at times, take actions that could negatively impact European economic activity. The United Kingdom withdrew from the European Union on January 31, 2020 and entered into a transition period, which ended on December 31, |
2020.
The longer term economic, legal, and political framework between the
United Kingdom and the EU is still developing and may lead to ongoing
political and economic uncertainly and periods of increased volatility in
the United Kingdom, Europe, and the global market. Investments in
companies
with significant operations and/or assets in the United Kingdom could be
adversely impacted by the new legal, political, and regulatory
environment,
whether by increased costs or impediments to the implementation of
business plans. The uncertainty resulting from any further exits
from
the EU, or the possibility of such exits, would also be likely to cause
market disruption in the EU and more broadly across the global economy,
as
well as introduce further legal, political, and regulatory uncertainty in
Europe. |
■ |
Pacific
Basin Securities.
Many Asian countries may be subject to a greater degree of social,
political and economic instability than is the case in the U.S.
and Western European countries. Such instability may result from, among
other things, (i) authoritarian governments or military involvement in
political
and economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with
demands
for improved political, economic and social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring countries; and (v)
ethnic,
religious and racial disaffection. In addition, the Asia-Pacific
geographic region has historically been prone to natural disasters. The
occurrence of
a natural disaster in the region, including the subsequent recovery, could
negatively impact the economy of any country in the region. The
existence
of overburdened infrastructure and obsolete financial systems also
presents risks in certain Asian countries, as do environmental
problems. The economies of most of the Asian countries are heavily dependent on international trade and are accordingly affected by protective trade barriers and the economic conditions of their trading partners, principally, the U.S., Japan, China and the EU. The enactment by the U.S. or other principal trading partners of protectionist trade legislation, reduction of foreign investment in the local economies and general declines in the international securities markets could have a significant adverse effect upon the securities markets of the Asian countries. The economies of certain Asian countries may depend to a significant degree upon only a few industries and/or exports of primary commodities and, therefore, are vulnerable to changes in commodity prices that, in turn, may be affected by a variety of factors. In addition, certain developing Asian countries, such as the Philippines and India, are especially large debtors to commercial banks and foreign governments. Many of the Pacific Basin economies may be intertwined, so an economic downturn in one country may result in, or be accompanied by, an economic downturn in other countries in the region. Furthermore, many of the Pacific Basin economies are characterized by high inflation, underdeveloped financial services sectors, heavy reliance on international trade, frequent currency fluctuations, devaluations, or restrictions, political and social instability, and less efficient markets. The securities markets in Asia are substantially smaller, less liquid and more volatile than the major securities markets in the U.S., and some of the stock exchanges in the region are in the early stages of their development, as compared to the stock exchanges in the U.S. Equity securities of many companies in the region may be less liquid and more volatile than equity securities of U.S. companies of comparable size. Additionally, many companies traded on stock exchanges in the region are smaller and less seasoned than companies whose securities are traded on stock exchanges in the U.S. A high proportion of the shares of many issuers may be held by a limited number of persons and financial institutions, which may limit the number of shares available for investment by a Fund. In some countries, there is no established secondary market for securities. Therefore, liquidity of securities may be generally low and transaction costs generally high. Similarly, volume and liquidity in the bond markets in Asia are less than in the U.S. and, at times, price volatility can be greater than in the U.S. A limited number of issuers in Asian securities markets may represent a disproportionately large percentage of market capitalization and trading value. The limited liquidity of securities markets in Asia may also affect a Fund’s ability to acquire or dispose of securities at the price and time it wishes to do so. In addition, the Asian securities markets are susceptible to being influenced by large investors trading significant blocks of securities. |
The
legal systems in certain developing market Pacific Basin countries also
may have an adverse impact on a Fund. For example, while the potential
liability
of a shareholder in a U.S. corporation with respect to acts of the
corporation is generally limited to the amount of the shareholder’s
investment,
the notion of limited liability is less clear in certain Pacific Basin
countries. Similarly, the rights of investors in Pacific Basin companies
may be
more limited than those of shareholders of U.S. corporations. It may be
difficult or impossible to obtain and/or enforce a judgment in a Pacific
Basin
country. |
Many
stock markets are undergoing a period of growth and change which may
result in trading volatility and difficulties in the settlement and
recording
of transactions, and in interpreting and applying the relevant law and
regulations. With respect to investments in the currencies of Asian
countries,
changes in the value of those currencies against the U.S. dollar will
result in corresponding changes in the U.S. dollar value of a Fund’s
assets
denominated in those currencies. Certain developing economies in the
Asia-Pacific region have experienced currency fluctuations, devaluations,
and restrictions; unstable employment rates; rapid fluctuation in, among
other things, inflation and reliance on exports; and less efficient
markets. Currency fluctuations or devaluations in any one country can have
a significant effect on the entire Asia Pacific region. Holding
securities
in currencies that are devalued (or in companies whose revenues are
substantially in currencies that are devalued) will likely decrease the
value
of a Fund’s investments. Some developing Asian countries prohibit or
impose substantial restrictions on investments in their capital markets,
particularly
their equity markets, by foreign entities such as a Fund. For example,
certain countries may require governmental approval prior to investments
by foreign persons or limit the amount of investment by foreign persons in
a particular company or limit the investment by foreign persons
to only a specific class of securities of a company which may have less
advantageous terms (including price and shareholder rights) than
securities
of the company available for purchase by nationals of the relevant
country. There can be no assurance that a Fund will be able to obtain
required
governmental approvals in a timely manner. In addition, changes to
restrictions on foreign ownership of securities subsequent to a Fund’s
purchase
of such securities may have an adverse effect on the value of such shares.
Certain countries may restrict investment opportunities in issuers
or
industries deemed important to national
interests. |
■ |
Collateralized
Mortgage Obligations (“CMOs”). A
CMO is a debt obligation of a legal entity that is collateralized by
mortgages or mortgage-related
assets. These
securities may be issued by U.S. Government agencies, instrumentalities or
sponsored enterprises such as Fannie Mae or
Freddie Mac or by trusts formed by private originators of, or investors
in, mortgage loans, including savings and loan associations, mortgage
bankers,
commercial banks, insurance companies, investment banks and special
purpose subsidiaries of the foregoing. CMOs
divide the cash flow generated
from the underlying mortgages or mortgage pass-through securities into
different groups referred to as “tranches,” which are typically
retired
sequentially over time in order of priority. Interest
and prepaid principal is paid, in most cases, on a monthly basis. CMOs may
be collateralized
by whole mortgage loans or private mortgage bonds, but they
are
more typically collateralized by portfolios of mortgage pass-through
securities
guaranteed by GNMA; FHLMC and FNMA (each a government-sponsored enterprise
and
may be owned
entirely by private shareholders); and
their income streams. The issuers of CMOs are structured as trusts or corporations established for the purpose of issuing such CMOs and often have no assets other than those underlying the securities and any credit support provided. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. Government or government-sponsored enterprises, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. Government, any government-sponsored enterprise, or any other person or entity. Prepayments could cause early retirement of CMOs. Payment of interest or principal on certain tranches of CMOs may be subject to contingencies, and certain tranches may bear some or all of the risk of default on the underlying mortgages. CMO tranches are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of schedule, the CMO tranches with the earliest maturities generally will be retired prior to their stated maturity date. Thus, the early retirement of particular tranches of a CMO would have a similar effect as the prepayment of mortgages underlying other MBS. Conversely, slower than anticipated prepayments can extend the effective maturities of CMOs, subjecting them to a greater risk of decline in market value in response to rising interest rates than traditional debt securities, and therefore, potentially increasing the volatility of a Fund’s investments in CMOs. An increase or decrease in prepayment rates (resulting from a decrease or increase in mortgage interest rates) will affect the yield, average life, and price of CMOs. Under certain CMO structures, certain tranches have priority over others with respect to the receipt of repayments on the mortgages. Therefore, depending on the type of CMOs in which a Fund invests, the investment may be subject to a greater or lesser risk of prepayment than other types of mortgage-related securities. The prices of certain CMOs, depending on their structure and the rate of prepayments, can be volatile. Some CMOs may also not be as liquid as other securities. |
■ |
Commercial
Mortgage-Backed Securities (“CMBSs”).
CMBS include securities that reflect an interest in, and are secured by,
mortgage loans on commercial
real estate property. CMBS are generally multi-class or pass-through
securities backed by a mortgage loan or a pool of mortgage loans
secured
by commercial property, such as industrial and warehouse properties,
office buildings, retail space and shopping malls, multifamily properties
and
cooperative apartments. The commercial mortgage loans that underlie CMBS
are generally not amortizing or not fully amortizing. That is, at
their
maturity date, repayment of the remaining principal balance or “balloon”
is due and is repaid through the attainment of an additional loan or
sale
of the property. Many of the risks of investing in CMBS reflect the risk
of investing in the real estate securing the underlying mortgage loans.
These
risks reflect the effects of local and other economic conditions on real
estate markets, the ability of tenants to make loan payments, and the
ability
of a property to attract and retain tenants. CMBS may be less liquid and
exhibit greater price volatility than other types of mortgage- or
asset-backed
securities. |
■ |
Mortgage
Dollar Rolls. A
Fund may enter into mortgage dollar rolls in which a Fund sells
mortgage-backed securities for delivery in the current month
and simultaneously contracts with the same counterparty to repurchase
fungible securities (e.g., same type, coupon, and maturity) on a
specified
future date at a pre-determined price. During the roll period, a Fund
would lose the right to receive principal (including prepayments of
principal)
and interest paid on the securities sold. However, a Fund would benefit to
the extent of any difference between the price received for the
securities
sold and the lower forward price for the future purchase (often referred
to as the “drop”) or fee income plus the return
earned on the cash
proceeds of the securities sold until the settlement date of the forward
purchase. If
such benefits do
not exceed
the income, capital appreciation
and gain due
to mortgage prepayments that would have been realized on the securities
sold as part of the mortgage dollar roll, the Fund
would incur a loss. A Fund only enters into covered dollar rolls, which means that a Fund will earmark cash or liquid securities to secure its obligation for the forward commitment to buy mortgage-backed securities plus any accrued interest, marked-to-market daily. Mortgage dollar roll transactions may be considered a borrowing under certain circumstances. Since a Fund may reinvest the cash proceeds from the sale, the transactions may involve leverage. Each mortgage dollar roll transaction is accounted for as a sale or purchase of a portfolio security and a subsequent purchase or sale of a substantially similar security in the forward market. Mortgage dollar roll transactions may result in higher transaction costs, increase interest rate risk or result in an increased portfolio turnover rate. Mortgage dollar rolls involve the risk that the market value of the securities subject to a Fund’s forward purchase commitment may decline below, or the market value of the securities subject to a Fund’s forward sale commitment may increase above, the exercise price of the forward commitment. Additionally, because dollar roll transactions do not require the purchase and sale of identical securities, the characteristics of the security delivered to a Fund may be less favorable than the security delivered to the dealer. The successful use of dollar rolls may depend upon a sub-advisor’s ability to correctly predict interest rates and prepayments, depending on the underlying security. There is no assurance that dollar rolls can be successfully employed. In addition, in the event the buyer of the securities under a mortgage dollar roll files for bankruptcy or becomes insolvent, a Fund’s use of the proceeds of the sale portion of the transaction may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to purchase the similar securities in the forward transaction. |
■ |
Mortgage
Pass-Through Securities. Mortgage
pass-through securities are securities representing interests in “pools”
of mortgages in which payments
of both interest and principal on the securities are generally made
monthly, in effect “passing through” monthly payments made by the
individual
borrowers on the residential mortgage loans that underlie the securities
(net of fees paid to the issuer or guarantor of the securities). There
are
generally three types of mortgage pass-through securities: (1) those
issued by the U.S. government or one of its agencies or instrumentalities,
such
as GNMA, FNMA, and FHLMC; (2) those issued by private issuers that
represent an interest in or are collateralized by pass-through securities
issued
or guaranteed by the U.S. government or one of its agencies or
instrumentalities; and (3) those issued by private issuers that represent
an interest
in or are collateralized by whole mortgage loans or pass-through
securities without a government guarantee but that usually have some
|
form
of private credit enhancement. The rate of pre-payments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. To the extent that unanticipated rates of pre-payment on underlying mortgages increase the effective duration of a mortgage-related security, the volatility of such security can be expected to increase. Government and Government-Related Mortgage Pass-Through Securities. Payment of principal and interest on some mortgage pass-through securities (but not the market value of the securities themselves) may be guaranteed by the full faith and credit of the U.S. Government, as in the case of securities guaranteed by GNMA, or guaranteed by government-sponsored enterprises, as in the case of securities guaranteed by FNMA or FHLMC, which are supported only by the discretionary authority of the U.S. Government to purchase the agency’s obligations. There are a number of important differences among the agencies of the U.S. government and government-sponsored enterprises that issue mortgage-related securities and among the securities that they issue. Such agencies and securities include: |
■ |
GNMA
Mortgage Pass-Through Certificates (“Ginnie Maes”)
— GNMA is a wholly owned U.S. Government corporation within the U.S.
Department
of Housing and Urban Development. Ginnie Maes represent an undivided
interest in a pool of mortgages that are insured by the Federal
Housing Administration or the Farmers Home Administration or guaranteed by
the Veterans Administration. Ginnie Maes entitle the holder
to receive all payments (including prepayments) of principal and interest
owed by the individual mortgagors, net of fees paid to GNMA and
to
the issuer that assembles the mortgage pool and passes through the monthly
mortgage payments to the certificate holders (typically, a mortgage
banking firm), regardless of whether the individual mortgagor actually
makes the payment. Because payments are made to certificate holders
regardless of whether payments are actually received on the underlying
mortgages, Ginnie Maes are of the “modified pass-through” mortgage
certificate type. GNMA guarantees the timely payment of principal and
interest on Ginnie Maes. GNMA’s guarantee is backed by the full
faith
and credit of the United States, and GNMA has unlimited authority to
borrow funds from the U.S. Treasury to make payments under the
guarantee.
The market for Ginnie Maes is highly liquid because of the government
guarantee, the size of the market, and the active participation
in
the secondary market of security dealers and a variety of
investors. |
■ |
FHLMC
Mortgage Participation Certificates (“Freddie Macs”)
— FHLMC is a government-sponsored enterprise owned by stockholders; it is
similar
to Fannie Mae. FHLMC issues participation certificates that represent
interests in mortgages from its national portfolio. Freddie Macs are
not
guaranteed by the United States and do not constitute a debt or obligation
of the United States. Freddie Macs represent interests in groups of
specified
first lien residential conventional mortgages underwritten and owned by
FHLMC. Freddie Macs entitle the holder to timely payment of interest,
which is guaranteed by FHLMC. FHLMC guarantees either ultimate collection
or timely payment of all principal payments on the underlying
mortgage loans. In cases where FHLMC has not guaranteed timely
payment of principal, FHLMC may remit the amount due because of
its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it
becomes
payable. |
■ |
FNMA
Guaranteed Mortgage Pass-Through Certificates (“Fannie
Maes”)
— FNMA is a government-sponsored enterprise owned by stockholders;
it is similar to Freddie Mac. It is subject to general regulation by the
Federal Housing Finance Authority (“FHFA”). Fannie Maes entitle
the
holder to timely payment of interest, which is guaranteed by FNMA. FNMA
guarantees either ultimate collection or timely payment of all
principal
payments on the underlying mortgage loans. In cases where FNMA has not
guaranteed timely payment of principal, FNMA may remit the amount
due because of its guarantee of ultimate payment of principal at any time
after default on an underlying mortgage, but in no event later
than
one year after it becomes payable. Fannie Maes represent an undivided
interest in a pool of conventional mortgage loans secured by first
mortgages
or deeds of trust, on one family or two to four family, residential
properties. FNMA is obligated to distribute scheduled monthly installments
of principal and interest on the mortgages in the pool, whether or not
received, plus full principal of any foreclosed or otherwise liquidated
mortgages. |
The U.S.
Treasury has historically had the authority to purchase obligations of
Fannie Mae and Freddie Mac. However, in 2008, due to capitalization
concerns,
Congress provided the Treasury with additional authority to lend Fannie
Mae and Freddie Mac emergency funds and to purchase their stock.
In September 2008, the Treasury and the FHFA announced that FNMA and FHLMC
had been placed in conservatorship. Since that time, FNMA and
FHLMC have received significant capital support through Treasury preferred
stock purchases, as well as Treasury and Federal Reserve purchases
of
their mortgage - backed securities. The FHFA and the U.S. Treasury
(through its agreement to purchase FNMA and FHLMC preferred stock) have
imposed
strict limits on the size of their mortgage portfolios. While the
mortgage-backed securities purchase programs ended in 2010, the Treasury
continued
its support for the entities’ capital as necessary to prevent a negative
net worth. When a credit rating agency downgraded long-term U.S.
Government
debt in August 2011, the agency also downgraded FNMA and FHLMC’s bond
ratings, from AAA to AA+, based on their direct reliance on
the U.S. Government (although that rating did not directly relate to their
mortgage-backed securities). In August 2012, the Treasury amended its
preferred
stock purchase agreements to provide that FNMA’s and FHLMC’s portfolios
will be wound down at an annual rate of 15 percent (up from the
previously agreed annual rate of 10 percent), requiring them to reach the
$250 billion target by December 31, 2018. FNMA and FHLMC were below
the $250 billion cap for year-end 2018. On December 21, 2017, a letter agreement between the Treasury and Fannie Mae and Freddie Mac changed the terms of the senior preferred stock certificates issued to the Treasury to permit the GSEs each to retain a $3 billion capital reserve, quarterly. Under the 2017 letter, each GSE paid a dividend to Treasury equal to the amount that its net worth exceeded $3 billion at the end of each quarter. On September 30, 2019, the Treasury and the FHFA, acting as conservator to Fannie Mae and Freddie Mac, announced amendments to the respective senior preferred stock certificates that will permit the GSEs to retain earnings beyond the $3 billion capital reserves previously allowed through the 2017 letter agreements. Fannie Mae and Freddie Mac are now permitted to maintain capital reserves of $25 billion and $20 billion, respectively. In late 2020, the FHFA issued a new capital rule requiring Fannie Mae and Freddie Mac to hold $283 billion in unadjusted total capital as of June 30, 2020, based on their assets at the time. In January 2021, the FHFA and the U.S. Treasury agreed to amend the preferred stock purchase agreements for the shares in Fannie Mae and Freddie Mac that the federal government continues to hold. The amendments permit Fannie Mae and Freddie Mac to retain all earnings until they have reached the requirements set by the 2020 capital rule. The problems faced by FNMA and FHLMC, resulting from their being placed into federal conservatorship and receiving significant U.S. Government |
support,
sparked serious debate among federal policymakers regarding the continued
role of the U.S. Government in providing liquidity for mortgage
loans. In December 2011, Congress enacted the Temporary Payroll Tax Cut
Continuation Act of 2011 which, among other provisions, requires
that FNMA and FHLMC increase their single-family guaranty fees by at least
10 basis points and remit this increase to the Treasury with respect
to all loans acquired by FNMA or FHLMC on or after April 1, 2012 and
before January 1, 2022. There have been discussions among policymakers,
however, as to whether FNMA and FHLMC should be nationalized, privatized,
restructured or eliminated altogether. FNMA and FHLMC
also are the subject of several continuing legal actions and
investigations over certain accounting, disclosure or corporate governance
matters,
which (along with any resulting financial restatements) may continue to
have an adverse effect on the guaranteeing entities. Under the direction of the FHFA, FNMA and FHLMC jointly developed a common securitization platform for the issuance of a uniform mortgage-backed security (“UMBS”) (the “Single Security Initiative”) that aligns the characteristics of FNMA and FHLMC certificates. In June 2019, under the Single Security Initiative, FNMA and FHLMC started issuing UMBS in place of their prior offerings of TBA-eligible securities. The Single Security Initiative seeks to support the overall liquidity of the TBA market by aligning the characteristics of FNMA and FHLMC certificates. The effects that the Single Security Initiative may have on the market for TBA and other mortgage-backed securities are uncertain. |
■ |
Mortgage
Pass-Through Securities Issued by Private Organizations
— The pools underlying privately-issued mortgage pass-through securities
consist of mortgage loans secured by mortgages or deeds of trust creating
a first lien on commercial, residential, residential multi-family
and
mixed residential/commercial properties. Pools created by non-governmental
issuers generally offer a higher rate of interest than government
and
government-related pools because there are no direct or indirect
government guarantees of payments in such pools. The timely payment of
interest
and principal on mortgage loans in these pools may be supported by various
other forms of insurance or guarantees, including individual loan,
pool and hazard insurance, subordination and letters of credit. Such
insurance and guarantees may be issued by private insurers, banks and
mortgage poolers.
There is no assurance that private guarantors or insurers, if any, will
meet their obligations. Timely payment of interest and principal
of these pools also may be partially supported by various enhancements
such as over-collateralization and senior/subordination structures
and
by various forms of insurance or guarantees, including individual loan,
title, pool and hazard insurance. The insurance and guarantees are
issued
by government entities, private insurers or the mortgage poolers. These
mortgage pass-through securities do not have the same credit standing
as U.S. government guaranteed securities and generally offer a higher
yield than similar securities issued by a government entity. Some
mortgage
pass-through securities issued by private organizations may not be readily
marketable, may be more difficult to value accurately and may
be more volatile than similar securities issued by a government
entity. Many transactions in the fixed-rate mortgage pass-through securities occur through the use of TBA transactions. TBA transactions are generally conducted in accordance with widely-accepted guidelines that establish commonly observed terms and conditions for execution, settlement and delivery. In a TBA transaction, the buyer and seller decided on general trade parameters, such as agency, settlement date, par amount and price. The actual pools delivered generally are determined two days prior to settlement date. Default by or bankruptcy of a counterparty to a TBA transaction would expose a Fund to possible loss because of adverse market action, expenses or delays in connection with the purchase or sale of the pools of mortgage pass-through securities specified in the TBA transaction. |
■ |
Stripped
Mortgage-Backed Securities (“SMBSs”).
SMBS are derivative multi-class mortgage securities. SMBS are created when
a U.S. government
agency or a financial institution separates the interest and principal
components of a MBS and sells them as individual securities. SMBS
may
be issued by agencies or instrumentalities of the U.S. Government, or by
private originators of, or investors in, mortgage loans, including
savings
and loan associations, mortgage banks, commercial banks, investment banks
and special purpose entities of the foregoing. SMBS are usually
structured
with two classes that receive different proportions of the interest and
principal distributions on a pool of mortgage assets. A common type
of
SMBS will have one class receiving some of the interest and most of the
principal from the mortgage assets, while the other class will receive
most of
the interest and the remainder of the principal. In the most extreme case,
one class will receive all of the interest (the interest-only or “IO”
class), while
the other class will receive the entire principal (the principal-only or
“PO” class). A Fund may invest in both the IO class and the PO class. The
prices
of stripped MBS may be particularly affected by changes in interest rates
and the rate of principal payments (including prepayments) on the
related
underlying mortgage assets. As interest rates fall, prepayment rates tend
to increase, which tends to reduce prices of IOs and increase prices
of
POs. Rising interest rates can have the opposite effect. The yield to
maturity on an IO class is extremely sensitive to the rate of principal
payments (including
pre-payments) on the related underlying mortgage assets, and a rapid rate
of principal payments in excess of that considered in pricing the
securities may have a material adverse effect on a Fund’s yield to
maturity from these securities. If the underlying mortgage assets
experience greater
than anticipated pre-payments of principal, a Fund may fail to recoup some
or all of its initial investment in these securities even if the
security
is in one of the highest rating categories. In addition, there are certain
types of IOs that represent the interest portion of a particular class as
opposed
to the interest portion of the entire pool. The sensitivity of this type
of IO to interest rate fluctuations may be increased because of the
characteristics
of the principal portion to which they relate. The secondary market for
stripped MBS may be more volatile and less liquid than that for
other
MBS, potentially limiting a Fund’s ability to buy or sell those securities
at any particular time. |
■ |
Commercial
Paper.
Commercial paper, the interest on which is exempt from federal income tax,
is issued by municipalities to help finance short-term
capital or operating needs in anticipation of future tax or other
revenue. |
■ |
General
Obligation
Bonds.
General obligation bonds are secured by the pledge of the issuer’s full
faith, credit, and usually, taxing power
and are payable
from and backed only by the issuer’s general unrestricted revenues and not
from any particular fund or source. The characteristics and method
of enforcement of general obligation bonds vary according to the law
applicable to the particular issuer, and payment may be dependent
upon
appropriation by the issuer’s legislative body. The
taxing power may be an unlimited ad valorem tax or a limited tax, usually
on real estate and personal
property. Most states do not tax real estate, but leave that power to
local units of government. |
■ |
Revenue
Obligations.
Revenue obligations,
such as industrial development bonds,
are backed by the revenue cash flow of a project or facility. The
interest
on such obligations is payable only from the revenues derived from a
particular project, facility, specific excise tax or other revenue source.
Revenue
obligations are not a debt or liability of the local or state government
and do not obligate that government to levy or pledge any form of
taxation
or to make any appropriation for payment. |
■ |
BDCs.
BDCs are a specialized form of closed-end fund that invest generally in
small developing companies and financially troubled businesses. The
Investment
Company Act imposes certain restraints upon the operation of a BDC. For
example, BDCs are required to invest at least 70% of their total
assets primarily in securities of private companies or thinly traded U.S.
public companies, cash, cash equivalents, U.S. government securities and
high
quality debt investments that mature in one year or less. As a result,
BDCs generally invest in private companies and thinly traded securities of
public
companies, including debt instruments. Generally, little public
information exists for private and thinly traded companies and there is a
risk that
investors may not be able to make fully informed investment decisions.
Many debt investments in which a BDC may invest will not be rated by a
credit
rating agency and will be below investment grade quality. Risks faced by
BDCs include competition for limited BDC investment opportunities;
the
liquidity of a BDC’s private investments; uncertainty as to the value of a
BDC’s private investments; risks associated with access to capital and
leverage;
and reliance on the management of a BDC. A Fund’s investments in BDCs are
similar and include portfolio company risk, leverage risk, market
and valuation risk, price volatility risk and liquidity risk.
Historically, shares of BDCs have frequently traded at a discount to their
net asset value,
which discounts have, on occasion, been substantial and lasted for
sustained periods of time. |
■ |
ETFs. A
Fund may purchase shares of ETFs. ETFs trade like a common stock and
passive ETFs usually represent a fixed portfolio of securities designed
to
track the performance and dividend yield of a particular domestic or
foreign market index. Typically, a Fund would purchase passive ETF
shares to obtain
exposure to all or a portion of the stock or bond market. As a shareholder
of an ETF, a Fund would be subject to its ratable share of the ETF’s
expenses,
including its advisory and administration expenses. An investment in an
ETF generally presents the same primary risks as an investment in a
conventional
mutual fund (i.e., one that is not exchange traded) that has the same
investment objective, strategies, and policies. The price of an ETF
can
fluctuate within a wide range, and a Fund could lose money investing
in an ETF if the prices of the securities owned by the ETF decline in
value. In
addition, ETFs are subject to the following risks that do not apply to
conventional mutual funds: (1) the market price of the ETF’s shares may
trade at
a discount or premium to their NAV per share; (2) an active trading market
for an ETF’s shares may not develop or be maintained; or (3) trading of
an
ETF’s shares may be halted if the listing exchange’s officials deem such
action appropriate, the shares are de-listed from the exchange, or the
activation
of market-wide “circuit breakers” (which are tied to large decreases in
stock prices) halts stock trading
generally. |
■ |
Money
Market Funds. A
Fund can invest free cash balances in registered open-end investment
companies regulated as money market funds under the
Investment Company Act, to provide liquidity or for defensive
purposes. A Fund would invest in money market funds rather
than purchasing individual
short-term investments. Although a money market fund is designed to be a
relatively low risk investment, it is not free of risk. Despite the
short
maturities and high credit quality of a money market fund’s investments,
increases in interest rates and deteriorations in the credit quality of
the
instruments the money market fund has purchased may reduce the money
market fund’s yield and can cause the price of a money market security
to decrease. In addition, a money market fund is subject to the risk that
the value of an investment may be eroded over time by inflation. If
the
liquidity of a money market fund’s portfolio deteriorates below certain
levels, the money market fund may suspend redemptions (i.e., impose a
redemption
gate) and thereby prevent a Fund from selling its investment in the money
market fund, or impose a fee of up to 2% on amounts redeemed
from the money market fund. |
1 | Engage in dollar rolls or purchase or sell securities on a when-issued or forward commitment basis. The purchase or sale of when-issued securities enables an investor to hedge against anticipated changes in interest rates and prices by locking in an attractive price or yield. The price of when-issued securities is fixed at the time the commitment to purchase or sell is made, but delivery and payment for the when-issued securities takes place at a later date, normally one to two months after the date of purchase. During the period between purchase and settlement, no payment is made by the purchaser to the issuer and no interest accrues to the purchaser. Such transactions therefore involve a risk of loss if the value of the security to be purchased declines prior to the settlement date or if the value of the security to be sold increases prior to the settlement date. A sale of a when-issued security also involves the risk that the other party will be unable to settle the transaction. Dollar rolls are a type of forward commitment transaction. Purchases and sales of securities on a forward commitment basis involve a commitment to purchase or sell securities with payment and delivery to take place at some future date, normally one to two months after the date of the transaction. As with when-issued securities, these transactions involve certain risks, but they also enable an investor to hedge against anticipated changes in interest rates and prices. Forward commitment transactions are executed for existing obligations, whereas in a when-issued transaction, the obligations have not yet been issued. |
2 | Invest in other investment companies (including affiliated investment companies) to the extent permitted by the Investment Company Act, or exemptive relief granted by the SEC. |
3 | Loan securities to broker-dealers or other institutional investors. Securities loans will not be made if, as a result, the aggregate amount of all outstanding securities loans by a Fund exceeds 33¹/3% of its total assets (including the market value of collateral received). For purposes of complying with a Fund’s investment policies and restrictions, collateral received in connection with securities loans is deemed an asset of a Fund to the extent required by law. |
4 | Enter into repurchase agreements. A repurchase agreement is an agreement under which securities are acquired by a Fund from a securities dealer or bank subject to resale at an agreed upon price on a later date. The acquiring Fund bears a risk of loss in the event that the other party to a repurchase agreement defaults on its obligations and a Fund is delayed or prevented from exercising its rights to dispose of the collateral securities. However, the Manager or the sub-advisors, as applicable, attempt to minimize this risk by entering into repurchase agreements only with financial institutions that are deemed to be of good financial standing. |
5 | Purchase securities sold in private placement offerings made in reliance on the “private placement” exemption from registration afforded by Section 4(a)(2) of the Securities Act and resold to qualified institutional buyers under Rule 144A under the Securities Act. A Fund will not invest more than 15% of its net assets in Section 4(a)(2) securities and illiquid securities unless the Manager or the sub-advisor, as applicable, determines that any Section 4(a)(2) securities held by such Fund in excess of this level are liquid. |
1 | Each
Fund, except American Beacon Garcia Hamilton Quality Bond Fund: Purchase
or sell real estate or real estate limited partnership interests,
provided,
however, that a Fund may invest in securities secured by real estate or
interests therein or issued by companies which invest in real estate
or
interests therein when consistent with the other policies and limitations
described in the Prospectus. American Beacon Garcia Hamilton Quality Bond Fund: Purchase or sell real estate or real estate limited partnership interests, provided, however, |
that the Fund may dispose of real estate acquired as a result of the ownership of securities or other instruments and invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein when consistent with the other policies and limitations described in the Prospectus. |
2 | Invest in physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent a Fund from purchasing or selling foreign currency, options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed-delivery basis, and other similar financial instruments). |
3 | Engage in the business of underwriting securities issued by others, except to the extent that, in connection with the disposition of securities, a Fund may be deemed an underwriter under federal securities law. |
4 | Each
Fund, except American Beacon Garcia Hamilton Quality Bond Fund: Lend any
security or make any other loan except (i) as otherwise permitted
under the Investment Company Act, (ii) pursuant to a rule,
order or interpretation issued by the SEC or its staff, (iii) through the
purchase of
a portion of an issue of debt securities in accordance with a Fund’s
investment objective, policies and limitations, or (iv) by engaging in
repurchase
agreements with respect to portfolio securities. American Beacon Garcia Hamilton Quality Bond Fund: Lend any security or make any other loan except (i) as otherwise permitted under the Investment Company Act, (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff, (iii) through the purchase of a portion of an issue of debt securities in accordance with a Fund’s investment objective, policies and limitations, or (iv) by engaging in repurchase agreements. |
5 | Issue any senior security except as otherwise permitted (i) under the Investment Company Act or (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff. |
6 | Borrow money, except as otherwise permitted under the Investment Company Act or pursuant to a rule, order or interpretation issued by the SEC or its staff, including (i) as a temporary measure, (ii) by entering into reverse repurchase agreements, and (iii) by lending portfolio securities as collateral. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other similar financial instruments shall not constitute borrowing. |
7 | Invest more than 5% of its total assets (taken at market value) in securities of any one issuer, other than obligations issued by the U.S. Government, its agencies and instrumentalities, or purchase more than 10% of the voting securities of any one issuer, with respect to 75% of a Fund’s total assets. |
8 | Each Fund, except American Beacon Garcia Hamilton Quality Bond Fund: Invest more than 25% of its total assets in the securities of companies primarily engaged in any one industry provided that: (i) this limitation does not apply to obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities; and (ii) municipalities and their agencies and authorities are not deemed to be industries. For purposes of this restriction, the Fund will regard only tax-exempt securities issued by municipalities and their agencies not to be an industry. |
American
Beacon Garcia Hamilton Quality Bond Fund: Invest more than 25% of its
assets in the securities of companies primarily engaged in any
particular
industry or group of industries provided that this limitation does not
apply to (i) obligations issued by or guaranteed by the U.S. Government,
its agencies or instrumentalities; and (ii) tax exempt securities issued
by municipalities and their agencies and
authorities. |
1 | Invest more than 15% of its net assets in illiquid securities, including time deposits and repurchase agreements that mature in more than seven days; or |
2 | Each
Fund, except American Beacon Garcia Hamilton Quality Bond Fund: Purchase
securities on margin or effect short sales, except that a Fund
may
obtain such short term credits as may be necessary for the clearance of
purchases or sales of securities. |
American Beacon Garcia Hamilton Quality Bond Fund: Purchase securities on margin, except that (1) the Fund may obtain such short term credits as necessary for the clearance of transactions, and (2) the Fund may make margin payments in connection with foreign currency, futures contracts, options, forward contracts, swaps, caps, floors, collars, securities purchased or sold on a forward-commitment or delayed-delivery basis or other financial instruments. |
1 | a complete list of holdings for each Fund on an annual and semi-annual basis in the reports to shareholders within sixty days of the end of each fiscal semi-annual period and in publicly available filings of Form N-CSR with the SEC within ten days thereafter (available on the SEC’s website at www.sec.gov); |
2 | a complete list of holdings for each Fund as of the end of each fiscal quarter in publicly available filings of Form N-PORT with the SEC within sixty days of the end of the fiscal quarter (available on the SEC’s website at www.sec.gov); |
3 | a complete list of holdings for each Fund as of the end of each month on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of the month; and |
4 | ten largest holdings for each Fund as of the end of each calendar quarter on the Funds’ website (www.americanbeaconfunds.com) and in sales materials approximately fifteen days after the end of the calendar quarter. |
Service
Provider |
Service |
Holdings
Access |
Manager |
Investment
management and administrator |
Complete
list on intraday basis with no lag |
Sub-Advisor |
Investment
management |
Holdings
under sub-advisor’s management on
intraday basis with no lag |
State
Street Bank and Trust Co. (“State
Street”) and its designated foreign
sub-custodians |
Securities
lending agent for Funds that participate in securities lending,
Funds’ custodian and foreign custody manager, and foreign
sub-custodians |
Complete
list on intraday basis with no lag |
PricewaterhouseCoopers
LLP |
Funds’
independent registered public accounting firm |
Complete
list on annual basis with no lag |
Abel
Noser Corp. |
Trade
execution analysis for a sub-advisor |
Complete
list on daily basis with no lag |
ACA
Performance Services |
GIPS
verification firm for a sub-advisor |
Complete
list on a monthly basis with lag |
Advent/Tamale |
Research
management system for a sub-advisor |
Complete
list on a daily basis with lag |
Ashland
Partners |
Performance
verification for a sub-advisor |
Complete
list on periodic basis with lag |
BBH
Infomediary |
SWIFT
messaging service provider for a sub-advisor |
Complete
list on daily basis with no lag |
BizAnalytica,
LLC |
Consulting
Service |
Complete
list on daily basis with no lag |
Bloomberg,
L.P. |
Performance
and portfolio analytics reporting |
Complete
list on daily basis with no lag |
BondEdge |
Financial
analytic database |
Partial
list on a daily basis with lag |
Broadridge/ProxyEdge |
Proxy
voting research provider for a sub-advisor |
Complete
list on a daily basis with lag |
Brown
Brothers Harriman |
Corporate
Action Management for a sub-advisor |
Complete
List on a daily basis with no lag |
Charles
River Systems |
Trade
order management for sub-advisors |
Complete
list on daily basis with no lag |
Chicago
Clearing |
Class
Actions |
Complete
list on a quarterly basis with no lag |
Commcise |
Transaction
cost analysis, trade execution analysis for a sub-advisor |
Partial
list on daily basis with no lag |
DTCC |
Trade
settlement services for a sub-advisor |
Partial
list on daily basis with no lag |
Eagle
Investment Systems Corp. |
Portfolio
accounting system for a sub-advisor |
Complete
list on a daily basis with no lag |
Electra |
Reconciliation
System for sub-advisors |
Complete
list on daily basis with no lag |
Eze
Castle |
Trade
order management for sub-advisors |
Complete
list on a daily basis with no lag |
FactSet
Research Systems, Inc. |
Performance
and portfolio analytics reporting for the Manager and sub-advisors |
Complete
list on daily basis with no lag |
FIS |
Portfolio
Accounting for a sub-advisor |
Complete
list on daily basis with no lag |
Fiserv |
Portfolio
Accounting |
Complete
list on daily basis with no lag |
FXTransparency |
Trade
Execution Assessment |
Complete
list on weekly basis with no lag |
Glass
Lewis & Co |
Proxy
voting services for sub-advisor |
Partial
list on a periodic basis with lag |
IEX
Data Analytics LLC (IEX Astral) |
Analytical
and reporting tool for a sub-advisor |
Partial
list on daily basis with no lag |
Institutional
Shareholder Services (“ISS”) |
Proxy
voting research provider to sub-advisors, and share recall services
provider to the Manager |
Complete
list on daily basis with no lag |
Investment
Technology Group, Inc. |
Fair
valuation of portfolio securities for Funds with significant foreign
securities holdings; transaction cost analysis for
sub-advisor |
Complete
list on daily basis with no lag and more
frequently when the Manager seeks advice
with respect to certain holdings |
KPMG
International |
Service
provider to State Street |
Complete
list on annual basis with lag |
LexisNexis |
OFAC
compliance service for a sub-advisor |
Complete
list on a weekly basis with lag |
MSCI
Barra, Inc. |
Analytics
platform to support portfolio risk management for a sub-advisor |
Complete
list on daily basis with no lag |
Northern
Trust |
Back
Office Operation for a sub-advisor |
Complete
list on a daily basis with no lag |
Omgeo
LLC |
Automated
trade matching service for sub-advisors |
Partial
list on a daily basis with no lag |
Parametric
Portfolio Associates LLC |
Provides
certain administrative services related to the equitization of
cash balances for certain Funds |
Partial
list on a daily basis with no lag |
Portia |
Portfolio
Accounting for a sub-advisor |
Complete
list on a daily basis with no lag |
Russell |
Ratings
Agency |
Complete
list on a daily basis with lag |
Service
Provider |
Service |
Holdings
Access |
SS&C
Advent |
Portfolio
Accounting for a sub-advisor |
Complete
list on a daily basis with lag |
SS&C
Eze |
Trading
and Order Management for a sub-advisor |
Complete
list on a daily basis with no lag |
SS&C
Vision FI |
Client
and investor reporting system for a sub-advisor |
Complete
list on a daily basis with no lag |
Street
Account |
Investment
research for a sub-advisor |
Partial
list on a periodic basis with lag |
Trading
Technologies International, Inc. |
Trade
execution analysis for a sub-advisor |
Complete
list on daily basis with no lag |
Varden
Technologies, Inc. |
Client
and investor reporting system |
Complete
list on a daily basis with no lag |
Virtu
ITG LLC |
Transaction
cost analysis Trade execution analysis for a sub-advisor |
Partial
list on a daily basis with lag |
1 | Recipients of portfolio holdings information must agree in writing to keep the information confidential until it has been posted to the Funds’ website and not to trade based on the information; |
2 | Holdings may only be disclosed as of a month-end date; |
3 | No compensation may be paid to the Funds, the Manager or any other party in connection with the disclosure of information about portfolio securities; and |
4 | A member of the Manager’s Compliance staff must approve requests for nonpublic holdings information. |
Name
and Year of
Birth*
|
Position
and Length
of Time Served
on the American
Beacon Funds
and American
Beacon Select
Funds |
Position
and Length
of Time Served
on the American
Beacon Institutional
Funds
Trust |
Principal
Occupation(s) and Directorships During Past 5 Years |
INTERESTED
TRUSTEE |
|||
Eugene
J. Duffy (1954)** |
Trustee
since 2008 |
Trustee
since 2017 |
Managing
Director, Global Investment Management Distribution, Mesirow Financial
Administrative
Corporation (2016-Present); Managing Director, Institutional Services,
Intercontinental
Real Estate Corporation (2014-2016); Trustee, American Beacon Sound
Point
Enhanced Income Fund (2018-2021); Trustee, American Beacon Apollo Total
Return Fund
(2018-2021). |
NON-INTERESTED
TRUSTEES |
|||
Gilbert
G. Alvarado (1969) |
Trustee
since 2015 |
Trustee
since 2017 |
Chief
Financial Officer, The Conrad Prebys Foundation (2022-Present); President,
SJVIIF, LLC, Impact
Investment Fund (2018-2022); Director, Kura MD, Inc. (local telehealth
organization) (2015-2017);
Senior Vice President/CFO, Sierra Health Foundation (health conversion
private
foundation) (2006-2022); Senior Vice President/CFO, Sierra Health
Foundation: Center
for Health Program Management (California public benefit corporation)
(2012-2022);
Director, Sacramento Regional Technology Alliance (2011-2016); Director,
Valley
Healthcare Staffing (2017–2018); Trustee, American Beacon Sound Point
Enhanced Income
Fund (2018-2021); Trustee, American Beacon Apollo Total Return Fund
(2018-2021). |
Joseph
B. Armes (1962) |
Trustee
since 2015 |
Trustee
since 2017 |
Director,
Switchback Energy Acquisition (2019-2021); Chairman & CEO, CSW
Industrials f/k/a
Capital Southwest Corporation (investment company) (2015-Present);
Chairman of the Board
of Capital Southwest Corporation, predecessor to CSW Industrials, Inc.
(investment company)
(2014-2017); President & CEO, JBA Investment Partners (family
investment vehicle)
(2010-Present); Director and Chair of Audit Committee, RSP Permian (oil
and gas producer)
(2013-2018); Trustee, American Beacon Sound Point Enhanced Income Fund
(2018-2021);
Trustee, American Beacon Apollo Total Return Fund
(2018-2021). |
Gerard
J. Arpey (1958) |
Trustee
since 2012 |
Trustee
since 2017 |
Partner,
Emerald Creek Group (private equity firm) (2011-Present); Director, S.C.
Johnson & Son,
Inc. (privately held company) (2008-Present); Director, The Home Depot,
Inc. (NYSE: HD)
(2015-Present); Trustee, American Beacon Sound Point Enhanced Income Fund
(2018-2021);
Trustee, American Beacon Apollo Total Return Fund
(2018-2021). |
Name
and Year of
Birth* |
Position
and Length
of Time Served
on the American
Beacon Funds
and American
Beacon Select
Funds |
Position
and Length
of Time Served
on the American
Beacon Institutional
Funds
Trust |
Principal
Occupation(s) and Directorships During Past 5 Years |
Brenda
A. Cline (1960) |
Chair
since 2019
Vice
Chair 2018
Trustee
since 2004 |
Chair
since 2019
Vice
Chair 2018
Trustee
since 2017 |
Chief
Financial Officer, Treasurer and Secretary, Kimbell Art Foundation
(1993-Present); Director,
Tyler Technologies, Inc. (public sector software solutions company)
(2014-Present); Director,
Range Resources Corporation (oil and natural gas company) (2015-Present);
Trustee,
Cushing Closed-End (2) and Open-End Funds (3) (2017-2021); Chair, American
Beacon
Sound Point Enhanced Income Fund (2019-2021), Vice Chair (2018), Trustee
(2018-2021);
Chair, American Beacon Apollo Total Return Fund (2019-2021), Vice Chair
(2018),
Trustee (2018-2021). |
Claudia
A. Holz (1957) |
Trustee
since 2018 |
Trustee
since 2018 |
Independent
Director, Blue Owl Capital Inc. (2021-Present); Partner, KPMG LLP
(1990-2017);
Trustee, American Beacon Sound Point Enhanced Income Fund (2018-2021);
Trustee,
American Beacon Apollo Total Return Fund (2018-2021). |
Douglas
A. Lindgren (1961) |
Trustee
since 2018 |
Trustee
since 2018 |
Director,
JLL Income Property Trust (2022-Present); CEO North America, Carne Global
Financial
Services (2016-2017); Consultant, Carne Financial Services (2017-2019);
Managing
Director, IPS Investment Management and Global Head, Content Management,
UBS
Wealth Management (2010-2016); Trustee, American Beacon Sound Point
Enhanced Income
Fund (2018-2021); Trustee, American Beacon Apollo Total Return Fund
(2018-2021). |
Barbara
J. McKenna (1963) |
Trustee
since 2012 |
Trustee
since 2017 |
President/Managing
Principal, Longfellow Investment Management Company (2005-Present,
President since 2009); Member, External Diversity Council of the Federal
Reserve
Bank of Boston (2021-Present); Member, Federal Reserve Bank of Boston CEO
Roundtable
(2021-Present); Board Advisor, United States Tennis Association
(2021-Present); Trustee,
American Beacon Sound Point Enhanced Income Fund (2018-2021); Trustee,
American
Beacon Apollo Total Return Fund
(2018-2021). |
* | The Board has adopted a retirement policy that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75. |
** | Mr. Duffy is deemed to be an “interested person” of the Trust, as defined by the Investment Company Act of 1940, as amended, by virtue of his position with Mesirow |
Financial, Inc., a broker-dealer. |
INTERESTED
TRUSTEE | |
American
Beacon Fund |
Duffy |
American
Beacon Balanced Fund |
None |
American
Beacon Garcia Hamilton Quality Bond Fund |
None |
American
Beacon International Equity Fund |
None |
American
Beacon Large Cap Value Fund |
None |
American
Beacon Small Cap Value Fund |
None |
Aggregate
Dollar Range of Equity Securities in all Trusts (27 Funds as
of December 31, 2023) |
Over
$100,000 |
NON-INTERESTED
TRUSTEES |
|||||||
American
Beacon Fund |
Alvarado |
Armes |
Arpey |
Cline |
Holz |
Lindgren |
McKenna |
American
Beacon Balanced Fund |
None |
None |
Over
$100,000 |
Over
$100,000 |
None |
None |
None |
American
Beacon Garcia Hamilton Quality Bond Fund |
None |
None |
None |
None |
$10,001-
$50,000 |
None |
None |
American
Beacon International Equity Fund |
$10,001-
$50,000 |
None |
Over
$100,000 |
$50,001
- $100,000 |
None |
None |
None |
American
Beacon Large Cap Value Fund |
None |
None |
None |
None |
$10,001-
$50,000 |
None |
None |
American
Beacon Small Cap Value Fund |
None |
None |
None |
None |
$10,001-
$50,000 |
None |
None |
Aggregate
Dollar Range of Equity Securities in all
Trusts (27 Funds as of December 31, 2023) |
Over
$100,000 |
Over
$100,000 |
Over
$100,000 |
Over
$100,000 |
Over
$100,000 |
Over
$100,000 |
Over
$100,000 |
The
following table shows total compensation (excluding reimbursements) paid
by the Trusts to each Trustee for the fiscal year ended October 31,
2023. | ||
Name
of Trustee |
Aggregate
Compensation from the Trust |
Total
Compensation from the Trusts |
INTERESTED
TRUSTEE |
||
Eugene
J. Duffy |
$189,994 |
$201,000 |
NON-INTERESTED
TRUSTEES |
||
Gilbert
G. Alvarado |
$209,135 |
$221,250 |
Joseph
B. Armes |
$202,282 |
$214,000 |
Gerard
J. Arpey |
$201,337 |
$213,000 |
Brenda
A. Cline1
|
$250,490 |
$265,000 |
Claudia
A. Holz |
$218,115 |
$230,750 |
Douglas
A. Lindgren |
$218,115 |
$230,750 |
Barbara
J. McKenna |
$209,135 |
$221,250 |
1 | Upon her retirement from the Board, Ms. Cline is eligible for flight benefits afforded to Eligible Trustees who served on the Boards prior to September 12, 2008 as described below. |
Name
and Year of
Birth |
Position
and Length
of Time Served
on the American
Beacon Funds
and American
Beacon Select
Funds |
Position
and Length
of Time Served
on the American
Beacon Institutional
Funds
Trust |
Principal
Occupation(s) and Directorships During Past 5 Years |
OFFICERS |
|||
Jeffrey
K. Ringdahl (1975) |
President
since April 2022 Vice
President 2010-2022 |
President
since April 2022 Vice
President 2017-2022 |
Director
(2015-Present), President (2018-Present), Chief Executive Officer
(2022-Present), Chief
Operating Officer (2010-2022), American Beacon Advisors, Inc.; Director
(2015-Present),
President (2018-Present), Resolute Investment Holdings, LLC; Director
(2015-Present),
President (2018-Present), Resolute Topco, Inc.; Director
(2015-Present), President
(2018-Present), Resolute Acquisition, Inc.; Director (2015-Present),
President (2018-Present),
Chief Executive Officer (2022-Present), Chief Operating Officer
(2018-2022),
Resolute Investment Managers, Inc.; Director (2017-Present), President and
Chief
Executive Officer (2022-Present), Executive Vice President (2017-2022),
Resolute Investment
Distributors, Inc.; Director (2017-Present), President (2018-Present),
Chief Executive
Officer (2022-Present), Chief Operating Officer (2018-2022), Resolute
Investment Services,
Inc.; President (2022-Present), Senior Vice President (2017-2022), Manager
(2015-Present),
American Private Equity Management, L.L.C.; Trustee, American Beacon
NextShares
Trust (2015-2020); Director and Executive Vice President & Chief
Operating Officer,
Alpha Quant Advisors, LLC (2016-2020); Director, Shapiro Capital
Management, LLC
(2017-Present); Director and Executive Vice President, Continuous Capital,
LLC (2018-2022);
Director, RSW Investments Holdings, LLC (2019-Present); Manager, SSI
Investment
Management, LLC (2019-Present); Director, National Investment Services of
America,
LLC (2019-Present); Director (2014-Present), President (2022-Present) and
Vice President
(2014-2022), American Beacon Cayman Managed Futures Strategy Fund, Ltd.;
Director
(2018-Present) and, President (2022-Present), Vice President (2018-2022),
American
Beacon Cayman TargetRisk Company, Ltd.; Director and President,
American Beacon
Cayman Multi-Alternatives Company, Ltd. (2023-Present); Director and
President, American
Beacon Cayman Trend Company, Ltd. (2023-Present); Vice President, American
Beacon
Sound Point Enhanced Income Fund (2018-2021); Vice President, American
Beacon Apollo
Total Return Fund (2018-2021). |
Rosemary
K. Behan (1959) |
Vice
President, Secretary
and Chief
Legal Officer since 2006 |
Vice
President, Secretary
and Chief
Legal Officer since 2017 |
Senior
Vice President (2021-Present), Vice President (2006-2021), Secretary and
General Counsel
(2006-Present), American Beacon Advisors, Inc.; Secretary, Resolute
Investment Holdings,
LLC (2015-Present); Secretary, Resolute Topco, Inc. (2015-Present);
Secretary, Resolute
Acquisition, Inc. (2015-Present); Senior Vice President (2021-Present),
Vice President
(2015-2021), Secretary and General Counsel (2015-Present), Resolute
Investment Managers,
Inc.; Secretary, Resolute Investment Distributors, Inc. (2017-Present);
Senior Vice President
(2021-Present), Vice President (2017-2021), Secretary and General Counsel
(2017-Present),
Resolute Investment Services, Inc.; Secretary, American Private Equity
Management,
LLC (2008-Present); Secretary and General Counsel, Alpha Quant Advisors,
LLC
(2016-2020); Vice President and Secretary, Continuous Capital, LLC
(2018-2022); Secretary,
Green Harvest Asset Management, LLC (2019-2021); Secretary,
American Beacon
Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Secretary,
American Beacon
Cayman TargetRisk Company, Ltd (2018-Present); Secretary, American Beacon
Cayman
Multi-Alternatives Company, Ltd. (2023-Present); Secretary, American
Beacon Cayman
Trend Company, Ltd. (2023-Present); Vice President, Secretary, and Chief
Legal Officer,
American Beacon Sound Point Enhanced Income Fund (2018-2021); Vice
President, Secretary,
and Chief Legal Officer, American Beacon Apollo Total Return Fund
(2018-2021). |
Paul
B. Cavazos (1969) |
Vice
President since 2016 |
Vice
President since 2017 |
Chief
Investment Officer and Senior Vice President, American Beacon Advisors,
Inc. (2016-Present);
Vice President, American Private Equity Management, L.L.C. (2017-Present);
Vice
President, American Beacon Sound Point Enhanced Income Fund (2018-2021);
Vice President,
American Beacon Apollo Total Return Fund
(2018-2021). |
Name
and Year of
Birth |
Position
and Length
of Time Served
on the American
Beacon Funds
and American
Beacon Select
Funds |
Position
and Length
of Time Served
on the American
Beacon Institutional
Funds
Trust |
Principal
Occupation(s) and Directorships During Past 5 Years |
Erica
B. Duncan (1970) |
Vice
President since 2011 |
Vice
President since 2017 |
Vice
President, American Beacon Advisors, Inc. (2011-Present); Vice President,
Resolute Investment
Managers, Inc. (2018-Present); Vice President, Resolute Investment
Services, Inc. (2018-Present);
Vice President, American Beacon Sound Point Enhanced Income Fund
(2018-2021);
Vice President, American Beacon Apollo Total Return Fund
(2018-2021). |
Rebecca
L. Harris (1966) |
Vice
President Since 2022 |
Vice
President Since 2022 |
Senior
Vice President (2021-Present), Vice President (2011-2021), American Beacon
Advisors,
Inc.; Senior Vice President (2021-Present), Vice President (2017-2021),
Resolute Investment
Managers, Inc.; Senior Vice President (2021-Present), Vice President
(2017-2021),
Resolute Investment Services, Inc.; Vice President, Alpha Quant Advisors,
LLC (2016-2020);
Vice President (2018-2022), Director (2022) Continuous Capital, LLC;
Director (2022-Present)
National Investment Services of America, LLC; Director (2022-Present) RSW
Investments
Holdings LLC; Director (2022-Present) Shapiro Capital Management LLC;
Director
(2022-Present) SSI Investment Management LLC; Assistant Secretary,
American Beacon
Sound Point Enhanced Income Fund (2018-2021); Assistant Secretary,
American Beacon
Apollo Total Return Fund (2018-2021); Assistant Secretary, American Beacon
Funds (2010
– 2022); Assistant Secretary, American Beacon Select Funds (2010 – 2022);
Assistant Secretary,
American Beacon Institutional Funds Trust (2017 –
2022). |
Terri
L. McKinney (1963) |
Vice
President since 2010 |
Vice
President since 2017 |
Senior
Vice President, (2021-Present) Vice President, (2009-2021), American
Beacon Advisors,
Inc.; Senior Vice President (2021-Present), Vice President (2017-2021),
Resolute Investment
Managers, Inc.; Senior Vice President (2021-Present), Vice President
(2018-2021),
Resolute Investment Services, Inc.; Vice President, Alpha Quant Advisors,
LLC (2016-2020);
Vice President, Continuous Capital, LLC (2018-2022); Vice President,
American
Beacon Sound Point Enhanced Income Fund (2018-2021); Vice President,
American
Beacon Apollo Total Return Fund (2018-2021). |
Samuel
J. Silver (1963) |
Vice
President since 2011 |
Vice
President since 2017 |
Vice
President (2011-Present), Chief Fixed Income Officer (2016-Present),
American Beacon Advisors,
Inc.; Vice President, American Beacon Sound Point Enhanced Income Fund
(2018-2021);
Vice President, American Beacon Apollo Total Return Fund
(2018-2021). |
Melinda
G. Heika (1961) |
Vice
President since 2021 |
Vice
President since 2021 |
Senior
Vice President (2021-Present), Treasurer and CFO (2010-Present), American
Beacon Advisors,
Inc.; Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute
Investment Holdings,
LLC (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present);
Senior Vice
President (2021-Present), Treasurer and CFO (2017-Present), Resolute
Investment Managers,
Inc.; Senior Vice President (2021-Present), Treasurer and CFO
(2017-Present), Resolute
Investment Services, Inc.; Treasurer, American Private Equity Management,
L.L.C. (2012-Present);
Treasurer and CFO, Alpha Quant Advisors, LLC (2016-2020); Treasurer,
Continuous
Capital, LLC (2018-2022); Director (2014-Present), Vice President
(2022-Present)
and Treasurer (2014-2022), American Beacon Cayman Managed Futures
Strategy
Fund, Ltd.; Director and Vice President (2022-Present), and Treasurer
(2018-2022), American
Beacon Cayman TargetRisk Company, Ltd.; Director and Vice President,
American Beacon
Cayman Multi-Alternatives Company, Ltd. (2023-Present); Director and Vice
President,
American Beacon Cayman Trend Company, Ltd. (2023-Present); Principal
Accounting
Officer and Treasurer, American Beacon Funds (2010-2021); Principal
Accounting
Officer and Treasurer, American Beacon Select Funds (2010-2021); Principal
Accounting
Officer and Treasurer, American Beacon Institutional Funds Trust
(2017-2021); Principal
Accounting Officer and Treasurer (2018-2021), Vice President (2021),
American Beacon
Sound Point Enhanced Income Fund; Principal Accounting Officer and
Treasurer (2018-2021),
Vice President (2021), American Beacon Apollo Total Return Fund
(2018-2021). |
Gregory
Stumm (1981) |
Vice
President since 2022 |
Vice
President since 2022 |
Senior
Vice President, American Beacon Advisors, Inc. (2022-Present); Senior Vice
President, Resolute
Investment Managers, Inc. (2022-Present); Senior Vice
President, Resolute Investment
Services, Inc. (2022-Present); Director and Senior Vice President,
Resolute Investment
Distributors, Inc. (2022-Present). |
Name
and Year of
Birth |
Position
and Length
of Time Served
on the American
Beacon Funds
and American
Beacon Select
Funds |
Position
and Length
of Time Served
on the American
Beacon Institutional
Funds
Trust |
Principal
Occupation(s) and Directorships During Past 5 Years |
Sonia
L. Bates (1956) |
Principal
Accounting
Officer
and Treasurer since 2021 |
Principal
Accounting
Officer
and Treasurer since 2021 |
Assistant
Treasurer, American Beacon Advisors, Inc. (2023-Present); Vice President,
Fund and Tax
Reporting (2023-Present), Director, Fund and Tax Reporting (2011-2023),
Resolute Investment
Services, Inc; Assistant Treasurer, American Private Equity Management,
L.L.C. (2012-Present);
Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd.
(2022-Present);
Treasurer (2022-Present) and Assistant Treasurer (2018-2022), American
Beacon
Cayman TargetRisk Company, Ltd.; Treasurer, American Beacon Cayman
Multi-Alternatives
Company, Ltd. (2023-Present); Treasurer, American Beacon Cayman
Trend
Company, Ltd. (2023-Present); Assistant Treasurer (2018-2021), Principal
Accounting Officer
and Treasurer (2021), American Beacon Sound Point Enhanced Income Fund;
Assistant
Treasurer (2019-2021), Principal Accounting Officer and Treasurer (2021),
American
Beacon Apollo Total Return Fund; Assistant Treasurer, American Beacon
Funds (2011-2021);
Assistant Treasurer, American Beacon Select Funds (2011-2021); Assistant
Treasurer,
American Beacon Institutional Funds Trust (2017-2021). |
Christina
E. Sears (1971) |
Chief
Compliance
Officer since 2004 Assistant Secretary since 1999 |
Chief
Compliance
Officer
and Assistant
Secretary since 2017 |
Chief
Compliance Officer (2004-Present), Vice President (2019-Present), American
Beacon Advisors,
Inc.; Vice President, Resolute Investment Managers, Inc. (2017-Present);
Vice President,
Resolute Investment Distributors, Inc. (2017-Present); Vice President,
Resolute Investment
Services, Inc. (2019-Present); Chief Compliance Officer, American Private
Equity Management,
LLC (2012-Present); Chief Compliance Officer, Green Harvest Asset
Management,
LLC (2019-2021); Chief Compliance Officer, RSW Investments Holdings, LLC
(2019-Present);
Chief Compliance Officer (2016-2019), Vice President (2016-2020), Alpha
Quant
Advisors, LLC; Chief Compliance Officer (2018-2019), Vice President
(2018-2022), Continuous
Capital, LLC.; Chief Compliance Officer and Assistant Secretary, American
Beacon
Sound Point Enhanced Income Fund (2018-2021); Chief Compliance Officer and
Assistant
Secretary, American Beacon Apollo Total Return Fund
(2018-2021). |
Shelley
L. Dyson (1969) |
Assistant
Treasurer since 2021 |
Assistant
Treasurer since 2021 |
Director
Fund Tax (2024-Present), Fund Tax Manager (2020-2024), Manager, Tax
(2014-2020),
Resolute Investment Services, Inc.; Assistant Treasurer, American Beacon
Cayman
Managed Futures Strategy Fund, Ltd. (2022-Present); Assistant Treasurer,
American Beacon
Cayman TargetRisk Company, Ltd (2022-Present); Assistant Treasurer,
American Beacon
Cayman Multi-Alternatives Company, Ltd. (2023-Present); Assistant
Treasurer, American
Beacon Cayman Trend Company, Ltd. (2023-Present); Assistant Treasurer,
American
Beacon Sound Point Enhanced Income Fund (2021); Assistant Treasurer,
American Beacon
Apollo Total Return Fund (2021). |
Shelley
D. Abrahams (1974) |
Assistant
Secretary since 2008 |
Assistant
Secretary since 2017 |
Corporate
Governance Manager (2023-Present), Senior Corporate Governance &
Regulatory
Specialist (2020-2023), Corporate Governance & Regulatory Specialist
(2017-2020),
Resolute Investment Services, Inc.; Assistant Secretary, American Beacon
Cayman
Managed Futures Strategy Fund, Ltd. (2022-Present); Assistant Secretary,
American Beacon
Cayman TargetRisk Company, Ltd (2022-Present); Assistant Secretary,
American Beacon
Cayman Multi-Alternatives Company, Ltd. (2023-Present); Assistant
Secretary, American
Beacon Cayman Trend Company, Ltd. (2023-Present); Assistant Secretary,
American
Beacon Sound Point Enhanced Income Fund (2018-2021); Assistant Secretary,
American
Beacon Apollo Total Return Fund (2018-2021). |
Teresa
A. Oxford (1958) |
Assistant
Secretary since 2015 |
Assistant
Secretary since 2017 |
Deputy
General Counsel (2024-Present), Assistant Secretary (2015-Present),
Associate General
Counsel (2015-2024), American Beacon Advisors, Inc.; Assistant Secretary
(2018-2021),
Resolute Investment Distributors, Inc.; Deputy General Counsel
(2024-Present),
Assistant Secretary (2017-Present), Associate General Counsel (2017-2024),
Resolute
Investment Managers, Inc.; Deputy General Counsel (2024-Present),
Assistant Secretary
(2018-Present), Associate General Counsel (2018-2024), Resolute Investment
Services,
Inc.; Assistant Secretary (2016-2020), Alpha Quant Advisors, LLC;
Assistant Secretary
(2020-2022), Continuous Capital, LLC.; Assistant Secretary, American
Beacon Sound
Point Enhanced Income Fund (2018-2021); Assistant Secretary, American
Beacon Apollo
Total Return Fund (2018-2021). |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
AMERICAN
ENTERPRISE INV SVCS*
|
9.50% |
6.39% |
|||||
707
2ND AVE S |
|||||||
MINNEAPOLIS
MN 55402-2405 |
|||||||
CHARLES
SCHWAB & CO FOR THE* |
24.42% | ||||||
EXCLUSIVE
BENEFIT OF OUR CUSTOMERS |
|||||||
ATTN
MUTUAL FUNDS OPS |
|||||||
9601
E PANORAMA CIR |
|||||||
ENGLEWOOD
CO 80112-3441 |
|||||||
CHARLES
SCHWAB & CO INC* |
9.35% |
7.11% |
|||||
SPECIAL
CUST A/C |
|||||||
EXCLUSIVE
BENEFIT OF CUSTOMERS |
|||||||
ATTN
MUTUAL FUNDS |
|||||||
211
MAIN ST |
|||||||
SAN
FRANCISCO CA 94105-1901 |
|||||||
LPL
FINANCIAL* |
27.71% |
44.28% |
25.54% |
4.93% |
32.12% |
||
4707
EXECUTIVE DR |
|||||||
SAN
DIEGO CA 92121-3091 |
|||||||
MERRILL
LYNCH PIERCE FENNER &* |
5.54% |
||||||
SMITH
INC (HOUSE ACCOUNT) |
|||||||
THE
AMERICAN BEACON FUNDS |
|||||||
4800
DEER LAKE DR EAST |
|||||||
JACKSONVILLE
FL 32246-6484 |
|||||||
MORGAN
STANLEY SMITH BARNEY LLC* |
17.46% |
7.68% | |||||
FOR
THE EXCLUSIVE BENE OF ITS CUST |
|||||||
1
NEW YORK PLZ FL 12 |
|||||||
NEW
YORK NY 10004-1965 |
|||||||
NATIONAL
FINANCIAL SERVICES LLC* |
5.90% |
9.81% |
38.71% |
18.26% |
26.73% |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
FOR
EXCLUSIVE BENEFIT OF OUR |
|||||||
CUSTOMERS |
|||||||
ATTN
MUTUAL FUNDS DEPT 4TH FLOOR |
|||||||
499
WASHINGTON BLVD |
|||||||
JERSEY
CITY NJ 07310-1995 |
|||||||
PERSHING
LLC* |
5.70% |
4.99% | |||||
1
PERSHING PLZ |
|||||||
JERSEY
CITY NJ 07399-0001 |
|||||||
RAYMOND
JAMES* |
6.41% |
8.39% |
|||||
OMNIBUS
FOR MUTUAL FUNDS |
|||||||
ATTN
COURTNEY WALLER |
|||||||
880
CARILLON PKWY |
|||||||
ST
PETERSBURG FL 33716-1100 |
|||||||
UBS
WM USA* |
14.06% |
4.99% |
|||||
OMNI
ACCOUNT M/F |
|||||||
SPEC
CDY A/C EBOC UBSFSI |
|||||||
1000
HARBOR BLVD |
|||||||
WEEHAWKEN
NJ 07086-6761 |
|||||||
WELLS
FARGO CLEARING SERVICES LLC* |
12.66% |
20.19% |
|||||
SPECIAL
CUSTODY ACCT FOR THE |
|||||||
EXCLUSIVE
BENEFIT OF CUSTOMERS |
|||||||
2801
MARKET ST |
|||||||
SAINT
LOUIS MO 63103-2523 |
|||||||
EMPOWER
TRUST FBO* |
61.72% |
||||||
EMPOWER
BENEFIT PLANS |
|||||||
8515
E ORCHARD RD 2T2 |
|||||||
GREENWOOD
VILLAGE CO 80111-5002 |
|||||||
G
& L FAMILY PARTNERS LTD |
14.10% |
||||||
PO
BOX 219643 |
|||||||
KANSAS
CITY, MO 64121-9643 |
|||||||
MATRIX
TRUST COMPANY CUST. FBO |
8.61% |
||||||
TRUTAG
TECHNOLOGIES 401(K) PLAN |
|||||||
717
17TH STREET |
|||||||
SUITE
1300 |
|||||||
DENVER
CO 80202-3304 |
|||||||
NATIONWIDE
TRUST COMPANY FSB |
8.72% |
9.52% |
|||||
C/O
IPO PORTFOLIO ACCOUNTING |
|||||||
PO
BOX 182029 |
|||||||
COLUMBUS
OH 43218-2029 |
|||||||
VANTAGEPOINT
TRADITIONAL IRA |
6.13% | ||||||
C/O
MISSIONSQUARE RETIREMENT |
|||||||
777
NORTH CAPITOL STREET, NE |
|||||||
WASHINGTON
DC 20002-4239 |
* | Denotes record owner of Fund shares only |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
Y
CLASS |
R6
CLASS |
R5
CLASS |
Investor
CLASS |
CHARLES
SCHWAB & CO INC*
|
43.54% |
21.16% |
22.18% | ||
SPECIAL
CUST A/C |
|||||
EXCLUSIVE
BENEFIT OF CUSTOMERS |
|||||
ATTN
MUTUAL FUNDS |
|||||
211
MAIN ST |
|||||
SAN
FRANCISCO CA 94105-1901 |
|||||
LPL
FINANCIAL* |
11.46% |
||||
4707
EXECUTIVE DR |
|||||
SAN
DIEGO CA 92121-3091 |
|||||
NATIONAL
FINANCIAL SERVICES LLC* |
43.28% |
70.37% | |||
FOR
EXCLUSIVE BENEFIT OF |
|||||
OUR
CUSTOMERS |
|||||
ATTN
MUTUAL FUNDS DEPT 4TH FLOOR |
|||||
499
WASHINGTON BLVD |
|||||
JERSEY
CITY NJ 07310-1995 |
|||||
CAPINCO |
37.61% |
||||
C/O
US BANK NA |
|||||
PO
BOX 1787 |
|||||
MILWAUKEE
WI 53201-1787 |
|||||
KEYBANK
NA |
5.71% | ||||
CLE
FDN PARADIGM INV CUST PRI USD |
|||||
PO
BOX 94871 |
|||||
CLEVELAND
OH 44101-4871 |
|||||
KEYBANK
NA |
13.71% |
||||
PF-SCATTERGOOD
BEHAV HEALTH CUST PR |
|||||
PO
BOX 94871 |
|||||
CLEVELAND
OH 44101-4871 |
|||||
LINCOLN
RETIREMENT SERVICES COMPANY |
17.87% |
||||
FBO:GARCIA
HAMILTON & ASSOC LP 401K |
|||||
PO
BOX 7876 |
|||||
FORT
WAYNE IN 46801-7876 |
|||||
UBATCO
& CO |
83.38% |
99.56% |
|||
FBO
COLLEGE SAVINGS GROUP |
|||||
PO
BOX 82535 |
|||||
LINCOLN
NE 68501-2535 |
* | Denotes record owner of Fund shares only |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
AMERICAN
ENTERPRISE INV SVCS*
|
5.44% |
7.43% |
20.98% |
|||||
707
2ND AVE S |
||||||||
MINNEAPOLIS
MN 55402-2405 |
||||||||
CHARLES
SCHWAB & CO FOR THE* |
35.47% | |||||||
EXCLUSIVE
BENEFIT OF OUR CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS OPS |
||||||||
9601
E PANORAMA CIR |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
ENGLEWOOD
CO 80112-3441 |
||||||||
CHARLES
SCHWAB & CO INC* |
7.79% |
30.24% |
10.06% |
35.37% |
||||
SPECIAL
CUST A/C |
||||||||
EXCLUSIVE
BENEFIT OF CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS |
||||||||
211
MAIN ST |
||||||||
SAN
FRANCISCO CA 94105-1901 |
||||||||
LPL
FINANCIAL* |
18.77% |
|||||||
OMNIBUS
CUSTOMER ACCOUNT |
||||||||
ATTN
MUTUAL FUND TRADING |
||||||||
4707
EXECUTIVE DR |
||||||||
SAN
DIEGO CA 92121-3091 |
||||||||
NATIONAL
FINANCIAL SERVICES LLC* |
4.94% |
13.92% |
9.44% |
30.10% |
29.80% | |||
FOR
EXCLUSIVE BENEFIT OF OUR |
||||||||
CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS DEPT 4TH FLOOR |
||||||||
499
WASHINGTON BLVD |
||||||||
JERSEY
CITY NJ 07310-1995 |
||||||||
RAYMOND
JAMES* |
5.39% |
|||||||
OMNIBUS
FOR MUTUAL FUNDS |
||||||||
ATTN
COURTNEY WALLER |
||||||||
880
CARILLON PKWY |
||||||||
ST
PETERSBURG FL 33716-1100 |
||||||||
COLORADO
RETIREMENT ASSOCIATION FBO |
48.24% |
|||||||
CRA
401A & 457 PLANS |
||||||||
C/O
FASCORE LLC |
||||||||
8515
E ORCHARD RD 2T2 |
||||||||
GREENWOOD
VILLAGE CO 80111-5002 |
||||||||
DCGT
AS TTEE AND/OR CUST |
6.07% |
|||||||
FBO
PLIC VARIOUS RETIREMENT PLANS |
||||||||
OMNIBUS |
||||||||
ATTN
NPIO TRADE DESK |
||||||||
711
HIGH STREET |
||||||||
DES
MOINES IA 50392-0001 |
||||||||
EMPOWER
TRUST FBO* |
5.91% |
|||||||
EMPLOYEE
BENEFITS CLIENTS 401K |
||||||||
8515
E ORCHARD RD 2T2 |
||||||||
GREENWOOD
VILLAGE CO 80111-5002 |
||||||||
EMPOWER
TRUST FBO* |
16.55% | |||||||
EMPOWER
IRA ADVANTAGE |
||||||||
C/O
FASCORE LLC |
||||||||
8515
E ORCHARD RD 2T2 |
||||||||
GREENWOOD
VILLAGE CO 80111-5002 |
||||||||
NABANK
& CO.* |
8.28% |
|||||||
PO
BOX 2180 |
||||||||
TULSA
OK 74101-2180 |
||||||||
NATIONWIDE
TRUST COMPANY FSB |
81.20% |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
C/O
IPO PORTFOLIO ACCOUNTING |
||||||||
PO
BOX 182029 |
||||||||
COLUMBUS
OH 43218-2029 |
||||||||
PIMS/PRUDENTIAL
RETIREMENT |
21.57% |
|||||||
AS
NOMINEE FOR THE TTEE/CUST PL 820 |
||||||||
MHI
GROUP 401(K) PLAN |
||||||||
20
GREENWAY PLZ STE 600 |
||||||||
HOUSTON
TX 77046-2019 |
||||||||
STATE
STREET BANK TTEE CUSTODIAN |
8.19% |
|||||||
CUST
FBO ADP ACCESS 401K PLAN |
||||||||
401(K)
PLAN |
||||||||
1
LINCOLN STREET |
||||||||
BOSTON
MA 02111-2901 |
||||||||
VOYA
RETIREMENT INSURANCE & ANNUITY* |
6.52% |
|||||||
COMPANY |
||||||||
ATTN
MICHAEL KAMINSKI |
||||||||
1
ORANGE WAY |
||||||||
WINDSOR
CT 06095-4773 |
||||||||
VRSCO |
7.88% |
|||||||
FBO
VTC CUST TTEE FBO |
||||||||
MIAMI
JEWISH HEALTH SYSTEM 403B |
||||||||
2727-A
ALLEN PARKWAY, 4-D1 |
||||||||
HOUSTON
TX 77019-2107 |
* | Denotes record owner of Fund shares only |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
CHARLES
SCHWAB & CO FOR THE*
|
26.13% | |||||||
EXCLUSIVE
BENEFIT OF OUR CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS OPS |
||||||||
9601
E PANORAMA CIR |
||||||||
ENGLEWOOD
CO 80112-3441 |
||||||||
CHARLES
SCHWAB & CO INC* |
4.98% |
5.66% |
10.95% |
|||||
SPECIAL
CUST A/C |
||||||||
EXCLUSIVE
BENEFIT OF CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS |
||||||||
211
MAIN ST |
||||||||
SAN
FRANCISCO CA 94105-1901 |
||||||||
LPL
FINANCIAL* |
13.08% |
51.29% |
21.84% |
|||||
4707
EXECUTIVE DR |
||||||||
SAN
DIEGO CA 92121-3091 |
||||||||
MERRILL
LYNCH PIERCE FENNER &* |
5.22% |
11.52% |
||||||
SMITH
INC (HOUSE ACCOUNT) |
||||||||
THE
AMERICAN BEACON FUNDS |
||||||||
4800
DEER LAKE DR EAST |
||||||||
JACKSONVILLE
FL 32246-6484 |
||||||||
MORGAN
STANLEY SMITH BARNEY LLC* |
5.75% |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
FOR
THE EXCLUSIVE BENE OF ITS CUST |
||||||||
1
NEW YORK PLZ FL 12 |
||||||||
NEW
YORK NY 10004-1965 |
||||||||
NATIONAL
FINANCIAL SERVICES LLC* |
45.19% |
50.38% |
13.80% |
42.38% |
38.19% |
54.45% |
49.01% | |
FOR
EXCLUSIVE BENEFIT OF OUR |
||||||||
CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS DEPT 4TH FLOOR |
||||||||
499
WASHINGTON BLVD |
||||||||
JERSEY
CITY NJ 07310-1995 |
||||||||
PERSHING
LLC* |
5.53% |
|||||||
1
PERSHING PLZ |
||||||||
JERSEY
CITY NJ 07399-0001 |
||||||||
RAYMOND
JAMES* |
8.05% |
|||||||
OMNIBUS
FOR MUTUAL FUNDS |
||||||||
ATTN
COURTNEY WALLER |
||||||||
880
CARILLON PKWY |
||||||||
ST
PETERSBURG FL 33716-1100 |
||||||||
UBS
WM USA* |
7.44% |
|||||||
OMNI
ACCOUNT M/F |
||||||||
SPEC
CDY A/C EBOC UBSFSI |
||||||||
1000
HARBOR BLVD |
||||||||
WEEHAWKEN
NJ 07086-6761 |
||||||||
WELLS
FARGO CLEARING SERVICES LLC* |
15.23% |
|||||||
SPECIAL
CUSTODY ACCT FOR THE |
||||||||
EXCLUSIVE
BENEFIT OF CUSTOMERS |
||||||||
2801
MARKET ST |
||||||||
SAINT
LOUIS MO 63103-2523 |
||||||||
DCGT
AS TTEE AND/OR CUST |
6.22% |
|||||||
FBO
PLIC VARIOUS RETIREMENT PLANS |
||||||||
OMNIBUS |
||||||||
ATTN
NPIO TRADE DESK |
||||||||
711
HIGH STREET |
||||||||
DES
MOINES IA 50392-0001 |
||||||||
EMPOWER
TRUST FBO* |
9.13% |
|||||||
EMPLOYEE
BENEFIT CLIENTS 401K |
||||||||
8515
E ORCHARD RD 2T2 |
||||||||
GREENWOOD
VILLAGE CO 80111-5002 |
||||||||
EMPOWER
TRUST FBO* |
48.34% |
|||||||
EMPOWER
BENEFIT PLANS |
||||||||
8515
E ORCHARD RD 2T2 |
||||||||
GREENWOOD
VILLAGE CO 80111-5002 |
||||||||
JOHN
HANCOCK TRUST COMPANY LLC* |
6.16% |
|||||||
200
BERKELEY ST STE 7 |
||||||||
BOSTON
MA 02116-5038 |
||||||||
MASSACHUSETTS
MUTUAL INSURANCE CO* |
15.38% |
|||||||
1295
STATE ST MTP C105 |
||||||||
SPRINGFIELD
MA 01111-0001 |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
MATRIX
TRUST COMPANY CUST FBO |
7.77% |
|||||||
NATIONAL
PETROLEUM COUNCIL RETIREME |
||||||||
PO
BOX 52129 |
||||||||
PHOENIX
AZ 85072-2129 |
||||||||
VRSCO |
5.17% |
|||||||
FBO
VTC CUST TTEE FBO |
||||||||
NASSAU
HEALTHCARE CORPORATION 457 |
||||||||
2727-A
ALLEN PARKWAY, 4-D1 |
||||||||
HOUSTON
TX 77019-2107 |
* | Denotes record owner of Fund shares only |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
AMERICAN
ENTERPRISE INV SVCS*
|
8.92% |
|||||||
707
2ND AVE S |
||||||||
MINNEAPOLIS
MN 55402-2405 |
||||||||
CHARLES
SCHWAB & CO INC* |
17.60% |
6.72% |
5.99% |
26.82% |
24.22% | |||
SPECIAL
CUST A/C |
||||||||
EXCLUSIVE
BENEFIT OF CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS |
||||||||
211
MAIN ST |
||||||||
SAN
FRANCISCO CA 94105-1901 |
||||||||
LPL
FINANCIAL* |
26.20% |
60.80% |
||||||
4707
EXECUTIVE DR |
||||||||
SAN
DIEGO CA 92121-3091 |
||||||||
MERRILL
LYNCH PIERCE FENNER &* |
7.76% |
|||||||
SMITH
INC (HOUSE ACCOUNT) |
||||||||
THE
AMERICAN BEACON FUNDS |
||||||||
4800
DEER LAKE DR EAST |
||||||||
JACKSONVILLE
FL 32246-6484 |
||||||||
NATIONAL
FINANCIAL SERVICES LLC* |
36.60% |
6.27% |
13.51% |
39.95% |
3.20% |
37.98% |
48.79% | |
FOR
EXCLUSIVE BENEFIT OF OUR |
||||||||
CUSTOMERS |
||||||||
ATTN
MUTUAL FUNDS DEPT 4TH FLOOR |
||||||||
499
WASHINGTON BLVD |
||||||||
JERSEY
CITY NJ 07310-1995 |
||||||||
DCGT
AS TTEE AND/OR CUST |
13.88% |
19.52% |
||||||
FBO
PLIC VARIOUS RETIREMENT PLANS |
||||||||
OMNIBUS |
||||||||
ATTN
NPIO TRADE DESK |
||||||||
711
HIGH STREET |
||||||||
DES
MOINES IA 50392-0001 |
||||||||
EMPOWER
TRUST FBO* |
20.16% |
5.06% |
||||||
EMPLOYEE
BENEFIT CLIENTS 401K |
||||||||
8515
E ORCHARD RD 2T2 |
||||||||
GREENWOOD
VILLAGE CO 80111-5002 |
Shareholder
Address |
Fund
Percentage (listed
if over 25%) |
A
CLASS |
C
CLASS |
Y
CLASS |
R6
CLASS |
Advisor
CLASS |
R5
CLASS |
Investor
CLASS |
LINCOLN
RETIREMENT SERVICES COMPANY |
6.79% |
|||||||
FBO
BCPS 403B |
||||||||
PO
BOX 7876 |
||||||||
FORT
WAYNE IN 46801-7876 |
||||||||
NATIONWIDE
TRUST COMPANY FSB |
7.10% |
|||||||
C/O
IPO PORTFOLIO ACCOUNTING |
||||||||
PO
BOX 182029 |
||||||||
COLUMBUS
OH 43218-2029 |
||||||||
RELIANCE
TRUST COMPANY FBO* |
10.42% |
|||||||
T
ROWE PRICE RETIREMENT |
||||||||
PLAN
CLIENTS |
||||||||
PO
BOX 78446 |
||||||||
ATLANTA
GEORGIA 30357 |
||||||||
TALCOTT
RESOLUTION LIFE INSURANCE |
13.78% |
|||||||
COMPANY |
||||||||
PO
BOX 5051 |
||||||||
HARTFORD
CT 06102-5051 |
||||||||
VOYA
INSTITUTIONAL TRUST COMPANY |
10.08% |
|||||||
ONE
ORANGE WAY B3N |
||||||||
WINDSOR
CT 06095-4773 |
||||||||
VOYA
RETIREMENT INSURANCE & ANNUITY* |
7.71% |
|||||||
COMPANY |
||||||||
ATTN
MICHAEL KAMINSKI |
||||||||
1
ORANGE WAY |
||||||||
WINDSOR
CT 06095-4773 |
* | Denotes record owner of Fund shares only |
American
Century Investment Management, Inc. (“American
Century”) |
||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
American
Century Companies, Inc. |
Parent
Company |
Holding
Company |
Stowers
Institute for Medical Research |
Ownership
of Parent Company |
Medical
Research |
Barrow,
Hanley, Mewhinney & Strauss, LLC (“Barrow”) |
||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
Perpetual
Limited |
Parent
Company |
Financial
Services |
Brandywine
Global Investment Management, LLC (“Brandywine
Global”) | ||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
Legg
Mason, Inc. |
Direct
Owner |
Financial
Services |
Franklin
Resources, Inc. |
Indirect
Owner |
Financial
Services |
Causeway
Capital Management LLC (“Causeway”) |
||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
Causeway
Capital Holdings LLC |
Parent
Company |
Parent
Company |
DePrince,
Race & Zollo, Inc. (“DRZ”) | ||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
Victor
A. Zollo, Jr. |
*Indirect
Majority Shareholder / Officer |
Individual |
John
D. Race |
*Indirect
Majority Shareholder / Officer |
Individual |
Kelly
W. Carbone |
*Indirect
Minority Shareholder / Management Committee |
Individual |
Gregory
T. Ramsby |
*Indirect
Minority Shareholder / Management Committee |
Individual |
Angela
Johnston |
Chief
Financial Officer / Management Committee |
Individual |
Adelbert
Sanchez |
Chief
Compliance Officer |
Individual |
* | This individual’s respective equity ownership of DePrince, Race & Zollo, Inc. is directly held by a trust, wholly owned and controlled by the individual. |
Garcia
Hamilton & Associates, L.P. (“Garcia Hamilton”) | ||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
New
Southwest GP Holdings, Inc. |
General
Partner, wholly owned by Gilbert Andrew
Garcia |
Financial
Services |
Hotchkis
and Wiley Capital Management, LLC (“Hotchkis”) |
||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
HWCap
Holdings, LLC |
Majority
Owner |
Financial
Services |
Stephens-H&W,
LLC |
Minority
Owner |
Financial
Services |
Lazard
Asset Management LLC (“Lazard”) |
||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
Lazard
Freres & Co. LLC |
Parent
Company |
Financial
Services |
Massachusetts
Financial Services Company (“MFS”) |
||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
Sun
Life Financial, Inc |
Majority
Owner |
Financial
Services |
Newton
Investment Management North America, LLC (“NIMNA”) | ||
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity Business |
Bank
of New York Mellon Corporation |
Parent
Company |
Financial
Services |
Controlling
Person/Entity |
Basis
of Control |
Nature
of Controlling Person/Entity’s Business |
Resolute
Topco, Inc. |
Parent
Company |
Holding
Company – Founded in 2015 |
First
$15 billion |
0.35% |
Next
$15 billion |
0.325% |
Over
$30 billion |
0.30% |
First
$5 billion |
0.35% |
Next
$5 billion |
0.325% |
Next
$10 billion |
0.30% |
Over
$20 billion |
0.275% |
■ |
complying
with reporting requirements; |
■ |
corresponding
with shareholders; |
■ |
maintaining
internal bookkeeping, accounting and auditing services and
records; |
■ |
supervising
the provision of services to the Trust by third parties;
and |
■ |
administering
the interfund lending facility and lines of credit, if
applicable. |
Management
Fees Paid to American Beacon Advisors, Inc. (Gross) | |||
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$659,962 |
$557,973 |
$466,356 |
American
Beacon Garcia Hamilton Quality Bond Fund |
$1,272,684 |
$1,418,724 |
$1,085,007 |
American
Beacon International Equity Fund |
$8,961,334 |
$6,115,636 |
$3,905,678 |
American
Beacon Large Cap Value Fund |
$14,897,334 |
$12,744,518 |
$11,152,815 |
American
Beacon Small Cap Value Fund |
$21,141,368 |
$18,029,676 |
$15,897,278 |
Sub-Advisor
Fees (Gross) | |||
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$300,641 |
$265,063 |
$206,610 |
0.17% |
0.17% |
0.17% | |
American
Beacon Garcia Hamilton Quality Bond Fund |
$727,476 |
$811,192 |
$620,004 |
0.20% |
0.20% |
0.20% | |
American
Beacon International Equity Fund |
$6,533,628 |
$4,387,673 |
$3,133,428 |
0.26% |
0.26% |
0.26% | |
American
Beacon Large Cap Value Fund |
$8,420,545 |
$7,321,565 |
$6,360,972 |
0.20% |
0.20% |
0.20% | |
American
Beacon Small Cap Value Fund*
|
$23,358,692 |
$18,405,314 |
$15,888,739 |
0.38% |
0.36% |
0.35% |
* | Sub-Advisor Fees includes fees paid to Foundry Partners LLC (“Foundry”) and Hillcrest Asset Management, LLC (“Hillcrest”), each formerly a sub-advisor of the American Beacon Small Cap Value Fund (“Small Cap Value Fund”), for the fiscal year ended October 31, 2023. On February 8, 2022, Foundry and Hillcrest were terminated as sub-advisors to the Small Cap Value Fund, and the assets previously managed by Foundry and Hillcrest were allocated among the remaining sub-advisors. On March 10, 2022, DePrince, Race & Zollo, Inc. was appointed as a sub-advisor to the Small Cap Value Fund. |
Management
Fees (Waived)/Recouped* | |||
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$0 |
$0 |
$0 |
American
Beacon Garcia Hamilton Quality Bond Fund |
$(720,361) |
$(773,688) |
$(670,072) |
American
Beacon International Equity Fund |
$(2,734) |
$(37,459) |
$(206,621) |
American
Beacon Large Cap Value Fund |
$0 |
$0 |
$0 |
American
Beacon Small Cap Value Fund |
$0 |
$0 |
$0 |
* | The sub-advisors for the Funds have not waived fees during the three most recent fiscal years ended October 31. |
A
Class | |
Fund |
Distribution
Fee |
American
Beacon Balanced Fund |
$34,424 |
American
Beacon International Equity Fund |
$19,975 |
American
Beacon Large Cap Value Fund |
$33,113 |
American
Beacon Small Cap Value Fund |
$105,096 |
C
Class | |
Fund |
Distribution
Fee |
American
Beacon Balanced Fund |
$146,122 |
American
Beacon International Equity Fund |
$31,298 |
American
Beacon Large Cap Value Fund |
$50,298 |
American
Beacon Small Cap Value Fund |
$82,251 |
Advisor
Class | |
Fund |
Distribution
Fee |
American
Beacon Balanced Fund |
$2,441 |
American
Beacon International Equity Fund |
$36,163 |
American
Beacon Large Cap Value Fund |
$111,427 |
American
Beacon Small Cap Value Fund |
$75,508 |
A
Class | |||
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$11,684 |
$11,322 |
$11,896 |
American
Beacon International Equity Fund |
$16,348 |
$12,849 |
$11,183 |
American
Beacon Large Cap Value Fund |
$21,723 |
$3,073 |
$18,126 |
American
Beacon Small Cap Value Fund |
$124,070 |
$101,226 |
$80,529 |
C
Class | |||
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$18,636 |
$15,253 |
$12,414 |
American
Beacon International Equity Fund |
$4,715 |
$3,895 |
$3,548 |
American
Beacon Large Cap Value Fund |
$5,423 |
$5,488 |
$4,423 |
American
Beacon Small Cap Value Fund |
$15,153 |
$11,540 |
$9,725 |
Advisor
Class | |||
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$4,618 |
$3,381 |
$2,257 |
American
Beacon International Equity Fund |
$46,182 |
$39,395 |
$36,056 |
American
Beacon Large Cap Value Fund |
$147,343 |
$137,060 |
$111,682 |
American
Beacon Small Cap Value Fund |
$130,077 |
$86,310 |
$75,523 |
Investor
Class | |||
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$255,866 |
$206,334 |
$149,923 |
American
Beacon Garcia Hamilton Quality Bond Fund |
$1,645 |
$3,571 |
$3,311 |
American
Beacon International Equity Fund |
$404,950 |
$361,759 |
$359,278 |
American
Beacon Large Cap Value Fund |
$3,146,405 |
$2,540,172 |
$1,991,555 |
American
Beacon Small Cap Value Fund |
$1,423,149 |
$1,105,627 |
$996,291 |
Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$2,237 |
$355 |
$426 |
American
Beacon Garcia Hamilton Quality Bond Fund |
- |
- |
- |
American
Beacon International Equity Fund |
$113,627 |
$38,911 |
$26,768 |
American
Beacon Large Cap Value Fund |
$59,470 |
$7,248 |
$20,493 |
American
Beacon Small Cap Value Fund |
$121,008 |
$17,746 |
$14,838 |
American
Beacon
Balanced
Fund |
American
Beacon
International
Equity
Fund |
American
Beacon
Large Cap
Value Fund |
American
Beacon
Small Cap
Value Fund | |
Gross
income earned by the fund from securities lending
activities |
$28,778 |
$647,252 |
$1,329,125 |
$701,845 |
Fees
and/or compensation paid by the fund for securities lending activities and
related services: |
||||
Fees
paid to securities lending agent from a revenue split |
$426 |
$26,768 |
$20,493 |
$14,838 |
Fees
paid for any cash collateral management service (including fees deducted
from a pooled
cash collateral reinvestment vehicle) that are not included in the revenue
split |
$515 |
$8,998 |
$23,623 |
$12,001 |
Administrative
fees not included in revenue split |
$0 |
$0 |
$0 |
$0 |
Indemnification
fee not included in revenue split |
$0 |
$0 |
$0 |
$0 |
Rebate
(paid to borrower) |
$23,784 |
$340,457 |
$1,094,959 |
$544,905 |
Other
fees not included in revenue split (administrative and oversight functions
provided
by the Manager) |
$426 |
$26,768 |
$20,493 |
$14,838 |
Aggregate
fees/compensation paid by the fund for securities lending
activities |
$25,151 |
$402,991 |
$1,159,568 |
$586,582 |
Net
income from securities lending activities |
$3,627 |
$244,261 |
$169,557 |
$115,263 |
American
Beacon Fund |
Sales
Charge Revenue |
Deferred
Sales Charge Revenue | |||
Fiscal
Year |
Amount
Paid to Distributor |
Amount
Retained
by Distributor |
Amount
Paid to Distributor |
Amount
Retained
by Distributor | |
American
Beacon Balanced Fund |
2023 |
$17,553 |
$2,044 |
$947 |
- |
2022 |
$28,664 |
$5,051 |
$862 |
- | |
2021 |
$20,321 |
$2,699 |
$485 |
- | |
American
Beacon Garcia Hamilton Quality Bond Fund |
2023 |
- |
- |
- |
- |
2022 |
- |
- |
- |
- | |
2021 |
- |
- |
- |
- | |
American
Beacon International Equity Fund |
2023 |
$10,400 |
$2,595 |
$18 |
- |
2022 |
$3,363 |
$518 |
$77 |
- | |
2021 |
$2,725 |
$202 |
$7 |
- | |
American
Beacon Large Cap Value Fund |
2023 |
$5,531 |
$589 |
$66 |
- |
2022 |
$8,323 |
$1,413 |
$315 |
- | |
2021 |
$48,853 |
$6,094 |
$1,063 |
- | |
American
Beacon Small Cap Value Fund |
2023 |
$11,215 |
$1,294 |
$109 |
- |
2022 |
$16,350 |
$1,392 |
$583 |
- | |
2021 |
$19,446 |
$723 |
$132 |
- |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
American
Beacon Advisors, Inc. |
||||||
Kirk
L. Brown |
1
($0.5 bil) |
None |
3
($12.2 bil) |
None |
None |
None |
Paul
B. Cavazos |
2
($0.9 bil) |
1
($0.5 bil) |
3
($12.2 bil) |
None |
None |
None |
Colin
J. Hamer |
2
($0.9 bil) |
1
($0.5 bil) |
2
($11.7 bil) |
None |
None |
None |
Erin
Higginbotham |
None |
None |
4
($11.35 bil) |
None |
None |
None |
Robyn
A. Serrano |
None |
1
($0.5 bil) |
2
($1.2 bil) |
None |
None |
None |
Samuel
Silver |
None |
None |
None |
None |
None |
None |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
American
Century Investment Management, Inc. | ||||||
Jonathan
Veiga |
1
($529 mil) |
None |
2
($116 mil) |
None |
None |
None |
Bert
Whitson |
1
($529 mil) |
None |
2
($116 mil) |
None |
None |
None |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Barrow,
Hanley, Mewhinney & Strauss, LLC | ||||||
Mark
Giambrone |
6
($2.3 bil) |
1
($160.2 mil) |
28
($6.1 bil) |
None |
None |
None |
W.
Coleman Hubbard |
2
($7.3 mil) |
1
($21 mil) |
7
($272 mil) |
None |
None |
None |
Justin
Martin |
1
($51.2 mil) |
1
($26.8 mil) |
11
($827 mil) |
None |
None |
None |
James
S. McClure |
2
($7.3 mil) |
1
($21 mil) |
7
($272 mil) |
None |
None |
None |
J.
Scott McDonald |
1
($51.2 mil) |
1
($26.8 mil) |
14
($856.6 mil) |
None |
None |
None |
Deborah
A. Petruzzelli |
1
($47.8 mil) |
1
($26.8 mil) |
7
($402.2 mil) |
None |
None |
None |
Matthew
Routh |
1
($51.2 mil) |
1
($26.8 mil) |
11
($827 mil) |
None |
None |
None |
DJ
Taylor |
2
($7.3 mil) |
1
($21 mil) |
7
($272 mil) |
None |
None |
None |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Brandywine
Global Investment Management, LLC | ||||||
Michelle
K. Bevan |
None |
3
($156 mil) |
1
($147 mil) |
None |
None |
None |
Henry
F. Otto |
8
($4.7 bil) |
8
($220 mil) |
42
($824 mil) |
None |
None |
2
($936 mil) |
Steven
M. Tonkovich |
8
($4.9 bil) |
8
($234 mil) |
42
($845 mil) |
None |
None |
2
($936 mil) |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Causeway
Capital Management LLC | ||||||
Sarah
H. Ketterer |
15
($13.1 bil) |
15
($3.7 bil) |
131
($19.5 bil) |
None |
None |
3
($1.6 bil) |
Harry
W. Hartford |
15
($13.1 bil) |
15
($3.7 bil) |
103
($19.2 bil) |
None |
None |
3
($1.6 bil) |
Jonathan
P. Eng |
15
($13.1 bil) |
15
($3.7 bil) |
96
($19.2 bil) |
None |
None |
3
($1.6 bil) |
Conor
Muldoon |
15
($13.1 bil) |
15
($3.7 bil) |
99
($19.2 bil) |
None |
None |
3
($1.6 bil) |
Ellen
Lee |
15
($13.1 bil) |
15
($3.7 bil) |
90
($19.2 bil) |
None |
None |
3
($1.6 bil) |
Alessandro
Valentini |
15
($13.1 bil) |
15
($3.7 bil) |
91
($19.2 bil) |
None |
None |
3
($1.6 bil) |
Steven
Nguyen |
15
($13.1 bil) |
15
($3.7 bil) |
91
($19.2 bil) |
None |
None |
3
($1.6 bil) |
Brian
Cho |
15
($13.1 bil) |
15
($3.7 bil) |
91
($19.2 bil) |
None |
None |
3
($1.6 bil) |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
DePrince,
Race & Zollo, Inc. | ||||||
Gregory
Ramsby |
None |
2
($141.2 mil) |
23
($800 mil) |
None |
None |
4
($316 mil) |
Randy
Renfrow |
None |
2
($141.2 mil) |
28
($968 mil) |
None |
None |
4
($316 mil) |
Number
of Other Accounts Managed and Assets by Account Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment
Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Garcia
Hamilton & Associates, L.P. | ||||||
Gilbert
Andrew Garcia |
None |
2
($65.9 mil) |
387
($19.6 bil) |
None |
None |
3
($275.9 mil) |
Karen
H. Tass*
|
None |
2
($67.2 mil) |
382
($19.7 bil) |
None |
None |
3
($242.5 mil) |
Jeffrey
D. Detwiler*
|
None |
2
($67.2 mil) |
382
($19.7 bil) |
None |
None |
3
($242.5 mil) |
Nancy
Rodriguez |
None |
2
($65.9 mil) |
387
($19.6 bil) |
None |
None |
3
($275.9 mil) |
* | As of December 31, 2023. |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Hotchkis
and Wiley Capital Management, LLC | ||||||
George
Davis |
22
($16.7 bil) |
10
($1.8 bil) |
55
($6 bil) |
2
($11.3 bil) |
1
($49.5 mil) |
4
($688.9 mil) |
Scott
McBride |
22
($16.7 bil) |
10
($1.8 bil) |
55
($6 bil) |
2
($11.3 bil) |
1
($49.5 mil) |
4
($688.9 mil) |
Patricia
McKenna |
22
($16.7 bil) |
10
($1.8 bil) |
55
($6 bil) |
2
($11.3 bil) |
1
($49.5 mil) |
4
($688.9 mil) |
Judd
Peters |
22
($16.9 bil) |
10
($1.8 bil) |
55
($6 bil) |
2
($11.3 bil) |
1
($49.5 mil) |
4
($688.9 mil) |
David
Green |
23
($16.9 bil) |
10
($1.8 bil) |
55
($6 bil) |
2
($11.3 bil) |
1
($49.5 mil) |
4
($688.9 mil) |
Jim
Miles |
23
($16.9 bil) |
10
($1.8 bil) |
55
($6 bil) |
2
($11.3 bil) |
1
($49.5 mil) |
4
($688.9 mil) |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Lazard
Asset Management LLC | ||||||
Michael
A. Bennett |
10
($10.8 bil) |
14
($4.9 bil) |
145
($18.2 bil) |
1
($4.9 bil) |
None |
3
($239.7 mil) |
Giles
Edwards |
5
($6.2 bil) |
8
($1.3 bil) |
108
($10.6 bil) |
1
($4.9 bil) |
None |
3
($239.7 mil) |
Michael
G. Fry |
5
($6.2 bil) |
8
($1.3 bil) |
108
($10.6 bil) |
1
($4.9 bil) |
None |
3
($239.7 mil) |
Michael
S. Powers |
8
($6.3 bil) |
8
($1.3 bil) |
107
($10.6 bil) |
1
($4.9 bil) |
None |
3
($239.7 mil) |
Paul
Selvey-Clinton |
5
($6.2 bil) |
15
($1.9 bil) |
115
($11.1 bil) |
1
($4.9 bil) |
None |
3
($239.7 mil) |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other
Pooled Investment
Vehicles |
Other
Accounts |
Massachusetts
Financial Services Company | ||||||
Katherine
Cannan |
10
($63.2 bil) |
3
($5.3 bil) |
16
($5.7 bil) |
None |
None |
None |
Nevin
Chitkara |
10
($63.2 bil) |
3
($5.3 bil) |
16
($5.7 bil) |
None |
None |
None |
Number
of Other Accounts Managed and Assets by Account
Type |
Number
of Accounts and Assets for Which Advisory Fee is Performance-Based | |||||
Name
of Investment Advisor and
Portfolio Manager |
Registered
Investment
Companies |
Other Pooled
Investment
Vehicles |
Other
Accounts |
Registered
Investment
Companies |
Other Pooled
Investment
Vehicles |
Other
accounts |
Newton
Investment Management North America, LLC | ||||||
Joseph
M. Corrado |
3
($15.1 bil) |
3
($25.4 mil) |
9
($731 mil) |
None |
None |
None |
Andrew
Leger |
7
($4.3 bil) |
9
($283.0 mil) |
23
($2.0 bil) |
None |
None |
3
($98.3 mil) |
1 | Similar Accounts may have investment objectives, strategies and risks that differ from those of the Fund. In addition, the Fund is subject to different regulations than certain of the Similar Accounts and, consequently, may not be permitted to invest in the same securities, exercise rights to exchange or convert securities or engage in all the investment techniques or transactions, or to invest, exercise or engage to the same degree, as the Similar Accounts. For these or other reasons, the portfolio managers may purchase different securities for the Fund and the corresponding Similar Accounts, and the performance of securities purchased for the Fund may vary from the performance of securities purchased for Similar Accounts, perhaps materially. |
2 | Conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities. Lazard may be perceived as causing accounts it manages to participate in an offering to increase Lazard’s overall allocation of securities in that offering, or to increase Lazard’s ability to participate in future offerings by the same underwriter or issuer. Allocations of bunched trades, particularly trade orders that were only partially filled due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as Lazard may have an incentive to allocate securities that are expected to increase in value to preferred accounts. Initial public offerings, in particular, are frequently of very limited availability. A potential conflict of interest may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by the other account, or when a sale in one account lowers the sale price received in a sale by a second account. |
3 | Portfolio managers may be perceived to have a conflict of interest because of the large number of Similar Accounts, in addition to the Fund, that they are managing on behalf of Lazard. Although Lazard does not track each individual portfolio manager’s time dedicated to each account, Lazard periodically reviews each portfolio manager’s overall responsibilities to ensure that he or she is able to allocate the necessary time and resources to effectively manage the Fund. As illustrated in the table above, most of the portfolio managers manage a significant number of Similar Accounts in addition to the Fund. |
4 | Generally, Lazard and/or its portfolio managers have investments in Similar Accounts. This could be viewed as creating a potential conflict of interest, since certain of the portfolio managers do not invest in the Fund. |
5 | The table above notes the portfolio managers who manage Similar Accounts with respect to which the advisory fee is based on the performance of the account, which could give the portfolio managers and Lazard an incentive to favor such Similar Accounts over the Fund. |
6 | Portfolio managers may place transactions on behalf of Similar Accounts that are directly or indirectly contrary to investment decisions made for the Fund, which could have the potential to adversely impact the Fund, depending on market conditions. In addition, if the Fund’s investment in an issuer is at a different level of the issuer’s capital structure than an investment in the issuer by Similar Accounts, in the event of credit deterioration of the issuer, there may be a conflict of interest between the Fund’s and such Similar Accounts’ investments in the issuer. If Lazard sells securities |
short, including on behalf of a Similar Account, it may be seen as harmful to the performance of the Fund to the extent it invests “long” in the same or similar securities whose market values fall as a result of short-selling activities. |
7 | Investment decisions are made independently from those of the Similar Accounts. If, however, such Similar Accounts desire to invest in, or dispose of, the same securities as the Fund, available investments or opportunities for sales will be allocated equitably to each. In some cases, this procedure may adversely affect the size of the position obtained for or disposed of by the Fund or the price paid or received by the Fund. |
8 | Under Lazard’s trade allocation procedures applicable to domestic and foreign initial and secondary public offerings and Rule 144A transactions (collectively herein a “Limited Offering”), Lazard will generally allocate Limited Offering shares among client accounts, including the Fund, pro rata based upon the aggregate asset size (excluding leverage) of the account. Lazard may also allocate Limited Offering shares on a random basis, as selected electronically, or other basis. It is often difficult for the Adviser to obtain a sufficient number of Limited Offering shares to provide a full allocation to each account. Lazard’s allocation procedures are designed to allocate Limited Offering securities in a fair and equitable manner. |
Portfolio
Manager |
Benchmark(s) |
Katherine
Cannan |
Russell
1000®
Value Index |
Nevin
Chitkara |
Russell
1000®
Value Index |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Balanced
Fund |
American
Beacon International
Equity
Fund |
American
Beacon Large
Cap Value Fund |
American
Beacon Small
Cap Value Fund |
American
Beacon Advisors, Inc. |
||||
Kirk
L. Brown |
None |
$100,001-
$500,000 |
$100,001-
$500,000 |
N/A |
Paul
B. Cavazos |
None |
$100,001-
$500,000 |
$100,001-
$500,000 |
$100,001-
$500,000 |
Colin
J. Hamer |
N/A |
N/A |
N/A |
$50,001-
$100,000 |
Erin
Higginbotham |
None |
N/A |
N/A |
N/A |
Robyn
A. Serrano |
N/A |
$10,001-$50,000 |
$10,001-$50,000 |
$10,001-$50,000 |
Samuel
Silver |
None |
N/A |
N/A |
N/A |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon International
Equity
Fund |
American
Century Investment Management, Inc. | |
Jonathan
Veiga |
None |
Bert
Whitson |
None |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Balanced
Fund |
American
Beacon Large
Cap Value Fund |
American
Beacon Small
Cap Value Fund |
Barrow,
Hanley, Mewhinney & Strauss, LLC | |||
Mark
Giambrone |
None |
None |
N/A |
W.
Coleman Hubbard |
N/A |
N/A |
None |
Justin
Martin |
None |
N/A |
N/A |
James
S. McClure |
N/A |
N/A |
None |
J.
Scott McDonald |
None |
N/A |
N/A |
Deborah
A. Petruzzelli |
None |
N/A |
N/A |
Matthew
Routh |
None |
N/A |
N/A |
DJ
Taylor |
N/A |
N/A |
$1-$10,000 |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Small Cap Value Fund |
Brandywine
Global Investment Management, LLC | |
Michelle
K. Bevan |
None |
Henry
F. Otto |
Over
$1,000,000 |
Steven
M. Tonkovich |
$100,001
- $500,000 |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon International
Equity
Fund |
Causeway
Capital Management LLC | |
Sarah
H. Ketterer |
None |
Harry
W. Hartford |
None |
Jonathan
Eng |
None |
Conor
Muldoon |
None |
Ellen
Lee |
None |
Alessandro
Valentini |
None |
Steven
Nguyen |
None |
Brian
Cho |
None |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Small
Cap Value Fund |
DePrince,
Race & Zollo, Inc. | |
Gregory
Ramsby |
$100,001-$500,000 |
Randy
Renfrow |
None |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Garcia
Hamilton Quality
Bond Fund |
Garcia
Hamilton & Associates, L.P. | |
Gilbert
Andrew Garcia |
Over
$1,000,000 |
Karen
H. Tass*
|
None |
Jeffrey
D. Detwiler*
|
$500,001-$1,000,000 |
Nancy
Rodriguez |
None |
* | As of December 31, 2023. |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Balanced
Fund |
American
Beacon Large
Cap Value Fund |
American
Beacon Small
Cap Value Fund |
Hotchkis
and Wiley Capital Management, LLC |
|||
George
Davis |
None |
None |
N/A |
David
Green |
N/A |
N/A |
None |
Scott
McBride |
None |
None |
N/A |
Patricia
McKenna |
None |
None |
N/A |
Jim
Miles |
N/A |
N/A |
None |
Judd
Peters |
None |
None |
N/A |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon International
Equity
Fund |
Lazard
Asset Management LLC | |
Michael
A. Bennett |
None |
Giles
Edwards |
None |
Michael
G. Fry |
None |
Michael
Powers |
None |
Paul
Selvey-Clinton |
None |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Large
Cap Value Fund |
Massachusetts
Financial Services Company | |
Katherine
Cannan |
None |
Nevin
Chitkara |
None |
Name
of Investment Advisor and Portfolio Managers |
American
Beacon Small
Cap Value Fund |
Newton
Investment Management North America, LLC | |
Joseph
M. Corrado |
None |
Andrew
Leger |
None |
American
Beacon Fund |
Amount
Received |
American
Beacon Balanced Fund |
$851 |
American
Beacon Garcia Hamilton Quality Bond Fund |
- |
American
Beacon International Equity Fund |
$6 |
American
Beacon Large Cap Value Fund |
- |
American
Beacon Small Cap Value Fund |
$66,859 |
American
Beacon Fund |
2021 |
2022 |
2023 |
American
Beacon Balanced Fund |
$47,789 |
$31,042 |
$31,814 |
American
Beacon Garcia Hamilton Quality Bond Fund |
$0 |
$0 |
$0 |
American
Beacon International Equity Fund |
$1,466,713 |
$988,348 |
$928,099 |
American
Beacon Large Cap Value Fund |
$1,264,057 |
$730,929 |
$757,891 |
American
Beacon Small Cap Value Fund |
$4,421,838 |
$5,066,612 |
$4,603,699 |
American
Beacon Fund |
Amounts
Directed |
Amounts
Paid in Commissions |
American
Beacon Balanced Fund |
$343,517,595 |
$301,921 |
American
Beacon Garcia Hamilton Quality Bond Fund |
$0 |
$0 |
American
Beacon International Equity Fund |
$1,223,305,829 |
$434,985 |
American
Beacon Large Cap Value Fund |
$625,017,034 |
$342,087 |
American
Beacon Small Cap Value Fund |
$4,410,765,784 |
$1,867,045 |
American
Beacon Fund |
Broker |
Affiliated
With |
2021
Commissions |
2022
Commissions |
2023
Commissions |
American
Beacon Small Cap Value Fund |
Keybanc
Capital Markets (cleared with affiliate
Pershing) |
Newton
Investment Management
North America |
$74,614 |
$89,171 |
$53,206 |
American
Beacon Small Cap Value Fund |
Leerink
Partners LLC (cleared with affiliate Pershing) |
Newton
Investment Management
North America |
$18,551 |
$14,782 |
$3,408 |
American
Beacon Small Cap Value Fund |
Needham
& Company (cleared with affiliate Pershing) |
Newton
Investment Management
North America |
$1,249 |
$0 |
$0 |
American
Beacon Small Cap Value Fund |
Berenberg
Capital Markets (cleared with affiliate
Pershing) |
Newton
Investment Management
North America |
$4,071 |
$19,568 |
$0 |
American
Beacon Small Cap Value Fund |
Piper
Jaffray Ltd. (cleared with affiliate Pershing) |
Newton
Investment Management
North America |
$167,908 |
$146,624 |
$92,901 |
Regular
Broker-Dealers |
American
Beacon Fund |
Aggregate
Value
of Securities (000’s) |
Bank
of America Corp |
American
Beacon Balanced Fund |
$239 |
State
Street Corp |
American
Beacon Balanced Fund |
$472 |
Goldman
Sachs Group Inc |
American
Beacon Balanced Fund |
$597 |
BNY
Mellon |
American
Beacon Balanced Fund |
$650 |
Citigroup
Inc |
American
Beacon Balanced Fund |
$1,119 |
Wells
Fargo & Co |
American
Beacon Balanced Fund |
$1,826 |
Citigroup
Inc |
American
Beacon Garcia Hamilton Quality Bond Fund |
$5,028 |
UBS
Group |
American
Beacon International Equity Fund |
$1,435 |
Barclays
PLC |
American
Beacon International Equity Fund |
$14,401 |
Bank
of America Corp |
American
Beacon Large Cap Value Fund |
$7,333 |
State
Street Corp |
American
Beacon Large Cap Value Fund |
$14,359 |
Morgan
Stanley |
American
Beacon Large Cap Value Fund |
$16,325 |
Regular
Broker-Dealers |
American
Beacon Fund |
Aggregate
Value
of Securities (000’s) |
Goldman
Sachs Group |
American
Beacon Large Cap Value Fund |
$18,657 |
BNY
Mellon |
American
Beacon Large Cap Value Fund |
$20,259 |
JP
Morgan Chase & Co |
American
Beacon Large Cap Value Fund |
$39,316 |
Stifel
Financial Corp |
American
Beacon Small Cap Value Fund |
$12,574 |
■ |
individual-type
employee benefit plans, such as an IRA, individual 403(b) plan or
single-participant Keogh-type plan; |
■ |
business
accounts solely controlled by you or your immediate family (for example,
you own the entire business); |
■ |
trust
accounts established by you or your immediate family (for trusts with only
one primary beneficiary, upon the trustor’s death the trust account
may
be aggregated with such beneficiary’s own accounts; for trusts with
multiple primary beneficiaries, upon the trustor’s death the trustees of
the trust
may instruct the
Funds’
transfer agent to establish separate trust accounts for each primary
beneficiary; each primary beneficiary’s separate trust account
may then be aggregated with such beneficiary’s own
accounts); |
■ |
endowments
or foundations established and controlled by you or your immediate family;
or |
■ |
529
accounts, which will be aggregated at the account owner level (Class 529-E
accounts may only be aggregated with an eligible employer
plan). |
■ |
for
a single trust estate or fiduciary account, including employee benefit
plans other than the individual-type employee benefit plans described
above; |
■ |
made
for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment Company Act, excluding
the
individual-type employee benefit plans described
above; |
■ |
for
nonprofit, charitable or educational organizations, or any endowments or
foundations established and controlled by such organizations, or any
employer-sponsored
retirement plans established for the benefit of the employees of such
organizations, their endowments, or their foundations;
or |
■ |
for
individually established participant accounts of a 403(b) plan that is
treated similarly to an employer-sponsored plan for sales charge purposes
(see
“Purchases by certain 403(b) plans” under “Sales Charges” above), or made
for two or more such 403(b) plans that are treated similarly to
employer-sponsored
plans for sales charge purposes, in each case of a single employer or
affiliated employers as defined in the Investment Company Act.
Purchases made for nominee or street name accounts (securities held in the
name of a broker-dealer or another nominee such as a bank trust
department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described
above. |
1 | current or retired trustees, and officers of the American Beacon Funds family, current or retired employees and directors of the Manager and its affiliated companies, certain family members and employees of the above persons, and trusts or plans primarily for such persons; |
2 | currently registered representatives and assistants directly employed by such representatives, retired registered representatives with respect to accounts established while active, or full-time employees (collectively, “Eligible Persons”) (and their spouses, and children, including children in step and adoptive relationships, sons-in-law and daughters-in-law, if the Eligible Persons or the spouses or children of the Eligible Persons are listed in the account registration with the spouse or parent) of broker-dealers who have sales agreements with the Distributor (or who clear transactions through such dealers), plans for the dealers, and plans that include as participants only the Eligible Persons, their spouses and/or children; |
3 | companies exchanging securities with the Funds through a merger, acquisition or exchange offer; |
4 | insurance company separate accounts; |
5 | accounts managed by the Manager, a sub-advisor to the Funds and their affiliated companies; |
6 | the Manager or a sub-advisor to the Funds and their affiliated companies; |
7 | an individual or entity with a substantial business relationship with, which may include the officers and employees of the Funds’ custodian or transfer agent, the Manager or a sub-advisor to the Funds and their affiliated companies, or an individual or entity related or relating to such individual or entity; |
8 | full-time employees of banks that have sales agreements with the Distributor, who are solely dedicated to directly supporting the sale of mutual funds; |
9 | directors, officers and employees of financial institutions that have a selling group agreement with the Distributor; |
10 | banks, broker-dealers and other financial institutions (including registered investment advisors and financial planners) that have entered into an agreement with the Distributor or one of its affiliates, purchasing shares on behalf of clients participating in a fund supermarket or in a wrap program, asset allocation program or other program in which the clients pay an asset-based fee; |
11 | clients of authorized dealers purchasing shares in fixed or flat fee brokerage accounts; |
12 | Employer-sponsored defined contribution - type plans, including 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans and non-qualified deferred compensation plans, and IRA rollovers involving retirement plan assets invested in a Fund in the American Beacon Funds fund family; and |
13 | Employee benefit and retirement plans for the Manager and its affiliates. |
■ |
redemption
proceeds from a non-retirement account (for example, a joint tenant
account) used to purchase Fund shares in an IRA or other individual-type
retirement account; |
■ |
“required
minimum distributions” (as described in Section 401(a)(9) of the Internal
Revenue Code) from an IRA or other individual-type retirement
account
used to purchase Fund shares in a non-retirement account;
and |
■ |
death
distributions paid to a beneficiary’s account that are used by the
beneficiary to purchase Fund shares in a different
account. |
■ |
Any
partial or complete redemption following death or “disability” (as defined
in the Internal Revenue Code) of a shareholder (including one who
owns
the shares with his or her spouse as a joint tenant with rights of
survivorship) from an account in which the deceased or disabled is named.
The
Manager or a Fund’s transfer agent may require documentation prior to
waiver of the charge, including death certificates, physicians’
certificates,
etc. |
■ |
Redemptions
from a systematic withdrawal plan. If the systematic withdrawal plan is
based on a fixed dollar amount or number of shares, systematic
withdrawal
redemptions are limited to no more than 10% of your account value or
number of shares per year, as of the date the Manager or a Fund’s
transfer agent receives your request. If the systematic withdrawal plan is
based on a fixed percentage of your account value, each redemption
is
limited to an amount that would not exceed 10% of your annual account
value at the time of withdrawal. |
■ |
Redemptions
from retirement plans qualified under Section 401 of the Internal Revenue
Code. The CDSC will be waived for benefit payments made by
American Beacon Funds directly to plan participants. Benefit payments
include, but are not limited to, payments resulting from death,
“disability,” “retirement,”
“separation from service” (each as defined in the Internal Revenue Code),
“required minimum distributions” (as described in Section 401(a)(9)
of the Internal Revenue Code), in-service distributions, hardships, loans
and qualified domestic relations orders. The CDSC waiver will not
apply
in the event of termination of the plan or transfer of the plan to another
financial institution. |
■ |
Redemptions
that are required minimum distributions from a traditional IRA as required
by the Internal Revenue Service. |
■ |
Involuntary
redemptions as a result of your account not meeting the minimum balance
requirements, the termination and liquidation of the Fund, or other
actions by the Fund. |
■ |
Distributions
from accounts for which the broker-dealer of record has entered into a
written agreement with the Distributor (or Manager) allowing this
waiver. |
■ |
To
return excess contributions made to a retirement
plan. |
■ |
To
return contributions made due to a mistake of
fact. |
■ |
Derive
at least 90% of its gross income each taxable year from (1) dividends,
interest, payments with respect to securities loans and gains from the
sale
or other disposition of securities or foreign currencies (together with
Qualifying Other Income (as defined below), “Qualifying Income”), or other
income,
including gains from options, futures or forward contracts, derived with
respect to its business of investing in securities or those currencies
(“Qualifying
Other Income”) and (2) net income derived from an interest in a “qualified
publicly traded partnership” (“QPTP”) (“Gross Income Requirement”).
A QPTP is a “publicly traded partnership” (that is, a partnership the
interests in which are “traded on an established securities market”
or “readily tradable on a secondary market (or the substantial equivalent
thereof)” (a “PTP”)) that meets certain qualifying income requirements
other than a partnership at least 90% of the gross income of which is
Qualifying Income; |
■ |
Diversify
its investments so that, at the close of each quarter of its taxable year,
(1) at least 50% of the value of its total assets is represented by cash
and
cash items, Government securities, securities of other RICs, and other
securities, with those other securities limited, in respect of any one
issuer, to
an amount that does not exceed 5% of the value of the Fund’s total assets
and that does not represent more than 10% of the issuer’s outstanding
voting securities (equity securities of QPTPs being considered voting
securities for these purposes), and (2) not more than 25% of the
value
of its total assets is invested in (a) the securities (other than
Government securities or securities of other RICs) of any one
issuer, (b) the securities
(other than securities of other RICs) of two or more issuers the Fund
controls (by owning 20% or more of their voting power) that are
determined
to be engaged in the same, similar or related trades or businesses, or (c)
the securities of one or more QPTPs (“Diversification Requirements”);
and |
■ |
Distribute
annually to its shareholders at least the sum of 90% of its investment
company taxable income (generally, net investment income, the excess
(if any) of net short-term capital gain over net long-term capital loss,
and net gains and losses (if any) from certain foreign currency
transactions,
all determined without regard to any deduction for dividends paid) and 90%
of its net exempt interest income (“Distribution Requirement”). |
1.
Routine Matters |
a.
Election of Directors (1) Generally. The Advisor will generally support the election of directors that result in a board made up of a majority of independent directors. In general, the Advisor will vote in favor of management’s director nominees if they are running unopposed. The Advisor believes that management is in the best possible position to evaluate the qualifications of directors and the needs and dynamics of a particular board. The Advisor of course maintains the ability to vote against any candidate whom it feels is not qualified or if there are specific concerns about the individual, such as allegations of criminal wrongdoing or breach of fiduciary responsibilities. Additional information the Advisor may consider concerning director nominees include, but is not limited to, whether (1) there is an adequate explanation for repeated absences at board meetings, (2) the nominee receives non-board fee compensation, or (3) there is a family relationship between the nominee and the company’s chief executive officer or controlling shareholder. When management’s nominees are opposed in a proxy contest, the Advisor will evaluate which nominees’ publicly-announced management policies and goals are most likely to maximize shareholder value, as well as the past performance of the incumbents. (2) Committee Service. The Advisor will withhold votes for non-independent directors who serve on the audit, compensation, and/or nominating committees of the board. (3) Classification of Boards. The Advisor will support proposals that seek to declassify boards. Conversely, the Advisor will oppose efforts to adopt classified board structures. (4) Majority Independent Board. The Advisor will support proposals calling for a majority of independent directors on a board. The Advisor believes that a majority of independent directors can help to facilitate objective decision making and enhances accountability to shareholders. (5) Majority Vote Standard for Director Elections. The Advisor will vote in favor of proposals calling for directors to be elected by an affirmative majority of the votes cast in a board election, provided that the proposal allows for a plurality voting standard in the case of contested elections. The Advisor may consider voting against such shareholder proposals where a company’s board has adopted an alternative measure, such as a director resignation policy, that provides a meaningful alternative to the majority voting standard and appropriately addresses situations where an incumbent director fails to receive the support of the majority of the votes cast in an uncontested election. (6) Withholding Campaigns. The Advisor will support proposals calling for shareholders to withhold votes for directors where such actions will advance the principles set forth in paragraphs (1) through (5) above. |
b.
Ratification of Selection of Auditors The Advisor will generally rely on the judgment of the issuer’s audit committee in selecting the independent auditors who will provide the best service to the company. The Advisor believes that independence of the auditors is paramount and will vote against auditors whose independence appears to be impaired. The Advisor will vote against proposed auditors in those circumstances where (1) an auditor has a financial interest in or association with the company, and is therefore not independent; (2) non-audit fees comprise more than 50% of the total fees paid by the company to the audit firm; or (3) there is reason to believe that the independent auditor has previously rendered an opinion to the issuer that is either inaccurate or not indicative of the company’s financial position. |
2.
Compensation Matters |
a.
Executive Compensation (1) Advisory Vote on Compensation. The Advisor believes there are more effective ways to convey concerns about compensation than through an advisory vote on compensation (such as voting against specific excessive incentive plans or withholding votes from compensation committee members). The Advisor will consider and vote on a case-by-case basis on say-on-pay proposals and will generally support management proposals unless specific concerns exist, including if the Advisor concludes that executive compensation is (i) misaligned with shareholder interests, (ii) |
unreasonable
in amount, or (iii) not in the aggregate meaningfully tied to the
company’s performance. (2)
Frequency of Advisory Votes on Compensation.
The Advisor generally supports the triennial option for the frequency of
say-on-pay proposals, but will consider management recommendations
for an alternative approach. |
b.
Equity Based Compensation Plans The Advisor believes that equity-based incentive plans are economically significant issues upon which shareholders are entitled to vote. The Advisor recognizes that equity-based compensation plans can be useful in attracting and maintaining desirable employees. The cost associated with such plans must be measured if plans are to be used appropriately to maximize shareholder value. The Advisor will conduct a case-by-case analysis of each stock option, stock bonus or similar plan or amendment, and generally approve management’s recommendations with respect to adoption of or amendments to a company’s equity-based compensation plans, provided that the total number of shares reserved under all of a company’s plans is reasonable and not excessively dilutive. The Advisor will review equity-based compensation plans or amendments thereto on a case-by-case basis. Factors that will be considered in the determination include the company’s overall capitalization, the performance of the company relative to its peers, and the maturity of the company and its industry; for example, technology companies often use options broadly throughout its employee base which may justify somewhat greater dilution. Amendments which are proposed in order to bring a company’s plan within applicable legal requirements will be reviewed by the Advisor’s legal counsel; amendments to executive bonus plans to comply with IRS Section 162(m) disclosure requirements, for example, are generally approved. The Advisor will generally vote against the adoption of plans or plan amendments that: |
■ |
Provide
for immediate vesting of all stock options in the event of a change of
control of the company without reasonable safeguards against abuse
(see “Anti-Takeover Proposals” below); |
■ |
Reset
outstanding stock options at a lower strike price unless accompanied by a
corresponding and proportionate reduction in the number of shares
designated. The Advisor will generally oppose adoption of stock option
plans that explicitly or historically permit repricing of stock
options,
regardless of the number of shares reserved for issuance, since their
effect is impossible to evaluate; |
■ |
Establish
restriction periods shorter than three years for restricted stock
grants; |
■ |
Do
not reasonably associate awards to performance of the company;
or |
■ |
Are
excessively dilutive to the company. |
3.
Anti-Takeover Proposals |
In
general, the Advisor will vote against any proposal, whether made by
management or shareholders, which the Advisor believes would materially
discourage
a potential acquisition or takeover. In most cases an acquisition or
takeover of a particular company will increase share value. The
adoption
of anti-takeover measures may prevent or frustrate a bid from being made,
may prevent consummation of the acquisition, and may have a negative
effect on share price when no acquisition proposal is pending. The items
below discuss specific anti-takeover
proposals. |
a.
Cumulative Voting The Advisor will vote in favor of any proposal to adopt cumulative voting and will vote against any proposal to eliminate cumulative voting that is already in place, except in cases where a company has a staggered board. Cumulative voting gives minority shareholders a stronger voice in the company and a greater chance for representation on the board. The Advisor believes that the elimination of cumulative voting constitutes an anti-takeover measure. |
b.
Staggered Board If a company has a “staggered board,” its directors are elected for terms of more than one year and only a segment of the board stands for election in any year. Therefore, a potential acquiror cannot replace the entire board in one year even if it controls a majority of the votes. Although staggered boards may provide some degree of continuity and stability of leadership and direction to the board of directors, the Advisor believes that staggered boards are primarily an anti-takeover device and will vote against establishing them and for eliminating them. However, the Advisor does not necessarily vote against the re-election of directors serving on staggered boards. |
c.
“Blank Check” Preferred Stock Blank check preferred stock gives the board of directors the ability to issue preferred stock, without further shareholder approval, with such rights, preferences, privileges and restrictions as may be set by the board. In response to a hostile takeover attempt, the board could issue such stock to a friendly party or “white knight” or could establish conversion or other rights in the preferred stock which would dilute the common stock and make an acquisition impossible or less attractive. The argument in favor of blank check preferred stock is that it gives the board flexibility in pursuing financing, acquisitions or other proper corporate purposes without incurring the time or expense of a shareholder vote. Generally, the Advisor will vote against blank check preferred stock. However, the Advisor may vote in favor of blank check preferred if the proxy statement discloses that such stock is limited to use for a specific, proper corporate objective as a financing instrument. |
d.
Elimination of Preemptive Rights When a company grants preemptive rights, existing shareholders are given an opportunity to maintain their proportional ownership when new shares are issued. A proposal to eliminate preemptive rights is a request from management to revoke that right. While preemptive rights will protect the shareholder from having its equity diluted, it may also decrease a company’s ability to raise capital through stock offerings or use stock for acquisitions or other proper corporate purposes. Preemptive rights may therefore result in a lower market value for the company’s stock. In the long term, shareholders could be adversely affected by preemptive rights. The Advisor generally votes against proposals to grant preemptive rights, and for proposals to eliminate preemptive rights. |
e.
Non-targeted Share Repurchase A non-targeted share repurchase is generally used by company management to prevent the value of stock held by existing shareholders from |
deteriorating.
A non-targeted share repurchase may reflect management’s belief in the
favorable business prospects of the company. The Advisor finds
no disadvantageous effects of a non-targeted share repurchase and will
generally vote for the approval of a non-targeted share repurchase
subject
to analysis of the company’s financial
condition. |
f.
Increase in Authorized Common Stock The issuance of new common stock can also be viewed as an anti-takeover measure, although its effect on shareholder value would appear to be less significant than the adoption of blank check preferred. The Advisor will evaluate the amount of the proposed increase and the purpose or purposes for which the increase is sought. If the increase is not excessive and is sought for proper corporate purposes, the increase will be approved. Proper corporate purposes might include, for example, the creation of additional stock to accommodate a stock split or stock dividend, additional stock required for a proposed acquisition, or additional stock required to be reserved upon exercise of employee stock option plans or employee stock purchase plans. Generally, the Advisor will vote in favor of an increase in authorized common stock of up to 100%; increases in excess of 100% are evaluated on a case-by-case basis, and will be voted affirmatively if management has provided sound justification for the increase. |
g.
“Supermajority” Voting Provisions or Super Voting Share
Classes A “supermajority” voting provision is a provision placed in a company’s charter documents which would require a “supermajority” (ranging from 66 to 90%) of shareholders and shareholder votes to approve any type of acquisition of the company. A super voting share class grants one class of shareholders a greater per-share vote than those of shareholders of other voting classes. The Advisor believes that these are standard anti-takeover measures and will generally vote against them. The supermajority provision makes an acquisition more time-consuming and expensive for the acquiror. A super voting share class favors one group of shareholders disproportionately to economic interest. Both are often proposed in conjunction with other anti-takeover measures. |
h.
“Fair Price” Amendments This is another type of charter amendment that would require an offeror to pay a “fair” and uniform price to all shareholders in an acquisition. In general, fair price amendments are designed to protect shareholders from coercive, two-tier tender offers in which some shareholders may be merged out on disadvantageous terms. Fair price amendments also have an anti-takeover impact, although their adoption is generally believed to have less of a negative effect on stock price than other anti-takeover measures. The Advisor will carefully examine all fair price proposals. In general, the Advisor will vote against fair price proposals unless the Advisor concludes that it is likely that the share price will not be negatively affected and the proposal will not have the effect of discouraging acquisition proposals. |
i.
Limiting the Right to Call Special Shareholder
Meetings. The corporation statutes of many states allow minority shareholders at a certain threshold level of ownership (frequently 10%) to call a special meeting of shareholders. This right can be eliminated (or the threshold increased) by amendment to the company’s charter documents. The Advisor believes that the right to call a special shareholder meeting is significant for minority shareholders; the elimination of such right will be viewed as an anti-takeover measure and the Advisor will generally vote against proposals attempting to eliminate this right and for proposals attempting to restore it. |
j.
Poison Pills or Shareholder Rights Plans Many companies have now adopted some version of a poison pill plan (also known as a shareholder rights plan). Poison pill plans generally provide for the issuance of additional equity securities or rights to purchase equity securities upon the occurrence of certain hostile events, such as the acquisition of a large block of stock. The basic argument against poison pills is that they depress share value, discourage offers for the company and serve to “entrench” management. The basic argument in favor of poison pills is that they give management more time and leverage to deal with a takeover bid and, as a result, shareholders may receive a better price. The Advisor believes that the potential benefits of a poison pill plan are outweighed by the potential detriments. The Advisor will generally vote against all forms of poison pills. The Advisor will, however, consider on a case-by-case basis poison pills that are very limited in time and preclusive effect. The Advisor will generally vote in favor of such a poison pill if it is linked to a business strategy that will – in our view – likely result in greater value for shareholders, if the term is less than three years, and if shareholder approval is required to reinstate the expired plan or adopt a new plan at the end of this term. |
k.
Golden Parachutes Golden parachute arrangements provide substantial compensation to executives who are terminated as a result of a takeover or change in control of their company. The existence of such plans in reasonable amounts probably has only a slight anti-takeover effect. In voting, the Advisor will evaluate the specifics of the plan presented. |
l.
Reincorporation Reincorporation in a new state is often proposed as one part of a package of anti-takeover measures. Several states (such as Pennsylvania, Ohio and Indiana) now provide some type of legislation that greatly discourages takeovers. Management believes that Delaware in particular is beneficial as a corporate domicile because of the well-developed body of statutes and case law dealing with corporate acquisitions. The Advisor will examine reincorporation proposals on a case-by-case basis. Generally, if the Advisor believes that the reincorporation will result in greater protection from takeovers, the reincorporation proposal will be opposed. The Advisor will also oppose reincorporation proposals involving jurisdictions that specify that directors can recognize non-shareholder interests over those of shareholders. When reincorporation is proposed for a legitimate business purpose and without the negative effects identified above, the Advisor will generally vote affirmatively. |
m.
Confidential Voting Companies that have not previously adopted a “confidential voting” policy allow management to view the results of shareholder votes. This gives management the opportunity to contact those shareholders voting against management in an effort to change their votes. Proponents of secret ballots argue that confidential voting enables shareholders to vote on all issues on the basis of merit without pressure from management to influence their decision. Opponents argue that confidential voting is more expensive and unnecessary; also, holding shares in a nominee name maintains shareholders’ confidentiality. The Advisor believes that the only way to insure anonymity of votes is through confidential voting, and |
that
the benefits of confidential voting outweigh the incremental additional
cost of administering a confidential voting system. Therefore, the
Advisor
will generally vote in favor of any proposal to adopt confidential
voting. |
n.
Opting In or Out of State Takeover Laws State takeover laws typically are designed to make it more difficult to acquire a corporation organized in that state. The Advisor believes that the decision of whether or not to accept or reject offers of merger or acquisition should be made by the shareholders, without unreasonably restrictive state laws that may impose ownership thresholds or waiting periods on potential acquirors. Therefore, the Advisor will generally vote in favor of opting out of restrictive state takeover laws. |
4.
Transaction Related Proposals The Advisor will review transaction related
proposals, such as mergers, acquisitions, and corporate reorganizations,
on
a case-by-case basis, taking into consideration the impact of the
transaction on each client account. In some instances, such as the
approval of a proposed
merger, a transaction may have a differential impact on client accounts
depending on the securities held in each account. For example,
whether
a merger is in the best interest of a client account may be influenced by
whether an account holds, and in what proportion, the stock of
both
the acquirer and the acquiror. In these circumstances, the Advisor may
determine that it is in the best interests of the accounts to vote the
accounts’
shares differently on proposals related to the same
transaction. |
5.
Other Matters |
a.
Proposals Involving Environmental, Social, and Governance (“ESG”)
Matters The Advisor believes that ESG issues can potentially impact an issuer’s long-term financial performance and has developed an analytical framework, as well as a proprietary assessment tool, to integrate risks and opportunities stemming from ESG issues into our investment process. This ESG integration process extends to our proxy voting practices in that our ESG Proxy Team analyzes on a case-by-case basis the financial materiality and potential risks or economic impact of the ESG issues underpinning proxy proposals and makes voting recommendations based thereon for the Advisor’s consideration. The ESG Proxy Team will generally recommend support for well-targeted ESG proposals if it believes that there is a rational linkage between a proposal, its economic impact, and its potential to maximize long-term shareholder value. Where the economic effect of such proposals is unclear and there is not a specific written client-mandate, the Advisor believes it is generally impossible to know how to vote in a manner that would accurately reflect the views of the Advisor’s clients, and, therefore, the Advisor will generally rely on management’s assessment of the economic effect if the Advisor believes the assessment is not unreasonable. Shareholders may also introduce proposals which are the subject of existing law or regulation. Examples of such proposals would include a proposal to require disclosure of a company’s contributions to political action committees or a proposal to require a company to adopt a non-smoking workplace policy. The Advisor believes that such proposals may be better addressed outside the corporate arena and, absent a potential economic impact, will generally vote with management’s recommendation. In addition, the Advisor will generally vote against any proposal which would require a company to adopt practices or procedures which go beyond the requirements of existing, directly applicable law. |
b.
Anti-Greenmail Proposals “Anti-greenmail” proposals generally limit the right of a corporation, without a shareholder vote, to pay a premium or buy out a 5% or greater shareholder. Management often argues that they should not be restricted from negotiating a deal to buy out a significant shareholder at a premium if they believe it is in the best interest of the company. Institutional shareholders generally believe that all shareholders should be able to vote on such a significant use of corporate assets. The Advisor believes that any repurchase by the company at a premium price of a large block of stock should be subject to a shareholder vote. Accordingly, it will generally vote in favor of anti-greenmail proposals. |
c.
Indemnification The Advisor will generally vote in favor of a corporation’s proposal to indemnify its officers and directors in accordance with applicable state law. Indemnification arrangements are often necessary in order to attract and retain qualified directors. The adoption of such proposals appears to have little effect on share value. |
d.
Non-Stock Incentive Plans Management may propose a variety of cash-based incentive or bonus plans to stimulate employee performance. In general, the cash or other corporate assets required for most incentive plans is not material, and the Advisor will vote in favor of such proposals, particularly when the proposal is recommended in order to comply with IRC Section 162(m) regarding salary disclosure requirements. Case-by-case determinations will be made of the appropriateness of the amount of shareholder value transferred by proposed plans. |
e.
Director Tenure These proposals ask that age and term restrictions be placed on the board of directors. The Advisor believes that these types of blanket restrictions are not necessarily in the best interests of shareholders and therefore will vote against such proposals, unless they have been recommended by management. |
f.
Directors’ Stock Options Plans The Advisor believes that stock options are an appropriate form of compensation for directors, and the Advisor will generally vote for director stock option plans which are reasonable and do not result in excessive shareholder dilution. Analysis of such proposals will be made on a case-by-case basis, and will take into account total board compensation and the company’s total exposure to stock option plan dilution. |
g.
Director Share Ownership The Advisor will generally vote against shareholder proposals which would require directors to hold a minimum number of the company’s shares to serve on the Board of Directors, in the belief that such ownership should be at the discretion of Board members. |
h.
Non-U.S. Proxies The Advisor will generally evaluate non-U.S. proxies in the context of the voting policies expressed herein but will also, where feasible, take into consideration differing laws, regulations, and practices in the relevant foreign market in determining if and how to vote. There may also be |
circumstances
when practicalities and costs involved with non-U.S. investing make it
disadvantageous to vote shares. For instance, the Advisor generally
does not vote proxies in circumstances where share blocking restrictions
apply, when meeting attendance is required in person, or when current
share ownership disclosure is required. Restrictions apply, when meeting
attendance is required in person, or when current share ownership
disclosure is required. |
C.
Use of Proxy Advisory Services |
The
Adviser may retain proxy advisory firms to provide services in connection
with voting proxies, including, without limitation, to provide
information
on shareholder meeting dates and proxy materials, translate proxy
materials printed in a foreign language, provide research on proxy
proposals
and voting recommendations in accordance with the voting policies
expressed herein, provide systems to assist with casting the proxy
votes,
and provide reports and assist with preparation of filings concerning the
proxies voted. Prior to the selection of a proxy advisory firm and
periodically
thereafter, the Advisor will consider whether the proxy advisory firm has
the capacity and competency to adequately analyze proxy issues
and
the ability to make recommendations based on material accurate information
in an impartial manner. Such considerations may include some or
all
of the following (i) periodic sampling of votes cast through the firm’s
systems to determine that votes are in accordance with the Advisor’s
policies and
its clients best interests, (ii) onsite visits to the proxy advisory
firm’s office and/or discussions with the firm to determine whether the
firm continues
to have the resources (e.g. staffing, personnel, technology, etc.)
capacity and competency to carry out its obligations to the Advisor, (iii)
a review
of the firm’s policies and procedures, with a focus on those relating to
identifying and addressing conflicts of interest and monitoring that
current
and accurate information is used in creating recommendations, (iv)
requesting that the firm notify the Advisor if there is a change in the
firm’s
material policies and procedures, particularly with respect to conflicts,
or material business practices (e.g., entering or exiting new lines of
business),
and reviewing any such change, and (v) in case of an error made by the
firm, discussing the error with the firm and determining whether
appropriate
corrective and preventative action is being taken. In the event the
Advisor discovers an error in the research or voting recommendations
provided
by the firm, it will take reasonable steps to investigate the error and
seek to determine whether the firm is taking reasonable steps to
reduce
similar errors in the future. While the Advisor takes into account
information from many different sources, including independent proxy
advisory
services, the decision on how to vote proxies will be made in accordance
with these policies. |
D.
Monitoring Potential Conflicts of
Interest |
Corporate
management has a strong interest in the outcome of proposals submitted to
shareholders. As a consequence, management often seeks to
influence large shareholders to vote with their recommendations on
particularly controversial matters. In the vast majority of cases, these
communications
with large shareholders amount to little more than advocacy for
management’s positions and give the Advisor’s staff the opportunity
to ask additional questions about the matter being presented. Companies
with which the Advisor has direct business relationships could
theoretically
use these relationships to attempt to unduly influence the manner in which
the Advisor votes on matters for its clients. To ensure that such
a conflict of interest does not affect proxy votes cast for the Advisor’s
clients, our proxy voting personnel regularly catalog companies with
whom
the Advisor has significant business relationships; all discretionary
(including case-by-case) voting for these companies will be voted by the
client
or an appropriate fiduciary responsible for the client (e.g., a committee
of the independent directors of a fund or the trustee of a retirement
plan).
In addition, to avoid any potential conflict of interest that may arise
when one American Century fund owns shares of another American
Century
fund, the Advisor will “echo vote” such shares, if possible. Echo voting
means the Advisor will vote the shares in the same proportion as the
vote
of all of the other holders of the fund’s shares. So, for example, if
shareholders of a fund cast 80% of their votes in favor of a proposal and
20%
against the proposal, any American Century fund that owns shares of such
fund will cast 80% of its shares in favor of the proposal and 20%
against.
When this is not possible (as in the case of the “NT” funds, where the
other American Century funds are the only shareholders), the shares
of
the underlying fund (e.g. the “NT” fund) will be voted in the same
proportion as the vote of the shareholders of the corresponding American
Century
policy portfolio for proposals common to both funds. For example, NT
Growth Fund shares will be echo voted in accordance with the votes
of
the Growth Fund shareholders. In the case where the policy portfolio does
not have a common proposal, shares will be voted in consultation with
a
committee of the independent directors. |
************************************************************ |
The
voting policies expressed above are of course subject to modification in
certain circumstances and will be reexamined from time to time. With
respect
to matters that do not fit in the categories stated above, the Advisor
will exercise its best judgment as a fiduciary to vote in the manner
which
will most enhance shareholder value. Case-by-case determinations will be
made by the Advisor’s staff, which is overseen by the General Counsel
of the Advisor, in consultation with equity managers. Electronic records
will be kept of all votes made. |
■ |
Research
on corporate governance, financial statements, business, legal and
accounting risks, |
■ |
Proxy
voting recommendations, including environmental,
social, and governance (“ESG”) voting
Guidelines, |
■ |
Portfolio
accounting and reconciliation of shareholdings for voting
purposes, |
■ |
Proxy
voting execution, record keeping, and reporting services.
|
■ |
Barrow
Hanley’s Proxy Oversight Committee is responsible for implementing and
monitoring this
proxy voting Policy,
procedures, disclosures, and recordkeeping. |
■ |
The
Proxy Oversight Committee conducts periodic reviews of
proxy votes to
ensure that the Policy
is observed, implemented properly, and amended or
updated, as appropriate. |
■ |
The
Proxy Oversight Committee is comprised
of the CCO, the Responsible Investing Committee Lead,
the Head
of Investment Operations,
the ESG Research
Coordinator,
and an At-Large
Portfolio Manager.
|
■ |
Proxy
Coordinators
are responsible for organizing and reviewing
the data and recommendations of
Glass Lewis. |
■ |
Proxy
Coordinators
are responsible for ensuring that the proxy ballots are routed to the
appropriate research analyst based on industry sector coverage. |
■ |
Research
Analysts
are responsible for
review and evaluate proposals
and make recommendations to the Proxy Voting Committee to ensure that
votes are
consistent with the Firm’s analysis. |
■ |
Equity
Portfolio
Managers
are members of the Proxy Voting
Committee. |
■ |
Equity
Portfolio
Managers vote
proposals based on our
Guidelines, internal research recommendations, and the
research
from Glass Lewis. Proxy votes
must be approved by the Proxy Voting Committee before submitting to
Glass
Lewis. |
■ |
Proxies
for the Diversified Small Cap Value accounts are voted in accordance with
the Glass
Lewis’
recommendations for the following
reasons: |
■ |
Investment
selection is
based on a quantitative model, |
■ |
The
holding period is too short to justify the time for analysis necessary
to
vote. |
■ |
Clients
elect to participate in securities lending arrangements; in such cases,
the votes follow the shares.
Barrow Hanley is not a party to the client’s lending
arrangement and typically does not have information about
shares on loan.
Under these circumstances
the proxies for those shares may not be
voted. |
■ |
If/when
a proxy voting issue is determined to be financially material, the Firm
makes a best-efforts attempt to alert clients and their custodial bank to
recall
shares from loan to be voted. In this context, Barrow Hanley defines a
financially material issue to be issues deemed by our investment team to
have
significant economic impact. The ultimate decision on whether to recall
shares is the responsibility of the
client. |
■ |
Barrow
Hanley invests in equity securities of corporations who are also clients
of the Firm.
In such
cases, the
Firm
seeks to mitigate potential conflicts by: |
■ |
Making
voting decisions for the benefit of the shareholder(s), our
clients, |
■ |
Uniformly
voting every proxy based on Barrow Hanley’s internal research and
consideration of Glass Lewis’ recommendations,
and |
■ |
Documenting
the votes of companies who are also clients of the
Firm. |
■ |
If
a material conflict of interest exists, members from the Proxy Voting and
Oversight Committees will determine if the affected clients should have
an
opportunity to vote their proxies themselves, or whether Barrow Hanley
will address the specific voting issue through other objective means, such
as
voting the proxies in a manner consistent with a predetermined voting
policy or accepting the voting recommendation of Glass Lewis.
|
■ |
A
proxy card or voting instruction form contains a list of voting options,
including For, Against, Abstain, and/or Withhold. A vote to Abstain or
Withhold
is effectively a vote against the proposal. Barrow Hanley assesses each
vote, the intended impact of our vote, and the rule(s) that apply to
the
vote and may select any of these options when casting the vote. Barrow
Hanley
sends a daily electronic transfer of equity positions to Glass
Lewis. |
■ |
Glass
Lewis
identifies accounts eligible to vote for each security and posts the
proposals and research on its secure, proprietary online
system. |
■ |
Barrow
Hanley sends a proxy report to clients at least annually and/or
as requested by client,
listing the number of shares voted and disclosing how proxies
were voted. |
■ |
Barrow
Hanley retains voting records in accordance with the Firm’s Books and
Records Policy. Glass Lewis retains the Firm’s voting records for seven
years.
|
■ |
Proxy
Coordinators are responsible for retaining
the following proxy records: |
■ |
These
policies,
procedures,
and amendments; |
■ |
Proxy
statements regarding
our clients’ securities; |
■ |
A
record of each proxy voted; |
■ |
Proxy
voting reports that are sent to clients
annually; |
■ |
Internal
documents related to voting decisions;
and |
■ |
Records
of clients’
requests
for proxy voting information
and/or correspondence about votes.
|
■ |
Board
of Directors |
■ |
Independent
Auditors |
■ |
Compensation
Issues |
■ |
Corporate
Structure and Shareholder Rights |
■ |
Shareholder
Proposals and ESG Issues |
■ |
Voting
of Non-U.S./Foreign Shares |
■ |
A
slate of nominees comprised of a two-thirds majority of independent
directors. |
■ |
Nominees
for Audit, Compensation and/or Nominating committees who are independent
of management. |
■ |
Nominees
who we believe have the required skills and diverse backgrounds to make
informed judgments about the subject matter for which the committee
is responsible. |
■ |
We
attempt to target board diversity of at least
30%. |
■ |
A
slate of nominees that results in a majority non-independent
directors. |
■ |
Nominees
for Audit, Compensation and/or Nominating committees who are not
independent of management. |
■ |
Incumbent
board members who failed to attend at least 75% of board and applicable
committee meetings. |
■ |
Nominees
who have served on boards or as executives of companies with records of
poor performance, inadequate risk oversight, excessive compensation,
audit, or accounting-related problems and/or other indicators of
mismanagement or actions against the interests of
shareholders. |
■ |
Nominees
whose actions on other committees demonstrate serious failures of
governance, which may include acting to significantly reduce shareholder
rights, or failure to respond to previous vote requests for directors and
shareholder proposals. |
■ |
An
independent director who has in the past three years, had a material
financial, familial, or other relationship with the company or its
executives. |
■ |
Members
of a Nominating committee where the board has an average tenure of over
ten years and has not appointed a new member to the board in
at least five years |
■ |
Members
of a Nominating committee where the board lacks
diversity. |
Stock-Based
Compensation Plans Stock-based compensation plans should be administered by an independent committee of the board and approved by shareholders. Barrow Hanley opposes compensation plans that substantially dilute a shareholder’s ownership interest, provides participants with excessive awards, and/or have other objectionable features. Compensation proposals are evaluated on a case-by-case basis using the following factors: |
■ |
The
company’s industry group, market capitalization, and competitors’
compensation plans. |
■ |
Requirements
for senior executives to hold a minimum amount/percentage of company
stock. |
■ |
Requirements
for minimum holding periods for stock acquired through equity
awards. |
■ |
Performance-vesting
awards, indexed options, and/or other grants linked to the company’s
performance. |
■ |
Requirements
that limit the concentration of equity grants to senior executives and
provide for a broad-based plan. |
■ |
Requirements
for stock-based compensation plans as a substitute for cash compensation
to deliver market-competitive total
compensation. |
Bonus
Plans Bonus based compensation plans should include the following features: |
■ |
Periodic
shareholder approval to properly qualify for deductions under Internal
Revenue Code Section 162(m). |
■ |
Performance
measures relating to key value drivers of the company’s
business. |
■ |
Maximum
award amounts expressed in dollar
amounts. |
Bonus
plans should not include excessive awards in both absolute and relative
terms. |
Executive
Compensation Plans (Say on Pay) Say on Pay type of executive compensation programs can effectively link pay and performance and provide competitive compensation opportunities. Say on Pay type plans should state the amount of compensation at risk and the amount of equity-based compensation linked to the company’s performance and include adequate disclosure about the overall compensation structure. Say on Pay type plans should not include significant compensation guarantees and/or compensation that is not sufficiently linked to performance. |
Recoupment
Provisions (Clawbacks) Executive compensation programs should be clearly tied to performance and include the following: |
■ |
Detailed
bonus recoupment policies to prevent executives from retaining
performance-based awards that were not truly
earned. |
■ |
Clawback
triggers in the event of a restatement of financial results or similar
revision of performance indicators upon which bonuses were
based. |
■ |
Policies
allowing board reviews of performance-related bonuses and awards paid to
senior executives during the period covered by a restatement that
allows the company to recoup such bonuses if performance goals were not
actually achieved. |
■ |
Clawback
policies that limit discretion and ensure the integrity of such
policies. |
Executive
Severance Agreement (Golden Parachutes) Executive compensation should be designed as an incentive for continued employment and include reasonable severance benefits, and the executive’s termination should be limited to three times salary and bonus, referred to as double-trigger plans. |
Guaranteed
severance benefits that exceed three times salary and bonus should be
disclosed and should require shareholder
approval. |
Barrow
Hanley does not support guaranteed severance benefits without a change in
control or arrangements that does not require the executive’s termination,
referred to as single-trigger plans. |
Employee
Stock Purchase Plans Employee stock purchase plans are effective ways to increase employees’ ownership in the company’s stock. Such plans should not allow for purchases below 85% of current market value and should limit shares reserved under the plan to 5% or less of the outstanding shares of the company. |
Shareholder
Right Plans (Poison Pills) Poison pill plans can erode shareholder value by limiting a potential acquirer’s ability to purchase a controlling interest in the company without the approval of its board of directors, and/or can serve to entrench incumbent management and directors. |
Shareholder
rights plans should be designed to enables the board to take appropriate
to defensive actions, and should require the
following: |
■ |
Shareholder
approval within a year of its adoption. |
■ |
Timing
limited to 3-5 years. |
■ |
Requirement
for shareholder approval for renewal. |
■ |
Reviews
by a committee of independent directors at least every three years,
referred to as TIDE provisions. |
■ |
Permitted
bid or qualified offer features requiring shareholder votes under specific
conditions referred to as chewable pills. |
■ |
Reasonable
ownership triggers of 15-20%. |
■ |
Highly
independent, non-classified boards. |
Shareholder
rights plans should avoid the following: |
■ |
Long-term
defensive features of 5 or more years. |
■ |
Automatic
renewals without shareholder approval. |
■ |
Ownership
triggers of less than 15%. |
■ |
Classified
boards. |
■ |
Boards
with limited independence. |
Political
Contributions and Lobbying Barrow Hanley evaluates an issuer’s policy and procedures governing political spending and lobbying. Proposals demonstrating insufficient or absent policies and disclosure are opposed. |
An
Increase in Authorized Shares Proposals for increases in authorized share amounts should not expose shareholders to excessive dilution and should be limited to increases of up to 20% of the current share authorization. |
Cumulative
Voting Cumulative voting should be proportional to the shareholders’ economic investment in the company. |
Supermajority
Vote Requirements Shareholders’ rights to approve or reject proposals should be based on a simple majority. |
Confidential
Voting Shareholder voting should be conducted in a confidential manner. |
Dual
Classes of Stock Barrow Hanley opposes dual-class capitalization structures that provide disparate voting rights to shareholders with similar economic interests. Proposals to create separate share classes with different voting rights are opposed. Proposals to dissolve separate share classes are approved. |
A.
has specifically authorized Brandywine Global to vote proxies in the
applicable investment management agreement or other written instrument;
or |
B.
without specifically authorizing Brandywine Global to vote proxies, has
granted general investment discretion to Brandywine Global in the
applicable
investment management agreement. |
A.
Procedures for Identifying Conflicts of
Interest |
Brandywine
Global relies on the procedures set forth below to seek to identify
conflicts of interest with respect to proxy
voting. |
1.
Brandywine Global’s Compliance Department annually requires each
Brandywine Global employee to complete a questionnaire designed to
elicit
information that may reveal potential conflicts between the employee’s
interests and those of Brandywine Global
clients. |
2.
Brandywine Global treats client and wrap sponsor relationships as creating
a material conflict of interest for Brandywine Global in voting proxies
with
respect to securities issued by such client or its known
affiliates. |
3.
As a general matter, Brandywine Global takes the position that
relationships between a non-Brandywine Global Franklin Resources business
unit and
an issuer (e.g., investment management relationship between an issuer and
a non-Brandywine Global Franklin Resources-owned asset manager)
do not present a conflict of interest for Brandywine Global in voting
proxies with respect to such issuer because Brandywine Global operates
as an independent business unit from other Franklin Resources business
units and because of the existence of informational barriers between
Brandywine Global and certain other Franklin Resources business
units. |
B.
Procedures for Assessing Materiality of Conflicts of
Interest |
1.
All potential conflicts of interest identified pursuant to the procedures
outlined in Section V.A.1. must be brought to the attention of the
Investment
Committee for resolution. |
2.
The Investment Committee shall determine whether a conflict of interest is
material. A conflict of interest shall be considered material to the
extent
that it is determined that such conflict is likely to influence, or appear
to influence, Brandywine Global’s decision-making in voting the
proxy.
All materiality determinations will be based on an assessment of the
particular facts and circumstances. A written record of all materiality
determinations
made by the Investment Committee shall be
maintained. |
3.
If it is determined by the Investment Committee that a conflict of
interest is not material, Brandywine Global may vote proxies following
normal processes
notwithstanding the existence of the
conflict. |
C.
Procedures for Addressing Material Conflicts of
Interest |
1.
With the exception of those material conflicts identified in A.2. which
will be voted in accordance with paragraph C.1.b., if it is determined by
the
Investment Committee that a conflict of interest is material, the
Investment Committee shall determine an appropriate method or combination
of
methods to resolve such conflict of interest before the proxy affected by
the conflict of interest is voted by Brandywine Global. Such determination
shall be based on the particular facts and circumstances, including the
importance of the proxy issue, the nature of the conflict of interest,
etc. Such methods may include: |
a.
confirming that the proxy will be voted in accordance with a stated
position or positions set forth in Appendix
A; |
b.
confirming that the proxy will be voted in accordance with the
recommendations of an independent proxy service firm retained by
Brandywine
Global; |
c.
in the case of a conflict of interest resulting from a particular
employee’s personal relationships or circumstances, removing such employee
from
the decision-making process with respect to such proxy
vote; |
d.
disclosing the conflict to clients and obtaining their consent before
voting; |
e.
suggesting to clients that they engage another party to vote the proxy on
their behalf; or |
f.
such other method as is deemed appropriate given the particular facts and
circumstances, including the importance of the proxy issue, the
nature
of the conflict of interest, etc. |
2.
A written record of the method used to resolve a material conflict of
interest shall be maintained. |
A.
Share Blocking |
Proxy
voting in certain countries requires “share blocking.” This means that
shareholders wishing to vote their proxies must deposit their shares
shortly
before the date of the meeting (e.g. one week) with a designated
depositary. During the blocking period, shares that will be voted at the
meeting
cannot be sold until the meeting has taken place and the shares have been
returned to client accounts by the designated depositary. In deciding
whether to vote shares subject to share blocking, Brandywine Global will
consider and weigh, based on the particular facts and circumstances,
the expected benefit to client accounts of voting in relation to the
potential detriment to clients of not being able to sell such shares
during
the applicable period. |
B.
Securities on Loan |
Certain
clients of Brandywine Global, such as an institutional client or a
registered investment company for which Brandywine Global acts as a
sub-adviser,
may engage in securities lending with respect to the securities in their
accounts. Brandywine Global typically does not direct or oversee
such
securities lending activities. To the extent feasible and practical under
the circumstances, Brandywine Global may request that the client recall
shares
that are on loan so that such shares can be voted if Brandywine Global
believes that the expected benefit to the client of voting such shares
outweighs
the detriment to the client of recalling such shares (e.g., foregone
income). The ability to timely recall shares for proxy voting purposes
typically
is not entirely within the control of Brandywine Global and requires the
cooperation of the client and its other service providers. Under
certain
circumstances, the recall of shares in time for such shares to be voted
may not be possible due to applicable proxy voting record dates and
administrative
considerations. |
A.
Proxy Voting Independence and Intent |
Brandywine
Global exercises its proxy voting authority independently of other
Franklin Resources-owned asset managers. Brandywine Global and its
employees
shall not consult with or enter into any formal or informal agreements
with Brandywine Global’s ultimate parent, Franklin Resources, Inc.,
any
other Franklin Resources business unit, or any of their respective
officers, directors or employees, regarding the voting of any securities
by Brandywine
Global on behalf of its clients. |
Brandywine
Global and its employees must not disclose to any person outside of
Brandywine Global, including without limitation another investment
management firm (affiliated or unaffiliated) or the issuer of securities
that are the subject of the proxy vote, how Brandywine Global intends
to vote a proxy without prior approval from Brandywine Global’s Chief
Compliance Officer. |
If
a Brandywine Global employee receives a request to disclose Brandywine
Global’s proxy voting intentions to, or is otherwise contacted by, another
person
outside of Brandywine Global (including an employee of another Franklin
Resources business unit) in connection with an upcoming proxy voting
matter, the employee should immediately notify Brandywine Global’s Chief
Compliance Officer. |
If
a Brandywine Global portfolio manager wants to take a public stance with
regards to a proxy, the portfolio manager must consult with and obtain
the
approval of Brandywine Global’s Chief Compliance Officer before making or
issuing a public statement. |
B.
Disclosure of Proxy Votes and Policy and
Procedures |
Upon
Brandywine Global’s receipt of any oral or written client request for
information on how Brandywine Global voted proxies for that client’s
account,
Brandywine Global must promptly provide the client with such requested
information in writing. |
Brandywine
Global must deliver to each client, for which it has proxy voting
authority, no later than the time it accepts such authority, a written
summary
of this Proxy Voting policy and procedures. This summary must include
information on how clients may obtain information about how Brandywine
Global has voted proxies for their accounts and must also state that a
copy of Brandywine Global’s Proxy Voting policy and procedures is
available
upon request. |
Brandywine
Global must create and maintain a record of each written client request
for proxy voting information. Such record must be created promptly
after receipt of the request and must include the date the request was
received, the content of the request, and the date of Brandywine
Global’s
response. Brandywine Global must also maintain copies of written client
requests and copies of all responses to such
requests. |
C.
Delegation of Duties |
Brandywine
Global may delegate to non-investment personnel the responsibility to vote
proxies in accordance with the guidelines set forth in Appendix
A. Such delegation of duties will only be made to employees deemed to be
reasonably capable of performing this function in a satisfactory
manner. |
A.
a copy of this Policy and Procedures, including any and all amendments
that may be adopted; |
B.
a copy of each proxy statement that Brandywine Global receives regarding
client securities; |
C.
a record of each vote cast by Brandywine Global on behalf of a
client; |
D.
documentation relating to the identification and resolution of conflicts
of interest; |
E.
any documents created by Brandywine Global that were material to a proxy
voting decision or that memorialized the basis for that
decision; |
F.
a copy of each written client request for information on how Brandywine
Global voted proxies on behalf of the client, and a copy of any written
response
by Brandywine Global to any (written or oral) client request for
information on how Brandywine Global voted proxies on behalf of the
requesting
client; and |
G.
records showing whether or not Brandywine Global has proxy voting
authority for each client account. |
A.
We vote for non-employee director stock options, unless we consider the
number of shares available for issue excessive. We may consider current
and
past stock option grants in determining whether the cumulative dilution is
excessive. |
B.
We vote for employee stock purchase programs. Normally, these programs
allow all employees to purchase company stock at a price equal to
85%
of current market price. Usually, we will still vote for these employee
programs even if we vote against a non-employee or executive-only stock
purchase
program because of excessive dilution. |
C.
We vote for compensation plans that are tied to the company achieving set
profitability hurdles. Plans are structured this way to comply with IRS
laws
allowing for deductibility of management compensation exceeding $1
million. |
D.
We vote against attempts to re-price options. Also, we vote against the
re-election of incumbent Directors in the event of such a re-pricing
proposal. |
E.
We vote against attempts to increase incentive stock options available for
issuance when the shares underlying such options would exceed 10%
of
the company’s outstanding shares. |
F.
We vote against stock option plans allowing for stock options with
exercise prices less than 100% of the stock’s price at the time of the
option grant. |
G.
We vote against stock option plans allowing for very large allocations to
a single individual because we generally believe that stock option plans
should
provide for widespread employee
participation. |
H.
We vote against proposals to authorize or approve loans to company
executives or Board members for personal reasons or for the purpose of
enabling
such persons to purchase company shares. |
A.
We vote for proposals to separate the Chief Executive Officer and Chairman
of the Board positions. |
B.
We vote against “catch-all” authorizations permitting proxy holders to
conduct unspecified business that arises during shareholder
meetings. |
A.
Staggered Boards of Directors (for example, where 1/3 of a company’s Board
is elected each year rather than the entire Board each
year). |
B.
Super-Majority Voting Measures (for example, requiring a greater than 50%
vote to approve takeovers or make certain
changes). |
C.
Poison Pills, which are special stock rights that go into effect upon a
takeover offer or an outsider acquiring more than a specified percentage
of a company’s
outstanding shares. |
A.
We vote for non-employee director stock options, unless we consider the
number of shares available for issue
excessive. |
B.
We vote for employee stock purchase programs. Normally, these programs
allow all employees to purchase company stock at a price equal to
85%
of current market price. Usually, we will still vote for these employee
programs even if we vote against a non-employee or executive-only stock
purchase
program because of excessive dilution. |
C.
We vote for measures that give shareholders a vote on executive
compensation. |
D.
We vote for compensation plans that are tied to the company achieving set
profitability hurdles. We
vote against compensation metrics that are not
easily measurable and where long-term incentives are not tied to operating
performance metrics. This
is to comply with IRS laws to allow for deductibility
of management compensation exceeding $1
million. |
E.
We vote against any attempt to re-price options. Also, we vote against the
re- election of incumbent Directors in the event of such a re-pricing
proposal. |
F.
We vote against attempts to increase incentive stock options when we
determine they are excessive, either in total or for one
individual. |
G.
We vote against stock option plans allowing for stock options with
exercise prices less than 100% of the stock’s price at the time of the
option grant. |
A.
We vote for cumulative shareholder
voting. |
B.
We vote against “catch-all” authorizations permitting proxy holders to
conduct unspecified business that arises during shareholder
meetings. |
C.
We vote against related-party transactions involving directors, senior
members of company management or other company
insiders. |
D.
We vote for proposals to separate the Chief Executive Officer and Chairman
of the Board positions. |
A.
Staggered Boards of Directors (for example, where 1/3 of a company’s Board
is elected each year rather than the entire Board each
year). |
B.
Super-Majority Voting Measures (for example, requiring a greater than 50%
vote to approve takeovers or make certain
changes). |
C.
Poison Pills, which are special stock rights that go into effect upon a
takeover offer or an outsider acquiring more
|
a
specified percentage of a company’s outstanding
shares. |
D.
Change-of-Control Contracts, which grant benefits to company personnel
(typically members of senior company management) in the event the
company
is acquired or is otherwise subject to a change of
control. |
A.
We vote for non-employee director stock options, unless we consider the
number of shares available for issue
excessive. |
B.
We vote for employee stock purchase programs. Normally, these programs
allow all employees to purchase company stock at a price equal to
85%
of current market price. Usually, we will still vote for these employee
programs even if we vote against a non-employee or executive-only stock
purchase
program because of excessive dilution. |
C.
We vote for measures that give shareholders a vote on executive
compensation. |
D.
We vote for compensation plans that are tied to the company achieving set
profitability hurdles. This is to comply with IRS laws to allow for
deductibility
of management compensation exceeding $1
million. |
E.
We vote against any attempt to re-price options. Also, we vote against the
re- election of incumbent Directors in the event of such a re-pricing
proposal. |
F.
We vote against attempts to increase incentive stock options when we
determine they are excessive, either in total or for one
individual. |
G.
We vote against stock option plans allowing for stock options with
exercise prices less than 100% of the stock’s price at the time of the
option grant. |
A.
We vote for cumulative shareholder
voting. |
B.
We vote against “catch-all” authorizations permitting proxy holders to
conduct unspecified business that arises during shareholder
meetings. |
A.
Staggered Boards of Directors (for example, where 1/3 of a company’s Board
is elected each year rather than the entire Board each
year). |
B.
Super-Majority Voting Measures (for example, requiring a greater than 50%
vote to approve takeovers or make certain
changes). |
C.
Poison Pills, which are special stock rights that go into effect upon a
takeover offer or an outsider acquiring more than a specified percentage
of a company’s
outstanding shares. |
■ |
distributions
of income |
■ |
appointment
of auditors |
■ |
director
compensation, unless deemed excessive |
■ |
boards
of directors – Causeway generally votes for management’s slate of director
nominees. However, it votes against incumbent nominees with poor
attendance records, or who have otherwise acted in a manner Causeway
believes is not in the best interests of shareholders. Causeway
recognizes
that, in certain jurisdictions, local law or regulation may influence
Board composition. |
■ |
financial
results/director and auditor reports |
■ |
share
repurchase plans |
■ |
changing
corporate names and other similar matters |
■ |
amendments
to articles of association or other governing
documents |
■ |
changes
in board or corporate governance
structure |
■ |
changes
in authorized capital including proposals to issue
shares |
■ |
compensation
– Causeway believes that it is important that a company’s equity-based
compensation plans, including stock option or restricted stock
plans,
are aligned with the interests of shareholders, including Causeway’s
clients, and focus on observable long-term returns. Causeway evaluates
compensation
plans on a case-by-case basis, with due consideration of potential
consequences of a particular compensation plan. Causeway generally
opposes packages that it believes provide excessive awards or create
excessive shareholder dilution. Causeway generally opposes proposals
to
reprice options because the underlying stock has fallen in
value. |
■ |
social
and environmental issues – Causeway believes that it is generally
management’s responsibility to address such issues within the context of
increasing
long-term shareholder value. To the extent that management’s position on a
social or environmental issue is inconsistent with increasing long-term
shareholder value, Causeway may vote against management or abstain.
Causeway may also seek to engage in longer-term dialogue with management
on these issues, either separately or in connection with proxy votes on
the issue. |
■ |
debt
issuance requests |
■ |
mergers,
acquisitions and other corporate reorganizations or
restructurings |
■ |
changes
in state or country of incorporation |
■ |
•
related party transactions |
■ |
anti-takeover
mechanisms – Causeway generally opposes anti-takeover mechanisms including
poison pills, unequal voting rights plans, staggered boards,
provisions requiring supermajority approval of a merger and other matters
that are designed to limit the ability of shareholders to approve
merger
transactions. |
■ |
If
a “for” or “against” or “with management” guideline applies to the
proposal, Causeway will vote in accordance with that
guideline. |
■ |
If
a “for” or “against” or “with management” guideline does not apply to the
proposal, Causeway will follow the recommendation of an independent
third party such as ISS. If Causeway seeks to follow the recommendation of
a third party, the Chief Operating Officer will assess the third
party’s capacity and competency to analyze the issue, as well as the third
party’s ability to identify and address conflicts of interest it may have
with
respect to the recommendation. |
■ |
An
investment adviser must disclose to clients how they can obtain
information on how client proxies were
voted. |
■ |
A
concise summation of the proxy voting process, rather than a reiteration
of the adviser’s proxy voting policy and procedures must also be disclosed
and
that upon client request, the adviser will provide a copy of the policies
and procedures. |
■ |
Proxy
Voting Policies and Procedures; |
■ |
Proxy
Statements Received Regarding Client
Securities; |
■ |
Records
of Votes Cast on Behalf of Clients; |
■ |
Records
of Client Requests for Proxy Voting Information;
and |
■ |
Any
Documents Prepared by the Adviser that were Material to Making a Decision
how to Vote, or that were Prepared by the Adviser to Memorialize
the
Basis for the Decision. |
■ |
DRZ
does not maintain a written proxy voting policy as required by Rule
206(4)-6. |
■ |
Proxies
are not voted in clients’ best interests. |
■ |
Proxies
are not identified and voted in a timely
manner. |
■ |
Conflicts
between DRZ’s interests and the client are not identified; therefore,
proxies are not voted appropriately. |
■ |
Proxy
voting records and client requests to review proxy votes are not
maintained. DRZ has established the following guidelines as an attempt to
mitigate
these risks. |
1 | DRZ shall maintain a list of all clients for which it votes proxies. The list will be maintained electronically and will be updated by the Compliance department who will obtain proxy voting information from client agreements. Notice of new accounts to be added to the proxy service must be sent to the Proxy Administrator no later than ten (10) days from the date a new account starts trading. Alternatively, DRZ’s Operations Department, as part of the account opening procedure, will inform the Proxy Administrator that DRZ will vote proxies for the new client. |
2 | DRZ shall work with the client to ensure that the Proxy Administrator is the designated party to receive proxy voting materials from companies or intermediaries. To that end, new account forms of broker- dealers/custodians will state that the Proxy Administrator should receive this documentation. The designation may also be made by telephoning contacts and/or Client Service Representatives at broker- dealers/custodians. These intermediaries will be informed to direct all proxy materials to DRZ’s designated Proxy Administrator. |
3 | DRZ shall work with the Proxy Administrator to ensure that the Proxy Administrator is properly instructed on the manner and direction to vote each client’s account based upon the type of client and specific voting instructions received from the client, if any. DRZ has established proxy voting policies with the Proxy Administrator in the interest of maximizing shareholder value. However, DRZ has instructed the Proxy Administrator to alert DRZ to certain issues that DRZ believes require an additional level of consideration. |
4 | The Proxy Administrator shall receive all proxy voting materials and will be responsible for ensuring that proxies are voted and submitted in a timely manner. DRZ’s Compliance Department shall receive and review current proxy information from the Proxy Administrator on a routine basis to ensure that all proxies are being received and voted. |
5 | The Proxy Administrator will review the list of clients and compare the record date of the proxies with a security holdings list for the security or company soliciting the proxy vote. For any client who has provided specific voting instructions, the Proxy Administrator shall vote that client’s proxy in accordance with the client’s written instructions. Proxies received for client’s who have elected to have their proxies voted by a third party outside of the proxy voting services DRZ provides, and whose proxies were received by DRZ, shall be forwarded back to the client for voting and submission. Proxies received after the termination date of a client relationship will not be voted. Such proxies should be delivered to the last known address of the former client or to the intermediary who distributed the proxy with a written or oral statement indicating that the advisory relationship has been terminated and that the proxies should be forwarded to the last known address of the former client. The statement should further indicate that future proxies for the named former client should not be delivered to DRZ or to the Proxy Administrator, but directly to the former client. |
6 | Proxy issues not covered by DRZ’s guidelines will be forwarded to the appropriate DRZ investment team for consideration and submission of a vote. |
7 | It is DRZ’s policy to abstain from voting proxy ballots over which the issuer has implemented a share blocking policy. Share blocking policies are generally implemented by issuers whose securities are traded in limited markets outside the United States. Under a “share blocking policy” voting any proxies on the ballot would prohibit trading shares of the issuer for a pre-determined period of time. DRZ typically invests in securities that have unrestricted liquidity and therefore DRZ will generally choose to avoid circumstances that would hinder DRZ’s ability to manage portfolio positions. DRZ will document exceptions or deviations from this policy. |
8 | DRZ shall compare the cost of voting the proxy to the benefit to the client. In the event that the costs of voting appear to outweigh the benefits, DRZ shall document such rationale and maintain the documentation in the permanent file (for example, voting a foreign security may require additional costs that overshadow the benefits) in accordance with DRZ’s record retention policy. |
9 | The Proxy Administrator and/or the CCO or CA will reasonably try to assess any material conflicts between DRZ’s interests and those of its clients with respect to proxy voting by considering the situations identified in the Conflicts of Interest section of this document. |
10 | So long as there is no material conflicts of interest identified, the Proxy Administrator will vote proxies according to the guidelines set forth above. DRZ may also elect to abstain from voting if it deems such abstinence in its clients’ best interests. The rationale for the occurrence of voting that deviates from the guidelines will be documented and the documentation will be maintained in the permanent file in accordance with DRZ’s record retention policy. |
11 | If the Proxy Administrator, the CCO or the CA (interchangeably referred to as the “Compliance Officer”) detects a conflict of interest, the following process will be followed: |
a.
In cases where the Proxy Administrator is the party identifying the
conflict, they have been instructed to contact DRZ’s CCO or ACO as soon as
reasonably
practicable. |
b.
The CCO and a member of the DRZ Proxy Voting Committee (the “Committee”)
will determine the appropriate method of resolution considering
the
nature of the conflict of interest, the proxy voting deadline, the number
of clients involved, and other material information related to the
matter. |
c.
The CCO will either (i) with the assistance of the appropriate investment
personnel, contact the client(s) directly for discussion of the matter and
determine
if the client(s) desire to vote the proxy directly or provide its vote to
DRZ to vote on their behalf, or (ii) will convene the Committee, as
appropriate. |
d.
If the CCO elects to contact the client(s) directly and the client(s)
desire to vote the proxy or provide DRZ with their vote, the CCO and the
Proxy Administrator
will provide the client(s) with the proxy and related information to
enable the client(s) to make an informed
decision. |
e.
Alternatively, if the CCO concludes the matter should go before the
Committee, they will immediately convene the Committee. Members of the
Committee
include the persons listed on Attachment A. A majority of the Committee
members shall constitute a quorum at a meeting of the Committee,
but in no event shall a quorum consist of less than one-third of the
Committee. The CCO will serve as chairperson. The CCO, at inception
of the Committee meeting, will appoint a Secretary, whose role it will be
to keep careful and detailed minutes. |
f.
The CCO will identify for the Committee the issuer and proposal to be
considered. The CCO will also identify the conflict of interest that has
been detected. |
g.
The members of the Committee will then consider the proposal by reviewing
the proxy voting materials and any additional documentation a member(s)
feels necessary in determining the appropriate vote. Members of the
Committee may wish to consider the following
questions: |
■ |
Whether
adoption of the proposal would have a positive or negative impact on the
issuer’s short term or long-term value. |
■ |
Whether
the issuer has already responded in some appropriate manner to the request
embodied in a proposal. |
■ |
Whether
the proposal itself is well framed and
reasonable. |
■ |
Whether
implementation of the proposal would achieve the objectives sought in the
proposal. |
■ |
Whether
the issues presented would best be handled through government or
issuer-specific action. |
h.
Upon the provision of a reasonable amount of time to consider the
proposal, each member of the Committee will in turn announce to the
Committee
their decision on whether DRZ will vote for or against the proposal.
Attending members of the Committee are prohibited from abstaining
from the Committee vote and are prohibited from recommending that DRZ
refrain from voting on the proposal, although “abstain” votes are
permitted. The Secretary of the Committee will record each member’s vote
and the rationale for their decision. |
i.
After each member of the Committee has announced their vote, the Secretary
will tally the votes. The tally will result in one of the following two
outcomes: |
■ |
If
all members of the Committee have voted in the same direction on the
proposal, all of DRZ’s proxies for that proposal will be voted in such
direction.
The CCO will document the unanimous vote and all notes of the meeting, if
created, will be maintained in the permanent file in accordance
with the DRZ’s proxy recordkeeping policy described
herein. |
■ |
If
a unanimous decision cannot be reached by the Committee, DRZ will, at its
expense, engage the services of an outside proxy voting service or
consultant
who will provide an independent recommendation on the direction in which
DRZ should vote on the proposal. The proxy voting service’s
or consultant’s determination will be binding on
DRZ. |
a.
The name of the issuer of the portfolio
security; |
b.
The exchange ticker symbol of the portfolio
security; |
c.
The Council on Uniform Securities Identification Procedures (“CUSIP”)
number for the portfolio security; |
d.
The shareholder meeting date; |
e.
The number of shares DRZ is voting on
firm-wide; |
f.
A brief identification of the matter voted
on; |
g.
Whether the matter was proposed by the issuer or by a security
holder; |
h.
Whether or not DRZ cast its vote on the
matter; |
i.
How DRZ cast its vote (e.g., for or against proposal, or abstain; for or
withhold regarding election of
directors); |
j.
Whether DRZ cast its vote with or against management;
and |
k.
Whether any client requested an alternative vote of its
proxy. |
■ |
Conflict:
DRZ retains an institutional client, or is in the process of retaining an
institutional client, that is affiliated with an issuer that is held in
DRZ’s client
portfolios. For example, DRZ may be retained to manage XYZ’s pension fund.
XYZ is a public company and DRZ client accounts hold shares of
XYZ.
This type of relationship may influence DRZ to vote with management on
proxies to gain favor with management. Such favor may influence
XYZ’s
decision to continue its advisory relationship with
DRZ. |
■ |
Conflict:
DRZ retains a client, or is in the process of retaining a client, that is
an officer or director of an issuer that is held in DRZ’s client
portfolios. The
similar conflicts of interest exist in this relationship as discussed
above. |
■ |
Conflict:
DRZ’s employees maintain a personal and/or business relationship (not an
advisory relationship) with issuers or individuals that serve as
officers
or directors of issuers. For example, the spouse of a DRZ employee may be
a high-level executive of an issuer that is held in DRZ’s client
portfolios.
The spouse could attempt to influence DRZ to vote in favor of
management. |
■ |
Conflict:
DRZ or an employee(s) personally owns a significant number of an issuer’s
securities that are also held in DRZ’s client portfolios. For any
number
of reasons, an employee(s) may seek to vote proxies in a different
direction for his/her personal holdings than would otherwise be warranted
by
the proxy voting policy. The employee(s) could oppose voting the proxies
according to the policy and successfully influence the Proxy Administrator
to vote proxies in contradiction to the
policy. |
■ |
Conflict:
DRZ or its affiliates has a financial interest in the outcome of a vote,
such as when DRZ receives distribution fees (i.e., Rule 12b-1 fees) from
mutual
funds that are maintained in client ac- counts and the proxy relates to an
increase in 12b-1 fees. |
■ |
Any
request, whether written (including e-mail) or oral, received by any
employee of DRZ, must be promptly reported to the CCO. All written
requests
must be retained in the permanent file in accordance with DRZ’s record
retention policy. |
■ |
The
CCO will record the identity of the client, the date of the request, and
the disposition (e.g., pro-vided a written or oral response to client’s
request,
referred to third party, not a proxy voting client, other dispositions,
etc.). |
■ |
DRZ
will make every effort to fulfill each individual client request for Proxy
Voting information in the client’s prescribed
format. |
■ |
Furnish
the information requested, free of charge, to the client within a
reasonable time period (with-in 10 business days). Maintain a copy of the
written
record provided in response to client’s written or oral request. The
written response should be attached and maintained with the client’s
written
re-quest, if applicable, and maintained in the permanent file in
accordance with the recordkeeping policy. |
■ |
Clients
are permitted to request any and all proxy voting records that have been
retained in accordance with DRZ’s record retention
policy. |
■ |
This
Proxy Voting Policy and Procedures and previous versions of DRZ’s adopted
Proxy Voting Policy and Procedures, if any, in accordance with DRZ’s
record
retention policies. |
■ |
DRZ’s
annual Form ADV Part 2A containing a concise summary of Proxy Policy and
Procedures and offer of the record to
clients. |
■ |
DRZ’s
Proxy Administrator receives proxies directly from the clients’
custodians. In the event DRZ receives a proxy that is not reflected on the
Proxy Administrator’s
system, DRZ will copy or print a sample of the proxy statement or card and
maintain the copy in a central file along. DRZ will vote the proxy
in accordance with these policies. Documentation of the process will be
maintained in accordance with DRZ’s proxy recordkeeping
policies. |
Note:
DRZ is permitted to rely on proxy statements filed on the SEC’s EDGAR
system instead of keeping its own copies. Proxy voting
records: |
■ |
DRZ
Proxy Voting Record. The proxy ballot, date, issuer, and vote cast, if
applicable. |
■ |
Documentation
or notes or any communications received from third parties, other industry
analysts, third party service providers, company’s management
discussions, etc., that were material in the basis for the
decision. |
■ |
DRZ
will ensure that Form ADV, Part 2A is updated as necessary to reflect: (i)
all material changes to DRZ’s Proxy Voting Policy and Procedures; and (ii)
regulatory
requirements. |
■ |
Takes
responsibility for voting client proxies in accounts comprised solely of
fixed income and cash equivalent holdings, which holdings are very, very
rarely
associated with proxies, only in instances when the client has
specifically assigned voting authority to GH&A for securities held in
the account. |
■ |
Votes
all proxies in the best interests of its clients as shareholders, i.e., to
maximize economic value. |
■ |
Evaluates
all factors it deems relevant when reviewing a proxy received for an
account. |
■ |
Provides
all clients, upon request, with copies of this Proxy Policy and related
reports, with such frequency as required to fulfill obligations under
applicable
law or as reasonably requested by
clients. |
■ |
Reviews
regularly the voting record to ensure that proxies are voted in accordance
with this Proxy Policy; and ensures that procedures, documentation,
and reports relating to the voting of proxies are promptly and properly
prepared and disseminated. |
■ |
Boards
and Directors |
■ |
Environmental
and Social Matters |
■ |
Auditors
and Related Matters |
■ |
Shareholder
Rights |
■ |
Capital
and Restructuring |
■ |
Executive
and Board Compensation |
■ |
Routine
and Miscellaneous Matters |
1.
Overview and Governance |
Lazard’s
proxy voting process is administered by members of its Operations
Department (“the Proxy Administration Team”). Oversight of the process
is
provided by Lazard’s Legal & Compliance Department and by a Proxy
Committee comprised of senior investment professionals, members of the
Legal
& Compliance Department, the firm’s Co-Heads of Sustainable Investment
& Environmental, Social and Corporate Governance (“ESG”) and
other
personnel. The Proxy Committee meets regularly, generally on a quarterly
basis, to review this Policy and other matters relating to the firm’s
proxy
voting functions. Meetings may be convened more frequently (for example,
to discuss a specific proxy agenda or proposal) as needed. A representative
of Lazard’s Legal & Compliance Department will participate in all
Proxy Committee meetings. |
A
quorum for the conduct of any meeting will be met if a majority of the
Proxy Committee’s members are in attendance by phone or in person.
Decisions
of the Proxy Committee will be made by consensus and minutes of each
meeting will be taken and maintained by the Legal & Compliance
Department.
The Proxy Committee may, upon consultation with Lazard’s Chief Compliance
Officer,
General Counsel
or his/her
designee, take any action
that it believes to be necessary or appropriate to carry out the purposes
of the Policy. The Chief Compliance Officer,
General Counsel
or his/her
designee, is responsible for updating this Policy, interpreting this
Policy, and may act on behalf of the Proxy Committee in circumstances
where a meeting
of the members is not feasible. |
2.
Role of Third Parties |
Lazard
currently subscribes to advisory and other proxy voting services provided
by Institutional Shareholder Services Inc. (“ISS”) and Glass, Lewis &
Co.
(“Glass Lewis”). These proxy advisory services provide independent
analysis and recommendations regarding various companies’ proxy proposals.
While
this research serves to help improve our understanding of the issues
surrounding a company’s proxy proposals, Lazard’s Portfolio
Manager/Analysts
and Research Analysts (collectively, “Portfolio Management”) are
responsible for providing the vote recommendation for a given proposal
except
when the Conflicts of Interest policy applies (see Section
F). |
ISS
provides additional proxy-related administrative services to Lazard. ISS
receives on Lazard’s behalf all proxy information sent by custodians that
hold
securities on behalf of Lazard’s clients and sponsored funds. ISS posts
all relevant information regarding the proxy on its password-protected
website
for Lazard to review, including meeting dates, all agendas and ISS’
analysis. The Proxy Administration Team reviews this information on a
daily
basis and regularly communicates with representatives of ISS to ensure
that all agendas are considered and proxies are voted on a timely basis.
ISS
also provides Lazard with vote execution, recordkeeping and reporting
support services. Members of the Proxy Committee, along with members
of
the Legal & Compliance Team, conducts periodic due diligence of ISS
and Glass Lewis consisting of an annual questionnaire and, as appropriate,
on
site visits. |
The
Proxy Committee believes that the Policy is consistent with the firm’s
Corporate Governance Principals and ESG and Climate Change Policies at
https://www.lazardassetmanagement.com/about/esg. |
3.
Voting Process |
The
Proxy Committee has approved proxy voting guidelines applicable to
specific types of common proxy proposals (the “Approved Guidelines”). As
discussed
more fully below in Section D of this Policy, depending on the proposal,
an Approved Guideline may provide that Lazard should vote for or
against
the proposal, or that the proposal should be considered on a case-by-case
basis. |
For
each shareholder meeting the Proxy Administration Team provides Portfolio
Management with the agenda and proposals, the Approved Guidelines,
independent vote recommendations from Glass Lewis and ISS and supporting
analyses for each proposal. Unless Portfolio Management disagrees
with the Approved Guideline for a specific proposal, or where a potential
material conflict of interest exists, the Proxy Administration Team
will
generally vote the proposal according to the Approved Guideline. In cases
where Portfolio Management recommends a vote contrary to the Approved
Guideline, a member of the Proxy Administration Team will contact a member
of the Legal & Compliance Department advising the Proxy Committee.
Such communication, which may be in the form of an e-mail, shall include:
the name of the issuer, a description of the proposal, the Approved
Guideline, any potential conflict of interest presented and the reason(s)
Portfolio Management believes a proxy vote in this manner is in
the
best interest of clients In such cases, the Proxy Committee and the Legal
& Compliance Department will review the proposal and make a
determination. |
Where
the Approved Guideline for a particular type of proxy proposal is to vote
on a case-by-case basis, Lazard believes that Portfolio Management
is
best able to evaluate the potential impact to shareholders resulting from
a particular proposal. Similarly, with respect to certain Lazard
strategies, as
discussed more fully in Sections F and G below, the Proxy Administration
Team will consult with Portfolio Management to determine when it
would
be appropriate to abstain from voting. The Proxy Administration Team seeks
Portfolio Management’s recommendation on how to vote all such proposals.
The Proxy Administration Team may also consult with Lazard’s Chief
Compliance Officer,
General Counsel or
his/her
designee,
and may seek
the final approval of the Proxy Committee regarding a recommendation by
Portfolio Management. |
As
a global firm, we recognize that there are differing governance models
adopted in various countries and that local laws and practices vary
widely. Although
the Approved Guidelines are intended to be applied uniformly world-wide,
where appropriate, Lazard will consider regional/local law and
guidance
in applying the Policy. |
D.
Specific Proxy Items |
Shareholders
receive proxies involving many different proposals. Many proposals are
routine in nature, such as a change in a company’s name. Others
are more complicated, such as items regarding corporate governance and
shareholder rights, changes to capital structure, stock option plans
and
other executive compensation/ issues, election of directors, mergers and
other significant transactions and social or political issues. Lazard’s
Approved
Guidelines for certain common agenda items are outlined below. The Proxy
Committee will also consider any other proposals presented and
determine whether to implement a new Approved
Guideline. |
Certain
strategy-specific considerations may result in Lazard voting proxies other
than according to the Approved Guidelines, not voting shares at all,
issuing
standing instructions to ISS on how to vote certain proxy matters on
behalf of Lazard, or taking other action where unique circumstances
require
special voting efforts or considerations. These considerations are
discussed in more detail in Section G,
below. |
1.
Routine Items |
Lazard
generally votes routine items as recommended by the issuer’s management
and board of directors, based on the view that management is generally
in a better position to assess these matters. Lazard considers routine
items to be those that do not change the structure, charter, bylaws,
or
operations of an issuer in any way that is material to long-term
shareholder value. Routine items generally
include: |
■ |
issues
relating to the timing or conduct of annual
meetings; |
■ |
provisionary
financial budgets and strategy for the current
year; |
■ |
proposals
that allow votes submitted for the first call of the shareholder meeting
to be considered in the event of a second
call; |
■ |
proposals
to receive or approve of variety of routine reports (Lazard will generally
vote FOR the approval of financial statements and director and
auditor
reports unless there are concerns about the accounts presented or audit
procedures used or the company is not responsive to shareholder
questions about specific items that should be publicly disclosed);
and |
■ |
changes
to a company’s name. |
2.
Amendments to Board
Policy/Charter/Regulation: |
Proposals
to amend a company’s Articles of Association and other bylaws are commonly
seen at shareholder meetings. Companies usually disclose what
is being amended, or the amended bylaws, or both in their meeting
circulars. Amendments are nearly always bundled together as a single
voting
resolution, and Lazard’s general approach is to review these amendments on
a case-by-case basis and to oppose article amendments as a whole
when they include changes Lazard opposes. Lazard has Approved Guidelines
generally to vote FOR bylaw amendments that are driven by regulatory
changes and are technical in nature or meant to update company-specific
information such as address and/or business scope. Lazard has
Approved Guidelines generally to vote AGAINST bylaw amendments
if |
■ |
there
is no disclosure on the proposed amendments or full text of the amended
bylaw; or |
■ |
the
amendments include increase in the decision authority of what is
considered “excessive” and the company fails to provide a compelling
justification. |
3.
Corporate Governance and Shareholder
Rights |
Many
proposals address issues related to corporate governance and shareholder
rights. These items often relate to a board of directors and its
committees,
anti-takeover measures, and the conduct of the company’s shareholder
meetings. |
a.
Board of Directors and its Committees |
Lazard
votes in favor of provisions that it believes will increase the
effectiveness of an issuer’s board of
directors. |
Lazard
has Approved Guidelines generally to vote FOR the
following: |
■ |
the
establishment of an independent nominating committee, audit committee or
compensation committee of a board of directors; |
■ |
a
requirement that a substantial majority (e.g., 2/3) of a company’s
directors be independent; |
■ |
a
proposal that a majority of the entirety of the board’s committees be
comprised of independent directors; |
■ |
proposals
seeking to de-classify a board; |
■ |
the
implementation of director stock retention/holding
periods; |
■ |
proposals
relating to the establishment of directors’ mandatory retirement age and
age restrictions for directors especially where such proposals
seek
to facilitate the improvement of the diversity of the board;
and |
■ |
changes
to the articles of association and other relevant documents which are in
the long-term interests of shareholders; |
■ |
the
appointment or (re)election of internal statutory auditors/fiscal council
members unless (a) the name of the management nominees are not
disclosed
in a timely manner prior to the meeting, (b) there are serious concerns
about statutory reports presented or the audit procedures used,
(c)
questions exist concerning any of the auditors, (d) the auditors have
previously served the company in an executive capacity (or are otherwise
considered
affiliated) or (e) minority shareholders have presented timely disclosure
of minority fiscal council nominee(s) to be elected under separate
elections. |
Lazard
has Approved Guidelines generally to vote on a CASE by CASE Basis for the
following: |
■ |
proposals
to require an independent board chair or the separation of chairman and
CEO; and |
■ |
establishment
of shareholder advisory committees. |
Lazard
has Approved Guidelines generally to vote AGAINST the
following: |
■ |
proposals
seeking to classify a board |
■ |
the
election of directors where the board does not have independent “key
committees” or sufficient board
independence; |
■ |
non-independent
directors who serve on key committees that are not sufficiently
independent; |
■ |
proposals
relating to cumulative voting; |
■ |
proposals
where the names of the candidates (in the case of an election) or the
principles for the establishment of a committee (where a new committee
is being created) have not been disclosed in a timely
manner; |
■ |
release
of restrictions on competitive activities of directors2 if (a) there is a
lack of disclosure on the key information including identities of
directors
in question, current position in the company and outside boards they are
serving on or (b) the non-nomination system is employed by the
company for the director election; and |
■ |
the
discharge of directors, including members of the management board and/or
supervisory board and auditors, unless there is reliable information
about significant and compelling concerns that the board is not fulfilling
its fiduciary duties; and |
■ |
the
chair of the board’s nominating committee, or all incumbent nominating
committee members in the absence of the chair, if there is not at
least
one female on the board of directors. |
US
Listed Corporates |
Given
the governance practices unique to the United States market, Lazard has
adopted the following principles-based approach to proxy voting
that
is designed to address: |
■ |
Board
effectiveness – supporting board structure, diversity of cognitive
thought, independence and avoiding over-
boarding. |
■ |
Accountability
– in conjunction with the immediately preceding bullet point, emphasizing
individual account- ability, for example holding the Chair
of the Nomination Committee accountable where weaknesses and conflicts
have been identified. |
b.
Anti-takeover Measures |
Certain
proposals are intended to deter outside parties from taking control of a
company. Such proposals could entrench management and adversely
affect shareholder rights and the value of the company’s
shares. |
Consequently,
Lazard has adopted Approved Guidelines to vote
AGAINST: |
■ |
proposals
to adopt supermajority vote requirements or increase vote
requirements; |
■ |
proposals
seeking to adopt fair price provisions and on a case-by-case basis
regarding proposals seeking to rescind them;
and |
■ |
“blank
check” preferred stock. |
Lazard
has adopted Approved Guidelines to vote on a CASE by CASE basis regarding
other provisions seeking to amend a company’s by-laws or charter
regarding anti-takeover provisions or shareholder rights plans (also known
as “poison pill plans”). |
Lazard
has adopted an Approved Guideline to vote FOR proposals that ask
management to submit any new poison pill plan to shareholder
vote. |
c.
Conduct of Shareholder Meetings |
Lazard
generally opposes any effort by management to restrict or limit
shareholder participation in shareholder meetings, and is in favor of
efforts to
enhance shareholder participation. |
Lazard
has therefore adopted Approved Guidelines to vote
AGAINST: |
■ |
proposals
to adjourn US meetings; |
■ |
proposals
seeking to eliminate or restrict shareholders’ right to call a special
meeting; |
■ |
efforts
to eliminate or restrict right of shareholders to act by written consent;
and |
■ |
proposals
to adopt supermajority vote requirements, or increase vote
requirements. |
Lazard
has adopted Approved Guidelines to vote on a CASE by CASE
basis
on changes to quorum requirements and FOR
proposals providing
for confidential voting. |
4.
Changes to Capital Structure |
Lazard
receives many proxies that include proposals relating to a company’s
capital structure. These proposals vary greatly, as each one is unique to
the
circumstances of the company involved, as well as the general economic and
market conditions existing at the time of the proposal. A board and
management
may have many legitimate business reasons in seeking to effect changes to
the issuer’s capital structure, including investing in financial
products
and raising additional capital for appropriate business reasons, cash flow
and market conditions. Lazard generally believes that these decisions
are best left to management but will monitor these proposals closely to
ensure that they are aligned with the long-term interests of shareholders. |
Lazard
has adopted Approved Guidelines to vote
FOR: |
■ |
management
proposals to increase or decrease authorized common or preferred stock
(unless it is believed that doing so is intended to serve as an
anti-takeover measure); |
■ |
stock
splits and reverse stock splits; |
■ |
investments
in financial products unless the company fails to provide meaningful
shareholder vote or there are significant concerns with the company’s
previous similar investments;4 |
■ |
requests
to reissue any repurchased shares unless there is clear evidence of abuse
of authority in the past; |
■ |
management
proposals to adopt or amend dividend reinvestment plans;
and |
■ |
dividend
distribution policies unless (a) the dividend payout ratio has been
consistently below 30% without adequate explanation or (b) the
payout
is excessive given the company’s financial
position. |
Lazard
has adopted Approved Guidelines to vote on a CASE by CASE basis
for: |
■ |
matters
affecting shareholder rights, such as amending
votes-per-share; |
■ |
management
proposals to issue a new class of common or preferred shares (unless
covered by an Approved Guideline relating to the disapplication
of pre-emption rights); • the use of proceeds and the company’s past share
issuances5; |
■ |
proposals
seeking to approve or amend stock ownership limitations or transfer
restrictions; and • loan and financing proposals. In assessing
requests
for loan financing provided by a related party the following factors will
be considered: (a) use of proceeds, size or specific amount of
loan
requested, interest rate and relation of the party providing the
loan. |
■ |
Lazard
has adopted Approved Guidelines to vote
AGAINST: |
■ |
changes
in capital structure designed to be used in poison pill plans or which
seeks to disregard pre-emption rights in a way that does not follow
guidance set by the UK Pre-Emption Group’s Statement of
Principles; |
■ |
the
provision of loans to clients, controlling shareholders and actual
controlling persons of the company; and |
■ |
the
provision of loans to an entity in which the company’s ownership stake is
less than 75% and the financing provision is not proportionate to
the
company’s equity stake. |
Lazard
has Approved Guidelines generally to vote
FOR: |
■ |
employee
stock purchase plans, deferred compensation plans, stock option plans and
stock appreciation rights plans that are in the long-term interests
of shareholders; |
■ |
proposals
to submit severance agreements to shareholders for
approval; |
■ |
annual
advisory votes on compensation outcomes where the outcomes are considered
to be aligned with the interest of shareholders;
and |
■ |
annual
compensation policy votes where the policy structures are considered to be
aligned with the interest of
shareholders. |
Lazard
has Approved Guidelines generally to vote on a CASE by CASE basis
regarding: |
■ |
restricted
stock plans that do not define performance criteria;
and |
■ |
proposals
to approve executive loans to exercise
options. |
Lazard
has Approved Guidelines generally to vote
AGAINST: |
■ |
proposals
to re-price underwater options; |
■ |
annual
advisory votes on remuneration outcomes where the outcomes are considered
not to be in the interests of shareholders;
and |
■ |
annual
remuneration policy vote where the policy structures are considered not to
be in the interests of shareholders. |
US
Listed Corporates Given the governance practices unique to the United States market, Lazard maintains the view that votes regarding Say on Pay should in principle, support fair and transparent remuneration. In addition, we also consider: |
■ |
the
level of dissent on previous Say on Pay votes;
and |
■ |
individual
accountability, for example holding the Chair of the Compensation
Committee accountable where weaknesses have been identified.
|
Lazard’s
Approved Guidelines are structured to evaluate many environmental, social
and corporate governance proposals on a case-by-case
basis. |
However,
as a guide, Lazard
will generally vote FOR proposals: |
■ |
asking
for a company to increase its environmental/social disclosures (e.g., to
provide a corporate sustainability
report); |
■ |
seeking
the approval of anti-discrimination
policies; |
■ |
which
are considered socially responsible agenda
items; |
■ |
which
improve an investee company’s ESG risk management and related disclosures;
and |
■ |
deemed
to be in the long-term interests of shareholders.
|
Lazard
has Approved Guidelines generally to vote FOR shareholder proposals
which: |
■ |
seek
improved disclosure of an investee company’s ESG practices over an
appropriate timeframe; |
■ |
seek
improved transparency over how the investee company is supporting the
transition to a low carbon economy; |
■ |
seek
to improve the diversity of the board; |
■ |
seek
improved disclosures on the diversity of the board and the wider
workforce; |
■ |
seek
to establish minimum stock-ownership requirements for directors over an
appropriate time frame; |
■ |
seek
to eliminate or restrict severance agreements,
or |
■ |
are
deemed to be in the long-term interests of shareholders including Lazard’s
clients. |
Lazard
has Approved Guidelines generally to vote AGAINST shareholder proposals
which: |
■ |
seek
to infringe excessively on management’s decision-making
flexibility; |
■ |
seek
to establish additional board committees (absent demonstrable
need); |
■ |
seek
to establish term limits for directors if this is
unnecessary; |
■ |
seek
to change the size of a board (unless this facilitates improved board
diversity); |
■ |
seek
to require two candidates for each board seat;
or |
■ |
are
considered not to be in the long-terms interests of
shareholders. |
■ |
Lazard
Frßres & Co. LLC (“LF&Co.”), Lazard’s parent company and a
registered broker- dealer, or a financial advisory affiliate, has a
relationship with a
company the shares of which are held in accounts of Lazard clients, and
has provided financial advisory or related services to the company with
respect
to an upcoming significant proxy proposal (i.e., a merger or other
significant transaction); |
■ |
Lazard
serves as an investment adviser for a company the management of which
supports a particular proposal; |
■ |
Lazard
serves as an investment adviser for the pension plan of an organization
that sponsors a proposal; or |
■ |
A
Lazard employee who would otherwise be involved in the decision-making
process regarding a particular proposal has a material relationship with
the
issuer or owns shares of the issuer. |
a.
Where Approved Guideline Is For or
Against |
Lazard
has an Approved Guideline to vote for or against regarding most proxy
agenda/proposals. Generally, unless Portfolio Management disagrees
with
the Approved Guideline for a specific proposal, the Proxy Administration
Team votes according to the Approved Guideline. It is therefore
necessary
to consider whether an apparent conflict of interest exists when Portfolio
Management disagrees with the Approved Guideline. The Proxy Administration
Team will use its best efforts to determine whether a conflict of interest
or potential conflict of interest exists. If conflict appears to
exist,
then the proposal will be voted according to the Approved Guideline.
Lazard also reserves its right to
Abstain. |
In
addition, in the event of a conflict that arises in connection with a
proposal for Lazard to vote shares held by Lazard clients in a Lazard
mutual fund,
Lazard will typically vote each proposal for or against proportion to the
shares voted by other shareholders. |
b.
Where Approved Guideline Is Case-by-Case |
In
situations where the Approved Guideline is to vote case-by-case and a
material conflict of interest appears to exist, Lazard’s policy is to vote
the proxy
item according to the majority recommendation of the independent proxy
services to which we subscribe. Lazard also reserves the right to
Abstain. |
1.
Issues Relating to Management of Specific Lazard
Strategies |
Due
to the nature of certain strategies managed by Lazard, there may be times
when Lazard believes that it may not be in the best interests of its
clients
to vote in accordance with the Approved Guidelines, or to vote proxies at
all. In certain markets, the fact that Lazard is voting proxies may
become
public information, and, given the nature of those markets, may impact the
price of the securities involved. Lazard may simply require more
time
to fully understand and address a situation prior to determining what
would be in the best interests of shareholders. In these cases the Proxy
Administration
Team will look to Portfolio Management to provide guidance on proxy voting
rather than vote in accordance with the Approved Guidelines,
and will obtain the Proxy Committee’s confirmation
accordingly. |
Additionally,
Lazard may not receive notice of a shareholder meeting in time to vote
proxies for or may simply be prevented from voting proxies in connection
with a particular meeting. Due to the compressed time frame for
notification of shareholder meetings and Lazard’s obligation to vote
proxies
on behalf of its clients, Lazard may issue standing instructions to ISS on
how to vote on certain matters. |
Different
strategies managed by Lazard may hold the same securities. However, due to
the differences between the strategies and their related investment
objectives, one Portfolio Management team may desire to vote differently
than the other, or one team may desire to abstain from voting proxies
while the other may desire to vote proxies. In this event, Lazard would
generally defer to the recommendation of the Portfolio Management
|
teams
to determine what action would be in the best interests of its clients.
The Chief Compliance Officer or
General Counsel, in consultation with members
of the Proxy Committee will determine whether it is appropriate to approve
a request to split votes among one or more Portfolio Management
teams. |
2.
Stock Lending |
As
noted in Section B above, Lazard does not generally vote proxies for
securities that a client has authorized their custodian bank to use in a
stock loan
program, which passes voting rights to the party with possession of the
shares. Under certain circumstances, Lazard may determine to recall
loaned
stocks in order to vote the proxies associated with those securities. For
example, if Lazard determines that the entity in possession of the
stock
has borrowed the stock solely to be able to obtain control over the issuer
of the stock by voting proxies, or if the client should specifically
request
Lazard to vote the shares on loan, Lazard may determine to recall the
stock and vote the proxies itself. However, it is expected that this will
be
done only in exceptional circumstances. In such event, Portfolio
Management will make this determination and the Proxy Administration Team
will
vote the proxies in accordance with the Approved
Guidelines. |
ADRs |
American
Depositary Receipts |
Advisers
Act |
Investment
Advisers Act of 1940, as amended. |
American
Beacon or the Manager |
American
Beacon Advisors, Inc. |
BDCs |
Business
Development Companies |
Beacon
Funds |
American
Beacon Funds |
Board |
Board
of Trustees |
Brexit |
The
United Kingdom’s departure from the European Union. |
CCO |
Chief
Compliance Officer |
CD |
Certificate
of Deposit |
CDSC |
Contingent
Deferred Sales Charge |
CFTC |
Commodity
Futures Trading Commission |
Denial
of Services |
A
cybersecurity incident that results in customers or employees being
unable
to access electronic systems. |
Dividends |
A
Fund’s distributions from net investment income. |
Dodd-Frank
Act |
Dodd-Frank
Wall Street Reform and Consumer Protection Act |
DRD |
Dividends-received
deduction. |
EMU |
The
European Union’s Economic and Monetary Union |
ETF |
Exchange-Traded
Fund |
EU |
European
Union |
Fannie
Mae |
Federal
National Mortgage Association |
FHFA |
Federal
Housing Finance Agency |
FHLMC |
Federal
Home Loan Mortgage Corporation |
FINRA |
Financial
Industry Regulatory Authority, Inc. |
Floaters |
Floating
rate debt instruments |
FNMA |
Federal
National Mortgage Association |
Forwards |
Forward
Currency Contracts |
Freddie
Mac |
Federal
Home Loan Mortgage Corporation |
GDR |
Global
Depositary Receipt |
Ginnie
Mae |
Government
National Mortgage Association |
GNMA |
Government
National Mortgage Association |
Holdings
Policy |
Policies
and Procedures for Disclosure of Portfolio Holdings |
Internal
Revenue Code |
Internal
Revenue Code of 1986, as amended |
Investment
Company Act |
Investment
Company Act of 1940, as amended |
IPO |
Initial
Public Offering |
IRA |
Individual
Retirement Account |
IRS |
Internal
Revenue Service |
ISS |
Institutional
Shareholder Services |
LIBOR |
ICE
LIBOR |
LLC |
Limited
Liability Company |
LOI |
Letter
of Intent |
Management
Agreement |
The
Fund’s Management Agreement with the Manager. |
Manager |
American
Beacon Advisors, Inc. |
MLP |
Master
Limited Partnership |
Moody’s |
Moody’s
Investors Service, Inc. |
|
|
NAV |
Net
asset value |
NDF |
Non-deliverable
forward contracts |
NYSE |
New
York Stock Exchange |
OTC |
Over-the-Counter |
Proxy
Policy |
Proxy
Voting Policy and Procedures |
QDI |
Qualified
Dividend Income |
REIT |
Real
Estate Investment Trust |
REMICs |
Real
Estate Mortgage Investment Conduits |
RIC |
Regulated
Investment Company |
S&P
Global |
S&P
Global Ratings |
SAI |
Statement
of Additional Information |
SEC |
Securities
and Exchange Commission |
Securities
Act |
Securities
Act of 1933, as amended |
State
Street |
State
Street Bank and Trust Co. |
STRIPS |
Separately
traded registered interest and principal securities |
TBA |
To
be announced security |
Trust |
American
Beacon Funds |
Trustee
Retirement Plan |
Trustee
Retirement and Trustee Emeritus and Retirement Plan |
UK |
United
Kingdom |
UMBS |
Uniform
mortgage-backed security |
Voluntary
Action |
When
a Fund voluntarily participates in corporate actions (for example,
rights
offerings, conversion privileges, exchange offers, credit event
settlements,
etc.) where the issuer or counterparty offers securities or instruments
to holders or counterparties, such as the Fund, and the acquisition
is determined to be beneficial to Fund
shareholders. |