2024-01-30ABNISCorePlusBondFund_FYE_01_31_Pro
PROSPECTUS
June
1, 2024
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Share
Class |
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A |
C |
Y |
R5 |
Investor |
American
Beacon Developing World Income Fund (formerly known
as the American Beacon Frontier Markets Income Fund) |
AGUAX |
AGECX |
AGEYX |
AGEIX |
AGEPX |
This
Prospectus contains important information you should know about investing,
including information about risks. Please read it before you invest
and keep it for future reference.
As
with all mutual funds, the Securities and Exchange Commission has not approved
or disapproved these securities or determined if this Prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
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American
Beacon Developing
World Income Fund SM(formerly
known
as the American Beacon Frontier Markets
Income Fund) |
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Investment
Objective
The
Fund’s investment objective is to seek income with capital appreciation as a
secondary objective.
Fees
and Expenses of the Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below. You
may qualify for sales discounts
if you and your eligible family members invest, or agree to invest in the
future, at least $50,000
in all classes of the American Beacon Funds on an aggregated
basis.
More information about these and other discounts is available from your
financial professional and in “Choosing Your Share Class” on page 28
of the Prospectus and “Additional Purchase and Sale Information for A Class
Shares” on page 45 of
the Statement of Additional Information (“SAI”). With
respect to purchases of shares through specific intermediaries, you may find
additional information regarding sales charge discounts and waivers in
Appendix
A to the Fund’s Prospectus entitled “Intermediary Sales Charge Discounts,
Waivers and Other Information.”
Shareholder
Fees
(fees paid directly from your investment)
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Share
Class |
A |
C |
Y |
R5 |
Investor |
Maximum
sales charge imposed on purchases (as a percentage of offering
price) |
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Maximum
deferred sales charge (as a percentage of the lower of original offering
price or
redemption proceeds) BEFORE July 1, 2024 |
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Maximum
deferred sales charge (as a percentage of the lower of original offering
price or
redemption proceeds) BEGINNING July 1, 2024 |
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Annual
Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your
investment) |
Share
Class |
A |
C |
Y |
R5 |
Investor |
Management
Fees |
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Distribution
and/or Service (12b-1) Fees |
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Other
Expenses |
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Acquired
Fund Fees and Expenses |
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Total
Annual Fund Operating Expenses3
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1 |
Currently,
the Fund does not assess a front-end sales load on purchases of A Class
shares of $1 million or more. However, the Fund assesses a
contingent deferred sales charge (‘‘CDSC’’)
of 0.50% on
certain purchases of $1,000,000 or more of A Class shares that are
redeemed in whole or part within 18 months of
purchase.
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2 |
Effective
July 1, 2024, the Fund will no longer assess a front-end sales load on
purchases of A Class shares of $500,000 or more. However, the Fund will
assess a CDSC
of 1.00% on certain purchases of $500,000 or more of A Class shares that
are redeemed in whole or part within 18 months of
purchase.
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3 |
The
Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to average net assets provided in the Fund’s Financial Highlights
table, which reflects the operating
expenses of the Fund and does not include Acquired Fund Fees and
Expenses. |
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that
you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that
your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. C Class shares automatically convert to A Class shares 8
years
after purchase, if the conversion is available through your financial
intermediary. This Example reflects your costs as though C Class shares were
held for the
full 10-year period. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
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Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
A |
$616 |
$912 |
$1,230 |
$2,128 |
C |
$321 |
$682 |
$1,170 |
$2,513 |
Y |
$118 |
$368 |
$638 |
$1,409 |
R5 |
$112 |
$350 |
$606 |
$1,340 |
Investor |
$145 |
$449 |
$776 |
$1,702
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Assuming
no redemption of shares:
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Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
C |
$221
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$682
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$1,170
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$2,513
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Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual
Fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 26%
of the
average value of its portfolio.
Prospectus
– Fund Summary1
Principal
Investment Strategies
Under
normal circumstances, the Fund will invest at least 80% of its net assets (plus
the amount of any borrowings for investment purposes) in investments
that
are economically tied to developing countries. Developing countries include all
countries in the world except the countries that are classified by MSCI Inc.
as
“developed markets.” Developing countries typically have lower incomes, less
integrated financial markets, smaller economies, and less mature political
systems
compared to developed countries. Developing countries are commonly located in
Africa, the Asia-Pacific region, Central or Eastern Europe, the Middle
East, Central America or the Caribbean, and South
America.
The
Fund’s investments in developing countries will generally include countries that
are commonly referred to as “frontier market” countries, which are among
the least developed countries. To a lesser extent, the Fund’s investments in
developing countries may include countries that are commonly referred to
as
“emerging market” countries, which are relatively more developed than frontier
market countries. Countries considered to be developing change from time
to time, and the Fund’s sub-advisors may reasonably determine any country to be
a developing country, other than countries that are classified by MSCI
Inc.
as “developed markets.”
An
investment is generally regarded as being economically tied to a developing
country if:
■ |
the
issuer is a government agency or is guaranteed by a sovereign government
agency, including a regional or municipal government within the country,
or quasi-governmental
agency of a developing
country; |
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the
issuer is organized under the laws of, or maintains its principal place of
business in, a developing
country; |
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the
issuer derives at least 50% of its revenues from, or has at least 50% of
its assets in, a developing
country; |
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it
is a currency of a developing
country; |
■ |
it
is principally traded in a developing
country; |
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the
value of the investment is linked to one of the above categories;
or |
■ |
it
is a derivative instrument whose value is linked to one of the above
categories. |
Investments
economically tied to developing countries may include debentures, currencies,
and derivative investments. The Fund’s investments are expected to include
primarily sovereign and quasi-sovereign debt instruments, such as obligations
issued or guaranteed by foreign (non-U.S.) governments, their agencies
or
instrumentalities and political subdivisions, and investments that provide
exposure to sovereign and quasi-sovereign debt instruments. The Fund also may
invest
in callable securities, municipal securities, including but not limited to
general obligation bonds, inflation index-linked securities, illiquid
securities, restricted
securities, and variable and floating-rate securities. The Fund may also invest
in debt instruments issued by corporations that are economically tied to
developing
countries and in obligations of supranational entities. Investments may be
denominated in foreign (non-U.S.)
currencies.
In
making investment decisions for the Fund, one of the Fund’s sub-advisors, Global
Evolution USA, LLC (“Global Evolution”), employs a top-down investment
process
that focuses on macroeconomic and political risk, as well as country risk, while
the Fund’s other sub-advisor, abrdn Investments Limited,
formerly known
as
Aberdeen Asset Managers Limited
(“aIL”),
employs a bottom-up investment process that applies fundamental research to
countries and companies in
selecting investments. The Fund may, at times, invest significantly in issuers
located in or economically tied to African countries. However, as the country
and
geographic allocation of the Fund’s portfolio changes over time, the Fund’s
exposure to African countries may be lower at a future date, and the Fund’s
exposure
to other countries and geographic regions may be
higher.
Each
sub-advisor’s investment processes generally incorporate the sub-advisor’s
environmental, social and/or governance (“ESG” and separately, “E,” “S,” and
“G”)
analysis as a consideration in the assessment of potential portfolio
investments. As
ESG information is just one investment consideration, ESG considerations
generally are not solely determinative in any investment decision made by a
sub-advisor.
However, as described below, in certain cases, ESG information
may result in an investment being excluded from consideration for the Fund’s
portfolio.
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Global
Evolution may exclude certain countries from its portion of the Fund’s
investment universe based on ESG considerations, such as political rights
and corruption.
Environmental considerations, for example, include renewable energy,
management of natural resources, risk of natural disasters, and
institutional
capacity to manage and regulate environmental standards. In situations
where Global Evolution believes that E, S, and G factors, such as the
management
of natural resource wealth, corruption, human capital accumulation, and
freedom of speech are either improving or deteriorating, Global
Evolution
will take such developments into consideration along with macro-economic,
financial, political and other credit-related factors in its assessment of
the
creditworthiness of sovereign debt
investments. |
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aIL
considers and assesses how ESG issues are managed and mitigated, and may
avoid investing in countries where ESG factors may erode the willingness
and
ability of the issuer to service its debt. ESG factors considered by
aIL
may include, among others, environmental factors, such as greenhouse gas
emissions
and air quality and an issuer’s energy management; social factors, such as
human rights, community relations and customer welfare, privacy and
data
management; and governance factors, such as financial transparency and
complexity of group structure/ownership. aIL
also considers political factors (referred
to as “P”), such as political corruption perception, political stability,
state fragility and press freedom, as such factors relate to sovereign
debt issuers. |
The
ESG and P factors listed above are not comprehensive; not all of the factors
will be material for all investments. A sub-advisor may invest in countries that
are
deemed to have poor ESG and/or P factors
but have favorable non-ESG and/or P factors. A sub-advisor may use ESG research
and/or ratings information provided
by one or more third parties in performing an ESG and P analysis and considering
the related risks.
The
Fund’s investments in derivatives may include structured products (including
credit-linked and structured notes which may be issued by special purpose
vehicles),
options (including non-deliverable options (“NDOs”), and options on non-U.S.
currency futures), warrants (including sovereign warrants), futures contracts
(including interest rate, currency and Treasury futures contracts), forward
contracts (including non-deliverable forwards (“NDFs”)), swaps, contracts
for
difference (“CFDs”) and similar instruments. The types of swaps that the Fund
may enter into include credit default swaps, currency swaps, interest rate
swaps,
total return swaps, and similar instruments. The Fund uses derivative
instruments to enhance total return, to hedge against fluctuations in securities
prices,
interest rates or currency exchange rates, to change the effective duration of
its portfolio, to manage certain investment risks or as a substitute for the
purchase
or sale of the underlying currencies or securities. Derivative instruments allow
the Fund to obtain economic exposure to developing countries without
directly holding their securities. For example, derivatives may be used where
regulatory or other restrictions make it difficult or undesirable for the
Fund
to invest directly in developing countries. Subject to applicable regulatory
restrictions, there is no limit on the amount of the Fund’s exposure to a single
counterparty.
The
Fund also may have significant exposure to foreign currencies for investment or
hedging purposes by purchasing or selling foreign currency forward contracts
(including NDFs), non-U.S. currency futures contracts, options on non-U.S.
currencies, and currency swaps. The Fund may also make direct investments
in non-U.S. currencies, including on a spot (cash) basis at the rate prevailing
in the currency exchange market, and in securities denominated in non-U.S.
currencies. Investments in currencies and currency derivatives are established
to add value or reduce risk.
2Prospectus
– Fund Summary
The
Fund does not have specific requirements for investment yield, duration,
maturity, market capitalization, or credit quality rating, and may invest
without limitation
in securities, and trade with counterparties, which are rated below investment
grade (commonly known as “high-yield” securities or “junk bonds”). Such
instruments or counterparties are rated BB or lower by S&P Global Ratings or
Fitch, Inc. and/or Ba or lower by Moody’s Investors Service, Inc., or the
unrated
equivalent. The Fund may achieve capital appreciation when a stronger
macro-economic and political situation for developing countries leads to
lower
yields, lower credit spreads and potentially stronger
currencies.
To
reduce market exposure or in anticipation of liquidity needs, the Fund may
invest cash balances in other investment companies, including a government
money
market fund advised by the Manager, with respect to which the Manager receives a
management fee.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objectives and you
could lose part or all of your investment in the
Fund.
The Fund is designed primarily
for investors seeking income and, to a lesser degree, capital appreciation from
a fund that typically invests in fixed-income, currency, and derivative
instruments
economically tied to developing markets, including frontier markets and emerging
markets. Those investors should be willing to assume the counterparty,
credit, currency, derivative, investment, market, sovereign debt, and other
risks associated with investing in developing markets. The
Fund is not
designed for investors who need an assured level of current income and is
intended to be a long-term investment. The Fund is not a complete
investment program and may not be appropriate for all investors. Investors
should carefully consider their own investment goals and risk
tolerance before investing in the Fund.
The principal risks of investing in the Fund listed below are presented in
alphabetical order and not in order of importance
or potential exposure. Among other matters, this presentation is intended to
facilitate your ability to find particular risks and compare them with
the
risks of other funds. Each risk summarized below is considered a “principal
risk” of investing in the Fund, regardless of the order in which it
appears.
Allocation
Risk
The
allocations among strategies, asset classes and market exposures may be less
than optimal and may adversely affect the Fund’s performance. There can be
no
assurance, particularly during periods of market disruption and stress, that
judgments about allocations will be correct. The Fund’s allocations may be
invested
in strategies, asset classes and market exposures during a period when such
strategies, asset classes and market exposures
underperform.
Callable
Securities Risk
The
Fund may invest in fixed-income securities with call features. A call feature
allows the issuer of the security to redeem or call the security prior to its
stated maturity
date. In periods of falling interest rates, issuers may be more likely to call
in securities that are paying higher coupon rates than prevailing interest
rates.
In the event of a call, the Fund would lose the income that would have been
earned to maturity on that security, and the proceeds received by the Fund
may
be invested in securities paying lower coupon rates and may not benefit from any
increase in value that might otherwise result from declining interest
rates.
Counterparty
Risk
The
Fund is subject to the risk that a party or participant to a transaction, such
as a broker or a derivative counterparty, will be unwilling or unable to satisfy
its obligation
to make timely principal, interest or settlement payments or to otherwise honor
its obligations to the Fund.
Credit
Risk
The
Fund is subject to the risk that the issuer, guarantor or insurer of an
obligation, or the counterparty to a transaction,
may fail, or become less able or unwilling,
to make timely payment of interest or principal or otherwise honor its
obligations or default completely. Changes in the actual or perceived
creditworthiness
of an issuer, or a downgrade or default affecting any of the Fund’s securities,
could affect the Fund’s performance. Generally, the longer the maturity
and the lower the credit quality of a security, the more sensitive it is to
credit risk.
Currency
Risk
The
Fund may have exposure to foreign currencies.
Foreign currencies may fluctuate significantly over short periods of time, may
be affected unpredictably by intervention,
or the failure to intervene, of the U.S.
or foreign governments or central banks, and may be affected by currency
controls or political developments
in the U.S. or abroad. Foreign currencies may also decline in value relative to
the U.S. dollar and other currencies and thereby affect the Fund’s investments.
Cybersecurity
and Operational Risk
Operational
risks arising from, among other problems, human errors, systems and technology
disruptions or failures, or cybersecurity incidents may negatively impact
the Fund and its service providers as well as the ability of shareholders to
transact in
the Fund’s shares,
and result in financial losses. Cybersecurity incidents
may allow an unauthorized party to gain access to Fund assets, shareholder data,
or proprietary information, or cause the Fund or its service providers,
as well as securities trading venues and their service providers, to suffer data
corruption or lose operational functionality. Cybersecurity incidents
can
result from deliberate attacks or unintentional events. It is not possible for
the Fund or its service providers to identify all of the operational risks that
may affect
the Fund or to develop processes and controls to completely eliminate or
mitigate their occurrence or effects. The Fund cannot control the cybersecurity
plans
and systems of its service providers, its counterparties or the issuers of
securities in which the Fund invests. The
issuers of the Fund’s investments are likely
to be
dependent on computers for their
operations
and require ready access to their
data and the
internet to conduct their business. Thus, cybersecurity incidents
could also affect issuers of the
Fund’s investments,
leading to significant loss of value.
Debentures
Risk
Debentures
are unsecured debt securities. The holder of a debenture is protected only by
the general creditworthiness of the issuer. The
Fund may invest in both
corporate and government debentures.
Derivatives
Risk
Derivatives
may involve significant risk. The use of derivative instruments may expose the
Fund to additional risks that it would not be subject to if it invested
directly
in the securities or other instruments underlying those derivatives, including
the high degree of leverage often embedded in such instruments, and potential
material and prolonged deviations between the theoretical value and realizable
value of a derivative. Some derivatives have the potential for unlimited
loss, regardless of the size of the Fund’s initial investment. The use of
derivatives may also increase any adverse effects resulting from the
underperformance
of strategies, asset classes and market exposures to which the Fund has
allocated its assets. Derivatives may at times be highly illiquid, and
the
Fund may not be able to close out or sell a derivative at a particular time or
at an anticipated price. Certain derivatives may be difficult to value, and
valuation
may be more difficult in times of market turmoil. Derivatives may also be more
volatile than other types of investments. The Fund may buy or sell derivatives
not traded on an exchange, which may be subject to heightened liquidity and
valuation risk. Derivative investments can increase portfolio turnover
and
transaction costs. Derivatives also are subject to counterparty risk and credit
risk. As a result, the Fund may not recover its investment or may only obtain
a
limited recovery, and any recovery may be delayed. Not all derivative
transactions require a counterparty to post collateral, which may expose the
Fund to greater
losses in the event of a default by a counterparty. There may be imperfect
correlation between the behavior of a derivative and that of the reference
instrument
underlying the derivative. An abrupt change in the price of a reference
instrument could render a derivative worthless. Derivatives may involve risks
different
from, and possibly greater than, the risks associated with investing directly in
the reference instrument. Suitable derivatives may not be available in all
Prospectus
– Fund Summary3
circumstances,
and there can be no assurance that the Fund will use derivatives to reduce
exposure to other risks when that might have been beneficial. Ongoing
changes to the regulation of the derivatives markets and potential changes in
the regulation of funds using derivative instruments could limit the
Fund’s
ability to pursue its investment strategies. New regulation of derivatives may
make them more costly, or may otherwise adversely affect their liquidity,
value
or performance. In
addition, the Fund’s investments in derivatives are subject to the following
risks:
■ |
Contracts
for Difference Risk.
A contract for difference (“CFD”) is a contract between two parties,
typically described as “buyer” and “seller,” stipulating that
the seller will pay to the buyer the difference between the current value
of an asset and its value in the future. If the difference is negative,
then the buyer
instead pays the seller. By entering into a CFD transaction, the Fund
could incur losses because it would face many of the same types of risks
as owning
the underlying security directly. As over-the-counter derivative
instruments, CFDs are subject to counterparty risk. Because CFDs are not
traded on an
exchange and may not have an expiration date, CFDs may be
illiquid. |
■ |
Credit-Linked
Notes Risk.
Credit-Linked Notes (“CLNs”) are debt obligations that are structured so
that their performance is linked to that of an underlying bond
or other debt obligation (a “reference asset”), normally by means of an
embedded or underlying credit default swap. They may be highly volatile
and are
subject to the credit risk of both the issuer of the CLN and the issuer of
the reference assets. In the event the issuer defaults or there is a
credit event that
relates to the reference asset, the recovery rate generally is less than
the Fund’s initial investment, and the Fund may lose money. They also are
subject to
currency risk, liquidity risk, valuation risk, counterparty risk, the
other risks of a credit default swap, and potential conflicts of interest
with the CLN issuer or
sponsor. |
■ |
Foreign
Currency Forward Contracts Risk.
Foreign currency forward contracts, including non-deliverable forwards
(“NDFs”), are derivative instruments pursuant
to a contract where the parties agree to a fixed price for an agreed
amount of foreign currency at an agreed date or to buy or sell a specific
currency
at a future date at a price set at the time of the contract and include
the risks associated with fluctuations in currency. There are no
limitations on daily
price movements of forward contracts. There can be no assurance that any
strategy used will succeed. Not all forward contracts, including NDFs,
require
a counterparty to post collateral, which may expose the Fund to greater
losses in the event of a default by a counterparty. The use of foreign
currency
forward contracts may expose the Fund to additional risks, such as credit
risk, liquidity risk, and counterparty risk, that it would not be subject
to if it
invested directly in the securities or currencies underlying the foreign
currency forward
contract. |
■ |
Foreign
Currency Futures Contracts Risk.
Foreign currency futures contracts are derivative instruments pursuant to
a contract where the parties agree to pay a
fixed price for an agreed amount of foreign currency at an agreed date or
to buy or sell a specific currency at a future date at a price set at the
time of the contract.
Foreign currency futures contracts are similar to foreign currency forward
contracts, except that they are traded on exchanges (and may have
margin
requirements) and are standardized as to contract size and delivery date.
The Fund may use foreign currency futures contracts for the same
purposes
as foreign currency forward contracts, subject to Commodity Futures
Trading Commission (“CFTC”) regulations. The use of foreign currency
futures
contracts may expose the Fund to additional risks, such as credit risk,
liquidity risk, and counterparty risk, that it would not be subject to if
it invested
directly in the currencies underlying the foreign currency futures
contract. Foreign currency futures transactions and currency futures
contracts include
risks associated with fluctuations in currency, and other risks inherent
in trading derivatives. There can be no assurance that a liquid secondary
market
will be available to the Fund for the appropriate type of contract at any
particular time. Consequently, the Fund may experience losses if it is
unable to
timely exit its position due to an illiquid secondary
market. |
■ |
Forward
Contracts Risk.
Forward contracts, including foreign currency forward contracts and
non-deliverable forwards (“NDFs”), are derivative instruments pursuant
to a contract where the parties agree to a fixed price for an agreed
amount of securities or other underlying assets at an agreed date or to
buy or sell
a specific currency at a future date at a price set at the time of the
contract. There are no limitations on daily price movements of forward
contracts. There
can be no assurance that any strategy used will succeed. Not all forward
contracts, including NDFs, require a counterparty to post collateral,
which may
expose the Fund to greater losses in the event of a default by a
counterparty. Forward
contracts involving currency include the risks associated with
fluctuations
in currency.
The use of forward contracts may expose the Fund to additional risks, such
as credit risk, liquidity risk, and counterparty risk, that it
would
not be subject to if it invested directly in the securities or currencies
underlying the forward
contract. |
■ |
Futures
Contracts Risk.
Futures contracts are derivative instruments pursuant to a contract where
the parties agree to a fixed price for an agreed amount of securities
or other underlying assets at an agreed date. The use of such derivative
instruments may expose the Fund to additional risks, such as credit risk,
liquidity
risk, and counterparty risk, that it would not be subject to if it
invested directly in the securities underlying those derivatives. There
can be no assurance
that any strategy used will succeed. There may at times be an imperfect
correlation between the movement in the prices of futures contracts and
the
value of their underlying instruments or indexes. There also can be no
assurance that, at all times, a liquid market will exist for offsetting a
futures contract
that the Fund has previously bought or sold, and this may result in the
inability to close a futures contract when desired. Futures contracts may
experience
potentially dramatic price changes, which will increase the volatility of
the Fund and may involve a small investment of cash (the amount of
initial
and variation margin) relative to the magnitude of the risk assumed (the
potential increase or decrease in the price of the futures contract).
Interest
rate
futures contracts expose the Fund to price fluctuations
resulting from changes in interest rates. The Fund could suffer a loss if
interest rates rise after the
Fund has purchased an interest rate futures contract or fall after the
Fund has sold an interest rate futures contract.
Treasury
futures contracts expose the
Fund to price fluctuations resulting from changes in interest rates and to
potential losses if interest rates do not move as
expected. |
■ |
Options
Risk.
An option is a contract that gives the purchaser (holder) of the option,
in return for a premium, the right to buy from (call) or sell to (put) the
seller
(writer) of the option the asset
underlying the option at a specified exercise price at any time during the
term of the option (normally not exceeding nine
months)
. The
Fund may use non-deliverable options (“NDOs”),
which are foreign exchange products designed
to assist in reducing the foreign exchange
risk, in particular situations when physical delivery of the underlying
asset
is not required or not possible.
There can be no guarantee that the use of
options will increase the Fund’s return or income. In addition, there may
be an imperfect correlation between the movement in prices of options and
the assets
underlying them, and there may at times not be a liquid secondary market
for options. If an option that the Fund has purchased expires unexercised,
the
Fund will experience a loss in the amount of the premium it paid. In order
for a call option to be profitable, the market price of the underlying
asset
must
rise sufficiently above the call option exercise price to cover the
premium and any transaction costs. These costs will reduce any profit that
might otherwise
have been realized had the Fund bought the underlying asset
instead of the call option. In order for a put option to be profitable,
the market price
of the underlying asset
must decline sufficiently below the put option’s exercise price to cover
the premium and any transaction costs. By using put options
in this manner, the Fund will reduce any profit it might otherwise have
realized from having shorted the declining underlying asset
by the premium paid
for the put option and by transaction costs. Options on currencies expose
the Fund to the risks associated with investments in
currencies. |
■ |
Structured
Notes Risk.
Structured notes are derivative debt instruments with principal and/or
interest payments linked to the value of a commodity, a foreign
currency, an index of securities, an interest rate, or other financial
indicators (“reference instruments”). The payments on a structured note
may vary based
on changes in one or more specified reference instruments, such as a
floating interest rate compared to a fixed interest rate, the exchange
rates between
two currencies, one or more securities or a securities or commodities
index. If the underlying investment or index does not perform as
anticipated, the
structured note might pay less interest than the stated coupon payment or
repay less principal upon maturity. The movement of such factors may cause
significant
price fluctuations. A structured note may be positively or negatively
indexed. Structured notes are subject to interest rate risk, market risk,
liquidity
risk and counterparty risk. They are also subject to credit risk with
respect both to the issuer and, if applicable, to the underlying security
or borrower.
Structured notes may have a limited trading market, making it difficult to
value them or sell them at an acceptable
price. |
4Prospectus
– Fund Summary
■ |
Swap
Agreements Risk.
Swap agreements or “swaps” are transactions in which the 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 or the performance of specified securities, indices or other assets
based on
a specified amount (the “notional” amount). Swaps can involve greater
risks than a direct investment in an underlying asset, because swaps
typically include
a certain amount of embedded leverage and as such are subject to leverage
risk. If swaps are used as a hedging strategy, the Fund is subject to the
risk
that the hedging strategy may not eliminate the risk that it is intended
to offset, due to, among other reasons, the occurrence of unexpected price
movements
or the non-occurrence of expected price movements. Swaps also may be
difficult to value. Swaps may be subject to liquidity risk and
counterparty
risk, and swaps that are traded over-the-counter are not subject to
standardized clearing requirements and may involve greater liquidity and
counterparty
risks. The
Fund may invest in the following types of
swaps: |
• |
Credit
Default
Swaps Risk.
Credit default swaps
may be subject to credit risk and the risks associated with the purchase
and sale of credit
protection. |
• |
Currency
Swaps
Risk.
Currency swaps
may be subject to currency risk and credit
risk. |
• |
Interest
Rate
Swaps Risk.
Interest
rate swaps may
be subject to interest rate risk and credit
risk. |
• |
Total
Return Swaps Risk.
Total
return swaps
may be subject to credit risk and market risk and, if the underlying
securities are bonds or other debt obligations,
interest rate
risk. |
■ |
Warrants
Risk, including Sovereign Warrants.
Warrants are derivative securities that give the holder the right to
purchase a specified amount of securities at a
specified price. Warrants may be more speculative than certain other types
of investments because warrants do not carry with them dividend or voting
rights
with respect to the underlying securities, or any rights in the assets of
the issuer. In addition, the value of a warrant does not necessarily
change with the
value of the underlying securities, and a warrant ceases to have value if
it is not exercised prior to its expiration date. The Fund may invest in
warrants that
represent the right to receive payments if an identified revenue,
commodity price or economic measure within a developing
market country, such as the
price or volume of domestically produced oil or the growth of the
country’s gross domestic product, equals or exceeds a specified level.
Such warrants may
result from the restructuring of a sovereign debt obligation and may be
more speculative than certain other types of sovereign investments. The
market for
warrants may be very limited and there may at times not be a liquid
secondary market for
warrants. |
Developing
Markets Risk
When
investing in developing markets, the risks of investing in foreign securities
are heightened. Developing markets are generally smaller, less developed, less
liquid
and more volatile than the securities markets of the U.S. and other developed
markets. There are also risks of: greater political or economic uncertainties;
an economy’s dependence on revenues from particular commodities or on
international aid or development assistance; currency transfer restrictions;
the imposition of economic sanctions or other government restrictions; a limited
number of potential buyers for such securities resulting in increased
volatility and limited liquidity for developing market securities; trading
suspensions and other restrictions on investment; delays and disruptions in
securities
settlement procedures; greater sensitivity to interest rate changes; currency
exchange rate volatility and currency inflation or deflation; and significant
limitations on investor rights and recourse. The governments of developing
market countries may also be more unstable and more likely to impose
capital
controls, nationalize a company or industry, place restrictions on foreign
ownership and on withdrawing sale proceeds of securities from the country,
intervene
in the financial markets, and/or impose burdensome taxes that could adversely
affect security prices. In addition, there may be less publicly available
information
about issuers in developing markets than would be available about issuers in
developed markets, and such issuers may not be subject to accounting,
auditing, financial reporting and recordkeeping standards and requirements
comparable to those to which U.S. companies are subject. Developing
markets may possess less developed regulatory or legal structures governing
private and foreign investment, and also may be more vulnerable to market
manipulation, corruption and fraud. These matters have the potential to impact
the Fund’s investment objectives and
performance.
The
risks of investing in developing market countries are magnified in frontier
market countries, which generally have smaller economies and less developed
capital
markets and legal, regulatory and political systems than other developing market
countries. The magnification of risks is generally the result of: (1) the
potential
for extreme price volatility and illiquidity in frontier markets; (2) government
ownership or control of parts of the private sector or other protectionist
measures;
(3) large currency fluctuations; (4) fewer companies and investment
opportunities; or (5) inadequate investor protections and regulatory
enforcement.
Investments that the Fund holds may be exposed to these risks, which could have
a negative impact on their value.
Environmental,
Social, and/or Governance Investing Risk
The
use of environmental, social, and/or governance (“ESG”) considerations
by a sub-advisor may cause the Fund to make different investments than
funds that
have a similar investment style but do not incorporate such considerations in
their strategy. As with the use of any investment considerations involved in
investment
decisions, there is no guarantee that the use of any ESG investment
considerations will result in the selection of issuers that will outperform
other issuers
or help reduce risk in the Fund. The
Fund may choose not to, or may not be able to, take advantage of certain
investment opportunities due to these considerations,
which may adversely affect investment performance.
The Fund may underperform funds that do not incorporate these considerations or
incorporate
different ESG considerations. Although a sub-advisor has established its
own process to oversee ESG integration in accordance with the Fund’s
strategies,
successful integration of ESG factors will depend on a sub-advisor’s skill
in researching, identifying, and applying these factors, as well as on the
availability
of relevant data. A
sub-advisor may use ESG research and/or ratings information provided by one or
more third parties in performing this analysis and
considering ESG risks.
The regulatory landscape with respect to ESG investing in the United States is
evolving and any future rules or regulations may require
the Fund to change its investment process with respect to the integration of ESG
factors.
Foreign
Investing Risk
Non-U.S.
investments carry potential risks not associated with U.S. investments. Such
risks include, but are not limited to: (1) currency exchange rate fluctuations,
(2) political and financial instability, (3) less liquidity, (4) lack of uniform
accounting, auditing and financial reporting standards, (5) greater volatility,
(6) different government regulation and supervision of foreign stock exchanges,
brokers and listed companies, and (7) delays or failures in transaction
payment and settlement in some foreign markets. The Fund’s investment in a
foreign issuer may subject the Fund to regulatory, political, currency,
security,
economic and other risks associated with that country. Global economic and
financial markets have become increasingly interconnected and conditions
(including recent volatility, terrorism, war and political instability) and
events (including natural disasters) in one country, region or financial market
may
adversely impact issuers in a different country, region or financial
market.
Geographic
Concentration Risk
From
time to time, based on market or economic conditions, the Fund may invest a
significant portion of its assets in the securities of issuers located in, or
with
significant economic ties to, a single country or geographic region, which could
increase the risk that economic, market,
political,
business, regulatory, diplomatic,
social and environmental conditions in that particular country or geographic
region may have a significant impact on the Fund’s performance. Investing
in such a manner could cause the Fund’s performance to be more volatile than the
performance of more geographically diverse funds.
A decline in the
economies or financial markets of one country or region may adversely affect the
economies or financial markets of another.
■ |
African
Investment Risk.
African countries involve heightened risks of political instability, civil
war, armed conflict and warfare, social instability as a result of
religious,
ethnic and/or socio-economic unrest, authoritarian and/or military
involvement in governmental decision-making, corruption, expropriation
and/or nationalization
of assets, confiscatory taxation,
inflation in local economies
and other risks. The capital markets in many African countries do not
include the |
Prospectus
– Fund Summary5
|
same
safeguards as developed countries, and there may be less financial and
other information publicly available to investors. The governments of
certain countries
may restrict or control foreign investment, limit repatriation of
investment proceeds, or levy taxes on foreign investments, which may
impact the Fund’s
returns. Many African countries are heavily dependent on international
trade and may be subject to trade barriers, embargoes, exchange controls,
currency
valuation adjustments and other protectionist measures. Since
a primary source of revenue for these countries is the export of
commodities, they are
more vulnerable to changes in commodity prices, interest rates, or factors
affecting a particular commodity. Africa
has historically been prone to natural disasters,
such as droughts, and is economically sensitive to environmental events.
In
addition, disease epidemics are more likely to affect certain
African countries.
Political
and social unrest, including warfare
and terrorist activities in African countries, may negatively affect the
value of an investment in the Fund.
The markets of African countries should be considered extremely volatile
even when compared with those of other developing market
countries. |
Hedging
Risk
If
the Fund uses a hedging instrument at the wrong time or judges the market
conditions incorrectly, or the hedged instrument does not correlate to the risk
sought
to be hedged, the hedge might be unsuccessful, reduce the Fund’s return, or
create a loss. In addition, hedges, even when successful in mitigating
risk,
may not prevent the Fund from experiencing losses on its investments. Hedging
instruments may also reduce or eliminate gains that may otherwise have
been
available had the Fund not used the hedging
instruments.
High-Yield
Securities Risk
Exposure
to high-yield, below investment-grade securities (commonly referred to as “junk
bonds”) generally involves significantly greater risks than an investment
in investment grade securities. High-yield debt securities may fluctuate more
widely in price and yield and may fall in price when the economy is weak
or expected to become weak. These securities also may be difficult to sell at
the time and price the Fund desires. High-yield securities are considered to
be
speculative with respect to an issuer’s ability to pay interest and principal
and carry a greater risk that the issuers of lower-rated securities will default
on the timely
payment of principal and interest. High-yield securities may experience greater
price volatility and less liquidity than investment grade securities. Issuers
of
securities that are in default or have defaulted may fail to resume principal or
interest payments, in which case the Fund may lose its entire
investment.
Inflation
Index-Linked Securities Risk
Unlike
a conventional bond, whose issuer makes regular fixed interest payments and
repays the face value of the bond at maturity, an inflation index-linked
security
provides principal payments and interest payments that vary as the principal
and/or interest are adjusted over time to reflect a rise or a drop in the
reference
inflation-related index. However, there can be no assurance that the inflation
index used will accurately measure the rate of inflation. For inflation
index-linked
debt securities for which repayment of the original principal upon maturity (as
adjusted for inflation) is not guaranteed, the adjusted principal value
of the securities repaid at maturity may be less than the original principal
value. The value of inflation index-linked securities is expected to change in
response
to real interest rates. The price of an inflation index-linked security
generally falls when real interest rates rise and rises when real interest rates
fall. Because
the interest and/or principal payments on an inflation index-linked security are
adjusted periodically for changes in inflation, the income distributed by
the
Fund may be irregular. In periods of deflation, the Fund may have no income at
all from such investments. The principal value of an investment in the
Fund
is not protected or otherwise guaranteed by the value of the Fund’s investments
in inflation index-linked securities.
Interest
Rate Risk
Generally,
the value of investments with interest rate risk, such as fixed-income
securities or derivatives, will move in the opposite direction as
movements in interest
rates. Factors including central bank monetary policy, rising inflation rates,
and changes in general economic conditions may cause interest rates to
rise,
which could cause the value of the Fund’s investments to decline. Interest
rate
increases, including significant or rapid increases, may result in a decline in
the
value of bonds or
derivatives
held by the Fund, lead to heightened volatility in the fixed-income markets and
adversely affect the liquidity of certain fixed-income
investments, any of which may result in substantial losses to the Fund.
Interest
rate changes may have a more pronounced effect on the market value
of fixed-rate instruments than on floating-rate instruments. The value of
floating rate and variable securities may decline if their interest rates do not
rise as
quickly, or as much, as general interest rates.
The prices of fixed-income securities or
derivatives
are
also affected by their durations.
Fixed-income securities or
derivatives with longer durations generally have greater sensitivity to changes
in interest rates
than those with shorter durations.
Rising interest rates may cause
the value of the Fund’s investments with longer durations and terms to maturity
to decline, which may adversely affect the value of the Fund. For example,
if a bond has a duration of four years, a 1% increase in interest rates could be
expected to result in a 4% decrease in the value of the bond. Fluctuations
in interest rates may also affect the liquidity of fixed-income securities and
instruments held by the Fund.
Investment
Risk
An
investment in the Fund is not a deposit with a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government
agency.
When you sell your shares of the Fund, they could be worth less than what you
paid for them. Therefore, you may lose money by investing
in the Fund.
Issuer
Risk
The
value of, and/or the return generated by, a security may decline for a number of
reasons that directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer’s goods or services, as
well as the historical and prospective earnings of the issuer and the
value
of its assets.
Leverage
Risk
The
Fund’s use of derivative instruments may have the economic effect of financial
leverage. Financial leverage magnifies the Fund’s exposure to the movements
in prices of an asset or class of assets underlying a derivative instrument and
may result in increased volatility, which means that the Fund will have
the potential for greater losses than if the Fund does not use the derivative
instruments that have a leveraging effect. Leverage may result in losses that
exceed
the amount originally invested and may accelerate the rate of losses. Leverage
tends to magnify, sometimes significantly, the effect of any increase or
decrease
in the Fund’s exposure to an asset or class of assets and may cause the Fund’s
net asset value (“NAV”) per share to be volatile. There can be no assurance
that the Fund’s use of leverage will be
successful.
Liquidity
Risk
The
Fund is susceptible to the risk that certain investments held by the Fund may
have limited marketability, be subject to restrictions on sale, be difficult or
impossible
to purchase or sell at favorable times or prices or become less liquid in
response to market developments or adverse credit events that may affect
issuers
or guarantors of a security. An inability to sell a portfolio position can
adversely affect the Fund’s value or prevent the Fund from being able to take
advantage
of other investment opportunities. Market prices for such instruments may be
volatile. During periods of substantial market volatility, an investment
or even an entire market segment may become illiquid, sometimes abruptly, which
can adversely affect the Fund’s ability to limit losses. The Fund could
lose money if it is unable to dispose of an investment at a time that is most
beneficial to the Fund. The Fund may be required to dispose of investments
at
unfavorable times or prices to satisfy obligations, which may result in losses
or may be costly to the Fund. For
example, liquidity risk may be magnified in rising
interest rate environments in the event of higher
than
normal redemption rates.
Unexpected
redemptions may force the Fund to sell certain investments
at unfavorable prices to meet redemption requests or other cash
needs. Judgment
plays a greater role in pricing illiquid investments than in investments
with more active markets.
6Prospectus
– Fund Summary
Market
Risk
The
Fund is subject to the risk that the securities markets will move down,
sometimes rapidly and unpredictably, based on overall economic conditions and
other
factors, which may negatively affect the Fund’s performance. Equity securities
generally have greater price volatility than fixed-income securities,
although
under certain market conditions fixed-income securities may have comparable or
greater price volatility. During a general downturn in the securities
markets,
multiple assets may decline in value simultaneously. Prices in many financial
markets have increased significantly over the last decade, but there have
also
been periods of adverse market and financial developments and cyclical change
during that timeframe, which have resulted in unusually high levels of
volatility
in domestic and foreign financial markets that has caused losses for investors
and may occur again in the future. The value of a security may decline
due
to adverse issuer-specific conditions, general market conditions unrelated to a
particular issuer, such as changes in interest or inflation rates, or factors
that
affect a particular industry or industries. Changes in the financial condition
of a single issuer or market segment also can impact the market as a whole.
Geopolitical
and other events, including war, terrorism, economic uncertainty, trade
disputes, pandemics, public health crises, natural disasters and related
events
have led, and in the future may continue to lead, to instability in world
economies and markets generally and reduced liquidity in equity, credit and
fixed-income
markets, which may disrupt economies and markets and adversely affect the value
of your investment. Changes in value may be temporary or may
last for extended periods.
Policy
changes by the U.S. government and/or Federal Reserve and political events
within the U.S. and abroad, such as changes in the U.S. presidential
administration
and Congress, the U.S. government’s inability at times to agree on a long-term
budget and deficit reduction plan, the threat or
occurrence of
a federal
government shutdown and threats or
the occurrence of a failure
to increase the federal government’s debt limit,
which could result in a default on the government’s
obligations, may affect investor and consumer confidence and may adversely
impact financial markets and the broader economy, perhaps suddenly
and to a significant degree.
Markets
and market participants are increasingly reliant upon both publicly available
and proprietary information data systems. Data imprecision, software or
other
technology malfunctions, programming inaccuracies, unauthorized use or access,
and similar circumstances may impair the performance of these systems
and may have an adverse impact upon a single issuer, a group of issuers, or the
market at large.
The
financial markets generally move in cycles, with periods of rising prices
followed by periods of declining prices. The value of your investment may
reflect these
fluctuations.
■ |
Recent
Market Events Risk.
Both U.S. and international markets have experienced significant
volatility in recent months and years. As a result of such volatility,
investment returns may fluctuate significantly. Moreover, the risks
discussed herein associated with an investment in the Fund may be
increased. |
|
Although
interest rates were unusually low in recent years in the U.S. and
abroad, in 2022, the Federal Reserve and certain foreign central banks
began to raise
interest rates as part of their efforts to address rising inflation. It is
difficult to accurately predict the pace at which interest rates might
increase or start decreasing,
the timing, frequency or magnitude of any such changes in interest rates,
or when such changes might stop or reverse course. Additionally,
various
economic and political factors could cause the Federal Reserve or another
foreign central bank to change their approach in the future and such
actions
may result in an economic slowdown in the U.S. and abroad. Unexpected
changes in interest rates could lead to significant market volatility or
reduce
liquidity in certain sectors of the market. Deteriorating economic
fundamentals may, in turn, increase the risk of default or insolvency of
particular issuers,
negatively impact market value, cause credit spreads to widen, and reduce
bank balance sheets. Any of these could cause an increase in market
volatility,
reduce liquidity across various markets or decrease confidence in the
markets. Additionally, high public debt in the U.S. and other
countries creates
ongoing systemic and market risks and policymaking
uncertainty. |
|
In
March 2023, the shutdown of certain financial institutions in
the U.S. and questions regarding the viability of other financial
institutions raised economic concerns
over disruption in the U.S. and global banking systems. There can be no
certainty that the actions taken by the U.S. or foreign governments will
be
effective in mitigating the effects of financial institution failures on
the economy and restoring public confidence in the U.S. and global banking
systems. |
|
Some
countries, including the U.S., have in recent years adopted more
protectionist trade policies. Slowing global economic growth; risks
associated with a trade
agreement between the United Kingdom and the European Union; the risks
associated with ongoing trade negotiations with China; and the
possibility
of changes to some international trade agreements; political or economic
dysfunction within some nations, including major producers of oil; and
dramatic
changes in commodity and currency prices could have adverse effects that
cannot be foreseen at the present
time. |
|
Tensions,
war, or open conflict between nations, such as between Russia and Ukraine,
in the Middle East or in eastern Asia could affect the economies of
many
nations, including the United States. The duration of ongoing hostilities
in the Middle East and between Russia and Ukraine, and any sanctions and
related
events cannot be predicted. Those events present material uncertainty and
risk with respect to markets globally and the performance of the Fund
and
its investments or operations could be negatively
impacted. |
|
Regulators
in the U.S. have proposed and recently adopted a number of changes
to regulations involving the markets and issuers, some of which apply to
the
Fund. The full effect of various newly-adopted regulations is not
currently known. Additionally, it is not clear whether the proposed
regulations will be adopted.
However, due to the broad scope of the new and proposed regulations,
certain changes could limit the Fund’s ability to pursue its investment
strategies
or make certain investments, or may make it more costly for the Fund to
operate, which may impact
performance. |
|
Economists
and others have expressed increasing concern about the potential effects
of global climate change on property and security values. Certain
issuers,
industries and regions may be adversely affected by the impacts of climate
change, including on the demand for and the development of goods and
services
and related production costs, and the impacts of legislation, regulation
and international accords related to climate change, as well as any
indirect consequences
of regulation or business trends driven by climate
change. |
Market
Timing Risk
The
Fund is subject to the risk of market timing activities by investors due to the
nature of the Fund’s investments, which requires the Fund, in certain
instances,
to fair value certain of its investments. Some investors may engage in frequent
short-term trading in the Fund to take advantage of any price differentials
that may be reflected in the net asset value (“NAV”) of the Fund’s shares.
Frequent trading by Fund shareholders poses risks to other shareholders
in
the Fund, including (i) the dilution of the Fund’s NAV, (ii) an increase in the
Fund’s expenses, and (iii) interference with the ability to execute efficient
investment
strategies.
Multiple
Sub-Advisor Risk
The
Manager may allocate the Fund’s assets among multiple sub-advisors, each of
which is responsible for investing its allocated portion of the Fund’s assets.
To
a significant extent, the Fund’s performance will depend on the success of the
Manager in selecting and overseeing the sub-advisors and allocating the
Fund’s
assets to sub-advisors. The sub-advisors’ investment styles may not work
together as planned, which could adversely affect the performance of the
Fund.
In addition, because each sub-advisor makes its trading decisions independently,
the sub-advisors may purchase or sell the same security at the same time
without aggregating their transactions. This may cause unnecessary brokerage and
other expenses.
Municipal
Securities Risk
Municipal
securities could be affected by adverse political and legislative changes. The
ability of a municipal issuer to make payments can be affected by uncertainties
in the municipal securities market, including: litigation; the strength of the
local or national economy; the issuer’s ability to raise revenues
Prospectus
– Fund Summary7
through
tax or other means; budgetary constraints of local, state and federal
governments upon which the issuer may be relying for funding; a legislature’s
willingness
or ability to appropriate funds needed to pay municipal securities obligations;
the bankruptcy of the issuer; adverse political and legislative changes,
including to eliminate or limit the tax-exempt status of municipal bond interest
or dividends; and other changes in the financial condition of a municipality.
At
times, municipal issuers have defaulted on obligations or commenced insolvency
proceedings. Financial difficulties of municipal issuers may continue
or get worse in the future. Reductions in tax rates may make municipal
securities less attractive in comparison to taxable bonds. In
addition, the Fund’s
investments in municipal securities are subject to the following
risks:
■ |
General
Obligation Bonds
Risk.
A general obligation bond is secured by the full faith, credit and taxing
power of the issuing municipality, not revenues from a
specific project or source. Consequently, timely payments depend on the
issuer’s credit quality, ability to raise tax revenues and ability to
maintain an adequate
tax base. A municipality in which the Fund invests may experience
significant financial difficulties, including bankruptcy or default, which
may negatively
impact the Fund. |
Other
Investment Companies Risk
To
the extent that the Fund invests in shares of other registered investment
companies, the Fund will indirectly bear the fees and expenses charged by those
investment
companies in addition to the Fund’s direct fees and expenses. To the extent the
Fund invests in other investment companies that invest in equity securities,
fixed-income securities and/or foreign securities, or that track an index, the
Fund is subject to the risks associated with the underlying investments
held
by the investment company or the index fluctuations to which the investment
company is subject. The Fund will be subject to the risks associated with
investments
in those companies, including but not limited to the
following:
■ |
Government
Money Market Funds Risk.
Investments in government money market funds are subject to interest rate
risk, credit risk, and market
risk. |
Redemption
Risk
The
Fund may experience periods of high levels of redemptions that could cause the
Fund to sell assets at inopportune times or at a loss or depressed value.
Heavy
redemptions could hurt the Fund’s performance. The sale of assets to meet
redemption requests may create net capital gains, which could cause the
Fund
to have to distribute substantial capital gains. Redemption risk is greater to
the extent that one or more investors or intermediaries control a large
percentage
of investments in the Fund. In addition, redemption risk is heightened during
periods of declining or illiquid markets. A
rise in interest rates or other
market developments may cause investors to move out of fixed-income securities
on a large scale.
During periods of heavy redemptions, the Fund may borrow
funds through the interfund credit facility or from a bank line of credit, which
may increase costs.
Restricted
Securities Risk
Securities
not registered in the U.S. under the Securities Act of 1933, as amended (the
“Securities Act”), or in non-U.S. markets pursuant to similar regulations,
including “Section 4(a)(2)” securities and “Rule 144A” securities, are
restricted as to their resale. Such securities may not be listed on an
exchange
and may have no active trading market. The prices of these securities may be
more difficult to determine than publicly traded securities and these
securities
may involve heightened risk as compared to investments in securities of publicly
traded companies. They may be more difficult to purchase or sell at an
advantageous time or price because such securities may not be readily marketable
in broad public markets or may have to be held for a certain time period
before
they can be resold. The Fund may not be able to sell a restricted security when
a sub-advisor considers it desirable to do so and/or may have to sell the
security
at a lower price than the Fund believes is its fair market value. In addition,
transaction costs may be higher for restricted securities and the Fund may
receive
only limited information regarding the issuer of a restricted security. The Fund
may have to bear the expense of registering restricted securities for
resale
and the risk of substantial delays in effecting the
registration.
Securities
Selection Risk
Securities
selected for the Fund may not perform to expectations. This could result in the
Fund’s underperformance compared to its performance index(es), or other
funds with similar investment objectives or
strategies.
Segregated
Assets Risk
In
connection with certain transactions that may give rise to future payment
obligations, the Fund may be required to maintain a segregated amount of, or
otherwise
earmark, cash or liquid securities to cover the obligation. Segregated assets
generally cannot be sold while the position they are covering is outstanding,
unless they are replaced with other assets of equal value. The need to segregate
cash or other liquid securities could limit the Fund’s ability to pursue
other opportunities as they arise.
Sovereign
and Quasi-Sovereign Debt Risk
The
Fund normally will have significant investments in sovereign and quasi-sovereign
debt securities.
Sovereign or quasi-sovereign debt securities are subject to
risk of payment delays or defaults due to, among other things: (1) country cash
flow problems, (2) insufficient foreign currency reserves, (3) political
considerations,
(4) large debt positions relative to the country’s economy, (5) policies toward
foreign lenders or investors, (6) the failure to implement economic
reforms required by the International Monetary Fund or other multilateral
agencies, or (7) an inability or unwillingness to repay debts. It may be
particularly
difficult to enforce the rights of debt holders in developing markets. A
governmental entity that defaults on an obligation may request additional
time
in which to repay loans, may request further loans, or may seek to restructure
its obligations to reduce interest rates or outstanding principal. There is no
legal
process for collecting sovereign and quasi-sovereign debt that a government does
not pay, nor are there bankruptcy proceedings through which all or part
of the sovereign debt that a governmental entity has not repaid may be
collected. Sovereign and quasi-sovereign debt risk is increased for developing
markets
issuers, which are among the largest debtors to commercial banks and foreign
governments. At times, certain developing market countries have declared
moratoria on the payment of principal and interest on external debt. Certain
developing market countries have experienced difficulty in servicing
their
sovereign debt on a timely basis, which has led to defaults and the
restructuring of certain indebtedness.
Supranational
Risk
Obligations
of supranational entities are subject to the risk that the governments on whose
support the entity depends for its financial backing or repayment may
be unable or unwilling to provide that support. Political changes in principal
donor nations may also unexpectedly disrupt the finances of supranational
entities.
Obligations of a supranational entity that are denominated in non-U.S.
currencies will also be subject to the risks associated with investments in
non-U.S.
currencies.
Unrated
Securities Risk
Because
the Fund may purchase securities that are not rated by any rating
organization, a sub-advisor, after assessing their credit quality, may
internally assign ratings
to certain of those securities in categories similar to those of rating
organizations. Unrated securities are subject to the risk that
a sub-advisor may not accurately
evaluate the security’s comparative credit rating. Some unrated securities may
not have an active trading market or may be difficult to value, which
means
the Fund might have difficulty selling them promptly at an acceptable price.
Unrated securities may be subject to greater liquidity risk and price
volatility.
8Prospectus
– Fund Summary
Valuation
Risk
Certain
of the Fund’s assets may be valued at a price different from the price at which
they can be sold. This risk may be especially pronounced for investments
that are illiquid or may become illiquid, or securities that trade in relatively
thin markets and/or markets that experience extreme volatility. The valuation
of the Fund’s investments in an accurate and timely manner may be impacted by
technological issues and/or errors by third party service providers,
such
as pricing services or accounting agents.
Variable
and Floating Rate Securities Risk
The
coupons on variable and floating-rate securities are not fixed and may fluctuate
based upon changes in market rates. A variable rate security has a coupon
that is adjusted at pre-designated periods in response to changes in the market
rate of interest on which the coupon is based. The coupon on a floating
rate security is generally based on an interest rate, such as a money-market
index, Secured
Overnight Financing Rate (“SOFR”), or a Treasury bill rate. Variable
and floating rate securities are subject to interest rate risk and credit risk.
As short-term interest rates decline, the coupons on variable and floating-rate
securities typically decrease. Alternatively, during periods of rising
short-term interest rates, the coupons on variable and floating-rate securities
typically
increase. Changes in the coupons of variable and floating-rate securities may
lag behind changes in market rates or may have limits on the maximum
increases
in the coupon rates. The value of variable and floating-rate securities may
decline if their coupons do not rise as much, or as quickly, as interest rates
in
general. Conversely, variable and floating rate securities will not generally
increase in value if interest rates decline. Certain types of variable and
floating rate
instruments may be subject to greater liquidity risk than other debt
securities.
Fund
Performance
The
bar chart and table below provide an indication of risk by showing changes in
the Fund’s performance over time. The bar chart shows how the Fund’s
performance
has varied from year to year. The table shows how the Fund’s average annual
total returns compare to a broad-based market index for the periods
indicated.
On
October 1, 2018, abrdn Investments Limited, formerly
known as Aberdeen Asset Managers Limited, began managing a portion of the assets
of the Fund. Prior
to that date, the Fund was known as American Beacon Global Evolution Frontier
Markets Income Fund and Global Evolution USA, LLC served as the Fund’s
sole sub-advisor. On January 4, 2023, the American Beacon Frontier Markets
Income Fund’s name changed to the American Beacon Developing World Income
Fund.
C
Class shares automatically convert to A Class shares 8 years after purchase, if
the conversion is available through your financial intermediary. In the table
below,
the performance for C Class shares reflects the conversion of C Class shares to
A Class shares after 8 years.
You
may obtain updated performance information on the Fund’s website at
www.americanbeaconfunds.com.
Past
performance (before and after taxes) is not necessarily
an indication of how the Fund will perform in the
future.
| |
Calendar
year total returns for Investor Class Shares.
Year Ended 12/31 |
|
Highest
Quarterly Return: 11.19%
2nd Quarter
2020 01/01/2015
through 12/31/2023
Lowest
Quarterly Return: -14.43%
1st Quarter
2020 01/01/2015
through
12/31/2023 |
The
calendar year-to-date total return as of March
31, 2024
was 7.14%. |
|
Average
annual total returns
for periods ended December 31, 2023
|
|
|
| |
|
Inception
Date |
1
Year |
5
Years |
Since
Inception |
Investor
Class |
|
|
|
|
Returns
Before Taxes |
|
|
|
|
Returns
After Taxes on Distributions |
|
|
|
|
Returns
After Taxes on Distributions and Sales of Fund Shares |
|
|
|
|
|
|
|
| |
|
Inception
Date |
1
Year |
5
Years |
Since
Inception |
Share
Class
(Before Taxes) |
|
|
|
|
A |
|
|
|
|
C |
|
|
|
|
Y |
|
|
|
|
R5 |
|
|
|
|
* |
The
Since Inception performance for C Class shares reflects the conversion of
C Class shares to A Class shares after 8 years. If C Class shares were not
converted to A Class shares
after 8 years, and were instead held for the full period since inception,
performance would have been
3.31%. |
|
|
|
| |
|
|
1
Year |
5
Years |
Since
Inception |
Index
(Reflects no deduction for fees, expenses or taxes) |
|
|
|
|
JPMorgan®
EMBI (“JPM EMBI”) Global Diversified Index |
|
|
|
|
Prospectus
– Fund Summary9
After-tax
returns are calculated using the historical highest individual federal marginal
income tax rates and do not reflect the impact of state and local income
taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. The
return after taxes on distributions and sale of Fund shares
may exceed the return before taxes due to an assumed tax benefit from any losses
on a sale of Fund shares at the end of the measurement period.
If
you
are a tax-exempt entity or hold your Fund shares through a tax-deferred
arrangement, such as an individual retirement account (“IRA”) or a 401(k) plan,
the
after-tax returns do not apply to your situation.
After-tax
returns are shown only for Investor Class shares of the Fund; after-tax returns
for other share classes
will vary.
Management
The
Manager
The
Fund has retained American Beacon Advisors, Inc. to serve as its
Manager.
Sub-Advisors
The
Fund’s investment sub-advisors are Global Evolution USA, LLC and abrdn
Investments Limited.
Portfolio
Managers
|
| |
American
Beacon Advisors, Inc. |
Paul
B. Cavazos Senior
Vice President & Chief Investment Officer Since
2019
Colin
J. Hamer Portfolio
Manager Since
2019 |
Patrick
Sporl Senior
Portfolio Manager Since
2019 |
abrdn
Investments Limited |
Brett
Diment Head
of Global Emerging Market Debt Since
2018
Kevin
Daly Investment
Director, Emerging
Markets Debt Since
2018 |
Edwin
Gutierrez Head
of Emerging Market Sovereign Debt Since
2018
Siddharth
Dahiya Head
of Emerging Market Corporate Debt Since
2018 |
Global
Evolution USA, LLC |
Morten
Bugge* Chief
Investment Officer Since
Fund Inception (2014)
Lars
Peter Nielsen* Senior
Portfolio Manager Since
Fund Inception (2014)
Kristian
Wigh* Senior
Portfolio Manager Since
2015
Anne
Margrethe Tingleff* Senior
Portfolio Manager Since
2024 |
Christian
Mejrup* Deputy
Chief Investment Officer Since
Fund Inception (2014)
Michael
Hansen* Senior
Strategist Since
Fund Inception (2014)
Sofus
Asboe* Senior
Portfolio Manager Since
2017
Stephen
Bailey-Smith* Senior
Economist and Portfolio Manager Since
2024 |
* |
The
positions shown for each of the portfolio managers are held with Global
Evolution Asset
Management
A/S, an
affiliate company
of Global Evolution USA, LLC. |
Purchase
and Sale of Fund Shares
You
may buy or sell shares of the Fund through a retirement plan, an investment
professional, a broker-dealer, or other financial intermediary. You may
purchase
or redeem shares of the Fund on any day the New York Stock Exchange (“NYSE”) is
open, at the Fund’s net asset value (“NAV”) per share next calculated
after your order is received in proper form, subject to any applicable sales
charge. The Manager may, in its sole discretion, allow certain individuals
to
invest directly in the Fund. For more information regarding eligibility to
invest directly please see “About Your Investment - Purchase and Redemption of
Shares.”
Direct mutual fund account shareholders may buy subsequent shares or sell shares
in various ways:
|
| |
Internet |
www.americanbeaconfunds.com |
Phone |
To
reach an American Beacon representative call 1-800-658-5811, option
1
Through
the Automated Voice Response Service call 1-800-658-5811, option 2
(Investor Class only) |
Mail |
American
Beacon Funds
P.O.
Box 219643
Kansas
City, MO 64121-9643 |
Overnight
Delivery:
American
Beacon Funds
430
W. 7th Street, Suite 219643
Kansas
City, MO 64105-1407 |
|
|
| |
|
New
Account |
Existing
Account |
Share
Class |
Minimum
Initial Investment Amount |
Purchase/Redemption
Minimum by Check/ACH/Exchange |
Purchase/Redemption
Minimum by Wire |
C |
$1,000 |
$50 |
$250 |
A,
Investor |
$2,500 |
$50 |
$250 |
Y |
$100,000 |
$50 |
None |
R5 |
$250,000 |
$50 |
None |
10Prospectus
– Fund Summary
Tax
Information
Dividends,
capital gains distributions,
and other distributions, if any, that you receive as a result of your
investment in the Fund are subject to federal income tax
and may also be subject to state and local income taxes, unless you are a
tax-exempt entity or your account is tax-deferred, such as an
individual retirement
account (“IRA”) or a 401(k) plan (in which case you may be taxed later, upon the
withdrawal of your investment from such account or plan).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund and the Fund’s distributor, Resolute
Investment
Distributors, Inc., or the Manager may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other intermediary and your
individual financial professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your financial intermediary’s
website for more information.
Additional
Information About the Fund
To
help you better understand the Fund, this section provides a detailed discussion
of the Fund’s investment policies, its principal strategies and principal risks
and
performance index. However, this Prospectus does not describe all of the Fund’s
investment practices. Capitalized
terms that are not otherwise defined
are defined in Appendix B.
For additional information, please see the Fund’s SAI, which is available at
www.americanbeaconfunds.com or by contacting
us via telephone at 1-800-658-5811, by U.S. mail at P.O. Box 219643, Kansas
City, MO 64121-9643, or by e-mail at [email protected].
Additional
Information About Investment Policies and Strategies
Investment
Objectives
The
Fund’s investment objective is to seek income with capital appreciation as a
secondary objective.
The
Fund’s investment objectives are “non-fundamental,” which means that they may be
changed by the Fund’s Board without the approval of Fund shareholders.
80%
Investment Policy
The
Fund has a non-fundamental policy to invest under normal circumstances at least
80% of its net assets (plus the amount of any borrowings for investment
purposes) in investments that are economically tied to developing
countries.
If
the Fund changes its 80% investment policy, a notice will be sent to
shareholders at least 60 days in advance of the change and this prospectus will
be supplemented.
Temporary
Defensive Policy
The
Fund may depart from its principal investment strategy by taking temporary
defensive or interim positions in response to adverse market, economic,
political,
or other conditions. During these times, the Fund may not achieve its investment
objectives.
Additional
Information About the Management of the Fund
The
Fund has retained American Beacon Advisors, Inc. to serve as its Manager. The
Manager may allocate the assets of the Fund among different sub-advisors.
The Manager provides or oversees the provision of all administrative, investment
advisory and portfolio management services to the Fund. The Manager:
■ |
develops
overall investment strategies for the
Fund, |
■ |
selects
and changes sub-advisors, |
■ |
allocates
assets among sub-advisors, |
■ |
monitors
and evaluates the sub-advisors’ investment
performance, |
■ |
monitors
the sub-advisors’ compliance with the Fund’s investment objectives,
policies and restrictions, |
■ |
oversees
the Fund’s securities lending activities and actions taken by the
securities lending agent to the extent applicable,
and |
■ |
directs
the investment of the portion of Fund assets that the sub-advisors
determine should be allocated to short-term
investments. |
The
assets of the Fund are currently allocated by the Manager to two sub-advisors,
Global Evolution USA, LLC and abrdn Investments Limited. Each sub-advisor
has full discretion to purchase and sell securities for its segment of the
Fund’s assets in accordance with the Fund’s objectives, policies, restrictions
and
more specific strategies provided by the Manager. The Manager oversees the
sub-advisors but does not reassess individual security selections made by the
sub-advisors
for their portfolios.
In
the future, the Manager may allocate the Fund’s assets to
one or more different
or additional
sub-advisors.
The Fund operates in a manager-of-managers structure.
The Fund and the Manager have received an exemptive order from the Securities
and Exchange Commission (“SEC”) that permits the Fund, subject to
certain conditions and approval by the Board, to hire and replace sub-advisors,
and materially amend agreements with sub-advisors, that are unaffiliated
with
the Manager without approval of the shareholders. In the future, the Fund and
the Manager may rely on an SEC staff no-action letter, dated July 9,
2019,
that would permit the Fund to expand its exemptive relief to hire and replace
sub-advisors that are affiliated and unaffiliated with the Manager without
shareholder
approval, subject to approval by the Board and other conditions. The Manager has
ultimate responsibility, subject to oversight by the Board, to oversee
sub-advisors and recommend their hiring, termination and replacement. The SEC
order also exempts the Fund from disclosing the advisory fees paid by
the Fund to individual sub-advisors in a multi-manager fund in various documents
filed with the SEC and provided to shareholders. In the future, the Fund
may
rely on the SEC staff no-action letter to expand its exemptive relief to
individual sub-advisors that are affiliated with the Manager. Under that
no-action letter,
the fees payable to sub-advisors unaffiliated with or partially-owned by the
Manager and its parent company would be aggregated, and fees payable to
sub-advisors
that are wholly-owned by the Manager or its parent company, if any, would be
aggregated with fees payable to the Manager. Whenever a sub-advisor
change is proposed in reliance on the order, in order for the change to be
implemented, the Board, including a majority of its “non-interested”
trustees,
must approve the change. In addition, the Fund is required to provide
shareholders with certain information regarding any new sub-advisor within 90
days
of the hiring of any new sub-advisor.
Additional
Information About Investments
This
section provides more detailed information regarding certain of the Fund’s
principal investment strategies as well as information regarding the Fund’s
strategy
with respect to investment of cash balances.
Prospectus
– Additional Information About the Fund11
Cash
Management
To
gain market exposure on cash balances held in anticipation of liquidity needs or
to reduce market exposure in anticipation of liquidity needs, the Fund may
utilize
the following investments:
■ |
Government
Money Market Funds. The
Fund may invest cash balances in government money market funds that are
registered as investment companies under
the Investment Company Act, including a government money market fund
advised by the Manager, with respect to which the Manager also receives
a
management fee. If the Fund invests in government money market funds, the
Fund becomes a shareholder of that investment company. As a result, Fund
shareholders
will bear their proportionate share of the expenses, including, for
example, advisory and administrative fees of the government money market
funds
in which the Fund invests, such as advisory fees charged by the Manager to
any applicable government money market funds advised by the Manager,
in
addition to the fees and expenses Fund shareholders directly bear in
connection with the Fund’s own operations. Shareholders also would be
exposed to the
risks associated with government money market funds and the portfolio
investments of such government money market funds, including the risk that
a government
money market fund’s yield will be lower than the return that the Fund
would have received from other investments that provide liquidity.
Investments
in government money market funds are not insured or guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government
agency. |
Credit-Linked
Notes (“CLNs”)
The Fund
may invest a significant portion of its assets in credit-linked notes. CLNs are
derivative debt obligations that are issued by limited purpose entities,
such
as special purpose vehicles, or by financial firms, such as banks, securities
firms or their affiliates. They are structured so that their performance is
linked to
that of an underlying bond or other debt obligation (a “reference asset”),
normally by means of an embedded or underlying credit default swap. The
reference
assets for the CLNs in which the Fund may invest will be limited to sovereign or
quasi-sovereign debt instruments or other investments in which the Fund
may invest directly. The Fund may invest in CLNs when a sub-advisor believes
that doing so is more efficient than investing in the reference assets
directly
or when such direct investment by the Fund is not feasible due to legal or other
restrictions. Under the terms of a CLN, the Fund will be entitled to
receive
a fixed or variable rate of interest on the outstanding principal amount of the
CLN, which in turn will be subject to reduction (potentially down to zero)
if
a “credit event” occurs with respect to the underlying reference asset or its
issuer. Such credit events will include, but will not be limited to, payment
defaults
on the reference asset. If a credit event occurs, payments on the CLN would
terminate, and the Fund normally would receive delivery of the underlying
reference asset (or, in some cases, a comparable “deliverable” asset) in lieu of
the repayment of principal. However, in some cases, including, but not
limited to, instances where there has been a market disruption or in which it is
or has become illegal, impossible or impracticable for the Fund to purchase,
hold or receive the reference assets, the Fund may receive a cash settlement
based on the value of the reference asset or a comparable instrument,
less
fees charged and certain expenses incurred by the CLN issuer. CLNs are debt
obligations of the CLN issuers, and the Fund would have no ownership or
other
property interest in the reference assets (other than following a credit event
that results in the reference assets being delivered to the Fund) or any direct
recourse
to the issuers of those reference assets.
Currencies
The Fund
may have exposure to foreign currencies by using various instruments. The Fund
may engage in these transactions in order to hedge or protect against
uncertainty in the level of future foreign exchange rates in the purchase and
sale of securities, or
other derivative positions,
or to shift exposure to foreign
currency fluctuations from one country to another. In
order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign
currency received from the sale of a foreign security into U.S. dollars, the
Fund may enter into spot currency trades. In a spot trade, the Fund agrees to
exchange
one currency for another at the current exchange rate. Spot trades allow for
prompt delivery and settlement at the rate prevailing in the currency
exchange
market. Spot trades may increase or decrease the Fund’s exposure to currency
risks.
The instruments in which the Fund may invest that provide exposure
to foreign currencies include the following:
■ |
Foreign
Currency-Denominated Securities |
■ |
Foreign
Currency Forward Contracts |
■ |
Foreign
Currency Futures Contracts |
■ |
Foreign
Currency Options |
Derivative
Investments
Derivatives
are financial instruments that have a value that depends upon, or is derived
from, a reference asset, such as one or more underlying securities, pools
of securities, commodities, options, futures, interest rates, credit rating,
volatility measures, indices or currencies. The Fund may invest in the following
derivative
instruments:
■ |
Contracts
for Difference.
The Fund may purchase contracts for differences (“CFDs”). A CFD is a form
of swap in which its value is based on the fluctuating value
of some underlying asset (e.g., a single security, stock basket or index).
A CFD is a privately negotiated contract between two parties, buyer and
seller, stipulating
that the seller will pay to or receive from the buyer the difference
between the nominal value of the underlying asset at the opening of the
contract
and that asset’s value at the end of the contract. The buyer and seller
are both required to post margin, which is adjusted daily, and adverse
market
movements against the underlying asset may require the buyer to make
additional margin payments. The buyer will also pay to the seller a
financing rate
on the notional amount of the capital employed by the seller less the
margin deposit. A CFD is usually terminated at the buyer’s initiative.
CFDs are similar
to total return swaps, except that payment only occurs once, on the
contract expiration date, whereas payment on total return swaps typically
occurs
at agreed upon intervals. |
■ |
Foreign
Currency Forward Contracts. Foreign
currency forward contracts are two-party contracts pursuant to which one
party agrees to pay the counterparty
a fixed price for an agreed-upon amount of foreign currency at an
agreed-upon future date, which may be any fixed number of days from the
date
of the contract agreed upon by the parties. A foreign currency forward
contract may be a non-deliverable forward contract (“NDF“),
which is a forward
contract where there is no physical settlement of the two currencies at
maturity. Rather, on the contract settlement date, a net cash settlement
will be
made by one party to the other based on the difference between the
contracted forward rate and the prevailing spot rate, on an agreed
notional amount. |
■ |
Foreign
Currency Futures Contracts.
A foreign currency futures contract is a contract to purchase or sell an
agreed-upon amount of a foreign currency at a specified
future date, at a price agreed upon when the contract is made. The Fund
may have exposure to foreign currencies for investment or hedging
purposes
by purchasing or selling futures contracts in non-U.S. currencies. Foreign
currencies may decline in value relative to the U.S. dollar and affect the
Fund’s
investments in securities or derivatives that provide exposure to foreign
(non-U.S.) currencies. Positions in foreign currency futures contracts
must be closed
out through a registered U.S. exchange or foreign board of trade that
provides a secondary market for such contracts. Such secondary markets may
not
exist or may not be accessible at a particular time, which may prevent the
Fund from closing its foreign currency futures position and expose the
Fund to
greater losses. |
12Prospectus
– Additional Information About the Fund
■ |
Forward
Contracts.
Forward contracts are two-party contracts pursuant to which one party
agrees to pay the counterparty a fixed price for an agreed upon
amount
of commodities or securities, or the cash value of commodities, securities
or a securities index, at an agreed upon future date. Not all forward
contracts
require a counterparty to post collateral, which may expose the Fund to
greater losses in the event of a default by a
counterparty. |
■ |
Futures
Contracts.
A futures contract is a contract to purchase or sell a particular asset,
or the cash value of an asset, such as a security, commodity, currency
or an index of such assets, at a specified future date, at a price agreed
upon when the contract is made. Under many such contracts, no delivery of
the
actual underlying asset is required. Rather, upon the expiration of the
contract, settlement is made by exchanging cash in an amount equal to the
difference
between the contract price and the closing price of the asset (e.g., a
security or an index) at expiration, net of initial and variation margin
that was
previously paid. An
interest rate futures contract is a contract for the future delivery of an
interest-bearing debt security.
A
Treasury futures contract is a contract
for the future delivery of a U.S. Treasury security.
The Fund also may have to sell assets at inopportune times to satisfy its
settlement or collateral obligations.
The risks associated with the use of futures contracts also include that
there may be an imperfect correlation between the changes in market
value
of the futures contracts and the assets underlying such contracts, and
that there may not be a liquid secondary market for a futures
contract. |
■ |
Non-Deliverable
Options.
An option may be a non-deliverable option, which is an option involving no
physical settlement of the security, commodity, currency
or derivative underlying the option at maturity. Rather, on the contract
settlement date, a net cash settlement will be made by one party to the
other
based on the difference between the specified exercise price and the
prevailing spot rate, on an agreed notional amount. Certain
non-deliverable options
involve foreign currencies or foreign currency futures. These options are
designed to assist in reducing foreign exchange risk, in particular
situations when
physical delivery of the underlying currencies is not required or not
possible. |
■ |
Options.
An option is a contract that gives the purchaser (holder) of the option,
in return for a premium, the right to buy from (call) or sell to (put) the
seller (writer)
of the option the security, commodity, currency or derivative underlying
the option at a specified exercise price at any time during the term of
the option
(normally not exceeding nine months), or on the option’s expiration date.
The writer of an option has the obligation upon exercise of the option to
deliver
the underlying security, commodity, currency or derivative upon payment of
the exercise price, in the case of a call option, or to pay the exercise
price
upon delivery of the underlying security or currency, in the case of a put
option. |
■ |
Structured
Notes.
Structured notes are specially-designed derivative debt instruments that
may be issued directly by an issuer or special purpose vehicle. The
terms
of the instrument may be determined or structured by the purchaser and the
issuer of the note. Payments of principal or interest on these notes may
be
linked to the value of an index (such as a currency or securities index),
one or more securities, a commodity or the financial performance of one or
more third-party
borrowers. The value of these notes will normally rise or fall in response
to the changes in the performance of the underlying security, index,
currency
or commodity, or the financial condition of such
borrowers. |
■ |
Swap
Agreements.
A swap is a transaction in which the 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,
indices or other assets based on the nominal or face amount of a reference
asset. Payments are usually made on a net basis so that, on any given
day,
the Fund would receive (or pay) only the amount by which its payment under
the swap is less than (or exceeds) the amount of the other party’s
payment.
The terms of the swap transaction are either negotiated by a sub-advisor
and the swap counterparty or established based on terms generally
available
on an exchange or contract market. Nearly any type of derivative,
including forward contracts, can be structured as a
swap. |
• |
Credit
Default Swaps.
In these transactions, the Fund is generally required to pay the par (or
other agreed-upon) value of a referenced debt security to the
counterparty in the event of a default on or downgrade of the debt
security and/or a similar credit event. In return, the Fund receives from
the counterparty
a periodic stream of payments over the term of the swap. If no default
occurs, the Fund keeps the stream of payments and has no payment
obligations.
As the seller, the Fund would effectively add leverage to its portfolio
because, in addition to its net assets, the Fund would be subject to loss
on
the par (or other agreed-upon) value it had undertaken to pay. A credit
default swap may also be entered by the Fund to attempt to hedge against a
decline
in the value of debt securities due to a credit event, such as an issuer’s
failure to make timely payments of interest or principal, bankruptcy or
restructuring.
As the buyer of protection against a credit event, the Fund pays the
counterparty a stream of payments over the term of the swap, regardless
of whether a credit event occurs. |
• |
Currency
Swaps.
The Fund may enter into currency swaps to hedge foreign currency exchange
risk. 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. |
• |
Interest
Rate Swaps. The
Fund may enter into an interest rate swap in order to protect against
declines in the value of fixed-income securities held by the Fund.
In an interest rate swap, the Fund and another party exchange the
right to receive interest payments on a security or other reference
rate. |
• |
Total
Return Swaps. The
Fund may enter into total return swaps to obtain exposure to a security or
market without owning or taking physical custody of such
security or market. In a total return swap, one party agrees to pay the
other party an amount equal to the total return on a defined underlying
asset or
a non-asset reference during a specified period of time. The underlying
asset might be a security; basket of securities; or a non-asset reference,
such as a
securities index. In return, the other party would make periodic payments
based on a fixed or variable interest rate or the total return from a
different underlying
asset or non-asset reference. |
■ |
Warrants.
Warrants are options to purchase an issuer’s securities at a stated price
during a stated term. 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. Warrants usually have no voting rights,
pay no dividends
and have no rights with respect to the assets of the corporation issuing
them. Warrants normally expire after a stated number of years.
Detachable
warrants are often independently traded on a stock exchange.
Non-detachable warrants cannot be traded independently from their
reference bond.
Corporations often issue warrants to give purchasers of common stock units
the right to purchase additional common stock at a specific price in the
future,
which is usually higher than the market price at the time the warrant is
issued. |
• |
Sovereign
Warrants.
Sovereign warrants are state-contingent instruments that are linked to the
performance of a certain commodity, such as oil, cotton or
gold, or the GDP level of a specific country, usually a developing market
country. |
Fixed-Income
Instruments
The
Fund’s investments in, or exposure to, fixed-income instruments may
include:
■ |
Corporate
Debt and Other Fixed-Income Securities. Corporate
debt securities are fixed-income securities issued by businesses to
finance their operations. Corporate
debt securities include bonds, notes, debentures and commercial paper
issued by companies to investors with a promise to repay the principal
amount
invested at maturity, with the primary difference being their maturities
and secured or unsecured status. The broad category of corporate debt
securities
includes debt issued by domestic or foreign companies of all kinds,
including companies of all market capitalizations. Corporate debt may be
rated
investment grade or below investment grade and may carry fixed or floating
rates of interest. Corporate bonds typically carry a set interest or
coupon rate,
while commercial paper is commonly issued at a discount to par with no
coupon. The perceived ability of the company to meet its principal and
interest
payment obligations is referred to as its creditworthiness, and it may be
supplemented by collateral securing the company’s obligations.
Debentures
are
unsecured, medium- to long-term debt securities protected only by the
general creditworthiness of the issuer, not by collateral.
Because of the wide range
of types and maturities of corporate debt securities, as well as the range
of creditworthiness of their issuers, corporate debt securities have
widely |
Prospectus
– Additional Information About the Fund13
|
varying
potentials for return and risk profiles. For example, commercial paper
issued by a large established domestic corporation that is rated
investment grade
may have a modest return on principal, but carries relatively limited
risk. On the other hand, a long-term corporate note issued by a small
foreign corporation
from a developing market country that has not been rated may have the
potential for relatively large returns on principal, but carries a
relatively high
degree of risk. Typically, the values of fixed-income securities change
inversely with prevailing interest rates. In addition, in the event of
bankruptcy, holders
of higher-ranking senior securities may receive amounts otherwise payable
to the holders of more junior securities. |
■ |
Debt
Securities of Supranational Organizations.
Supranational organizations are entities designated or supported by a
government or governmental group to
promote economic development. Supranational organizations have no taxing
authority and are dependent on their members for payments of interest
and
principal. Obligations of a supranational entity may be denominated in
foreign currencies. |
■ |
Developing
Markets Debt. The
Fund may invest a significant portion of its assets in debt securities
associated with a particular geographic region or country, including
developing markets. Developing countries include all countries in the
world except the countries that are classified by MSCI Inc. as “developed
markets.”
Developing countries typically have lower incomes, less integrated
financial markets, smaller economies, and less mature political systems
compared
to developed countries. Developing countries are commonly located in
Africa, the Asia-Pacific region, Central or Eastern Europe, the Middle
East, Central
America or the Caribbean, and South America. Frontier
market countries have smaller, newer and/or less developed economies; less
developed, less liquid and/ or lower-capitalization capital markets; and
less
developed political and legal systems than those of other developing
markets. These countries typically are located in the Asia-Pacific region,
Central and
Eastern Europe and the former Soviet Union, the Middle East, Central and
South America, and Africa. |
■ |
High-Yield
Bonds.
High yield, non-investment grade bonds (also known as “junk bonds”) are
low-quality, high-risk corporate bonds that generally offer a high
level of current income. High yield bonds are considered speculative by
rating organizations. For example, Moody’s, S&P Global Ratings and
Fitch, Inc. rate
them below Baa3, BBB- and BBB-, respectively. Please see “Appendix C
Ratings Definitions” in the SAI for an explanation of the ratings applied
to high yield
bonds. High yield bonds are often issued as a result of corporate
restructurings, such as leveraged buyouts, mergers, acquisitions, or other
similar events.
They may also be issued by smaller, less creditworthy companies or by
highly leveraged firms, which are generally less able to make scheduled
payments
of interest and principal than more financially stable firms. Because of
their low credit quality, high-yield bonds must pay higher interest to
compensate
investors for the substantial credit risk they assume. Lower-rated
securities are subject to additional risks that may not be present with
investments
in higher-grade securities. Investors should consider carefully their
ability to assume the risks associated with lower-rated securities before
investing
in the Fund. |
■ |
Inflation
Index-Linked Securities.
Inflation-indexed securities, also known as inflation-protected
securities, are fixed income instruments structured such that their
interest and principal payments are adjusted to increase and decrease with
changes in official inflation rates. In periods of deflation when the
inflation rate
is declining, the principal value of an inflation-indexed security will be
adjusted downward. This will result in a decrease in the interest
payments. |
■ |
Municipal
Securities.
Municipal securities are debt obligations that are exempt from federal,
state and/or local income taxes that generally are issued to raise
funding
for various public purposes, including general financing for state and
local governments, or financing for a specific project or public facility.
Municipal
securities may be fully or partially backed by the taxing authority of the
local government, by the credit of a private issuer, by the current or
anticipated
revenues from a specific project or specific assets or by domestic or
foreign entities providing credit support, such as letters of credit,
guarantees or
insurance, and are generally classified into general obligation bonds and
special revenue obligations. General obligation bonds are secured by the
issuer’s pledge
of its full faith and credit including, if available, its taxing power for
the payment of principal and interest. Issuers of general obligation bonds
include
states, counties, cities, towns and various regional or special districts.
Revenue bonds are secured only by a specific revenue source. Although the
security
behind revenue bonds varies widely, many provide additional security in
the form of a debt service reserve fund which may also be used to make
principal
and interest payments on the issuer’s obligations. In addition, some
revenue obligations (as well as general obligations) are insured by a bond
insurance
company or backed by a letter of credit issued by a banking
institution. |
• |
General
Obligation Bonds.
General obligation bonds are municipal securities that are secured by the
pledge of the issuer’s full faith, credit, and if available,
its taxing power, for the payment of principal and interest. Issuers of
general obligation bonds include states, counties, cities, towns and
various regional
or special districts. |
■ |
Restricted
Securities.
Restricted securities, which include private placements of private and
public companies, are subject to legal or contractual restrictions
on
their resale. Restricted securities may be difficult to sell at the time
and price a portfolio prefers. Restricted securities include securities
eligible for resale pursuant
to Rule 144A, and securities of U.S. and non-U.S. issuers initially
offered and sold outside the United States pursuant to Regulation S.
Restricted securities
may not be listed on an exchange and may have no active trading market.
The Fund may incur additional expense and delay when disposing of
restricted
securities, including all or a portion of the cost to register the
securities. The Fund also may acquire securities through private placement
transactions
under which it may agree to contractual restrictions on the resale of such
securities that are in addition to applicable legal restrictions. In
addition,
if the Manager and/or a sub-advisor, if applicable, receives non-public
information about the issuer, the Fund may as a result be unable to sell
the securities. |
■ |
Sovereign
and Quasi-Sovereign Debt.
Sovereign debt securities are typically issued or guaranteed by national
governments or their agencies, authorities, instrumentalities,
political subdivisions, or by a supranational organization, in order to
finance the issuing country’s growth and/or budget. Sovereign debt
may
be in the form of conventional securities or other types of debt
instruments such as loans or loan participations. Investing in foreign
sovereign debt securities
will expose the Fund to the direct or indirect consequences of political,
social or economic changes in the countries that issue the debt
securities. Quasi-sovereign
debt securities are debt securities issued by entities that are fully or
partially government owned or controlled. Quasi-sovereign debt
typically
is not guaranteed by a sovereign entity. |
Illiquid
and Restricted Securities
Generally,
an illiquid asset is an asset that the Fund reasonably expects cannot be sold or
disposed of in current market conditions in seven calendar days or less
without the sale or disposition significantly changing the market value of the
investment, as determined pursuant to Rule 22e-4 under the Investment
Company
Act or as otherwise permitted or required by SEC rules and interpretations.
Historically, illiquid securities have included securities that have not been
registered
under the Securities Act, securities that are otherwise not readily marketable,
and repurchase agreements having a remaining maturity of longer than
seven calendar days. Securities that have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased
directly from the issuer or in the secondary market. These securities may be
sold only in a privately negotiated transaction or pursuant to an exemption
from registration. Rule 144A, under the Securities Act, permits the sale of
certain unregistered securities to qualified institutional buyers. To the
extent
privately placed securities held by the Fund qualify under Rule 144A and an
institutional market develops for those securities, the Fund likely will be
able
to dispose of the securities without registering them under the Securities Act.
To the extent that institutional buyers become, for a time, uninterested in
purchasing
these securities, investing in Rule 144A securities could increase the level of
the Fund’s illiquidity. The Manager or sub-advisor, as applicable, may
determine
that certain securities qualified for trading under Rule 144A are liquid.
Regulation S under the Securities Act permits the sale abroad of securities
that
are not registered for sale in the United States and includes a provision for
U.S. investors, such as the Fund, to purchase such unregistered securities if
certain
conditions are met. Securities sold in private placement offerings made in
reliance on the “private placement” exemption from registration afforded by
14Prospectus
– Additional Information About the Fund
Section
4(a)(2) of the Securities Act and resold to qualified institutional buyers under
Rule 144A under the Securities Act (“Section 4(a)(2) securities”) are
restricted
as to disposition under the federal securities laws, and generally are sold to
institutional investors, such as the Fund, that agree they are purchasing
the
securities for investment and not with an intention to distribute to the public.
Any resale by the purchaser must be pursuant to an exempt transaction and
may
be accomplished in accordance with Rule 144A. Section 4(a)(2) securities
normally are resold to other institutional investors through or with the
assistance
of the issuer or dealers that make a market in the Section 4(a)(2) securities,
thus providing liquidity. The Manager and the applicable sub-advisor
will
carefully monitor the Fund’s investments in Section 4(a)(2) securities offered
and sold under Rule 144A, focusing on such important factors, among others,
as
valuation, liquidity, and availability of information.
Other
Investment Companies
The Fund,
at times, may invest in shares of other investment companies. The
Fund may invest in securities of an investment company advised by the Manager,
with
respect to which the Manager also receives a management fee.
Investments in the securities of other investment companies may involve
duplication of advisory
fees and certain other expenses. By investing in another investment company, the
Fund becomes a shareholder of that investment company. As a result,
Fund shareholders indirectly will bear the Fund’s proportionate share of the
fees and expenses paid by shareholders of the other investment company,
in
addition to the fees and expenses Fund shareholders directly bear in connection
with the Fund’s own operations. These other fees and expenses, if applicable,
are reflected as Acquired Fund Fees and Expenses and are included in the Fees
and Expenses Table for the Fund in this Prospectus. Investment in other
investment companies may involve the payment of substantial premiums above the
value of such issuer’s portfolio securities.
■ |
Government
Money Market Funds. The
Fund can invest free cash balances in registered open-end investment
companies regulated as government money market
funds under the Investment Company Act to provide liquidity or for
defensive purposes. The Fund could invest in government money market funds
rather
than purchasing individual short-term investments. If the Fund invests in
government money market funds, shareholders will bear their proportionate
share
of the expenses, including for example, advisory and administrative fees,
of the government money market funds in which the Fund invests, including
advisory
fees charged by the Manager to any applicable government money market
funds advised by the Manager. Although a government 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 government
money market
fund’s investments, increases in interest rates and deteriorations in the
credit quality of the instruments the government money market fund has
purchased
may reduce the government money market fund’s yield and can cause the
price of a government money market security to decrease. In addition,
a
government money market fund is subject to the risk that the value of an
investment may be eroded over time by
inflation. |
Variable
and Floating Rate Securities
Variable
and floating rate securities are securities that pay interest at rates that
adjust whenever a specified interest rate changes and/or that reset on
predetermined
dates (such as the last day of a month or a calendar quarter). The terms of such
obligations typically provide that interest rates are adjusted based
upon an interest or market rate adjustment as provided in the respective
obligations. The adjustment intervals may be regular, and range from daily up
to
annually, or may be event-based, such as based on a change in the prime rate.
Variable rate obligations typically provide for a specified periodic adjustment
in
the interest rate, while floating rate obligations typically have an interest
rate which changes whenever there is a change in the external interest or market
rate.
Because of the interest rate adjustment feature, variable and floating rate
securities provide the Fund with a certain degree of protection against rises in
interest
rates, although the Fund will participate in any declines in interest rates as
well. Generally, changes in interest rates will have a smaller effect on the
market
value of variable and floating rate securities than on the market value of
comparable fixed-rate obligations. Thus, investing in variable and floating rate
securities
generally allows less opportunity for capital appreciation and depreciation than
investing in comparable fixed-rate securities.
Additional
Information About Risks
The
greatest risk of investing in a mutual fund is that its returns will fluctuate
and you could lose money. The following section provides additional information
regarding
the Fund’s principal risk factors in light of its principal investment
strategies. The Fund is designed primarily for investors seeking income and, to
a lesser
degree, capital appreciation from a fund that typically invests in fixed-income,
currency, and derivative instruments economically tied to developing
markets.
Those investors should be willing to assume the counterparty, credit, currency,
derivative, investment, market, sovereign debt, and other risks associated
with investing in developing markets. The principal risks of investing in the
Fund listed below are presented in alphabetical order and not in order
of
importance or potential exposure. Among other matters, this presentation is
intended to facilitate your ability to find particular risks and compare them
with
the risks of other funds. Each risk summarized below is considered a “principal
risk” of investing in the Fund, regardless of the order in which it
appears.
Allocation
Risk
This
is the risk that allocations among strategies, asset classes and market
exposures may be less than optimal and may adversely affect the Fund’s
performance.
There can be no assurance, particularly during periods of market disruption and
stress, that judgments about asset allocation will be correct. Some
broad asset categories and sub-classes may perform below expectations, or below
the securities markets generally, over short and extended periods. The
Fund may be negatively impacted if market correlations change abruptly or
unexpectedly. The Fund’s allocations may be invested in strategies, asset
classes
and market exposures during a period when such strategies, asset classes and
market exposures underperform.
Callable
Securities Risk
The
Fund may invest in fixed-income securities with call features. A call feature
allows the issuer of the security to redeem or call the security prior to its
stated maturity
date. In periods of falling interest rates, issuers may be more likely to call
in securities that are paying higher coupon rates than prevailing interest
rates.
In the event of a call, the Fund would lose the income that would have been
earned to maturity on that security, the proceeds received by the Fund
may
be invested in securities paying lower coupon rates or other less favorable
characteristics, and the Fund may not benefit from any increase in value that
might
otherwise result from declining interest rates. Thus, the Fund’s income could be
reduced as a result of a call and this may reduce the amount of the Fund’s
distributions. In addition, the market value of a callable security may decrease
if it is perceived by the market as likely to be called, which could have a
negative
impact on the Fund’s total return.
Counterparty
Risk
The Fund
is subject to the risk that a party or participant to a transaction, such as a
broker or derivative counterparty, will be unwilling or unable to satisfy its
obligation
to make timely principal, interest or settlement payments or to otherwise honor
its obligations to the Fund. As a result, the Fund may not recover
its
investment or may only obtain a limited recovery, and any recovery may be
delayed. Not all derivative transactions require a counterparty to post
collateral, which
may expose the Fund to greater losses in the event of a default by a
counterparty.
Some
of the markets in which the Fund may effect derivative transactions are
OTC or “interdealer” markets. The participants in such markets are typically not
subject
to credit evaluation and regulatory oversight to the same extent as are members
of a clearing organization. This exposes the Fund to the risk that a
counterparty
will not settle a transaction in accordance with its terms and conditions
because of a credit or liquidity problem with the counterparty. Recent
turbulence
in the financial markets could exacerbate counterparty risk resulting from OTC
derivative transactions.
Prospectus
– Additional Information About the Fund15
The Fund
is also subject to the risk that an FCM would default on an obligation set forth
in an agreement between the Fund and the FCM. This risk exists at
and
from the time that the Fund enters into derivatives transactions that are
centrally cleared. In such cases, a clearing organization becomes
the Fund’s counterparty
and the principal counterparty risk is that the clearing organization itself
will default. In addition, the FCM may hold margin posted in connection
with
those contracts and that margin may be re-hypothecated (or re-pledged) by the
FCM, and lost, or its return delayed, due to a default by the FCM or
other
customer of the FCM. The FCM may itself file for bankruptcy, which would either
delay the return of, or jeopardize altogether, the assets posted by the
FCM
as margin in response to margin calls relating to cleared positions. If a
counterparty fails to meet its contractual obligations, goes bankrupt, or
otherwise experiences
a business interruption, the Fund could miss investment opportunities or
otherwise hold investments it would prefer to sell, resulting in losses for
the Fund.
Credit
Risk
The
Fund is subject to the risk that the issuer, guarantor or insurer of an
obligation, or the counterparty to a transaction,
may fail, or become less able or unwilling,
to make timely payment of interest or principal or otherwise honor its
obligations or default completely. There are varying degrees of credit risk,
depending
on the financial condition of an issuer, guarantor, or counterparty, as well as
the terms of an obligation, which may be reflected in the credit rating
of
the issuer, guarantor, or counterparty. The
strategies utilized by a sub-advisor
require accurate and detailed credit analysis of issuers and there can be no
assurance
that its analysis will be accurate or complete. The Fund
may be subject to substantial losses in the event of credit deterioration or
bankruptcy of one or
more issuers in its portfolio. Financial strength and solvency of an issuer are
the primary factors influencing credit risk. In addition, inadequacy of
collateral or
credit enhancement for a debt instrument may affect its credit risk. Credit risk
may change over the life of an instrument and debt obligations which are
rated
by rating agencies may be subject to downgrade. The credit ratings of debt
instruments and investments represent the rating agencies’ opinions regarding
their credit quality, are not a guarantee of future credit performance of such
securities, are not a guarantee of quality and do not protect against a
decline
in the value of a security. Rating agencies attempt to evaluate the safety of
the timely payment of principal and interest (or dividends) and do not
evaluate
the risks of fluctuations in market value. The ratings assigned to securities by
rating agencies do not purport to fully reflect the true risks of an
investment.
A decline in the credit rating of an individual security held by the Fund may
have an adverse impact on its price and may make it difficult for the
Fund
to sell it. Rating agencies might not always change their credit rating on an
issuer or security in a timely manner to reflect events that could affect the
issuer’s
ability to make timely payments on its obligations. Changes in the actual or
perceived creditworthiness of an issuer, or a downgrade or default affecting
any of the Fund’s securities, could affect the Fund’s performance. Generally,
the longer the maturity and the lower the credit quality of a security, the
more
sensitive it is to credit risk.
Currency
Risk
The
Fund may have exposure to foreign currencies.
Foreign currencies may fluctuate significantly over short periods of time for a
number of reasons, including changes
in interest rates, may be affected unpredictably by intervention, or the failure
to intervene, of the U.S. or foreign governments, central banks, or supranational
entities such as the International Monetary Fund, and may be affected by the
imposition of currency controls or political developments in the U.S.
or abroad. As a result, the Fund’s exposure to foreign currencies may
reduce the returns of the Fund. Foreign currencies may decline in value
relative to the
U.S. dollar and other currencies and thereby affect the Fund’s
investments. In addition, changes in currency exchange rates could adversely
impact investment
gains or add to investment losses. Currency
derivatives may not always work as intended, and in specific cases, the Fund may
be worse off than if it
had not used such instrument(s). In the case of hedging positions, the U.S.
dollar or other currency may decline in value relative to the foreign currency
that is
being hedged and thereby affect the Fund’s investments. There may not always be
suitable hedging instruments available. Even where suitable hedging instruments
are available, the Fund may choose to not hedge its currency risks.
Cybersecurity
and Operational Risk
Operational
risks arising from, among other problems, human errors, systems and technology
disruptions or failures, or cybersecurity incidents may negatively impact
the Fund, its service providers, and third-party fund distribution platforms, as
well as the ability of shareholders to transact in
the Fund’s shares,
and result
in financial losses. Cybersecurity incidents may allow an unauthorized party to
gain access to Fund assets, shareholder data, or proprietary information,
or
cause the Fund or its service providers, as well as the securities trading
venues and their service providers, to suffer data corruption or lose
operational functionality.
Cybersecurity incidents can result from deliberate attacks or unintentional
events. A cybersecurity incident could, among other things, result in
the
loss or theft of shareholder data or funds, shareholders or service providers
being unable to access electronic systems (also known as “denial of services”),
loss
or theft of proprietary information or financial
data, the inability to process Fund transactions, interference with the Fund’s
ability to calculate its NAV, impediments
to trading, physical damage to a computer or network system, or remediation
costs associated with system repairs. The occurrence of any of these
problems could result in a loss of information, violations of applicable privacy
and other laws, regulatory scrutiny, penalties, fines, reputational damage,
additional
compliance requirements, and other consequences, any of which could have a
material adverse effect on the Fund or its shareholders. The Manager,
through its monitoring and oversight of Fund service providers, endeavors to
determine that service providers take appropriate precautions to avoid
and
mitigate risks that could lead to such problems. While the Manager has
established business continuity plans and risk management systems seeking to
address
these problems, there are inherent limitations in such plans and systems, and it
is not possible for the Manager, other Fund service providers, or third-party
fund distribution platforms to identify all of the operational risks that may
affect the Fund or to develop processes and controls to completely eliminate
or mitigate their occurrence or effects. Recent geopolitical tensions may
increase the scale and sophistication of deliberate attacks, particularly those
from
nation-states or from entities with nation-state backing. The Fund cannot
control the cybersecurity plans and systems of its service providers, its
counterparties
or the issuers of securities in which the Fund invests. The
issuers of the Fund’s investments are likely to be
dependent on computers for their
operations
and require ready access to their
data and the
internet to conduct their business. Thus, cybersecurity incidents could also
affect issuers of the
Fund’s
investments,
leading to significant loss of value.
Debentures
Risk
In
the event of a default or bankruptcy by the issuer, as unsecured creditors,
debenture holders will not have a claim against any specific assets of the
issuer and
will therefore only be paid from the issuer’s assets after the secured creditors
have been paid. The Fund is subject to the risk that the value of a debenture
will
fluctuate with changes in interest rates and the perceived ability of the issuer
to make interest or principal payments on time. The Fund may invest in both
corporate
and government debentures.
Derivatives
Risk
Derivatives
are financial instruments that have a value which depends upon, or is derived
from, a reference asset, such as one or more underlying securities, pools
of securities, options, futures, indexes or currencies. The Fund may use
derivatives to enhance total return of its portfolio, to hedge against
fluctuations in
interest rates or currency exchange rates, to change the effective duration of
its portfolio, or to manage certain investment risks or for exposure to a market
as
a substitute for the purchase or sale of the underlying currencies or
securities. The Fund may also hold derivative instruments to obtain economic
exposure to
an issuer without directly holding its securities. Derivatives may involve
significant risk. The use of derivative instruments may expose the Fund to
additional risks
that it would not be subject to if it invested directly in the securities or
other instruments underlying those securities. Derivatives can be highly complex
and
their use within a management strategy can require specialized skills. There can
be no assurance that any strategy used will succeed. If a sub-advisor
incorrectly
forecasts stock market values, or the direction of interest rates or currency
exchange rates in utilizing a specific derivatives strategy for the Fund,
16Prospectus
– Additional Information About the Fund
the
Fund could lose money. In addition, leverage embedded in a derivative instrument
can expose the Fund to greater risk and increase its costs. Gains or
losses
in the value of a derivative instrument may be magnified and be much greater
than the derivative’s original cost (generally the initial margin deposit).
There
may also be material and prolonged deviations between the theoretical value and
realizable value of a derivative. Some derivatives have the potential
for
unlimited loss, regardless of the size of the Fund’s initial investment, for
example, where the Fund may be called upon to deliver a security it does not
own. As
a result, the Fund could lose more than the amount it invests. The use of
derivatives may also increase any adverse effects resulting from the
underperformance
of strategies, asset classes and market exposures to which the Fund has
allocated its assets. Derivatives may at times be illiquid and may be
more
volatile than other types of investments. The Fund may not be able to
close out or sell a derivative position at a particular time or at an
anticipated price. Certain
derivatives may also be difficult to value, and valuation may be more difficult
in times of market turmoil.
The
Fund may buy or sell derivatives not traded on organized exchanges. The Fund may
also enter into transactions that are not cleared through clearing organizations.
These types of transactions may be subject to heightened liquidity and valuation
risk. Derivative investments can increase portfolio turnover and transaction
costs. Derivatives also are subject to counterparty risk and credit risk. As a
result, the Fund may not recover its investment or may only obtain a
limited
recovery, and any recovery may be delayed. Not all derivative transactions
require a counterparty to post collateral, which may expose the Fund to
greater
losses in the event of a default by a counterparty. Certain derivatives require
the Fund to post margin to secure its future obligation; if the Fund has
insufficient
cash, it may have to sell investments from its portfolio to meet daily variation
margin requirements at a time when it may be disadvantageous to do
so. The Fund’s use of derivatives also may create financial leverage, which may
result in losses that exceed the amount originally invested and accelerate
the
rate of losses. There may be imperfect correlation between the behavior of a
derivative and that of the reference instrument underlying the derivative. An
abrupt
change in the price of a reference instrument could render a derivative
worthless. Derivatives may involve risks different from, and possibly greater
than,
the risks associated with investing directly in the reference instrument.
Suitable derivatives may not be available in all circumstances, and there can be
no assurance
that the Fund will use derivatives to reduce exposure to other risks when that
might have been beneficial. Because the markets for certain derivative
instruments
(including markets located in foreign countries) are relatively new and still
developing, suitable derivatives transactions may not be available in all
circumstances
for risk management or other purposes. Upon the expiration of a particular
contract, a sub-advisor may wish to retain the Fund’s position in the
derivative
instrument by entering into a similar contract, but may be unable to do so if
the counterparty to the original contract is unwilling to enter into the
new
contract and no other suitable counterparty can be found. Although the Fund may
attempt to hedge against certain risks, the hedging instruments may not
perform as expected and could produce losses. Hedging instruments may also
reduce or eliminate gains that may otherwise have been available had the
Fund
not used the hedging instruments. The Fund may not hedge certain risks in
particular situations, even if suitable instruments are available.
The
Fund’s ability to use derivatives may also be limited by certain regulatory and
tax considerations. For example, the CFTC and the designated contract
markets
have established position limits for certain futures and
options
contracts, which may restrict the ability of the Fund, or the Manager or
sub-advisor entering
trades on the Fund’s behalf, to make certain trading decisions. Rule 18f-4
places limits on the use of derivatives by registered investment companies,
such
as the Fund. A fund that relies on Rule 18f-4 is required to comply with limits
on the amount of leverage-related risk that the fund may obtain, and may
also
be required to adopt and implement a derivatives risk management program and
designate a derivatives risk manager or adopt policies and procedures
designed
to manage a fund’s derivatives risks.
Ongoing
changes to the regulation of the derivatives markets and potential changes in
the regulation of funds using derivative instruments could limit the
Fund’s
ability to pursue its investment strategies. The extent and impact of such
regulation is not yet fully known and may not be for some time. New regulation
may make derivatives more costly, may limit their availability, may disrupt
markets, or may otherwise adversely affect their value or performance. In
addition
to other changes, these rules provide for central clearing of derivatives that
in the past were traded exclusively over-the-counter and may increase
costs
and margin requirements, but are expected to reduce certain counterparty risks.
The Fund may be subject to the risks associated with investments in derivatives,
including but not limited to the following:
■ |
Contracts
for Difference Risk.
A contract for difference (“CFD”) is a contract between two parties,
typically described as “buyer” and “seller,” stipulating that
the seller will pay to the buyer the difference between the current value
of an asset and its value in the future. If the difference is negative,
then the buyer
instead pays the seller. CFDs allow a fund to take advantage of values on
underlying assets moving up (long positions) or values moving down (short
positions).
For example, when applied to equities, a CFD is an equity derivative that
allows a fund to obtain investment exposure to share price movements,
without
the need for ownership of the underlying shares. By entering into a CFD
transaction, the Fund could incur losses because it would face many of the
same
types of risks as owning the underlying security directly. As
over-the-counter derivative instruments, CFDs are subject to counterparty
risk. Because CFDs
are not traded on an exchange and may not have an expiration date, CFDs
may be illiquid. |
■ |
Credit-Linked
Notes Risk.
Credit-linked notes (“CLNs”) are debt obligations that are structured so
that their performance is linked to that of an underlying bond
or other debt obligation (a “reference asset”), normally by means of an
embedded or underlying credit default swap. They may be highly volatile
and are
subject to the credit risk of both the issuer of the CLN and the issuer of
the reference assets. The buyer of a credit-linked note assumes the risk
of default
by the issuer and the underlying reference asset or entity. In the event
the issuer defaults or there is a credit event that relates to the
reference asset, the
recovery rate generally is less than the Fund’s initial investment, and
the Fund may lose money. They also are subject to currency risk, liquidity
risk, valuation
risk, counterparty risk, the other risks of a credit default swap, and
potential conflicts of interest with the CLN issuer or
sponsor. |
■ |
Foreign
Currency Forward Contracts Risk.
Foreign currency forward contracts, including NDFs, are derivative
instruments pursuant to a contract where the parties
agree to pay a fixed price for an agreed amount of foreign currency at an
agreed date or to buy or sell a specific currency at a future date at a
price set
at the time of the contract. The use of foreign currency forward contracts
may expose the Fund to additional risks, such as credit risk, liquidity
risk, and counterparty
risk, that it would not be subject to if it invested directly in the
securities or currencies underlying the foreign currency forward contract.
Foreign
currency forward transactions, including NDFs, and forward currency
contracts include risks associated with fluctuations in currency, and
other risks inherent
in trading derivatives. There are no limitations on daily price movements
of forward contracts. Not all forward contracts, including NDFs, require a
counterparty
to post collateral, which may expose the Fund to greater losses in the
event of a default by a counterparty. There may at times be an imperfect
correlation
between the price of a forward contract and the underlying currency, which
may increase the volatility of the Fund. The 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, the
Fund will have contractual remedies pursuant to the forward contract, but
such remedies may be subject to bankruptcy and insolvency laws which
could
affect the Fund’s rights as a creditor. There can be no assurance that any
strategy used will succeed. |
■ |
Foreign
Currency Futures Contracts Risk.
Foreign currency futures contracts are derivative instruments pursuant to
a contract where the parties agree to pay a
fixed price for an agreed amount of foreign currency at an agreed date or
to buy or sell a specific currency at a future date at a price set at the
time of the contract.
Foreign currency futures contracts are similar to foreign currency forward
contracts, except that they are traded on exchanges (and may have
margin
requirements) and are standardized as to contract size and delivery date.
Foreign currency futures contracts are regulated by the Commodity Futures
Trading
Commission (“CFTC”). The Fund may use foreign currency futures contracts
for the same purposes as foreign currency forward contracts, subject to
CFTC
regulations. The Fund may also enter into put and call options and write
covered call and cash-secured put options on foreign currency futures.
Foreign
currency futures positions entered into on exchanges may require the Fund
to make variation margin payments. The use of foreign currency futures
contracts
may expose the Fund to additional risks, such as credit risk, liquidity
risk, and counterparty risk, that it would not be subject to if it
invested |
Prospectus
– Additional Information About the Fund17
|
directly
in the currencies underlying the foreign currency futures contract.
Foreign currency futures transactions and currency futures contracts
include risks associated
with fluctuations in currency, and other risks inherent in trading
derivatives. CFTC regulations require foreign currency futures contracts
to be closed
out on a U.S. exchange or a foreign board of trade. Although the Fund
intends to purchase or sell foreign currency futures contracts only on
exchanges
or boards of trade where there appears to be an active secondary market,
there can be no assurance that a liquid secondary market will be
available
to the Fund for the appropriate type of contract at any particular time.
Options on foreign currency futures primarily trade in the
over-the-counter market,
though some options are also listed on exchanges. While the Fund similarly
intends to buy or sell options when it believes there is a liquid
secondary
market available for such options, there can be no guarantee that such a
liquid secondary market will develop or continue. Consequently, the
Fund
may experience losses if it is unable to timely exit its position due to
an illiquid secondary market. Regulatory changes could materially and
adversely affect
the ability of the Fund to enter into foreign currency futures contracts
or could increase the transaction costs of such positions. Such changes
can come
from a variety of sources, including CFTC regulations, rules from the
exchange or board of trade, membership requirements from the derivatives
clearing
organization, or from foreign regulatory
authorities. |
■ |
Forward
Contracts Risk.
Forward contracts,
including foreign currency forward contracts and NDFs,
are derivative instruments pursuant to a contract where the
parties agree to a fixed price for an agreed amount of securities or other
underlying assets at an agreed date or to buy or sell a specific currency
at a future
date at a price set at the time of the contract. There may at times be an
imperfect correlation between the price of a forward contract and the
underlying
security, index or currency, which may increase the volatility of the
Fund. The 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, the Fund will have
contractual remedies pursuant
to the forward contract, but such remedies may be subject to bankruptcy
and insolvency laws which could affect the Fund’s rights as a
creditor. There
are no limitations on daily price movements of forward contracts. There
can be no assurance that any strategy used will succeed. Not all forward
contracts,
including NDFs, require a counterparty to post collateral, which may
expose the Fund to greater losses in the event of a default by a
counterparty. The
use of forward contracts may expose the Fund to additional risks, such as
credit risk, liquidity risk, and counterparty risk, that it would not be
subject to if
it invested directly in the securities underlying the forward
contract. |
■ |
Futures
Contracts Risk.
Futures contracts are derivative instruments pursuant to a contract where
the parties agree to a fixed price for an agreed amount of securities
or other underlying assets at an agreed date. The use of such derivative
instruments may expose the Fund to additional risks, such as credit risk,
liquidity
risk, and counterparty risk, that it would not be subject to if it
invested directly in the instruments underlying those derivatives. There
can be no assurance
that any strategy used will succeed. There may at times be an imperfect
correlation between the movement in the prices of futures contracts and
the
value of their underlying instruments or index. Futures contracts may
experience dramatic price changes (losses) and imperfect correlations
between the price
of the contract and the underlying security, index or currency, which may
increase the volatility of the Fund. Futures contracts may involve a
small investment
of cash (the amount of initial and variation margin) relative to the
magnitude of the risk assumed (the potential increase or decrease in the
price of
the futures contract). There can be no assurance that, at all times, a
liquid market will exist for offsetting a futures contract that
the Fund has previously bought
or sold and this may result in the inability to close a futures contract
when desired. When the Fund purchases or sells a futures contract,
it is subject to
daily variation margin calls that could be substantial. If the Fund
has insufficient cash to meet daily variation margin requirements, it
might need to sell securities
at a time when such sales are disadvantageous. Interest
rate and Treasury futures contracts expose the Fund to price fluctuations
resulting from changes
in interest rates. The Fund could suffer a loss if interest rates
rise after the Fund has purchased an interest rate futures contract or
fall after the Fund
has sold an interest rate futures contract. Similarly, Treasury futures
contracts expose the Fund to potential losses if interest rates do
not move as expected. |
■ |
Options
Risk.
An option is a contract that gives the purchaser (holder) of the option,
in return for a premium, the right to buy from (call) or sell to (put) the
seller
(writer) of the option the security or currency underlying the option at a
specified exercise price at any time during the term of the option
(normally not
exceeding nine months). The
Fund may use non-deliverable options (“NDOs”) to assist in reducing the
foreign exchange risk in particular situations where
physical delivery of the underlying currencies is not required or not
possible.
There can be no guarantee that the use of options will increase the
Fund’s
return or income. In addition, there may be an imperfect correlation
between the movement in prices of options and the securities underlying
them, and
there may at times not be a liquid secondary market for options. The
movements experienced by the Fund between the prices of options and prices
of the
assets (or indices) underlying such options, may differ from expectations,
and may cause the Fund to not achieve its objective. Options on currencies
expose
the Fund to the risks associated with investments in
currencies. In
order for a call option to be profitable, the market price of the
underlying security or index must rise sufficiently above the call option
exercise price to cover
the premium and any transaction costs. These costs will reduce any profit
that might otherwise have been realized had the Fund bought the
underlying
security instead of the call option. The buyer of a call option assumes
the risk of losing its entire investment in the call
option. In
order for a put option to be profitable, the market price of the
underlying security or index must decline sufficiently below the put
option’s exercise price to
cover the premium and any transaction costs. By using put options in this
manner, the Fund will reduce any profit it might otherwise have realized
from having
shorted the declining underlying security by the premium paid for the put
option and by transaction costs. The buyer of a put option assumes the
risk
of losing its entire investment in the put
option. |
■ |
Structured
Notes Risk.
Structured notes are derivative debt instruments with principal and/or
interest payments linked to the value of a commodity, a foreign
currency, an index of securities, an interest rate, or other financial
indicators (“reference instruments”). The payments on a structured note
may vary based
on changes in one or more specified reference instruments, such as a
floating interest rate compared to a fixed interest rate, the exchange
rates between
two currencies, one or more securities or a securities or commodities
index. If the underlying investment or index does not perform as
anticipated, the
structured note might pay less interest than the stated coupon payment or
repay less principal upon maturity. The movement of such factors may cause
significant
price fluctuations. A structured note may be positively or negatively
indexed. For example, its principal amount and/or interest rate may
increase or
decrease if the value of the reference instrument increases, depending
upon the terms of the instrument. Structured notes can have risks of both
fixed-income
securities and derivatives transactions. Structured notes are subject to
interest rate risk, market risk, liquidity risk and counterparty risk, and
to all
of the risks of their underlying securities and derivatives. They are also
subject to credit risk with respect both to the issuer and, if applicable,
to the underlying
security or borrower. If the underlying investment or index does not
perform as anticipated, the structured note might pay less interest than
the stated
coupon payment or repay less principal upon maturity. The price of
structured notes may be very volatile and they may have a limited trading
market,
making it difficult to value them or sell them at an acceptable price. In
some cases, the Fund may enter into agreements with an issuer of
structured
notes to purchase minimum amounts of those notes over
time. |
■ |
Swap
Agreements Risk.
Swap agreements or “swaps” are transactions in which the 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, indices or other assets based on a specified amount
(the “notional” amount). Swaps can involve greater risks than a direct
investment
in an underlying asset, because swaps typically include a certain amount
of embedded leverage and as such are subject to leveraging risk. If
swaps
are used as a hedging strategy, the Fund is subject to the risk that the
hedging strategy may not eliminate the risk that it is intended to offset,
due to,
among other reasons, a lack of correlation between the swaps and the
portfolio of assets that the swaps are designed to hedge or replace. Swaps
also may
be difficult to value. Swaps may be subject to liquidity risk and
counterparty risk. The value of swaps may be affected by changes in
overall market |
18Prospectus
– Additional Information About the Fund
|
movements
and changes in interest rates and currency exchange rates. Some swaps are
now executed through an organized exchange or regulated facility
and
cleared through a regulated clearing organization. A highly liquid
secondary market may not exist for certain swaps, and there can be no
assurance that
one will develop. The use of an organized exchange or market for swap
transactions may result in certain trading and valuation efficiencies for
swaps, however,
this may not always be the case. The absence of an organized exchange or
market for swaps transactions may result in difficulties in trading and
valuation,
especially in the event of market disruptions. Swaps that are traded
over-the-counter also are not subject to standardized clearing
requirements and
the direct oversight of self-regulatory organizations. Swaps may involve
greater liquidity and counterparty risks, including settlement risk, as
well as collateral
risk (i.e., the risk that the swap will not be properly secured with
sufficient collateral), legal risk (i.e., the risk that a swap will not be
legally enforceable
on all of its terms) and operational risk (i.e., the risk of processing
and human errors, inadequate or failed internal or external processes,
failures in
systems and technology errors or malfunctions). The Fund may invest in the
following types of swaps, which may be subject to the risks discussed
above, as
well as the additional risks as described
below: |
• |
Credit
Default
Swaps Risk.
Credit
default swaps
may be subject to credit risk and the risks associated with the purchase
and sale of credit protection. |
• |
Currency
Swaps
Risk.
Currency swaps
may be subject to foreign exchange, currency, market,
and credit risks. |
• |
Interest
Rate
Swaps Risk.
Interest rate swaps
may be subject to interest rate risk, market risk and credit
risk. |
• |
Total
Return Swaps Risk.
Total return swaps may be subject to credit risk and market risk and, if
the underlying securities are bonds or other debt obligations,
interest rate risk. |
■ |
Warrants
Risk, including Sovereign Warrants.
Warrants are derivative securities that give the holder the right to
purchase a specified amount of securities at a
specified price. Warrants may be more speculative than certain other types
of investments because warrants do not carry with them dividend or voting
rights
with respect to the underlying securities, or any rights in the assets of
the issuer. In addition, the value of a warrant does not necessarily
change with the
value of the underlying securities, and a warrant ceases to have value if
it is not exercised prior to its expiration date. The price of a warrant
may be more
volatile than the price of its underlying security, and a warrant may
offer greater potential for capital appreciation as well as capital loss.
Detached warrants
may be traded on a stock exchange; however, non-detached warrants can only
be exercised by the bondholder. The Fund may invest in warrants
that
represent the right to receive payments if an identified revenue,
commodity price or economic measure within a country, including a
developing market
country, such as the price or volume of domestically produced oil or the
growth of the country’s gross domestic product, equals or exceeds a
specified
level. Such warrants may result from the restructuring of a sovereign debt
obligation and may be more speculative than certain other types of
sovereign
investments because they are priced based on market expectations as to the
likelihood and amount of such payments and because investors will
receive
no payments for any period in which the specified level is not reached.
The market for warrants may be very limited and there may at times not be
a liquid
secondary market for warrants. |
Developing
Markets Risk
When
investing in developing markets, the risks of investing in foreign securities
are heightened. Developing markets have unique risks that are greater than,
or
in addition to, the risks associated with investing in developed markets because
developing markets are generally smaller, less developed, less liquid and
more
volatile than the securities markets of the U.S. and other developed markets.
There are also risks of: greater political and economic uncertainties; an
economy’s
dependence on revenues from particular commodities or on international aid or
development assistance; currency transfer restrictions; the imposition
of economic sanctions or other government restrictions; a limited number of
potential buyers for such securities, resulting in increased volatility and
limited
liquidity for developing market securities; trading suspensions and other
restrictions on investment; delays and disruptions in securities settlement
procedures;
greater sensitivity to interest rate changes; currency exchange rate volatility
and currency inflation or deflation; and significant limitations on investor
rights and recourse. The economies and political environments of developing
market countries tend to be more unstable than those of developed countries,
resulting in more volatile rates of return than the developed markets and
substantially greater risk to investors. The governments of developing
market
countries may also be more unstable and more likely to impose capital controls,
nationalize a company or industry, place restrictions on foreign ownership
and on withdrawing sale proceeds of securities from the country, intervene in
the financial markets, and/or impose burdensome taxes that could adversely
affect security prices.
Developing
market countries often have less uniformity in accounting, auditing, financial
reporting and recordkeeping requirements and less reliable clearance
and
settlement, registration, and custodial procedures. In addition, there may be
less publicly available or less reliable information about issuers in developing
markets
than would be available about issuers in developed markets, which can impede a
sub-advisor’s ability to accurately evaluate foreign securities. 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.
Certain developing market countries have material limitations on Public Company
Accounting Oversight Board (“PCAOB”) inspection, investigation and
enforcement capabilities, which hinder the ability to engage in independent
oversight or inspection of accounting firms located in or operating in certain
developing
markets; therefore, there is no guarantee that the quality of financial
reporting or the audits conducted by audit firms of such developing market
issuers
meet PCAOB standards. Developing markets may possess less developed regulatory
or legal structures governing private and foreign investment. In certain
developing market countries, market manipulation, fraud and corruption may be
more prevalent than in developed market countries, and investor protections
may be more limited than those in other countries. It may be difficult to obtain
or enforce legal judgments against non-U.S. companies and non-U.S.
persons in foreign jurisdictions, either through the foreign judicial system or
through a private arbitration process. Certain developing markets also
may
face other significant internal or external risks, including a heightened risk
of war or ethnic, religious or racial conflicts. Additional risks may include:
inability
to purchase and sell investments or otherwise settle security or derivative
transactions (i.e., a market freeze); unavailability of currency hedging
techniques;
slower clearance and settlement; difficulties in obtaining and/or enforcing
legal judgments; and significantly smaller market capitalizations of
issuers.
These matters have the potential to impact the Fund’s investment objectives and
performance.
The
risks of investing in developing market countries are magnified in frontier
market countries, which generally have smaller economies and less developed
capital
markets and legal, regulatory and political systems than other developing market
countries. The magnification of risks is generally the result of: (1) the
potential
for extreme price volatility and illiquidity in frontier markets; (2) government
ownership or control of parts of the private sector or other protectionist
measures,
including managed adjustments in relative currency values, trade barriers, and
exchange controls; (3) large currency fluctuations; (4) fewer companies
and investment opportunities; or (5) inadequate investor protections and
regulatory enforcement, and the relatively new and unsettled securities
laws
in many frontier countries. Investments that the Fund holds may be exposed to
these risks, which could have a negative impact on their value.
Environmental,
Social, and/or Governance Investing Risk
The
use of environmental, social and/or governance (“ESG”) considerations by a
sub-advisor may cause the Fund to make different investments than funds
that
have a similar investment style but do not incorporate such considerations in
their strategy. As with the use of any investment considerations involved in
investment
decisions, there is no guarantee that the use of any ESG investment
considerations will result in the selection of issuers that will outperform
other issuers
or help reduce risk in the Fund. The use of ESG investment considerations may
also affect the Fund’s exposure to certain investments, sectors or industries,
which may impact the Fund’s relative investment performance depending on the
performance of those issuers, sectors or industries. Depending
on how
ESG considerations are incorporated, the Fund
may choose not to or may not be able to take advantage of certain investment
opportunities due to these considerations,
which may adversely affect investment performance.
The Fund may underperform funds that do not incorporate these considerations or
Prospectus
– Additional Information About the Fund19
incorporate
different ESG considerations. Although a sub-advisor has established its own ESG
integration process in accordance with the Fund’s investment strategies,
successful integration of ESG factors will depend on a sub-advisor’s skill in
researching, identifying, and applying these factors, as well as on the
availability
of relevant data. A sub-advisor
may use ESG research and/or ratings information provided by one or more third
parties in performing an ESG analysis
and considering ESG risks.
Because there are few generally accepted standards to use in such
considerations, the information may not be readily available,
complete or accurate, and may differ from the information and considerations
used for other funds, which could negatively impact the Fund’s performance
or create additional risk in the portfolio. The regulatory landscape with
respect to ESG investing in the United States is evolving and any future
rules
or regulations may require the Fund to change its investment process with
respect to the integration of ESG factors.
Foreign
Investing Risk
Non-U.S.
investments carry potential risks not associated with U.S. investments. Such
risks include, but are not limited to: (1) currency exchange rate fluctuations,
(2) political and financial instability, (3) less liquidity, (4) lack of uniform
accounting, auditing and financial reporting standards, (5) greater volatility;
(6) different government regulation and supervision of foreign banks, stock
exchanges, brokers and listed companies, and (7) delays in transaction
settlement
in some foreign markets. There may be very limited oversight of certain foreign
banks or securities depositories that hold foreign securities and currency,
and the laws of certain countries may limit the ability to recover such assets
if a foreign bank, depository, or their agents goes bankrupt. Additionally,
in certain markets, the Fund may not receive timely payment for securities or
other instruments it has delivered or receive delivery of securities
paid
for and may be subject to increased risk that the counterparty will fail to make
payments or delivery when due or default completely. To the extent the
Fund
invests a significant portion of its assets in securities of a single country or
region, it is more likely to be affected by events or conditions of that country
or
region. The Fund’s investment in a foreign issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with that
country.
There
may be restrictions on the flow of international capital, including the possible
seizure or nationalization of the securities issued by non-U.S. issuers held
by
the Fund. In addition, the repatriation of investment income, capital or the
proceeds of sales of securities from certain of the countries may require
advance government
notification or authority, and if a deterioration occurs in a country’s balance
of payments, the country could impose temporary restrictions on foreign
capital remittances. The Fund also could be adversely affected by delays in, or
a refusal to grant, any required governmental approval for repatriation,
as
well as by the application to it of other restrictions on investment. Global
economic and financial markets have become increasingly interconnected and
conditions
(including recent volatility, terrorism, war and political instability) and
events (including natural disasters) in one country, region or financial market
may
adversely impact issuers in a different country, region or financial
market.
Geographic
Concentration Risk
From
time to time, based on market or economic conditions, the Fund may invest a
significant portion of its assets in the securities of issuers located in, or
with
significant economic ties to, a single country or geographic region, which could
increase the risk that economic, political, business, regulatory, diplomatic,
social and environmental conditions in that particular country or geographic
region may have a significant impact on the Fund’s performance. Investing
in such a manner could cause the Fund’s performance to be more volatile
than the performance of more geographically diverse funds. The economies
and financial markets of certain countries or regions can be highly
interdependent. Therefore, a decline in the economies or financial markets of
one
country or region may adversely affect the economies or financial markets of
another.
■ |
African
Investment Risk. African
countries involve heightened risks of political instability, civil war,
armed conflict and warfare, social and
economic instability
as a result of religious, ethnic and/or socio-economic unrest
and, in some countries, genocidal warfare,
authoritarian and/or military involvement in
governmental decision-making, corruption, expropriation and/or
nationalization of assets, confiscatory taxation, arbitrary or
inconsistent government action,
inflation in local economies,
cancellation, nullification or unenforceability of contractual rights,
underdeveloped industrial and economic infrastructure
and other risks. The capital markets in many African countries do not
include the same safeguards as developed countries, and may be
subject
to higher volatility and counterparty risk, lower
market capitalization and trading volume, illiquidity, uncertainty
regarding the existence of trading markets,
fewer
brokerage firms, inconsistent regulation and trading
suspensions,
and governmental control and heavy regulation of labor and industry.
Because
certain countries in Africa generally have less developed capital markets
than other developing market countries, the risks of investing in
developing
market securities are magnified in such countries. There may also be a
high concentration of trading volume in a small number of issuers,
investors
and financial intermediaries, representing a limited number of sectors or
industries. There may be
less financial and other information publicly available
to investors, and the information that is provided may lack integrity. The
governments of certain countries may exercise substantial influence over
many
aspects of the private sector,
including ownership or control of companies.
They also may restrict or control foreign investment, limit repatriation
of investment
proceeds, limit
foreign investment to a certain class of securities of an issuer that may
have less advantageous rights than the classes available for
purchase by domestic investors of those countries, or
levy taxes on foreign investments, which may impact the returns or income
received from investments
in such countries. Many African countries are heavily dependent on
international trade and may be subject to trade barriers, embargoes,
exchange
controls, currency valuation adjustments and other protectionist measures.
They may also be subject to, or deal with countries subject to,
sanctions
and/or embargoes imposed by the U.S. government and the United Nations,
and/or countries identified as state sponsors of terrorism, which
could
further limit liquidity or cause reputational damage. The
securities markets in Africa are underdeveloped and are often considered
to be less correlated to global economic cycles than markets located in
more developed
economies, countries or geographic regions. Since a primary source of
revenue for these countries is the export of commodities such as
agricultural
products, gold, silver, copper, diamonds and oil, they are more vulnerable
to changes in commodity prices, interest rates, or factors affecting a
particular
commodity, including natural disasters and weather, embargoes, tariffs,
and international economic, political and regulatory developments. Africa
has
historically been prone to natural disasters, such as droughts, and is
economically sensitive to environmental events. In addition, disease
epidemics are more
likely to affect certain African countries. Political instability and
protests in North Africa have caused significant disruptions to many
industries. Political and
social unrest, including warfare and terrorist activities in African
countries, may negatively affect the value of an investment in the Fund.
The markets of African
countries should be considered extremely volatile even when compared with
those of other developing market countries.
|
Hedging
Risk
The Fund
may enter into hedging transactions with the intention of reducing or
controlling risk. It is possible that hedging strategies will not be effective
in controlling
risk, due to unexpected non-correlation (or even positive correlation) between
the hedging instrument and the position being hedged, increasing, rather
than reducing, both risk and losses. To the extent that the Fund enters
into hedging transactions, the hedges will not be static but rather will need to
be
continually adjusted based on a sub-advisor’s assessment of market
conditions, as well as the expected degree of non-correlation between the hedges
and the
portfolio being hedged. The success of the Fund’s hedging strategies will
depend on a sub-advisor’s ability to implement such strategies efficiently
and cost-effectively,
as well as on the accuracy of a sub-advisor’s judgments concerning the
hedging positions to be acquired by the Fund. A counterparty to a
hedging
transaction may be unable to honor its financial obligation to the Fund.
In addition, a sub-advisor may be unable to close the transaction at the
time it
would like or at the price it believes the security is currently worth. The Fund
may not, in general, attempt to hedge all market or other risks inherent in
the Fund’s
investments, and may hedge certain risks only partially, if at all. Certain
risks, either in respect of particular investments or in respect of
the Fund’s overall
portfolio, may not be hedged, particularly if doing so is economically
unattractive. As a result, various directional market risks may remain unhedged.
Gains
or losses from positions in hedging instruments may be much greater than the
instrument’s original cost. If the Fund uses a hedging instrument at the
20Prospectus
– Additional Information About the Fund
wrong
time or judges the market conditions incorrectly, or the hedged instrument does
not correlate to the risk sought to be hedged, the hedge might be unsuccessful.
The use of hedges may fail to mitigate risks, reduce the Fund’s return, or
create a loss. In addition, hedges, even when successful in mitigating
risk,
may not prevent the Fund from experiencing losses on its investments.
Hedging instruments may also reduce or eliminate gains that may otherwise have
been
available had the Fund not used the hedging instruments. When hedging is
combined with leverage, the Fund risks losses that are multiplied by the
degree
of leverage used.
High-Yield
Securities Risk
Exposure
to high-yield securities (commonly referred to as ‘’junk bonds’’) generally
involves significantly greater risks of loss of your money than an investment
in
investment-grade securities. Compared with issuers of investment grade
securities, issuers of high-yield securities are more likely to encounter
financial difficulties
and to be materially affected by these difficulties. High-yield debt securities
may fluctuate more widely in price and yield and may fall in price when
the
economy is weak or expected to become weak. These securities also may be
difficult to sell at the time and price the Fund desires. High-yield
securities are considered
to be speculative with respect to an issuer’s ability to pay interest and
principal and carry a greater risk that issuers of lower-rated securities will
default
on the timely payment of principal or interest. Rising interest rates may
compound these difficulties and reduce an issuer’s ability to repay principal
and interest
obligations. Issuers of lower-rated securities also have a greater risk of
default or bankruptcy. Issuers of securities that are in default or have
defaulted may
fail to resume principal or interest payments, in which case the Fund may
lose its entire investment. Below-investment-grade securities may experience
greater
price volatility and less liquidity than investment-grade
securities.
Lower-rated
securities are subject to certain risks that may not be present with investments
in higher-grade securities. The lower rating of certain high-yielding
corporate
income securities reflects a greater possibility that the financial condition of
the issuer or adverse changes in general economic conditions may impair
the ability of the issuer to pay income and principal. Changes by credit rating
agencies in their ratings of a fixed-income security also may affect the
value
of these investments. However, allocating investments among securities of
different issuers could reduce the risks of owning any such securities
separately.
The prices of these high-yield securities tend to be less sensitive to interest
rate changes than investment-grade investments, but more sensitive to
adverse
economic changes or individual corporate developments. During economic downturns
or periods of rising interest rates, highly leveraged issuers may experience
financial stress that adversely affects their ability to service principal and
interest payment obligations, to meet projected business goals or to
obtain
additional financing, and the markets for their securities may be more volatile.
If an issuer defaults, the Fund may incur additional expenses to seek
recovery.
Additionally, accruals of interest income for the Fund may have to be
adjusted in the event of default. In the event of an issuer’s default,
the Fund may
write off prior income accruals for that issuer, resulting in a reduction in
the Fund’s current dividend payment. Frequently, the higher yields of
high-yielding
securities may not reflect the value of the income stream that holders of such
securities may expect, but rather the risk that such securities may lose
a substantial portion of their value as a result of their issuer’s financial
restructuring or default.
The
credit rating of a security may not accurately reflect the actual credit risk
associated with such a security. The creditworthiness of issuers of these
securities may
be more complex to analyze than that of issuers of investment grade debt
securities, and the overreliance on credit ratings may present additional
risks.
Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of such securities, especially
in
a thinly traded or illiquid market. To the extent the Fund owns or may acquire
illiquid or restricted high-yield securities or unrated securities of comparable
quality,
these securities may involve special registration responsibilities, liabilities,
costs, and liquidity and valuation difficulties.
Inflation
Index-Linked Securities Risk
Unlike
a conventional bond, whose issuer makes regular fixed interest payments and
repays the face value of the bond at maturity, an inflation index-linked
security
provides principal payments and interest payments that vary as the principal
and/or interest are adjusted over time to reflect a rise or a drop in the
reference
inflation-related index. For inflation index-linked debt securities for which
repayment of the original principal upon maturity (as adjusted for inflation)
is not guaranteed, the adjusted principal value of the securities repaid at
maturity may be less than the original principal value. The value of inflation
index-linked
securities is expected to change in response to real interest rates. However,
there can be no assurance that the inflation index used will accurately
measure
the real rate of inflation. The price of an inflation index-linked security
generally falls when real interest rates rise and rises when real interest rates
fall.
In periods of deflation, the Fund may have no income at all from such
investments. Interest payments on such securities are unpredictable and will
fluctuate
as the principal and interest are adjusted to reflect movements in the
inflation-related index. Any increase in the principal amount of an inflation
index-linked
security will be taxable as ordinary income, even though the Fund will not
receive the increased principal until maturity.
Interest
Rate Risk
Investments
in fixed-income securities or
derivatives
that are influenced by interest rates are subject to interest rate risk.
Generally, the value of investments with
interest rate risk, such as fixed-income securities or
derivatives,
will move in the opposite direction as movements in interest rates. For
example, the value of
the Fund’s fixed-income investments or
derivatives
typically will fall when interest rates rise. Factors including central bank
monetary policy, rising inflation rates,
and changes in general economic conditions may cause interest rates to rise,
which could cause the value of the Fund’s investments to decline. Interest
rate
increases, including significant or rapid increases, may result in a decline in
the value of bonds or
derivatives held
by the Fund, lead to heightened volatility
in the fixed-income markets and adversely affect the liquidity of certain
fixed-income investments, any of which may result in substantial losses to the
Fund.
Interest
rate changes may have a more pronounced effect on the market value of fixed-rate
instruments than on floating-rate instruments. The value of floating
rate and variable securities may decline if their interest rates do not rise as
quickly, or as much, as general interest rates. The
prices of fixed-income securities
or
derivatives are
also affected by their durations. Fixed-income securities with longer durations
tend to be more sensitive to changes in interest rates,
usually making them more volatile than fixed-income securities with shorter
durations. Rising interest rates may cause the value of the Fund’s investments
in investments with longer durations and terms to maturity to decline, which may
adversely affect the value of the Fund. For example, if a bond has
a duration of four years, a 1% increase in interest rates could be expected to
result in a 4% decrease in the value of the bond. Yields of fixed-income
securities
will fluctuate over time. In
addition, decreases in fixed-income dealer market-making capacity may lead to
lower trading volume, heightened volatility,
wider bid-ask spreads, and less transparent pricing in certain fixed-income
markets.
The
Fund may not be able to hedge against changes in interest rates or may choose
not to do so for cost or other reasons. In addition, any hedges may not
work
as intended.
Investment
Risk
An
investment in the Fund is not a deposit with a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government
agency. The Fund should not be relied upon as a complete investment
program. The share price of the Fund fluctuates, which means that when
you
sell your shares of the Fund, they could be worth less than what you paid
for them. Therefore, you may lose money by investing in
the Fund.
Issuer
Risk
The
value of, and/or the return generated by, a security may decline for a number of
reasons that directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer’s goods or services, as
well as the historical and prospective earnings of the issuer and the
Prospectus
– Additional Information About the Fund21
value
of its assets. When the issuer of a security implements strategic initiatives,
including mergers, acquisitions and dispositions, there is the risk that the
market
response to such initiatives will cause the share price of the issuer’s
securities to fall. An individual security may be more volatile, and may perform
differently,
than the market as a whole.
Leverage
Risk
The
Fund’s use of derivative instruments may have the economic effect of financial
leverage. Financial leverage magnifies the exposure to the movement in
prices
of an asset or class of assets underlying a derivative instrument and may result
in increased volatility, which means that the Fund will have the potential
for
greater losses than if the Fund does not use the derivative instruments that
have a leveraging effect. Leverage may result in losses that exceed the amount
originally
invested and may accelerate the rate of losses. Leverage tends to magnify,
sometimes significantly, the effect of any increase or decrease in the
Fund’s
exposure to an asset or class of assets and may cause the Fund’s NAV per share
to be volatile. The use of leverage may cause the Fund to liquidate portfolio
positions when it may not be advantageous to do so to satisfy its obligations or
to meet any required asset segregation requirements. In addition, the
costs that the Fund pays to engage in these practices are additional costs borne
by the Fund and could reduce or eliminate any net investment profits.
There
can be no assurance that the Fund’s use of leverage will be
successful.
The
Fund may experience leverage risk in connection with investments in derivatives
because its investments in derivatives may be purchased with a fraction of the
assets that would be needed to purchase the securities directly, so that
the remainder of the assets may be invested in other investments. Such
investments may have the effect of leveraging the Fund because the Fund may
experience
gains or losses not only on its investments in derivatives, but also on the
investments purchased with the remainder of the assets. If the value of
the
Fund’s investments in derivatives is increasing, this could be offset by
declining values of the Fund’s other investments. Conversely, it is possible
that the rise
in the value of the Fund’s non-derivative investments could be offset by a
decline in the value of the Fund’s investments in derivatives. In either
scenario, the
Fund may experience losses. In a market where the value of the Fund’s
investments in derivatives is declining and the value of its other investments
is declining,
the Fund may experience substantial losses.
Liquidity
Risk
The Fund
is susceptible to the risk that certain investments held by the Fund may have
limited marketability, be subject to restrictions on sale, be difficult or
impossible
to purchase or sell at favorable times or prices or become less liquid in
response to market developments or adverse credit events that may affect
issuers
or guarantors of a security. Market prices for such instruments may be volatile.
During periods of substantial market volatility, an investment or even
an
entire market segment may become illiquid, sometimes abruptly, which can
adversely affect the Fund’s ability to limit losses. When there is little or no
active
trading market for specific types of securities, it can become more difficult to
purchase or sell the securities at or near their perceived value. As a result,
the
Fund may have to lower the price on certain securities that it is trying to
sell, sell other securities instead or forgo an investment opportunity, any of
which could
have a negative effect on Fund management or performance. An inability to sell a
portfolio position can adversely affect the Fund’s NAV or prevent the
Fund
from being able to take advantage of other investment opportunities. The Fund
could lose money if it is unable to dispose of an investment at a time
that
is most beneficial to the Fund. Unexpected
redemptions or redemptions by a few large investors in the Fund may force the
Fund to sell certain investments
at unfavorable prices to meet redemption requests or other cash needs and may
have a significant adverse effect on the Fund’s NAV per share and
remaining Fund shareholders. This could negatively affect the Fund’s ability to
buy or sell debt securities and increase the related volatility and trading
costs.
The Fund may lose money if it is forced to sell certain investments at
unfavorable prices to meet redemption requests or other cash needs. For
example, liquidity
risk may be magnified in rising interest rate environments in the event of
higher
than
normal redemption rates.
Judgment plays a greater role in pricing
illiquid investments than in investments with more active markets.
Market
Risk
The Fund
is subject to the risk that the securities markets will move down, sometimes
rapidly and unpredictably, based on overall economic conditions and other
factors, which may negatively affect the Fund’s performance. Equity securities
generally have greater price volatility than fixed-income securities,
although
under certain market conditions fixed-income securities may have comparable or
greater price volatility. During a general downturn in the securities
markets,
multiple asset classes may decline in value simultaneously. In some cases,
traditional market participants have been less willing to make a market in
some
types of debt instruments, which has affected the liquidity of those
instruments. During times of market turmoil, investors tend to look to the
safety of securities
issued or backed by the U.S. Treasury, causing the prices of these securities to
rise and the yields to decline. Reduced liquidity in fixed-income and
credit
markets may negatively affect many issuers worldwide. Prices in many financial
markets have increased significantly over the last decade, but there have
also
been periods of adverse market and financial developments and cyclical change
during that timeframe, which have resulted in unusually high levels of
volatility
in domestic and foreign financial markets that has caused losses for investors
and may occur again in the future, particularly if markets enter a period
of
uncertainty or economic weakness. Periods of unusually high volatility in the
financial markets and restrictive credit conditions, sometimes limited to a
particular
sector or geographic region, continue to recur. The value of a security may
decline due to adverse issuer-specific conditions or general market conditions
unrelated to a particular issuer, such as real or perceived adverse
geopolitical, regulatory, market, economic or other developments that may cause
broad
changes in market value, changes in the general outlook for corporate earnings,
changes in interest, currency or inflation rates, lack of liquidity in the
markets,
public perceptions concerning these developments or adverse market sentiment
generally. The value of a security may also decline due to factors that
affect a particular industry or industries, such as tariffs, labor shortages or
increased production costs and competitive conditions within an industry.
Changes
in the financial condition of a single issuer or market segment also can impact
the market as a whole.
Geopolitical
and other events, including war, terrorism, economic uncertainty, trade
disputes, pandemics, public health crises, natural disasters and related
events
have led, and in the future may continue to lead, to instability in world
economies and markets generally and reduced liquidity, which may adversely
affect
the value of your investment. Such market disruptions have caused, and may
continue to cause, broad changes in market value, negative public perceptions
concerning these developments, a reduction in the willingness and ability of
some lenders to extend credit, difficulties for some borrowers in obtaining
financing on attractive terms, if at all, and adverse investor sentiment or
publicity. Changes in value may be temporary or may last for extended
periods.
Adverse market events may also lead to increased shareholder redemptions, which
could cause the Fund to sell investments at an inopportune time to
meet redemption requests by shareholders and may increase the Fund’s portfolio
turnover, which could increase the costs that the Fund incurs and lower
the
Fund’s performance. Even when securities markets perform well, there is no
assurance that the investments held by the Fund will increase in value along
with
the broader market.
Policy
changes by the U.S. government and/or Federal Reserve and political events
within the U.S. and abroad, such as changes in the U.S. presidential
administration
and Congress, the U.S. government’s inability at times to agree on a long-term
budget and deficit reduction plan, the threat or
occurrence of
a federal
government shutdown and threats or
the occurrence of a failure
to increase the federal government’s debt limit,
which could result in a default on the government’s
obligations, may affect investor and consumer confidence and may adversely
impact financial markets and the broader economy, perhaps suddenly
and to a significant degree. The severity or duration of adverse economic
conditions may also be affected by policy changes made by governments
or
quasi-governmental organizations. Global economies and financial markets are
becoming increasingly interconnected, which increases the possibility of
many
markets being affected by events in a single country or events affecting a
single or small number of issuers.
22Prospectus
– Additional Information About the Fund
Markets
and market participants are increasingly reliant upon both publicly available
and proprietary information data systems. Data imprecision, software or
other
technology malfunctions, programming inaccuracies, unauthorized use or access,
and similar circumstances may impair the performance of these systems
and may have an adverse impact upon a single issuer, a group of issuers, or the
market at large. In certain cases, an exchange or market may close or
issue
trading halts on either specific securities or even the entire market, which may
result in the Fund being, among other things, unable to buy or sell certain
securities
or financial instruments or accurately price its investments. These fluctuations
in securities prices could be a sustained trend or a drastic movement.
The
financial markets generally move in cycles, with periods of rising prices
followed by periods of declining prices. The value of your investment may
reflect these
fluctuations.
■ |
Recent
Market Events Risk.
Both U.S. and international markets have experienced significant
volatility in recent months and years. As a result of such volatility,
investment returns may fluctuate significantly. Moreover, the risks
discussed herein associated with an investment in the Fund may be
increased. Deteriorating
economic fundamentals may increase the risk of default or insolvency of
particular issuers, negatively impact market value, increase market
volatility,
cause credit spreads to widen, reduce bank balance sheets and cause
unexpected changes in interest rates. Any of these could cause an increase
in
market volatility, reduce liquidity across various sectors or markets or
decrease confidence in the markets. Historical patterns of correlation
among asset classes
may break down in unanticipated ways during times of high volatility,
disrupting investment programs and potentially causing
losses. |
|
Although
interest rates were unusually low in recent years in the U.S. and
abroad, in 2022, the U.S. Federal Reserve and certain foreign central
banks began to
raise interest rates as part of their efforts to address rising inflation.
In addition, ongoing inflation pressures could continue to cause an
increase in interest
rates and/or negatively impact issuers. It is difficult to accurately
predict the pace at which interest rates might increase or start
decreasing, the timing,
frequency or magnitude of any such changes in interest rates, or when such
changes might stop or reverse course. Additionally, various economic
and
political factors, such as rising inflation rates, could cause the Federal
Reserve or other foreign banks to change their approach in the future as
such actions
may result in an economic slowdown both in the U.S. and abroad. Unexpected
changes in interest rates could lead to significant market volatility or
reduce
liquidity in certain sectors of the market. Also, regulators have
expressed concern that rate increases may cause investors to sell fixed
income securities
faster than the market can absorb them, contributing to price volatility.
Over the longer term, rising interest rates may present a greater risk
than has
historically been the case due to the prior period of relatively low rates
and the effect of government fiscal and monetary policy initiatives and
potential market
reaction to those initiatives, or their alteration or cessation. It is
difficult to predict the impact on various markets of significant rate
increases or other
significant policy changes. |
|
In
March 2023, the shutdown of certain financial institutions in
the U.S. and questions regarding the viability of other financial
institutions raised economic concerns
over disruption in the U.S. and global banking systems. There can be no
certainty that the actions taken by the U.S. or foreign governments will
be
effective in mitigating the effects of financial institution failures on
the economy and restoring public confidence in the U.S. and global banking
systems. |
|
Some
countries, including the U.S., have in recent years adopted more
protectionist trade policies. Slowing global economic growth; the rise in
protectionist trade
policies; changes to international trade agreements; risks associated with
the trade agreement between the United Kingdom and the European Union
and
the risks associated with ongoing trade negotiations with China; political
or economic dysfunction within some nations, including major producers of
oil;
and dramatic changes in commodity and currency prices could have adverse
effects that cannot be foreseen at the present time. Tensions, war
or open conflict
between nations, such as between Russia and Ukraine, in the Middle East or
in eastern Asia could affect the economies of many nations, including
the
United States. The duration of ongoing hostilities and any sanctions and
related events cannot be predicted. Those events present material
uncertainty and
risk with respect to markets globally and the performance of the Fund and
its investments or operations could be negatively
impacted. |
|
Regulators
in the U.S. have proposed and recently adopted a number of changes to
regulations involving the markets and issuers, some of which apply to
the
Fund. The full effect of various newly-adopted regulations is not
currently known. Additionally, it is not clear whether the proposed
regulations will be adopted.
However, due to the broad scope of the new and proposed regulations,
certain changes could limit the Fund’s ability to pursue its investment
strategies
or make certain investments, or may make it more costly for the Fund to
operate, which may impact performance. Further, advancements in
technology
may also adversely impact market movements and liquidity and may affect
the overall performance of the Fund. For example, the advanced
development
and increased regulation of artificial intelligence may impact the economy
and the performance of the Fund. As artificial intelligence is used
more
widely, the value of the Fund’s holdings may be impacted, which could
impact the overall performance of the
Fund. |
|
High
public debt in the U.S. and other countries creates ongoing systemic and
market risks and policymaking uncertainty. There is no assurance that the
U.S.
Congress will act to raise the nation’s debt ceiling; a failure to do so
could cause market turmoil and substantial investment risks that cannot
now be fully
predicted. Unexpected political, regulatory and diplomatic events within
the U.S. and abroad may affect investor and consumer confidence and may
adversely
impact financial markets and the broader
economy. |
|
Certain
illnesses spread rapidly and have the potential to significantly and
adversely affect the global economy. The impact of epidemics and/or
pandemics that
may arise in the future could negatively affect the economies of many
nations, individual companies and the global securities and commodities
markets,
including their liquidity, in ways that cannot necessarily be foreseen at
the present time and could last for an extended period of time. China’s
economy,
which has been sustained through debt-financed spending on housing and
infrastructure, appears to be experiencing a significant slowdown and
growing
at a lower rate than prior years. Due to the size of China’s economy, such
a slowdown could impact financial markets and the broader economy.
|
|
Economists
and others have expressed increasing concern about the potential effects
of global climate change on property and security values. Impacts
from
climate change may include significant risks to global financial assets
and economic growth. A rise in sea levels, an increase in powerful
windstorms and/or
a climate-driven increase in sea levels or flooding could cause coastal
properties to lose value or become unmarketable altogether. Certain
issuers, industries
and regions may be adversely affected by the impacts of climate change,
including on the demand for and the development of goods and services
and related production costs, and the impacts of legislation, regulation
and international accords related to climate change, as well as any
indirect consequences
of regulation or business trends driven by climate change. Regulatory
changes and divestment movements tied to concerns about climate
change
could adversely affect the value of certain land and the viability of
industries whose activities or products are seen as accelerating climate
change. Losses
related to climate change could adversely affect, among others, corporate
issuers and mortgage lenders, the value of mortgage-backed securities,
the
bonds of municipalities that depend on tax or other revenues and tourist
dollars generated by affected properties, and insurers of the property
and/or of corporate,
municipal or mortgage-backed securities. |
Market
Timing
Risk
The
Fund is subject to the risk of market timing activities by investors due to the
nature of its investments, which requires the Fund in certain instances to fair
value
certain of its investments. Some investors may engage in frequent short-term
trading in the Fund to take advantage of any price differentials that may
be
reflected in the NAV of the Fund’s shares. Frequent trading by Fund shareholders
poses risks to other shareholders in the Fund, including (i) the dilution of
the
Fund’s NAV, (ii) an increase in the Fund’s expenses, and (iii) interference with
the ability to execute efficient investment strategies. While the Manager
monitors
trading in the Fund, there is no guarantee that it can detect all market timing
activities.
Multiple
Sub-Advisor Risk
The
Manager may allocate the Fund’s assets among multiple sub-advisors, each of
which is responsible for investing its allocated portion of the Fund’s assets.
To
a significant extent, the Fund’s performance will depend on the success of the
Manager in selecting and overseeing the sub-advisors and allocating the
Prospectus
– Additional Information About the Fund23
Fund’s
assets to sub-advisors. The sub-advisors’ investment styles may not work
together as planned, which could adversely affect the performance of the
Fund.
Because each sub-advisor manages its allocated portion of the Fund independently
from another sub-advisor, the same security may be held in different
portions
of the Fund, or may be acquired for one portion of the Fund at a time when a
sub-advisor to another portion deems it appropriate to dispose of the
security
from that other portion, resulting in higher expenses without accomplishing any
net result in the Fund’s holdings. Similarly, under certain market conditions,
one sub-advisor may believe that temporary, defensive investments in short-term
instruments or cash are appropriate when another sub-advisor believes
continued exposure to the equity or debt markets is appropriate for its
allocated portion of the Fund. Because each sub-advisor directs the trading for
its
own portion of the Fund, and does not aggregate its transactions with those of
the other sub-advisors, the Fund may incur higher brokerage costs than
would
be the case if a single sub-advisor were managing the entire Fund. In addition,
while the Manager seeks to allocate the Fund’s assets among the Fund’s
sub-advisors
in a manner that it believes is consistent with achieving the Fund’s investment
objective(s), the Manager may be subject to potential conflicts of interest
in allocating the Fund’s assets among sub-advisors, due to factors that could
impact the Manager’s revenues and profits.
Municipal
Securities Risk
The
value of municipal securities, and the ability of a municipal issuer to make
payments, can be affected by uncertainties in the municipal securities market,
including:
litigation; the strength of the local or national economy; the issuer’s ability
to raise revenues through tax or other means; budgetary constraints of
local,
state and federal governments upon which the issuer may be relying for funding;
a legislature’s willingness or ability to appropriate funds needed to pay
municipal
securities obligations; the bankruptcy of the issuer; adverse political and
legislative changes, including to eliminate or limit the tax-exempt status of
municipal
bond interest or dividends; and other changes in the financial condition of a
municipality.
Municipal
securities and their issuers may be more susceptible to downgrade, default and
bankruptcy as a result of economic stress. Factors contributing to the
economic stress on municipalities may include lower property tax collections as
a result of lower home values, lower sales tax revenue as a result of
consumers
cutting back spending, and lower income tax revenue as a result of a higher
unemployment rate. In addition, since some municipal obligations may
be secured or guaranteed by banks and other institutions, the risk to the Fund
could increase if the banking or financial sector suffers an economic
downturn
and/or if the credit ratings of the institutions issuing the guarantee are
downgraded or at risk of being downgraded by a national rating organization.
If such events were to occur, the value of the security could decrease or the
value could be lost entirely, and it may be difficult or impossible for
the
Fund to sell the security at the time and the price that normally prevails in
the market. At
times, municipal issuers have defaulted on obligations or commenced
insolvency proceedings. Financial difficulties of municipal issuers may continue
or get worse in the future. Reductions in tax rates may make municipal
securities less attractive in comparison to taxable bonds. Some obligations may
be difficult to trade or interest payments may be tied only to a specific
stream of revenue. In
addition, the Fund’s investments in municipal securities are subject to the
following risks:
■ |
General
Obligation Bonds
Risk.
A general obligation bond is secured by the full faith, credit and taxing
power of the issuing municipality, not revenues from a
specific project or source. Consequently, timely payments depend on the
issuer’s credit quality, ability to raise tax revenues and ability to
maintain an adequate
tax base. The taxing power of a municipality may be limited by provisions
of constitutions or laws and a municipality’s credit will depend on many
factors.
A municipality in which the Fund invests may experience significant
financial difficulties, including bankruptcy or default, which may
negatively impact
the Fund. |
Other
Investment Companies Risk
To
the extent that the Fund invests in shares of other registered investment
companies, the Fund will indirectly bear the fees and expenses, including,
for example,
advisory and administrative fees, charged by those investment companies in
addition to the Fund’s direct fees and expenses. If the Fund invests in
other
investment companies, the Fund may receive distributions of taxable gains from
portfolio transactions by that investment company and may recognize taxable
gains from transactions in shares of that investment company, which could be
taxable to the Fund’s shareholders when distributed to them. The Fund
must
rely on the investment company in which it invests to achieve its investment
objective. If the investment company fails to achieve its investment
objective,
the value of the Fund’s investment may decline, adversely affecting
the Fund’s performance. To the extent the Fund invests in other
investment companies
that invest in equity securities, fixed-income securities and/or foreign
securities, or that track an index, the Fund is subject to the risks
associated with
the underlying investments held by the investment company or the index
fluctuations to which the investment company is subject. The Fund will be
subject
to the risks associated with investments in those companies, including but not
limited to the following:
■ |
Government
Money Market Funds Risk.
Investments in government money market funds are subject to interest rate
risk, credit risk, and market risk. The SEC
has proposed rule amendments that, if adopted, among other changes, may
require government money market fund to convert to a floating net asset
value
per share in a negative interest rate
environment. |
Redemption
Risk
The Fund
may experience periods of heavy redemptions that could cause the Fund to sell
assets at inopportune times or at a loss or a depressed value. Heavy
redemptions,
whether by a few large investors or many smaller investors, could hurt the
Fund’s performance. Redemption risk is greater to the extent that one
or
more investors or intermediaries control a large percentage of investments in
the Fund, have short investment horizons, or have unpredictable cash flow
needs.
The risk of loss is also greater if redemption requests are frequent, occur in
times of overall market turmoil or declining prices for the securities sold, or
when
the securities the Fund wishes to sell are illiquid. The
ability or willingness of dealers and other institutional investors to buy or
hold fixed-income securities
or otherwise to “make a market” in debt securities may also be reduced. These
factors, along with an inability to find a ready buyer, or legal restrictions
on a security’s resale, may result in decreased liquidity and increased
volatility in the fixed-income markets, and heightened redemption
risk.
Certain
securities that were liquid when purchased may later become illiquid,
particularly in times of overall economic distress. Redemption
risk is heightened if
the Fund invests in developing market securities, which are generally less
liquid than the securities of U.S. and other developed markets.
During periods of heavy
redemptions, the Fund may borrow funds through the interfund credit facility, or
from a bank line of credit, which may increase costs. The sale of assets
to
meet redemption requests may create net capital gains or losses, which could
cause the Fund to have to distribute substantial capital gains.
Restricted
Securities Risk
Securities
not registered in the U.S. under the Securities Act of 1933, as amended (the
“Securities Act”), or in non-U.S. markets pursuant to similar regulations,
including “Section 4(a)(2)” securities and “Rule 144A” securities, are
restricted as to their resale. Such securities may not be listed on an
exchange
and may have no active trading market. The prices of these securities may be
more difficult to determine than publicly traded securities and these
securities
may involve heightened risk as compared to investments in securities of publicly
traded companies. They may be more difficult to purchase or sell at an
advantageous time or price because such securities may not be readily marketable
in broad public markets, or may have to be held for a certain time period
before they can be resold. The Fund may not be able to sell a restricted
security when a sub-advisor considers it desirable to do so and/or may have to
sell
the security at a lower price than the Fund believes is its fair market value. A
restricted security that was liquid at the time of purchase may subsequently
become
illiquid. In addition, transaction costs may be higher for restricted securities
and the Fund may receive only limited information regarding the issuer of
a
restricted security. The Fund may have to bear the expense of registering
restricted securities for resale and the risk of substantial delays in effecting
the registration.
If, during such a delay, adverse market conditions were to develop, the Fund
might obtain a less favorable price than prevailed at the time it decided
to seek registration of the security.
24Prospectus
– Additional Information About the Fund
Securities
Selection Risk
Securities
selected for the Fund may decline substantially in value or may not perform to
expectations. Judgments about the attractiveness, value and anticipated
price movements of a security or asset class may be incorrect, and there is no
guarantee that securities will perform as anticipated. The
value of a security
can be more or less volatile than the market as a whole, and the Fund’s
strategy may fail to produce the intended results.
It
may not be possible to predict,
or to hedge against, a widening in the yield spread of the securities selected
for the Fund.
This could result in the Fund’s underperformance compared to
other funds with similar investment objectives.
Segregated
Assets Risk
In
connection with certain transactions that may give rise to future payment
obligations, the
Fund
may be required to maintain a segregated amount of, or otherwise
earmark, cash or liquid securities to cover the position. Segregated or
earmarked securities generally
cannot
be sold while the position or transaction
they are covering is outstanding, unless they are replaced with other securities
of equal value. There is the possibility that the segregation or earmarking
of a large percentage of the Fund’s
assets may, in some circumstances, limit the Fund’s
ability to take advantage of investment opportunities or meet
redemption requests. In addition, the need to segregate cash or other liquid
securities could limit the Fund’s
ability to pursue other opportunities as they arise.
Sovereign
and Quasi Sovereign Debt Risk
An
investment in sovereign and quasi-sovereign debt obligations involves special
risks not present in corporate debt obligations. Sovereign and quasi-sovereign
debt securities are issued or guaranteed by a sovereign government or entity
affiliated with or backed by a sovereign government. The issuer of
the sovereign or quasi-sovereign debt that controls the repayment of the debt
may be unable or unwilling to repay principal or interest when due, and
the Fund
may have limited recourse in the event of a default. In addition, these
investments are subject to risk of payment delays or defaults due to, among
other
things: (1) country cash flow problems, (2) insufficient foreign currency
reserves, (3) political considerations, (4) large debt positions relative to the
country’s
economy, (5) policies toward foreign lenders or investors, (6) the failure to
implement economic reforms required by the International Monetary Fund
or other multilateral agencies, or (7) an inability or unwillingness to repay
debts. It may be particularly difficult to enforce the rights of debt holders in
developing
markets. A governmental entity that defaults on an obligation may request
additional time in which to repay loans, may request to receive further
loans,
or may seek to restructure its obligations to reduce interest rates or
outstanding principal. There is no legal process for collecting sovereign and
quasi-sovereign
debt that a government does not pay nor are there bankruptcy proceedings through
which all or part of the sovereign debt that a governmental
entity has not repaid may be collected. Sovereign and quasi-sovereign debt risk
is increased for developing markets issuers, which are among the
largest debtors to commercial banks and foreign governments. At times, certain
developing market countries have declared moratoria on the payment of
principal
and interest on external debt. Certain developing market countries have
experienced difficulty in servicing their sovereign debt on a timely basis,
which
has led to defaults and the restructuring of certain indebtedness.
Supranational
Risk
Supranational
organizations are entities designated or supported by a government or
governmental group to promote economic development. Supranational organizations
have no taxing authority and are dependent on their members for payments of
interest and principal. There is no guarantee that the members will
continue to make capital contributions. If such contributions are not made, the
entity may be unable to pay interest or repay principal on its debt securities.
Political changes in principal donor nations may also unexpectedly disrupt the
finances of supranational entities. Further, the lending activities of
such
entities are limited to a percentage of their total capital, reserves and net
income. Obligations of supranational entities are subject to the risk that the
governments
on whose support the entity depends for its financial backing or repayment may
be unable or unwilling to provide that support. Obligations of a supranational
entity that are denominated in foreign currencies will also be subject to the
risks associated with investments in foreign currencies, as described
above
in the section entitled “Currency Risk.”
Unrated
Securities Risk
Because
the Fund may purchase securities that are not rated by any rating
organization, a sub-advisor, after assessing their credit quality, may
internally assign ratings
to certain of those securities, in categories of those similar to those of
rating organizations. Investing in unrated securities involves the risk that
a sub-advisor
may not accurately evaluate the security’s comparative credit rating. To the
extent that the Fund invests in unrated securities, the Fund’s
success in
achieving its investment objectives may depend more heavily on
a sub-advisor’s credit analysis than if the Fund invested
exclusively in rated securities. Less public
information is typically available about unrated securities or issuers. Some
unrated securities may not have an active trading market or may be difficult
to
value, which means the Fund might have difficulty selling them promptly at
an acceptable price. Unrated securities may also be subject to greater liquidity
risk
and price volatility.
Valuation
Risk
This
is the risk that a security may be valued at a price different from the price at
which it can be sold. This risk may be especially pronounced for investments
that
may be illiquid or may become illiquid and for securities that trade in
relatively thin markets and/or markets that experience extreme volatility. The
valuation
of the Fund’s investments in an accurate and timely manner may be impacted by
technological issues and/or errors by third party service providers,
such
as pricing services or accounting agents. If market conditions make it difficult
to value certain investments, SEC rules and applicable accounting protocols
may
require the valuation of these investments using more subjective methods, such
as fair-value methodologies. Using fair value methodologies to price
investments
may result in a value that is different from an investment’s most recent closing
price and from the prices used by others for the same investment. Investors
who purchase or redeem Fund shares on days when the Fund is holding fair-valued
securities may receive fewer or more shares, or lower or higher redemption
proceeds, than they would have received if the securities had not been fair
valued or a different valuation methodology had been used. The value
of
foreign securities, certain fixed-income securities and currencies, as
applicable, may be materially affected by events after the close of the markets
on which they
are traded, but before the Fund determines its NAV.
Variable
and Floating Rate Securities Risk
The
coupons on variable and floating rate securities in which the Fund may invest
are not fixed and may fluctuate based upon changes in market rates. Variable
and floating rate securities are subject to interest rate risk and may fluctuate
in value in response to interest rate changes if there is a delay between
changes
in market interest rates and the interest reset date for the obligation, or for
other reasons. As short-term interest rates decline, the coupons on variable
and floating rate securities typically decrease. Alternatively, during periods
of rising short-term interest rates, the coupons on variable and floating
rate
securities typically increase. Changes in the coupons of variable and floating
rate securities may lag behind changes in market rates or may have limits on
the
maximum increases in the coupon rates. The value of variable and floating rate
securities may decline if their coupons do not rise as much, or as quickly,
as
interest rates in general. Conversely, variable and floating rate securities
will not generally increase in value if interest rates decline. Thus, investing
in variable
and floating rate instruments generally allows less opportunity for capital
appreciation and depreciation than investing in instruments with a fixed
interest
rate. Variable and floating rate securities are less effective than fixed rate
securities at locking in a particular yield and may be subject to credit risk.
Certain
types of floating rate instruments may also be subject to greater liquidity risk
than other debt securities.
Prospectus
– Additional Information About the Fund25
Additional
Information About Performance Index
The
total return of the Fund is compared to the JPMorgan® EMBI (“JPM EMBI”) Global
Diversified Index. The JPM EMBI Global Diversified Index is a benchmark
that tracks dollar denominated bonds issued by developing market governments,
which includes those issued by emerging and frontier market countries.
The JPM EMBI universe consists of emerging and frontier market countries in
Asia-Pacific region, Central or Eastern Europe, the Middle East, Central
or
South America, Caribbean and Africa. Investors should be aware that the Fund may
invest in numerous countries that are not presently included in the JPM
EMBI
Global Diversified Index and that the Fund is not required to invest in all
countries included in the JPM EMBI.
Fund
Management
The
Manager
AMERICAN
BEACON ADVISORS, INC. (the “Manager”)
serves as the Manager and administrator of the Fund. The Manager, located at 220
East Las Colinas
Boulevard, Suite 1200, Irving, Texas 75039, is an indirect wholly-owned
subsidiary of
Resolute Topco,
Inc. (“Topco”),
which is owned primarily by various
institutional investment funds that are managed by financial institutions and
other investment advisory firms. No owner of Topco owns 25% or more of
the outstanding equity or voting interests of Topco.
The
Manager was organized in 1986 to provide investment management, advisory, and
administrative services. The Manager is registered as an investment adviser
under the Advisers Act. The Manager, on behalf of the Fund, has filed a notice
claiming the CFTC Regulation 4.5 exclusion from registration as a CPO
under
the Commodity Exchange Act, and the Manager is also exempt from registration as
a commodity trading advisor under CFTC Regulation 4.14(a)(8) with respect
to the Fund.
For
the fiscal year ended January 31, 2024,
the Fund paid aggregate management fees to the Manager and investment advisory
fees to its sub-advisors of 0.85%
of the Fund’s average daily net assets, net of any waivers and recoupments of
the management and sub-advisory fees.
As
compensation for services provided by the Manager in connection with securities
lending activities conducted by the Fund, the lending Fund pays to the
Manager,
with respect to cash collateral posted by borrowers, a fee of 10% of the net
monthly investment
income (the income
earned in the form of interest, dividends
and realized capital gains from
the investment of cash collateral, plus
any negative rebate fees paid by borrowers, less the rebate
amount paid to borrowers
as
well as
related expenses) and,
with respect to collateral
other than cash, a fee up to 10% of loan
fees
and demand premiums paid by borrowers.
The
SEC has granted exemptive relief that permits the Fund to invest cash collateral
received from securities lending transactions in shares of one or more
private
or registered investment companies managed by the Manager.
As
of the date of this Prospectus, the Fund does not intend to engage in securities
lending activities.
A
discussion of the Board’s consideration and approval of the current
Management
Agreement between the Fund and the Manager and the current
Investment
Advisory Agreement
among the Trust, on behalf of the Fund, abrdn
Investments Limited
and the Manager is available in the Fund’s Semi-Annual Shareholder
Report for the period ended July 31, 2023.
That report also includes a discussion of the Board’s consideration and approval
of the renewal of the prior
Management Agreement and prior Investment Advisory Agreements previously in
effect for the Funds. A discussion of the Board’s consideration and approval
of the current Investment Advisory Agreement among the Trust, on behalf of the
Fund, Global Evolution USA, LLC and the Manager is available in the
Fund’s Annual Shareholder Report for the period ended January 31,
2024.
From
time to time, the Manager may contractually agree to waive fees and/or reimburse
expenses of the Fund to the extent that Total Annual Fund Operating Expenses
exceed a percentage of a class’s
average daily net assets (excluding taxes, interest, brokerage commissions,
acquired fund fees and expenses, securities
lending fees, expenses associated with securities sold short, litigation, and
other extraordinary expenses). When the Manager enters into a fee waiver/expense
reimbursement agreement with the Fund, the Manager will itself waive fees
and/or reimburse expenses of the Fund to maintain the contractual
expense ratio caps for each applicable class of shares or make arrangements with
other service providers to do so. The Manager may also, from time
to time, voluntarily waive fees and/or reimburse expenses of the Fund. The Board
has approved a policy whereby the Manager may seek repayment for any
contractual or voluntary fee waivers or expense reimbursements if reimbursement
to the Manager (a) occurs within three years from the date of the Manager’s
waiver/reimbursement and (b) does not cause the Total Annual Fund Operating
Expenses of a class to exceed the lesser of the contractual percentage
limit in effect at the time of the waiver/reimbursement or the time of
recoupment.
The
American Beacon team members discussed below are jointly and primarily
responsible for the day-to-day management oversight of the sub-advisors,
including
reviewing the sub-advisors’ performance, allocating the Fund’s assets among the
sub-advisors, and investing the portion of Fund assets that the sub-advisors
determine should be allocated to short-term investments.
Paul
B. Cavazos,
Senior Vice President and Chief Investment Officer and became a member of the
portfolio management team upon joining the Manager in 2016.
Prior to joining the Manager, Mr. Cavazos was Chief Investment Officer and
Assistant Treasurer of DTE Energy from 2007 to 2016.
Colin
J. Hamer,
Portfolio Manager, has served on the portfolio management team since 2018. Mr.
Hamer has served on the asset management team since January
2015, is a CFA® charterholder, and has earned the CAIA designation. Prior to
joining the Manager, Mr. Hamer worked at Fidelity Investments in various
investment-related roles from 2008 to 2014.
Patrick
Sporl,
Senior Portfolio Manager, has served on the Manager’s portfolio management team
since 2016. He was previously a Senior Portfolio Manager in
the Fixed Income group at the Manager from 1996 to 2016. Mr. Sporl is an
inactive Certified Public Accountant, a CFA charterholder and a member of the
CFA
Institute and the CFA Society of Dallas/Fort Worth.
Mr.
Cavazos is responsible for recommending sub-advisors to the Fund’s Board of
Trustees. Messrs. Sporl, and Hamer oversee the sub-advisors, review the
sub-advisors’
performance and allocate the Fund’s assets among the sub-advisors, as
applicable.
The
Fund’s SAI provides additional information about the members of the portfolio
management team, including other accounts they manage, their ownership
in the Funds they manage and their compensation.
The
Sub-Advisors
Set
forth below is a brief description of each sub-advisor and the portfolio
managers with joint and primary responsibility for the day-to-day management of
the
Fund. The Fund’s SAI provides additional information about the portfolio
managers, including other accounts they manage, their ownership in the Fund
and
their compensation.
abrdn
Investments Limited (“aIL”),
10 Queen’s Terrace, Aberdeen, Scotland AB10 1YG, is a U.S. registered investment
adviser. aIL
is a direct wholly-owned subsidiary
of abrdn (Holdings) Limited, which has its registered offices at 1 George
Street, Edinburgh, Scotland EH2 2LL. abrdn (Holdings) Limited is a direct
wholly-owned
subsidiary of abrdn plc (“abrdn”), a London stock exchange listed company. abrdn
and its affiliates manage approximately $467
billion in
26Prospectus
– Fund Management
assets
as of December 31, 2023.
abrdn and its affiliates provide asset management and investment solutions for
clients and customers worldwide. Prior to November
25, 2022, abrdn Investments Limited was known as Aberdeen Asset Managers
Limited.
Brett
Diment
– Head of Global Emerging Market Debt: London School of Economics, BSc. Mr.
Diment joined abrdn via the acquisition of Deutsche Asset Management’s
London and Philadelphia fixed income business in 2005. Mr. Diment held the same
role at Deutsche since 1999. Mr. Diment joined Deutsche in 1991
as a graduate and started researching emerging markets in 1995.
Kevin
Daly
– Investment Director, Emerging Market Debt: BA English Lit. UCLA. Mr. Daly
joined the emerging market debt team at abrdn in April 2007 as a portfolio
manager, having spent the previous 10 years at Standard & Poor’s in London
and Singapore as a credit market analyst covering global emerging market
debt, and was head of marketing for Global Sovereign Ratings. Mr. Daly was a
regular participant on the Global Sovereign Committee, served as a member
of the Sovereign Ratings Review Board, and was one of the initial members of the
Emerging Market Council, formed in 2006 to advise senior management
on business and market developments in emerging markets.
Edwin
Gutierrez
– Head of Emerging Market Sovereign Debt: Georgetown University, MS in
International Affairs and BA in International Political Economy from
the University of California, Berkeley. Mr. Gutierrez joined abrdn via the
acquisition of Deutsche Asset Management’s London and Philadelphia fixed
income
businesses in 2005, where he held the same role since joining Deutsche in 2000.
Mr. Gutierrez joined Deutsche Asset Management from Invesco Asset
Management where he was an emerging debt portfolio manager. Prior to that, Mr.
Gutierrez was a Latin American economist at LGT Asset Management.
Siddharth
Dahiya
– Head of Emerging Market Corporate Debt: Bachelor’s degree (Hons) in
Electronics and Electrical Communication Engineering from Punjab
Engineering College, India. Post-graduate degree in Business Management from the
Indian Institute of Management, Lucknow and CFA charterholder. Mr.
Dahiya joined abrdn in 2010 and initially worked as a Credit Risk Analyst for
the Counterparty Risk team. Previously, Mr. Dahiya worked for four years at
ICICI
Bank UK PLC in London. He was part of the Treasury Investment team focusing on
Indian bond investments. He started his career at ICICI with the Corporate
Finance team focusing on cross-border M&A.
Global
Evolution USA, LLC (“Global Evolution”),
is
located at 250 Park Avenue, 15th Floor, New York, NY 10177, United States.
Global Evolution is an investment
management firm. The firm was formed in 2012 and managed approximately
$698.5
million as of March 31, 2024.
Global Evolution is 100% owned
by a parent company, Global Evolution Financial
ApS (Denmark) (“Global Ev Financial”),
located at Buen 11, 2nd floor, Kolding
Denmark 6000.
Global
Evolution Holding
ApS (Denmark) (“Global Ev Holding”) owns approximately 98.45%
of Global Ev
Financial.
Conning Holdings Limited (UK)
(“Conning”)
owns approximately 77.89%
of Global Ev
Holding).
The ultimate owner of Conning is Assicurazioni
Generali S.p.A.
Morten
Bugge
co-founded Global Evolution Asset
Management A/S
(“GEAM”),
an affiliate of Global Evolution, in
2007 and serves as Global Evolution’s Chief
Investment Officer. Prior to co-founding GEAM,
Mr. Bugge worked for seven years as a Managing Director at Sydbank responsible
for all emerging markets
funds. Prior to this, Morten held a role as proprietary emerging market fixed
income and FX Trader for five years at Jyske Bank.
Christian
Mejrup
is Deputy Chief Investment Officer of EM Sovereign Debt and Senior Portfolio
Manager responsible for formulating Global Evolution’s hard currency
and local currency strategies with special focus on frontier countries. Prior to
joining Global Evolution in 2007, Mr. Mejrup held a position as Portfolio
Manager
since 2005 in Sydbank Emerging Markets & Structured Credit where he was part
of the investment management team responsible for emerging markets
fixed income and FX mutual funds.
Lars
Peter Nielsen
is a Senior Portfolio Manager responsible for formulating Global Evolution’s
local currency strategies. Prior to joining Global Evolution in 2007,
Mr. Nielsen held a similar position in Sydbank Emerging Markets & Structured
Credit where he was part of the investment management team responsible
for emerging markets fixed income and FX mutual funds. Mr. Nielsen joined
Sydbank in 2004, prior to which he spent four years trading and advising
institutional investors on emerging markets fixed income at Jyske
Bank.
Kristian
Wigh
is a Senior Portfolio Manager responsible for formulating hard currency
strategies with main focus on traditional emerging market countries and
ESG analysis across all strategies. Prior to joining Global Evolution in 2012,
Mr. Wigh worked as a Research Analyst for Mergermarket (FT Group) from
March
2012 to August 2012 and has previously worked for Danske Capital from July 2008
to December 2010.
Sofus
Asboe
is a Senior Portfolio Manager responsible for formulating hard currency
strategies with main focus on traditional emerging market countries.
Furthermore,
he provides general support within the investment management team. Prior to
joining Global Evolution in 2016, Mr. Asboe was employed as an Assistant
Portfolio Manager at Markedskraft ASA in 2015. Mr. Asboe studied at Aarhaus
University prior to joining Markedskraft ASA where he received his graduate
degree in 2016. Mr. Asboe holds an MSc in Finance from Aarhaus, supplemented
with courses from Harvard.
Michael
Hansen
is Senior Strategist responsible for formulating the overall trading and hedging
strategies at Global Evolution and is in charge of ongoing emerging
market commentary and strategy research. Prior to joining Global Evolution in
2007, Mr. Hansen worked as a strategist for Sydbank Emerging Markets
& Structured Credit. Mr. Hansen joined Sydbank in 1994.
Stephen
Bailey-Smith
holds a position as Senior Economist and Portfolio Manager proving a valuable
combination of top-down ideas and bottom-up country
analysis to the investment process and portfolio management. Prior to joining
Global Evolution in 2016, Stephen had many years of experience analyzing
emerging and frontier economies and markets and is recognized as a leading
authority on African financial markets, where he has been at the forefront
of their rapid development in recent years. Previously Stephen was Head of
Research and Strategy for Africa at Standard Bank for almost 10 years.
He
held previous positions in economics and strategy at ING Bank, independent
research house IDEAGlobal and Dun and Bradstreet Ltd.
Anne
Margrethe Tingleff
is a Senior Portfolio Manager and is responsible for formulating hard currency
and local currency strategies with special focus on frontier
countries. She has been with Global Evolution since 2024. Ms. Tingleff attended
the University of Copenhagen, Denmark (2003 – 2009) where she earned
an MSc in Economics. From 2010 to 2014, she held a position at Sparinvest where
she was part of the investment management team responsible for fixed
income and FX mutual funds. From 2014 – 2020 she was at Nordea Asset Management
being part of the team responsible for Global Fixed Income and Emerging
Markets Debt and FX, and lately she was part of Danske Bank Asset Management
from 2020-2024, with the team responsible for Emerging Markets
Debt and FX.
GEAM
is considered a participating affiliate of Global Evolution pursuant to
applicable regulatory guidance and Messrs. Bugge, Mejrup, Nielsen, Wigh, Asboe,
Hansen,
and Bailey-Smith and Ms. Tingleff
are considered to be “supervised persons” of Global Evolution, as the term is
defined in the Advisers Act.
Valuation
of Shares
The
price of the Fund’s shares is based on its NAV. The Fund’s NAV per
share is computed by adding total assets, subtracting all of the Fund’s
liabilities, and dividing
the result by the total number of shares outstanding.
Prospectus
– Fund Management27
The
NAV per share of each class of the Fund’s shares is determined based on a pro
rata allocation of the Fund’s investment income, expenses and total capital
gains
and losses. The Fund’s NAV per share is determined each business day as of the
regular close of trading on the NYSE, which is typically 4:00 p.m. Eastern
Time. However, if trading on the NYSE closes at a time other than 4:00 p.m.
Eastern Time, the Fund’s NAV per share typically would still be determined
as of the regular close of trading on the NYSE. The Fund does not price its
shares on days that the NYSE is closed. Foreign exchanges may permit
trading
in foreign securities on days when the Fund is not open for business, which may
result in the value of the Fund’s portfolio investments being affected
at
a time when you are unable to buy or sell shares.
Equity
securities and certain derivative instruments that are traded on an exchange are
valued based on market value. Certain derivative instruments (other than
short-term securities) usually are valued on the basis of prices provided by a
pricing service. The price of debt securities generally is determined using
pricing
services or quotes obtained from broker/dealers who may consider a number of
inputs and factors, such as comparable characteristics, yield curve,
credit
spreads, estimated default rates, coupon rates, underlying collateral and
estimated cash flow. Investments in other mutual funds are valued at the
closing
NAV per share of the mutual funds on the day of valuation. Equity securities,
including shares of closed-end funds and ETFs, are valued at the last sale
price
or official closing price.
The
valuation of securities traded on foreign markets and certain fixed-income
securities will generally be based on prices determined as of the earlier
closing time
of the markets on which they primarily trade, unless a significant event has
occurred. When the Fund holds securities or other assets that are denominated
in a foreign currency, the exchange rates as of 4:00 p.m. Eastern Time will
normally be used.
Rule
2a-5 under the Investment Company Act establishes requirements for determining
fair value in good faith for purposes of the Investment Company Act,
including
related oversight and reporting requirements. The rule also defines when market
quotations are “readily available” for purposes of the Investment Company
Act, the threshold for determining whether a Fund must fair value a
security.
Among
other things, Rule 2a-5 permits the Fund’s board to designate the Fund’s primary
investment adviser as “valuation designee” to perform the Fund’s fair
value determinations subject to board oversight and certain reporting and other
requirements intended to ensure that the registered investment company’s
board receives the information it needs to oversee the investment adviser’s fair
value determinations. The Board has designated the Manager as valuation
designee under Rule 2a-5 to perform fair value functions in accordance with the
requirements of Rule 2a-5.
Securities
may be valued at fair value, as determined in good faith and pursuant to the
Manager’s procedures. For example, fair value pricing will be used when
market quotations are not readily available or reliable, as determined by the
Manager, such as for fixed income securities and when: (i) trading for a
security
is restricted or stopped; (ii) a security’s trading market is closed (other than
customary closings); or (iii) a security has been de-listed from a national
exchange.
A security with limited market liquidity may require fair value pricing if the
Manager determines that the available price does not reflect the security’s
true market value. In addition, if a significant event that the Manager
determines to affect the value of one or more securities held by the Fund
occurs
after the close of a related exchange but before the determination of the Fund’s
NAV per share, fair value pricing may be used on the affected security
or
securities. Securities of small-capitalization companies are also more likely to
require a fair value determination using these procedures because they are
more
thinly traded and less liquid than the securities of larger capitalization
companies. Securities may be fair valued as a result of significant events
occurring after
the close of the foreign markets in which it invests. In addition, the Fund may
invest in illiquid securities requiring these procedures.
Attempts
to determine the fair value of securities introduce an element of subjectivity
to the pricing of securities. As a result, the price of a security determined
through fair valuation techniques may differ from the price quoted or published
by other sources and may not accurately reflect the market value of
the security when trading resumes. If a reliable market quotation becomes
available for a security formerly valued through fair valuation techniques, the
Manager
compares the new market quotation to the fair value price to evaluate the
effectiveness of the Fund’s fair valuation procedures. You may view the
Fund’s
most recent NAV per share at www.americanbeaconfunds.com by clicking on ‘‘Quick
Links’’ and then ‘‘Daily NAVs.’’
About
Your Investment
Choosing
Your Share Class
The Fund
offers various classes of shares. Each share class of the Fund represents
an investment in the same portfolio of securities for the Fund, but each class
has
its own expense structure and combination of purchase restrictions, sales
charges and ongoing fees, allowing you to choose the class that best fits your
situation.
Factors
you should consider when choosing a class of shares include:
■ |
How
long you expect to own the shares; |
■ |
How
much you intend to invest; |
■ |
Total
expenses associated with owning shares of each
class; |
■ |
Whether
you qualify for any reduction or waiver of sales
charges; |
■ |
Whether
you plan to take any distributions in the near future;
and |
■ |
Availability
of share classes. |
Each
investor’s financial considerations are different. You should speak with your
financial professional to help you decide which share class is best for
you.
A
Class Charges and Waivers
The
table below shows the amount of sales charges you will pay on purchases of A
Class shares of the Fund both as a percentage of offering price and as a
percentage
of the amount you invest. The sales charge differs depending upon the amount you
invest and may be reduced or eliminated for larger purchases as
indicated below. If you invest more, the sales charge will be
lower.
Any
applicable sales charge will be deducted directly from your investment. Because
of rounding of the calculation in determining the sales charges, you may
pay
more or less than what is shown in the table below. Shares acquired through
reinvestment of dividends or other distributions are not subject to a
front-end
sales charge. You may qualify for a reduced sales charge or the sales charge may
be waived as described below in ‘‘A Class Sales Charge Reductions and
Waivers.’’
28Prospectus
– About Your Investment
The
table below shows the amount of sales charges you will pay on purchases of A
Class shares of the Fund both as a percentage of offering price
and as a percentage of the amount you invest prior to July 1,
2024:
|
|
| |
Amount
of Sale/Account Value |
As
a % of Offering Price |
As
a % of Investment |
Dealer
Commission as a % of Offering
Price |
Less
than $50,000 |
4.75% |
4.99% |
4.00% |
$50,000
but less than $100,000 |
4.25% |
4.44% |
3.50% |
$100,000
but less than $250,000 |
3.50% |
3.63% |
2.75% |
$250,000
but less than $500,000 |
2.75% |
2.83% |
2.05% |
$500,000
but less than $1 million |
2.00% |
2.04% |
1.50% |
$1
million and above |
0.00% |
0.00%†
|
‡
|
†
|
No
initial sales charge applies on purchases of $1,000,000 or more. A CDSC of
0.50% of the offering price will be charged on purchases of $1,000,000 or
more that are redeemed
in whole or in part within eighteen (18) months of
purchase |
‡ |
See
“Dealer Concessions on A Class Purchases Without a Front-End Sales
Charge.” |
The
table below shows the amount of sales charges you will pay on purchases of A
Class shares of the Fund both as a percentage of offering price
and as a percentage of the amount you invest beginning July 1,
2024:
|
|
| |
Amount
of Sale/Account Value |
As
a % of Offering Price |
As
a % of Investment |
Dealer
Commission as a % of Offering
Price |
Less
than $50,000 |
4.75% |
4.99% |
4.00% |
$50,000
but less than $100,000 |
4.25% |
4.44% |
3.50% |
$100,000
but less than $250,000 |
3.50% |
3.63% |
2.75% |
$250,000
but less than $500,000 |
2.75% |
2.83% |
2.05% |
$500,000
and above |
0.00% |
0.00%†
|
‡
|
† |
No
initial sales charge applies on purchases of $500,000 or more. A CDSC of
1.00% of the offering price will be charged on purchases of $500,000 or
more that are redeemed in
whole or in part within eighteen (18) months of
purchase. |
‡ |
See
“Dealer Concessions on A Class Purchases Without a Front-End Sales
Charge.” |
The
Distributor retains any portion of the commissions that are not paid to
financial intermediaries to solely pay distribution-related expenses. This
information is
available, free of charge, on the Fund’s website. Please visit
www.americanbeaconfunds.com. You may also call 1-800-658-5811 or consult with
your financial
professional.
A
Class Sales Charge Reductions and Waivers
A
shareholder may qualify for a waiver or reduction in sales charges under certain
circumstances. To receive a waiver or reduction in your A Class sales charge,
you
must advise the Fund’s transfer agent, your broker-dealer or other financial
intermediary of your eligibility at the time of purchase. If you, or your
financial intermediary,
do not let the Fund’s transfer agent know that you are eligible for a reduction,
you may not receive a sales charge discount to which you are otherwise
entitled. This information is available, free of charge, on the Fund’s website.
Please visit www.americanbeaconfunds.com. You may also call 1-800-658-5811
or consult with your financial professional.
Waiver
of Sales Charges
There
is no sales charge if you invest $1 million or more in A Class shares of the
Fund.
Sales
charges also may be waived for certain shareholders or transactions, such
as:
■ |
The
Manager or its affiliates; |
■ |
Present
and former directors, trustees, officers, employees of the Manager, the
Manager’s parent company, and the American Beacon Funds (and their
‘‘immediate
family’’ as defined in the SAI), and retirement plans established by them
for their employees; |
■ |
Registered
representatives or employees of intermediaries that have selling
agreements with the Fund; |
■ |
Shares
acquired through merger or acquisition; |
■ |
Insurance
company separate accounts; |
■ |
Employer-sponsored
retirement plans; |
■ |
Dividend
reinvestment programs; |
■ |
Purchases
through certain fee-based programs under which investors pay advisory fees
that may be offered through selected registered investment advisers,
broker-dealers,
and other financial intermediaries; |
■ |
Shareholders
that purchase the Fund through a financial intermediary that offers our A
Class shares uniformly on a ‘‘no load’’ (or reduced load) basis to you
and
all similarly situated customers of the intermediary in accordance with
the intermediary’s prescribed fee schedule for purchases of fund
shares; |
■ |
Mutual
fund shares exchanged from an existing position in the same fund as part
of a share class conversion instituted by an intermediary;
and |
■ |
Reinvestment
of proceeds within 90 days of a redemption from A Class account (see
Redemption Policies for more
information). |
The
availability of A Class shares sales charge waivers may depend upon the
policies, procedures, and trading platform of your financial
intermediary.
Reduced
Sales Charges
Under
a “Rights of Accumulation Program,” a “Letter of Intent” or through “Concurrent
Purchases” you may be eligible to buy A Class shares of the Fund at the
reduced sales charge rates that would apply to a larger purchase. The Fund
reserves the right to modify or to cease offering these programs at any
time.
This
information is available, free of charge, on the Fund’s website. Please visit
www.americanbeaconfunds.com. You may also call 1-800-658-5811 or consult
with
your financial professional.
Dealer
Concessions on A Class Purchases Without a Front-End Sales
Charge
Prior
to July 1, 2024, brokers who initiate and are responsible for purchases of
$1,000,000 or more of A Class shares of the Fund may receive a dealer
concession
from the Fund’s Distributor of 0.50% of the offering price. Beginning July
1, 2024, brokers who initiate and are responsible for purchases of $500,000
or more of A Class shares of the Fund may receive a dealer concession from the
Fund’s Distributor of 1.00% of the offering price. If a client or
Prospectus
– About Your Investment29
broker
is unable to provide account verification on purchases of $1,000,000 or more
(prior to July 1, 2024) or $500,000 (beginning July 1, 2024), the dealer
concession
will be forfeited by the broker and front-end sales loads will apply. Dealer
concessions will not be paid on shares purchased by exchange or shares
that
were previously subject to a front-end sales charge or dealer concession. Dealer
concessions will be paid only on eligible purchases where the applicability
of
the CDSC can be monitored. Purchases eligible for sales charge waivers as
described under ‘‘A Class Sales Charge Reductions and Waivers’’ are not eligible
for
dealer concessions on purchases of $1,000,000 or more (prior to July 1, 2024) or
$500,000 or more (beginning July 1, 2024).
Rights
of Accumulation Program
Under
the Rights of Accumulation Program, you may qualify for a reduced sales charge
for A Class shares by aggregating all of your investments held in certain
accounts (‘’Qualified Accounts’’). The following Qualified Accounts holding any
share class of the American Beacon Funds may be grouped together to qualify
for the reduced sales charge under the Rights of Accumulation Program or Letter
of Intent:
■ |
Accounts
owned by you, your spouse or your minor children under the age of 21,
including trust or other fiduciary accounts in which you, your spouse or
your
minor children are the beneficiary; |
■ |
IRAs,
including traditional, Roth, SEP and SIMPLE IRAs;
and |
■ |
Coverdell
Education Savings Accounts or qualified 529
plans. |
A
fiduciary can apply a right of accumulation to all shares purchased for a trust,
estate or other fiduciary account that has multiple accounts.
You
must notify your financial intermediary, or the Fund’s transfer agent, in
the case of shares held directly with the Fund, at the time of purchase that a
purchase
qualifies for a reduced sales charge under the Rights of Accumulation Program.
In addition, you must provide either a list of account numbers or copies
of account statements verifying your qualification. You may combine the
historical cost or current market value, as of the day prior to your additional
American
Beacon Funds’ purchase (whichever is higher) of your existing American Beacon
Funds mutual fund with the amount of your current purchase in order
to take advantage of the reduced sales charge. Historical cost is the price you
actually paid for the shares you own, plus your reinvested dividends and
other
distributions. If you are using historical cost to qualify for a reduced sales
charge, you should retain any records to substantiate your historical costs
since the
Fund, its transfer agent or your financial intermediary may not maintain this
information.
If
your shares are held through financial intermediaries and/or in a retirement
account (such as a 401(k) or employee benefit plan), you may combine the
current
market value of your existing American Beacon Funds mutual fund investment with
the amount of your current purchase in order to take advantage of
the reduced sales charge. You or your financial intermediary must notify the
Fund’s transfer agent at the time of purchase that a purchase qualifies for a
reduced
sales charge and provide copies of account statements dated within three months
of your current purchase verifying your qualification.
Upon
receipt of the above referenced supporting documentation, the financial
intermediary or the Fund’s transfer agent will calculate the combined value of
all
of your Qualified Accounts to determine if the current purchase is eligible for
a reduced sales charge. Purchases made for nominee or street name accounts
(securities
held in the name of a dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with purchases for
other accounts and may not be aggregated with other nominee or street name
accounts unless otherwise qualified as described above.
Letter
of Intent
If
you plan to invest at least $50,000 (excluding any reinvestment of dividends and
other distributions) during the next 13 months in any class of the Fund,
you
may qualify for a reduced sales charge for purchases of A Class shares by
completing the Letter of Intent section of your account
application.
A
Letter of Intent indicates your intent to purchase at least $50,000 in any class
of the American Beacon Funds over the next 13 months in exchange for a
reduced
A Class sales charge indicated on the above tables. The minimum initial
investment under a Letter of Intent is $2,500. You are not obligated to
purchase
additional shares if you complete a Letter of Intent. However, if you do not buy
enough shares to qualify for the projected level of sales charge by the
end of the 13-month period (or when you sell your shares, if earlier), your
sales charge will be recalculated to reflect your actual purchase level. During
the term
of the Letter of Intent, shares representing 5% of your intended purchase will
be held in escrow. If you do not purchase enough shares during the 13-month
period to qualify for the projected reduced sales charge, the additional sales
charge will be deducted from your account. If you have purchased shares
of any American Beacon mutual fund within 90 days prior to signing a Letter of
Intent, they may be included as part of your intended purchase, however,
previous purchase transactions will not be recalculated with the proposed new
breakpoint. You must provide either a list of account numbers or copies
of account statements verifying your purchases within the past 90
days.
Concurrent
Purchases
You
may combine simultaneous purchases in shares of any of the American Beacon Funds
to qualify for a reduced charge.
CDSC
— A Class Shares
Prior
to July 1, 2024, unless a waiver applies, investors who purchase $1,000,000 or
more of A Class shares of the Fund (and, thus, pay no initial sales charge)
will
be subject to a 0.50% CDSC if those shares are redeemed within 18 months after
they are purchased. Beginning July 1, 2024, unless a waiver applies,
investors
who purchase $500,000 or more of A Class shares of the Fund (and, thus, pay no
initial sales charge) will be subject to a 1.00% CDSC if those shares
are redeemed within 18 months after they are purchased. The CDSC does not apply
if you are otherwise eligible to purchase A Class shares without an initial
sales charge or are eligible for one of the waivers described herein or in the
SAI.
CDSC
— C Class Shares
If
you redeem C Class shares within 12 months of purchase, you may be charged a
CDSC of 1%. The CDSC generally will be deducted from your redemption
proceeds.
In some circumstances, you may be eligible for one of the waivers described
herein or in the SAI. You must advise the transfer agent of your eligibility
for a waiver when you place your redemption request.
How
CDSCs will be Calculated
The
amount of the CDSC will be based on the market value of the redeemed shares at
the time of the redemption or the original purchase price, whichever is
lower.
Because of the rounding of the calculation in determining the CDSC, you may pay
more or less than the indicated rate. Your CDSC holding period is based
upon the date of your purchase. The CDSCs will be deducted from the proceeds of
your redemption, not from amounts remaining in your account. A CDSC
is not imposed on any increase in NAV per share over the initial purchase price
or shares you received through the reinvestment of dividends or other
distributions.
To
keep your CDSC as low as possible, each time you place a request to sell shares,
the Fund(s) will redeem your shares in the following order:
■ |
shares
acquired by the reinvestment of dividends or other
distributions; |
30Prospectus
– About Your Investment
■ |
other
shares that are not subject to the CDSC; |
■ |
shares
held the longest during the holding
period. |
Waiver
of CDSCs — A and C Class Shares
A
shareholder may qualify for a CDSC waiver under certain circumstances. To have
your CDSC waived, you must advise the Fund’s transfer agent, your broker-dealer
or other financial intermediary of your eligibility at the time of redemption.
If you or your financial intermediary do not let the Fund’s transfer
agent
know that you are eligible for a waiver, you may not receive a waiver to which
might otherwise be otherwise entitled.
The
CDSC may be waived if:
■ |
The
redemption is due to a shareholder’s death or post-purchase
disability; |
■ |
The
redemption is from a systematic withdrawal plan and represents no more
than 10% of your annual account value; |
■ |
The
redemption is a benefit payment made from a qualified retirement plan,
unless the redemption is due to the termination of the plan or the
transfer of the
plan to another financial institution; |
■ |
The
redemption is for a “required minimum distribution” from a traditional IRA
as determined by the Internal Revenue
Service; |
■ |
The
redemption is due to involuntary redemptions by the Fund as a result of
your account not meeting the minimum balance requirements, the termination
and
liquidation of the Fund, or other
actions; |
■ |
The
redemption is from accounts for which the broker-dealer of record has
entered into a written agreement with the Distributor (or Manager)
allowing this waiver; |
■ |
The
redemption is to return excess contributions made to a retirement plan;
or |
■ |
The
redemption is to return contributions made due to a mistake of
fact. |
The
SAI contains further details about the CDSC and the conditions for waiving the
CDSC.
Information
regarding CDSC waivers for A and C Class shares is available, free of charge, on
the Fund’s website. Please visit www.americanbeaconfunds.com. You
may also call 1-800-658-5811 or consult with your financial
professional.
Sales
Charge Waivers and Reductions Available Through Certain Financial
Intermediaries
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from the Fund or through a financial
intermediary.
Different intermediaries may impose different sales charges (including potential
reductions in or waivers of sales charges). Such intermediary-specific
sales charge variations are described in Appendix A to this Prospectus, entitled
“Intermediary Sales Charge Discounts, Waivers and Other Information.”
Appendix A is incorporated herein by reference (is legally a part of this
Prospectus).
In
all instances, it is the purchaser’s responsibility to notify the Fund or the
purchaser’s financial intermediary at the time of purchase of any relationship
or other
facts qualifying the purchaser for sales charge waivers or discounts. For
waivers and discounts not available through a particular intermediary,
shareholders
may have to purchase Fund shares through another intermediary to receive these
waivers or discounts. This information is available, free of charge,
on the Fund’s website. Please visit www.americanbeaconfunds.com. You may also
call 1-800-658-5811 or consult with your financial professional.
Conversion
of C Class Shares to A Class Shares
C
Class shares convert automatically into A Class shares eight (8) years after the
initial date of purchase or, if you acquired your C Class shares through an
exchange
or conversion from another share class, eight (8) years after the date you
acquired your C Class shares, provided the conversion is available through
your
financial intermediary. When C Class shares that you acquired through a purchase
or exchange convert to A Class shares, any other C Class shares that
you
purchased with reinvested dividends and distributions also will convert into A
Class shares on a pro rata basis. A different holding period may also apply
depending
on your intermediary. Certain financial intermediaries may not make this
conversion available to their clients. Please see “Appendix A—Intermediary
Sales Charge Discounts, Waivers and Other Information” in this Prospectus, or
contact your financial intermediary for additional information.
Purchase
and Redemption of Shares
Eligibility
The
A Class, C Class, Y Class, R5 Class and Investor Class shares offered in
this Prospectus are available to eligible investors who meet the minimum initial
investment.
American Beacon Funds do not accept accounts registered to foreign individuals
or entities, including foreign correspondent accounts. The Fund does
not conduct operations and is not offered for purchase outside of the United
States. Subject to your eligibility, as described below, you may invest in the
Fund
directly or through intermediary organizations, such as broker-dealers,
insurance companies, plan sponsors, third party administrators, and retirement
plans.
As described below, the Manager may allow certain individuals to invest directly
in the Fund in its sole discretion.
If
you are eligible and invest directly with the Fund, the fees and policies with
respect to the Fund’s shares that are outlined in this Prospectus are set by the
Fund.
The Manager and the Fund are not responsible for determining the suitability of
the Fund or a share class for any investor.
Because
in most cases it is more advantageous for investors using an intermediary to
purchase A Class shares than C Class shares for amounts of $1,000,000
or
more (prior to July 1, 2024) and $500,000 or more (beginning July 1, 2024), the
Fund will decline a request to purchase C Class shares for $1,000,000 or
more
(prior to July 1, 2024) and $500,000 or more (beginning July 1,
2024).
If
you invest through a financial intermediary, most of the information you will
need for managing your investment will come from your financial intermediary.
This
includes information on how to buy, sell and exchange shares of the Fund. If you
establish an account through a financial intermediary, the investment
minimums
described in this section may not apply. Investors investing in the Fund through
a financial intermediary should consult with their financial intermediary
to ensure they obtain any proper ‘‘breakpoint’’ discount and all information
regarding the differences between available share classes. Your broker-dealer
or financial intermediary also may charge fees that are in addition to those
described in this Prospectus. Please contact your intermediary for information
regarding investment minimums, how to purchase and redeem shares and applicable
fees.
Prospectus
– About Your Investment31
Minimum
Investment Amount by Share Class
|
|
| |
|
New
Account |
Existing
Account |
Share
Class |
Minimum
Initial Investment Amount |
Purchase/Redemption
Minimum by Check/ACH/Exchange |
Purchase/Redemption
Minimum by Wire |
C |
$1,000 |
$50 |
$250 |
A,
Investor |
$2,500 |
$50 |
$250 |
Y |
$100,000 |
$50 |
None |
R5 |
$250,000 |
$50 |
None |
The
Manager may allow a reasonable period of time after opening an account for a Y
Class or R5 Class investor to meet the initial investment requirement. In
addition,
for investors such as trust companies and financial professionals who make
investments for a group of clients, the minimum initial investment can be
met
through aggregated purchase orders for more than one client.
Opening
an Account
You
may open an account through a retirement plan, an investment professional, a
broker-dealer, or other financial intermediary. Please contact your financial
intermediary
for more information on how to open an account. Shares you purchase through your
broker-dealer will normally be held in your account with that
firm.
Direct
mutual fund accounts are not available to new shareholders. Existing direct
mutual fund account shareholders may continue to buy or sell shares through
their existing direct mutual fund accounts, but will not be able to open new
direct mutual fund accounts. The Manager may allow the following individuals
or entities to open new direct mutual fund accounts in its sole discretion: (i)
corporate accounts, (ii) employees of the Manager, or its direct parent
company,
Resolute Investment Managers, Inc., and its affiliates and subsidiaries, (iii)
employees of a sub-advisor to a fund in the American Beacon Funds Complex,
(iv) members of the Board, and
(v) members
of the Manager’s Board of Directors.
To
help the government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions to obtain, verify,
and record
information that identifies each person who opens an account. When you open an
account, you will be asked for information that will allow the Fund or
your financial institution to identify you. Non-public corporations and other
entities may be required to provide articles of incorporation, trust or
partnership agreements,
and taxpayer identification numbers on the account or other documentation. The
Fund is required by law to reject your new account application if
the required identifying information is not provided.
The Fund
reserves the right to liquidate a shareholder’s account at the current day’s NAV
per share and remit proceeds via check if the Fund or a financial institution is
unable to verify the shareholder’s identity within three days of account
opening.
Purchase
Policies
Shares
of the Fund are offered and purchase orders are typically accepted until 4:00
p.m. Eastern Time or the close of the NYSE (whichever comes first) on
each
day on which the NYSE is open for business. If a purchase order is received by
the Fund in good order prior to the Fund’s deadline, the purchase price
will
be the NAV per share next determined on that day, plus any applicable sales
charges. A purchase order is considered to be received in good order when it
complies
with all of the Fund’s applicable policies. If a purchase order is received in
good order after the applicable deadline, the purchase price will be the
NAV
per share of the following day that the Fund is open for business, plus any
applicable sales charges. Shares of the Fund will only be issued against full
payment,
as described more fully in this Prospectus and SAI.
The
Fund has authorized certain third-party financial intermediaries, such as
broker-dealers, insurance companies, third-party administrators and trust
companies,
to receive purchase and redemption orders on behalf of the Fund and to designate
other intermediaries to receive purchase and redemption orders
on behalf of the Fund. The Fund is deemed to have received such orders when they
are received by the financial intermediaries or their designees. Thus,
an order to purchase or sell Fund shares will be priced at the Fund’s next
determined NAV per share after receipt by the financial intermediary or its
designee.
It is the responsibility of your broker-dealer or financial intermediary to
transmit orders that will be received by the Fund in proper form and in a
timely
manner. The Fund is not responsible for the failure of a broker-dealer or
financial intermediary to transmit a purchase order in proper form and in a
timely
manner.
Fund
shares may be purchased only in U.S. States and Territories in which they can be
legally sold. Prospective investors should inquire as to whether Fund
shares
are available for offer and sale in their jurisdiction. The Fund reserves the
right to refuse purchases if, in the judgment of the Fund, the transaction
would
adversely affect the Fund and its shareholders. The Fund has the right to reject
any purchase order or cease offering any or all classes of shares at any
time.
The Fund reserves the right to require payment by wire. Checks to purchase
shares are accepted subject to collection at full face value in U.S. funds and
must
be drawn in U.S. dollars on a U.S. bank. The Fund will not accept ‘‘starter’’
checks, credit card checks, money orders, cashier’s checks, or third-party
checks.
If
your payment is not received and collected, your purchase may be canceled and
you could be liable for any losses or fees the Fund or the Manager has
incurred.
Under applicable anti-money laundering regulations and other federal
regulations, purchase orders may be suspended, restricted or canceled and
the
monies may be withheld.
Please
refer to the section titled ‘‘Frequent Trading and Market Timing’’ for
information on the Fund’s policies regarding frequent purchases, redemptions,
and exchanges.
Redemption
Policies
If
you purchased shares of the Fund through your financial intermediary, please
contact your broker-dealer or other financial intermediary to sell shares of the
Fund.
A sale or redemption of your shares is generally taxable to you. See
“Distributions and Taxes - Taxes.”
The
redemption price will be the NAV per share next determined after a redemption
request is received in good order, minus any applicable CDSC and/or redemption
fees. In order to receive the redemption price calculated on a particular
business day, redemption requests must be received in good order by 4:00
p.m.
Eastern Time or by the close of the NYSE (whichever comes first).
Wire
proceeds from redemption requests received in good order by 4:00 p.m. Eastern
Time or by the close of the NYSE (whichever comes first) generally are
transmitted
to shareholders on the next day the Fund is open for business. In any event,
proceeds from a redemption request will typically be transmitted to a
shareholder
by no later than seven days after the receipt of a redemption request in good
order. Delivery of proceeds from shares purchased by check, ACH, or
pre-authorized automatic investment may be delayed until the funds have cleared,
which may take up to ten days.
32Prospectus
– About Your Investment
You
may, within 90 days of redemption, reinvest all or part of the proceeds of your
redemption of A or C Class shares of the Fund, without incurring any
applicable
additional sales charge, in the same class of another American Beacon Fund, by
sending a written request and a check to your financial intermediary
or directly to the Fund. Reinvestment must be into the same account from which
you redeemed the shares or received the distribution. Proceeds from
a redemption and all dividend payments and other distributions will be
reinvested in the same share class from which the original redemption or
distribution
was made. Reinvestment will be at the NAV per share next calculated after the
Fund receives your request. You must notify the Fund and your financial
intermediary at the time of investment if you decide to exercise this
privilege.
The
Fund reserves the right to suspend redemptions or postpone the date of payment
for more than seven days (i) when the NYSE is closed (other than for
customary
weekend and holiday closings); (ii) when trading on the NYSE is restricted;
(iii) when the SEC determines that an emergency exists so that disposal
of
the Fund’s investments or determination of its NAV is not reasonably
practicable; or (iv) by order of the SEC for protection of the Fund’s
shareholders.
Although
the Fund intends to redeem shares by paying out available cash, cash generated
by selling portfolio holdings (including cash equivalent portfolio holdings),
or funds borrowed through the interfund credit facility, or from a bank line of
credit, in stressed market conditions and other appropriate circumstances,
the Fund reserves the right to pay the redemption price in whole or in part by
borrowing funds from external parties or distributing securities or
other assets held by the Fund. To the extent that the Fund redeems its shares in
this manner, the shareholder assumes the risk of a subsequent change in
the
market value of those securities, the cost of liquidating the securities and the
possibility of a lack of a liquid market for those securities.
Please
refer to the section titled “Frequent Trading and Market Timing” for information
on the Fund’s policies regarding frequent purchases, redemptions, and
exchanges.
Exchange
Policies
If
you purchased shares of the Fund through your financial intermediary, please
contact your financial intermediary to determine if you may take advantage of
the
exchange policies described in this section and for the intermediary’s policies
to effect an exchange.
Shares
of any class of the Fund may be exchanged for shares of the same
class of another American Beacon Fund under certain limited circumstances. Since
an
exchange involves a concurrent redemption and purchase, please review the
sections titled ‘‘Redemption Policies’’ and ‘‘Purchase Policies’’ for additional
limitations
that apply to redemptions and purchases. There is no front-end sales charge on
exchanges between A Class shares of the Fund for A Class shares of
another fund. Shares otherwise subject to a CDSC will not be charged a CDSC in
an exchange to shares of another fund that has a CDSC. However, shares
exchanged
between funds that impose a CDSC will be charged a CDSC if redeemed within 12
months or 18 months, as applicable, of the purchase of the initial
shares.
Before
exchanging shares, shareholders should consider how the exchange may affect any
CDSC that might be imposed on the subsequent redemption of remaining
shares.
If
Fund shares were purchased by check, a shareholder must have owned those shares
for at least ten days prior to exchanging out of the Fund and into another
fund.
The
eligibility and minimum investment requirement must be met for the class into
which the shareholder is exchanging. Fund shares may be acquired through
exchange only in U.S. states and Territories in which they can be legally sold.
The Fund reserves the right to charge a fee and to modify or terminate
the
exchange privilege at any time. The Fund reserves the right to refuse exchange
requests if, in the judgment of the Fund, the transaction would adversely
affect
the Fund and its shareholders. Please refer to the section titled “Frequent
Trading and Market Timing” for information on the Fund’s policies regarding
frequent
purchases, redemptions, and exchanges.
Shares
of any class of the Fund may be converted to shares of another class of the Fund
under certain limited circumstances. For federal income tax purposes,
the
conversion of shares of one share class of the Fund to shares of a different
share class of the Fund will not result in the realization of a capital gain or
loss. However,
an exchange of shares of the Fund for shares of a different American Beacon Fund
generally is considered a redemption and a concurrent purchase, respectively,
and thus may result in the realization of a capital gain or loss for those
purposes.
How
to Purchase, Redeem or Exchange Shares
If
your account is through a broker-dealer or other financial intermediary, please
contact them directly to purchase, redeem or exchange shares of the Fund.
Your
broker-dealer or financial intermediary can help you open a new account, review
your financial needs and formulate long-term investment goals and objectives.
Your broker-dealer or financial intermediary will transmit your request to the
Fund and may charge you a fee for this service. The Fund will not accept
a purchase order for amounts of $1,000,000 or more (prior to July 1, 2024) and
$500,000 or more (beginning July 1, 2024) for C Class shares if the
purchase
is known to be on behalf of a single investor (not including dealer “street
name” or omnibus accounts). Dealers, other financial intermediaries or
fiduciaries
purchasing shares for their customers are responsible for determining the
suitability of a particular share class for an investor. You should include
the
following information with any order:
|
•
Your name/account registration |
|
•
Type of transaction requested |
|
•
Fund name(s) and fund number(s) |
|
•
Dollar amount or number of shares |
Transactions
for direct shareholders are conducted through:
|
| |
Internet |
www.americanbeaconfunds.com |
Phone |
To
reach an American Beacon representative call 1-800-658-5811, option
1
Through
the Automated Voice Response Service call 1-800-658-5811, option 2
(Investor Class Only) |
Mail |
American
Beacon Funds
PO
Box 219643
Kansas
City, MO 64121-9643 |
Overnight
Delivery:
American
Beacon Funds
430
W. 7th Street, Suite 219643
Kansas
City, MO 64105-1407 |
Prospectus
– About Your Investment33
Purchases
by Wire:
Send
a bank wire to State Street Bank and Trust Co. with these
instructions:
■ |
ABA#
0110-0002-8; AC-9905-342-3, |
■ |
Attn:
American Beacon Funds, |
■ |
the
fund name and fund number, and |
■ |
shareholder
account number and registration. |
|
|
| |
|
New
Account |
Existing
Account |
Share
Class |
Minimum
Initial Investment Amount |
Purchase/Redemption
Minimum by Check/ACH/Exchange |
Purchase/Redemption
Minimum by Wire |
C |
$1,000 |
$50 |
$250 |
A,
Investor |
$2,500 |
$50 |
$250 |
Y |
$100,000 |
$50 |
None |
R5 |
$250,000 |
$50 |
None |
Redemption
proceeds will be mailed to the account of record or transmitted to commercial
bank designated on the account application form.
Supporting
documents may be required for redemptions by estates, trusts, guardianships,
custodians, corporations, and welfare, pension and profit sharing plans.
Redemption requests must also include authorized signature(s) of all persons
required to sign for the account. Call 1-800-658-5811 for
instructions.
To
protect the Fund and your account from fraud, a Medallion signature guarantee is
required for redemption orders:
■ |
with
a request to send the proceeds to an address or commercial bank account
other than the address or commercial bank account designated on the
account
application, or |
■ |
for
an account whose address has changed within the last 30 days if proceeds
are sent by check. |
The
Fund only accepts Medallion signature guarantees, which may be obtained at
participating banks, broker-dealers and credit unions. A notary public
cannot
provide a signature guarantee. Call 1-800-658-5811 for instructions and further
assistance.
Payments
to Financial Intermediaries
For
certain share classes, the Fund and/or the Manager (and/or the Manager’s
affiliates), at their own expense, may pay compensation to financial
intermediaries
for shareholder-related services and, if applicable, distribution-related
services, including administrative, sub-transfer agency type, recordkeeping
and shareholder communication services. For example, compensation may be paid to
make Fund shares available to sales representatives and/or
customers of a fund supermarket platform or similar program sponsor or for
services provided in connection with such fund supermarket platforms and
programs.
The
amount of compensation paid to different financial intermediaries may differ.
The compensation paid to a financial intermediary may be based on a variety
of factors, including average assets under management in accounts distributed
and/or serviced by the financial intermediary, gross sales by the financial
intermediary and/or the number of accounts serviced by the financial
intermediary that invest in the Fund. To the extent that the Fund pays any such
compensation,
it is designed to compensate the financial intermediary for providing services
that would otherwise be provided by the Manager, the Fund or its
transfer agent. To the extent the Manager or its affiliates pay such
compensation, it would likely include amounts from that party’s own
resources and constitute
what is sometimes referred to as ‘‘revenue sharing’’.
Compensation
received by a financial intermediary from the Fund, the Manager or an affiliate
of the Manager may include payments for marketing and/or training
expenses incurred by the financial intermediary, including expenses incurred by
the financial intermediary in educating (itself and) its salespersons with
respect
to Fund shares. For example, such compensation may include reimbursements for
expenses incurred in attending educational seminars regarding the Fund,
including travel and lodging expenses. It may also cover costs incurred by
financial intermediaries in connection with their efforts to sell Fund shares,
including
costs incurred compensating (registered) sales representatives and preparing,
printing and distributing sales literature.
Any
compensation received by a financial intermediary, whether from the Fund or the
Manager and/or its affiliates, and the prospect of receiving it may
provide
the financial intermediary with an incentive to recommend the shares of the
Fund, or a certain class of shares of the Fund, over other potential
investments.
Similarly, the compensation may cause financial intermediaries to elevate the
prominence of the Fund within its organization by, for example, placing
it on a list of preferred funds. You can contact your financial intermediary for
details about any such payments it receives from the Manager, its affiliates
and/or the Fund, or any other fees, expenses, or commissions your financial
intermediary may charge you in addition to those disclosed in this Prospectus.
Additional
Payments with Respect to Y Class Shares
Y
Class shares may also be available on brokerage platforms of firms that have
agreements with the Fund’s distributor to offer such shares solely when acting
as
an agent for the investor. An investor transacting in Y Class shares in these
programs may be required to pay a commission and/or other forms of compensation
to the broker. Shares of the Fund are available in other share classes that have
different fees and expenses.
General
Policies
If
a shareholder’s account balance falls below the following minimum levels, the
shareholder may be asked to increase the balance.
| |
Share
Class |
Account
Balance |
A,
Investor |
$2,500 |
C |
$1,000 |
Y |
$25,000 |
| |
Share
Class |
Account
Balance |
R5 |
$75,000 |
If
the account balance remains below the applicable minimum account balance after
45 days, the Fund reserves the right, upon 30 days’ advance written notice,
to close the account and send the proceeds to the shareholder. The Fund reserves
the authority to modify minimum account balances in its discretion.
A
traditional IRA or Roth IRA invested directly will be charged an annual
maintenance fee of $15.00 by the Custodian.
34Prospectus
– About Your Investment
An
ACH privilege allows electronic transfer from a checking or savings account into
a direct account with the Fund. The ACH privilege may not be used for
initial
purchases but may be used for subsequent purchases and redemptions. Purchases of
Fund shares by ACH are subject to a limit of $2,000 per day. The Fund
reserves the right to waive such limit in its sole discretion.
ACH
privileges must be requested on the account application, or may be established
on an existing account by submitting a request in writing to the Fund.
Validated
signatures from all shareholders of record for the account are required on the
written request. See details below regarding signature validations. Such
privileges apply unless and until the Fund receives written instructions from
all shareholders of record canceling such privileges. Changes of bank account
information
must also be made in writing with validated signatures. The Fund reserves the
right to amend, suspend or discontinue the ACH privilege at any time
without prior notice. The ACH privilege does not apply to shares held in broker
“street name” accounts or in other omnibus accounts.
When
a signature validation is called for, a Medallion signature guarantee or
Signature Validation Program (“SVP”) stamp may be required. A Medallion
signature
guarantee is intended to provide signature validation for transactions
considered financial in nature, and an SVP stamp is intended to provide
signature
validation for transactions non-financial in nature. A Medallion signature
guarantee or SVP stamp may be obtained from a domestic bank or trust
company,
broker, dealer, clearing agency, savings association or other financial
institution which is participating in a Medallion program or SVP recognized by
the
Securities Transfer Association. The Fund may reject a Medallion signature
guarantee or SVP stamp. Shareholders should call 1-800-658-5811 for additional
details regarding the Fund’s signature guarantee requirements.
The
following policies apply to instructions you may provide to the Fund by
telephone:
■ |
The Fund,
its officers, trustees, employees, or agents are not responsible for the
authenticity of instructions provided by telephone, nor for any loss,
liability, cost
or expense incurred for acting on them. |
■ |
The Fund
employs procedures reasonably designed to confirm that instructions
communicated by telephone are genuine. |
■ |
Due
to the volume of calls or other unusual circumstances, telephone
redemptions may be difficult to implement during certain time
periods. |
The Fund
reserves the right to:
■ |
liquidate
a shareholder’s account at the current day’s NAV per share and remit
proceeds via check if the Fund or a financial institution is unable to
verify the shareholder’s
identity within three business days of account
opening, |
■ |
seek
reimbursement from the shareholder for any related loss incurred by the
Fund if payment for the purchase of Fund shares by check does not clear
the shareholder’s
bank, and |
■ |
reject
a purchase order and seek reimbursement from the shareholder for any
related loss incurred by the Fund if funds are not received by the
applicable wire
deadline. |
A
shareholder will not be required to pay a CDSC when the registration for A Class
or C Class shares is transferred to the name of another person or entity.
The
transfer may occur by absolute assignment, gift or bequest, as long as it does
not involve, directly or indirectly, a public sale of the shares. When A Class
or
C Class shares are transferred, any applicable CDSC will continue to apply to
the transferred shares and will be calculated as if the transferee had acquired
the
shares in the same manner and at the same time as the transferring
shareholder.
Escheatment
Please
be advised that certain state escheatment laws may require the Fund to turn over
your mutual fund account to the state listed in your account registration
as abandoned property unless you contact the Fund. Many states have added
‘‘inactivity’’ or the absence of customer-initiated
contact
as a component
of their rules and guidelines for the escheatment of unclaimed property. These
states consider property to be abandoned when there is no shareholder-initiated
activity
on an account for at least three (3) to five (5) years.
Depending
on the laws in your jurisdiction, customer-initiated contact might be achieved
by one of the following methods:
■ |
Send
a letter to American Beacon Funds via the United States Post
Office. |
■ |
Speak
to a Customer Service Representative on the phone after you go through a
security verification process. For
residents of certain states, contact cannot
be made by phone but must be in writing or through the Fund’s
secure
web application. |
■ |
Access
your account through the Fund’s secure web
application. |
■ |
Cashing
checks that are received and are made payable to the owner of the
account. |
The
Fund, the Manager, and the transfer
agent
will not be liable to shareholders or their representatives for good faith
compliance with escheatment laws. To learn
more about the escheatment rules for your particular state, please contact your
attorney or State Treasurer’s and/or Controller’s Offices. Unless you hold
your
shares directly with the Fund, you should contact your broker-dealer, retirement
plan, or other third-party intermediary regarding applicable state escheatment
laws.
Shareholders
that reside in the state of Texas may designate a representative to receive
escheatment notifications by completing and submitting a designation
form
that can be found on the website of the Texas Comptroller. While the designated
representative does not have any rights to claim or access the shareholder’s
account or assets, the escheatment period will cease if the representative
communicates knowledge of the shareholder’s location and confirms that
the shareholder has not abandoned his or her property. If a shareholder
designates a representative to receive escheatment notifications, any
escheatment
notices will be delivered both to the shareholder and the designated
representative. The completed designation form may be mailed to the below
address.
Contact
information:
|
American
Beacon Funds P.O.
Box 219643 Kansas
City, MO 64121-9643 1-800-658-5811 www.americanbeaconfunds.com |
Frequent
Trading and Market Timing
Frequent
trading by Fund shareholders poses risks to other shareholders in the Fund,
including: (i) the dilution of the Fund’s NAV per share, (ii) an increase in
the
Fund’s expenses, and (iii) interference with the portfolio manager’s ability to
execute efficient investment strategies. Frequent, short-term trading of Fund
shares
in an attempt to profit from day-to-day fluctuations in the Fund’s NAV per share
is known as market timing.
The Funds’ Board has adopted policies and procedures
intended to discourage frequent trading and market timing.
Prospectus
– About Your Investment35
Shareholders
may transact one ‘‘round trip’’ in the Fund in any rolling 90-day period. A
‘‘round trip’’ is defined as two transactions, each in an opposite direction.
A round trip may involve either (i) a purchase or exchange into the Fund
followed by a redemption or exchange out of the Fund or (ii) a redemption
or
exchange out of the Fund followed by a purchase or exchange into the Fund. If
the Manager detects that a shareholder has exceeded one round trip in the
Fund
in any rolling 90-day period, the Manager, without prior notice to the
shareholder, may prohibit the shareholder from making further purchases of
the Fund.
In general, the Fund reserves the right to reject any purchase order, terminate
the exchange privilege, or liquidate the account of any shareholder that
the
Manager determines has engaged in frequent trading or market timing, regardless
of whether the shareholder’s activity violates any policy stated in this
Prospectus.
Additionally, the Manager may, in its discretion, reject any purchase or
exchange into the Fund from any individual investor, institutional investor,
or
group whose trading activity could disrupt the management of the Fund or dilute
the value of the Fund’s shares, including collective trading (e.g. following
the
advice of an investment newsletter). Such investors may be barred from future
purchases of American Beacon Funds.
The
round-trip limit does not apply to the following transaction types:
■ |
shares
acquired through the reinvestment of dividends and other
distributions; |
■ |
systematic
purchases and redemptions; |
■ |
shares
redeemed to return excess IRA contributions;
or |
■ |
certain
transactions made within a retirement or employee benefit plan, such as
payroll contributions, minimum required distributions, loans, and hardship
withdrawals,
or other transactions that are initiated by a party other than the plan
participant. |
Financial
intermediaries that offer Fund shares, such as broker-dealers, third party
administrators of retirement plans, and trust companies, will be asked to
enforce
the Fund’s policies to discourage frequent trading and market timing by
investors. However, certain intermediaries that offer Fund shares have
informed
the Fund that they are currently unable to enforce the Fund’s policies on an
automated basis. In those instances, the Manager will monitor trading
activity
of the intermediary in an attempt to detect patterns of activity that indicate
frequent trading or market timing by underlying investors. In some cases,
intermediaries
that offer Fund shares have their own policies to deter frequent trading and
market timing that differ from the Fund’s policies. The Fund may defer
to an intermediary’s policies. For more information, please contact the
financial intermediary through which you invest in the Fund.
The
Manager monitors trading activity in the Fund to attempt to identify
shareholders engaged in frequent trading or market timing. The Manager may
exclude
transactions below a certain dollar amount from monitoring and may change that
dollar amount from time to time. The ability of the Manager to detect
frequent trading and market timing activity by investors who own shares through
an intermediary is dependent upon the intermediary’s provision of information
necessary to identify transactions by the underlying investors. The Fund has
entered into agreements with the intermediaries that service the Fund’s
investors, pursuant to which the intermediaries agree to provide information on
investor transactions to the Fund and to act on the Fund’s instructions
to
restrict transactions by investors who the Manager has identified as having
violated the Fund’s policies and procedures to deter frequent trading and market
timing.
Wrap
programs offered by certain intermediaries may be designated ‘‘Qualified Wrap
Programs’’ by the Fund based on specific criteria established by the Fund
and
a certification by the intermediary that the criteria have been met. A Qualified
Wrap Program is a wrap program whose sponsoring intermediary: (i) certifies
that it has investment discretion over $50 million or more in client assets
invested in mutual funds at the time of the certification, (ii) certifies that
it directs
transactions in accounts participating in the wrap program(s) in concert with
changes in a model portfolio; (iii) provides the Manager a description of
the
wrap program(s); and (iv) managed by an intermediary that agrees to provide the
Manager sufficient information to identify individual accounts in the
intermediary’s
wrap program(s). For purposes of applying the round-trip limit, transactions
initiated by clients invested in a Qualified Wrap Program will not be
matched
to transactions initiated by the intermediary sponsoring the Qualified Wrap
Program. For example, a client’s purchase of the Fund followed within 90
days
by the intermediary’s redemption of the same Fund would not be considered a
round trip. However, transactions initiated by a Qualified Wrap Program
client
are subject to the round-trip limit and will be matched to determine if the
client has exceeded the round-trip limit. In addition, the Manager will monitor
transactions
initiated by Qualified Wrap Program intermediaries to determine whether any
intermediary has engaged in frequent trading or market timing. If the
Manager determines that an intermediary has engaged in activity that is harmful
to the Fund, the Manager will revoke the intermediary’s Qualified Wrap
Program
status. Upon termination of status as a Qualified Wrap Program, all account
transactions will be matched for purposes of testing compliance with the
Fund’s
frequent trading and market timing policies.
The
Fund reserves the right to modify the frequent trading and market timing
policies and procedures and grant or eliminate waivers to such policies and
procedures
at any time without advance notice to shareholders. There can be no assurance
that the Fund’s policies and procedures to deter frequent trading and
market timing will have the intended effect or that the Manager will be able to
detect frequent trading and market timing.
Distributions
and Taxes
The
Fund distributes most or all of its net earnings and realized gains, if any,
each taxable year in the form of dividends from net investment income
(“dividends”)
on a monthly basis and distributions of realized net capital gains (“capital
gain distributions”) and net gains from foreign currency transactions
(sometimes
referred to below collectively as “other distributions”) on an annual basis (and
dividends and other distributions are sometimes referred to below collectively
as “distributions”). Different tax treatment applies to different types of
distributions (as described in the table below).
The
Fund does not have a fixed dividend rate nor does it guarantee that it will pay
any distributions in any particular period. Distributions paid by the Fund
with
respect to each class of shares are calculated in the same manner and at the
same time, but dividends on different classes of shares may be different as a
result
of the services and/or fees applicable to certain classes of shares. Any
dividends are paid monthly, and capital gains distributions and other
distributions are paid annually.
Options
for Receiving Dividends and Other Distributions
When
you open your Fund account, you can specify on your application how you want to
receive distributions. To change that option, you must notify the transfer
agent. Unless you instruct otherwise in your account application, distributions
payable to you by the Fund will be reinvested in additional shares of
the
distributing class of the Fund. There are four payment options
available:
■ |
Reinvest
All Distributions. You can elect to reinvest all distributions by the Fund
in additional shares of the distributing class of the
Fund. |
■ |
Reinvest
Only Some Distributions. You can elect to reinvest some types of
distributions by the Fund in additional shares of the distributing class
of the Fund while
receiving the other types of distributions by the Fund by check or having
them sent directly to your bank account by ACH (“in
cash”). |
■ |
Receive
All Distributions in Cash. You can elect to receive all
distributions in cash. |
■ |
Reinvest
Your Distributions in shares of another American Beacon Fund. You can
reinvest all of your distributions by the Fund on a particular class
of shares in
shares of the same class of another American Beacon Fund that is available
for exchanges. You must have an existing account in the same share
class
of the selected fund. |
Distributions
of Fund income are generally taxable to you regardless of the manner in which
received or reinvested.
36Prospectus
– About Your Investment
If
you invest directly with the Fund, any election to receive distributions payable
by check will only apply to distributions totaling $10.00 or more. Any
distribution
by the Fund totaling less than $10.00 will be reinvested in shares of the
distributing class of the Fund and will not be paid to you by
check.
If
you elect to receive a distribution by check and the U.S. Postal Service
cannot deliver your check, or if your check remains uncashed for at least six
months, the
Fund reserves the right to reinvest the amount of your check, and to reinvest
all subsequent distributions, in shares of the distributing class of the Fund at
the
NAV per share on the day of the reinvestment. Interest will not accrue on
amounts represented by uncashed distribution or redemption checks.
Shareholders
investing in the Fund through a financial intermediary should discuss their
options for receiving distributions with the intermediary.
Taxes
Fund
distributions are taxable to shareholders other than tax-qualified retirement
plans and accounts and other tax-exempt investors. However, the portion of
the
Fund’s dividends derived from its investments in U.S. Government obligations, if
any, is generally exempt from state and local income taxes. Fund dividends,
except those that are “qualified dividend income” (as described below), are
subject to federal income tax at the rates for ordinary income contained
in the Internal Revenue Code. The following table outlines the typical status of
transactions in taxable accounts:
| |
Type
of Transaction |
Federal
Tax Status |
Dividends
from net investment income* |
Ordinary
income** |
Distributions
of the excess of net short-term capital gain over net long-term capital
loss* |
Ordinary
income |
Distributions
of net gains from certain foreign currency transactions* |
Ordinary
income |
Distributions
of the excess of net long-term capital gain over net short-term capital
loss
(“net capital gain”)* |
Long-term
capital gains |
Redemptions
or exchanges of shares owned for more than one year |
Long-term
capital gains or losses |
Redemptions
or exchanges of shares owned for one year or less |
Net
gains are taxed at the same rate as ordinary income; net losses
are
subject to special rules |
* |
Whether
reinvested or taken in cash. |
** |
Except
for dividends that are attributable to ‘‘qualified dividend income,’’ if
any. |
To
the extent distributions are attributable to net capital gain that the Fund
recognizes they are subject to a 15% maximum federal income tax rate for
individual
and certain other non-corporate shareholders (each, an ‘‘individual’’) (20% for
individuals with taxable income exceeding certain thresholds, which are
indexed for inflation annually), regardless of how long the shareholder held his
or her Fund shares. A portion of the dividends the Fund pays to
individuals may
be ‘‘qualified dividend income’’ (‘‘QDI’’) and thus eligible for the
preferential rates, mentioned above, that apply to net capital gain. QDI
is the aggregate of
dividends the Fund receives on shares of most domestic corporations and certain
foreign corporations with respect to which the Fund satisfies certain
holding
period and other restrictions. To be eligible for those rates, a shareholder
must meet similar restrictions with respect to his or her Fund
shares.
A
portion of the dividends the Fund pays may also be eligible for the
dividends-received deduction allowed to corporations (“DRD”), subject to similar
holding period
and other restrictions, but the eligible portion may not exceed the aggregate
dividends the Fund receives from domestic corporations only.
The
Fund does not expect a substantial part of its dividends to qualify as QDI or be
eligible for the DRD.
A
shareholder may realize a taxable gain or loss when redeeming or exchanging
shares. That gain or loss is treated as a short-term or long-term capital gain
or loss,
depending on how long the redeemed or exchanged shares were held. Any capital
gain an individual shareholder recognizes on a redemption or exchange
of Fund shares that have been held for more than one year will qualify for the
15% and 20% tax rates mentioned above.
A
shareholder who wants to use an acceptable basis determination method with
respect to Fund shares other than the average basis method (the Fund’s
default
method) must elect to do so in writing, which may be electronic. The Fund, or
its administrative agent, must report to the Internal
Revenue Service
and
furnish to its shareholders the basis information for dispositions of Fund
shares. See “Tax Information” in the SAI for a description of the rules
regarding that
election and the Fund’s reporting obligation.
An
individual must pay a 3.8% tax on the lesser of (1) the individual’s ‘‘net
investment income,’’ which generally includes distributions the Fund pays and
net gains
realized on the redemption or exchange of Fund shares, or (2) the excess of the
individual’s ‘‘modified adjusted gross income’’ over a threshold amount
($250,000
for married persons filing jointly and $200,000 for single taxpayers). This tax
is in addition to any other taxes due on that income. A similar tax applies
to estates and trusts. Shareholders should consult their own tax advisers
regarding the effect, if any, this tax may have on their investment in Fund
shares.
Each
year, the Fund’s shareholders will receive tax information regarding Fund
distributions and dispositions of Fund shares to assist them in preparing their
income
tax returns.
The
foregoing is only a summary of some of the important federal income tax
considerations that may affect Fund shareholders, who should consult their tax
advisers
regarding specific questions as to the effect of federal, state and local income
taxes on an investment in the Fund.
Additional
Information
The
Fund’s Board oversees generally the operations of the Fund. The Trust enters
into contractual arrangements with various parties, including among others,
the
Fund’s manager, sub-advisor(s), custodian, transfer agent, and accountants, who
provide services to the Fund. Shareholders are not parties to any such
contractual
arrangements, and those contractual arrangements are not intended to create in
any shareholder any right to enforce them directly against the service
providers or to seek any remedy under them directly against the service
providers.
This
Prospectus provides information concerning the Fund that you should consider in
determining whether to purchase Fund shares. Neither this Prospectus
nor
the SAI is intended, or should be read, to be or create an agreement or contract
between the Trust or the Fund and any investor, or to create any rights in
any
shareholder or other person other than any rights under federal or state law
that may not be waived. Nothing in this Prospectus, the SAI or the Fund’s
reports
to shareholders is intended to provide investment advice and should not be
construed as investment advice.
Prospectus
– Additional Information37
Distribution
and Service Plans
The
Fund has adopted separate Distribution Plans for its A Class and C Class shares
in accordance with Rule 12b-1 under the Investment Company Act, which
allows
the A Class and C Class shares to pay distribution and other fees for the sale
of Fund shares and for other services provided to shareholders. Each Plan
also
authorizes the use of any fees received by the Manager in accordance with the
Management Agreement, and any fees received by the sub-advisors pursuant
to their Investment Advisory Agreements, to be used for the sale and
distribution of Fund shares. The Plans provide that the A Class shares of the
Fund
will pay up to 0.25% per annum of the average daily net assets attributable to
the A Class and the C Class shares of the Fund will pay up to 1.00% per
annum
of the average daily net assets attributable to the C Class, to the Manager (or
another entity approved by the Board). Because these fees are paid out
of
the Fund’s A Class and C Class assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than
paying
other types of sales charges.
The
Fund has also adopted a shareholder services plan for its A Class, C Class and
Investor Class shares for certain non-distribution shareholder services
provided
by financial intermediaries. The shareholder services plan authorizes annual
payment of up to 0.25% of the average daily net assets attributable to
the
A Class shares, up to 0.25% of the average daily net assets attributable to the
C Class shares, and up to 0.375% of the average daily net assets attributable
to the Investor Class shares. In addition, the Fund may reimburse the
Manager for certain non-distribution shareholder services provided by
financial
intermediaries attributable to Y Class and R5 Class shares of the
Fund.
Portfolio
Holdings
A
complete list of the Fund’s holdings is made available on the Fund’s website on
a monthly basis approximately twenty days after the end of each month and
remains
available for six months thereafter. A list of the Fund’s ten largest holdings
is made available on the Fund’s website on a quarterly basis. The ten
largest
holdings of the Fund are generally posted to the website approximately
fifteen days after the end of each calendar quarter and remain available until
the
next quarter. To access the holdings information, go to
www.americanbeaconfunds.com. The Fund’s ten largest holdings may also be
accessed by selecting
the Fund’s fact sheet.
A
description of the Fund’s policies and procedures regarding the disclosure of
portfolio holdings is available in the SAI, which you may access on the Fund’s
website
at www.americanbeaconfunds.com or call 1-800-658-5811 to request a free
copy.
Delivery
of Documents
The
summary prospectus, Annual Shareholder Reports and Semi-Annual Shareholder
Reports (“Shareholder Reports”) are available online at www.americanbeaconfunds.com/reports.
If you are interested in electronic delivery of the Fund’s summary prospectus,
please go to www.americanbeaconfunds.com
and click on ‘‘Quick Links’’ and then ‘‘Register for E-Delivery.’’ You can also
request to receive paper Shareholder Reports by calling
1-866-345-5954 with the unique ID number that is provided in the notification
you receive, or you may directly inform your financial intermediary of
your
wish.
To
reduce expenses, your financial institution may mail only one copy of the
summary prospectus and Shareholder Reports to those addresses shared by two
or
more accounts. If you wish to receive individual copies of these documents,
please contact your financial institution. Delivery of individual copies will
commence
thirty days after receiving your request.
Financial
Highlights
The
financial highlights tables are intended to help you understand the Fund’s
financial performance for the past five fiscal years. Certain information
reflects financial
results for a single Fund share.
The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment of all
dividends
and other distributions). The information in the financial highlights has been
derived from the Fund’s financial statements audited by PricewaterhouseCoopers
LLP, an independent registered public accounting firm, whose report, along with
the Fund’s financial statements, is included in the Fund’s
Annual Shareholder Report, which you may obtain upon request.
38Prospectus
– Additional Information
|
|
|
|
| |
American
Beacon Developing World Income Fund |
|
A
Class |
For
a share outstanding throughout the period: |
Year
Ended January
31, 2024 |
Year
Ended January
31, 2023 |
Year
Ended January
31, 2022 |
Year
Ended January
31, 2021 |
Year
Ended January
31, 2020 |
Net
asset value, beginning of period |
|
|
|
|
|
Income
(loss) from investment operations: |
|
|
|
|
|
Net
investment income |
|
|
|
|
|
Net
gains (losses) on investments (both realized and unrealized)
|
|
|
|
|
|
Total
income (loss) from investment operations |
|
|
|
|
|
Less
distributions: |
|
|
|
|
|
Dividends
from net investment income |
|
|
|
|
|
Distributions
from net realized gains |
|
|
|
|
|
Tax
return of capitalA
|
|
|
|
|
|
Total
distributions |
|
|
|
|
|
Redemption
fees added to beneficial interestsB
|
|
|
|
|
|
Net
asset value, end of period |
|
|
|
|
|
Total
returnC
|
|
|
|
|
|
Ratios
and supplemental data: |
|
|
|
|
|
Net
assets, end of period |
$3,179,862 |
$2,574,241 |
$5,855,674 |
$4,657,416 |
$4,275,426 |
Ratios
to average net assets: |
|
|
|
|
|
Expenses,
before reimbursements and/or recoupments |
|
|
|
|
|
Expenses,
net of reimbursements and/or recoupments |
|
|
|
|
|
Net
investment income, before expense reimbursements
and/or recoupments |
|
|
|
|
|
Net
investment income, net of reimbursements and/or recoupments
|
|
|
|
|
|
Portfolio
turnover rate |
|
|
|
|
|
| |
A |
Tax
return of capital is calculated based on shares outstanding at the time of
distribution. |
B |
Amount
represents less than $0.01 per share. |
C |
Based
on net asset value, which does not reflect the sales charge, redemption
fee, or contingent deferred sales charge, if applicable. May include
adjustments in accordance with
U.S. GAAP and as such, the net asset value for reporting purposes and the
returns based upon those net asset values may differ from the net asset
value and returns for shareholder
transactions. |
D |
Includes
non-operating expenses consisting of loan interest expenses. The expenses,
net of reimbursements or recoupments ratio excluding non-operating
expenses is 1.40% for the
year ended 2020. |
Prospectus
– Additional Information39
|
|
|
|
| |
American
Beacon Developing World Income Fund |
|
C
Class |
For
a share outstanding throughout the period: |
Year
Ended January
31, 2024 |
Year
Ended January
31, 2023 |
Year
Ended January
31, 2022 |
Year
Ended January
31, 2021 |
Year
Ended January
31, 2020 |
Net
asset value, beginning of period |
|
|
|
|
|
Income
(loss) from investment operations: |
|
|
|
|
|
Net
investment income |
|
|
|
|
|
Net
gains (losses) on investments (both realized and unrealized)
|
|
|
|
|
|
Total
income (loss) from investment operations |
|
|
|
|
|
Less
distributions: |
|
|
|
|
|
Dividends
from net investment income |
|
|
|
|
|
Distributions
from net realized gains |
|
|
|
|
|
Tax
return of capitalA
|
|
|
|
|
|
Total
distributions |
|
|
|
|
|
Redemption
fees added to beneficial interestsB
|
|
|
|
|
|
Net
asset value, end of period |
|
|
|
|
|
Total
returnC
|
|
|
|
|
|
Ratios
and supplemental data: |
|
|
|
|
|
Net
assets, end of period |
$8,609,551 |
$7,880,681 |
$9,775,702 |
$10,651,100 |
$12,599,753 |
Ratios
to average net assets: |
|
|
|
|
|
Expenses,
before reimbursements and/or recoupments |
|
|
|
|
|
Expenses,
net of reimbursements and/or recoupments |
|
|
|
|
|
Net
investment income, before expense reimbursements
and/or recoupments |
|
|
|
|
|
Net
investment income, net of reimbursements and/or recoupments
|
|
|
|
|
|
Portfolio
turnover rate |
|
|
|
|
|
| |
A |
Tax
return of capital is calculated based on shares outstanding at the time of
distribution. |
B |
Amount
represents less than $0.01 per share. |
C |
Based
on net asset value, which does not reflect the sales charge, redemption
fee, or contingent deferred sales charge, if applicable. May include
adjustments in accordance with
U.S. GAAP and as such, the net asset value for reporting purposes and the
returns based upon those net asset values may differ from the net asset
value and returns for shareholder
transactions. |
D |
Includes
non-operating expenses consisting of loan interest expenses. The expenses,
net of reimbursements or recoupments ratio excluding non-operating
expenses is 2.17% for the
year ended 2020. |
40Prospectus
– Additional Information
|
|
|
|
| |
American
Beacon Developing World Income Fund |
|
Y
Class |
For
a share outstanding throughout the period: |
Year
Ended January
31, 2024 |
Year
Ended January
31, 2023 |
Year
Ended January
31, 2022 |
Year
Ended January
31, 2021 |
Year
Ended January
31, 2020 |
Net
asset value, beginning of period |
|
|
|
|
|
Income
(loss) from investment operations: |
|
|
|
|
|
Net
investment income |
|
|
|
|
|
Net
gains (losses) on investments (both realized and unrealized)
|
|
|
|
|
|
Total
income (loss) from investment operations |
|
|
|
|
|
Less
distributions: |
|
|
|
|
|
Dividends
from net investment income |
|
|
|
|
|
Distributions
from net realized gains |
|
|
|
|
|
Tax
return of capitalA
|
|
|
|
|
|
Total
distributions |
|
|
|
|
|
Redemption
fees added to beneficial interestsB
|
|
|
|
|
|
Net
asset value, end of period |
|
|
|
|
|
Total
returnC
|
|
|
|
|
|
Ratios
and supplemental data: |
|
|
|
|
|
Net
assets, end of period |
$389,293,148 |
$305,728,868 |
$397,300,935 |
$310,325,331 |
$303,866,061 |
Ratios
to average net assets: |
|
|
|
|
|
Expenses,
before reimbursements and/or recoupments |
|
|
|
|
|
Expenses,
net of reimbursements and/or recoupments |
|
|
|
|
|
Net
investment income, before expense reimbursements
and/or recoupments |
|
|
|
|
|
Net
investment income, net of reimbursements and/or recoupments
|
|
|
|
|
|
Portfolio
turnover rate |
|
|
|
|
|
| |
A |
Tax
return of capital is calculated based on shares outstanding at the time of
distribution. |
B |
Amount
represents less than $0.01 per share. |
C |
Based
on net asset value, which does not reflect the sales charge, redemption
fee, or contingent deferred sales charge, if applicable. May include
adjustments in accordance with
U.S. GAAP and as such, the net asset value for reporting purposes and the
returns based upon those net asset values may differ from the net asset
value and returns for shareholder
transactions. |
D |
Includes
non-operating expenses consisting of loan interest expenses. The expenses,
net of reimbursements or recoupments ratio excluding non-operating
expenses is 1.21% for the
year ended 2020. |
Prospectus
– Additional Information41
|
|
|
|
| |
American
Beacon Developing World Income Fund |
|
R5
ClassA
|
For
a share outstanding throughout the period: |
Year
Ended January
31, 2024 |
Year
Ended January
31, 2023 |
Year
Ended January
31, 2022 |
Year
Ended January
31, 2021 |
Year
Ended January
31, 2020 |
Net
asset value, beginning of period |
|
|
|
|
|
Income
(loss) from investment operations: |
|
|
|
|
|
Net
investment income |
|
|
|
|
|
Net
gains (losses) on investments (both realized and unrealized)
|
|
|
|
|
|
Total
income (loss) from investment operations |
|
|
|
|
|
Less
distributions: |
|
|
|
|
|
Dividends
from net investment income |
|
|
|
|
|
Distributions
from net realized gains |
|
|
|
|
|
Tax
return of capitalB
|
|
|
|
|
|
Total
distributions |
|
|
|
|
|
Redemption
fees added to beneficial interestsC
|
|
|
|
|
|
Net
asset value, end of period |
|
|
|
|
|
Total
returnD
|
|
|
|
|
|
Ratios
and supplemental data: |
|
|
|
|
|
Net
assets, end of period |
$52,304,497 |
$46,282,796 |
$47,897,191 |
$67,157,974 |
$71,344,608 |
Ratios
to average net assets: |
|
|
|
|
|
Expenses,
before reimbursements and/or recoupments |
|
|
|
|
|
Expenses,
net of reimbursements and/or recoupments |
|
|
|
|
|
Net
investment income, before expense reimbursements
and/or recoupments |
|
|
|
|
|
Net
investment income, net of reimbursements and/or recoupments
|
|
|
|
|
|
Portfolio
turnover rate |
|
|
|
|
|
| |
A |
Prior
to February 28, 2020, the R5 Class was known as Institutional
Class. |
B |
Tax
return of capital is calculated based on shares outstanding at the time of
distribution. |
C |
Amount
represents less than $0.01 per share. |
D |
Based
on net asset value, which does not reflect the sales charge, redemption
fee, or contingent deferred sales charge, if applicable. May include
adjustments in accordance with
U.S. GAAP and as such, the net asset value for reporting purposes and the
returns based upon those net asset values may differ from the net asset
value and returns for shareholder
transactions. |
E |
Includes
non-operating expenses consisting of loan interest expenses. The expenses,
net of reimbursements or recoupments ratio excluding non-operating
expenses is 1.15% for the
year ended 2020. |
42Prospectus
– Additional Information
|
|
|
|
| |
American
Beacon Developing World Income Fund |
|
Investor
Class |
For
a share outstanding throughout the period: |
Year
Ended January
31, 2024 |
Year
Ended January
31, 2023 |
Year
Ended January
31, 2022 |
Year
Ended January
31, 2021 |
Year
Ended January
31, 2020 |
Net
asset value, beginning of period |
|
|
|
|
|
Income
(loss) from investment operations: |
|
|
|
|
|
Net
investment income |
|
|
|
|
|
Net
gains (losses) on investments (both realized and unrealized)
|
|
|
|
|
|
Total
income (loss) from investment operations |
|
|
|
|
|
Less
distributions: |
|
|
|
|
|
Dividends
from net investment income |
|
|
|
|
|
Distributions
from net realized gains |
|
|
|
|
|
Tax
return of capitalA
|
|
|
|
|
|
Total
distributions |
|
|
|
|
|
Redemption
fees added to beneficial interestsB
|
|
|
|
|
|
Net
asset value, end of period |
|
|
|
|
|
Total
returnC
|
|
|
|
|
|
Ratios
and supplemental data: |
|
|
|
|
|
Net
assets, end of period |
$35,099,499 |
$35,767,335 |
$51,845,178 |
$49,433,819 |
$73,505,036 |
Ratios
to average net assets: |
|
|
|
|
|
Expenses,
before reimbursements and/or recoupments |
|
|
|
|
|
Expenses,
net of reimbursements and/or recoupments |
|
|
|
|
|
Net
investment income, before expense reimbursements
and/or recoupments |
|
|
|
|
|
Net
investment income, net of reimbursements and/or recoupments
|
|
|
|
|
|
Portfolio
turnover rate |
|
|
|
|
|
| |
A |
Tax
return of capital is calculated based on shares outstanding at the time of
distribution. |
B |
Amount
represents less than $0.01 per share. |
C |
Based
on net asset value, which does not reflect the sales charge, redemption
fee, or contingent deferred sales charge, if applicable. May include
adjustments in accordance with
U.S. GAAP and as such, the net asset value for reporting purposes and the
returns based upon those net asset values may differ from the net asset
value and returns for shareholder
transactions. |
D |
Includes
non-operating expenses consisting of loan interest expenses. The expenses,
net of reimbursements or recoupments ratio excluding non-operating
expenses is 1.44% for the
year ended 2020. |
Prospectus
– Additional Information43
Additional
Information
Additional
information about the Fund is found in the documents listed below. Request a
free copy of these documents by calling 1-800-658-5811
or you may access them on the Fund’s website at
www.americanbeaconfunds.com.
Annual
Shareholder Report/Semi-Annual Shareholder Report
The
Fund’s Annual and Semi-Annual Shareholder Reports and
Form N-CSR include additional information about the Fund’s investments. The
Annual
and Semi-Annual Shareholder Reports
also include a discussion by the Manager of market conditions and investment
strategies that significantly
affected the Fund’s performance. The Form
N-CSR includes the Fund’s annual and semi-annual financial statements as well as
the
report
of the Fund’s independent registered public accounting firm in
the annual financial statements.
SAI
The
SAI contains more details about the Fund and its investment policies. The SAI is
incorporated in this Prospectus by reference (it is legally part
of this Prospectus). A current SAI is on file with the SEC.
Appendix
A to the Prospectus – Intermediary Sales Charge Discounts, Waivers and Other
Information
Appendix
A contains more information about specific sales charge discounts and waivers
available for shareholders who purchase Fund shares
through a specific financial intermediary. Appendix A is incorporated herein by
reference (is legally a part of this Prospectus).
To
obtain more information about the Fund or to request a copy of the documents
listed above:
| |
By
Telephone: |
Call 1-800-658-5811 |
By
Mail: |
American
Beacon Funds P.O.
Box 219643 Kansas
City, MO 64121-9643 |
By
E-mail: |
|
On
the Internet: |
|
The
SAI and other information about the Fund are available on the EDGAR Database on
the SEC’s Internet site at www.sec.gov. Copies of this
information may be obtained, after paying a duplicating fee, by electronic mail
to [email protected], or by writing to the SEC’s Public Reference
Section, 100 F Street, NE, Washington, D.C. 20549-1520. The SAI and other
information about the Fund may also be reviewed and
copied at the SEC’s Public Reference Room. Information on the operation of the
SEC’s Public Reference Room may be obtained by calling
the SEC at (202) 551-8090.
| |
American
Beacon is a registered service mark of American Beacon Advisors, Inc. The
American Beacon Funds and
American Beacon Developing World Income Fund are service marks of American
Beacon Advisors, Inc. |
|
SEC
File Number 811-04984
Appendix
A
INTERMEDIARY
SALES CHARGE DISCOUNTS, WAIVERS AND OTHER INFORMATION
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from the Fund or through a financial
intermediary.
Specific intermediaries may have different policies and procedures regarding the
availability of front-end sales load waivers or CDSC waivers, which
are discussed below. In all instances, it is the purchaser’s responsibility to
notify the Fund or the purchaser’s financial intermediary at the time of
purchase
of any relationship or other facts qualifying the purchaser for sales charge
waivers or discounts. For waivers and discounts not available through a
particular
intermediary, shareholders will have to purchase Fund shares directly from the
Fund or through another intermediary to receive any applicable waivers
or discounts. Please see the section entitled “Choosing Your Share Class” for
more information on sales charges and waivers available for different
classes.
The
information in this Appendix is part of, and incorporated into, the Fund’s
prospectus.
Appendix
A: Ameriprise Financial
Class
A Shares Front-End Sales Charge Waivers Available at Ameriprise
Financial:
The
following information applies to Class A shares purchases if you have an account
with or otherwise purchase Fund shares through Ameriprise
Financial:
Shareholders
purchasing Fund shares through an Ameriprise Financial brokerage account are
eligible for the following front-end sales charge waivers, which may
differ from those disclosed elsewhere in this Fund’s prospectus or
SAI:
■ |
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and
defined benefit plans). For purposes of this provision, employer-sponsored
retirement plans do not include SEP IRAs, Simple IRAs or
SAR-SEPs. |
■ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same Fund (but not any
other
fund within the same fund family). |
■ |
Shares
exchanged from Class C shares of the same fund in the month of or
following the 7-year anniversary of the purchase date. To the extent that
this prospectus
elsewhere provides for a waiver with respect to exchanges of Class C
shares or conversion of Class C shares following a shorter holding period,
that
waiver will apply. |
■ |
Employees
and registered representatives of Ameriprise Financial or its affiliates
and their immediate family members. |
■ |
Shares
purchased by or through qualified accounts (including IRAs, Coverdell
Education Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and
defined
benefit plans) that are held by a covered family member, defined as an
Ameriprise financial advisor and/or the advisor’s spouse, advisor’s lineal
ascendant
(mother, father, grandmother, grandfather, great grandmother, great
grandfather), advisor’s lineal descendant (son, step-son, daughter,
step-daughter,
grandson, granddaughter, great grandson, great granddaughter) or any
spouse of a covered family member who is a lineal
descendant. |
■ |
Shares
purchased from the proceeds of redemptions within the same fund family,
provided (1) the repurchase occurs within 90 days following the
redemption,
(2) the redemption and purchase occur in the same account, and (3)
redeemed shares were subject to a front-end or deferred sales load (i.e.
Rights
of Reinstatement). |
Appendix
A: Baird
Effective
June 15, 2020, shareholders purchasing fund shares through a Baird platform or
account will only be eligible for the following sales charge waivers
(front-end
sales charge waivers and CDSC waivers) and discounts, which may differ from
those disclosed elsewhere in this prospectus or the SAI.
Front-End
Sales Charge Waivers on Investors A-shares Available at Baird
■ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing share of the same
fund |
■ |
Shares
purchased by employees and registers representatives of Baird or its
affiliate and their family members as designated by
Baird |
■ |
Shares
purchased from the proceeds of redemptions within the same fund family,
provided (1) the repurchase occurs within 90 days following the
redemption,
(2) the redemption and purchase occur in the same accounts, and (3)
redeemed shares were subject to a front-end or deferred sales charge
(known
as rights of reinstatement) |
■ |
A
shareholder in the Fund’s Investor C shares will have their share
converted at net asset value to Investor A shares of the fund if the
shares are no longer subject
to CDSC and the conversion is in line with the policies and procedures of
Baird |
■ |
Employer-sponsored
retirement plans or charitable accounts in a transactional brokerage
account at Baird, including 401(k) plans, 457 plans, employer-sponsored
403(b) plans, profit sharing and money purchase pension plans and defined
benefit plans. For purposes of this provision, employer-sponsored
retirement plans do not include SEP IRAs, Simple IRAs or
SAR-SEPs |
CDSC
Waivers on Investor A and C shares Available at Baird
■ |
Shares
sold due to death or disability of the
shareholder |
■ |
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
Prospectus |
■ |
Shares
bought due to returns of excess contributions from an IRA
Account |
■ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts due to the shareholder reaching age 72 as described in the Fund’s
prospectus |
■ |
Shares
sold to pay Baird fees but only if the transaction is initiated by
Baird |
■ |
Shares
acquired through a right of reinstatement |
Front-End
Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of
Accumulations
■ |
Breakpoints
as described in this prospectus |
■ |
Rights
of accumulation which entitles shareholders to breakpoint discounts will
be automatically calculated based on the aggregated holding of fund family
assets
held by accounts within the purchaser’s household at Baird. Eligible fund
family assets not held at Baird may be included in the rights of
accumulations
calculation only if the shareholder notifies his or her financial advisor
about such assets |
■ |
Letters
of Intent (LOI) allow for breakpoint discounts based on anticipated
purchases within a fund family through Baird, over a 13-month period of
time |
Appendix
A: Janney
Montgomery Scott
Effective
May 1, 2020, if you purchase fund shares through a Janney Montgomery Scott LLC
(“Janney”) brokerage account, you will be eligible for the following
load waivers (front-end sales charge waivers and contingent deferred sales
charge (“CDSC”), or back-end sales charge, waivers) and discounts, which
may differ from those disclosed elsewhere in this fund’s Prospectus or
SAI.
Front-end
sales charge* waivers on Class A shares available at Janney
■ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any
other
fund within the fund family). |
■ |
Shares
purchased by employees and registered representatives of Janney or its
affiliates and their family members as designated by
Janney. |
■ |
Shares
purchased from the proceeds of redemptions within the same fund family,
provided (1) the repurchase occurs within ninety (90) days following the
redemption,
(2) the redemption and purchase occur in the same account, and (3)
redeemed shares were subject to a front-end or deferred sales load (i.e.,
right
of reinstatement). |
■ |
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and
defined benefit plans). For purposes of this provision, employer-sponsored
retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh
plans. |
■ |
Shares
acquired through a right of
reinstatement. |
■ |
Class
C shares that are no longer subject to a contingent deferred sales charge
and are converted to Class A shares of the same fund pursuant to Janney’s
policies
and procedures. |
CDSC
waivers on Class A and C shares available at Janney
■ |
Shares
sold upon the death or disability of the
shareholder. |
■ |
Shares
sold as part of a systematic withdrawal plan as described in the fund’s
Prospectus. |
■ |
Shares
purchased in connection with a return of excess contributions from an IRA
account. |
■ |
Shares
sold as part of a required minimum distribution for IRA and other
retirement accounts due to the shareholder reaching age 70½ as described
in the fund’s
Prospectus. |
■ |
Shares
sold to pay Janney fees but only if the transaction is initiated by
Janney. |
■ |
Shares
acquired through a right of
reinstatement. |
■ |
Shares
exchanged into the same share class of a different
fund. |
Front-end
sales charge* discounts available at Janney: breakpoints, rights of
accumulation, and/or letters of intent
■ |
Breakpoints
as described in the fund’s Prospectus. |
■ |
Rights
of accumulation (“ROA”), which entitle shareholders to breakpoint
discounts, will be automatically calculated based on the aggregated
holding of fund
family assets held by accounts within the purchaser’s household at Janney.
Eligible fund family assets not held at Janney may be included in the ROA
calculation
only if the shareholder notifies his or her financial advisor about such
assets. |
■ |
Letters
of intent which allow for breakpoint discounts based on anticipated
purchases within a fund family, over a 13-month time period. Eligible fund
family
assets not held at Janney Montgomery Scott may be included in the
calculation of letters of intent only if the shareholder notifies his or
her financial advisor
about such assets. |
*Also
referred to as an “initial sales charge.”
Appendix
A: J.P.
Morgan Securities LLC
If
you purchase or hold fund shares through an applicable J.P. Morgan Securities
LLC brokerage account, you will be eligible for the following sales charge
waivers
(front-end sales charge waivers and contingent deferred sales charge (“CDSC”),
or back-end sales charge, waivers), share class conversion policy and
discounts,
which may differ from those disclosed elsewhere in this fund’s prospectus or
Statement of Additional Information (“SAI”).
Front-end
sales charge waivers on Class A shares available at J.P. Morgan Securities
LLC
■ |
Shares
exchanged from Class C (i.e., level-load) shares that are no longer
subject to a CDSC and are exchanged into Class A shares of the same fund
pursuant
to J.P. Morgan Securities LLC’s share class exchange
policy. |
■ |
Qualified
employer-sponsored defined contribution and defined benefit retirement
plans, nonqualified deferred compensation plans, other employee
benefit
plans and trusts used to fund those plans. For purposes of this provision,
such plans do not include SEP IRAs, SIMPLE IRAs, SAR-SEPs or
501(c)(3) accounts. |
■ |
Shares
of funds purchased through J.P. Morgan Securities LLC Self-Directed
Investing accounts. |
■ |
Shares
purchased through rights of
reinstatement. |
■ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any
other
fund within the fund family). |
■ |
Shares
purchased by employees and registered representatives of J.P. Morgan
Securities LLC or its affiliates and their spouse or financial dependent
as defined
by J.P. Morgan Securities LLC. |
Class
C to Class A share conversion
■ |
A
shareholder in the fund’s Class C shares will have their shares
converted by J.P. Morgan Securities LLC to Class A shares (or the
appropriate share class) of the
same fund if the shares are no longer subject to a CDSC and the conversion
is consistent with J.P. Morgan Securities LLC’s policies and
procedures. |
CDSC
waivers on Class A and C shares available at J.P. Morgan Securities
LLC
■ |
Shares
sold upon the death or disability of the
shareholder. |
■ |
Shares
sold as part of a systematic withdrawal plan as described in the fund’s
prospectus. |
■ |
Shares
purchased in connection with a return of excess contributions from an IRA
account. |
■ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts pursuant to the Internal Revenue
Code. |
■ |
Shares
acquired through a right of
reinstatement. |
Front-end
load discounts available at J.P. Morgan Securities LLC: breakpoints, rights of
accumulation & letters of intent
■ |
Breakpoints
as described in the prospectus. |
■ |
Rights
of Accumulation (“ROA”) which entitle shareholders to breakpoint discounts
as described in the fund’s prospectus will be automatically calculated
based
on the aggregated holding of fund family assets held by accounts within
the purchaser’s household at J.P. Morgan Securities LLC. Eligible fund
family assets
not held at J.P. Morgan Securities LLC (including 529 program holdings,
where applicable) may be included in the ROA calculation only if the
shareholder
notifies their financial advisor about such
assets. |
■ |
Letters
of Intent (“LOI”) which allow for breakpoint discounts based on
anticipated purchases within a fund family, through J.P. Morgan Securities
LLC, over a
13-month period of time (if applicable). |
Appendix
A: Merrill Lynch
Purchases
or sales of front-end (i.e. Class A) or level-load (i.e., Class C) mutual
fund
shares through a Merrill platform
or account will be eligible only for the following
sales
load
waivers (front-end,
contingent deferred, or back-end waivers)
and discounts, which differ
from those disclosed elsewhere in this
Fund’s prospectus.
Purchasers will have to buy mutual fund shares directly from the mutual fund
company or through another intermediary to be eligible for waivers or
discounts not listed below.
It
is the client’s responsibility to notify Merrill at the time of purchase or sale
of any relationship or other facts that qualify the transaction for a waiver or
discount.
A Merrill representative may ask for reasonable documentation of such facts and
Merrill may condition the granting of a waiver or discount on the timely
receipt of such documentation.
Additional
information on waivers and discounts is available in the Merrill Sales Load
Waiver and Discounts Supplement (the “Merrill SLWD Supplement”) and in
the Mutual Fund Investing at Merrill pamphlet at ml.com/funds. Clients are
encouraged to review these documents and speak with their financial advisor to
determine
whether a transaction is eligible for a waiver or discount.
Front-end
Load
Waivers Available
at Merrill
■ |
Shares
of mutual funds available for purchase by employer-sponsored
retirement, deferred compensation,
and employee benefit plans (including health savings
accounts) and trusts used to fund those plans
provided the
shares are not held in a commission-based brokerage account and shares are
held for the
benefit of the plan.
For purposes of this provision, employer-sponsored retirement plans do not
include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans
|
■ |
Shares
purchased through a Merrill investment
advisory program |
■ |
Brokerage
class shares exchanged from advisory class shares
due to the holdings moving from a Merrill investment
advisory program to a Merrill brokerage
account
|
■ |
Shares
purchased
through the Merrill Edge Self-Directed platform
|
■ |
Shares
purchased through the
systematic reinvestment
of capital gains distributions and dividend reinvestment when purchasing
shares of the same mutual
fund
in the same account |
■ |
Shares
exchanged from level-load
shares to front-end load
shares of the same mutual
fund in accordance with the description in the Merrill SLWD Supplement |
■ |
Shares
purchased by eligible employees of Merrill
or its affiliates and their family members
who purchase shares in accounts within the employee’s Merrill Household
(as defined in the Merrill SLWD
Supplement) |
■ |
Shares
purchased by eligible persons associated with the fund as defined in this
prospectus (e.g. the fund’s officers or
trustees) |
■ |
Shares
purchased from the proceeds of a
mutual fund redemption in front-end load shares provided (1) the
repurchase is in a mutual fund
within the same fund
family;
(2)
the repurchase occurs within 90 calendar
days
from
the redemption
trade date,
and
(3)
the redemption and purchase occur in the same account
(known as Rights of Reinstatement). Automated transactions (i.e.
systematic purchases and withdrawals) and purchases made after shares are
automatically
sold to pay Merrill’s
account maintenance fees are not eligible for Rights
of Reinstatement |
Contingent
Deferred Sales Charge (“CDSC”) Waivers on Front-end, Back-end, and Level Load
Shares Available at Merrill
■ |
Shares
sold due to the client’s death or disability (as defined by Internal
Revenue Code Section 22I(3)) |
■ |
Shares
sold pursuant
to
a systematic withdrawal program
subject to Merrill’s maximum systematic withdrawal limits
as described in the Merrill
SLWD Supplement |
■ |
Shares
sold due to return
of excess contributions from an IRA account |
■ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts due
to the investor reaching the qualified age based on applicable
IRS
regulation |
■ |
Front-end
or level-load shares held in commission-based, non-taxable
retirement brokerage accounts
(e.g.
traditional, Roth, rollover, SEP IRAs, Simple IRAs, SAR-SEPs
or Keogh plans) that are transferred to fee-based
accounts or platforms and
exchanged for a lower cost share class of the same mutual fund
|
Front-end
Load
Discounts Available at Merrill:
Breakpoints, Rights of Accumulation & Letters of Intent
■ |
Breakpoint
discounts,
as described in this prospectus,
where the sales load is at or below the maximum sales load that Merrill
permits to be assessed to a front-end
load purchase, as described in the Merrill SLWD
Supplement |
■ |
Rights
of Accumulation (ROA),
as described in the Merrill
SLWD Supplement, which entitle clients to breakpoint discounts
based on the aggregated holdings
of mutual
fund
family assets held in
accounts in their Merrill Household |
■ |
Letters
of Intent (LOI),
which allow for breakpoint discounts on
eligible new purchases based
on anticipated future
eligible purchases
within a fund family
at Merrill,
in accounts within your Merrill Household, as further described in the
Merrill SLWD Supplement |
Appendix
A: Morgan Stanley
Effective
July 1, 2018, shareholders purchasing Fund shares through a Morgan Stanley
Wealth Management transactional brokerage account will be eligible only
for the following front-end sales charge waivers with respect to Class A shares,
which may differ from and may be more limited than those disclosed elsewhere
in this Fund’s Prospectus or SAI.
Front-end
Sales Charge Waivers on Class A Shares available at Morgan Stanley Wealth
Management
■ |
Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and
defined benefit plans). For purposes of this provision, employer-sponsored
retirement plans do not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh
plans |
■ |
Morgan
Stanley employee and employee-related accounts according to Morgan
Stanley’s account linking rules |
■ |
Shares
purchased through reinvestment of dividends and capital gains
distributions when purchasing shares of the same
fund |
■ |
Shares
purchased through a Morgan Stanley self-directed brokerage
account |
■ |
Class
C (i.e., level-load) shares that are no longer subject to a contingent
deferred sales charge and are converted to Class A shares of the same fund
pursuant
to Morgan Stanley Wealth Management’s share class conversion
program |
■ |
Shares
purchased from the proceeds of redemptions within the same fund family,
provided (i) the repurchase occurs within 90 days following the
redemption,
(ii) the redemption and purchase occur in the same account, and (iii)
redeemed shares were subject to a front-end or deferred sales
charge. |
Appendix
A: Oppenheimer & Co. Inc. (“OPCO”)
Effective
February 26, 2020, shareholders purchasing Fund shares through an OPCO platform
or account are eligible only for the following load waivers (front-end
sales charge waivers and contingent deferred, or back-end, sales charge waivers)
and discounts, which may differ from those disclosed elsewhere in this
Fund’s prospectus or SAI.
Front-end
Sales Load Waivers on Class A Shares available at OPCO
■ |
Employer-sponsored
retirement, deferred compensation and employee benefit plans (including
health savings accounts) and trusts used to fund those plans, provided
that the shares are not held in a commission-based brokerage account and
shares are held for the benefit of the
plan |
■ |
Shares
purchased by or through a 529 Plan |
■ |
Shares
purchased through an OPCO affiliated investment advisory
program |
■ |
Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any
other
fund within the fund family) |
■ |
Shares
purchased form the proceeds of redemptions within the same fund family,
provided (1) the repurchase occurs within 90 days following the
redemption,
(2) the redemption and purchase occur in the same amount, and (3) redeemed
shares were subject to a front-end or deferred sales load (known
as Rights of Restatement). |
■ |
A
shareholder in the Fund’s Class C shares will have their shares converted
at net asset value to Class A shares (or the appropriate share class) of
the Fund if the
shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of OPCO |
■ |
Employees
and registered representatives of OPCO or its affiliates and their family
members |
■ |
Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or
any of its affiliates, as described in this
prospectus |
CDSC
Waivers on A, B and C Shares available at OPCO
■ |
Death
or disability of the shareholder |
■ |
Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus |
■ |
Return
of excess contributions from an IRA
Account |
■ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts due to the shareholder reaching age 70½ as described in the
prospectus |
■ |
Shares
sold to pay OPCO fees but only if the transaction is initiated by
OPCO |
■ |
Shares
acquired through a right of reinstatement |
Front-end
load Discounts Available at OPCO: Breakpoints, Rights of Accumulation &
Letters of Intent
■ |
Breakpoints
as described in this prospectus. |
■ |
Rights
of Accumulation (ROA) which entitle shareholders to breakpoint discounts
will be automatically calculated based on the aggregated holding of fund
family
assets held by accounts within the purchaser’s household at OPCO. Eligible
fund family assets not held at OPCO may be included in the ROA
calculation
only if the shareholder notifies his or her financial advisor about such
assets. |
Appendix
A: Raymond James
Shareholders
purchasing Fund shares through a Raymond James platform or account, or through
an introducing broker-dealer or independent registered investment
adviser for which Raymond James provides trade execution, clearance, and/or
custody services, will be eligible only for the following load waivers
(front-end
sales charge waivers and contingent deferred, or back-end, sales charge waivers)
and discounts, which may differ from those disclosed elsewhere in this
Fund’s prospectus or SAI.
Front-end
Sales Charge Waivers on Class A Shares available at Raymond
James
■ |
Shares
purchased in an investment advisory
program. |
■ |
Shares
purchased within the same fund family through a systematic reinvestment of
capital gains and dividend distributions. |
■ |
Employees
and registered representatives of Raymond James or its affiliates and
their family members as designated by Raymond
James. |
■ |
Shares
purchased from the proceeds of redemptions within the same fund family,
provided (1) the repurchase occurs within 90 days following the
redemption,
(2) the redemption and purchase occur in the same account, and (3)
redeemed shares were subject to a front-end or deferred sales load
(known
as Rights of Reinstatement). |
■ |
A
shareholder in the Fund’s Class C shares will have their shares converted
at net asset value to Class A shares (or the appropriate share class) of
the Fund if the
shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of Raymond
James. |
CDSC
Waivers on Classes A and C shares available at Raymond
James
■ |
Death
or disability of the shareholder. |
■ |
Shares
sold as part of a systematic withdrawal plan as described in the fund’s
prospectus. |
■ |
Return
of excess contributions from an IRA
Account. |
■ |
Shares
sold as part of a required minimum distribution for IRA and retirement
accounts due to the shareholder reaching the qualified age based on
applicable
IRS regulations as described in the fund’s
prospectus. |
■ |
Shares
sold to pay Raymond James fees but only if the transaction is initiated by
Raymond James. |
■ |
Shares
acquired through a right of
reinstatement. |
Front-end
load discounts available at Raymond James: breakpoints, rights of accumulation,
and/or letters of intent
■ |
Breakpoints
as described in this Prospectus. |
■ |
Rights
of accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family
assets
held by accounts within the purchaser’s household at Raymond James.
Eligible fund family assets not held at Raymond James may be included in
the calculation
of rights of accumulation only if the shareholder notifies his or her
financial advisor about such assets. |
■ |
Letters
of intent which allow for breakpoint discounts based on anticipated
purchases within a fund family, over a 13-month time period. Eligible fund
family
assets not held at Raymond James may be included in the calculation of
letters of intent only if the shareholder notifies his or her financial
advisor about
such assets. |
Appendix
A: Wells Fargo
Effective
June 30, 2020, C Class shares will convert automatically into A Class shares on
the 25th day of the month (or, if the 25th is not a business day, the
next
business day thereafter) following the eighth anniversary of the month on which
the purchase order was accepted, provided that the Fund or the financial
intermediary through which a shareholder purchased C Class shares has records
verifying that the C Class shares have been held for at least eight years.
The first conversion of C Class to A Class shares under this new policy would
take place on July 25, 2020 for all C Class shares that were held for more
than
eight years as of June 30, 2020.
Appendix
B
GLOSSARY
|
| |
ACH |
Automated
Clearing House |
American
Beacon or Manager |
American
Beacon Advisors, Inc. |
Beacon
Funds |
American
Beacon Funds |
Board |
Board
of Trustees |
Capital
Gains Distributions |
Distributions
of realized net capital gains |
CDSC |
Contingent
Deferred Sales Charge |
CFD |
Contract
For Difference |
CFTC |
Commodity
Futures Trading Commission |
CLN |
Credit-Linked
Notes |
CPO |
Commodity
Pool Operator |
Dividends |
Distributions
from the Fund’s net investment income |
ESG |
Environmental,
Social, and Governance |
Forwards |
Forward
Currency Contracts |
Internal
Revenue Code |
Internal
Revenue Code of 1986, as amended |
Investment
Company Act |
Investment
Company Act of 1940, as amended |
IRA |
Individual
Retirement Account |
IRS |
Internal
Revenue Service |
Junk
Bonds |
High-yield,
non-investment grade bonds |
LOI |
Letter
of Intent |
Management
Agreement |
The
Fund’s Management Agreement with the Manager |
Moody’s |
Moody’s
Investors Service, Inc. |
NAV |
Fund’s
net asset value |
NDF |
Non-deliverable
foreign currency forward contract |
NYSE |
New
York Stock Exchange |
Other
Distributions |
Distributions
of net gains from foreign currency transactions |
OTC |
Over-the-Counter |
QDI |
Qualified
Dividend Income |
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 |
SVP |
Signature
Validation Program |
Trust |
American
Beacon Funds |
UK |
United
Kingdom |