UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
220 East Las Colinas Boulevard, Suite 1200
Irving, Texas 75039
(Address of principal executive offices)-(Zip code)
GENE L. NEEDLES, JR., PRESIDENT
220 East Las Colinas Boulevard, Suite 1200
Irving, Texas 75039
(Name and address of agent for service)
Registrant’s telephone number, including area code: (817) 391-6100
Date of fiscal year end: January 31, 2017
Date of reporting period: January 31, 2017
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
American Beacon(R)
FUNDS
2017 ANNUAL REPORT
January 31, 2017
CRESCENT SHORT DURATION HIGH INCOME FUND
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
CRESCENT SHORT DURATION HIGH INCOME FUND
The Fund’s investments in high yield securities, including loans, restricted securities and floating rate securities are subject to greater levels of credit, interest rate, market and liquidity risks than investment-grade securities. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | January 31, 2017 |
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Schedule of Investments: | ||||
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Financial Highlights: | ||||
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Back Cover |
![]() | Dear Shareholders,
In the weeks ahead of the U.S. presidential election on November 8, 2016, uncertainty about the outcome caused many investors to stay on the sidelines. Some investors questioned whether the election’s result would have negative consequences for their portfolios, although elections have rarely had a lasting effect on the market.
Following the election, the markets responded positively to aspects of the incoming administration’s proposed plans for economic growth; i.e., repatriating jobs from overseas, relaxing regulations, lowering taxes and increasing infrastructure spending. From Election Day 2016 to Inauguration Day 2017, the S&P 500 Index - a broad measure of the performance of large U.S. companies - climbed approximately 6%. |
In December 2016, the Federal Reserve increased short-term interest rates by 0.25% to a range of 0.50% and 0.75%, signifying the Federal Open Market Committee’s confidence in an improving economy. It was the second rate increase in a decade; the first rate increase occurred in December 2015. Economists anticipate more rate increases this year.
For the 12-month period that ended January 31, 2017, the Dow Jones Industrial Average - which follows the performance of 30 significant stocks trading on the New York Stock Exchange and The NASDAQ Stock Market - gained 23.89%. The S&P 500 Index, a domestic equity bellwether, grew 20.04%. The MSCI EAFE Index, which measures the world’s developed markets, increased 12.03%. The BofA Merrill Lynch U.S. High Yield Cash Pay BB-B 1-5 Year Index climbed 14.81%.
For the 12 months ended January 31, 2017:
• | American Beacon Crescent Short Duration High Income Fund (Investor Class) returned 11.96%. |
At American Beacon Advisors, we are proud to offer a broad range of global equity and fixed-income funds sub-advised by experienced asset managers who employ distinctive investment processes to manage assets through a variety of economic and market conditions. Together, we work diligently to help our shareholders meet their long-term financial goals.
Thank you for your continued investment in American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, |
Gene L. Needles, Jr. |
President |
American Beacon Funds |
1
High Yield Bond Market Overview
January 31, 2017 (Unaudited)
The global bond market produced mixed results during the period as high-quality government issuers posted low or negative returns and high-yield outperformed. The Bloomberg Barclays Global Treasury Index returned 1.8% while the Bloomberg Barclays Global High Yield Index returned 18.2%.
The period began with a weak economic outlook as equity markets declined, commodity prices softened and interest rates drifted lower. Central banks across the globe emphasized their commitment to economic recovery and followed with a variety of accommodative actions.
In the summer of 2016, the markets were again tested as the U.K.’s Brexit vote to leave the European Union sent shockwaves through the markets. Record amounts of government bonds (primarily in Europe and Japan) traded into negative yields, and safe-haven U.S. Treasury yields dropped below the levels seen during the financial crisis of 2008 and the European debt crisis of 2012. As a result, total returns from government bonds were very strong during the first half of the period.
The volatility was short lived, however, as policy makers remained accommodative and hints of improved economic growth eventually began to surface. Commodity prices stabilized as equity markets regained their footing.
The final months of the year proved most pivotal as Donald Trump’s surprise victory in the U.S. presidential election provoked a risk-on rally into year end. Developed market equities rose sharply in hopes of growth-friendly initiatives from the new president, and government bond prices rolled over (yields rose). Emerging market bonds weakened against criticism of trade and immigration policies, but they still managed to finish the year with solid returns overall. The JPMorgan Emerging Market Bond Indexes (both hard and local currency) returned 12.0%. Mexico was particularly hard hit (down 1.8%) as talk of building walls and limiting trade was most pronounced.
The smaller, frontier economies also produced strong results as their commodity-export economies were viewed as less susceptible to trade sanctions, as compared to manufacturing exporters, and they avoided the mainstream selling in emerging markets. The JPMorgan NEXGEM Index returned 19.2%.
U.S. high-yield bonds outperformed investment-grade bonds as investors sought greater income and protection from rising interest rates. The rising stock markets were also helpful for high-yield bonds as they tend to be positively correlated. The Energy and Materials sectors led with returns of more than 50.0%, according to the Bloomberg Barclays High Yield Index. By comparison, investment-grade corporate bonds returned 6.1%, according to the Bloomberg Barclays Corporate Bond Index.
The period ended with optimism that the U.S. would continue to recover, Europe would pull out of its malaise and the worst of the commodity rout was behind. The Federal Reserve had already begun to reduce its monetary policy accommodation. Investors, however, were also beginning to look cautiously at the upcoming elections in Europe and at central bank actions in Japan and China. Likewise, the non-traditional administration in the U.S. was likely to have a few surprises of its own.
2
American Beacon Crescent Short Duration High Income FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Investor Class of the American Beacon Crescent Short Duration High Income Fund (the “Fund”) returned 11.96% for the twelve-month period ended January 31, 2017, underperforming the Bank of America Merrill Lynch U.S. High Yield Cash Pay BB-B 1-5 Year Index (the “Index”) return of 14.81%. For further comparison, the Bank of America U.S. High Yield Master II Index returned 20.98% and the Credit Suisse Leveraged Loan Index returned 11.27% during the period.
Comparison of Change in Value of a $10,000 Investment for the period from 10/1/2014 through 1/31/2017
Total Returns for the Period ended January 31, 2017
Ticker | 1 Year | Since Inception 10/1/2014 | Value of $10,000 10/1/2014- 1/31/2017 | |||||||||||||
Institutional Class (1,3) | ACHIX | 12.38 | % | 3.38 | % | $ | 10,806 | |||||||||
Y Class (1,3) | ACHYX | 12.27 | % | 3.25 | % | $ | 10,775 | |||||||||
Investor Class (1,3) | ACHPX | 11.96 | % | 3.00 | % | $ | 10,714 | |||||||||
A without Sales Charge (1,3) | ACHAX | 11.94 | % | 2.93 | % | $ | 10,697 | |||||||||
A with Sales Charge (1,3) | ACHAX | 9.15 | % | 1.80 | % | $ | 10,426 | |||||||||
C without Sales Charge (1,3) | ACHCX | 10.98 | % | 2.17 | % | $ | 10,515 | |||||||||
C with Sales Charge (1,3) | ACHCX | 9.98 | % | 2.17 | % | $ | 10,515 | |||||||||
BofA Merrill Lynch U.S High Yield Cash Pay BB-B 1-5 Year Index (2) | 14.81 | % | 3.89 | % | $ | 10,933 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A portion of the fees charged to each Class of the Fund has been waived since inception. Performance prior to waiving fees was lower than the actual returns shown since inception. A Class shares have a maximum sales charge of 2.50%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase. |
3
American Beacon Crescent Short Duration High Income FundSM
Performance Overview
January 31, 2017 (Unaudited)
2. | The BofA Merrill Lynch U.S. High Yield Cash Pay BB-B 1-5 Year Index is an unmanaged index that generally tracks the performance of BB-B rated U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market with maturities of 1 to 5 years. One cannot directly invest in an index. |
3. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 1.28%, 1.30%, 1.47%, 1.56%, and 2.37%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund’s sub-advisor actively allocates among traditional high-yield, floating-rate bank loan and private debt sectors of the bond market to seek attractive risk-adjusted returns with lower volatility than that of the high-yield market overall. This flexibility also allows for opportunity to invest in securities outside of the traditional indices. On average during the period, the Fund held approximately 65% of assets in traditional high yield, 25% in floating-rate bank loans and 10% in private debt.
The Fund underperformed the Index due primarily to its exposure to floating-rate bank loans and underweight position in the commodity sectors (including energy and metals). The Fund actively seeks investments in floating-rate bank loans due to their attractive risk-adjusted characteristics, but loans underperformed during the period as interest rates declined and high yield spreads narrowed. Near period end, however, in response to the improving U.S. economy, surprise election results and Fed rate hike, interest rates rose markedly contributing to a strong finish for loans.
The Fund also held underweight positions in the energy and metals sectors, which detracted from results as those were the best performing sectors during the period. Commodity prices stabilized early in the period, and the improving economic outlook encouraged investors to look for opportunity. The Fund, however, has been underweight commodities since 2014 when they began to roll over. As such, the Fund’s two-year returns, which are in line with the index and peer group, are more reflective of its longer-term approach to add value over the cycle.
To a lesser extent, the Fund’s underweight position in financials detracted somewhat from returns as the banking sector posted a strong finish based on expectations of the Trump administration’s easing of the regulatory burden.
Overall, the Fund performed as expected during the period and delivered attractive risk-adjusted returns.
Top Ten Holdings (% Net Assets) | ||||||||
T-Mobile USA, Inc., 6.625%, Due 4/1/2023 | 1.7 | |||||||
Sprint Corp., 7.25%, Due 9/15/2021 | 1.3 | |||||||
HCA, Inc., 5.875%, Due 5/1/2023 | 0.9 | |||||||
Post Holdings, Inc., 6.00%, Due 12/15/2022, 144A | 0.8 | |||||||
Fly Leasing Ltd., 6.75%, Due 12/15/2020 | 0.8 | |||||||
First Data Corp., 7.00%, Due 12/1/2023, 144A | 0.7 | |||||||
Ally Financial, Inc., 3.75%, Due 11/18/2019 | 0.7 | |||||||
Cott Beverages, Inc., 5.375%, Due 7/1/2022 | 0.7 | |||||||
Block Communications, Inc., 7.25%, Due 2/1/2020, 144A | 0.7 | |||||||
Universal Hospital Services, Inc., 7.625%, Due 8/15/2020 | 0.7 | |||||||
Total Fund Holdings | 346 |
Sector Weightings (% Investments) | ||||||||
Service | 32.8 | |||||||
Manufacturing | 27.3 | |||||||
Energy | 12.8 | |||||||
Finance | 10.0 | |||||||
Telecom | 6.7 | |||||||
Consumer | 6.1 | |||||||
Transportation | 2.2 | |||||||
Utilities | 2.0 |
4
Expense Example
January 31, 2017 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The Examples below are intended to help you understand the ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period (or the inception date of the Fund) in each Class and held for the entire period from August 1, 2016 through January 31, 2017.
Actual Expenses
The “Actual” lines of the tables provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and Investor Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as sales charges (loads). Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
5
American Beacon FundsSM
Expense Example
January 31, 2017 (Unaudited)
Crescent Short Duration High Income Fund
Beginning Account Value 8/1/2016 | Ending Account Value 1/31/2017 | Expenses Paid During Period 8/1/2016-1/31/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,046.88 | $ | 4.37 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.87 | $ | 4.32 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.28 | $ | 4.88 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.36 | $ | 4.82 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.76 | $ | 6.32 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.95 | $ | 6.24 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.70 | $ | 6.42 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.85 | $ | 6.34 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.75 | $ | 10.25 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,015.06 | $ | 10.13 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 0.85%, 0.95%, 1.23%, 1.25% and 2.00% for the Institutional, Y, Investor, A and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. |
** | 5% return before expenses. |
6
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of American Beacon Funds and Shareholders of American Beacon Crescent Short Duration High Income Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments as of January 31, 2017, and the related statements of operations and of changes in net assets and the financial highlights for the year then ended present fairly, in all material respects, the financial position of the American Beacon Crescent Short Duration High Income Fund (a series constituting American Beacon Funds, hereafter referred to as the “Fund”), as of January 31, 2017, the results of its operations, the changes in its net assets and its financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities as of January 31, 2017 by correspondence with the custodian, agent banks and brokers or by other appropriate auditing procedures where replies were not received, provide a reasonable basis for our opinion. The financial statements as of and for the year ended January 31, 2016 and the financial highlights for each of the periods ended on or prior to January 31, 2016 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated March 31, 2016 expressed an unqualified opinion on those financial statements and financial highlights.
PricewaterhouseCoopers
Boston, Massachusetts
March 30, 2017
7
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
COMMON STOCKS - 0.01% (Cost $26,255) | ||||||||
ENERGY- 0.00% | ||||||||
Oil & Gas - 0.00% | ||||||||
Energy & Exploration Partners, Inc.A | 3 | $ | 1,050 | |||||
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HEALTH CARE- 0.01% | ||||||||
Pharmaceuticals - 0.01% | ||||||||
Millennium Health, LLCA B | 4,651 | 4,944 | ||||||
|
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Total Common Stocks (Cost $26,255) | 5,994 | |||||||
|
| |||||||
Principal Amount | ||||||||
BANK LOAN OBLIGATIONS - 24.47% | ||||||||
Consumer - 2.38% | ||||||||
Albertsons LLC, 2016 First Lien Term Loan B4, VR, 3.778%, Due 8/22/2021C D | $ | 94,940 | 95,325 | |||||
Anchor Glass Container Corp., First Lien Term Loan, VR, 4.25%, Due 12/7/2023C D | 170,568 | 172,061 | ||||||
Anchor Glass Container Corp., Second Lien Term Loan, VR, 8.75%, Due 12/7/2024C D | 27,185 | 27,547 | ||||||
B & G Foods, Inc., 2015 Term Loan B, VR, 3.771%, Due 11/2/2022C D | 114,011 | 115,008 | ||||||
Dell International LLC, Term Loan A2, VR, 3.03%, Due 9/7/2021B C D | 54,042 | 54,062 | ||||||
Dell International LLC, Term Loan B, VR, 4.03%, Due 9/7/2023B C D | 80,533 | 80,875 | ||||||
JBS USA, LLC, Term Loan B, 3.25%, Due 10/30/2022B D | 125,000 | 125,000 | ||||||
Maple Holdings Acquisition Corp., Term Loan B, VR, 5.313%, Due 3/3/2023C D | 56,019 | 56,778 | ||||||
NVA Holdings, Inc., First Lien Term Loan, VR, 4.75%, Due 8/14/2021C D | 185,135 | 185,946 | ||||||
Pinnacle Foods Finance LLC, 2017 Term Loan B, VR, 2.00%, Due 1/27/2024 B D | 23,374 | 23,418 | ||||||
Prestige Brands, Inc., Term Loan B4, VR, 3.50%, Due 1/26/2024 D | 30,000 | 30,263 | ||||||
Revlon Consumer Products Corp., New Term Loan, VR, 4.278%, Due 9/7/2023C D | 57,841 | 58,296 | ||||||
RSC Acquisition, Inc., Term Loan, VR, 6.25%, Due 11/30/2022D | 247,521 | 243,809 | ||||||
Shearers Foods LLC, First Lien Term Loan, VR, 4.938%, Due 6/30/2021 B D | 89,845 | 89,958 | ||||||
Shearers Foods, Inc., Incremental Term Loan, VR, 5.25%, Due 6/30/2021C D | 9,900 | 9,894 | ||||||
Spectrum Brands, Inc., Term Loan, VR, 3.313%, Due 6/23/2022C D | 36,584 | 36,989 | ||||||
Varsity Brands, Inc. First Lien Term Loan, VR, 5.00%, Due 12/11/2021D | 77,716 | 78,737 | ||||||
|
| |||||||
1,483,966 | ||||||||
|
| |||||||
Energy - 0.67% | ||||||||
Chief Exploration & Development LLC, 2nd Lien Term Loan, VR, 6.50%, Due 5/16/2021B D | 250,000 | 246,875 | ||||||
CITGO Petroleum Corp., Term Loan B, VR, 4.50%, Due 7/29/2021C D | 125,000 | 125,039 | ||||||
Energy & Exploration Partners, Inc., 2016 2nd Lien PIK Term Loan, VR, 5.00%, Due 5/13/2022D | 6,195 | 2,788 | ||||||
MEG Energy Corp., 2017 Term Loan B, VR, 4.50%, Due 12/31/2023 D | 40,499 | 40,626 | ||||||
|
| |||||||
415,328 | ||||||||
|
| |||||||
Finance - 3.24% | ||||||||
Acrisure LLC, 2016 Term Loan B, VR, 5.75%, Due 10/28/2023 B D J | 58,451 | 59,123 | ||||||
Americold Realty Operating Partnership, L.P., Term Loan B, 4.75%, Due 12/1/2022C D E | 75,064 | 76,284 | ||||||
Ascensus, Inc., Term Loan, VR, 5.50%, Due 12/3/2022C D | 45,872 | 45,814 | ||||||
AssuredPartners Inc., First Lien Term Loan, VR, 5.25%, Due 10/21/2022 D | 173,255 | 175,248 | ||||||
Asurion LLC, Term Loan B4, VR, 4.25%, Due 8/4/2022B C D | 170,406 | 172,182 | ||||||
Capital Automotive LP, Second Lien Term Loan, VR, 6.00%, Due 4/30/2020D E | 250,000 | 251,668 | ||||||
Cision US Inc., Term Loan B, VR, 7.00%, Due 6/16/2023D | 99,500 | 99,314 | ||||||
DTZ U. S. Borrower LLC, First Lien Term Loan, VR, 4.25%, Due 11/4/2021B C D | 246,250 | 247,597 | ||||||
Higginbotham & Associates LLC, Term Loan, VR, 6.00%, Due 11/25/2021B D | 208,025 | 208,545 | ||||||
IG Investment Holdings LLC, Term Loan B, VR, 6.00%, Due 10/29/2021B D | 244,898 | 246,122 | ||||||
iStar, Inc., 2016 Term Loan B, VR, 5.50%, Due 7/1/2020C D | 79,391 | 79,987 | ||||||
iStar, Inc., 2017 Term Loan B, VR, 4.75%, Due 7/1/2020 D | 5,649 | 5,649 | ||||||
MPH Acquisition Holdings LLC, 2016 Cov-Lite First Lien Term Loan, VR, 5.00%, Due 6/7/2023B D | 105,591 | 107,065 | ||||||
RPI Finance Trust, Term Loan B5, VR, 3.498%, Due 10/14/2022C D | 80,491 | 81,114 | ||||||
Travelport Finance Luxembourg Sarl, 2017 Term Loan B, VR, 5.00%, Due 9/2/2021 D | 163,376 | 163,580 | ||||||
|
| |||||||
2,019,292 | ||||||||
|
| |||||||
Manufacturing - 7.12% | ||||||||
American Bath Group LLC, 2017 First Lien Add On Term Loan, VR, 6.25%, Due 9/30/2023 B D | 226,415 | 227,547 | ||||||
American Bath Group LLC, Delayed Draw Term Loan, VR, 6.25%, Due 9/30/2023 B D | 23,585 | 23,762 |
See accompanying notes
8
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Manufacturing - 7.12% (continued) | ||||||||
Avast Software BV, Initial Dollar Term Loan, VR, 5.00%, Due 9/30/2022C D | $ | 103,441 | $ | 104,863 | ||||
BMC Software Finance, Inc., US Borrower Term Loan, VR, 5.00%, Due 9/10/2020D | 128,569 | 128,208 | ||||||
Builders FirstSource, Inc., First LienTerm Loan B, VR, 4.75%, Due 7/31/2022C D | 155,883 | 155,688 | ||||||
Chromaflo Technologies Corp., 2016 First Lien Term Loan, VR, 5.00%, Due 11/18/2023 D | 54,340 | 54,680 | ||||||
Chromaflo Technologies Corp., 2016 Term Loan B2, VR, 5.00%, Due 11/18/2023 D | 70,660 | 71,101 | ||||||
Computer Sciences Government Services, Inc., Term Loan B, VR, 3.435%, Due 11/28/2022C D | 21,758 | 21,894 | ||||||
Compuware Corp., Term Loan B2, VR, 6.25%, Due 12/15/2021C D | 108,681 | 108,763 | ||||||
Cortes NP Acquisition Corp. (aka Vertiv Co.), First Lien Term Loan, VR, 6.039%, Due 11/30/2023 D | 64,815 | 65,139 | ||||||
CPG Merger Sub LLC, First Lien Term Loan, VR, 4.75%, Due 9/30/2020 D | 147,781 | 148,983 | ||||||
Doosan Infracore International, Inc., Term Loan B, VR, 4.50%, Due 5/28/2021D | 55,964 | 56,629 | ||||||
Electrical Components International, Inc., First Lien Term Loan B, VR, 5.75%, Due 5/30/2021C D | 100,000 | 100,125 | ||||||
Emerald Performance Materials LLC, First Lien Term Loan, VR, 4.50%, Due 8/1/2021 B D | 124,960 | 125,467 | ||||||
Engility Corp., Term Loan B2, VR, 5.75%, Due 8/12/2023C D | 35,765 | 35,820 | ||||||
Epicor Software Corp., 1st Lien Bridge Loan, VR, 4.75%, Due 6/1/2022C D | 233,012 | 233,886 | ||||||
First Data Corp., 2021 C New USD Term Loan, VR, 3.775%, Due 3/24/2021C D | 11,173 | 11,238 | ||||||
First Data Corp., 2022C Dollar Term Loan, VR, 3.775%, Due 7/10/2022 D | 93,295 | 93,918 | ||||||
Flex Acquisition Co. Inc., First Lien Term Loan, VR, 4.25%, Due 12/29/2023C D | 125,000 | 126,016 | ||||||
Global Brass & Copper, Inc., Term Loan B, VR, 5.25%, Due 7/18/2023D | 48,260 | 48,743 | ||||||
Huntsman International LLC, First Lien Term Loan B, VR, 3.963%, Due 4/1/2023 B D | 99,251 | 100,150 | ||||||
Informatica Corp., Term Loan, VR, 4.50%, Due 8/5/2022C D | 70,575 | 70,275 | ||||||
Jeld-Wen, Inc., First Lien Incremental Term Loan B2, VR, 4.75%, Due 7/1/2022 D | 94,719 | 95,232 | ||||||
MacDermid, Inc., Term Loan Tranche B4, VR, 5.00%, Due 6/7/2023 D | 24,130 | 24,439 | ||||||
MacDermid, Inc., Term Loan Tranche B5, VR, 4.50%, Due 6/7/2020C D | 42,813 | 43,337 | ||||||
Magic Newco LLC, Term Loan, VR, 5.00%, Due 12/12/2018B D | 239,185 | 239,732 | ||||||
Munters Corp., Term Loan, VR, 6.25%, Due 5/5/2021C D | 36,794 | 36,932 | ||||||
Murray Energy Corp., 2015 Term Loan B, VR, 8.25%, Due 4/16/2020C D | 96,217 | 91,166 | ||||||
Netsmart Technologies, Inc., 1st Lien Term Loan, VR, 5.75%, Due 4/19/2023C D | 40,000 | 40,300 | ||||||
Netsmart Technologies, Inc.,Term Loan C 1, VR, 5.50%, Due 4/19/2023C D | 39,900 | 40,049 | ||||||
Omnitracs LLC, First Lien Term Loan, VR, 4.75%, Due 11/25/2020B C D | 62,151 | 62,578 | ||||||
PQ Corp., First Lien Term Loan B1, VR, 5.289%, Due 11/4/2022 D | 141,788 | 143,591 | ||||||
Press Ganey Holdings, Inc., First Lien Term Loan, VR, 4.25%, Due 10/21/2023C D | 37,667 | 37,738 | ||||||
Quickcrete Holdings, Inc., First Lien Term Loan, VR, 4.017%, Due 11/15/2023D | 125,000 | 126,476 | ||||||
Reynolds Group Holdings, Inc., Term Loan, VR, 4.25%, Due 2/5/2023C D | 109,725 | 109,988 | ||||||
Riverbed Technology, Inc., First Amendment Term Loan, VR, 4.25%, Due 4/24/2022C D | 17,558 | 17,677 | ||||||
Road Infrastructure Investment Holdings, Term Loan, VR, 5.00%, Due 6/13/2023C D | 77,809 | 78,315 | ||||||
Royal Holdings, Inc., 2015 First Lien Term Loan, VR, 4.50%, Due 6/19/2022C D | 88,650 | 89,056 | ||||||
Shoes For Crews, LLC, Term Loan, VR, 6.00%, Due 10/27/2022B D | 247,500 | 246,263 | ||||||
SI Organization Vencore, Inc., First Lien Term Loan, VR, 5.75%, Due 11/23/2019C D | 74,606 | 75,538 | ||||||
Sophia LP, 2015 First Lien Closing Date Term Loan B, VR, 4.75%, Due 9/30/2022C D E | 96,934 | 97,055 | ||||||
SS&C Technologies, Inc., 2015 First LienTerm Loan B1, VR, 4.028%, Due 7/8/2022C D | 30,092 | 30,366 | ||||||
SS&C Technologies, Inc., 2015 First LienTerm Loan B2, VR, 4.028%, Due 7/8/2022C D | 2,893 | 2,919 | ||||||
Strategic Partners Acquisition Corp., First Lien Term Loan, VR, 6.25%, Due 6/30/2023C D | 119,700 | 120,299 | ||||||
Systems Maintenance Services I, First Lien Term Loan, VR, 6.00%, Due 10/11/2023D | 35,000 | 34,810 | ||||||
Tank Intermediate Holding Corp., Term Loan A, VR, 5.25%, Due 3/16/2022D | 90,217 | 89,451 | ||||||
USIC Holdings, Inc., 2016 First Lien Term Loan, VR, 4.75%, Due 12/8/2023 D | 132,021 | 132,956 | ||||||
UTEX Industries, Inc., First Lien Term Loan, VR, 5.00%, Due 5/22/2021D | 48,030 | 45,148 | ||||||
Western Digital Corp., Term Loan B1, VR, 4.526%, Due 4/29/2023C D | 17,876 | 18,010 | ||||||
Zebra Technologies Corp., Term Loan B, VR, 3.434%, Due 10/27/2021C D | 160,928 | 162,226 | ||||||
|
| |||||||
4,444,542 | ||||||||
|
| |||||||
Service - 8.96% | ||||||||
Academy Ltd., 2015 Term Loan B, VR, 5.00%, Due 7/1/2022C D | 237,497 | 207,019 | ||||||
Acosta Holdco, Inc., 2015 Term Loan, VR, 4.289%, Due 9/26/2021D | 121,812 | 117,548 | ||||||
Affordable Care Holdings Corp., 2015 1st Lien Term Loan, VR, 5.75%, Due 10/22/2022C D | 49,500 | 49,500 | ||||||
Amneal Pharmaceuticals LLC, Second Incremental First Lien Term Loan, 4.50%, Due 11/1/2019B C D | 65,507 | 65,384 | ||||||
Aspen Dental - ADMI Corp., 2015 Term Loan B, VR, 5.25%, Due 4/30/2022 D | 41,560 | 41,854 | ||||||
ATI Holdings Acquisition, Inc., First Lien Iniitial Term Loan, VR, 7.25%, Due 5/10/2023D | 100,394 | 101,649 | ||||||
Bass Pro Group LLC, Term Loan B, VR, 5.970%, Due 12/16/2023 B D | 51,028 | 49,409 | ||||||
BioClinica, Inc., First Lien Term Loan, VR, 5.25%, Due 10/20/2023D | 86,678 | 87,436 | ||||||
BJ’s Wholesale Club, Inc., 2017 First Lien Term Loan, VR, 4.75%, Due 1/26/2024 D | 138,292 | 137,904 |
See accompanying notes
9
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Service - 8.96% (continued) | ||||||||
BJ’s Wholesale Club, Inc., 2017 Second Lien Term Loan, VR, 8.50%, Due 1/26/2025D | $ | 100,000 | $ | 101,000 | ||||
Brightview Landscapes LLC, Second Lien Term Loan, VR, 7.50%, Due 12/17/2021 B C D | 125,000 | 125,521 | ||||||
Burger King - New Red Finance, Inc., 2015 Term Loan B, VR, 3.75%, Due 12/10/2021C D | 35,683 | 36,004 | ||||||
California Pizza Kitchen, Inc., 2016 Term Loan, VR, 7.00%, Due 8/23/2022D | 249,375 | 248,752 | ||||||
Camelot Finance LP, First Lien Term Loan B, VR, 4.75%, Due 10/3/2023C D E | 67,121 | 67,680 | ||||||
Charter Communications Operating LLC, 2016 Term Loan I, VR, 3.026%, Due 1/15/2024 B D | 79,400 | 79,653 | ||||||
CHG Healthcare Services, Inc., Term Loan, VR, 4.75%, Due 6/7/2023C D | 145,931 | 147,354 | ||||||
CHS/Community Health Systems, Inc., Incremental 2021 First Lien Term Loan H, VR, 4.00%, Due 1/27/2021C D | 110,721 | 104,608 | ||||||
CSC Holdings LLC / Neptune Finco Corp., 2016 Term Loan B, VR, 3.767%, Due 10/11/2024B C D | 56,987 | 57,343 | ||||||
Curo Health Services LLC, Term Loan, VR, 6.539%, Due 2/7/2022B C D | 115,281 | 116,146 | ||||||
ExamWorks Group, Inc., Term Loan, VR, 6.50%, Due 7/27/2023D | 62,656 | 62,910 | ||||||
Fort Dearborn Co., 2016 1st Lien Term Loan, VR, 5.00%, Due 10/19/2023D | 67,391 | 68,234 | ||||||
Grifols Worldwide Operations USA, Inc., USD Add On Term Loan, VR, 2.25%, Due 12/20/2023 D | 30,000 | 30,154 | ||||||
HCA INC., Term Loan B7, VR, 3.528%, Due 2/15/2024D | 33,315 | 33,538 | ||||||
inVentiv Health, Inc., 2016 Term Loan B, VR, 4.75%, Due 9/28/2023D | 84,045 | 84,746 | ||||||
JC Penney Corp., Inc., Term Loan B, VR, 5.25%, Due 6/23/2023C D | 109,628 | 109,457 | ||||||
Jo-Ann Stores LLC, Term Loan B, VR, 6.256%, Due 9/27/2023 B C | 51,644 | 50,611 | ||||||
Merrill Communications LLC, Term Loan, VR, 6.289%, Due 6/1/2022B C D | 89,684 | 89,497 | ||||||
Mission Broadcasting, Inc., First Lien Term Loan B, VR, 3.00%, Due 1/17/2024C D | 2,331 | 2,359 | ||||||
Mister Car Wash Holdings, Inc., Term Loan B, VR, 5.25%, Due 8/20/2021C D | 114,872 | 114,968 | ||||||
Mister Car Wash, Inc., Delayed Draw Term Loan, VR, 5.00%, Due 8/20/2021 D J | 10,000 | 10,008 | ||||||
MTL Publishing LLC, Term Loan B 4, VR, 2.75%, Due 8/22/2022 B C D | 22,740 | 22,800 | ||||||
Neiman Marcus Group Ltd., LLC, Term Loan, VR, 4.25%, Due 10/25/2020B C D | 46,940 | 38,798 | ||||||
Nexstar Broadcasting, Inc., First Lien Term Loan B, VR, 3.00%, Due 1/17/2024C D | 89,859 | 90,692 | ||||||
NMSC Holdings Inc., 1st Lien Term Loan, VR, 6.00%, Due 4/19/2023D | 73,351 | 73,901 | ||||||
Numericable U.S. LLC (SFR Group), Term Loan B7, VR, 5.289%, Due 1/15/2024B C D | 124,005 | 125,283 | ||||||
Onex Carestream Health, Inc., First Lien Term Loan, VR, 5.00%, Due 6/7/2019D | 122,324 | 117,278 | ||||||
Paradigm Acquisition Corp., Term Loan, VR, 6.00%, Due 6/2/2022C D | 230,264 | 229,546 | ||||||
Petco Animal Supplies, Inc., 2016 Term Loan, VR, 5.00%, Due 1/26/2023C D | 69,768 | 69,063 | ||||||
Playpower, Inc., First Lien Term Loan, VR, 5.75%, Due 6/23/2021D | 247,487 | 246,250 | ||||||
Prime Security Services Borrower LLC, First Lien Term Loan, VR, 4.25%, Due 5/2/2022 B D | 210,964 | 212,943 | ||||||
Prospect Medical Holdings, Inc., Term Loan B, VR, 7.00%, Due 6/30/2022C D | 74,625 | 74,065 | ||||||
Rentpath, Inc., First Lien Term Loan, VR, 6.25%, Due 12/17/2021D | 120,635 | 119,830 | ||||||
Scientific Games International, Inc., Term Loan B 2, VR, 6.00%, Due 10/1/2021D | 149,626 | 150,655 | ||||||
Serta Simmons Bedding LLC, First Lien Term Loan, VR, 4.50%, Due 11/8/2023 B C D | 15,452 | 15,419 | ||||||
Survey Sampling International LLC, First Lien Term Loan B, VR, 6.00%, Due 12/4/2020B C D | 122,812 | 122,198 | ||||||
Survey Sampling International LLC, Second Lien Term Loan, VR, 10.00%, Due 12/4/2021B C D | 125,000 | 121,250 | ||||||
Team Health, Inc., First Lien Term Loan, VR, 3.75%, Due 1/17/2024 D | 130,000 | 129,757 | ||||||
Tribune Media Company, Term Loan C, VR, 3.75%, Due 1/27/2024 D | 55,601 | 55,971 | ||||||
Tribune Media Company, Term Loan, VR, 3.77%, Due 12/27/2020D | 13,350 | 13,413 | ||||||
Triple Point Technology, Inc., First Lien Terrm Loan, VR, 5.25%, Due 7/10/2020C D | 85,019 | 75,454 | ||||||
USAGM Holdco LLC, 2015 Term Loan, VR, 4.75%, Due 7/28/2022B C D | 163,350 | 163,912 | ||||||
Valeant Pharmaceuticals International, Inc., Term Loan Series E Tranche B, VR, 5.25%, Due 8/5/2020C D | 9,505 | 9,526 | ||||||
Valeant Pharmaceuticals International, Term Loan B, VR, 5.50%, Due 4/1/2022C D | 86,182 | 86,516 | ||||||
Vestcom Parent Holdings, Inc., First Lien Term Loan, VR, 5.25%, Due 12/19/2023 D | 126,563 | 127,828 | ||||||
Virgin Media Investment Holdings Ltd., USD Term Loan I, VR, 3.517%, Due 1/31/2025 D | 107,500 | 108,105 | ||||||
Vistage Worldwide, Inc., Term Loan B, VR, 6.50%, Due 8/19/2021 D | 100,000 | 100,250 | ||||||
WEX Inc., Term Loan B, VR, 4.278%, Due 7/1/2023C D | 48,231 | 48,774 | ||||||
William Morris Endeavor Entertainment LLC, Term Loan B, VR, 5.25%, Due 5/6/2021B D | 121,250 | 121,614 | ||||||
Ziggo Secured Finance Partners, USD Term Loan E, VR, 2.50%, Due 4/23/2025 D | 125,000 | 125,248 | ||||||
|
| |||||||
5,594,585 | ||||||||
|
| |||||||
Telecommunications - 0.29% | ||||||||
LTS Buyer LLC, Term Loan B, VR, 4.248%, Due 4/13/2020B C D | 24,617 | 24,740 | ||||||
Sprint Communications, Inc., First Lien Term Loan B, VR, 3.25%, Due 1/13/2024 D | 125,000 | 125,000 | ||||||
Telesat Canada, Term Loan B, VR, 4.78%, Due 11/17/2023D | 32,290 | 32,290 | ||||||
|
| |||||||
182,030 | ||||||||
|
|
See accompanying notes
10
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Transportation - 1.20% | ||||||||
Air Canada, Term Loan B, VR, 3.755%, Due 10/6/2023D | $ | 60,000 | $ | 60,450 | ||||
American Tire Distributors, Inc., 2015 Term Loan, 5.25%, Due 9/1/2021D | 241,900 | 240,541 | ||||||
Avolon Holdings Limited, Term Loan B, VR, 3.50%, Due 1/13/2022 D | 179,232 | 181,537 | ||||||
Delta Air Lines, Inc., 2015 Term Loan B, VR, 3.276%, Due 8/24/2022D | 49,375 | 49,800 | ||||||
Univar, Inc., 2017 Term Loan B, VR, 4.25%, Due 7/1/2022 D | 148,125 | 148,436 | ||||||
XPO Logistics, Inc., Term Loan B, VR, 4.25%, Due 11/1/2021C D | 67,530 | 67,952 | ||||||
|
| |||||||
748,716 | ||||||||
|
| |||||||
Utilities - 0.61% | ||||||||
Calpine Corp., First Lien Term Loan B5, VR, 3.75%, Due 1/15/2024C D | 59,547 | 59,813 | ||||||
TPF II Power LLC, Syndicated Term Loan B, VR, 5.00%, Due 10/2/2021B D | 317,156 | 320,327 | ||||||
|
| |||||||
380,140 | ||||||||
|
| |||||||
Total Bank Loan Obligations (Cost $15,243,561) | 15,268,599 | |||||||
|
| |||||||
CORPORATE OBLIGATIONS - 73.74% | ||||||||
Consumer - 3.79% | ||||||||
Avon International Opera, 7.875%, Due 8/15/2022F | 150,000 | 159,795 | ||||||
Central Garden & Pet Co., 6.125%, Due 11/15/2023 | 225,000 | 240,750 | ||||||
Cott Beverages, Inc., 5.375%, Due 7/1/2022 | 450,000 | 460,800 | ||||||
Dole Food Co., Inc., 7.25%, Due 5/1/2019F | 375,000 | 382,725 | ||||||
Post Holdings, Inc., 6.00%, Due 12/15/2022F | 500,000 | 525,000 | ||||||
Spectrum Brands, Inc., 5.75%, Due 7/15/2025 | 250,000 | 261,250 | ||||||
Vector Group Ltd., 6.125%, Due 2/1/2025F | 325,000 | 333,938 | ||||||
|
| |||||||
2,364,258 | ||||||||
|
| |||||||
Energy - 12.17% | ||||||||
Archrock Partners LP / Archrock Partners Finance Corp., 6.00%, Due 4/1/2021E | 250,000 | 247,500 | ||||||
Bristow Group, Inc., 6.25%, Due 10/15/2022 | 100,000 | 89,375 | ||||||
Calfrac Holdings LP, 7.50%, Due 12/1/2020E F | 175,000 | 162,750 | ||||||
California Resources Corp., 8.00%, Due 12/15/2022F | 400,000 | 356,000 | ||||||
Callon Petroleum Co., 6.125%, Due 10/1/2024F | 50,000 | 52,937 | ||||||
Carrizo Oil & Gas, Inc., 7.50%, Due 9/15/2020 | 250,000 | 259,375 | ||||||
Cenovus Energy, Inc., 6.75%, Due 11/15/2039 | 100,000 | 112,341 | ||||||
Chesapeake Energy Corp., | ||||||||
6.625%, Due 8/15/2020 | 95,000 | 95,475 | ||||||
8.00%, Due 12/15/2022F | 50,000 | 53,375 | ||||||
5.75%, Due 3/15/2023 | 225,000 | 216,000 | ||||||
Continental Resources, Inc., 4.90%, Due 6/1/2044 | 450,000 | 396,000 | ||||||
CSI Compressco LP / Compressco Finance, Inc., 7.25%, Due 8/15/2022E | 425,000 | 408,000 | ||||||
Denbury Resources, Inc., 5.50%, Due 5/1/2022 | 300,000 | 257,250 | ||||||
Energy Transfer Equity LP, 7.50%, Due 10/15/2020E | 100,000 | 112,250 | ||||||
EP Energy LLC / Everest Acquisition Finance, Inc., 9.375%, Due 5/1/2020B | 300,000 | 300,000 | ||||||
FTS International, Inc., 8.46%, Due 6/15/2020C F | 200,000 | 204,750 | ||||||
Genesis Energy LP / Genesis Energy Finance Corp., 5.625%, Due 6/15/2024E | 400,000 | 403,000 | ||||||
Hilcorp Energy, 5.00%, Due 12/1/2024F | 250,000 | 246,250 | ||||||
Jones Energy Holdings LLC / Jones Energy Finance Corp., 6.75%, Due 4/1/2022 B | 350,000 | 342,125 | ||||||
Laredo Petroleum, Inc., 5.625%, Due 1/15/2022 | 250,000 | 253,750 | ||||||
Lonestar Resources America, Inc., 8.75%, Due 4/15/2019F | 150,000 | 138,000 | ||||||
Nabors Industries, Inc., 5.50%, Due 1/15/2023F | 75,000 | 78,375 | ||||||
Parker Drilling Co., 6.75%, Due 7/15/2022 | 150,000 | 129,750 | ||||||
Parsley Energy LLC / Parsley Finance Corp., 5.375%, Due 1/15/2025 B F | 200,000 | 205,000 | ||||||
QEP Resources, Inc., 6.875%, Due 3/1/2021 | 250,000 | 264,375 | ||||||
Sanchez Energy Corp., 6.125%, Due 1/15/2023 | 150,000 | 144,000 | ||||||
SM Energy Co., | ||||||||
5.625%, Due 6/1/2025 | 175,000 | 170,625 | ||||||
6.75%, Due 9/15/2026 | 200,000 | 208,000 | ||||||
Southwestern Energy Co., 5.80%, Due 1/23/2020 | 150,000 | 154,875 | ||||||
Summit Midstream Holdings LLC / Summit Midstream Finance Corp., 5.50%, Due 8/15/2022 B | 125,000 | 125,313 | ||||||
Sunoco LP / Sunoco Finance Corp., 6.375%, Due 4/1/2023 | 125,000 | 128,313 |
See accompanying notes
11
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Energy - 12.17% (continued) | ||||||||
Tesoro Logistics LP / Tesoro Logistics Finance Corp., 6.25%, Due 10/15/2022 E | $ | 200,000 | $ | 213,000 | ||||
Transocean, Inc., 8.125%, Due 12/15/2021 | 250,000 | 258,750 | ||||||
Unit Corp., 6.625%, Due 5/15/2021 | 300,000 | 297,750 | ||||||
Weatherford Bermuda Company, 5.125%, Due 9/15/2020 | 250,000 | 238,750 | ||||||
WPX Energy, Inc., 7.50%, Due 8/1/2020 | 250,000 | 271,250 | ||||||
|
| |||||||
7,594,629 | ||||||||
|
| |||||||
Finance - 6.53% | ||||||||
American Equity Investment Life Holding Co., 6.625%, Due 7/15/2021 | 250,000 | 261,828 | ||||||
CIT Group, Inc., 5.00%, Due 8/1/2023 | 300,000 | 312,750 | ||||||
Communications Sales & Leasing Inc / CSL Capital LLC, 8.25%, Due 10/15/2023 B | 300,000 | 325,500 | ||||||
FelCor Lodging LP, 5.625%, Due 3/1/2023E | 375,000 | 388,125 | ||||||
Fly Leasing Ltd., 6.75%, Due 12/15/2020 | 500,000 | 523,125 | ||||||
Grinding Media Inc / MC Grinding Media Canada, Inc., 7.375%, Due 12/15/2023F | 200,000 | 211,250 | ||||||
Icahn Enterprises LP / Icahn Enterprises Finance Corp., | ||||||||
6.00%, Due 8/1/2020E | 300,000 | 307,350 | ||||||
6.25%, Due 2/1/2022F | 100,000 | 100,750 | ||||||
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp., 5.875%, Due 8/1/2021F H | 90,000 | 89,325 | ||||||
OneMain Financial Holdings, Inc., 6.75%, Due 12/15/2019F | 400,000 | 415,000 | ||||||
RHP Hotel Properties LP / RHP Finance Corp., 5.00%, Due 4/15/2023E | 350,000 | 353,500 | ||||||
Royal Bank of Scotland Group PLC, 4.70%, Due 7/3/2018 G | 250,000 | 255,373 | ||||||
Springleaf Finance Corp., 5.25%, Due 12/15/2019 | 300,000 | 301,500 | ||||||
Starwood Property Trust, Inc., 5.00%, Due 12/15/2021F | 150,000 | 152,438 | ||||||
Tervita Escrow Corp., 7.625%, Due 12/1/2021F | 75,000 | 77,813 | ||||||
|
| |||||||
4,075,627 | ||||||||
|
| |||||||
Manufacturing - 19.62% | ||||||||
Advanced Micro Devices, Inc., 7.00%, Due 7/1/2024 | 400,000 | 415,500 | ||||||
Alcoa Nederland Holding BV, 7.00%, Due 9/30/2026F | 200,000 | 219,000 | ||||||
Allison Transmission, Inc., 5.00%, Due 10/1/2024F | 150,000 | 151,125 | ||||||
Ally Financial, Inc., 3.75%, Due 11/18/2019 | 450,000 | 457,312 | ||||||
Anixter, Inc., 5.50%, Due 3/1/2023 | 175,000 | 182,437 | ||||||
ArcelorMittal, 6.50%, Due 3/1/2021C | 250,000 | 273,125 | ||||||
Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc., 4.625%, Due 5/15/2023F G | 50,000 | 50,469 | ||||||
Berry Plastics Corp., 5.125%, Due 7/15/2023 | 50,000 | 51,160 | ||||||
BMC Software Finance, Inc., 8.125%, Due 7/15/2021F | 250,000 | 241,250 | ||||||
Bombardier, Inc., 6.00%, Due 10/15/2022F | 350,000 | 342,125 | ||||||
CF Industries Holdings, Inc., 7.125%, Due 5/1/2020 | 150,000 | 165,375 | ||||||
CF Industries, Inc., 5.15%, Due 3/15/2034 | 50,000 | 45,875 | ||||||
Chemours Co., | ||||||||
6.625%, Due 5/15/2023 | 200,000 | 199,000 | ||||||
7.00%, Due 5/15/2025 | 200,000 | 199,300 | ||||||
CONSOL Energy, Inc., 5.875%, Due 4/15/2022 | 450,000 | 435,375 | ||||||
Constellium N.V., 5.75%, Due 5/15/2024F | 100,000 | 96,250 | ||||||
Credit Acceptance Corp., 6.125%, Due 2/15/2021 | 375,000 | 380,625 | ||||||
Entegris, Inc., 6.00%, Due 4/1/2022F | 250,000 | 261,250 | ||||||
Equinix, Inc., 5.375%, Due 1/1/2022 | 250,000 | 264,375 | ||||||
Fiat Chrysler Automobiles N.V., 5.25%, Due 4/15/2023 | 150,000 | 153,750 | ||||||
First Data Corp., 7.00%, Due 12/1/2023F | 425,000 | 450,713 | ||||||
First Quantum Minerals Ltd., 6.75%, Due 2/15/2020F | 400,000 | 410,252 | ||||||
FMG Resources August 2006 Property Ltd., | ||||||||
9.75%, Due 3/1/2022F | 100,000 | 116,000 | ||||||
6.875%, Due 4/1/2022F | 100,000 | 103,625 | ||||||
Freeport-McMoRan Copper & Gold, Inc., 3.55%, Due 3/1/2022 | 450,000 | 420,750 | ||||||
Gibraltar Industries, Inc., 6.25%, Due 2/1/2021 | 250,000 | 258,281 | ||||||
Hexion Inc., 6.625%, Due 4/15/2020 | 150,000 | 139,875 | ||||||
HudBay Minerals, Inc., 7.25%, Due 1/15/2023F | 400,000 | 423,000 | ||||||
Huntsman International Co., 5.125%, Due 11/15/2022 | 250,000 | 258,282 | ||||||
INEOS Group Holdings S.A., 5.625%, Due 8/1/2024F | 250,000 | 249,375 | ||||||
Infor Software Parent, Inc., 7.125%, Due 5/1/2021F | 300,000 | 308,250 |
See accompanying notes
12
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Manufacturing - 19.62% (continued) | ||||||||
Lennar Corp., 4.875%, Due 12/15/2023 | $ | 75,000 | $ | 76,312 | ||||
Micron Technology, Inc., 5.50%, Due 2/1/2025 | 125,000 | 125,625 | ||||||
NCI Building Systems, Inc., 8.25%, Due 1/15/2023F | 250,000 | 272,500 | ||||||
New Gold, Inc., 6.25%, Due 11/15/2022F | 400,000 | 401,000 | ||||||
Novelis Corp., 5.875%, Due 9/30/2026F | 125,000 | 126,875 | ||||||
Open Text Corp., 5.875%, Due 6/1/2026F | 100,000 | 104,750 | ||||||
Perstorp Holding AB, 8.50%, Due 6/30/2021F | 225,000 | 228,656 | ||||||
Platform Specialty Products Corp., 6.50%, Due 2/1/2022F | 375,000 | 382,500 | ||||||
PQ Corp., 6.75%, Due 11/15/2022F | 100,000 | 108,250 | ||||||
SBA Communications Corp., 4.875%, Due 7/15/2022 | 400,000 | 405,500 | ||||||
Solera LLC / Solera Finance, Inc., 10.50%, Due 3/1/2024 B F | 300,000 | 341,250 | ||||||
Springs Industries, Inc., 6.25%, Due 6/1/2021 | 375,000 | 388,125 | ||||||
Standard Industries, Inc., 5.375%, Due 11/15/2024F | 250,000 | 257,812 | ||||||
Teck Resources Ltd., 4.50%, Due 1/15/2021 | 150,000 | 152,625 | ||||||
TransDigm, Inc., 6.00%, Due 7/15/2022 | 400,000 | 403,000 | ||||||
Tronox Finance LLC, 6.375%, Due 8/15/2020B | 250,000 | 240,312 | ||||||
United States Steel Corp., | ||||||||
6.875%, Due 4/1/2021 | 21,000 | 21,394 | ||||||
8.375%, Due 7/1/2021F | 200,000 | 222,000 | ||||||
7.50%, Due 3/15/2022 | 50,000 | 51,626 | ||||||
Wise Metals Group LLC, 8.75%, Due 12/15/2018B F | 200,000 | 206,808 | ||||||
|
| |||||||
12,240,001 | ||||||||
|
| |||||||
Service - 23.11% | ||||||||
Ahern Rentals, Inc., 7.375%, Due 5/15/2023F | 200,000 | 187,000 | ||||||
Altice Luxembourg S.A., 7.75%, Due 5/15/2022F | 400,000 | 424,500 | ||||||
APX Group, Inc., 8.75%, Due 12/1/2020 | 400,000 | 415,000 | ||||||
Ashtead Capital, Inc., 5.625%, Due 10/1/2024F | 375,000 | 393,750 | ||||||
Block Communications, Inc., 7.25%, Due 2/1/2020F | 450,000 | 457,875 | ||||||
Brand Energy and Infrastructure Company, 8.50%, Due 12/1/2021F | 100,000 | 103,750 | ||||||
Cable One, Inc., 5.75%, Due 6/15/2022F | 75,000 | 78,375 | ||||||
Cablevision Systems Corp., | ||||||||
7.75%, Due 4/15/2018 | 250,000 | 263,125 | ||||||
5.875%, Due 9/15/2022 | 300,000 | 301,500 | ||||||
Cardtronics, Inc., 5.125%, Due 8/1/2022 | 250,000 | 253,750 | ||||||
CEC Entertainment, Inc., 8.00%, Due 2/15/2022 | 200,000 | 209,000 | ||||||
Cequel Communications Holdings I LLC / Cequel Capital Corp., 5.125%, Due 12/15/2021B F | 150,000 | 152,062 | ||||||
CHS/Community Health Systems, Inc., 5.125%, Due 8/15/2018 | 100,000 | 100,312 | ||||||
Community Health Systems, Inc., 8.00%, Due 11/15/2019 | 350,000 | 311,500 | ||||||
DaVita, Inc., 5.75%, Due 8/15/2022 | 100,000 | 103,875 | ||||||
DISH DBS Corp., 5.125%, Due 5/1/2020 | 250,000 | 256,875 | ||||||
Dollar Tree, Inc., 5.75%, Due 3/1/2023 | 250,000 | 264,750 | ||||||
EMI Music Publishing Group N. America Holdings, Inc., 7.625%, Due 6/15/2024F | 125,000 | 136,563 | ||||||
Endo Ltd / Endo Finance LLC / Endo Finco, Inc., 6.00%, Due 7/15/2023B F | 200,000 | 170,500 | ||||||
Guitar Center, Inc., 6.50%, Due 4/15/2019F | 250,000 | 224,375 | ||||||
HCA, Inc., | ||||||||
5.875%, Due 5/1/2023 | 500,000 | 532,500 | ||||||
5.375%, Due 2/1/2025 | 250,000 | 255,000 | ||||||
HealthSouth Corp., 5.75%, Due 11/1/2024 | 400,000 | 406,500 | ||||||
Herc Rentals, Inc., 7.50%, Due 6/1/2022F | 300,000 | 324,000 | ||||||
Horizon Pharma Financing, Inc., 6.625%, Due 5/1/2023 | 40,000 | 38,500 | ||||||
IHS Markit, Ltd., 5.00%, Due 11/1/2022F | 325,000 | 336,781 | ||||||
JC Penney Corp, Inc., 5.875%, Due 7/1/2023F | 400,000 | 405,600 | ||||||
LifePoint Health, Inc., | ||||||||
5.875%, Due 12/1/2023 | 25,000 | 24,875 | ||||||
5.375%, Due 5/1/2024F | 150,000 | 143,625 | ||||||
Mallinckrodt International Finance SA / Mallinckrodt CB LLC, 5.625%, Due 10/15/2023B F | 350,000 | 310,188 | ||||||
Mednax, Inc., 5.25%, Due 12/1/2023F | 225,000 | 232,312 | ||||||
Midas Intermediate Holdco II LLC / Midas Intermediate Holdco II Finance, Inc., 7.875%, Due 10/1/2022 B F | 100,000 | 102,750 |
See accompanying notes
13
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Service - 23.11% (continued) | ||||||||
Monitronics International, Inc., 9.125%, Due 4/1/2020 | $ | 325,000 | $ | 316,062 | ||||
Natures Bounty Co., 7.625%, Due 5/15/2021F | 400,000 | 419,000 | ||||||
Nielsen Finance LLC / Nielsen Finance Co., 5.00%, Due 4/15/2022B F | 250,000 | 255,313 | ||||||
Numericable Group S.A., 6.00%, Due 5/15/2022F | 350,000 | 360,063 | ||||||
PetSmart, Inc., 7.125%, Due 3/15/2023F | 375,000 | 368,437 | ||||||
Pinnacle Entertainment, Inc., 5.625%, Due 5/1/2024F | 125,000 | 126,804 | ||||||
Rite Aid Corp., 6.75%, Due 6/15/2021 | 250,000 | 260,000 | ||||||
Sabre GLBL, Inc., 5.25%, Due 11/15/2023F | 75,000 | 75,938 | ||||||
Scientific Games International, Inc., 10.00%, Due 12/1/2022 | 150,000 | 153,693 | ||||||
Silversea Cruise Finance Ltd., 7.25%, Due 2/1/2025F | 125,000 | 128,464 | ||||||
Sinclair Television Group, Inc., | ||||||||
5.375%, Due 4/1/2021 | 250,000 | 256,875 | ||||||
6.125%, Due 10/1/2022 | 150,000 | 156,845 | ||||||
Sirius XM Radio, Inc., 6.00%, Due 7/15/2024F | 250,000 | 266,095 | ||||||
Tenet Healthcare Corp., | ||||||||
5.00%, Due 3/1/2019 | 250,000 | 245,938 | ||||||
4.75%, Due 6/1/2020 | 200,000 | 203,000 | ||||||
6.75%, Due 6/15/2023 | 200,000 | 189,000 | ||||||
Tops Holding LLC / Tops Markets II Corp., 8.00%, Due 6/15/2022B F | 200,000 | 160,000 | ||||||
United Rentals North America, Inc., 5.50%, Due 5/15/2027 | 375,000 | 378,281 | ||||||
Universal Health Services, Inc., 4.75%, Due 8/1/2022F | 350,000 | 352,187 | ||||||
Universal Hospital Services, Inc., 7.625%, Due 8/15/2020 | 450,000 | 446,625 | ||||||
Univision Communications, Inc., | ||||||||
5.125%, Due 5/15/2023F | 175,000 | 173,796 | ||||||
5.125%, Due 2/15/2025F | 100,000 | 95,438 | ||||||
Viking Cruises Ltd., 6.25%, Due 5/15/2025F | 50,000 | 48,000 | ||||||
Virgin Media Finance PLC, 6.375%, Due 4/15/2023F G | 250,000 | 262,500 | ||||||
VTR Finance BV, 6.875%, Due 1/15/2024F | 290,000 | 304,500 | ||||||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp., 5.50%, Due 3/1/2025 B F | 350,000 | 350,875 | ||||||
Ziggo Bond Finance BV, 6.00%, Due 1/15/2027F | 150,000 | 148,815 | ||||||
|
| |||||||
14,423,612 | ||||||||
|
| |||||||
Telecommunications - 6.28% | ||||||||
CenturyLink, Inc., | ||||||||
5.80%, Due 3/15/2022 | 125,000 | 128,555 | ||||||
7.50%, Due 4/1/2024 | 200,000 | 211,750 | ||||||
Frontier Communications Corp., | ||||||||
7.125%, Due 3/15/2019 | 250,000 | 266,250 | ||||||
8.875%, Due 9/15/2020 | 75,000 | 79,875 | ||||||
11.00%, Due 9/15/2025 | 150,000 | 151,687 | ||||||
Hughes Satellite Systems Corp., 5.25%, Due 8/1/2026F | 100,000 | 100,000 | ||||||
Level 3 Financing, Inc., 5.375%, Due 1/15/2024 | 400,000 | 404,500 | ||||||
Qwest Corp., 6.75%, Due 12/1/2021 | 25,000 | 27,483 | ||||||
Sprint Corp., 7.25%, Due 9/15/2021 | 750,000 | 803,625 | ||||||
Sprint Nextel Corp., 6.00%, Due 11/15/2022 | 425,000 | 431,375 | ||||||
T-Mobile USA, Inc., 6.625%, Due 4/1/2023 | 1,000,000 | 1,062,700 | ||||||
Windstream Corp., 6.375%, Due 8/1/2023 | 50,000 | 45,250 | ||||||
Windstream Services LLC, 7.75%, Due 10/15/2020B | 200,000 | 204,250 | ||||||
|
| |||||||
3,917,300 | ||||||||
|
| |||||||
Transportation - 0.87% | ||||||||
Intrepid Aviation Group Holdings LLC / Intrepid Finance Co., 6.875%, Due 2/15/2019B F | 250,000 | 227,500 | ||||||
XPO Logistics, Inc., 6.50%, Due 6/15/2022F | 300,000 | 312,750 | ||||||
|
| |||||||
540,250 | ||||||||
|
| |||||||
Utilities - 1.37% | ||||||||
AES Corp., 5.50%, Due 3/15/2024 | 250,000 | 253,125 | ||||||
Calpine Corp., 5.375%, Due 1/15/2023 | 300,000 | 295,500 |
See accompanying notes
14
American Beacon Crescent Short Duration High Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Utilities - 1.37% (continued) | ||||||||
NRG Energy, Inc., 6.625%, Due 3/15/2023 | $ | 300,000 | $ | 309,000 | ||||
|
| |||||||
857,625 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $44,787,678) | 46,013,302 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 4.00% (Cost $2,498,843) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassI | 2,498,843 | 2,498,843 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 102.22% (Cost $62,556,337) | 63,786,738 | |||||||
LIABILITIES, NET OF OTHER ASSETS - (2.22%) | (1,384,127 | ) | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 62,402,611 | ||||||
|
| |||||||
Percentages are stated as a percent of net assets. |
A | Non-income producing security. |
B | LLC - Limited Liability Company. |
C | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
D | Term Loan. |
E | LP - Limited Partnership. |
F | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $18,741,037 or 30.03% of net assets. The Fund has no right to demand registration of these securities. |
G | PLC - Public Limited Company. |
H | LLLP - Limited Liability Limited Partnership. |
I | The Fund is affiliated by having the same investment advisor. |
J | Unfunded Loan Commitment. At period end, the amount of unfunded loan commitments was $16,773 or 0.03% of net assets. Of this amount, $6,773 and $10,000 relate to Acrisure LLC and Mister Car Wash, Inc, respectively. |
See accompanying notes
15
American Beacon Crescent Short Duration High Income FundSM
Statement of Assets and Liabilities
January 31, 2017
Assets: | ||||
Investments in unaffiliated securities, at fair value A | $ | 61,287,895 | ||
Investments in affiliated securities, at fair value B | 2,498,843 | |||
Dividends and interest receivable | 850,515 | |||
Receivable for investments sold | 1,625,270 | |||
Receivable for fund shares sold | 40,873 | |||
Receivable for expense reimbursement (Note 2) | 30,815 | |||
Prepaid expenses | 25,345 | |||
|
| |||
Total assets | 66,359,556 | |||
|
| |||
Liabilities: | ||||
Payable for investments purchased | 3,711,698 | |||
Payable for fund shares redeemed | 13,511 | |||
Dividends payable | 4,133 | |||
Cash due to custodian | 87,297 | |||
Unfunded loan commitments | 16,773 | |||
Management and investment advisory fees payable | 38,565 | |||
Administrative service and service fees payable | 1,939 | |||
Transfer agent fees payable | 590 | |||
Custody and fund accounting fees payable | 9,277 | |||
Professional fees payable | 69,274 | |||
Trustee fees payable | 711 | |||
Payable for prospectus and shareholder reports | 2,586 | |||
Other liabilities | 591 | |||
|
| |||
Total liabilities | 3,956,945 | |||
|
| |||
Net Assets | $ | 62,402,611 | ||
|
| |||
Analysis of Net Assets: | ||||
Paid-in-capital | $ | 63,948,636 | ||
Undistributed (overdistribution of) net investment income | 310 | |||
Accumulated net realized (loss) | (2,776,736 | ) | ||
Unrealized appreciation of investments | 1,230,401 | |||
|
| |||
Net assets | $ | 62,402,611 | ||
|
| |||
Shares outstanding at no par value (unlimited shares authorized): | ||||
Institutional Class | 5,378,958 | |||
|
| |||
Y Class | 651,797 | |||
|
| |||
Investor Class | 277,946 | |||
|
| |||
A Class | 122,895 | |||
|
| |||
C Class | 44,421 | |||
|
| |||
Net assets: | ||||
Institutional Class | $ | 51,834,666 | ||
|
| |||
Y Class | $ | 6,277,416 | ||
|
| |||
Investor Class | $ | 2,679,338 | ||
|
| |||
A Class | $ | 1,183,362 | ||
|
| |||
C Class | $ | 427,829 | ||
|
| |||
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 9.64 | ||
|
| |||
Y Class | $ | 9.63 | ||
|
| |||
Investor Class | $ | 9.64 | ||
|
| |||
A Class | $ | 9.63 | ||
|
| |||
A Class (offering price) | $ | 9.88 | ||
|
| |||
C Class | $ | 9.63 | ||
|
| |||
A Cost of investments in unaffiliated securities | $ | 60,057,494 | ||
B Cost of investments in affiliated securities | $ | 2,498,843 |
See accompanying notes
16
American Beacon Crescent Short Duration High Income FundSM
Statement of Operations
For the year ended January 31, 2017
Investment income: | ||||
Dividend income from unaffiliated securities | $ | 954 | ||
Dividend income from affiliated securities | 7,120 | |||
Interest income | 2,861,455 | |||
|
| |||
Total investment income | 2,869,529 | |||
|
| |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 327,233 | |||
Administrative service fees (Note 2): | ||||
Institutional Class | 34,559 | |||
Y Class | 6,058 | |||
Investor Class | 3,412 | |||
A Class | 998 | |||
C Class | 386 | |||
Transfer agent fees: | ||||
Institutional Class | 3,515 | |||
Y Class | 360 | |||
Investor Class | 1,716 | |||
A Class | 63 | |||
C Class | 45 | |||
Custody and fund accounting fees | 55,479 | |||
Professional fees | 98,307 | |||
Registration fees and expenses | 69,025 | |||
Service fees (Note 2): | ||||
Y Class | 6,655 | |||
Investor Class | 8,137 | |||
A Class | 1,675 | |||
C Class | 671 | |||
Distribution fees (Note 2): | ||||
A Class | 2,793 | |||
C Class | 4,473 | |||
Prospectus and shareholder report expenses | 14,974 | |||
Trustee fees | 4,192 | |||
Other expenses | 7,723 | |||
|
| |||
Total expenses | 652,449 | |||
|
| |||
Net fees waived and expenses reimbursed (Note 2) | (201,928 | ) | ||
|
| |||
Net expenses | 450,521 | |||
|
| |||
Net investment income | 2,419,008 | |||
|
| |||
Realized and unrealized gain (loss) from investments: | ||||
Net realized gain (loss) from: | ||||
Investments | (1,100,111 | ) | ||
Change in net unrealized appreciation (depreciation) of: | ||||
Investments | 4,409,874 | |||
|
| |||
Net gain from investments | 3,309,763 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 5,728,771 | ||
|
|
See accompanying notes
17
American Beacon Crescent Short Duration High Income FundSM
Statement of Changes in Net Assets
Crescent Short Duration High Income Fund | ||||||||
Year Ended January 31, 2017 | Year Ended January 31, 2016 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 2,419,008 | $ | 2,169,994 | ||||
Net realized gain (loss) from investments | (1,100,111 | ) | (1,364,082 | ) | ||||
Change in net unrealized appreciation (depreciation) from investments | 4,409,874 | (2,381,371 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 5,728,771 | (1,575,459 | ) | |||||
|
|
|
| |||||
Net investment income: | ||||||||
Institutional Class | (1,882,382 | ) | (1,759,283 | ) | ||||
Y Class | (321,091 | ) | (271,569 | ) | ||||
Investor Class | (147,957 | ) | (99,781 | ) | ||||
A Class | (50,709 | ) | (31,972 | ) | ||||
C Class | (16,867 | ) | (7,389 | ) | ||||
|
|
|
| |||||
Net distributions to shareholders | (2,419,006 | ) | (2,169,994 | ) | ||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from sales of shares | 19,803,117 | 34,658,888 | ||||||
Reinvestment of dividends and distributions | 2,333,667 | 2,130,973 | ||||||
Cost of shares redeemed | (13,547,704 | ) | (16,928,188 | ) | ||||
|
|
|
| |||||
Net increase in net assets from capital share transactions | 8,589,080 | 19,861,673 | ||||||
|
|
|
| |||||
Net increase in net assets | 11,898,845 | 16,116,220 | ||||||
|
|
|
| |||||
Net Assets: | ||||||||
Beginning of period | 50,503,766 | 34,387,546 | ||||||
|
|
|
| |||||
End of Period * | $ | 62,402,611 | $ | 50,503,766 | ||||
|
|
|
| |||||
* Includes undistributed (overdistribution of) net investment income | $ | 310 | $ | 308 | ||||
|
|
|
|
See accompanying notes
18
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
1. | Organization and Significant Accounting Policies |
American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. As of January 31, 2017, the Trust consists of twenty-seven active series, one of which is presented in this filing (the “Fund”): American Beacon Crescent Short Duration High Income Fund (“Crescent Short Duration Fund”). The remaining twenty-six active series are reported in separate filings.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Resolute Investment Managers, Inc., which is indirectly owned by investment funds affiliated with Kelso & Company, L.P. and Estancia Capital Management, LLC, and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
New Accounting Pronouncements
In October 2016, the SEC adopted amendments to rules under the Investment Company Act of 1940 (“final rules”) intended to modernize the reporting and disclosure of information by registered investment companies.
The final rules amend Regulation S-X and require funds to provide standardized, enhanced derivative disclosure in fund financial statements in a format designed for individual investors. The amendments to Regulation S-X also update the disclosures for other investments and investments in, and advances to affiliates and amend the rules regarding the general form and content of fund financial statements. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the amendments and its impact, if any, on the fund’s financial statements.
Class Disclosure
The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
Class | Eligible Investors | Minimum Initial Investments | ||||
Institutional | Large institutional investors - sold directly or through intermediary channels. | $ | 250,000 | |||
Y Class | Large institutional retirement plan investors - sold directly or through intermediary channels. | $ | 100,000 | |||
Investor | All investors using intermediary organizations such as broker-dealers or retirement plan sponsors - sold directly through intermediary channels. | $ | 2,500 | |||
A Class | All investors who invest through intermediary organizations, such as broker-dealers or third party administrator. Retail investors who invest directly through a financial intermediary such as a broker, bank, or registered investment advisor, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”). | $ | 2,500 | |||
C Class | Retail investors who invest directly through a financial intermediary such as a broker or employee directed benefit plans with applicable sales charges, which may include CDSC. | $ | 1,000 |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
The following is a summary of significant accounting policies, consistently followed by the Fund in the preparation of the financial statements. The Funds are investment companies, and accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946, Financial Services - Investment Companies, which is part of U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
19
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the net asset value (“NAV”). The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the Fund generally will be declared daily and paid monthly. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
Concentration of Ownership
From time to time, the Fund may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of accounts that represent a controlling ownership of more than 5% of the Fund’s outstanding shares could have a material impact on the Fund. As of January 31, 2017, based on management’s evaluation of the shareholder account base, two accounts have been identified as representing a non-affiliated controlling ownership of approximately 60% of the Fund’s outstanding shares.
20
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
2. | Transactions with Affiliates |
Management Agreement
From February 1, 2016 to May 29, 2016 the Trust and the Manager were parties to a Management Agreement that obligated the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. As compensation for performing the duties required under the Management Agreement, the Manager received from the Fund an annualized fee equal to 0.05% of the average daily net assets. Effective May 29, 2016 the Fund and the Manager entered a Management Agreement that obligates the Manager to provide investment advisory, fund management, and administrative services to the Fund. As compensation for performing the duties under the Management Agreement, the Manager receives from the Fund an annualized fee at the following annual rates as a percentage of average daily net assets: 0.35% of the first $5 billion, 0.325% of the next $5 billion, 0.30% of the next $10 billion, and 0.275% over $20 billion. The Fund also pays the unaffiliated investment advisor hired to direct investment activities of the Fund an annualized investment advisory fee based on a percentage of the Fund’s average daily assets. Management fees paid by the Fund during the year ended January 31, 2017 were as follows:
Fund | Management Fee Rate | Management Fee | Amounts Paid to Investment Advisor | Amounts Paid to Manager | ||||||||||||
Crescent Short Duration | 0.75 | % | $ | 327,233 | $ | 198,536 | $ | 128,697 |
Administration Agreement
From February 1, 2016 to May 29, 2016, the Manager and the Trust were parties to an Administration Agreement which obligated the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administration Agreement, the Manager received an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, A, and C Classes of the Fund.
Distribution Plans
The Fund, except for the A and C Classes, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees will be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administration fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to separately compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annualized fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of up to 0.10% of the average daily net assets of the Y Class, up to 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.
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American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
Sub-Transfer Agent Fees
The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional Class of the Fund and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Fund primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Fund. Certain services would have been provided by the Fund’s transfer agent and other service providers if the shareholders’ accounts were maintained directly by the Fund’s transfer agent. Accordingly, the Fund, pursuant to the Trust’s Board of Trustees (the “Board”) approval, have agreed to reimburse the Manager for all or a portion of the servicing fees paid to these intermediaries for the Institutional Class. The reimbursement amounts (sub-transfer agent fees) paid to the Manager are subject to a fee limit of up to 0.10% of an intermediaries average net assets in the Institutional Class on an annual basis. For the year ended January 31, 2017, the sub-transfer agent fees, as included in “Transfer agent fees” on the Statement of Operations, were as follows:
Fund | Sub-Transfer Agent Fees | |||
Crescent Short Duration | $ | 2,234 |
As of January 31, 2017, the Fund owes the manager the following reimbursements of sub-transfer agent fees, as included in “Transfer agent fees payable” on the Statement of Assets and Liabilities:
Fund | Reimbursement of Sub-Transfer Agent Fees | |||
Crescent Short Duration | $ | 78 |
Investment in Affiliated Funds
The Fund may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). Cash collateral received by the Fund in connection with securities lending may also be invested in the USG Select Fund. The Fund and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as the investment advisor to the USG Select Fund and receives management and administrative fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the year ended January 31, 2017, the Manager earned fees on the Fund’s direct investments in the USG Select Fund as shown below:
Fund | Direct Investments in USG Select Fund | |||
Crescent Short Duration | $ | 2,499 |
Interfund Lending Program
Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the year ended January 31, 2017, the Fund did not utilize the credit facility.
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American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
Expense Reimbursement Plan
The Manager contractually agreed to reimburse the Fund to the extent that total annual fund operating expenses exceeded a Fund’s expense cap. For the year ended January 31, 2017, the Manager waived or reimbursed expenses as follows:
Class | Expense Cap | Reimbursed Expenses | Expiration | |||||||||
Fund | 2/1/2016 to 1/31/2017 | |||||||||||
Crescent Short Duration | Institutional | 0.85 | % | $ | 157,876 | 2020 | ||||||
Crescent Short Duration | Y | 0.95 | % | 27,055 | 2020 | |||||||
Crescent Short Duration | Investor | 1.23 | % | 10,650 | 2020 | |||||||
Crescent Short Duration | A | 1.25 | % | 4,535 | 2020 | |||||||
Crescent Short Duration | C | 2.00 | % | 1,812 | 2020 |
Of these amounts, $30,815 was disclosed as a receivable from the Manager on the Statement of Assets and Liabilities for the Fund at January 31, 2017. The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The Fund has not recorded a liability for these potential reimbursements due to the current assessment that reimbursements are unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||
Crescent Short Duration | $ | — | $ | 167,017 | 2018 | |||||
Crescent Short Duration | — | 180,253 | 2019 |
Sales Commissions
The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the year ended January 31, 2017, Foreside collected $118 for the Fund from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended January 31, 2017, there were no CDSC fees collected for Class A Shares of the Fund.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended January 31, 2017, CDSC fees of $290 were collected for the Fund.
Trustee Fees and Expenses
As compensation for their service to the Trust and the American Beacon Select Funds Trust, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board of Trustee meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.
23
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
3. | Security Valuation and Fair Value Measurements |
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4:00 p.m. Eastern Time, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Debt securities are normally valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board.
For valuation purposes, the last quoted price of non U.S. equity securities may be adjusted under the circumstances described below. If the Fund determines that developments between the close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of its portfolio securities, the Fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A Fund may also fair value securities in other situations, such as when a particular foreign market is closed but the Fund is open. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service.
Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Manager’s Valuation Committee, pursuant to procedures established by the Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 - | Quoted prices in active markets for identical securities. | |
Level 2 - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Fixed-income securities are generally considered Level 2 as they are valued using observable inputs. | |
Level 3 - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are
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American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date are categorized as Level 2 of the fair value hierarchy.
Common stocks that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities using valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Level 3 trading assets and trading liabilities, at fair value
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows:
Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and may be categorized as Level 3 of the fair value hierarchy.
Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.
The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.
When the Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the Trust cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Fund may differ from the value that would be realized if the securities were sold.
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American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in and out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included below.
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of
January 31, 2017, the investments were classified as described below:
Crescent Short Duration Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 5,994 | $ | — | $ | — | $ | 5,994 | ||||||||
Bank Loan Obligations | — | 15,268,599 | — | 15,268,599 | ||||||||||||
Corporate Obligations | — | 46,013,302 | — | 46,013,302 | ||||||||||||
Short-Term Investments - Money Market Funds | 2,498,843 | — | — | 2,498,843 | ||||||||||||
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|
|
|
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| |||||||||
Total Investments in Securities | $ | 2,504,837 | $ | 61,281,901 | $ | — | $ | 63,786,738 | ||||||||
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* | Refer to the Schedule of Investments for Industry Information. |
U.S. GAAP also requires all significant transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Funds’ assets and liabilities. During the year ended January 31, 2017, the Fund transferred out $243,809 in bank loan obligations from Level 3 to Level 2, as this security is being priced by our primary pricing vendor.
The following table reconciles the Level 3 assets in the Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:
Crescent Short Duration Fund | Bank Loan Obligations | |||
Balance as of 1/31/2016 | $ | 483,000 | ||
Net purchases | 30,488 | |||
Net sales | 276,842 | |||
Realized gain (loss) | 5,331 | |||
Change in unrealized appreciation (depreciation) | 1,832 | |||
Transfer to Level 3 | — | |||
Transfer out of Level 3 | 243,809 | |||
|
| |||
Balance as of 1/31/2017 | $ | — | ||
|
| |||
Change in unrealized at period end** | $ | 1,832 | ||
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** | Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation (depreciation) on the Statement of Operations. |
4. | Securities and Other Investments |
Bank Loans and Senior Loans
Loans are typically administered by a bank, insurance company, finance company or other financial institution (the “agent”) for a lending syndicate of financial institutions. In a typical loan, the agent administers the terms of the loan agreement and is responsible for the collection of principal and interest and fee payments from the borrower and the apportionment of these payments to all lenders that are parties to the loan agreement. In addition, an institution (which may be the agent) may hold collateral on behalf of the lenders. Typically, under loan agreements, the agent is given broad authority in monitoring the borrower’s performance and is obligated to use the same care it would use in the management of its own property. In asserting rights against a borrower, the Fund normally will be dependent on the willingness of the lead bank to assert these rights, or upon a vote of all the lenders to authorize the action. If an agent becomes insolvent, or has a receiver, conservator, or similar official appointed for it by the appropriate regulatory authority, or becomes a debtor in a bankruptcy proceeding, the agent’s appointment may be terminated and a successor agent would be appointed. If an appropriate regulator or court determines that assets held by the agent for the benefit of purchasers of loans are subject to the claims
26
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
of the agent’s general or secured creditors, the Fund might incur certain costs and delays in realizing payment on a loan or suffer a loss of principal and/or interest. The Fund may be subject to similar risks when it buys a participation interest or an assignment from an intermediary.
Bank loans can be fixed and floating rate loans arranged through private negotiations between a company or a non-U.S. government and one or more financial institutions (lenders). The Fund may invest in senior loans, which are floating rate loans that hold a senior position in the capital structure of U.S. and foreign corporations, partnerships or other business entities that, under normal circumstances, allow them to have priority of claim ahead of other obligations of a borrower in the event of liquidation. Bank loans and senior loans may be collateralized or uncollateralized. They pay interest at rates that float above, or are adjusted periodically based on, a benchmark that reflects current interest rates. The Fund may invest in such loans in the form of participations in loans and assignments of all or a portion of loans from third parties. In connection with purchasing participations in such instruments, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation. When the Fund purchases assignments from lenders, the Fund will acquire direct rights against the borrower on the loan.
Corporate debt and other fixed-income securities
Typically, the values of fixed-income securities change inversely with prevailing interest rates. Therefore, a fundamental risk of fixed-income securities is interest rate risk, which is the risk that their value will generally decline as prevailing interest rates rise, which may cause a Fund’s net asset value to likewise decrease, and vice versa. How specific fixed-income securities may react to changes in interest rates will depend on the specific characteristics of each security. For example, while securities with longer maturities tend to produce higher yields, they also tend to be more sensitive to changes in prevailing interest rates and are therefore more volatile than shorter-term securities and are subject to greater market fluctuations as a result of changes in interest rates. Fixed-income securities are also subject to credit risk, which is the risk that the credit strength of an issuer of a fixed-income security will weaken and/or that the issuer will be unable to make timely principal and interest payments and that the security may go into default.
Floating Rate Loan Interests
Floating rate loan interests held by the Fund are typically issued to companies (the “borrower”) by banks, other financial institutions, and privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Fund may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. The Fund considers these investments to be investments in debt securities for purposes of its investment policies.
When the Fund purchases a floating rate loan interest it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by the Fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. The Fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.
27
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
Floating rate loan interests are usually freely callable at the borrower’s option. The Fund may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in the Fund having a contractual relationship only with the lender, not with the borrower. The Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Fund will assume the credit risk of both the borrower and the lender that is selling the Participation. The Fund’s investment in Participations involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Fund having a direct contractual relationship with the borrower, and the Fund may enforce compliance by the borrower with the terms of the loan agreement.
In connection with floating rate loan interests, the Fund may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, the Fund earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in “Interest income” in the Statement of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statement of Assets and Liabilities and Statement of Operations.
High Yield Securities
High yield securities are debt obligations rated below investment grade (such as BB or lower by Standard & Poor’s Ratings Services or Fitch, Inc. and/or Ba or lower by Moody’s Investors Service, Inc.) or not rated, but considered by a subadvisor to be of similar quality. These types of securities are also commonly referred to as “junk bonds”.
Foreign Debt Securities
A Fund may invest in foreign fixed and floating rate income securities (including emerging market securities) all or a portion of which may be non-U.S. dollar denominated and which include: (a) debt obligations issued or guaranteed by foreign national, provincial, state, municipal or other governments with taxing authority or by their agencies or instrumentalities, including Brady Bonds; (b) debt obligations of supranational entities; (c) debt obligations of the U.S. Government issued in non-dollar securities; (d) debt obligations and other fixed income securities of foreign corporate issuers (both dollar and non-dollar denominated); and (e) U.S. corporate issuers (both Eurodollar and non- dollar denominated). There is no minimum rating criteria for a Fund’s investments in such securities. Investing in the securities of foreign issuers involves special considerations that are not typically associated with investing in the securities of U.S. issuers. In addition, emerging markets are markets that have risks that are different and higher than those in more developed markets.
28
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
5. | Principal Risks |
Investing in the Fund may involve certain risks including, but not limited to, those described below.
Credit Risk
The Fund is subject to the risk that the issuer or guarantor of a debt security, or the counterparty to a derivatives contract or a loan will fail to make timely payment of interest or principal or otherwise honor its obligations or default completely. Credit risk is typically greater for securities with ratings that are below investment grade (commonly referred to as “junk bonds”). Since the Fund can invest significantly in lower-quality debt securities considered speculative in nature, this risk will be substantial.
Floating Rate Securities Risk
The interest rates payable on floating rate securities are not fixed and may fluctuate based upon changes in market rates. The interest rate on a floating rate security is a variable rate which is tied to another interest rate, such as a money-market index or Treasury bill rate. Floating rate securities are subject to interest rate risk and credit risk.
As short-term interest rates decline, interest payable on floating rate securities typically should decrease. Alternatively, during periods of increasing interest rates, changes in the interest rates of floating rate securities may lag behind changes in market rates or may have limits on the maximum increases in interest rates. The value of floating rate securities may decline if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline.
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 and greater volatility, (4) lack of uniform accounting, auditing and financial reporting standards, (5) increased price volatility, (6) less government regulation and supervision of foreign stock exchanges, brokers and listed companies; and (7) delays in transaction settlement in some foreign markets.
High Yield Securities Risk
Investing in high yield, below investment-grade securities (commonly referred to as “junk bonds”) generally involves significantly greater risks of loss of your money 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. 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. Below investment grade securities may experience greater price volatility and less liquidity than investment grade securities.
Illiquid and Restricted Securities Risk
Securities not registered in the U.S. under the Securities Act of 1933, as amended (the “Securities Act”), including 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. 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 the 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.
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American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
Interest Rate Risk
The Fund is subject to the risk that the market value of fixed income securities it holds will decline due to rising interest rates. As of the date of this Prospectus, interest rates are near historic lows, but may rise substantially and/or rapidly, potentially resulting in substantial losses to the Fund. Generally, the value of investments with interest rate risk, such as fixed income securities, will move in the opposite direction as movements in interest rates. The prices of fixed income securities are also affected by their durations. Fixed income securities with longer duration generally have greater sensitivity to changes in interest rates. For example, if a bond has a duration of three years, a 1% increase in interest rates could be expected to result in a 3% decrease in the value of the bond. Significant upward pressure on domestic interest rates and a corresponding widening of credit spreads could negatively impact the market price of emerging debt investments. An increase in interest rates can impact markets broadly as well.
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.
Liquidity Risk
The Fund is susceptible to the risk that certain investments held by the Fund may have limited marketability or be subject to restrictions on sale, and may be difficult to sell at favorable times or prices. The Fund could lose money if it is unable to dispose of an investment at a time that is most beneficial to the Fund. For example, the Fund may be forced to sell certain investments at unfavorable prices to meet redemption requests or other cash needs.
Loan Interests Risk
Unlike publicly traded common stocks which trade on national exchanges, there is no central place or exchange for loans to trade. Loans trade in an over-the- counter market, and confirmation and settlement, which are effected through standardized procedures and documentation, may take significantly longer than seven days to complete. Extended trade settlement periods may, in unusual market conditions with a high volume of shareholder redemptions, present a risk to shareholders regarding the Fund’s ability to pay redemption proceeds within the allowable time periods stated in its prospectus. The secondary market for floating rate loans also may be subject to irregular trading activity and wide bid/ask spreads. The lack of an active trading market for certain floating rate loans may impair the ability of the Fund to sell its loan interests at a time when it may otherwise be desirable to do so or may require the Fund to sell them at prices that are less than what the Fund regards as their fair market value and may make it difficult to value such loans. Interests in loans made to finance highly leveraged companies or transactions, such as corporate acquisitions, may be especially vulnerable to adverse changes in economic or market conditions. When the Fund’s loan interest is a participation, the Fund is subject to the risk that the party selling the participation interest will not remit the Fund’s pro rata share of loan payments to the Fund and the Fund may have less control over the exercise of remedies than the party selling the participation interest.
Market Risk
Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in fixed income instruments experiencing unusual liquidity issues, increased price volatility and, in some cases, credit downgrades and increased likelihood of default. These events have reduced the willingness and ability of some lenders to extend credit, and have made it more difficult for some borrowers to obtain financing on attractive terms, if at all. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions
30
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.
In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it is difficult to predict the impact on various markets of a significant rate increase, whether brought about by U.S. policy makers or by dislocations in world markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.
Other Investment Companies Risk
The Fund may invest in shares of other registered investment companies, including money market funds. To the extent that the Fund invests in shares of other registered investment companies, you will indirectly bear fees and expenses charged by the underlying funds in addition to the Fund’s direct fees and expense and will be subject to the risks associated with investments in those funds. For example, money market funds are subject to interest rate risk, credit risk, and market risk.
Preferred Stock Risk
If interest rates rise, the dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. The rights of preferred stock on distribution of a corporation’s assets in the event of its liquidation are generally subordinated to the rights associated with a corporation’s debt securities. Therefore, in the event of an issuer’s bankruptcy, there is substantial risk that there will be nothing left to pay preferred stockholders after payments, if any, to bondholders have been made. Preferred stocks may also be subject to credit risk.
Prepayment and Extension Risk
Prepayment risk is the risk that the principal amount of the underlying collateral may be repaid prior to the bond’s maturity date. Due to a decline in interest rates or excess cash flow, a debt security may be called or otherwise prepaid before maturity. If this occurs, no additional interest will be paid on the investment and the Fund may have to invest at a lower rate, may not benefit from an increase in value that may result from declining interest rates, and may lose any premium it paid to acquire the security. Extension risk is the risk that a decrease in prepayments may, as a result of higher interest rates or other factors, result in the extension of a security’s effective maturity, heighten interest rate risk and increase the potential for a decline in its price.
Unrated Securities Risk
Because the Fund may purchase securities that are not rated by any rating organization, the sub-advisor may internally assign ratings to certain of those securities, after assessing their credit quality, in categories of those similar to those of rating organizations. 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.
31
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
6. | Federal Income and Excise Taxes |
It is the policy of the Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Funds are treated as a single entity for the purpose of determining such qualification.
The Fund does not have any unrecorded tax liabilities in the accompanying financial statements. The tax years ended January 31, 2015, 2016, and 2017 are subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.
The Fund may be subject to taxes imposed by countries in which they invest. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
The tax character of distributions paid were as follows:
Distributions paid from: | Year Ended January 31, 2017 | Year Ended January 31, 2016 | ||||||
Ordinary Income* | ||||||||
Institutional Class | $ | 1,882,382 | $ | 1,759,283 | ||||
Y Class | 321,091 | 271,569 | ||||||
Investor Class | 147,957 | 99,781 | ||||||
A Class | 50,709 | 31,972 | ||||||
C Class | 16,867 | 7,389 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 2,419,006 | $ | 2,169,994 | ||||
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of January 31, 2017, the components of distributable earnings (deficits) on a tax basis were as follows:
Cost basis of investments for federal income tax purposes | $ | 62,594,773 | ||
Unrealized appreciation | 1,564,674 | |||
Unrealized depreciation | (372,709 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) | 1,191,965 | |||
Undistributed ordinary income | 4,443 | |||
Undistributed long-term capital gains | — | |||
Accumulated capital and other losses | (2,738,300 | ) | ||
Other temporary differences | (4,133 | ) | ||
|
| |||
Distributable earnings (deficits) | $ | (1,546,025 | ) | |
|
|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation (depreciation) are attributable primarily to the tax deferral of losses from wash sales.
32
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities. There are no permanent differences as of January 31, 2017.
Under the Regulated Investment Company Modernization Act of 2010 (the “RICMOD”), net capital losses recognized by the Fund in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.
For the year ended January 31, 2017, the Fund has $1,136,714 of short-term capital loss carryforward and $1,601,586 of long-term capital loss carryforwards. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
7. | Investment Transactions |
The aggregate cost of purchases and proceeds from sales and maturities of long-term investments, other than short-term obligations, for the year ended January 31, 2017 were as follows:
Crescent Short Duration Fund | ||||
Purchases (excluding U.S. government securities) | $ | 57,429,904 | ||
Sales and Maturities (excluding U.S. government securities) | 44,965,345 |
A summary of the Fund’s direct transactions in the USG Select Fund for the year ended January 31, 2017 were as follows:
Type of Transaction | January 31, 2016 Shares/Fair Value | Purchases | Sales | January 31, 2017 Shares/Fair Value | Dividend Income | |||||||||||||||
Direct | $ | — | $ | 39,088,928 | $ | 36,590,085 | $ | 2,498,843 | $ | 7,120 |
8. | Capital Share Transactions |
The tables below summarize the activity in capital shares for each Class of the Fund:
Institutional Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Crescent Short Duration High Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,604,936 | $ | 15,345,755 | 1,754,507 | $ | 16,841,437 | ||||||||||
Reinvestment of dividends | 199,329 | 1,878,899 | 184,571 | 1,754,659 | ||||||||||||
Shares redeemed | (530,776 | ) | (4,904,046 | ) | (1,334,707 | ) | (12,827,294 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 1,273,489 | $ | 12,320,608 | 604,371 | $ | 5,768,802 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Crescent Short Duration High Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 374,672 | $ | 3,523,009 | 1,230,642 | $ | 11,854,195 | ||||||||||
Reinvestment of dividends | 30,309 | 285,423 | 28,553 | 267,579 | ||||||||||||
Shares redeemed | (695,631 | ) | (6,454,380 | ) | (326,905 | ) | (3,064,331 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (290,650 | ) | $ | (2,645,948 | ) | 932,290 | $ | 9,057,443 | ||||||||
|
|
|
|
|
|
|
|
33
American Beacon Crescent Short Duration High Income FundSM
Notes to Financial Statements
January 31, 2017
Investor Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Crescent Short Duration High Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 45,154 | $ | 424,004 | 411,947 | $ | 3,980,643 | ||||||||||
Reinvestment of dividends | 11,800 | 111,013 | 7,913 | 73,947 | ||||||||||||
Shares redeemed | (174,202 | ) | (1,643,102 | ) | (44,272 | ) | (417,208 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (117,248 | ) | $ | (1,108,085 | ) | 375,588 | $ | 3,637,382 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Crescent Short Duration High Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 26,753 | $ | 254,321 | 146,078 | $ | 1,413,995 | ||||||||||
Reinvestment of dividends | 4,742 | 44,656 | 3,024 | 28,318 | ||||||||||||
Shares redeemed | (23,427 | ) | (221,496 | ) | (44,422 | ) | (424,009 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 8,068 | $ | 77,481 | 104,680 | $ | 1,018,304 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Crescent Short Duration High Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 27,226 | $ | 256,028 | 61,004 | $ | 568,618 | ||||||||||
Reinvestment of dividends | 1,451 | 13,676 | 693 | 6,470 | ||||||||||||
Shares redeemed | (34,989 | ) | (324,680 | ) | (21,075 | ) | (195,346 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (6,312 | ) | $ | (54,976 | ) | 40,622 | $ | 379,742 | ||||||||
|
|
|
|
|
|
|
|
9. | Subsequent Events |
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Funds financial statements through this date.
34
American Beacon Crescent Short Duration High Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||
Year Ended January 31, | October 1 A to January 31, | |||||||||||
2017 | 2016 | 2015 | ||||||||||
Net asset value, beginning of period | $ | 9.01 | $ | 9.68 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.46 | 0.47 | 0.16 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.63 | (0.67 | ) | (0.32 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.09 | (0.20 | ) | (0.16 | ) | |||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.46 | ) | (0.47 | ) | (0.16 | ) | ||||||
Distributions from net realized gains | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total distributions | (0.46 | ) | (0.47 | ) | (0.16 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 9.64 | $ | 9.01 | $ | 9.68 | ||||||
|
|
|
|
|
| |||||||
Total return B | 12.38 | % | (2.23 | )% | (1.65 | )%C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 51,834,666 | $ | 36,971,459 | $ | 33,903,138 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.26 | % | 1.27 | % | 2.24 | %D | ||||||
Expenses, net of reimbursements | 0.85 | % | 0.85 | % | 0.85 | %D | ||||||
Net investment income, before expense reimbursements | 4.51 | % | 4.41 | % | 3.37 | %D | ||||||
Net investment income, net of reimbursements | 4.93 | % | 4.83 | % | 4.76 | %D | ||||||
Portfolio turnover rate | 95 | % | 72 | % | 31 | %E | ||||||
Y Class | ||||||||||||
Year Ended January 31, | October 1 A to January 31, | |||||||||||
2017 | 2016 | 2015 | ||||||||||
Net asset value, beginning of period | $ | 9.00 | $ | 9.68 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.45 | 0.46 | 0.15 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.63 | (0.68 | ) | (0.32 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.08 | (0.22 | ) | (0.17 | ) | |||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.45 | ) | (0.46 | ) | (0.15 | ) | ||||||
Distributions from net realized gains | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total distributions | (0.45 | ) | (0.46 | ) | (0.15 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 9.63 | $ | 9.00 | $ | 9.68 | ||||||
|
|
|
|
|
| |||||||
Total return B | 12.27 | % | (2.39 | )% | (1.68 | )%C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 6,277,416 | $ | 8,481,991 | $ | 98,343 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.36 | % | 1.29 | % | 7.71 | %D | ||||||
Expenses, net of reimbursements | 0.95 | % | 0.95 | % | 0.95 | %D | ||||||
Net investment income (loss), before expense reimbursements | 4.42 | % | 4.80 | % | (2.11 | )%D | ||||||
Net investment income, net of reimbursements | 4.83 | % | 5.14 | % | 4.64 | %D | ||||||
Portfolio turnover rate | 95 | % | 72 | % | 31 | %E |
A | October 1, 2014 is the inception date of the Crescent Short Duration High Income Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from October 1, 2014 to January 31, 2015, and is not annualized. |
35
American Beacon Crescent Short Duration High Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||
Year Ended January 31, | October 1 A to January 31, | |||||||||||
2017 | 2016 | 2015 | ||||||||||
Net asset value, beginning of period | $ | 9.01 | $ | 9.69 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.43 | 0.44 | 0.14 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.63 | (0.68 | ) | (0.31 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.06 | (0.24 | ) | (0.17 | ) | |||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.43 | ) | (0.44 | ) | (0.14 | ) | ||||||
Distributions from net realized gains | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total distributions | (0.43 | ) | (0.44 | ) | (0.14 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 9.64 | $ | 9.01 | $ | 9.69 | ||||||
|
|
|
|
|
| |||||||
Total return B | 11.96 | % | (2.67 | )% | (1.67 | )%C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 2,679,338 | $ | 3,560,159 | $ | 189,898 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.56 | % | 1.46 | % | 6.21 | %D | ||||||
Expenses, net of reimbursements | 1.23 | % | 1.23 | % | 1.23 | %D | ||||||
Net investment income (loss), before expense reimbursements | 4.22 | % | 4.44 | % | (0.41 | )%D | ||||||
Net investment income, net of reimbursements | 4.55 | % | 4.68 | % | 4.57 | %D | ||||||
Portfolio turnover rate | 95 | % | 72 | % | 31 | %E | ||||||
A Class | ||||||||||||
Year Ended January 31, | October 1 A to January 31, | |||||||||||
2017 | 2016 | 2015 | ||||||||||
Net asset value, beginning of period | $ | 9.00 | $ | 9.68 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.43 | 0.43 | 0.14 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.63 | (0.68 | ) | (0.32 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.06 | (0.25 | ) | (0.18 | ) | |||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.43 | ) | (0.43 | ) | (0.14 | ) | ||||||
Distributions from net realized gains | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total distributions | (0.43 | ) | (0.43 | ) | (0.14 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 9.63 | $ | 9.00 | $ | 9.68 | ||||||
|
|
|
|
|
| |||||||
Total return B | 11.94 | % | (2.71 | )% | (1.78 | )%C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 1,183,362 | $ | 1,033,329 | $ | 98,255 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.66 | % | 1.55 | % | 7.97 | %D | ||||||
Expenses, net of reimbursements | 1.25 | % | 1.25 | % | 1.25 | %D | ||||||
Net investment income (loss), before expense reimbursements | 4.13 | % | 4.28 | % | (2.37 | )%D | ||||||
Net investment income, net of reimbursements | 4.54 | % | 4.59 | % | 4.36 | %D | ||||||
Portfolio turnover rate | 95 | % | 72 | % | 31 | %E |
A | October 1, 2014 is the inception date of the Crescent Short Duration High Income Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from October 1, 2014 to January 31, 2015, and is not annualized. |
36
American Beacon Crescent Short Duration High Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||
Year Ended January 31, | October 1 A to January 31, | |||||||||||
2017 | 2016 | 2015 | ||||||||||
Net asset value, beginning of period | $ | 9.00 | $ | 9.68 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.35 | 0.36 | 0.12 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.63 | (0.68 | ) | (0.32 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 0.98 | (0.32 | ) | (0.20 | ) | |||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.35 | ) | (0.36 | ) | (0.12 | ) | ||||||
Distributions from net realized gains | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total distributions | (0.35 | ) | (0.36 | ) | (0.12 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 9.63 | $ | 9.00 | $ | 9.68 | ||||||
|
|
|
|
|
| |||||||
Total return B | 11.10 | % | (3.40 | )% | (2.03 | )%C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 427,829 | $ | 456,828 | $ | 97,911 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 2.41 | % | 2.36 | % | 8.70 | %D | ||||||
Expenses, net of reimbursements | 2.00 | % | 2.00 | % | 2.00 | %D | ||||||
Net investment income (loss), before expense reimbursements | 3.37 | % | 3.76 | % | (3.12 | )%D | ||||||
Net investment income, net of reimbursements | 3.78 | % | 4.12 | % | 3.59 | %D | ||||||
Portfolio turnover rate | 95 | % | 72 | % | 31 | %E |
A | October 1, 2014 is the inception date of the Crescent Short Duration High Income Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from October 1, 2014 to January 31, 2015, and is not annualized. |
37
Federal Tax Information
January 31, 2017 (Unaudited)
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended January 31, 2017. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2016.
The Fund designated the following items with regard to distributions paid during the year ended December 31, 2016. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Corporate Dividends Received Deduction | 0.0 | % | ||
Qualified Dividend Income | 0.0 | % |
Shareholders received notification in January 2017 of the appropriate tax information necessary to prepare their 2016 income tax returns.
38
Trustees and Officers of the American Beacon FundsSM
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees twenty-eight funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (80) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal resignation or retirement* | ||||
Gilbert G. Alvarado (47) | Trustee since 2015 | Director, Kura MD, Inc. (local telehealth organization) (2015-present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present) Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-Present); Director, Sacramento Regional Technology Alliance (2011-Present); Director, Women’s Empowerment (2009-2014); Trustee, American Beacon Select Funds (2015-Present). | ||
Josephe B. Armes (54) | Trustee since 2015 | Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2013-Present); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Chief Operating Officer, Hicks Holdings, LLC (Hicks Family assets and investments) (2005-2010); Trustee, Baylor University Board of Regents (2001-2010); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present). | ||
Gerard J. Arpey (58) | Trustee since 2012 | Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003- 2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Brenda A. Cline (56) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc.(public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (62) | Trustee since 2008 | Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008- 2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). |
39
Trustees and Officers of the American Beacon FundsSM
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
TRUSTEES (CONT.) | Term | |||
M. Dunning (74) | Trustee since 2008 | Chairman Emeritus (2008-Present); Lockton Dunning Benefits (consulting firm in employee benefits); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present) (software consulting); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard M. Massman (73) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004- 2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (53) | �� | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005- Present); Trustee, American Beacon Select Funds (2012-Present). | |
R. Gerald Turner (71) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001- 2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
OFFICERS | ||||
Gene. L. Needles, Jr. (62) | President since 2009 Executive Vice President since 2009 | President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Resolute Investment Managers, Inc. (2015-Present); President, CEO and Director, Resolute Acquisition, Inc.(2015-Present); President, CEO and Director, Resolute Topco, Inc. (2015-Present), President, CEO and Director, Resolute Investment Holdings, LLC. (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc.; (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, L.L.C. (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). | ||
Rosemary K. Behan (57) | VP, Secretary and Chief Legal Officer since 2006 | Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Resolute Investment Managers, Inc. (2015-Present); Secretary, Resolute Acquisition, Inc. (2015- Present); Secretary, Resolute Topco, Inc. (2015-Present); Secretary, Resolute Investment Holdings, LLC. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008- 2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, L.L.C.(2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). | ||
Brian E. Brett (56) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Paul B. Cavazos (47) | VP since 2016 | Chief Investment Officer and Vice President, Asset Management, American Beacon Advisors, Inc. (2016-Present); Chief Investment Officer and Assistant Treasurer, DTE Energy (2007-2016); | ||
Erica Duncan (46) | VP since 2011 | Vice President, Marketing and Client Services, American Beacon Advisors, Inc. (2011-Present); Supervisor, Brand Marketing, Invesco (2010-2011); |
40
Trustees and Officers of the American Beacon FundsSM
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
Melinda G. Heika (55) | Treasurer since 2010 | Treasurer, American Beacon Advisors, Inc. (2010-Present); Treasurer, Resolute Investment Managers, Inc. (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present); Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute Investment Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, L.L.C. (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). | ||
One Year | ||||
Terri L. McKinney (53) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (41) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Manager and Senior Vice President, American Private Equity Management, L.L.C. (2012-Present); Senior Vice President and Director, Resolute Investment Managers, Inc. (2015-Present); Senior Vice President and Director, Resolute Acquisition, Inc. (2015-Present); Senior Vice President and Director, Resolute Topco, Inc. (2015-Present), Senior Vice President and Director, Resolute Investment Holdings, LLC. (2015-Present); Senior Vice President, Lighthouse Holdings, Inc. (2013- 2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013- 2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010). | ||
Samuel J. Silver (53) | VP since 2011 | Chief Fixed Income Officer (2016–Present), Vice President, Fixed Income Investments (2011-2016) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (45) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, L.L.C. (2012-Present). | ||
Sonia L. Bates (60) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011-Present), Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer, Resolute Investment Managers, Inc. (2015-Present); Asst. Treasurer, Resolute Acquisition, Inc.(2015-Present); Asst. Treasurer, Resolute Topco, Inc. (2015-Present); Asst. Treasurer, Resolute Investment Holdings, LLC.; Asst. Treasurer, Lighthouse Holdings, Inc. (2011-2015); Asst. Treasurer, Lighthouse Holdings Parent Inc. (2011- 2015); Asst. Treasurer, American Private Equity Management, L.L.C. (2012-Present). | ||
Shelley D. Abrahams (42) | Assistant Secretary since 2008 | Assistant Secretary, American Beacon Advisors, Inc. (2008-Present) | ||
Rebecca L. Harris (50) | Assistant Secretary since 2011 | Assistant Secretary, American Beacon Advisors, Inc. (2011-Present) | ||
Diana N. Lai (41) | Assistant Secretary since 2012 | Assistant Secretary, American Beacon Advisors, Inc. (2012-Present) | ||
Teresa A. Oxford (58) | Assistant Secretary since 2015 | Assistant Secretary, American Beacon Advisors, Inc. (2015-Present) |
* | As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75. |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors. |
41
Privacy Policy
January 31, 2017 (Unaudited)
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
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Delivery of Documents
eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your shareholder reports and summary prospectus on-line. Sign up at www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
![]() | ![]() | |
By E-mail: | On the Internet: | |
american_beacon.funds@ambeacon.com | Visit our website at www.americanbeaconfunds.com | |
|
By Mail: | |
By Telephone: | American Beacon Funds | |
Institutional, Y, and Investor Classes | P.O. Box 219643 | |
Call (800) 658-5811 | Kansas City, MO 64121-9643 | |
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-2736. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately sixty days after the end of each quarter. |
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www. sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Boston, MA | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds and American Beacon Crescent Short Duration High Income Fund are service marks of American Beacon Advisors, Inc.
AR 1/17
American Beacon®
FUNDS
2017 ANNUAL REPORT
January 31, 2017
ACADIAN EMERGING MARKETS MANAGED VOLATILITY FUND
SGA GLOBAL GROWTH FUND
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
ACADIAN EMERGING MARKETS MANAGED VOLATILITY FUND
Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in lower volatility securities may produce more modest gains than other stock funds as a trade-off for the potentially lower downside risk. The use of futures contracts for cash management may subject the Fund to losing more money than invested. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
SGA GLOBAL GROWTH FUND
Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | January 31, 2017 |
1 | ||||
2 | ||||
9 | ||||
11 | ||||
Schedules of Investments: | ||||
American Beacon Acadian Emerging Markets Managed Volatility Fund | 12 | |||
21 | ||||
23 | ||||
27 | ||||
Financial Highlights: | ||||
American Beacon Acadian Emerging Markets Managed Volatility Fund | 47 | |||
50 | ||||
53 | ||||
54 | ||||
57 | ||||
Back Cover |
![]() | Dear Shareholders,
In the weeks ahead of the U.S. presidential election on November 8, 2016, uncertainty about the outcome caused many investors to stay on the sidelines. Some investors questioned whether the election’s result would have negative consequences for their portfolios, although elections have rarely had a lasting effect on the market.
Following the election, the markets responded positively to aspects of the incoming administration’s proposed plans for economic growth; i.e., repatriating jobs from overseas, relaxing regulations, lowering taxes and increasing infrastructure spending. From Election Day 2016 to Inauguration Day 2017, the S&P 500 Index – a broad measure of the performance of large U.S. companies – climbed approximately 6%. |
For the 12-month period that ended January 31, 2017, the Dow Jones Industrial Average – which follows the performance of 30 significant stocks trading on the New York Stock Exchange and The NASDAQ Stock Market – gained 23.89%. The S&P 500 Index, a domestic equity bellwether, grew 20.04%. Key global equity benchmarks also posted favorable returns for the same period: The MSCI EAFE Index, which measures the world’s developed market, increased 12.03%; the MSCI All Country World Index, which includes the equity market performance of developed and emerging markets, added 17.93%; and the MSCI Emerging Markets Index achieved 25.41%.
For the 12 months ended January 31, 2017:
• | American Beacon Acadian Emerging Markets Managed Volatility Fund (Investor Class) returned 11.89%. |
• | American Beacon SGA Global Growth Fund (Investor Class) returned 13.20%. |
At American Beacon Advisors, we are proud to offer a broad range of global equity and fixed-income funds sub-advised by experienced asset managers who employ distinctive investment processes to manage assets through a variety of economic and market conditions. Together, we work diligently to help our shareholders meet their long-term financial goals.
Thank you for your continued investment in American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, |
![]() |
Gene L. Needles, Jr. |
President |
American Beacon Funds |
1
Global Equity and Emerging Markets Overview
January 31, 2017 (Unaudited)
Global equity markets rallied broadly for the 12-month period from February 2016 through January 2017, evidenced by the 17.1% return of the MSCI World Index. This strong performance occurred despite the surprise Brexit election results in the U.K. in late June and the surprise U.S. presidential election results for Donald Trump – along with a majority sweep by the Republican Party in both chambers of Congress – in November. Equity performance was lifted over the course of the year with a broad-based commodity recovery headlined by the doubling of crude oil from a low of almost $26 per barrel in February 2016 to a high of more than $52 per barrel at the end of the period.
Domestic small cap stocks, represented by the Russell 2000 Index, returned a blistering 33.5%. Small caps outperformed large cap stocks despite the S&P 500 Index returning a solid 20.0% for the year. From a sector perspective within the S&P 500 Index, the top performers were the cyclical sectors, including Materials (up 36.5%) and Financials (up 35.0%). On the other hand, those lagging were the more defensive sectors, including Consumer Staples (up 6.4%) and Health Care (up 7.7%). From a style standpoint, value outperformed growth as demonstrated by the Russell 3000 Value Index returning 25.8% versus the Russell 3000 Growth Index return of 17.9%.
International developed markets also performed reasonably well over the period as the MSCI EAFE Index returned 12.0%. In Europe, the MSCI Germany Index returned 16.3% compared to the MSCI United Kingdom Index return of 7.7%. The U.K. market lagged in terms of U.S. dollars due to headwinds from the Brexit vote and the subsequent weakening of the British pound. In Asia, the MSCI Japan Index returned a solid 15.7%.
In the developing world, emerging markets rebounded strongly as rising commodity prices lifted stocks and the MSCI Emerging Market Index returned 25.4%. Leading the way over the period was Brazil, where the MSCI Brazil Index returned a scorching 98.6% as a political regime change instilled confidence in the future direction of the economy. In China, stocks produced a solid return as the MSCI China Index was up 23.5%. President Trump’s protectionist rhetoric was heavily directed at the U.S.’s southern neighbor and a main driver causing the MSCI Mexico Index to return -3.9% for the year.
Overall, global equity investors were rewarded with a very resilient year as stocks steadily marched upward despite political surprises.
2
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Investor Class of the American Beacon Acadian Emerging Markets Managed Volatility Fund (the “Fund”) returned 11.89% for the twelve months ended January 31, 2017. The Fund underperformed the MSCI Emerging Markets Index (the “Index”) return of 25.41% for the period.
Comparison of Changes in Value of a $10,000 Investment for the period 9/27/2013 Through 1/31/2017
Total Returns for the Period ended January 31, 2017
Ticker | 1 Year | 3 Years | Since Inception 9/27/2013 | Value of $10,000 9/27/2013- 1/31/2017 | ||||||||||||||||
Institutional Class (1,3) | ACDIX | 12.37 | % | 0.02 | % | (1.21 | )% | $ | 9,602 | |||||||||||
Y Class (1,3) | ACDYX | 12.28 | % | (0.10 | )% | (1.31 | )% | $ | 9,568 | |||||||||||
Investor Class (1,3) | ACDPX | 11.89 | % | (0.36 | )% | (1.58 | )% | $ | 9,482 | |||||||||||
A without Sales Charge (1,3) | ACDAX | 11.84 | % | (0.43 | )% | (1.64 | )% | $ | 9,463 | |||||||||||
A with Sales Charge (1,3) | ACDAX | 5.39 | % | (2.36 | )% | (3.36 | )% | $ | 8,919 | |||||||||||
C without Sales Charge (1,3) | ACDCX | 11.11 | % | (1.15 | )% | (2.37 | )% | $ | 9,229 | |||||||||||
C with Sales Charge (1,3) | ACDCX | 10.11 | % | (1.15 | )% | (2.37 | )% | $ | 9,229 | |||||||||||
MSCI Emerging Markets Index (2) | 25.41 | % | 1.44 | % | (0.55 | )% | $ | 9,835 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A portion of the fees charged to each Class of the Fund has been waived since inception. Performance prior to waiving fees was lower than the actual returns shown since inception. A Class shares have a maximum sales charge of 5.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase. |
2. | The MSCI Emerging Markets Index is a market capitalization weighted index composed of companies that are representative of the market structure of developing countries in Latin America, Asia, Eastern Europe, the Middle East and Africa. One cannot directly invest in an index. |
3. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 1.69%, 1.78%, 1.99%, 2.11%, and 2.88%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.. |
3
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Fund underperformed the Index over the one-year period due to stock selection and country allocation.
Stock selections in Brazil and Mexico detracted from relative performance during the period. This was partially offset by strong selections in Thailand. The primary detractors in Brazil were stocks the portfolio did not own, including Itau Unibanco Holding S Pref (up 120.8%) and Banco Bradesco SA Pref (up 163.7%). In Mexico, portfolio holdings in Grupo Lala SAB De Cv (down 35.2%) and Grupo Bimbo SAB Series A (down 21.3%) hurt relative performance. In Thailand, a position in Thai Vegetable Oil PCL (up 93.8%) contributed positively to performance.
Relative contribution from country allocation was negative for the twelve month period. Underweighting Brazil (up 99.2%) and overweighting Malaysia (down 3.4%) were the largest detractors. On the other hand, overweighting Russia (up 56.0%) contributed positively to relative performance during the period.
The Fund’s basic philosophy remains focused on investing in a well-diversified portfolio of low volatility stocks that aims to maximize risk-adjusted returns.
Top Ten Holdings (% Net Assets) | ||||||||
SK Hynix, Inc. | 1.5 | |||||||
China Communications Services Corp., Ltd. H | 1.3 | |||||||
Samsung Electronics Co. Ltd. | 1.3 | |||||||
Gazprom PJSC, ADR | 1.2 | |||||||
PetroChina Co., Ltd. H | 1.1 | �� | ||||||
Agricultural Bank of China H | 1.1 | |||||||
LG Electronics, Inc. | 1.1 | |||||||
Severstal, Reg S | 1.1 | |||||||
Bank of China Ltd. H | 1.1 | |||||||
Tencent Holdings Ltd. | 1.1 | |||||||
Total Fund Holdings | 370 |
Sector Allocation (% Equities) | ||||
Financials | 16.9 | |||
Consumer Staples | 16.3 | |||
Telecommunication Services | 14.2 | |||
Information Technology | 11.9 | |||
Consumer Discretionary | 11.2 | |||
Utilities | 8.3 | |||
Industrials | 6.8 | |||
Health Care | 5.1 | |||
Materials | 3.6 | |||
Energy | 3.3 | |||
Real Estate | 2.4 |
4
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Performance Overview
January 31, 2017 (Unaudited)
Country Allocation (% Equities) | ||||
Hong Kong/China | 20.6 | |||
India | 12.0 | |||
South Korea | 11.6 | |||
Taiwan | 9.3 | |||
Malaysia | 7.4 | |||
Thailand | 6.6 | |||
Russia | 5.7 | |||
Chile | 3.7 | |||
South Africa | 3.5 | |||
Mexico | 3.5 | |||
Poland | 2.8 | |||
Philippines | 2.2 | |||
Brazil | 2.2 | |||
Indonesia | 2.0 | |||
Turkey | 1.7 | |||
Hungary | 1.6 | |||
Czech Republic | 1.5 | |||
Egypt | 1.5 | |||
Colombia | 0.4 | |||
Greece | 0.1 | |||
Peru | 0.1 |
5
American Beacon SGA Global Growth FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Investor Class of the American Beacon SGA Global Growth Fund (the “Fund”) returned 13.20% for the twelve months ended January 31, 2017. The Fund underperformed the MSCI All Country World Index (the “Index”) return of 17.93% for the period.
Comparison of Change in Value of a $10,000 Investment for the period from 12/31/2010 through 1/31/2017
Total Returns for the Period ended January 31, 2017
Ticker | 1 Year | 3 Years | 5 Years | Since Inception (12/31/2010) | Value of $10,000 12/31/2010- 1/31/2017 | |||||||||||||||||||
Institutional Class (1,7) | SGAGX | 13.66 | % | 7.89 | % | 9.46 | % | 9.12 | % | $ | 17,004 | |||||||||||||
Y Class (1,2,7) | SGAYX | 13.55 | % | 7.76 | % | 9.38 | % | 9.05 | % | $ | 16,941 | |||||||||||||
Investor Class (1,3,7) | SGAPX | 13.20 | % | 7.47 | % | 9.18 | % | 8.88 | % | $ | 16,781 | |||||||||||||
A without Sales Charge (1,4,7) | SGAAX | 13.21 | % | 7.45 | % | 9.16 | % | 8.87 | % | $ | 16,772 | |||||||||||||
A with Sales Charge (1,4,7) | SGAAX | 6.72 | % | 5.36 | % | 7.88 | % | 7.82 | % | $ | 11,716 | |||||||||||||
C without Sales Charge (1,5,7) | SGACX | 12.41 | % | 6.64 | % | 8.62 | % | 8.42 | % | $ | 16,356 | |||||||||||||
C with Sales Charge (1,5,7) | SGACX | 11.41 | % | 6.64 | % | 8.62 | % | 8.42 | % | $ | 12,125 | |||||||||||||
MSCI All Country World Index (6) | 17.93 | % | 5.49 | % | 8.72 | % | 6.76 | % | $ | 15,116 | ||||||||||||||
MSCI All Country World Growth Index (6) | 14.42 | % | 6.16 | % | 9.19 | % | 7.22 | % | $ | 15,061 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A portion of the fees charged to each Class of the Fund has been waived since inception. Performance prior to waiving fees was lower than the actual returns shown since inception. A Class shares have a maximum sales charge of 5.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase. |
6
American Beacon SGA Global Growth FundSM
Performance Overview
January 31, 2017 (Unaudited)
2. | Fund performance for the five-year and since inception periods represent the total returns achieved by the Institutional Class from 12/31/10 up to 10/4/13, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 12/31/10. |
3. | Fund performance for the five-year and since inception periods represent the total returns achieved by the Institutional Class from 12/31/10 up to 10/4/13, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 12/31/10. |
4. | Fund performance for the five-year and since inception periods represent the total returns achieved by the Institutional Class from 12/31/10 up to 10/4/13, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 12/31/10. The maximum sales charge for A Class is 5.75%. |
5. | Fund performance for the five-year and since inception periods represent the total returns achieved by the Institutional Class from 12/31/10 up to 10/4/13, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/10. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
6. | The MSCI All Country World Index (“ACWI”) is a free float-adjusted, market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Growth Index is designed to measure equity market performance of companies with higher growth values in developed and emerging markets. One cannot directly invest in an index. |
7. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A and C Class shares was 2.63%, 2.73%, 3.09%, 3.06% and 3.77%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
From a country perspective, stock selection detracted from performance and country allocation added to performance relative to the Index over the one-year period.
Stock selections in South Korea and Denmark detracted from the Fund’s relative performance during the period, including Amorepacific Corp., and LG Household + Health Care (down 18.7% and 22.5%, respectively) in South Korea, and Novo Nordisk A/S B (down 30.4%) in Denmark. Stock selection in the United Kingdom, including ARM Holdings PLC and Aon PLC (up 56.5% and 27.1%, respectively) contributed positively to the Fund.
From a country allocation perspective, overweighting Brazil (up 99.2%) and underweighting the United Kingdom (up 5.8%) aided relative performance, overcoming value lost through overweighting Denmark (down 8.0%).
The Fund’s basic philosophy remains focused on investing in low-risk companies that offer predictable earnings and cash flow growth over the long term.
Top Ten Holdings (% Net Assets) | ||||||||
Tencent Holdings Ltd. | 4.0 | |||||||
AIA Group Ltd. | 4.0 | |||||||
SAP AG, Sponsored ADR | 3.9 | |||||||
Visa, Inc., Class A | 3.9 | |||||||
Novo Nordisk A.S., Class B | 3.5 | |||||||
Regeneron Pharmaceuticals, Inc. | 3.1 | |||||||
Salesforce.com, Inc. | 3.0 | |||||||
Apple, Inc. | 2.9 | |||||||
priceline.com, Inc. | 2.9 | |||||||
Equinix Inc. | 2.9 | |||||||
Total Fund Holdings | 35 |
7
American Beacon SGA Global Growth FundSM
Performance Overview
January 31, 2017 (Unaudited)
Sector Allocation (% Equities) | ||||
Information Technology | 34.5 | |||
Consumer Staples | 19.5 | |||
Consumer Discretionary | 14.5 | |||
Health Care | 11.2 | |||
Financials | 6.3 | |||
Energy | 6.0 | |||
Real Estate | 5.2 | |||
Industrials | 2.8 | |||
Country Allocation (% Equities) | ||||
United States | 56.2 | |||
Hong Kong/China | 8.4 | |||
India | 4.6 | |||
Germany | 4.2 | |||
Denmark | 3.7 | |||
United Kingdom | 3.1 | |||
France | 3.1 | |||
Netherlands | 2.9 | |||
South Africa | 2.7 | |||
South Korea | 2.5 | |||
Bermuda | 2.1 | |||
Japan | 2.1 | |||
Mexico | 2.0 | |||
Argentina | 1.4 | |||
Australia | 1.0 |
8
Expense Examples
January 31, 2017 (Unaudited)
Fund Expense Example
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, such as sales charges (loads) on purchase payments and redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The Examples are intended to help you understand the ongoing cost (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from August 1, 2016 through January 31, 2017.
Actual Expenses
The “Actual” lines of the tables provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the tables provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Funds with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and Investor Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Funds, such as sales charges (loads). Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
9
American Beacon FundsSM
Expense Examples
January 31, 2017 (Unaudited)
Acadian Emerging Markets Managed Volatility Fund
Beginning Account Value 8/1/2016 | Ending Account Value 1/31/2017 | Expenses Paid During Period 8/1/2016-1/31/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 993.05 | $ | 6.76 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.35 | $ | 6.85 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 991.98 | $ | 7.26 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,017.85 | $ | 7.35 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 990.35 | $ | 8.66 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,016.44 | $ | 8.77 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 990.14 | $ | 8.75 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,016.34 | $ | 8.87 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 986.43 | $ | 12.48 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,012.57 | $ | 12.65 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 1.35%, 1.45%, 1.73%, 1.75% and 2.50% for the Institutional, Y, Investor, A and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. |
** | 5% return before expenses. |
SGA Global Growth Fund
Beginning Account Value 8/1/2016 | Ending Account Value 1/31/2017 | Expenses Paid During Period 8/1/2016-1/31/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 969.90 | $ | 4.85 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.21 | $ | 4.98 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 969.16 | $ | 5.30 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.76 | $ | 5.43 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 967.68 | $ | 6.63 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.38 | $ | 6.80 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 968.27 | $ | 6.83 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.22 | $ | 7.00 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 964.35 | $ | 10.47 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,014.47 | $ | 10.74 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 0.98%, 1.07%, 1.34%, 1.38% and 2.12% for the Institutional, Y, Investor, A and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. |
** | 5% return before expenses. |
10
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of American Beacon Funds and Shareholders of American Beacon Acadian Emerging Markets Managed Volatility Fund and American Beacon SGA Global Growth Fund
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, as of January 31, 2017, and the related statements of operations and of changes in net assets and the financial highlights for the year then ended, present fairly, in all material respects, each of the financial positions of American Beacon Acadian Emerging Markets Managed Volatility Fund and American Beacon SGA Global Growth Fund (two of the series constituting American Beacon Funds, hereafter referred to as the “Funds”) as of January 31, 2017, the results of each of their operations, the changes in each of their net assets and each of their financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of January 31, 2017 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies were not received, provide a reasonable basis for our opinions. The financial statements of each of the Funds as of and for the year ended January 31, 2016 and the financial highlights for each of the periods ended on or prior to January 31, 2016 (not presented herein, other than the statements of changes in net assets and the financial highlights) were audited by other auditors whose report dated March 31, 2016 expressed an unqualified opinion on those financial statements and financial highlights.
PricewaterhouseCoopers
Boston, Massachusetts
March 30, 2017
11
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Brazil - 2.18% | ||||||||
Common Stocks - (Cost $1,745,419) | ||||||||
AmBev S.A. | 98,000 | $ | 534,924 | |||||
BRF S.A. | 43,400 | 612,346 | ||||||
Dimed SA Distribuidora da MedicamentosA | 300 | 61,597 | ||||||
FII BTG Pactual Corp. Office FundB | 2,670 | 81,512 | ||||||
Grendene S.A. | 11,200 | 65,790 | ||||||
Hypermarcas S.A. | 56,700 | 502,924 | ||||||
|
| |||||||
Total Common Stocks | 1,859,093 | |||||||
|
| |||||||
Preferred Stocks - (Cost $157,964) | ||||||||
Centrais Eletricas Santa CatarinaC | 1,100 | 6,385 | ||||||
Cia de Gas de Sao Paulo, Class AC | 6,262 | 92,506 | ||||||
|
| |||||||
Total Preferred Stocks | 98,891 | |||||||
|
| |||||||
Total Brazil | 1,957,984 | |||||||
|
| |||||||
Chile - 3.65% | ||||||||
Common Stocks - (Cost $3,372,432) | ||||||||
Aguas Andinas S.A., Class A | 78,422 | 42,577 | ||||||
AntarChile S.A | 2,356 | 25,774 | ||||||
Banco de Chile, ADRD | 2,821 | 201,166 | ||||||
Banco de Chile | 4,513 | 538 | ||||||
Cencosud S.A | 11,293 | 57,219 | ||||||
Compania Cervecerias Unidas S.A., Sponsored ADRD | 32,647 | 737,496 | ||||||
Embotelladora Andina S.A., Series B, ADR D | 12,400 | 266,600 | ||||||
Empresa Nacional de Electricidad S.A | 210,481 | 135,416 | ||||||
Empresa Nacional de Electricidad S.A., Sponsored ADRD | 7,877 | 152,656 | ||||||
Enel Americas S.A | 589,347 | 105,407 | ||||||
Enel Americas S.A., ADRD | 59,791 | 539,913 | ||||||
Enersis Chile S.A | 3,176,390 | 526,016 | ||||||
Engie Energia Chile S.A | 44,541 | 73,482 | ||||||
Inversiones Aguas Metropolitanas S.A. | 64,069 | 92,265 | ||||||
Sigdo Koppers S.A | 16,018 | 20,499 | ||||||
Sociedad Matriz del Banco de Chile S.A., Class B | 252,545 | 85,665 | ||||||
Vina Concha y Toro S.A. | 111,423 | 181,245 | ||||||
Vina Concha y Toro S.A., Sponsored ADRD | 1,112 | 36,329 | ||||||
|
| |||||||
Total Chile | 3,280,263 | |||||||
|
| |||||||
Colombia - 0.43% | ||||||||
Common Stocks - (Cost $410,096) | ||||||||
Grupo Aval Acciones y Valores S.A., ADR D | 45,923 | 382,079 | ||||||
|
| |||||||
Czech Republic - 1.51% | ||||||||
Common Stocks - (Cost $1,351,462) | ||||||||
CEZ A.S. | 44,493 | 762,376 | ||||||
Komercni Banka A.S. | 3,083 | 109,003 | ||||||
O2 Czech Republic A.S | 19,874 | 205,640 | ||||||
Pegas Nonwovens S.A. | 5,825 | 190,823 | ||||||
Philip Morris CR A.S.A | 163 | 86,114 | ||||||
|
| |||||||
Total Czech Republic | 1,353,956 | |||||||
|
| |||||||
Egypt - 1.49% | ||||||||
Common Stocks - (Cost $1,395,278) | ||||||||
Commercial International Bank Egypt SAE | 154,250 | 623,430 | ||||||
Eastern Tobacco | 14,398 | 148,159 | ||||||
Egyptian International Pharmaceuticals | 492 | 2,337 |
See accompanying notes
12
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Egypt - 1.49% (continued) | ||||||||
Common Stocks - (Cost $1,395,278) (continued) | ||||||||
Elswedy Electric Co. | 11,392 | $ | 50,377 | |||||
Faisal Islamic Bank of Egypt | 1,500 | 1,316 | ||||||
Global Telecom Holding SAE | 144,513 | 53,840 | ||||||
Sidi Kerir Petrochemicals Co. | 120,679 | 127,684 | ||||||
Telecom Egypt | 512,669 | 331,679 | ||||||
|
| |||||||
Total Egypt | 1,338,822 | |||||||
|
| |||||||
Greece - 0.08% | ||||||||
Common Stocks - (Cost $72,850) | ||||||||
Hellenic Telecommunications Organization S.A. | 7,655 | 69,662 | ||||||
|
| |||||||
Hong Kong/China - 20.29% | ||||||||
Common Stocks - (Cost $17,214,550) | ||||||||
Agricultural Bank of China H | 2,343,000 | 984,441 | ||||||
Bank of China Ltd. H | 2,142,000 | 977,288 | ||||||
Bank of Chongqing Co., Ltd. H | 181,000 | 156,764 | ||||||
Bank of Communications Co., Ltd. H | 613,000 | 454,285 | ||||||
Bank of Jinzhou Co. Ltd. | 33,000 | 40,022 | ||||||
C.banner International Holdings Ltd.A | 121,000 | 35,868 | ||||||
China Communications Services Corp., Ltd. H | 1,682,000 | 1,146,784 | ||||||
China Construction Bank H | 1,265,000 | 945,624 | ||||||
China Creative Home Group Ltd. | 492,000 | 22,194 | ||||||
China Dongxiang Group Co., Ltd. | 1,477,000 | 276,025 | ||||||
China Lilang Ltd. | 31,000 | 18,818 | ||||||
China Mobile Ltd. | 81,500 | 922,782 | ||||||
China Petroleum & Chemical Corp., H | 154,000 | 123,257 | ||||||
China Resources Enterprise Ltd.A | 298,000 | 606,839 | ||||||
China SCE Property Holdings Ltd.A | 282,000 | 90,500 | ||||||
China Shineway Pharmaceutical Group Ltd. | 159,000 | 182,794 | ||||||
China Telecom Corp., Ltd. H | 1,726,000 | 820,856 | ||||||
China Unicom Hong Kong Ltd. | 808,000 | 960,157 | ||||||
China Vanke Co. Ltd. | 101,800 | 259,784 | ||||||
China Yuchai International Ltd. | 457 | 6,357 | ||||||
CITIC Ltd. | 408,000 | 606,828 | ||||||
Cosco International Holdings Ltd.E | 64,000 | 28,953 | ||||||
COSCO Shipping Ports Ltd.E | 74,000 | 73,820 | ||||||
CSPC Pharmaceutical Group Ltd. | 424,000 | 478,707 | ||||||
Dah Chong Hong Holdings Ltd. | 72,000 | 29,417 | ||||||
Fuguiniao Co., Ltd. H N | 28,000 | 13,966 | ||||||
Goldlion Holdings Ltd. | 46,000 | 18,320 | ||||||
Haier Electronics Group Co., Ltd. | 94,000 | 165,977 | ||||||
Hengan International Group Co., Ltd. | 100,000 | 821,637 | ||||||
Hopewell Highway Infrastructure Ltd. | 654,500 | 345,854 | ||||||
Huishang Bank Corp., Ltd. H | 605,000 | 306,442 | ||||||
Industrial & Commercial Bank of China Ltd. H | 1,568,000 | 965,993 | ||||||
Jinmao China Hotel Investments and Management Ltd. | 45,000 | 22,909 | ||||||
K Wah International Holdings Ltd. | 278,000 | 139,378 | ||||||
KFM Kingdom Holdings Ltd. | 88,000 | 12,930 | ||||||
Kingboard Chemical Holdings Ltd. | 206,000 | 711,544 | ||||||
Kingboard Laminates Holdings Ltd. | 63,500 | 70,056 | ||||||
Koradior Holdings Ltd. | 200,000 | 240,240 | ||||||
NVC Lighting Holding Ltd. | 2,128,000 | 257,810 | ||||||
PetroChina Co., Ltd. H | 1,258,000 | 1,008,488 | ||||||
Powerlong Real Estate Holdings Ltd. | 72,000 | 21,158 | ||||||
Qinqin Foodstuffs Group Cayman Co., Ltd.A | 676,400 | 214,456 | ||||||
Road King Infrastructure Ltd. | 140,000 | 120,713 | ||||||
Ronshine China Holdings Ltd.A | 545,500 | 449,258 |
See accompanying notes
13
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Hong Kong/China - 20.29% (continued) | ||||||||
Common Stocks - (Cost $17,214,550) (continued) | ||||||||
Sinopharm Group Co. H | 14,800 | $ | 67,907 | |||||
Spring Real Estate Investment TrustB | 49,000 | 19,830 | ||||||
Tencent Holdings Ltd. | 37,000 | 974,726 | ||||||
Tong Ren Tang Technologies Co., Ltd. H | 69,000 | 123,613 | ||||||
Tsingtao Brewery Co., Ltd. H | 22,000 | 88,183 | ||||||
Want Want China Holdings Ltd. | 767,000 | 549,629 | ||||||
XTEP International Holdings Ltd. | 129,500 | 54,912 | ||||||
Yuexiu Real Estate Investment TrustB | 102,000 | 56,134 | ||||||
Yuexiu Transport Infrastructure Ltd. | 104,000 | 66,216 | ||||||
Yuzhou Properties Co., Ltd. | 225,000 | 73,946 | ||||||
|
| |||||||
Total Hong Kong/China | 18,231,389 | |||||||
|
| |||||||
Hungary - 1.55% | ||||||||
Common Stocks - (Cost $1,182,386) | ||||||||
Magyar Telekom Telecommunications PLCF | 321,667 | 574,663 | ||||||
Richter Gedeon Nyrt | 37,908 | 816,242 | ||||||
|
| |||||||
Total Hungary | 1,390,905 | |||||||
|
| |||||||
India - 11.80% | ||||||||
Common Stocks - (Cost $10,445,237) | ||||||||
Bajaj Auto Ltd. | 11,021 | 461,064 | ||||||
Biocon Ltd. | 24,548 | 366,528 | ||||||
Cadila Healthcare Ltd. | 31,910 | 165,535 | ||||||
Cipla Ltd. | 44,417 | 375,854 | ||||||
Colgate-Palmolive India Ltd. | 34,683 | 454,925 | ||||||
Divi’s Laboratories Ltd. | 11,143 | 114,969 | ||||||
Dr. Reddy’s Laboratories Ltd., ADRD | 9,385 | 424,202 | ||||||
Dr. Reddy’s Laboratories Ltd. | 5,075 | 225,456 | ||||||
GlaxoSmithKline Consumer Healthcare Ltd. | 2,375 | 181,507 | ||||||
Grasim Industries Ltd. | 13,145 | 176,313 | ||||||
Hero Honda Motors Ltd. | 16,331 | 763,305 | ||||||
Hindustan Unilever Ltd. | 64,250 | 808,748 | ||||||
Infosys Technologies Ltd. | 30,639 | 419,720 | ||||||
Infosys Technologies Ltd., Reg S, Sponsored ADR D G | 28,373 | 390,696 | ||||||
ITC Ltd. | 226,882 | 863,452 | ||||||
Marico Ltd. | 13,000 | 49,283 | ||||||
Maruti Suzuki India Ltd. | 9,185 | 798,748 | ||||||
Minda Industries Ltd. | 2,245 | 11,534 | ||||||
Mphasis Ltd. | 5,923 | 48,627 | ||||||
Nestle India Ltd. | 1,567 | 135,486 | ||||||
NHPC Ltd. | 133,413 | 56,830 | ||||||
Omaxe Ltd. | 240,219 | 583,154 | ||||||
Oracle Financial Services Software Ltd.A | 2,485 | 121,750 | ||||||
Power Grid Corp. of India Ltd. | 137,129 | 418,694 | ||||||
Procter & Gamble Hygiene & Health Care Ltd. | 507 | 52,236 | ||||||
Raymond Ltd. | 4,411 | 32,069 | ||||||
Tata Consultancy Services Ltd. | 24,361 | 801,441 | ||||||
Torrent Pharmaceuticals Ltd. | 5,713 | 109,890 | ||||||
Videocon Industries Ltd. | 97,796 | 149,480 | ||||||
Wipro Ltd., ADRD | 9,614 | 88,737 | ||||||
Wipro Ltd. | 110,724 | 751,379 | ||||||
WNS Holdings Ltd., ADRA D | 7,261 | 206,503 | ||||||
|
| |||||||
Total India | 10,608,115 | |||||||
|
|
See accompanying notes
14
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Indonesia - 1.93% | ||||||||
Common Stocks - (Cost $1,625,250) | ||||||||
Bank Central Asia Tbk PT | 408,200 | $ | 467,737 | |||||
Hanjaya Mandala Sampoerna Tbk PT | 730,300 | 210,571 | ||||||
Multipolar Technology Tbk PT | 570,100 | 59,348 | ||||||
Sarana Meditama Metropolitan Tbk PT | 747,000 | 147,134 | ||||||
Telekomunikasi Indonesia Persero Tbk PT | 2,721,700 | 788,839 | ||||||
Tunas Ridean Tbk PT | 7,500 | 758 | ||||||
Unilever Indonesia Tbk PT | 17,600 | 54,306 | ||||||
|
| |||||||
Total Indonesia | 1,728,693 | |||||||
|
| |||||||
Malaysia - 7.24% | ||||||||
Common Stocks - (Cost $7,276,446) | ||||||||
Allianz Malaysia Bhd | 2,800 | 6,827 | ||||||
Batu Kawan Bhd | 1,500 | 6,400 | ||||||
DiGi.Com Bhd | 28,500 | 31,913 | ||||||
Fraser & Neave Holdings Bhd | 83,000 | 440,343 | ||||||
Guinness Anchor Bhd | 19,600 | 70,267 | ||||||
Hong Leong Bank Bhd | 210,600 | 626,641 | ||||||
IHH Healthcare Bhd | 314,000 | 446,597 | ||||||
KPJ Healthcare Bhd | 128,200 | 121,558 | ||||||
Kuala Lumpur Kepong Bhd | 161,300 | 877,600 | ||||||
Malayan Banking Bhd | 116,600 | 216,379 | ||||||
Maxis Bhd | 203,100 | 281,988 | ||||||
Nestle Malaysia Bhd | 16,900 | 289,965 | ||||||
Panasonic Manufacturing Malaysia Bhd | 1,400 | 9,931 | ||||||
Petronas Gas Bhd | 140,300 | 661,353 | ||||||
PPB Group Bhd | 22,500 | 82,594 | ||||||
Public Bank Bhd | 195,500 | 887,132 | ||||||
Star Media Group Bhd | 43,100 | 22,380 | ||||||
Telekom Malaysia Bhd | 519,100 | 697,290 | ||||||
Tenaga Nasional Bhd | 239,400 | 724,226 | ||||||
|
| |||||||
Total Malaysia | 6,501,384 | |||||||
|
| |||||||
Mexico - 3.42% | ||||||||
Common Stocks - (Cost $3,918,383) | ||||||||
Coca-Cola Femsa S.A.B. de C.V., Series L | 73,500 | 455,376 | ||||||
Concentradora Hipotecaria SAPI de C.V.B | 138,836 | 146,935 | ||||||
Corp Inmobiliaria Vesta SAB de CV | 27,555 | 30,312 | ||||||
Grupo Aeroportuario del Pacific, Series B | 3,570 | 27,672 | ||||||
Grupo Aeroportuario del Sureste, S.A.B. de C.V., ADRD | 2,153 | 311,905 | ||||||
Grupo Bimbo S.A.B. de C.V., Series A | 177,640 | 391,764 | ||||||
Grupo GICSA S.A. de C.V.A | 44,070 | 23,902 | ||||||
Grupo Industrial Maseca S.A.B. de C.V., Series B | 3,260 | 3,782 | ||||||
Grupo Lala S.A.B. de C.V. | 277,011 | 415,645 | ||||||
Grupo Lamosa S.A.B. de C.V. | 10,519 | 17,655 | ||||||
Grupo Sanborns S.A. de C.V. | 24,367 | 24,304 | ||||||
Grupo Sports World S.A.B. de C.V.A | 33,015 | 25,173 | ||||||
Industrias Bachoco S.A.B. de C.V., Series B | 50,523 | 196,074 | ||||||
Industrias CH SAB de CVA | 7,402 | 46,854 | ||||||
La Comer S.A.B. de C.V.A | 425,953 | 302,304 | ||||||
Megacable Holdings S.A.B. de C.V.E | 120,585 | 381,644 | ||||||
Organizacion Soriana S.A.B. de C.V., Series B | 37,530 | 79,187 | ||||||
Prologis Property Mexico S.A. de C.V.B | 53,162 | 73,242 | ||||||
Rassini SAB de CV | 18,938 | 69,873 | ||||||
Unifin Financiera SAPI de C.V. SOFOM ENR | 16,953 | 39,941 | ||||||
Vitro S.A.B. de C.V., Series A | 4,135 | 12,889 | ||||||
|
| |||||||
Total Mexico | 3,076,433 | |||||||
|
|
See accompanying notes
15
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Peru - 0.11% | ||||||||
Common Stocks - (Cost $105,499) | ||||||||
Alicorp SAA | 10,384 | $ | 23,841 | |||||
Enel Distribucion Peru SAA | 17,888 | 32,265 | ||||||
Enersur S.A. | 14,277 | 39,152 | ||||||
Luz Del Sur SAA | 2,046 | 7,956 | ||||||
|
| |||||||
Total Peru | 103,214 | |||||||
|
| |||||||
Philippines - 2.21% | ||||||||
Common Stocks - (Cost $2,073,996) | ||||||||
Aboitiz Power Corp. | 615,700 | 522,105 | ||||||
ABS-CBN Holdings Corp., ADRD | 41,720 | 39,821 | ||||||
Cebu Air, Inc. | 48,130 | 91,830 | ||||||
Century Pacific Food, Inc. | 233,400 | 76,823 | ||||||
China Banking Corp. | 6,045 | 4,677 | ||||||
Cosco Capital, Inc. | 151,300 | 27,910 | ||||||
Globe Telecom, Inc. | 5,740 | 198,388 | ||||||
Integrated Micro-Electronics, Inc. | 204,500 | 25,149 | ||||||
Manila Electric Co. | 116,540 | 666,946 | ||||||
Manila Water Co. Inc. | 224,800 | 136,195 | ||||||
Megawide Construction Corp. | 121,000 | 36,374 | ||||||
Pepsi-Cola Products Philippines, Inc. | 66,900 | 4,396 | ||||||
San Miguel Corp. | 50,960 | 100,353 | ||||||
San Miguel Pure Foods Co. | 1,480 | 7,584 | ||||||
Union Bank of the Philippines | 29,140 | 45,878 | ||||||
|
| |||||||
Total Philippines | 1,984,429 | |||||||
|
| |||||||
Poland - 2.77% | ||||||||
Common Stocks - (Cost $2,708,456) | ||||||||
Agora S.A. | 4,326 | 14,529 | ||||||
Alchemia S.A.A | 23,200 | 28,792 | ||||||
Altus Towarzystwo Funduszy Inwestycyjnych S.A.A G | 4,294 | 15,676 | ||||||
Alumetal S.A. | 3,195 | 52,735 | ||||||
Amica Wronki S.A.A | 810 | 37,823 | ||||||
AmRest Holdings SEA | 2,497 | 204,514 | ||||||
Asseco Poland S.A. | 31,491 | 452,152 | ||||||
Boryszew S.A.A | 27,262 | 77,265 | ||||||
CD Projekt S.A.A | 16,855 | 246,846 | ||||||
ComArch S.A.A | 430 | 19,338 | ||||||
Emperia Holding S.A. | 429 | 7,338 | ||||||
Eurocash S.A. | 42,897 | 427,395 | ||||||
Fabryki Mebli Forte S.A. | 336 | 6,964 | ||||||
Impexmetal S.A.A | 26,138 | 25,977 | ||||||
Netia S.A. | 29,180 | 32,643 | ||||||
Neuca S.A. | 364 | 36,403 | ||||||
Oponeo.pl S.A. | 3,251 | 41,962 | ||||||
Orange Polska S.A. | 432,110 | 582,664 | ||||||
PGE S.A. | 35,681 | 97,295 | ||||||
Tauron Polska Energia S.A.A | 96,629 | 71,180 | ||||||
Zaklady Lentex S.A. | 2,609 | 6,971 | ||||||
|
| |||||||
Total Poland | 2,486,462 | |||||||
|
| |||||||
Russia - 5.62% | ||||||||
Common Stocks - (Cost $4,033,248) | ||||||||
Gazprom NEFT, Sponsored ADRD | 21,767 | 423,368 | ||||||
Gazprom PJSC, ADRD H | 216,957 | 1,072,852 | ||||||
Magnit PJSC, GDRH I | 4,197 | 153,610 | ||||||
Magnitogorsk Iron & Steel OJSC J | 5,492 | 46,023 |
See accompanying notes
16
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Russia - 5.62% (continued) | ||||||||
Common Stocks - (Cost $4,033,248) (continued) | ||||||||
Megafon, Reg S, GDRG I | 20,875 | $ | 226,494 | |||||
MMC Norilsk Nickel PJSCH | 54,847 | 886,876 | ||||||
Novolipetsk Steel PJSCH | 15,189 | 299,223 | ||||||
Rosneft Oil Co. PJSC, Reg S, GDRG H I | 44,085 | 291,181 | ||||||
Rostelecom, Sponsored ADRD | 34,269 | 290,601 | ||||||
Sberbank PAO, Sponsored ADRA D | 4,998 | 58,277 | ||||||
Severstal, Reg SA G | 61,919 | 981,416 | ||||||
Sistema JSFC, Reg S, Sponsored GDRA G I M | 33,004 | 315,848 | ||||||
|
| |||||||
Total Russia | 5,045,769 | |||||||
|
| |||||||
South Africa - 3.47% | ||||||||
Common Stocks - (Cost $2,894,871) | ||||||||
Adbee Rf Ltd.A | 701 | 1,834 | ||||||
Advtech Ltd. | 108,357 | 135,899 | ||||||
AVI Ltd. | 96,517 | 656,244 | ||||||
Bid Corp Ltd. | 43,921 | 757,006 | ||||||
Blue Label Telecoms Ltd. | 124,267 | 168,026 | ||||||
Clover Industries Ltd. | 157,282 | 203,912 | ||||||
Distell Group Ltd. | 7,017 | 78,106 | ||||||
Rhodes Food Group Pty. Ltd. | 55,433 | 115,803 | ||||||
Vodacom Group Pty. Ltd. | 83,335 | 933,846 | ||||||
|
| |||||||
Total Common Stocks | 3,050,676 | |||||||
|
| |||||||
Preferred Stocks - (Cost $87,140) | ||||||||
Barclays Africa Group Ltd.C | 1,084 | 62,506 | ||||||
|
| |||||||
Total South Africa | 3,113,182 | |||||||
|
| |||||||
South Korea - 11.40% | ||||||||
Common Stocks - (Cost $9,922,403) | ||||||||
Aju Capital Co. Ltd. | 3,026 | 17,785 | ||||||
Binggrae Co. Ltd. | 1,538 | 85,364 | ||||||
Busan City Gas Co., Ltd. | 333 | 9,829 | ||||||
Charm Engineering Co., Ltd.A | 122,754 | 284,148 | ||||||
Dae Won Kang Up Co. Ltd. | 3,779 | 14,048 | ||||||
Daeduck Electronics Co. | 16,851 | 120,064 | ||||||
Daesung Energy Co., Ltd. | 12,842 | 68,956 | ||||||
Dong-Il Corp. | 981 | 50,228 | ||||||
e-Credible Co., Ltd. | 2,267 | 22,824 | ||||||
ESTec Corp/Republic of Korea | 2,209 | 20,815 | ||||||
GMB Korea Corp. | 4,370 | 18,708 | ||||||
Hankook Tire Co., Ltd. | 14,663 | 714,160 | ||||||
Hanwha Life Insurance Co., Ltd. | 5,311 | 29,432 | ||||||
Huvis Corp. | 6,026 | 41,795 | ||||||
Hyundai Motor Co. | 89 | 10,684 | ||||||
JB Financial Group Co., Ltd. | 15,128 | 72,900 | ||||||
Jinro Distillers Co., Ltd. | 828 | 20,769 | ||||||
JLS Co. Ltd. | 6,133 | 40,373 | ||||||
Keyang Electric Machinery Co., Ltd. | 4,164 | 18,238 | ||||||
Kia Motors Corp. | 23,829 | 746,386 | ||||||
Korea Electric Power Corp. | 18,995 | 693,863 | ||||||
KT Corp. | 29,158 | 737,669 | ||||||
KT&G Corp. | 4,034 | 348,866 | ||||||
Kyung Nong Corp. | 3,593 | 17,902 | ||||||
LF Corp. | 4,494 | 82,757 | ||||||
LG Display Co., Ltd., ADRD | 16,120 | 217,298 |
See accompanying notes
17
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
South Korea - 11.40% (continued) | ||||||||
Common Stocks - (Cost $9,922,403) (continued) | ||||||||
LG Electronics, Inc. | 20,643 | $ | 984,100 | |||||
LG UPlus Corp. | 27,150 | 266,337 | ||||||
Mi Chang Oil Industrial Co. Ltd. | 229 | 18,346 | ||||||
Mirae Asset Life Insurance Co., Ltd. | 25,708 | 130,962 | ||||||
Namyang Dairy Products Co., Ltd. | 279 | 175,020 | ||||||
NAVER Corp. | 282 | 183,939 | ||||||
Nexen Corp. | 13,462 | 92,905 | ||||||
S-1 Corp. | 2,140 | 154,870 | ||||||
Saeron Automotive Corp. | 3,060 | 20,802 | ||||||
Sam Young Electronics Co., Ltd. | 9,075 | 91,757 | ||||||
Samchully Co., Ltd. | 345 | 28,767 | ||||||
Samsung Electronics Co., Ltd. | 690 | 1,171,474 | ||||||
Samwonsteel Co. Ltd. | 6,173 | 18,725 | ||||||
SAVEZONE I&C Corp.A | 4,297 | 18,858 | ||||||
SJM Holdings Ltd. | 2,950 | 15,434 | ||||||
SK Hynix, Inc. | 28,597 | 1,321,452 | ||||||
SK Telecom Co., Ltd. | 4,435 | 851,050 | ||||||
Uju Electronics Co., Ltd. | 2,948 | 44,774 | ||||||
Woorison F&G Co. LtdA | 14,997 | 25,939 | ||||||
Yesco Co., Ltd. | 2,264 | 70,817 | ||||||
Youlchon Chemical Co., Ltd. | 2,089 | 24,447 | ||||||
Young Poong Precision Corp. | 2,451 | 18,961 | ||||||
|
| |||||||
Total South Korea | 10,235,597 | |||||||
|
| |||||||
Taiwan - 9.16% | ||||||||
Common Stocks - (Cost $7,858,388) | ||||||||
Ability Enterprise Co., Ltd. | 37,000 | 20,007 | ||||||
Bank of Kaohsiung Co. LtdA | 69,000 | 20,361 | ||||||
Cheng Loong Corp.A | 83,000 | 38,129 | ||||||
China Chemical & Pharmaceutical Co., Ltd. | 43,000 | 24,829 | ||||||
China Motor Corp. | 199,000 | 181,884 | ||||||
China Synthetic Rubber | 69,460 | 63,043 | ||||||
Chun Yuan Steel | 58,000 | 22,111 | ||||||
Chunghwa Telecom Co., Ltd. | 247,000 | 803,739 | ||||||
DA CIN Construction Co. Ltd. | 18,000 | 11,111 | ||||||
Far Eastern International Bank | 1,071,400 | 313,771 | ||||||
First Financial Holding Co., Ltd. | 1,665,462 | 927,146 | ||||||
HON HAI Precision Industry Co., Ltd. | 329,288 | 879,264 | ||||||
KD Holding Corp. | 15,000 | 83,743 | ||||||
Keysheen Cayman Holdings Co., Ltd. | 6,000 | 12,059 | ||||||
Kwong Fong Industries Corp.A | 39,000 | 32,846 | ||||||
Lien Hwa Industrial Corp. | 224,926 | 167,909 | ||||||
Microlife Corp. | 25,000 | 60,614 | ||||||
Nichidenbo Corp. | 29,000 | 22,574 | ||||||
Sampo Corp. | 139,000 | 80,484 | ||||||
Shanghai Commercial & Savings Bank Ltd. | 522,815 | 470,177 | ||||||
Shan-Loong Transportation Co. Ltd. | 30,000 | 27,563 | ||||||
Shihlin Electric & Engineering Corp. | 5,000 | 6,476 | ||||||
Shin Kong No.1 REITB | 51,000 | 22,794 | ||||||
Stark Technology, Inc. | 24,000 | 21,515 | ||||||
Taichung Commercial Bank | 1,172,379 | 344,465 | ||||||
Taiwan Business BankA | 1,628,135 | 424,356 | ||||||
Taiwan Cooperative Financial Holding Co., Ltd. | 1,975,934 | 901,418 | ||||||
Taiwan Mobile Co., Ltd. | 191,000 | 636,748 | ||||||
Taiwan Sakura Corp. | 92,800 | 89,259 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd. | 207,105 | 876,834 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADRD | 7,555 | 233,525 | ||||||
Taiwan Shin Kong Security Co., Ltd. | 203,170 | 257,641 |
See accompanying notes
18
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Taiwan - 9.16% (continued) | ||||||||
Common Stocks - (Cost $7,858,388) (continued) | ||||||||
Trade-Van Information Services Co. | 16,000 | $ | 13,577 | |||||
TTet Union Corp. | 6,000 | 16,270 | ||||||
Uni-President Enterprises Corp. | 3,720 | 6,349 | ||||||
Wisdom Marine Lines Co., Ltd. | 32,926 | 32,300 | ||||||
YungShin Global Holding Corp. | 40,000 | 57,934 | ||||||
Zenitron Corp. | 33,000 | 18,581 | ||||||
|
| |||||||
Total Taiwan | 8,223,406 | |||||||
|
| |||||||
Thailand - 6.46% | ||||||||
Common Stocks - (Cost $5,129,127) | ||||||||
Advanced Information Technology PCLK | 60,500 | 45,534 | ||||||
Bangkok Bank PCL, NVDRK L | 94,300 | 467,349 | ||||||
Bangkok Bank PCLK | 95,200 | 471,809 | ||||||
Bangkok Land PCL, NVDR K L | 1,623,900 | 87,629 | ||||||
BCPG PCL, NVDR K L | 366,300 | 144,606 | ||||||
CP ALL PCL, NVDR K L | 129,000 | 221,656 | ||||||
CS Loxinfo PCLK | 26,900 | 4,699 | ||||||
Dhipaya Insurance PCL, NVDR K L | 70,100 | 110,496 | ||||||
Electricity Genera PCL, NVDR K L | 52,200 | 299,472 | ||||||
Electricity Generating PCLK | 12,300 | 70,565 | ||||||
IMPACT Growth Real Estate Investment Trust, Series AB | 158,100 | 66,455 | ||||||
Kang Yong Electric PCLK | 2,100 | 25,885 | ||||||
Kang Yong Electric PCL, NVDRK L | 100 | 1,233 | ||||||
KGI Securities Thailand PCLK | 601,100 | 69,995 | ||||||
Khon Kaen Sugar Industry PCL, NVDR K L | 134,730 | 25,829 | ||||||
Krung Thai Bank PCL, NVDR K L | 1,247,300 | 673,067 | ||||||
MBK PCL, NVDR K L | 41,200 | 17,201 | ||||||
Mega Lifesciences PCLK | 204,700 | 164,237 | ||||||
MK Restaurants Group PCLK | 142,300 | 228,343 | ||||||
Modernform Group PCLK | 33,200 | 5,610 | ||||||
Modernform Group PCL, NVDRK L | 26,400 | 4,461 | ||||||
Platinum Group PCLK | 147,800 | 29,384 | ||||||
Ratchaburi Electricity Generating Holding PCLK | 103,400 | 149,770 | ||||||
Ratchaburi Electricity Generating Holding PCL, NVDRK L | 93,100 | 134,851 | ||||||
Somboon Advance Technology PCL, NVDR K L | 59,500 | 25,517 | ||||||
SPCG PCLK | 74,300 | 44,736 | ||||||
Thai Nakarin Hospital PCL, NVDR K L | 15,000 | 15,869 | ||||||
Thai Vegetable Oil PCLK | 334,600 | 389,622 | ||||||
Thai Vegetable Oil PCL, NVDRK L | 435,000 | 506,532 | ||||||
Thai Wah PCLK | 327,000 | 90,085 | ||||||
Thanachart Capital PCL, NVDR K L | 137,000 | 184,820 | ||||||
The Siam Cement PCL, NVDRK L | 62,500 | 898,182 | ||||||
Vinythai PCL, NVDR K L | 195,100 | 98,076 | ||||||
WHA Premium Growth Freehold & Leasehold Real Estate InvestmentTrustB | 91,400 | 25,959 | ||||||
|
| |||||||
Total Thailand | 5,799,534 | |||||||
|
| |||||||
Turkey - 1.70% | ||||||||
Common Stocks - (Cost $1,719,461) | ||||||||
Adana Cimento Sanayii TAS, Class C | 98,525 | 23,501 | ||||||
Arcelik A.S. | 98,453 | 596,487 | ||||||
BIM Birlesik Magazalar A.S. | 39,107 | 558,131 | ||||||
Bursa Cimento Fabrikasi A.S. | 11,599 | 19,859 | ||||||
NET Holding A.S.A | 18,821 | 13,717 | ||||||
Nuh Cimento Sanayi A.S. | 7,962 | 23,676 | ||||||
Pinar Entegre Et ve Un Sanayi A.S. | 4,048 | 11,587 | ||||||
Selcuk Ecza Deposu Ticaret ve Sanayi A.S. | 140,444 | 128,416 |
See accompanying notes
19
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Turkey - 1.70% (continued) | ||||||||
Common Stocks - (Cost $1,719,461) (continued) | ||||||||
Turkcell Iletisim Hizmetleri A.S. | 48,997 | $ | 147,258 | |||||
|
| |||||||
Total Turkey | 1,522,632 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 1.45% (Cost $1,304,383) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class O | 1,304,383 | 1,304,383 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.92% (Cost $88,004,725) | 89,738,293 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 0.08% | 74,574 | |||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 89,812,867 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | REIT - Real Estate Investment Trust. |
C | A type of Preferred Stock that has no maturity date. |
D | ADR - American Depositary Receipt. |
E | Par value represents units rather than shares. |
F | PLC - Public Limited Company. |
G | Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. |
H | PJSC - Private Joint Stock Company. |
I | GDR - Global Depositary Receipt. |
J | OJSC - Open Joint Stock Company. |
K | PCL - Public Company Limited (Thailand). |
L | NVDR - Non Voting Depository Receipt |
M | JSFC - Joint Stock Financial Corporation. |
N | Fair valued pursuant to procedures approved by the board of Trustees. At period end, the value of these securities amounted to $13,966 or 0.02% of net assets. |
O | The Fund is affiliated by having the same investment advisor. |
Futures Contracts Open on January 31, 2017:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Mini MSCI Emerging Markets Index Futures | Long | 27 | March 2017 | $ | 1,235,385 | $ | 50,038 | |||||||||||||
|
|
|
| |||||||||||||||||
$ | 1,235,385 | $ | 50,038 | |||||||||||||||||
|
|
|
|
See accompanying notes
20
American Beacon SGA Global Growth FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
Argentina - 1.34% | ||||||||
Common Stocks - (Cost $219,142) | ||||||||
MercadoLibre, Inc. | 1,651 | $ | 306,079 | |||||
|
| |||||||
Australia - 0.95% | ||||||||
Common Stocks - (Cost $225,020) | ||||||||
MYOB Group Ltd. | 83,677 | 215,766 | ||||||
|
| |||||||
Bermuda - 1.95% | ||||||||
Common Stocks - (Cost $383,938) | ||||||||
IHS Markit Ltd. A | 11,303 | 445,903 | ||||||
|
| |||||||
Denmark - 3.53% | ||||||||
Common Stocks - (Cost $927,388) | ||||||||
Novo Nordisk A.S., Class B | 22,402 | 804,572 | ||||||
|
| |||||||
France - 2.91% | ||||||||
Common Stocks - (Cost $736,155) | ||||||||
Danone S.A. | 10,617 | 664,626 | ||||||
|
| |||||||
Germany - 3.95% | ||||||||
Common Stocks - (Cost $764,118) | ||||||||
SAP AG, Sponsored ADR B | 9,853 | 901,648 | ||||||
|
| |||||||
Hong Kong/China - 7.95% | ||||||||
Common Stocks - (Cost $1,523,129) | ||||||||
AIA Group Ltd. | 145,359 | 904,876 | ||||||
Tencent Holdings Ltd. | 34,602 | 911,553 | ||||||
|
| |||||||
Total Hong Kong/China | 1,816,429 | |||||||
|
| |||||||
India - 4.37% | ||||||||
Common Stocks - (Cost $1,034,040) | ||||||||
HDFC Bank, Ltd. ADRB | 6,518 | 449,286 | ||||||
Infosys Technologies Ltd., Reg S, Sponsored ADR B C | 39,956 | 550,194 | ||||||
|
| |||||||
Total India | 999,480 | |||||||
|
| |||||||
Japan - 1.96% | ||||||||
Common Stocks - (Cost $455,524) | ||||||||
Fast Retailing Co. Ltd. | 1,420 | 447,468 | ||||||
|
| |||||||
Mexico - 1.87% | ||||||||
Common Stocks - (Cost $498,556) | ||||||||
Fomento Economico Mexicano, S.A.B. de C.V., Series B, Sponsored ADRB | 5,694 | 428,360 | ||||||
|
| |||||||
Netherlands - 2.78% | ||||||||
Common Stocks - (Cost $641,232) | ||||||||
Core Laboratories N.V. | 5,432 | 634,621 | ||||||
|
| |||||||
South Africa - 2.51% | ||||||||
Common Stocks - (Cost $520,498) | ||||||||
Shoprite Holdings Ltd. | 43,211 | 574,009 | ||||||
|
|
See accompanying notes
21
American Beacon SGA Global Growth FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
South Korea - 2.40% | ||||||||
Common Stocks - (Cost $624,238) | ||||||||
Amorepacific Corp. | 2,008 | $ | 547,746 | |||||
|
| |||||||
United Kingdom - 2.93% | ||||||||
Common Stocks - (Cost $687,766) | ||||||||
Nielsen Holdings PLC D | 16,388 | 670,433 | ||||||
|
| |||||||
United States - 52.83% | ||||||||
Common Stocks - (Cost $11,074,388) | ||||||||
Alphabet, Inc., Class CA | 811 | 646,197 | ||||||
Amazon.com, Inc.A | 804 | 662,078 | ||||||
Amgen, Inc. | 2,845 | 445,755 | ||||||
Apple, Inc. | 5,530 | 671,066 | ||||||
Cerner Corp.A | 8,640 | 464,054 | ||||||
Colgate-Palmolive Co. | 10,256 | 662,332 | ||||||
Equinix, Inc.E | 1,746 | 672,175 | ||||||
FleetCor Technologies, Inc.A | 4,486 | 661,640 | ||||||
Kansas City Southern | 6,928 | 595,184 | ||||||
Lowe’s Cos., Inc. | 9,151 | 668,755 | ||||||
Mondelez International, Inc., Class A | 14,888 | 659,241 | ||||||
NIKE, Inc., Class B | 8,284 | 438,224 | ||||||
priceline.com, Inc.A | 427 | 672,581 | ||||||
Red Hat, Inc.A | 7,348 | 557,566 | ||||||
Regeneron Pharmaceuticals, Inc.A | 1,940 | 697,023 | ||||||
Salesforce.com, Inc.A | 8,598 | 680,102 | ||||||
Schlumberger Ltd. | 7,911 | 662,230 | ||||||
Visa, Inc., Class A | 10,706 | 885,492 | ||||||
Whole Foods Market, Inc. | 21,853 | 660,397 | ||||||
|
| |||||||
Total United States | 12,062,092 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 5.98% (Cost $1,365,262) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class F | 1,365,262 | 1,365,262 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 100.21% (Cost $21,680,394) | 22,884,494 | |||||||
LIABILITIES, NET OF OTHER ASSETS - (0.21)% | (48,411 | ) | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 22,836,083 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | ADR - American Depositary Receipt. |
C | Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. |
D | PLC - Public Limited Company. |
E | REIT - Real Estate Investment Trust. |
F | The fund is affiliated by having the same investment advisor. |
Futures Contracts Open on January 31, 2017:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Mini MSCI EAFE Index Futures | Long | 250 | March 2017 | $ | 432,100 | $ | (4,636 | ) | ||||||||||||
Mini MSCI Emerging Markets Index Futures | Long | 150 | March 2017 | 137,265 | (1,106 | ) | ||||||||||||||
S&P 500 E-Mini Index Futures | Long | 250 | March 2017 | 568,625 | (5,073 | ) | ||||||||||||||
|
|
|
| |||||||||||||||||
$ | 1,137,990 | $ | (10,815 | ) | ||||||||||||||||
|
|
|
|
See accompanying notes
22
Statements of Assets and Liabilities
January 31, 2017
Acadian Emerging Markets Managed Volatility Fund | SGA Global Growth Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at fair value A | $ | 88,433,910 | $ | 21,519,232 | ||||
Investments in affiliated securities, at fair value B | 1,304,383 | 1,365,262 | ||||||
Foreign currency, at fair value C | 174,772 | — | ||||||
Deposit with brokers for futures contracts | 7,890 | 62,023 | ||||||
Dividends and interest receivable | 102,400 | 9,914 | ||||||
Receivable for investments sold | 301 | 87,048 | ||||||
Receivable for fund shares sold | 130,433 | 58,347 | ||||||
Receivable for tax reclaims | — | 6,849 | ||||||
Receivable for expense reimbursement (Note 2) | 18,036 | 19,707 | ||||||
Receivable for variation margin from open futures contracts | 50,098 | — | ||||||
Prepaid expenses | 29,175 | 25,954 | ||||||
|
|
|
| |||||
Total assets | 90,251,398 | 23,154,336 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Payable for investments purchased | — | 243,612 | ||||||
Payable for fund shares redeemed | 250,823 | 3,042 | ||||||
Payable for variation margin from open futures contracts | — | 10,788 | ||||||
Management and investment advisory fees payable | 84,507 | 15,498 | ||||||
Administrative service and service fees payable | 4,211 | 3,038 | ||||||
Transfer agent fees payable | 1,554 | 266 | ||||||
Custody and fund accounting fees payable | 26,554 | 4,400 | ||||||
Professional fees payable | 61,924 | 35,209 | ||||||
Trustee fees payable | 206 | 48 | ||||||
Payable for prospectus and shareholder reports | 7,354 | 1,259 | ||||||
Other liabilities | 1,578 | 1,093 | ||||||
|
|
|
| |||||
Total liabilities | 438,711 | 318,253 | ||||||
|
|
|
| |||||
Net Assets | $ | 89,812,687 | $ | 22,836,083 | ||||
|
|
|
| |||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | $ | 93,026,883 | $ | 21,683,812 | ||||
Undistributed (overdistribution of) net investment income | (469,952 | ) | (1,910 | ) | ||||
Accumulated net realized (loss) | (4,531,713 | ) | (38,825 | ) | ||||
Unrealized appreciation of investments | 3,964,382 | 1,290,142 | ||||||
Unrealized (depreciation) of currency transactions | (2,226,951 | ) | (86,321 | ) | ||||
Unrealized appreciation (depreciation) of futures contracts | 50,038 | (10,815 | ) | |||||
|
|
|
| |||||
Net assets | $ | 89,812,687 | $ | 22,836,083 | ||||
|
|
|
|
See accompanying notes
23
American Beacon FundsSM
Statements of Assets and Liabilities
January 31, 2017
Acadian Emerging Markets Managed Volatility Fund | SGA Global Growth Fund | |||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||
Institutional Class | 5,726,175 | 509,484 | ||||||
|
|
|
| |||||
Y Class | 3,547,816 | 113,367 | ||||||
|
|
|
| |||||
Investor Class | 377,336 | 765,835 | ||||||
|
|
|
| |||||
A Class | 55,557 | 69,060 | ||||||
|
|
|
| |||||
C Class | 49,626 | 68,206 | ||||||
|
|
|
| |||||
Net assets: | ||||||||
Institutional Class | $ | 52,787,468 | $ | 7,698,159 | ||||
|
|
|
| |||||
Y Class | $ | 32,606,568 | $ | 1,706,678 | ||||
|
|
|
| |||||
Investor Class | $ | 3,457,789 | $ | 11,414,261 | ||||
|
|
|
| |||||
A Class | $ | 510,236 | $ | 1,028,223 | ||||
|
|
|
| |||||
C Class | $ | 450,626 | $ | 988,762 | ||||
|
|
|
| |||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 9.22 | $ | 15.11 | ||||
|
|
|
| |||||
Y Class | $ | 9.19 | $ | 15.05 | ||||
|
|
|
| |||||
Investor Class | $ | 9.16 | $ | 14.90 | ||||
|
|
|
| |||||
A Class | $ | 9.18 | $ | 14.89 | ||||
|
|
|
| |||||
A Class (offering price) | $ | 9.74 | $ | 15.80 | ||||
|
|
|
| |||||
C Class | $ | 9.08 | $ | 14.50 | ||||
|
|
|
| |||||
A Cost of investments in unaffiliated securities | $ | 86,700,342 | $ | 20,315,132 | ||||
B Cost of investments in affiliated securities | $ | 1,304,383 | $ | 1,365,262 | ||||
C Cost of foreign currency | $ | 173,426 | $ | — |
See accompanying notes
24
American Beacon FundsSM
Statements of Operations
For the year ended January 31, 2017
Acadian Emerging Markets Managed Volatility Fund | SGA Global Growth Fund | |||||||
Investment income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 2,199,679 | $ | 143,242 | ||||
Dividend income from affiliated securities | 5,219 | 2,788 | ||||||
|
|
|
| |||||
Total investment income | 2,204,898 | 146,030 | ||||||
|
|
|
| |||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 738,938 | 100,491 | ||||||
Administrative service fees (Note 2): | ||||||||
Institutional Class | 46,382 | 6,190 | ||||||
Y Class | 30,338 | 160 | ||||||
Investor Class | 3,732 | 605 | ||||||
A Class | 596 | 401 | ||||||
C Class | 648 | 443 | ||||||
Transfer agent fees: | ||||||||
Institutional Class | 8,389 | 2,822 | ||||||
Y Class | 1,254 | 142 | ||||||
Investor Class | 1,985 | 1,331 | ||||||
A Class | 75 | 45 | ||||||
C Class | 283 | 74 | ||||||
Custody and fund accounting fees | 138,922 | 26,070 | ||||||
Professional fees | 92,476 | 40,667 | ||||||
Registration fees and expenses | 72,257 | 68,812 | ||||||
Service fees (Note 2): | ||||||||
Y Class | 30,768 | 735 | ||||||
Investor Class | 8,903 | 11,746 | ||||||
A Class | 878 | 876 | ||||||
C Class | 971 | 993 | ||||||
Distribution fees (Note 2): | ||||||||
A Class | 1,463 | 1,460 | ||||||
C Class | 6,470 | 6,621 | ||||||
Prospectus and shareholder report expenses | 24,037 | 8,029 | ||||||
Trustee fees | 5,923 | 920 | ||||||
Other expenses | 42,307 | 5,114 | ||||||
|
|
|
| |||||
Total expenses | 1,257,995 | 284,747 | ||||||
|
|
|
| |||||
Net fees waived and expenses reimbursed (Note 2) | (93,050 | ) | (123,518 | ) | ||||
|
|
|
| |||||
Net expenses | 1,164,945 | 161,229 | ||||||
|
|
|
| |||||
Net investment income | 1,039,953 | (15,199 | ) | |||||
|
|
|
| |||||
Realized and unrealized gain (loss) from investments: | ||||||||
Net realized gain (loss) fromB: | ||||||||
Investments | (830,689 | ) | 436,451 | |||||
Foreign currency transactions | (1,089,335 | ) | (79,514 | ) | ||||
Futures contracts | 107,064 | 131,059 | ||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||
Investments | 7,701,374 | 550,236 | ||||||
Foreign currency transactions | 1,791,428 | 90,220 | ||||||
Futures contracts | 57,340 | (11,086 | ) | |||||
|
|
|
| |||||
Net gain from investments | 7,737,182 | 1,117,366 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | $ | 8,777,135 | $ | 1,102,167 | ||||
|
|
|
| |||||
A Foreign taxes | $ | 271,919 | $ | 7,986 | ||||
B Net of foreign withholding taxes on capital gains | 11,325 | (1,169 | ) |
See accompanying notes
25
American Beacon FundsSM
Statements of Changes in Net Assets
Acadian Emerging Markets Managed Volatility Fund | SGA Global Growth Fund | |||||||||||||||
Year Ended January 31, 2017 | Year Ended January 31, 2016 | Year Ended January 31, 2017 | Year Ended January 31, 2016 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | 1,039,953 | $ | 565,838 | $ | (15,199 | ) | $ | 10,081 | |||||||
Net realized gain (loss) from investments, foreign currency transactions, and futures contracts | (1,812,960 | ) | (2,433,634 | ) | 487,996 | 192,238 | ||||||||||
Change in net unrealized appreciation (depreciation) from investments, foreign currency transactions, and futures contracts | 9,550,142 | (7,685,042 | ) | 629,370 | 42,835 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets resulting from operations | 8,777,135 | (9,552,838 | ) | 1,102,167 | 245,154 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (862,939 | ) | (390,026 | ) | — | (6,800 | ) | |||||||||
Y Class | (596,064 | ) | (217,893 | ) | — | (148 | ) | |||||||||
Investor Class | (52,099 | ) | (27,290 | ) | — | (1,065 | ) | |||||||||
A Class | (7,642 | ) | (1,988 | ) | — | (341 | ) | |||||||||
C Class | (3,871 | ) | (150 | ) | — | (508 | ) | |||||||||
Net realized gain from investments: | ||||||||||||||||
Institutional Class | — | — | (249,734 | ) | (86,553 | ) | ||||||||||
Y Class | — | — | (59,401 | ) | (1,885 | ) | ||||||||||
Investor Class | — | — | (317,163 | ) | (13,554 | ) | ||||||||||
A Class | — | — | (26,647 | ) | (4,341 | ) | ||||||||||
C Class | — | — | (30,843 | ) | (6,469 | ) | ||||||||||
Return of capital: | ||||||||||||||||
Institutional Class | — | (15,683 | ) | — | — | |||||||||||
Y Class | — | (8,777 | ) | — | — | |||||||||||
Investor Class | — | (1,099 | ) | — | — | |||||||||||
A Class | — | (80 | ) | — | — | |||||||||||
C Class | — | (6 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (1,522,615 | ) | (662,992 | ) | (683,788 | ) | (121,664 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 26,100,204 | 79,784,492 | 16,749,538 | 2,215,771 | ||||||||||||
Reinvestment of dividends and distributions | 1,516,697 | 662,266 | 669,589 | 121,264 | ||||||||||||
Cost of shares redeemed | (15,811,551 | ) | (25,611,772 | ) | (2,525,553 | ) | (1,098,725 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets from capital share transactions | 11,805,350 | 54,834,986 | 14,893,574 | 1,238,310 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets | 19,059,870 | 44,619,156 | 15,311,953 | 1,361,800 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 70,752,817 | 26,133,661 | 7,524,130 | 6,162,330 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 89,812,687 | $ | 70,752,817 | $ | 22,836,083 | $ | 7,524,130 | ||||||||
|
|
|
|
|
|
|
| |||||||||
*Includes undistributed (overdistribution of) net investment income | $ | (469,952 | ) | $ | (36,614 | ) | $ | (1,910 | ) | $ | — | |||||
|
|
|
|
|
|
|
|
See accompanying notes
26
Notes to Financial Statements
January 31, 2017
1. | Organization and Significant Accounting Policies |
American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”) as a diversified, open-end management investment company. As of December 31, 2016, the Trust consists of twenty-seven active series, two of which are presented in this filing (collectively, the “Funds” and each individually a “Fund”): American Beacon Acadian Emerging Markets Managed Volatility Fund (“Acadian Emerging Markets Fund”) and the American Beacon SGA Global Growth Fund (“SGA Global Fund”). The remaining twenty-five active series are reported in separate filings.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Resolute Investment Managers, Inc., which is indirectly owned by investment funds affiliated with Kelso & Company, L.P. and Estancia Capital Management, LLC, and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
New Accounting Pronouncements
In October 2016, the SEC adopted amendments to rules under the Investment Company Act of 1940 (“final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. The final rules amend Regulation S-X and require funds to provide standardized, enhanced derivative disclosure in fund financial statements in a format designed for individual investors. The amendments to Regulation S-X also update the disclosures for other investments and investments in, and advances to affiliates and amend the rules regarding the general form and content of fund financial statements. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the amendments and its impact, if any, on the fund’s financial statements.
Class Disclosure
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:
Class | Eligible Investors | Minimum Initial Investments | ||||
Institutional | Large institutional investors - sold directly or through intermediary channels. | $ | 250,000 | |||
Y Class | Large institutional retirement plan investors - sold directly or through intermediary channels. | $ | 100,000 | |||
Investor | All investors using intermediary organizations such as broker-dealers or retirement plan sponsors - sold directly through intermediary channels. | $ | 2,500 | |||
A Class | All investors who invest through intermediary organizations, such as broker-dealers or third party administrator. Retail investors who invest directly through a financial intermediary such as a broker, bank, or registered investment advisor, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”). | $ | 2,500 | |||
C Class | Retail investors who invest directly through a financial intermediary such as a broker or employee directed benefit plans with applicable sales charges, which may include CDSC. | $ | 1,000 |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administration fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
The following is a summary of significant accounting policies, consistently followed by the Funds in preparation of the financial statements. The Funds are considered investment companies and accordingly,
27
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946, Financial Services - Investment Companies, which is part of U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the Net Asset Value (“NAV”). The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in fair values of securities held and is reported with all other foreign currency gains and losses in the Funds’ Statements of Operations.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP. To the extent necessary to fully distribute capital gains, the Fund also designates earnings and profits distributed to shareholders on the redemption of shares.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Redemption Fees
All Classes of the Acadian Fund imposes a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Fund. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of this Fund pro-rata based on the net assets.
28
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
Concentration of Ownership
From time to time, the Fund may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of accounts that represent a controlling ownership of more than 5% of the Fund’s outstanding shares could have a material impact on the Fund. As of January 31, 2017, based on management’s evaluation of the shareholder account base, one account has been identified as representing a non-affiliated controlling ownership of approximately 52% of the Acadian Emerging Markets Fund’s outstanding shares.
2. | Transactions with Affiliates |
Management Agreement
From February 1, 2016 to May 29, 2016, the Trust and the Manager were parties to a Management Agreement that obligated the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. As compensation for performing the duties required under the Management Agreement, the Manager received from the Funds an annualized fee equal to 0.05% of the average daily net assets. Effective May 29, 2016, the Fund and the Manager entered into a management agreement that obligates the Manager to provide investment advisory, fund management, and administrative services to the Funds. As compensation for performing the duties under the Management Agreement, the Manager receives from the Funds an annualized fee at the following annual rates as a percentage of average daily net assets: 0.35% of the first $5 billion, 0.325% of the next $5 billion, 0.30% of the next $10 billion, and 0.275% over $20 billion. The Funds pay the unaffiliated investment advisor hired to direct investment activities of the Funds an annualized investment advisory fee based on a percentage of the Funds’ average daily assets. Management fees paid by the Fund during the year ended January 31, 2017 were as follows:
Fund | Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | ||||||||||||
Acadian Emerging Markets | 0.98 | % | $ | 738,938 | $ | 531,960 | $ | 206,978 | ||||||||
SGA Global | 0.79 | % | 100,491 | 60,797 | 39,694 |
Administration Agreement
From February 1, 2016 to May 29, 2016, the Manager and the Trust were parties to an Administrative Agreement which obligated the Manager to provide or oversee administrative services to each Fund. As compensation for performing the duties required under the Administrative Agreement, the Manager received an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, A, and C Classes of the Funds.
Distribution Plans
The Funds, except for the A and C Classes, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administration fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to separately compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
29
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annualized fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of up to 0.10% of the average daily net assets of the Y Class, up to 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.
Sub-Transfer Agent Fees
The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional Class of the Funds and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. Certain services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly by the Funds’ transfer agent. Accordingly, the Funds, pursuant to the Trust’s Board of Trustees (the “Board”) approval, have agreed to reimburse the Manager for all or a portion of the servicing fees paid to these intermediaries for the Institutional Class. The reimbursement amounts (sub-transfer agent fees) paid to the Manager are subject to a fee limit of up to 0.10% of an intermediaries average net assets in the Institutional Class on an annual basis. For the year ended January 31, 2017, the sub-transfer agent fees, as included in “Transfer agent fees” on the Statements of Operations, were as follows:
Fund | Sub-Transfer Agent Fees | |||
Acadian Emerging Markets | $ | 5,801 | ||
SGA Global | 1,734 |
As of January 31, 2017, the Funds owe the manager the following reimbursements of sub-transfer agent fees, as included in “Transfer agent fees payable” on the Statements of Assets and Liabilities:
Fund | Sub-Transfer Agent Fees | |||
Acadian Emerging Markets | $ | 955 | ||
SGA Global | 10 |
Investment in Affiliated Funds
The Funds may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). The Funds and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the USG Select Fund and receives management and administration fees totaling 0.10% of its average daily net assets of the USG Select Fund. During the year ended January 31, 2017, the manager earned fees on the Funds’ direct investments in the USG Select Fund as shown below:
Fund | Direct Investments in USG Select Fund | |||
Acadian Emerging Markets | $ | 1,896 | ||
SGA Global | 993 |
30
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the year ended January 31, 2017, Acadian Fund borrowed on average $2,322,551 for eight days at an average rate of 1.08% with interest charges of $612. For the Year ended January 31, 2017 the SGA Fund did not utilize the credit facility. This amount is recorded within “Other expenses” on the accompanying Statements of Operations.
Expense Reimbursement Plan
The Manager contractually agreed to reimburse the following Funds to the extent that total operating expenses exceeded a Fund’s expense cap. During the periods ended January 31, 2017, the Manager reimbursed expenses as follows:
Expense Cap | ||||||||||||
Fund | Class | 2/1/2016 - 1/31/2017 | Reimbursed Expenses | Expiration | ||||||||
Acadian Emerging Markets | Institutional | 1.35 | % | $ | 58,239 | 2020 | ||||||
Acadian Emerging Markets | Y | 1.45 | % | 31,481 | 2020 | |||||||
Acadian Emerging Markets | Investor | 1.73 | % | 1,458 | 2020 | |||||||
Acadian Emerging Markets | A | 1.75 | % | 830 | 2020 | |||||||
Acadian Emerging Markets | C | 2.50 | % | 1,042 | 2020 | |||||||
SGA Global | Institutional | 0.98 | % | 71,949 | 2020 | |||||||
SGA Global | Y | 1.08 | % | 5,981 | 2020 | |||||||
SGA Global | Investor | 1.36 | % | 33,678 | 2020 | |||||||
SGA Global | A | 1.38 | % | 5,573 | 2020 | |||||||
SGA Global | C | 2.13 | % | 6,337 | 2020 |
Of these amounts, $18,036 and $19,707 were disclosed as a receivable from the Manager on the Statements of Assets and Liabilities for the Acadian Emerging Markets and SGA Global Funds at January 31, 2017. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The reimbursed expenses above will expire in 2020. The Funds did not record a liability for potential reimbursement due to the current assessment that a reimbursement is unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||
Acadian Emerging Markets | $ | — | $ | 169,517 | 2018 | |||||
Acadian Emerging Markets | — | 120,326 | 2019 | |||||||
SGA Global | — | 170,369 | 2018 | |||||||
SGA Global | — | 118,368 | 2019 |
31
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the periods ended January 31, 2017, Foreside collected $418 and $2,134 for Acadian Emerging Markets and SGA Global Funds, respectively, from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the periods ended January 31, 2017, there were no CDSC fees collected for Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended January 31, 2017, a CDSC fees of $246 and $269 were collected for the C Class Shares of the Acadian Emerging Markets and SGA Global Funds, respectively.
Trustee Fees and Expenses
As compensation for their service to the Trust and the American Beacon Select Funds Trust, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.
3. | Security Valuation and Fair Value Measurements |
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. Eastern Time, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”), for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board.
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Fund determines that developments between the earlier close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of its portfolio securities, the Fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S.
32
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the close of the Exchange. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. These securities are fair valued using a pricing service and are categorized as Level 2 in the fair value hierarchy. The pricing service, using methods approved by the Board, considers the correlation of the trading patterns of the foreign security to intraday trading in the U.S. markets, based on indices of domestic securities and other appropriate indicators such as prices of relevant ADRs and futures contracts.
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the margin disclosed on the Statements of Assets and Liabilities.
Debt securities are normally valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. The prices of debt securities may be determined using quotes obtained from brokers.
Other investments, including restricted securities, and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, established by the Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 | - | Quoted prices in active markets for identical securities. | ||
Level 2 | - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Fixed-income securities are generally considered Level 2 as they are valued using observable inputs. | ||
Level 3 | - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Common stocks and financial derivative instruments, such as futures contracts or options that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
33
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers. Depending on the product and the terms of the transaction, the fair value of the financial derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends, and exchange rates. Financial derivatives that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Level 3 trading assets and trading liabilities, at fair value
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows.
Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and may be categorized as Level 3 of the fair value hierarchy.
Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.
The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.
When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the Trust cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in and out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included below.
34
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The Funds’ investments are summarized by level based on the inputs used to determine their values. As of January 31, 2017, the investments were classified as described below:
Acadian Emerging Markets Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Foreign Common Stocks: | ||||||||||||||||
Brazil | $ | 1,859,093 | $ | — | $ | — | $ | 1,859,093 | ||||||||
Chile | 3,280,263 | — | — | 3,280,263 | ||||||||||||
Colombia | 382,079 | — | — | 382,079 | ||||||||||||
Czech Republic | 1,353,956 | — | — | 1,353,956 | ||||||||||||
Egypt | 1,338,822 | — | — | 1,338,822 | ||||||||||||
Greece | 69,662 | — | — | 69,662 | ||||||||||||
Hong Kong/China | 18,217,423 | — | 13,966 | 18,231,389 | ||||||||||||
Hungary | 1,390,905 | — | — | 1,390,905 | ||||||||||||
India | 10,608,115 | — | — | 10,608,115 | ||||||||||||
Indonesia | 1,728,693 | — | — | 1,728,693 | ||||||||||||
Malaysia | 6,501,384 | — | — | 6,501,384 | ||||||||||||
Mexico | 3,076,433 | — | — | 3,076,433 | ||||||||||||
Peru | 103,214 | — | — | 103,214 | ||||||||||||
Philippines | 1,984,429 | — | — | 1,984,429 | ||||||||||||
Poland | 2,486,462 | — | — | 2,486,462 | ||||||||||||
Russia | 5,045,769 | — | — | 5,045,769 | ||||||||||||
South Africa | 3,050,676 | — | — | 3,050,676 | ||||||||||||
South Korea | 10,235,597 | — | — | 10,235,597 | ||||||||||||
Taiwan | 8,223,406 | — | — | 8,223,406 | ||||||||||||
Thailand | 3,916,846 | 1,882,688 | — | 5,799,534 | ||||||||||||
Turkey | 1,522,632 | — | — | 1,522,632 | ||||||||||||
Foreign Preferred Stocks: | ||||||||||||||||
Brazil | 98,891 | — | — | 98,891 | ||||||||||||
South Africa | 62,506 | — | — | 62,506 | ||||||||||||
Short-Term Investments - Money Market Funds | 1,304,383 | — | — | 1,304,383 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 87,841,639 | $ | 1,882,688 | $ | 13,966 | $ | 89,738,293 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 50,038 | $ | — | $ | — | $ | 50,038 | ||||||||
|
|
|
|
|
|
|
| |||||||||
SGA Global Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Foreign Common Stocks: | ||||||||||||||||
Argentina | $ | 306,079 | $ | — | $ | — | $ | 306,079 | ||||||||
Australia | 215,766 | — | — | 215,766 | ||||||||||||
Bermuda | 445,903 | — | — | 445,903 | ||||||||||||
Denmark | 804,572 | — | — | 804,572 | ||||||||||||
France | 664,626 | — | — | 664,626 | ||||||||||||
Germany | 901,648 | — | — | 901,648 | ||||||||||||
Hong Kong/China | 1,816,429 | — | — | 1,816,429 | ||||||||||||
India | 999,480 | — | — | 999,480 | ||||||||||||
Japan | 447,468 | — | — | 447,468 | ||||||||||||
Mexico | 428,360 | — | — | 428,360 | ||||||||||||
Netherlands | 634,621 | — | — | 634,621 | ||||||||||||
South Africa | 574,009 | — | — | 574,009 | ||||||||||||
South Korea | 547,746 | — | — | 547,746 | ||||||||||||
United Kingdom | 670,433 | — | — | 670,433 | ||||||||||||
Domestic Common Stocks | 12,062,092 | — | — | 12,062,092 | ||||||||||||
Short-Term Investments - Money Market Funds | 1,365,262 | — | — | 1,365,262 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 22,884,494 | $ | — | $ | — | $ | 22,884,494 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||
Futures Contracts | $ | (10,815 | ) | $ | — | $ | — | $ | (10,815 | ) | ||||||
|
|
|
|
|
|
|
|
(1) | Refer to the Schedules of Investments for industry information. |
35
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Funds’ assets and liabilities. During the year ended January 31, 2017, the Acadian Emerging Markets Fund transferred foreign common stock with a value of $63,199,192 and the SGA Global Fund transferred foreign common stock with a value of $4,623,148 from Level 2 to Level 1 as of the end of period, in accordance with fair value procedures established by the Board. These transfers from Level 2 to Level 1 were due to prior year assessment that adjustments were applied to certain securities due to significant movement in the market. Additionally, the Acadian Emerging Markets Fund transferred foreign common stock with a value of $758,140 from Level 1 to Level 2 due to non-exchange traded foreign shares deriving their price based on a local equivalent.
The following table is a reconciliation of Level 3 assets within the Acadian Emerging Markets Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:
Acadian Emerging Markets Fund | Foreign Common Stock | |||
Balance as of 1/31/2016 | $ | — | ||
Net Purchases | — | |||
Net Sales | — | |||
Realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation) | — | |||
Transfer into Level 3 | 13,966 | |||
Transfer out of Level 3 | — | |||
|
| |||
Balance as of 1/31/2017 | $ | 13,966 | ||
|
| |||
Change in unrealized appreciation (depreciation) at period end** | $ | — |
** | Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation (depreciation) on the Statements of Operations. |
The foreign common stock classified as Level 3 were valued using the last traded price. However, these securities were transferred in the Level 3 category due to limited market transparency.
4. | Securities and Other Investments |
American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), and Non-Voting Depositary Receipts (“NVDRs”)
ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. GDRs are in bearer form and traded in both the U.S. and European securities markets. NVDRs represent financial interests in an issuer, but the holder is not entitled to any voting rights. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Funds’ possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the Funds may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Funds to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
36
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Common Stock
Common stock generally takes the form of shares in a corporation which represent an ownership interest. It ranks below preferred stock and debt securities in claims for dividends and for assets of the company in a liquidation or bankruptcy. The value of a company’s common stock may fall as a result of factors directly relating to that company, such as decisions made by its management or decreased demand for the company’s products or services. A stock’s value may also decline because of factors affecting not just the company, but also companies in the same industry or sector. The price of a company’s stock may also be affected by changes in financial markets that are relatively unrelated to the company, such as changes in interest rates, currency exchange rates or industry regulation. Companies that elect to pay dividends on their common stock generally only do so after they invest in their own business and make required payments to bondholders and on other debt and preferred stock. Therefore, the value of a company’s common stock will usually be more volatile than its bonds, other debt and preferred stock. Common stock may be exchange-traded or over-the-counter (“OTC”). OTC stock may be less liquid than exchange-traded stock.
Foreign Securities
The Funds may invest in U.S. dollar-denominated and non-U.S. dollar denominated equity and debt securities of foreign issuers and foreign branches of U.S. banks, including negotiable CDs, bankers’ acceptances, and commercial paper. Foreign issuers are issuers organized and doing business principally outside the United States and include corporations, banks, non-U.S. governments, and quasi-governmental organizations. While investments in foreign securities are intended to reduce risk by providing further diversification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political or social instability, nationalization, expropriation, or confiscatory taxation); the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States; different laws and customs governing securities tracking; and possibly limited access to the courts to enforce a Fund’s rights as an investor.
Illiquid and Restricted Securities
The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933 (the “Securities Act”). 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. Disposal of both illiquid and restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Illiquid and restricted securities outstanding at the period ended January 31, 2017 are disclosed in the Notes to the Schedules of Investments.
Other Investment Company Securities and Other Exchange Traded Products
The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Funds become a shareholder of that investment company. As a result, the Funds’ shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid
37
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
by shareholders of the other investment company, in addition to the fees and expenses the Funds’ shareholders directly bear in connection with the Funds’ own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
Preferred Stock
A preferred stock blends the characteristics of a bond and common stock. It can offer the higher yield of a bond and has priority over common stock in equity ownership, but does not have the seniority of a bond and its participation in the issuer’s growth may be limited. Preferred stock generally has preference over common stock in the receipt of dividends and in any residual assets after payment to creditors should the issuer be dissolved. Although the dividend is set at a fixed or variable rate, in some circumstances it can be changed or omitted by the issuer. Preferred stocks are subject to the risks associated with other types of equity securities, as well as additional risks, such as credit risk, interest rate risk, potentially greater volatility and risks related to deferral, non-cumulative dividends, subordination, liquidity, limited voting rights, and special redemption rights.
Real Estate Investment Trusts
The Funds may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. The Funds re-characterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year.
5. | Financial Derivative Instruments |
The Funds may utilize derivative instruments to gain market exposure on cash balances or reduce market exposure in anticipation of liquidity needs. When considering the Funds’ use of derivatives, it is important to note that the Funds do not use derivatives for the purpose of creating financial leverage.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. A Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
38
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
For the year ended January 31, 2017, the Acadian Emerging Markets and SGA Global Funds entered into future contracts primarily for exposing cash to markets.
The Funds’ average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at each quarter end.
Average Futures Contracts Outstanding | ||||
Fund | Year ended January 31, 2017 | |||
Acadian Emerging Markets | 43 | |||
SGA Global | 10 |
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure(1):
Fair Values of financial derivative instruments on the Statements of Assets and Liabilities not accounted for as hedging instruments as of January 31, 2017:
Assets | Derivatives | Acadian Emerging Markets Fund | SGA Global Fund | |||||||
Receivable for variation margin from open futures contracts(2) | Equity Contracts | $ | 50,038 | $ | — | |||||
Liabilities | ||||||||||
Payable for variation margin from open futures contracts(2) | Equity Contracts | $ | — | $ | (10,815 | ) |
The effect of financial derivative instruments not accounted for as hedging instruments during the year ended January 31, 2017:
Statement of Operations | ||||||||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 107,064 | $ | 131,059 | |||||
Change in net realized appreciation (depreciation) of futures contracts | Equity Contracts | $ | 57,340 | $ | (11,086 | ) |
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Schedules of Investments footnotes. Only the current day’s variation margin is reported within the Statements of Assets and Liabilities. |
6. | Principal Risks |
Investing in the Funds may involve certain risks including, but not limited to, those described below.
Counterparty Risk
The Funds are 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 Funds.
Credit Risk
The Funds are subject to the risk that the counterparty to a derivatives contract or a loan will fail to make timely payment of interest or principal or otherwise honor its obligations or default completely.
Currency Risk
The Funds may have exposure to foreign currencies by making investments in securities denominated in non-U.S. currencies and purchasing or selling forwards or currency futures contracts. Foreign currencies may decline in value relative to the U.S. dollar and other currencies and thereby affect the Funds’ investments in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, or in derivatives that provide exposure to, foreign (non-U.S.) currencies.
39
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Emerging Markets Risk
When investing in emerging markets, the risks of investing in foreign securities are heightened. Emerging 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 uncertainties; an economy’s dependence on revenues from particular commodities or on international aid or development assistance; currency transfer restrictions; a limited number of potential buyers for such securities; and delays and disruptions in securities settlement procedures.
Forward Currency Contracts Risk
Foreign currency forward contracts, including non-deliverable forwards, are derivative instruments pursuant to a contract with a counterparty to pay 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. The use of foreign currency forward contracts may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities or currencies underlying the foreign currency forward contract.
Futures Contract Risk
Futures contracts are derivative investments pursuant to a contract with a counterparty to pay 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 Funds to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. Futures contracts may experience dramatic price changes (losses) and imperfect correlation between the price of the contract and the underlying security or index which will increase the volatility of the Funds 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).
Hedging Risk
The Funds will employ various hedging strategies. There are a variety of factors that may cause hedges to fail to mitigate risks in the manner expected, such as if an instrument used to hedge fails to demonstrate the expected correlation to the risk being hedged. In addition, hedges, even when successful in mitigating risk, may not prevent the Funds from experiencing losses on its investments, and therefore the use of hedging strategies may reduce the Funds’ return, or create a loss.
Liquidity Risk
The Funds are susceptible to the risk that certain investments held by the Funds may have limited marketability or be subject to restrictions on sale, and may be difficult to sell at favorable times or prices. The Funds could lose money if it is unable to dispose of an investment at a time that is most beneficial to the Funds. For example, the Funds may be forced to sell certain investments at unfavorable prices to meet redemption requests or other cash needs.
Market Risk
Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in fixed-income instruments experiencing unusual liquidity issues, increased price volatility and, in some cases, credit downgrades and increased likelihood of default. These events have reduced the willingness and ability of some lenders to extend credit, and have made it more difficult for some borrowers to obtain financing on attractive terms, if at all. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions
40
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.
In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it is difficult to predict the impact on various markets of a significant rate increase, whether brought about by U.S. policy makers or by dislocations in world markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.
Market Timing Risk
Because the Funds invest in foreign securities, it is particularly subject to the risk of market timing activities. Frequent trading by Funds’ shareholders poses risks to other shareholders in the Funds, including (i) the dilution of the Funds’ NAV, (ii) an increase in the Funds’ expenses, and (iii) interference with the portfolio manager’s ability to execute efficient investment strategies. Because of specific securities in which the Funds may invest, it could be subject to the risk of market timing activities by shareholders.
Other Investment Companies Risk
The Funds may invest in shares of other registered investment companies, including money market funds. To the extent that the Funds invests in shares of other registered investment companies, you will indirectly bear fees and expenses charged by the underlying funds in addition to the Funds’ direct fees and expenses and will be subject to the risks associated with investments in those funds. For example, money market funds are subject to interest rate risk, credit risk, and market risk.
Valuation Risk
The Funds may value certain assets at a price different from the price at which they can be sold. This risk may be especially pronounced for investments, such as certain derivatives, which may be illiquid or which may become illiquid.
Offsetting Assets and Liabilities
The Funds are parties to enforceable master netting agreements between brokers and counterparties, which provides for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of January 31, 2017.
41
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Acadian Emerging Markets Fund
Offsetting of Financial Assets and Derivative Assets as of January 31, 2017:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Assets Presented in the Statements of Assets and Liabilities | |||||||||
Futures contracts (1) | $ | 50,038 | $ | — | $ | 50,038 |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of January 31, 2017:
Gross Amounts Offset in the Statements of Assets and Liabilities | ||||||||||||||||
Counterparty | Net Amount of Assets Presented in the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||
Goldman Sachs & Co. (1) | $ | 50,038 | $ | — | $ | — | $ | 50,038 |
SGA Global Fund
Offsetting of Financial Liabilities and Derivative Liabilities as of January 31, 2017:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Liabilities Presented in the Statements of Assets and Liabilities | |||||||||
Futures contracts (1) | $ | (10,815 | ) | $ | — | $ | (10,815 | ) |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty as of January 31, 2017:
Gross Amounts Offset in the Statements of Assets and Liabilities | ||||||||||||||||
Counterparty | Net Amount of Liabilities Presented in the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||
Goldman Sachs & Co. (1) | $ | (10,815 | ) | $ | — | $ | — | $ | (10,815 | ) |
(1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
7. | Federal Income and Excise Taxes |
It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecorded tax liabilities in the accompanying financial statements. The tax year for the period ended September 30, 2013 for the SGA Global Fund and the periods ended January 31, 2014, 2015, 2016, and 2017 for the Acadian Emerging Markets and SGA Global Funds, remain subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
The Funds may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
42
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
The tax character of distributions paid were as follows:
Acadian Emerging Markets Fund | SGA Global Fund | |||||||||||||||
Year Ended January 31, 2017 | Year Ended January 31, 2016 | Year Ended January 31, 2017 | Year Ended January 31, 2016 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary Income* | ||||||||||||||||
Institutional Class | $ | 862,939 | $ | 390,026 | $ | 45,901 | $ | 5,254 | ||||||||
Y Class | 596,064 | 217,893 | 10,918 | 114 | ||||||||||||
Investor Class | 52,099 | 27,290 | 58,295 | 823 | ||||||||||||
A Class | 7,642 | 1,988 | 4,898 | 264 | ||||||||||||
C Class | 3,871 | 150 | 5,669 | 392 | ||||||||||||
Long-term capital gains | ||||||||||||||||
Institutional Class | — | — | 203,833 | 88,099 | ||||||||||||
Y Class | — | — | 48,483 | 1,920 | ||||||||||||
Investor Class | — | — | 258,868 | 13,796 | ||||||||||||
A Class | — | — | 21,749 | 4,417 | ||||||||||||
C Class | — | — | 25,174 | 6,584 | ||||||||||||
Tax return of capital | — | — | ||||||||||||||
Institutional Class | — | 15,683 | — | — | ||||||||||||
Y Class | — | 8,777 | — | — | ||||||||||||
Investor Class | — | 1,099 | — | — | ||||||||||||
A Class | — | 80 | — | — | ||||||||||||
C Class | — | 6 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions paid | $ | 1,522,615 | $ | 662,992 | $ | 683,788 | $ | 121,663 | ||||||||
|
|
|
|
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of January 31, 2017, the components of distributable earnings (deficit) on a tax basis were as follows:
Acadian Emerging Markets Fund | SGA Global Fund | |||||||
Cost basis of investments for federal income tax purposes | $ | 88,489,474 | $ | 21,730,073 | ||||
Unrealized appreciation | 7,088,035 | 1,811,107 | ||||||
Unrealized depreciation | (5,839,216 | ) | (656,686 | ) | ||||
|
|
|
| |||||
Net unrealized appreciation (depreciation) | 1,248,819 | 1,154,421 | ||||||
Undistributed ordinary income | 483 | — | ||||||
Undistributed long-term capital gains | — | — | ||||||
Accumulated capital and other losses | (4,467,360 | ) | — | |||||
Other temporary differences | 3,862 | (2,150 | ) | |||||
|
|
|
| |||||
Distributable earnings (deficits) | $ | (3,214,196 | ) | $ | 1,152,271 | |||
|
|
|
|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gain (losses) on certain derivative instruments, the realization for tax purposes of unrealized gain (losses) on investments in passive foreign investment companies, late year ordinary loss deferrals, reclassifications of income from master limited partnerships.
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
43
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Accordingly, the following amounts represent current year permanent differences derived from foreign currency, gains (losses) from sales of investments in passive foreign investment companies, reclassifications of income from master limited partnerships, and net operating losses used to offset short-term capital gains as of January 31, 2017:
Acadian Emerging Markets Fund | SGA Global Fund | |||||||
Paid-in-capital | $ | 25,644 | $ | — | ||||
Undistributed (overdistribution of) net investment income | 49,327 | 13,289 | ||||||
Accumulated net realized gain (loss) | (74,971 | ) | (13,250 | ) | ||||
Unrealized appreciation (depreciation) of investments in futures contracts | — | (39 | ) |
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by Funds are carried forward indefinitely and retain their character as short-term and/or long-term losses.
For the year ended January 31, 2017, Acadian Emerging Markets Fund had $1,944,443 short-term and $2,522,917 long-term post enactment capital loss carryforwards. The SGA Global Fund does not have any capital loss carryforwards.
The Funds are permitted for tax purposes to defer into their next fiscal year qualified late year losses. Qualified late year capital losses are any capital losses incurred after October 31 through the funds’ fiscal year January 31, 2017. Qualified late year ordinary losses are specified losses generally incurred after October 31 and ordinary losses incurred after December 31 through the end of the Funds’ fiscal year, January 31, 2017. For the periods ended January 31, 2017, the SGA Global Fund deferred $1,910 of qualified late year ordinary losses to February 1, 2017.
8. | Investment Transactions |
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the periods ended January 31, 2017 were as follows:
Acadian Emerging Markets Fund | SGA Global Fund | |||||||
Purchases (excluding U.S. government securities) | $ | 37,614,354 | $ | 17,283,497 | ||||
Sales and Maturities (excluding U.S. government securities) | 25,444,898 | 4,095,532 |
A summary of the Funds’ transactions in the USG Select Fund for the year ended January 31, 2017 are as follows:
Fund | Type of Transaction | January 31, 2016 Shares/Fair Value | Purchases | Sales | January 31, 2017 Shares/Fair Value | Dividend Income | ||||||||||||||||
Acadian Emerging Markets | Direct | $ | — | $ | 31,600,432 | $ | 30,296,049 | $ | 1,304,383 | $ | 5,219 | |||||||||||
SGA Global | Direct | — | 20,594,951 | 19,229,689 | 1,365,262 | 2,788 |
44
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
9. | Capital Share Transactions |
The tables below summarize the activity in capital shares for each Class of the Fund:
Institutional Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Acadian Emerging Markets Managed Volatility Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,404,972 | $ | 12,824,980 | 4,700,972 | $ | 41,830,669 | ||||||||||
Reinvestment of dividends | 98,509 | 862,939 | 46,314 | 405,709 | ||||||||||||
Shares redeemed | (602,712 | ) | (5,525,711 | ) | (1,199,623 | ) | (10,600,342 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 900,769 | $ | 8,162,208 | 3,547,663 | $ | 31,636,036 | ||||||||||
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|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Acadian Emerging Markets Managed Volatility Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,348,877 | $ | 12,226,918 | 3,551,321 | $ | 34,026,670 | ||||||||||
Reinvestment of dividends | 67,633 | 590,432 | 25,921 | 226,549 | ||||||||||||
Shares redeemed | (877,209 | ) | (7,851,190 | ) | (1,019,004 | ) | (9,341,825 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 539,301 | $ | 4,966,160 | 2,558,238 | $ | 24,911,394 | ||||||||||
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|
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| |||||||||
Investor Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Acadian Emerging Markets Managed Volatility Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 92,875 | $ | 843,971 | 328,776 | $ | 3,168,598 | ||||||||||
Reinvestment of dividends | 5,949 | 51,813 | 3,191 | 27,822 | ||||||||||||
Shares redeemed | (194,305 | ) | (1,674,075 | ) | (311,702 | ) | (2,868,738 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (95,481 | ) | $ | (778,291 | ) | 20,265 | $ | 327,682 | ||||||||
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|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Acadian Emerging Markets Managed Volatility Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 16,930 | $ | 153,823 | 35,868 | $ | 352,252 | ||||||||||
Reinvestment of dividends | 875 | 7,642 | 233 | 2,030 | ||||||||||||
Shares redeemed | (51,033 | ) | (445,718 | ) | (263,152 | ) | (2,591,916 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (33,228 | ) | $ | (284,253 | ) | (227,051 | ) | $ | (2,237,634 | ) | ||||||
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|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Acadian Emerging Markets Managed Volatility Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 5,586 | $ | 50,512 | 40,840 | $ | 406,303 | ||||||||||
Reinvestment of dividends | 448 | 3,871 | 18 | 156 | ||||||||||||
Shares redeemed | (34,716 | ) | (314,857 | ) | (24,261 | ) | (208,951 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (28,682 | ) | $ | (260,474 | ) | 16,597 | $ | 197,508 | ||||||||
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|
|
|
| |||||||||
Institutional Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
SGA Global Growth Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 115,376 | $ | 1,734,578 | 66,801 | $ | 917,387 | ||||||||||
Reinvestment of dividends | 17,070 | 249,734 | 6,469 | 93,353 | ||||||||||||
Shares redeemed | (74,095 | ) | (1,114,205 | ) | (2,253 | ) | (32,593 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 58,351 | $ | 870,107 | 71,017 | $ | 978,147 | ||||||||||
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|
|
|
|
|
45
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Y Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
SGA Global Growth Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 106,656 | $ | 1,654,360 | 8,506 | $ | 118,200 | ||||||||||
Reinvestment of dividends | 3,512 | 51,209 | 141 | 2,033 | ||||||||||||
Shares redeemed | (6,078 | ) | (92,801 | ) | (8,293 | ) | (118,351 | ) | ||||||||
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|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 104,090 | $ | 1,612,768 | 354 | $ | 1,882 | ||||||||||
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| |||||||||
Investor Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
SGA Global Growth Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 775,795 | $ | 11,870,353 | 64,320 | $ | 937,299 | ||||||||||
Reinvestment of dividends | 21,979 | 317,163 | 1,022 | 14,619 | ||||||||||||
Shares redeemed | (62,802 | ) | (979,822 | ) | (42,597 | ) | (611,504 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 734,972 | $ | 11,207,694 | 22,745 | $ | 340,414 | ||||||||||
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|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
SGA Global Growth Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 56,052 | $ | 833,835 | 13,441 | $ | 193,460 | ||||||||||
Reinvestment of dividends | 1,440 | 20,764 | 328 | 4,682 | ||||||||||||
Shares redeemed | (13,720 | ) | (206,169 | ) | (21,038 | ) | (293,170 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 43,772 | $ | 648,430 | (7,269 | ) | $ | (95,028 | ) | ||||||||
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|
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| |||||||||
C Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
SGA Global Growth Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 44,531 | $ | 656,412 | 3,488 | $ | 49,425 | ||||||||||
Reinvestment of dividends | 2,186 | 30,719 | 468 | 6,577 | ||||||||||||
Shares redeemed | (9,133 | ) | (132,556 | ) | (3,116 | ) | (43,107 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 37,584 | $ | 554,575 | 840 | $ | 12,985 | ||||||||||
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|
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|
|
10. | Subsequent Events |
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Funds financial statements through this date.
46
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||
Year Ended January 31, | September 27A to January 31, | |||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
Net asset value, beginning of period | $ | 8.36 | $ | 10.24 | $ | 9.59 | $ | 10.00 | ||||||||
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| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.13 | 0.04 | 0.13 | 0.02 | ||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.90 | (1.84 | ) | 0.64 | (0.42 | ) | ||||||||||
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| |||||||||
Total income (loss) from investment operations | 1.03 | (1.80 | ) | 0.77 | (0.40 | ) | ||||||||||
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Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.08 | ) | (0.12 | ) | (0.01 | ) | ||||||||
Distributions from net realized gains | — | — | — | — | ||||||||||||
Distributions from return of capital | — | (0.00 | )F | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.17 | ) | (0.08 | ) | (0.12 | ) | (0.01 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Redemption fees added to beneficial interests F | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 9.22 | $ | 8.36 | $ | 10.24 | $ | 9.59 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return B | 12.37 | % | (17.58 | )% | 8.04 | % | (4.05 | )%C | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 52,787,468 | $ | 40,335,580 | $ | 13,079,558 | $ | 9,968,951 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 1.47 | % | 1.68 | % | 2.26 | % | 4.20 | %D | ||||||||
Expenses, net of reimbursements | 1.35 | % | 1.35 | % | 1.35 | % | 1.35 | %D | ||||||||
Net investment income (loss), before expense reimbursements | 1.18 | % | 1.16 | % | 0.44 | % | (2.30 | )%D | ||||||||
Net investment income, net of reimbursements | 1.31 | % | 1.49 | % | 1.35 | % | 0.55 | %D | ||||||||
Portfolio turnover rate | 32 | % | 35 | % | 22 | % | 9 | %E | ||||||||
Y Class | ||||||||||||||||
Year Ended January 31, | September 27A to January 31, | |||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
Net asset value, beginning of period | $ | 8.34 | $ | 10.22 | $ | 9.59 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.11 | 0.14 | 0.04 | 0.01 | ||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.91 | (1.94 | ) | 0.71 | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income (loss) from investment operations | 1.02 | (1.80 | ) | 0.75 | (0.40 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.08 | ) | (0.12 | ) | (0.01 | ) | ||||||||
Distributions from net realized gains | — | — | — | — | ||||||||||||
Distributions from return of capital | — | (0.00 | )F | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.17 | ) | (0.08 | ) | (0.12 | ) | (0.01 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Redemption fees added to beneficial interests F | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 9.19 | $ | 8.34 | $ | 10.22 | $ | 9.59 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return B | 12.28 | % | (17.64 | )% | 7.83 | % | (4.05 | )%C | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 32,606,568 | $ | 25,098,823 | $ | 4,603,907 | $ | 488,729 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 1.55 | % | 1.77 | % | 2.12 | % | 6.19 | %D | ||||||||
Expenses, net of reimbursements | 1.45 | % | 1.45 | % | 1.45 | % | 1.45 | %D | ||||||||
Net investment income (loss), before expense reimbursements | 1.15 | % | 1.23 | % | 0.01 | % | (4.30 | )%D | ||||||||
Net investment income, net of reimbursements | 1.25 | % | 1.55 | % | 0.68 | % | 0.44 | %D | ||||||||
Portfolio turnover rate | 32 | % | 35 | % | 22 | % | 9 | %E |
A | Commencement of operations. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from September 27, 2013 through January 31, 2014 and is not annualized. |
F | Amount represents less than $0.01 per share. |
47
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||
Year Ended January 31, | September 27A to January 31, | |||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
Net asset value, beginning of period | $ | 8.32 | $ | 10.19 | $ | 9.58 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.11 | 0.16 | 0.07 | 0.00 | F | |||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.87 | (1.98 | ) | 0.66 | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income (loss) from investment operations | 0.98 | (1.82 | ) | 0.73 | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.05 | ) | (0.12 | ) | (0.01 | ) | ||||||||
Distributions from net realized gains | — | — | — | — | ||||||||||||
Distributions from return of capital | — | (0.00 | )F | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.14 | ) | (0.05 | ) | (0.12 | ) | (0.01 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Redemption fees added to beneficial interests F | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 9.16 | $ | 8.32 | $ | 10.19 | $ | 9.58 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return B | 11.89 | % | (17.86 | )% | 7.63 | % | (4.15 | )%C | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 3,457,789 | $ | 3,933,437 | $ | 4,612,098 | $ | 1,326,164 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 1.77 | % | 1.98 | % | 2.42 | % | 5.46 | %D | ||||||||
Expenses, net of reimbursements | 1.73 | % | 1.73 | % | 1.73 | % | 1.73 | %D | ||||||||
Net investment income (loss), before expense reimbursements | 0.94 | % | 1.30 | % | 0.12 | % | (3.60 | )%D | ||||||||
Net investment income, net of reimbursements | 0.98 | % | 1.55 | % | 0.81 | % | 0.13 | %D | ||||||||
Portfolio turnover rate | 32 | % | 35 | % | 22 | % | 9 | %E | ||||||||
A Class | ||||||||||||||||
Year Ended January 31, | September 27A to January 31, | |||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
Net asset value, beginning of period | $ | 8.34 | $ | 10.18 | $ | 9.58 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.13 | 0.12 | 0.06 | 0.00 | F | |||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.85 | (1.94 | ) | 0.66 | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income (loss) from investment operations | 0.98 | (1.82 | ) | 0.72 | (0.41 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.02 | ) | (0.12 | ) | (0.01 | ) | ||||||||
Distributions from net realized gains | — | — | — | — | ||||||||||||
Distributions from return of capital | — | (0.00 | )F | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.14 | ) | (0.02 | ) | (0.12 | ) | (0.01 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Redemption fees added to beneficial interests F | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 9.18 | $ | 8.34 | $ | 10.18 | $ | 9.58 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return B | 11.84 | % | (17.90 | )% | 7.53 | % | (4.15 | )%C | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 510,236 | $ | 740,272 | $ | 3,214,591 | $ | 554,182 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 1.90 | % | 2.10 | % | 2.49 | % | 7.71 | %D | ||||||||
Expenses, net of reimbursements | 1.75 | % | 1.75 | % | 1.77 | % | 1.85 | %D | ||||||||
Net investment income (loss), before expense reimbursements | 0.86 | % | 1.08 | % | 0.09 | % | (5.92 | )%D | ||||||||
Net investment income (loss), net of reimbursements | 1.01 | % | 1.43 | % | 0.81 | % | (0.07 | )%D | ||||||||
Portfolio turnover rate | 32 | % | 35 | % | 22 | % | 9 | %E |
A | Commencement of operations. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from September 27, 2013 through January 31, 2014 and is not annualized. |
F | Amount represents less than $0.01 per share. |
48
American Beacon Acadian Emerging Markets Managed Volatility FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||
Year Ended January 31, | September 27A to January 31, | |||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
Net asset value, beginning of period | $ | 8.23 | $ | 10.10 | $ | 9.55 | $ | 10.00 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.02 | 0.10 | 0.02 | (0.01 | ) | |||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.89 | (1.97 | ) | 0.62 | (0.43 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income (loss) from investment operations | 0.91 | (1.87 | ) | 0.64 | (0.44 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.06 | ) | (0.00 | ) | (0.09 | ) | (0.01 | ) | ||||||||
Distributions from net realized gains | — | — | — | — | ||||||||||||
Distributions from return of capital | — | (0.00 | )F | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.06 | ) | (0.00 | ) | (0.09 | ) | (0.01 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Redemption fees added to beneficial interests F | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 9.08 | $ | 8.23 | $ | 10.10 | $ | 9.55 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return B | 11.11 | % | (18.50 | )% | 6.66 | % | (4.45 | )%C | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 450,626 | $ | 644,705 | $ | 623,506 | $ | 148,736 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 2.67 | % | 2.87 | % | 3.26 | % | 10.04 | %D | ||||||||
Expenses, net of reimbursements | 2.50 | % | 2.50 | % | 2.52 | % | 2.60 | %D | ||||||||
Net investment income (loss), before expense reimbursements | 0.11 | % | 0.40 | % | (0.90 | )% | (8.13 | )%D | ||||||||
Net investment income (loss), net of reimbursements | 0.28 | % | 0.77 | % | (0.16 | )% | (0.68 | )%D | ||||||||
Portfolio turnover rate | 32 | % | 35 | % | 22 | % | 9 | %E |
A | Commencement of operations. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from September 27, 2013 through January 31, 2014 and is not annualized. |
F | Amount represents less than $0.01 per share. |
49
American Beacon SGA Global Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||
Year Ended January 31, | Four Months Ended January 31, | Year Ended September 30, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
Net asset value, beginning of period | $ | 13.79 | $ | 13.43 | $ | 13.05 | $ | 13.15 | $ | 12.04 | $ | 9.48 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.03 | 0.03 | 0.06 | 0.01 | (0.04 | )E | (0.05 | )E | ||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.84 | 0.56 | 0.72 | 0.15 | 1.36 | 2.61 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.87 | 0.59 | 0.78 | 0.16 | 1.32 | 2.56 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | — | (0.02 | ) | (0.03 | ) | — | — | — | ||||||||||||||||
Distributions from net realized gains | (0.55 | ) | (0.21 | ) | (0.37 | ) | (0.26 | ) | (0.21 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.55 | ) | (0.23 | ) | (0.40 | ) | (0.26 | ) | (0.21 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 15.11 | $ | 13.79 | $ | 13.43 | $ | 13.05 | $ | 13.15 | $ | 12.04 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 13.66 | % | 4.26 | % | 5.98 | % | 1.13 | %B | 11.21 | %G | 27.00 | %G | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 7,698,159 | $ | 6,219,477 | $ | 5,106,079 | $ | 4,738,199 | $ | 4,351,023 | $ | 2,096,989 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 2.03 | % | 2.62 | % | 3.82 | % | 5.28 | %C | 8.00 | % | 12.02 | % | ||||||||||||
Expenses, net of reimbursements | 0.98 | % | 0.98 | % | 0.98 | % | 1.00 | %C | 1.75 | % | 1.75 | % | ||||||||||||
Net investment (loss), before expense reimbursements | (0.83 | )% | (1.37 | )% | (2.41 | )% | (4.12 | )%C | (6.56 | )% | (10.76 | )% | ||||||||||||
Net investment income (loss), net of reimbursements | 0.21 | % | 0.27 | % | 0.42 | % | 0.16 | %C | (0.31 | )% | (0.49 | )% | ||||||||||||
Portfolio turnover rate | 32 | % | 39 | % | 38 | % | 15 | %F | 39 | % | 41 | % |
Y Class | ||||||||||||||||
Year Ended January 31, | October 4D to January 31, | |||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
Net asset value, beginning of period | $ | 13.75 | $ | 13.41 | $ | 13.05 | $ | 13.25 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.03 | ) | 0.02 | 0.04 | 0.00 | H | ||||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.88 | 0.55 | 0.72 | 0.06 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income (loss) from investment operations | 1.85 | 0.57 | 0.76 | 0.06 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | — | (0.02 | ) | (0.03 | ) | — | ||||||||||
Distributions from net realized gains | (0.55 | ) | (0.21 | ) | (0.37 | ) | (0.26 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.55 | ) | (0.23 | ) | (0.40 | ) | (0.26 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 15.05 | $ | 13.75 | $ | 13.41 | $ | 13.05 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return A | 13.55 | % | 4.12 | % | 5.83 | % | 0.37 | %B | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 1,706,678 | $ | 127,585 | $ | 119,680 | $ | 105,161 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 1.88 | % | 2.72 | % | 3.84 | % | 10.23 | %C | ||||||||
Expenses, net of reimbursements | 1.07 | % | 1.08 | % | 1.08 | % | 1.08 | %C | ||||||||
Net investment (loss), before expense reimbursements | (0.96 | )% | (1.51 | )% | (2.44 | )% | (9.09 | )%C | ||||||||
Net investment income (loss), net of reimbursements | (0.15 | )% | 0.13 | % | 0.32 | % | 0.06 | %C | ||||||||
Portfolio turnover rate | 32 | % | 39 | % | 38 | % | 15 | %F |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Commencement of operations. |
E | The Predecessor Fund calculated the change in undistributed net investment income based on average shares outstanding during the period. |
F | Portfolio turnover rate (not annualized) is for the period from October 1, 2013 through January 31, 2014. |
G | Total returns would have been lower had expenses not been waived or absorbed by the Predecessor Fund. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distribution or the redemption of Fund shares. |
H | Amounts represent less than $0.01 per share. |
50
American Beacon SGA Global Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||
Year Ended January 31, | October 4A to January 31, 2014 | |||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||
Net asset value, beginning of period | $ | 13.66 | $ | 13.36 | $ | 13.03 | $ | 13.25 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.06 | (0.04 | ) | 0.01 | (0.01 | ) | ||||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.73 | 0.57 | 0.72 | 0.05 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income (loss) from investment operations | 1.79 | 0.53 | 0.73 | 0.04 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | — | (0.02 | ) | (0.03 | ) | — | ||||||||||
Distributions from net realized gains | (0.55 | ) | (0.21 | ) | (0.37 | ) | (0.26 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.55 | ) | (0.23 | ) | (0.40 | ) | (0.26 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 14.90 | $ | 13.66 | $ | 13.36 | $ | 13.03 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return B | 13.20 | % | 3.84 | % | 5.60 | % | 0.22 | %C | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 11,414,261 | $ | 421,630 | $ | 108,458 | $ | 106,990 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 2.05 | % | 3.08 | % | 5.28 | % | 10.37 | %D | ||||||||
Expenses, net of reimbursements | 1.34 | % | 1.36 | % | 1.36 | % | 1.36 | %D | ||||||||
Net investment (loss), before expense reimbursements | (1.14 | )% | (2.04 | )% | (3.88 | )% | (9.22 | )%D | ||||||||
Net investment income (loss), net of reimbursements | (0.43 | )% | (0.32 | )% | 0.05 | % | (0.22 | )%D | ||||||||
Portfolio turnover rate | 32 | % | 39 | % | 38 | % | 15 | %E | ||||||||
A Class | ||||||||||||||||
Year Ended January 31, | October 4A to January 31, 2014 | |||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||
Net asset value, beginning of period | $ | 13.65 | $ | 13.35 | $ | 13.03 | $ | 13.25 | ||||||||
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Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.03 | (0.03 | ) | 0.00 | F | 0.00 | F | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.76 | 0.56 | 0.72 | 0.04 | ||||||||||||
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Total income (loss) from investment operations | 1.79 | 0.53 | 0.72 | 0.04 | ||||||||||||
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Less distributions: | ||||||||||||||||
Dividends from net investment income | — | (0.02 | ) | (0.03 | ) | — | ||||||||||
Distributions from net realized gains | (0.55 | ) | (0.21 | ) | (0.37 | ) | (0.26 | ) | ||||||||
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Total distributions | (0.55 | ) | (0.23 | ) | (0.40 | ) | (0.26 | ) | ||||||||
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Net asset value, end of period | $ | 14.89 | $ | 13.65 | $ | 13.35 | $ | 13.03 | ||||||||
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Total return B | 13.21 | % | 3.84 | % | 5.53 | % | 0.22 | %C | ||||||||
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Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 1,028,223 | $ | 345,107 | $ | 434,636 | $ | 362,595 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 2.33 | % | 3.05 | % | 4.19 | % | 8.22 | %D | ||||||||
Expenses, net of reimbursements | 1.38 | % | 1.38 | % | 1.42 | % | 1.48 | %D | ||||||||
Net investment (loss), before expense reimbursements | (1.22 | )% | (1.90 | )% | (2.78 | )% | (6.91 | )%D | ||||||||
Net investment (loss), net of reimbursements | (0.27 | )% | (0.22 | )% | (0.01 | )% | (0.17 | )%D | ||||||||
Portfolio turnover rate | 32 | % | 39 | % | 38 | % | 15 | %E |
A | Commencement of operations. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate (not annualized) is for the period from October 1, 2013 through January 31, 2014. |
F | Amounts represent less than $0.01 per share. |
51
American Beacon SGA Global Growth FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||
Year Ended January 31, | October 4A to January 31, 2014 | |||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||
Net asset value, beginning of period | $ | 13.40 | $ | 13.21 | $ | 13.00 | $ | 13.25 | ||||||||
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Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.05 | (0.12 | ) | (0.05 | ) | (0.04 | ) | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.60 | 0.54 | 0.66 | 0.05 | ||||||||||||
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Total income (loss) from investment operations | 1.65 | 0.42 | 0.61 | 0.01 | ||||||||||||
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Less distributions: | ||||||||||||||||
Dividends from net investment income | — | (0.02 | ) | (0.03 | ) | — | ||||||||||
Distributions from net realized gains | (0.55 | ) | (0.21 | ) | (0.37 | ) | (0.26 | ) | ||||||||
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Total distributions | (0.55 | ) | (0.23 | ) | (0.40 | ) | (0.26 | ) | ||||||||
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Net asset value, end of period | $ | 14.50 | $ | 13.40 | $ | 13.21 | $ | 13.00 | ||||||||
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Total return B | 12.41 | % | 3.04 | % | 4.69 | % | (0.01 | )%C | ||||||||
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Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 988,762 | $ | 410,331 | $ | 393,478 | $ | 109,489 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 3.08 | % | 3.76 | % | 4.77 | % | 11.36 | %D | ||||||||
Expenses, net of reimbursements | 2.12 | % | 2.13 | % | 2.16 | % | 2.23 | %D | ||||||||
Net investment (loss), before expense reimbursements | (1.95 | )% | (2.51 | )% | (3.41 | )% | (10.22 | )%D | ||||||||
Net investment (loss), net of reimbursements | (1.00 | )% | (0.89 | )% | (0.80 | )% | (1.09 | )%D | ||||||||
Portfolio turnover rate | 32 | % | 39 | % | 38 | % | 15 | %E |
A | Commencement of operations. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate (not annualized) is for the period from October 1, 2013 through January 31, 2014. |
52
Federal Tax Information
January 31, 2017 (Unaudited)
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended January 31, 2017. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2016.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2016. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Acadian Emerging Markets Managed Volatility Fund | SGA Global Growth Fund | |||||||
Corporate Dividends Received Deduction | 0.1 | % | 35.4 | % | ||||
Qualified Dividend Income | 100.0 | % | 0.0 | % | ||||
Long-term capital gains distributions | $ | — | $ | 558,107 | ||||
Short-term capital gains distributions | $ | — | $ | 125,681 |
Shareholders received notification in January 2017 of the applicable tax information necessary to prepare their 2016 income tax returns.
53
Trustees and Officers of the American Beacon FundsSM (Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees twenty-eight funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (80) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal resignation or retirement* | ||||
Gilbert G. Alvarado (47) | Trustee since 2015 | Director, Kura MD, Inc. (local telehealth organization) (2015-present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present) Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-Present); Director, Sacramento Regional Technology Alliance (2011-Present); Director, Women’s Empowerment (2009-2014); Trustee, American Beacon Select Funds (2015-Present). | ||
Josephe B. Armes (54) | Trustee since 2015 | Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2013-Present); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Chief Operating Officer, Hicks Holdings, LLC (Hicks Family assets and investments) (2005-2010); Trustee, Baylor University Board of Regents (2001-2010); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present). | ||
Gerard J. Arpey (58) | Trustee since 2012 | Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Brenda A. Cline (56) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc. (public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (62) | Trustee since 2008 | Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008- 2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). |
54
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
TRUSTEES (CONT.) | Term | |||
M. Dunning (74) | Trustee since 2008 | Chairman Emeritus (2008-Present); Lockton Dunning Benefits (consulting firm in employee benefits); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present) (software consulting); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard M. Massman (73) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (53) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (71) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
OFFICERS | ||||
Gene. L. Needles, Jr. (62) | President since 2009 Executive Vice President since 2009 | President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Resolute Investment Managers, Inc. (2015-Present); President, CEO and Director, Resolute Acquisition, Inc. (2015-Present); President, CEO and Director, Resolute Topco, Inc. (2015-Present), President, CEO and Director, Resolute Investment Holdings, LLC. (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc.; (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, L.L.C. (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). | ||
Rosemary K. Behan (57) | VP, Secretary and Chief Legal Officer since 2006 | Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Resolute Investment Managers, Inc. (2015-Present); Secretary, Resolute Acquisition, Inc. (2015-Present); Secretary, Resolute Topco, Inc. (2015-Present); Secretary, Resolute Investment Holdings, LLC. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, L.L.C. (2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). | ||
Brian E. Brett (56) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Paul B. Cavazos (47) | VP since 2016 | Chief Investment Officer and Vice President, Asset Management, American Beacon Advisors, Inc. (2016-Present); Chief Investment Officer and Assistant Treasurer, DTE Energy (2007-2016); | ||
Erica Duncan (46) | VP since 2011 | Vice President, Marketing and Client Services, American Beacon Advisors, Inc. (2011-Present); Supervisor, Brand Marketing, Invesco (2010-2011); |
55
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
Melinda G. Heika (55) | Treasurer since 2010 | Treasurer, American Beacon Advisors, Inc. (2010-Present); Treasurer, Resolute Investment Managers, Inc. (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present); Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute Investment Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, L.L.C. (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). | ||
One Year | ||||
Terri L. McKinney (53) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (41) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Manager and Senior Vice President, American Private Equity Management, L.L.C. (2012-Present); Senior Vice President and Director, Resolute Investment Managers, Inc. (2015-Present); Senior Vice President and Director, Resolute Acquisition, Inc. (2015-Present); Senior Vice President and Director, Resolute Topco, Inc. (2015-Present), Senior Vice President and Director, Resolute Investment Holdings, LLC. (2015-Present); Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010). | ||
Samuel J. Silver (53) | VP since 2011 | Chief Fixed Income Officer (2016–Present), Vice President, Fixed Income Investments (2011-2016) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (45) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, L.L.C. (2012-Present). | ||
Sonia L. Bates (60) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011-Present), Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer, Resolute Investment Managers, Inc. (2015-Present); Asst. Treasurer, Resolute Acquisition, Inc. (2015-Present); Asst. Treasurer, Resolute Topco, Inc. (2015-Present); Asst. Treasurer, Resolute Investment Holdings, LLC.; Asst. Treasurer, Lighthouse Holdings, Inc. (2011-2015); Asst. Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Asst. Treasurer, American Private Equity Management, L.L.C. (2012-Present). | ||
Shelley D. Abrahams (42) | Assistant Secretary since 2008 | Assistant Secretary, American Beacon Advisors, Inc. (2008-Present) | ||
Rebecca L. Harris (50) | Assistant Secretary since 2011 | Assistant Secretary, American Beacon Advisors, Inc. (2011-Present) | ||
Diana N. Lai (41) | Assistant Secretary since 2012 | Assistant Secretary, American Beacon Advisors, Inc. (2012-Present) | ||
Teresa A. Oxford (58) | Assistant Secretary since 2015 | Assistant Secretary, American Beacon Advisors, Inc. (2015-Present) |
* | As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75. |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors. |
56
Privacy Policy
January 31, 2017 (Unaudited)
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
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60
Delivery of Documents
eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your shareholder reports and summary prospectus on-line. Sign up at www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
![]() | ![]() | |
By E-mail: | On the Internet: | |
american_beacon.funds@ambeacon.com | Visit our website at www.americanbeaconfunds.com | |
| ||
![]() | ||
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By Mail: American Beacon Funds | |
By Telephone: | ||
Institutional, Y, and Investor Classes | P.O. Box 219643 | |
Call (800) 658-5811 | Kansas City, MO 64121-9643 | |
| ||
Availability of Quarterly Portfolio Schedules | Availability of Proxy Voting Policy and Records | |
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-2736. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (800)-SEC-0330. A complete schedule of the American Beacon Acadian Emerging Markets Managed Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month. A complete schedule of the American Beacon SGA Global Growth Fund’s portfolio holdings is also available on the website approximately twenty days after the end of each month. | A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Boston, MA | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus of Summary Prospectus.
American Beacon Funds, American Beacon Acadian Emerging Markets Managed Volatility Fund, and American Beacon SGA Global Growth Fund are service marks of American Beacon Advisors, Inc.
AR 1/17
American Beacon®
FUNDS
2017 ANNUAL REPORT
January 31, 2017
GROSVENOR LONG/SHORT FUND
NUMERIC INTEGRATED ALPHA FUND
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
GROSVENOR LONG/SHORT FUND
All investing involves risk including the possible loss of principal. The Fund’s strategy of investing in a variety of long/short strategies entails certain risks including that the lead sub-advisor’s judgments about allocation between such strategies, as well as the selection of the sub-advisors and their subsequent individual investment decisions, may not perform to expectations resulting in the Fund’s underperformance or even losses versus other similar funds. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. The Fund may have high portfolio turnover risk, which could increase the Fund’s transaction costs and possibly have a negative impact on performance. Investing in small- or mid-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in derivative instruments involves liquidity, credit, interest rate and market risks and in some cases the addition of financial leverage, which can magnify these risks. Short sales involve special risks, including greater reliance on the sub-advisor’s ability to accurately anticipate the future value of a security or instrument; the Fund’s losses are potentially unlimited in a short sale.
NUMERIC INTEGRATED ALPHA FUND
The Fund’s strategy of investing in a variety of long/short strategies entails certain risks including that the sub-advisor’s judgments about allocation between such strategies may not perform to expectations resulting in the Fund’s underperformance or even losses versus other similar funds. Short sales involve special risks, including greater reliance on the sub-advisor’s ability to accurately anticipate the future value of a security or instrument; the Fund’s losses are potentially unlimited in a short sale. Investing in derivative instruments involves liquidity, credit, interest rate and market risks and in some cases the addition of financial leverage, which can magnify these risks. Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. The Fund may have high portfolio turnover risk, which could increase the Fund’s transaction costs and possibly have a negative impact on performance. Investing in small- or mid-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks.
Please see the prospectus for a complete discussion of the Funds’ risks. There can be no assurances that the investment objectives of the Funds will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | January 31, 2017 |
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2 | ||||
9 | ||||
11 | ||||
Schedules of Investments: | ||||
12 | ||||
29 | ||||
41 | ||||
46 | ||||
Financial Highlights: | ||||
71 | ||||
73 | ||||
74 | ||||
Disclosure Regarding Approvals of the Management and Investment Advisory Agreements | 75 | |||
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83 | ||||
Back Cover |
![]() | Dear Shareholders,
In the weeks ahead of the U.S. presidential election on November 8, 2016, uncertainty about the outcome caused many investors to stay on the sidelines. Some investors questioned whether the election’s result would have negative consequences for their portfolios, although elections have rarely had a lasting effect on the market.
Following the election, the markets responded positively to aspects of the incoming administration’s proposed plans for economic growth; i.e., repatriating jobs from overseas, relaxing regulations, lowering taxes and increasing infrastructure spending. From Election Day 2016 to Inauguration Day 2017, the S&P 500 Index - a broad measure of the performance of large U.S. companies - climbed approximately 6%. |
For the 12-month period that ended January 31, 2017, the Dow Jones Industrial Average - which follows the performance of 30 significant stocks trading on the New York Stock Exchange and The NASDAQ Stock Market - gained 23.89%. The S&P 500 Index, a domestic equity bellwether, grew 20.04%. The MSCI EAFE Index, which measures the world’s developed market, increased 12.03%.
• | For the 12 months ended January 31, 2017, the American Beacon Grosvenor Long/Short Fund (Investor Class) returned 10.56%. |
• | From its inception on November 1, 2016, through January 31, 2017, the American Beacon Numeric Integrated Alpha Fund (Investor Class) returned 2.50%. |
At American Beacon Advisors, we are proud to offer a broad range of global equity and fixed-income funds sub-advised by experienced asset managers who employ distinctive investment processes to manage assets through a variety of economic and market conditions. Together, we work diligently to help our shareholders meet their long-term financial goals.
Thank you for your continued interest in American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, |
Gene L. Needles, Jr. |
President |
American Beacon Funds |
1
January 31, 2017 (Unaudited)
Global equity markets rallied broadly for the 12-month period from February 2016 through January 2017, evidenced by the 17.1% return of the MSCI World Index. This strong performance occurred despite the surprise Brexit election results in the U.K. in late June and the surprise U.S. presidential election results for Donald Trump - along with a majority sweep by the Republican Party in both chambers of Congress - in November. Equity performance was lifted over the course of the year with a broad-based commodity recovery headlined by the doubling of crude oil from a low of almost $26 per barrel in February 2016 to a high of more than $52 per barrel at the end of the period.
Domestic small cap stocks, represented by the Russell 2000 Index, returned a blistering 33.5%. Small caps outperformed large cap stocks despite the S&P 500 Index returning a solid 20.0% for the year. From a sector perspective within the S&P 500 Index, the top performers were the cyclical sectors, including Materials (up 36.5%) and Financials (up 35.0%). On the other hand, those lagging were the more defensive sectors, including Consumer Staples (up 6.4%) and Health Care (up 7.7%). From a style standpoint, value outperformed growth as demonstrated by the Russell 3000 Value Index returning 25.8% versus the Russell 3000 Growth Index return of 17.9%.
International developed markets also performed reasonably well over the period as the MSCI EAFE Index returned 12.0%. In Europe, the MSCI Germany Index returned 16.3% compared to the MSCI United Kingdom Index return of 7.7%. The U.K. market lagged in terms of U.S. dollars due to headwinds from the Brexit vote and the subsequent weakening of the British pound. In Asia, the MSCI Japan Index returned a solid 15.7%.
In the developing world, emerging markets rebounded strongly as rising commodity prices lifted stocks and the MSCI Emerging Market Index returned 25.4%. Leading the way over the period was Brazil, where the MSCI Brazil Index returned a scorching 98.6% as a political regime change instilled confidence in the future direction of the economy. In China, stocks produced a solid return as the MSCI China Index was up 23.5%. President Trump’s protectionist rhetoric was heavily directed at the U.S.’s southern neighbor and a main driver causing the MSCI Mexico Index to return -3.9% for the year.
Overall, global equity investors were rewarded with a very resilient year as stocks steadily marched upward despite political surprises.
2
American Beacon Grosvenor Long/Short FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Investor Class of the American Beacon Grosvenor Long/Short Fund (the “Fund”) returned 10.56% for the twelve months ended January 31, 2017. The Fund underperformed the long-only MSCI World Index (the “Index”) return of 17.11% but outperformed the long-short HFRX Equity Hedge Index return of 5.34%.
Comparison of Change in Value of a $10,000 Investment for the period from 10/1/2015 through 1/31/2017
Total Returns for the Period ended January 31, 2017
Ticker | 1 Year | Since Inception 10/1/2015 | Value of $10,000 10/01/2015- 1/31/2017 | |||||||||||||
Institutional Class (1,3) | GVRIX | 10.95 | % | 6.47 | % | $ | 10,873 | |||||||||
Y Class (1,3) | GVRYX | 10.85 | % | 6.32 | % | $ | 10,852 | |||||||||
Investor Class (1,3) | GVRPX | 10.56 | % | 6.03 | % | $ | 10,813 | |||||||||
A without Sales Charge (1,3) | GSVAX | 10.56 | % | 6.03 | % | $ | 10,813 | |||||||||
A with Sales Charge (1,3) | GSVAX | 5.28 | % | 2.22 | % | $ | 10,813 | |||||||||
C without Sales Charge (1,3) | GVRCX | 9.66 | % | 5.22 | % | $ | 10,703 | |||||||||
C with Sales Charge (1,3) | GVRCX | 8.66 | % | 5.22 | % | $ | 10,703 | |||||||||
MSCI World Index (2) | 17.11 | % | 11.53 | % | $ | 11,298 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A portion of the fees charged to each Class of the Fund has been waived since inception. Performance prior to waiving fees was lower than the actual returns shown since inception. A Class shares have a maximum sales charge of 5.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase. |
2. | The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. One cannot directly invest in an index. |
3. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A and C Class shares was 10.00%, 13.10%, 13.33%, 12.81%, and 14.24%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
3
American Beacon Grosvenor Long/Short FundSM
Performance Overview
January 31, 2017 (Unaudited)
During the period, global equity markets generally reported strong performance but were interrupted by brief episodes of volatility. A series of unexpected geopolitical events, including growth concerns in China, the “Brexit” vote, insolvency fears surrounding Deutsche Bank, the U.S. election and the resignation of the Italian prime minister, provided ample opportunity to disrupt investors, but markets powered ahead. In addition, measures of market volatility ended the year near historic lows due primarily to central bank involvement. Likewise, asset correlations remained elevated. Generally, this type of macro backdrop can prove challenging for the Fund’s strategy, but its performance was solid.
The Fund’s most beneficial position during the period was its long exposure to regional and community banks. This sector appreciated notably toward period end given the Fed’s move to raise interest rates and the swift optimism surrounding the new President’s goal to reduce regulation. The Fund also benefitted from long exposures to the energy and commodity markets as those sectors rebounded firmly during the year.
The Fund’s short positions, however, detracted from returns as they produced negative results. In particular, positions meant to benefit from market volatility and poor investor sentiment underperformed as markets finished the year strongly.
The Fund’s investment strategy typically produces returns that are less volatile than those of the Index. As such, risk-adjusted returns generally provide an appropriate method of analyzing performance.
The Fund’s lead sub-advisor, Grosvenor Capital Management, provides a distinct investment process consisting of thorough manager due diligence and dynamic manager allocation. Their comprehensive analysis is done through three separate teams covering the areas of investment research, risk management and operations of each manager and continues with ongoing monitoring. This investment process has remained consistent since the Fund’s inception.
Top 10 Long Exposures (% Net Assets) | ||||
Yahoo! Inc. | 2.7 | |||
Lowe’s Cos. Inc. | 1.3 | |||
KAR Auction Services, Inc. | 1.3 | |||
Teck Resources, Ltd. | 1.2 | |||
HRG Group, Inc. | 1.2 | |||
LKQ Corp. | 1.2 | |||
United Health Group, Inc. | 1.1 | |||
RIO Tinto PLC | 1.1 | |||
SS&C Technologies Holdings, Inc. | 1.1 | |||
Valvoline, Inc. | 1.1 | |||
Top 10 Short Exposures (% Net Assets) | ||||
SPDR S&P500 ETF Trust | (2.0 | ) | ||
Consumer Discretionary Select Sector SPDR Fund | (1.3 | ) | ||
Consumer Staples Select Sector SPDR Fund | (1.1 | ) | ||
IShares 20+ Year Treasury Bond ETF | (0.7 | ) | ||
IShares EUR Govt. Bond 7-10YR UCITS ETF EUR Dist. | (0.7 | ) | ||
IShares MSCI China ETF | (0.6 | ) | ||
Corning Inc. | (0.6 | ) | ||
International Business Machines Corp. | (0.6 | ) | ||
Infosys Ltd. | (0.5 | ) | ||
Health Care Select Sector SPDR Fund | (0.5 | ) |
4
American Beacon Grosvenor Long/Short FundSM
Performance Overview
January 31, 2017 (Unaudited)
Net Sector Exposures (% Investments) | ||||
Consumer Discretionary | 13.7 | |||
Financials | 11.3 | |||
Materials | 8.9 | |||
Information Technology | 6.7 | |||
Industrials | 5.5 | |||
Energy | 5.4 | |||
Consumer Staples | 2.7 | |||
Telecom | 2.0 | |||
Health Care | 1.2 | |||
Real Estate | 0.4 | |||
Utilities | (0.4 | ) | ||
Broad Market Indices | (3.3 | ) | ||
Fund Level Exposures (% Investments) | ||||
Net Exposure | 54.1 | |||
Gross Exposure | 116.5 | |||
Long Exposure | 85.3 | |||
Short Exposure | 31.2 |
5
American Beacon Numeric Integrated Alpha FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Investor Class of the American Beacon Numeric Integrated Alpha Fund (the “Fund”) returned 2.50% since inception on November 1, 2016 through January 31, 2017.
Comparison of Change in Value of a $10,000 Investment for the period from 11/01/2016 through 1/31/2017
Total Returns for the Period ended January 31, 2017
Ticker | Since Inception 11/1/2016* | Value of $10,000 11/1/2016- 1/31/2017 | ||||||||
Institutional Class (1,3) | NIAIX | 2.50 | % | $ | 10,250 | |||||
Y Class (1,3) | NIAYX | 2.60 | % | $ | 10,260 | |||||
Investor Class (1,3) | NIAPX | 2.50 | % | $ | 10,250 | |||||
Ultra Class (1,3) | NIAUX | 2.70 | % | $ | 10,270 | |||||
BofA Merril Lynch U.S 3-Month Treasury Bill Index (2) | 0.43 | % | $ | 10,043 |
* | Not Annualized. |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to each Class of the Fund has been waived since inception. Performance prior to waiving fees was lower than the actual returns shown since inception. |
2. | The BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is designed to measure the total return on cash, including price and interest income, based on short-term government Treasury Bills of about 90-day maturity. One cannot directly invest in an index. |
3. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, and Ultra Class shares was 6.17%, 6.27%, 6.55%, and 6.07%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
6
American Beacon Numeric Integrated Alpha FundSM
Performance Overview
January 31, 2017 (Unaudited)
Among the Fund’s strategies, the Core Market Neutral component generated a majority of the Fund’s positive return. This strategy develops a market-neutral, long-short equity portfolio that seeks to identify mispriced securities caused by valuation discrepancies, investor sentiment, seasonal trends and other events that cause equity prices to fluctuate around fundamental valuations. U.S. equity exposures produced the majority of returns during the period followed by smaller contributions from European equities.
Within the Core Market Neutral strategy, the Fund employs industry specific models in both Retail and Real Estate Investment Trust (REIT). Both contributed positively to Fund performance with Retail outpacing the REIT model.
Also, within the Core Market Neutral strategy, the Fund’s long exposures exhibited low price-to-earnings characteristics similar to those of value equities, while the short exposures exhibited higher price-to-earnings characteristic in line with growth equities. Overall, the value segments of the equity indices outperformed growth during the period.
The Fund’s Dynamic Beta component contributed positively to returns during the period. This strategy uses global equity indices and U.S. Treasuries to add long exposure to the Fund when the models identify opportunity. During this period, exposures to the MSCI EAFE and S&P 500 Indices added value whereas exposures to MSCI Emerging Markets Index and the ten-year U.S. Treasury detracted slightly. Overall, the strategy added value.
Lastly, the Dislocation and the Sector components of the Fund’s strategies both generated positive contributions to performance during the period. The Dislocation strategy seeks to benefit from market-neutral long and short positions in companies whose stock prices have been dislocated, or moved, beyond typical ranges due to news headlines, earnings results, analyst opinions or other announcements. The Fund seeks to benefit when prices revert back to more appropriate levels.
The Sector strategy seeks to benefit from market-neutral long and short positions by utilizing S&P 500 Index
Sector Exchange Traded Funds. To the extent that valuation discrepancies across equity sectors become abnormally large, the Fund seeks to benefit from their reversion to more appropriate levels.
The sub-advisor’s systematic investment process utilizes a fundamentals based approach by combining a diversified set of uncorrelated quantitative strategies. This investment process has remained consistent since the
Fund’s inception.
Top 10 Long Exposures (% Total Mv) | ||||
Industrial Select Sector SPDR Fund | 4.3 | |||
Consumer Discretionary Select Sector SPDR Fund | 2.4 | |||
United Rentals Inc. | 1.3 | |||
Domino’s Pizza, Inc. | 1.3 | |||
American Homes 4 Rent, Class A | 1.3 | |||
Simon Property Group, Inc. | 1.2 | |||
Marinemax, Inc. | 1.2 | |||
Argan, Inc. | 1.2 | |||
Select Income REIT | 1.2 | |||
Empire State Realty Trust, Inc. | 1.2 |
7
American Beacon Numeric Integrated Alpha FundSM
Performance Overview
January 31, 2017 (Unaudited)
Top 10 Short Exposures (%Total Mv) | ||||
Health Care Select Sector Fund | (4.2 | ) | ||
Consumer Staples Select Sector Fund | (2.1 | ) | ||
Utilities Select Sector Fund | (1.7 | ) | ||
Chipotle Mexican Grill | (1.3 | ) | ||
Tesla Motors, Inc. | (1.3 | ) | ||
HCP, Inc. | (1.3 | ) | ||
Chatham Lodging Trust | (1.2 | ) | ||
Schlumberger, Ltd. | (1.2 | ) | ||
Ball Corp. | (1.2 | ) | ||
Willis Towers Watson, PLC | (1.2 | ) |
Sector Exposure | Portfolio Long | Portfolio Short | ||||||
Consumer Discretionary | 19.3 | 14.6 | ||||||
Industrials | 18.0 | 11.4 | ||||||
Real Estate | 16.0 | 15.4 | ||||||
Technology | 10.0 | 7.0 | ||||||
Financials | 9.6 | 7.9 | ||||||
Materials | 8.2 | 6.5 | ||||||
Health Care | 6.4 | 8.3 | ||||||
Consumer Staples | 5.8 | 5.3 | ||||||
Energy | 5.1 | 5.1 | ||||||
Utilities | 1.8 | 3.3 | ||||||
Telecommunication | 1.3 | 1.0 |
8
Expense Example
January 31, 2017 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The Examples are intended to help you understand the ongoing cost (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from August 1, 2016 through January 2017 for the Grosvenor Long/Short Fund and the entire period from November 1, 2016 through January 31, 2017 for the Numeric Integrated Alpha Fund.
Actual Expenses
The “Actual” lines on the tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” line of the tables provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Funds with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and Investor Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Funds, such as sales charges (loads) or redemption fees, as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
9
American Beacon FundsSM
Expense Example
January 31, 2017 (Unaudited)
Grosvenor Long/Short Fund
Beginning Account Value 8/1/2016 | Ending Account Value 1/31/2017 | Expenses Paid During Period 8/1/2016-1/31/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,063.88 | $ | 10.89 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,014.58 | $ | 10.63 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,062.95 | $ | 11.41 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,014.08 | $ | 11.14 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,061.10 | $ | 12.85 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,012.67 | $ | 12.55 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,061.10 | $ | 12.95 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,012.57 | $ | 12.65 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,056.52 | $ | 16.80 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,008.80 | $ | 16.41 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 2.10%, 2.20%, 2.48%, 2.50% and 3.25% for the Institutional, Y, Investor, A and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. |
** | 5% return before expenses. |
Numeric Integrated Alpha Fund
Beginning Account Value 11/1/2016 | Ending Account Value 1/31/2017 | Expenses Paid During Period 11/1/2016-1/31/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,025.00 | $ | 4.96 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,007.67 | $ | 4.91 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.00 | $ | 5.23 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,007.40 | $ | 5.18 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,025.00 | $ | 5.94 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,006.70 | $ | 5.89 | ||||||
Ultra Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,027.00 | $ | 4.67 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,007.96 | $ | 4.63 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the period of 1.95%, 2.05%, 2.33% and 1.85% for the Institutional, Y, Investor and Ultra Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (92) by days in the year (366) to reflect the half-year period. |
** | 5% return before expenses. |
10
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
American Beacon Grosvenor Long/Short Fund, and American Beacon Numeric Integrated Alpha Fund:
In our opinion, the (i) accompanying statement of assets and liabilities, including the schedule of investments, as of January 31, 2017, and the related statements of operations and of changes in net assets and the financial highlights for the year then ended present fairly, in all material respects, the financial position of the American Beacon Grosvenor Long/Short Fund as of January 31, 2017, the results of its operations, the changes in its net assets and its financial highlights for the year then ended, and (ii) accompanying statement of assets and liabilities, including the schedule of investments, as of January 31, 2017, and the related statements of operations and of changes in net assets and the financial highlights for the period then ended present fairly, in all material respects, the financial position of American Beacon Numeric Integrated Alpha Fund as of January 31, 2017, the results of its operations, the changes in its net assets and its financial highlights for the period November 1, 2016 (commencement of operations) through January 31, 2017, (two of the series constituting American Beacon Funds, hereafter referred to as the “Funds”), in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of January 31, 2017 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies were not received, provides a reasonable basis for our opinions. With respect to the American Beacon Grosvenor Long/Short Fund, the financial statements as of January 31, 2016 and for the period October 1, 2015 to January 31, 2016 and the financial highlights for the period October 1, 2015 to January 31, 2016 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated March 31, 2016 expressed an unqualified opinion on those financial statements and financial highlights.
PricewaterhouseCoopers |
Boston, Massachusetts |
March 30, 2017 |
11
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
SECURITIES HELD LONG | ||||||||
COMMON STOCKS - 74.26% | ||||||||
CONSUMER DISCRETIONARY - 17.80% | ||||||||
Auto Components - 2.11% | ||||||||
Johnson Controls International PLCA J | 3,645 | $ | 160,307 | |||||
LKQ Corp.B J | 6,283 | 200,491 | ||||||
|
| |||||||
360,798 | ||||||||
|
| |||||||
Automobiles - 0.37% | ||||||||
Avis Budget Group, Inc.B J | 428 | 15,930 | ||||||
Harley-Davidson, Inc. | 652 | 37,190 | ||||||
Peugeot S.A.B | 577 | 10,713 | ||||||
|
| |||||||
63,833 | ||||||||
|
| |||||||
Commercial Services - 1.01% | ||||||||
ServiceMaster Global Holdings, Inc.B | 4,703 | 173,917 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure - 2.35% | ||||||||
Brinker International, Inc. | 420 | 18,690 | ||||||
Caesars Entertainment Corp.B | 592 | 5,298 | ||||||
Carnival Corp. | 1,187 | 65,736 | ||||||
Extended Stay America, Inc. | 811 | 13,146 | ||||||
Las Vegas Sands Corp. | 576 | 30,286 | ||||||
Melco Crown Entertainment Ltd., ADRC | 3,889 | 65,491 | ||||||
MGM Resorts InternationalB J | 3,278 | 94,406 | ||||||
Royal Caribbean Cruises Ltd. | 261 | 24,437 | ||||||
Wyndham Worldwide Corp. | 907 | 71,707 | ||||||
Wynn Resorts Ltd. | 130 | 13,186 | ||||||
|
| |||||||
402,383 | ||||||||
|
| |||||||
Household Durables - 1.81% | ||||||||
Mohawk Industries, Inc.B | 453 | 97,776 | ||||||
Newell Rubbermaid, Inc. | 3,827 | 181,132 | ||||||
NVR, Inc.B | 17 | 31,586 | ||||||
|
| |||||||
310,494 | ||||||||
|
| |||||||
Internet & Catalog Retail - 1.52% | ||||||||
Amazon.com, Inc.B | 15 | 12,352 | ||||||
Ctrip.com International Ltd., ADRC | 663 | 28,648 | ||||||
JD.com, Inc., ADRB C | 1,117 | 31,723 | ||||||
SS&C Technologies Holdings, Inc. J | 5,867 | 188,507 | ||||||
|
| |||||||
261,230 | ||||||||
|
| |||||||
Media - 3.61% | ||||||||
Banner Corp. J | 354 | 19,866 | ||||||
CBS Corp., Class BD | 1,193 | 76,937 | ||||||
Comcast Corp., Class A J | 898 | 67,727 | ||||||
CTS Eventim AG & Co., KGaA | 1,850 | 64,116 | ||||||
ITV PLCA | 47,559 | 121,573 | ||||||
Nielsen Holdings PLCA | 1,558 | 63,738 | ||||||
Time Warner, Inc. | 433 | 41,936 | ||||||
Viacom, Inc., Class B | 2,954 | 124,482 | ||||||
Walt Disney Co. | 358 | 39,613 | ||||||
|
| |||||||
619,988 | ||||||||
|
| |||||||
Multiline Retail - 0.88% | ||||||||
Dollar General Corp. J | 2,040 | 150,593 | ||||||
|
| |||||||
Retail - 0.01% | ||||||||
Barnes and Noble, Inc. | 215 | 2,193 | ||||||
|
| |||||||
Specialty Retail - 3.83% | ||||||||
Bed Bath & Beyond, Inc. | 44 | 1,775 | ||||||
Dollar Tree, Inc.B | 1,879 | 145,040 | ||||||
Foot Locker, Inc. | 622 | 42,632 |
See accompanying notes
12
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
CONSUMER DISCRETIONARY - 17.80% (continued) | ||||||||
Specialty Retail - 3.83% (continued) | ||||||||
Lowe’s Cos., Inc. | 3,031 | $ | 221,505 | |||||
MarineMax, Inc.B | 1,813 | 38,889 | ||||||
Ocado Group PLCA B | 41,558 | 130,386 | ||||||
Tile Shop Holdings, Inc. | 4,057 | 77,489 | ||||||
|
| |||||||
657,716 | ||||||||
|
| |||||||
Textiles & Apparel - 0.30% | ||||||||
Kate Spade & Co.B | 698 | 12,920 | ||||||
Moncler SpA | 775 | 14,892 | ||||||
NIKE, Inc., Class B | 436 | 23,064 | ||||||
|
| |||||||
50,876 | ||||||||
|
| |||||||
Total Consumer Discretionary | 3,054,021 | |||||||
|
| |||||||
CONSUMER STAPLES - 5.10% | ||||||||
Beverages - 1.01% | ||||||||
Molson Coors Brewing Co., Class B J | 1,396 | 134,742 | ||||||
Monster Beverage Corp.B | 897 | 38,212 | ||||||
|
| |||||||
172,954 | ||||||||
|
| |||||||
Food & Drug Retailing - 1.34% | ||||||||
Alimentation Couche-Tard, Inc., Class B | 3,872 | 177,376 | ||||||
Kroger Co. J | 1,504 | 51,076 | ||||||
|
| |||||||
228,452 | ||||||||
|
| |||||||
Food Products - 0.42% | ||||||||
Mondelez International, Inc., Class A | 1,617 | 71,601 | ||||||
|
| |||||||
Household Products - 1.50% | ||||||||
HRG Group, Inc.B | 12,266 | 206,437 | ||||||
Procter & Gamble Co. | 605 | 52,998 | ||||||
|
| |||||||
259,435 | ||||||||
|
| |||||||
Tobacco - 0.83% | ||||||||
Reynolds American, Inc. J | 2,346 | 141,065 | ||||||
|
| |||||||
Total Consumer Staples | 873,507 | |||||||
|
| |||||||
ENERGY - 7.45% | ||||||||
Energy Equipment & Services - 1.09% | ||||||||
Halliburton Co. J | 2,473 | 139,898 | ||||||
TechnipFMC PLCA B | 1,432 | 48,144 | ||||||
|
| |||||||
188,042 | ||||||||
|
| |||||||
Oil & Gas - 6.36% | ||||||||
Anadarko Petroleum Corp. J | 786 | 54,651 | ||||||
Canadian Natural Resources Ltd. | 828 | 25,030 | ||||||
Concho Resources, Inc.B J | 1,158 | 161,472 | ||||||
Continental Resources, Inc.B J | 142 | 6,896 | ||||||
Devon Energy Corp. J | 998 | 45,449 | ||||||
Hess Corp. | 451 | 24,435 | ||||||
Kinder Morgan, Inc. J | 1,479 | 33,041 | ||||||
Marathon Petroleum Corp. | 3,059 | 146,985 | ||||||
MPLX LPE | 839 | 31,756 | ||||||
Parsley Energy, Inc., Class AB J | 2,443 | 86,042 | ||||||
Pioneer Natural Resources Co. J | 343 | 61,819 | ||||||
Plains All American Pipeline LPE | 839 | 26,336 | ||||||
Tesoro Corp. | 1,383 | 111,816 | ||||||
Williams Cos., Inc. | 5,980 | 172,463 | ||||||
Williams Partners LPE | 2,523 | 103,544 | ||||||
|
| |||||||
1,091,735 | ||||||||
|
| |||||||
Total Energy | 1,279,777 | |||||||
|
|
See accompanying notes
13
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
FINANCIALS - 17.82% | ||||||||
Banks - 13.89% | ||||||||
American Business BankB J | 1,485 | $ | 56,950 | |||||
American River Bankshares | 1,660 | 24,900 | ||||||
American Riviera BankB J | 2,244 | 34,670 | ||||||
Astoria Financial Corp. | 8,384 | 158,541 | ||||||
Bancorp of New Jersey, Inc. | 1,129 | 15,637 | ||||||
Bank of Marin Bancorp. J | 678 | 45,562 | ||||||
Bank of the James Financial Group, Inc. J | 3,536 | 53,747 | ||||||
Bay Bancorp, Inc.B | 4,996 | 34,972 | ||||||
Baycom Corp.B | 856 | 13,696 | ||||||
BofI Holding, Inc.B J | 1,072 | 31,624 | ||||||
Bridge Bancorp, Inc. J | 4,655 | 168,278 | ||||||
Bryn Mawr Bank Corp. J | 736 | 29,477 | ||||||
California Bank of CommerceB | 158 | 2,797 | ||||||
Cambridge Bancorp. J | 740 | 47,367 | ||||||
Capital City Bank Group, Inc. J | 510 | 10,552 | ||||||
Citizens Financial Group J | 1,753 | 63,406 | ||||||
Comerica, Inc. J | 551 | 37,209 | ||||||
Commerce West BankB J | 1,605 | 29,773 | ||||||
Community Financial Corp. J | 2,259 | 64,562 | ||||||
CU BancorpB J | 1,200 | 43,500 | ||||||
Empire Bancorp, Inc.B | 1,257 | 16,215 | ||||||
Farmers & Merchants Bank of Long Beach | 5 | 35,500 | ||||||
Fifth Third Bancorp | 1,172 | 30,589 | ||||||
First of Long Island Corp. J | 2,790 | 75,609 | ||||||
First South Bancorp, Inc. J | 1,886 | 23,368 | ||||||
Guaranty Bancorp J | 1,824 | 44,141 | ||||||
Huntington Bancshares, Inc. J | 1,405 | 19,010 | ||||||
Independent Bank Corp. | 620 | 13,020 | ||||||
KeyCorp. J | 1,786 | 32,094 | ||||||
Live Oak Bancshares, Inc. | 650 | 13,293 | ||||||
Old Line Bancshares, Inc. J | 1,367 | 36,649 | ||||||
Old Point Financial Corp. | 155 | 4,332 | ||||||
Orrstown Financial Services, Inc. J | 1,318 | 28,930 | ||||||
Peapack Gladstone Financial Corp. J | 1,862 | 56,242 | ||||||
PNC Financial Services Group, Inc. J | 315 | 37,945 | ||||||
Premier Financial Bancorp, Inc. J | 1,059 | 19,401 | ||||||
Provident Bancorp, Inc.B J | 1,847 | 36,386 | ||||||
Puget Sound Bancorp, Inc.B | 1,067 | 24,541 | ||||||
Regions Financial Corp. J | 9,926 | 143,034 | ||||||
Republic First Bancorp, Inc.B J | 4,833 | 36,489 | ||||||
Seacoast Banking Corp. of Florida B J | 5,585 | 121,641 | ||||||
Shore Bancshares, Inc. J | 1,576 | 25,358 | ||||||
Signature Bank/New York NYB | 260 | 40,955 | ||||||
Sunshine Bancorp, Inc.B J | 2,930 | 52,916 | ||||||
SunTrust Banks, Inc. | 998 | 56,706 | ||||||
Sussex Bancorp J | 1,956 | 41,565 | ||||||
SVB Financial Group B J | 305 | 52,530 | ||||||
Triumph Bancorp, Inc. B J | 1,366 | 36,950 | ||||||
Unity Bancorp, Inc. | 1,524 | 25,070 | ||||||
Veritex Holdings, Inc. B J | 2,820 | 76,591 | ||||||
WashingtonFirst Bankshares, Inc. J | 2,797 | 77,896 | ||||||
Wintrust Financial Corp. | 568 | 40,669 | ||||||
Zions Bancorporation J | 977 | 41,220 | ||||||
|
| |||||||
2,384,075 | ||||||||
|
| |||||||
Consumer Finance - 0.25% | ||||||||
Regional Management Corp.B J | 1,702 | 42,567 | ||||||
|
|
See accompanying notes
14
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
FINANCIALS - 17.82% (continued) | ||||||||
Diversified Financials - 2.26% | ||||||||
Ally Financial, Inc. J | 6,120 | $ | 129,254 | |||||
Caesars Acquisition Company, Class AB | 256 | 3,840 | ||||||
Capital One Financial Corp. J | 516 | 45,093 | ||||||
OneMain Holdings, Inc.B J | 1,096 | 24,528 | ||||||
PennyMac Financial Services, Inc., Class AB J | 1,679 | 28,375 | ||||||
Santander Consumer USA Holdings, Inc. | 1,529 | 20,213 | ||||||
Texas Capital Bancshares, Inc.B | 337 | 27,803 | ||||||
Wells Fargo & Co. J | 1,958 | 110,294 | ||||||
|
| |||||||
389,400 | ||||||||
|
| |||||||
Insurance - 0.69% | ||||||||
American International Group, Inc. J | 606 | 38,942 | ||||||
First American Financial Corp. J | �� | 1,024 | 38,482 | |||||
Prudential Financial, Inc. | 396 | 41,624 | ||||||
|
| |||||||
119,048 | ||||||||
|
| |||||||
Real Estate - 0.73% | ||||||||
Realogy Holdings Corp. | 4,862 | 125,974 | ||||||
|
| |||||||
Total Financials | 3,061,064 | |||||||
|
| |||||||
HEALTH CARE - 2.51% | ||||||||
Biotechnology - 0.35% | ||||||||
Actelion Ltd. | 43 | 11,363 | ||||||
Biogen Idec, Inc.B | 44 | 12,199 | ||||||
Incyte Corp.B J | 154 | 18,666 | ||||||
Vertex Pharmaceuticals, Inc.B | 200 | 17,174 | ||||||
|
| |||||||
59,402 | ||||||||
|
| |||||||
Health Care Providers & Services - 1.90% | ||||||||
Aetna, Inc. J | 512 | 60,728 | ||||||
AmerisourceBergen Corp. | 13 | 1,135 | ||||||
Cardinal Health, Inc. | 13 | 974 | ||||||
Cigna Corp. | 265 | 38,748 | ||||||
Express Scripts Holding Co.B | 29 | 1,998 | ||||||
McKesson Corp. | 7 | 974 | ||||||
Service Corp International J | 1,049 | 30,557 | ||||||
UnitedHealth Group, Inc. J | 1,185 | 192,089 | ||||||
|
| |||||||
327,203 | ||||||||
|
| |||||||
Pharmaceuticals - 0.26% | ||||||||
Allergan PLCA | 200 | 43,778 | ||||||
|
| |||||||
Total Health Care | 430,383 | |||||||
|
| |||||||
INDUSTRIALS - 5.59% | ||||||||
Aerospace & Defense - 0.70% | ||||||||
AerCap Holdings N.V.B J | 839 | 37,143 | ||||||
Meggitt PLCA | 8,119 | 42,683 | ||||||
TransDigm Group, Inc. | 190 | 41,116 | ||||||
|
| |||||||
120,942 | ||||||||
|
| |||||||
Air Freight & Couriers - 0.30% | ||||||||
FedEx Corp. | 274 | 51,816 | ||||||
|
| |||||||
Airlines - 0.86% | ||||||||
Copa Holdings S.A., Class A | 181 | 17,646 | ||||||
Delta Air Lines, Inc. | 1,471 | 69,490 | ||||||
Latam Airlines Group SP, ADRC | 996 | 9,133 |
See accompanying notes
15
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
INDUSTRIALS - 5.59% (continued) | ||||||||
Airlines - 0.86% (continued) | ||||||||
Southwest Airlines Co. | 376 | $ | 19,669 | |||||
United Continental Holdings, Inc. | 460 | 32,416 | ||||||
|
| |||||||
148,354 | ||||||||
|
| |||||||
Building Products - 0.02% | ||||||||
JELD-WEN Holding, Inc.B | 144 | 3,898 | ||||||
|
| |||||||
Commercial Services & Supplies - 1.53% | ||||||||
CyrusOne, Inc.F | 904 | 43,537 | ||||||
KAR Auction Services, Inc. J | 4,767 | 217,137 | ||||||
|
| |||||||
260,674 | ||||||||
|
| |||||||
Construction & Engineering - 0.15% | ||||||||
Fluor Corp. | 468 | 25,974 | ||||||
|
| |||||||
Electrical Equipment - 0.07% | ||||||||
A.O. Smith Corp. | 263 | 12,821 | ||||||
|
| |||||||
Electronic Equipment & Instruments - 0.27% | ||||||||
Rockwell Automation, Inc. J | 315 | 46,617 | ||||||
|
| |||||||
Machinery - 0.37% | ||||||||
Caterpillar, Inc. | 414 | 39,603 | ||||||
Trinity Industries, Inc. | 821 | 22,610 | ||||||
|
| |||||||
62,213 | ||||||||
|
| |||||||
Road & Rail - 1.01% | ||||||||
CSX Corp. J | 3,732 | 173,127 | ||||||
|
| |||||||
Trading Companies & Distributors - 0.31% | ||||||||
Air Lease Corp. J | 1,017 | 36,998 | ||||||
Herc Holdings, Inc.B | 316 | 15,696 | ||||||
|
| |||||||
52,694 | ||||||||
|
| |||||||
Total Industrials | 959,130 | |||||||
|
| |||||||
INFORMATION TECHNOLOGY - 8.93% | ||||||||
Communications Equipment - 0.59% | ||||||||
CommScope Holding Co., Inc.B | 505 | 19,099 | ||||||
Palo Alto Networks, Inc.B | 555 | 81,896 | ||||||
|
| |||||||
100,995 | ||||||||
|
| |||||||
Computers & Peripherals - 1.54% | ||||||||
Hewlett Packard Enterprise Co. | 597 | 13,540 | ||||||
HP, Inc. J | 6,307 | 94,920 | ||||||
Western Digital Corp. J | 1,951 | 155,553 | ||||||
|
| |||||||
264,013 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 0.77% | ||||||||
Flextronics International Ltd.B | 4,006 | 62,774 | ||||||
OSI Systems, Inc.B | 943 | 70,414 | ||||||
|
| |||||||
133,188 | ||||||||
|
| |||||||
Internet Software & Services - 3.64% | ||||||||
Alibaba Group Holding Ltd., Sponsored ADRB C | 643 | 65,142 | ||||||
Alphabet, Inc., Class CB J | 82 | 65,337 | ||||||
Alphabet, Inc., Class AB | 37 | 30,347 | ||||||
Baidu, Inc., Sponsored ADRB C | 29 | 5,077 | ||||||
Yahoo, Inc.B J | 10,415 | 458,989 | ||||||
|
| |||||||
624,892 | ||||||||
|
|
See accompanying notes
16
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
INFORMATION TECHNOLOGY - 8.93% (continued) | ||||||||
IT Consulting & Services - 0.21% | ||||||||
Cognizant Technology Solutions Corp., Class AB J | 662 | $ | 34,815 | |||||
Dell Technologies, Class VB | 24 | 1,512 | ||||||
|
| |||||||
36,327 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 0.56% | ||||||||
Intel Corp. | 291 | 10,715 | ||||||
Marvell Technology Group Ltd. J | 5,736 | 85,294 | ||||||
|
| |||||||
96,009 | ||||||||
|
| |||||||
Software - 1.62% | ||||||||
LINE Corp., ADRB C | 2,445 | 77,873 | ||||||
Microsoft Corp. J | 873 | 56,439 | ||||||
Nimble Storage, Inc.B | 6,377 | 54,651 | ||||||
Red Hat, Inc.B | 872 | 66,167 | ||||||
Symantec Corp. J | 870 | 23,969 | ||||||
|
| |||||||
279,099 | ||||||||
|
| |||||||
Total Information Technology | 1,534,523 | |||||||
|
| |||||||
MATERIALS - 6.73% | ||||||||
Chemicals - 1.40% | ||||||||
Dow Chemical Co. | 186 | 11,091 | ||||||
Trinseo S.A. | 494 | 31,987 | ||||||
Valspar Corp. | 98 | 10,846 | ||||||
Valvoline, Inc. J | 8,100 | 187,515 | ||||||
|
| |||||||
241,439 | ||||||||
|
| |||||||
Construction Materials - 0.64% | ||||||||
Buzzi Unicem SpA | 798 | 19,641 | ||||||
Summit Materials, Inc., Class AB | 1,115 | 27,987 | ||||||
Vulcan Materials Co. J | 485 | 62,240 | ||||||
|
| |||||||
109,868 | ||||||||
|
| |||||||
Containers & Packaging - 0.43% | ||||||||
Berry Plastics Group, Inc.B J | 1,446 | 73,789 | ||||||
|
| |||||||
Metals & Mining - 3.46% | ||||||||
Boliden AB | 1,599 | 46,633 | ||||||
First Quantum Minerals Ltd. | 2,480 | 31,275 | ||||||
Freeport-McMoRan Copper & Gold, Inc.B | 6,573 | 109,440 | ||||||
Newmont Mining Corp. | 2,021 | 73,322 | ||||||
Teck Resources Ltd., Class B | 8,439 | 207,093 | ||||||
United States Steel Corp. | 2,724 | 89,102 | ||||||
Voestalpine AG | 863 | 36,519 | ||||||
|
| |||||||
593,384 | ||||||||
|
| |||||||
Paper & Forest Products - 0.80% | ||||||||
Canfor Corp.B | 7,623 | 82,659 | ||||||
West Fraser Timber Co., Ltd. | 1,629 | 55,633 | ||||||
|
| |||||||
138,292 | ||||||||
|
| |||||||
Total Materials | 1,156,772 | |||||||
|
| |||||||
REAL ESTATE - 0.51% | ||||||||
Equity Real Estate Investment Trusts - 0.08% | ||||||||
Gaming & Leisure Properties, Inc. F | 434 | 13,727 | ||||||
Financial - 0.43% | ||||||||
Colony Northstar, Inc., Class A F | 5,438 | 75,697 | ||||||
|
| |||||||
Total Materials | 89,424 | |||||||
|
|
See accompanying notes
17
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
TELECOMMUNICATION SERVICES - 1.82% | ||||||||
Diversified Telecommunication Services - 1.29% | ||||||||
Telefonica Deutschland Holding AG | 25,259 | $ | 105,251 | |||||
Verizon Communications, Inc. J | 2,369 | 116,105 | ||||||
|
| |||||||
221,356 | ||||||||
|
| |||||||
Wireless Telecommunication Services - 0.53% | ||||||||
Tim Participacoes S.A., ADRC | 6,425 | 90,785 | ||||||
|
| |||||||
Total Telecommunication Services | 312,141 | |||||||
|
| |||||||
Total COMMON STOCKS (Cost $11,491,869) | 12,750,742 | |||||||
|
| |||||||
PARTICIPATORY NOTES - 2.30% | ||||||||
FINANCE - 1.26% | ||||||||
Banks - 1.26% | ||||||||
HSBC Bank PLC, 1/22/2018 A B | 53,047 | 212,941 | ||||||
|
| |||||||
MATERIALS - 1.04% | ||||||||
Chemicals - 1.04% | ||||||||
Saudi Basic Industries Corp., 3/2/2017 | 6,987 | 178,099 | ||||||
|
| |||||||
Total PARTICIPATORY NOTES (Cost $348,505) | 391,040 | |||||||
|
| |||||||
WARRANTS – 0.00% (Cost $293) | ||||||||
ENERGY - 0.00% | ||||||||
Oil & Gas - 0.00% | ||||||||
Kinder Morgan, Inc., 5/25/2017, Strike Price $40.00G | 307 | 2 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 17.42% (Cost $2,991,077) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassH | 2,991,077 | 2,991,077 | ||||||
|
| |||||||
Total Securities Held Long (Cost $14,831,744) | 16,132,861 | |||||||
|
| |||||||
SECURITIES HELD SHORT | ||||||||
COMMON STOCKS - (20.23%) | ||||||||
CONSUMER DISCRETIONARY - (2.64%) | ||||||||
Auto Components - (0.16%) | ||||||||
Delphi Automotive PLCA | (383 | ) | (26,833 | ) | ||||
|
| |||||||
Automobiles - (0.46%) | ||||||||
Tesla Motors, Inc.B | (142 | ) | (35,774 | ) | ||||
Toyota Motor Corp., ADRC | (376 | ) | (43,522 | ) | ||||
|
| |||||||
(79,296 | ) | |||||||
|
| |||||||
Hotels, Restaurants & Leisure - (0.46%) | ||||||||
Cheesecake Factory, Inc. | (235 | ) | (14,161 | ) | ||||
Darden Restaurants, Inc. | (365 | ) | (26,747 | ) | ||||
Intercontinental Hotels Group | (378 | ) | (17,499 | ) | ||||
Panera Bread Co., Class AB | (1 | ) | (209 | ) | ||||
Six Flags Entertainment Corp. | (144 | ) | (8,580 | ) | ||||
Wyndham Worldwide Corp. | (142 | ) | (11,227 | ) | ||||
|
| |||||||
(78,423 | ) | |||||||
|
| |||||||
Household Durables - (0.14%) | ||||||||
Leggett & Platt, Inc. | (6 | ) | (286 | ) | ||||
Meritage Homes Corp. | (312 | ) | (11,466 | ) | ||||
Pulte Group, Inc. | (556 | ) | (11,960 | ) | ||||
|
| |||||||
(23,712 | ) | |||||||
|
| |||||||
Internet & Catalog Retail - (0.03%) | ||||||||
Boohoo.com PLCA B | (3,215 | ) | (5,733 | ) | ||||
|
|
See accompanying notes
18
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
CONSUMER DISCRETIONARY - (2.64%) (continued) | ||||||||
Leisure Equipment & Products - (0.18%) | ||||||||
Allegiant Travel Co. | (62 | ) | $ | (10,664 | ) | |||
Polaris Industries, Inc. | (244 | ) | (20,513 | ) | ||||
|
| |||||||
(31,177 | ) | |||||||
|
| |||||||
Media - (0.26%) | ||||||||
Discovery Communications, Inc., Class AB | (468 | ) | (13,268 | ) | ||||
IMAX Corp.B | (50 | ) | (1,630 | ) | ||||
Scripps Networks Interactive, Inc., Class A | (123 | ) | (9,368 | ) | ||||
Sinclair Broadcast Group, Inc., Class A | (451 | ) | (15,221 | ) | ||||
Walt Disney Co. | (42 | ) | (4,647 | ) | ||||
|
| |||||||
(44,134 | ) | |||||||
|
| |||||||
Multiline Retail - (0.34%) | ||||||||
Kohl’s Corp. | (269 | ) | (10,714 | ) | ||||
Marks & Spencer Group PLCA | (1,316 | ) | (5,554 | ) | ||||
Michael Kors Holdings Ltd.B | (309 | ) | (13,228 | ) | ||||
Nordstrom, Inc. | (277 | ) | (12,249 | ) | ||||
Target Corp. | (258 | ) | (16,636 | ) | ||||
|
| |||||||
(58,381 | ) | |||||||
|
| |||||||
Specialty Retail - (0.36%) | ||||||||
Advance Auto Parts, Inc. | (81 | ) | (13,303 | ) | ||||
Best Buy Co., Inc. | (62 | ) | (2,760 | ) | ||||
CarMax, Inc.B | (137 | ) | (9,139 | ) | ||||
Dollar Tree, Inc.B | (240 | ) | (18,526 | ) | ||||
Gap, Inc. | (591 | ) | (13,611 | ) | ||||
Ross Stores, Inc. | (44 | ) | (2,909 | ) | ||||
|
| |||||||
(60,248 | ) | |||||||
|
| |||||||
Textiles & Apparel - (0.25%) | ||||||||
Fossil Group, Inc.B | (371 | ) | (9,486 | ) | ||||
Hugo Boss AG | (12 | ) | (768 | ) | ||||
Steven Madden Ltd. | (74 | ) | (2,605 | ) | ||||
Swatch Groug AG | (85 | ) | (30,021 | ) | ||||
|
| |||||||
(42,880 | ) | |||||||
|
| |||||||
Total Consumer Discretionary | (450,817 | ) | ||||||
|
| |||||||
CONSUMER STAPLES - (1.78%) | ||||||||
Beverages - (0.19%) | ||||||||
Coca-Cola Co. | (101 | ) | (4,199 | ) | ||||
Constellation Brands, Inc., Class A | (138 | ) | (20,667 | ) | ||||
Dr Pepper Snapple Group, Inc. | (87 | ) | (7,934 | ) | ||||
|
| |||||||
(32,800 | ) | |||||||
|
| |||||||
Food & Drug Retailing - (0.32%) | ||||||||
Costco Wholesale Corp. | (245 | ) | (40,168 | ) | ||||
Kroger Co. | (202 | ) | (6,860 | ) | ||||
Tesco PLCA B | (1,083 | ) | (2,651 | ) | ||||
Wal-Mart Stores, Inc. | (67 | ) | (4,472 | ) | ||||
|
| |||||||
(54,151 | ) | |||||||
|
| |||||||
Food Products - (0.65%) | ||||||||
Blue Buffalo Pet Products, Inc.B | (182 | ) | (4,414 | ) | ||||
General Mills, Inc. | (452 | ) | (28,241 | ) | ||||
Hormel Foods Corp. | (792 | ) | (28,750 | ) | ||||
Kraft Heinz Co. | (477 | ) | (42,591 | ) | ||||
Whitewaves Food Co.B | (136 | ) | (7,488 | ) | ||||
|
| |||||||
(111,484 | ) | |||||||
|
|
See accompanying notes
19
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
CONSUMER STAPLES - (1.78%) (continued) | ||||||||
Household Products - (0.17%) | ||||||||
Church & Dwight Co., Inc. | (63 | ) | $ | (2,849 | ) | |||
Procter & Gamble Co. | (299 | ) | (26,192 | ) | ||||
|
| |||||||
(29,041 | ) | |||||||
|
| |||||||
Tobacco - (0.45%) | ||||||||
British American Tobacco PLC, ADRA C | (622 | ) | (76,630 | ) | ||||
|
| |||||||
Total Consumer Staples | (304,106 | ) | ||||||
|
| |||||||
ENERGY - (2.13%) | ||||||||
Energy Equipment & Services - (0.87%) | ||||||||
Baker Hughes, Inc. | (502 | ) | (31,666 | ) | ||||
National Oilwell Varco, Inc. | (1,437 | ) | (54,333 | ) | ||||
Schlumberger Ltd. | (765 | ) | (64,038 | ) | ||||
|
| |||||||
(150,037 | ) | |||||||
|
| |||||||
Oil & Gas - (1.26%) | ||||||||
Apache Corp. | (623 | ) | (37,268 | ) | ||||
Chevron Corp. | (284 | ) | (31,623 | ) | ||||
EOG Resources, Inc. | (437 | ) | (44,390 | ) | ||||
Hess Corp. | (287 | ) | (15,550 | ) | ||||
Marathon Oil Corp. | (1,770 | ) | (29,648 | ) | ||||
Occidental Petroleum Corp. | (858 | ) | (58,147 | ) | ||||
|
| |||||||
(216,626 | ) | |||||||
|
| |||||||
Total Energy | (366,663 | ) | ||||||
|
| |||||||
FINANCIALS - (5.11%) | ||||||||
Banks - (4.66%) | ||||||||
Bank of the Ozarks, Inc. | (357 | ) | (19,589 | ) | ||||
Clifton Bancorp, Inc. | (406 | ) | (6,301 | ) | ||||
Community Bank System, Inc. | (694 | ) | (40,502 | ) | ||||
CVB Financial Corp. | (1,228 | ) | (27,679 | ) | ||||
Eagle Bancorp, Inc.B | (205 | ) | (12,556 | ) | ||||
FCB Financial Holdings, Inc., Class AB | (898 | ) | (42,161 | ) | ||||
First Financial Bankshares, Inc. | (908 | ) | (38,726 | ) | ||||
First Republic Bank | (358 | ) | (33,770 | ) | ||||
German American Bancorp, Inc. | (42 | ) | (2,016 | ) | ||||
Glacier Bancorp, Inc. | (1,098 | ) | (39,012 | ) | ||||
Home Bancshares, Inc. | (1,152 | ) | (31,035 | ) | ||||
Iberiabank Corp. | (294 | ) | (24,152 | ) | ||||
Independent Bank Corp. | (372 | ) | (23,194 | ) | ||||
MB Financial, Inc. | (283 | ) | (12,602 | ) | ||||
NBT Bancorp, Inc. | (180 | ) | (7,333 | ) | ||||
Northwest Bancshares, Inc. | (713 | ) | (12,171 | ) | ||||
PacWest Bancorp | (261 | ) | (14,459 | ) | ||||
Park National Corp. | (52 | ) | (5,761 | ) | ||||
People’s United Financial, Inc. | (1,721 | ) | (32,269 | ) | ||||
Prosperity Bancshares, Inc. | (178 | ) | (12,928 | ) | ||||
Renasant Corp. | (776 | ) | (30,885 | ) | ||||
ServisFirst Bancshares, Inc. | (336 | ) | (13,453 | ) | ||||
Simmons First National Corp., Class A | (335 | ) | (20,150 | ) | ||||
South State Corp. | (435 | ) | (38,889 | ) | ||||
Southside Bancshares, Inc. | (728 | ) | (24,868 | ) | ||||
Sterling Bancorp | (3,216 | ) | (76,702 | ) | ||||
Stock Yards Bancorp, Inc. | (181 | ) | (8,109 | ) | ||||
Tompkins Financial Corp. | (153 | ) | (13,854 | ) | ||||
Trustmark Corp. | (839 | ) | (28,207 | ) | ||||
United Bankshares, Inc. | (673 | ) | (30,150 | ) |
See accompanying notes
20
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
FINANCIALS - (5.11%) (continued) | ||||||||
Banks - (4.66%) (continued) | ||||||||
Washington Trust Bancorp, Inc. | (271 | ) | $ | (14,770 | ) | |||
WesBanco, Inc. | (332 | ) | (13,778 | ) | ||||
Westamerica Bancorporation | (443 | ) | (25,140 | ) | ||||
WSFS Financial Corp. | (428 | ) | (19,388 | ) | ||||
|
| |||||||
(796,559 | ) | |||||||
|
| |||||||
Diversified Financials - (0.33%) | ||||||||
Capitol Federal Financial, Inc. | (368 | ) | (5,686 | ) | ||||
Credit Acceptance Corp.B | (62 | ) | (12,727 | ) | ||||
Discover Financial Services | (227 | ) | (15,727 | ) | ||||
Kearny Financial Corp. | (778 | ) | (11,865 | ) | ||||
Synchrony Financial | (345 | ) | (12,358 | ) | ||||
|
| |||||||
(58,363 | ) | |||||||
|
| |||||||
Specialty Finance - (0.12%) | ||||||||
GATX Corp. | (347 | ) | (20,064 | ) | ||||
|
| |||||||
Total Financials | (874,986 | ) | ||||||
|
| |||||||
HEALTH CARE - (0.70%) | ||||||||
Biotechnology - (0.02%) | ||||||||
Celgene Corp.B | (27 | ) | (3,136 | ) | ||||
|
| |||||||
Health Care Equipment & Supplies - (0.42%) | ||||||||
Intuitive Surgical, Inc.B | (105 | ) | (72,732 | ) | ||||
|
| |||||||
Health Care Providers & Services - (0.25%) | ||||||||
HCA Holdings, Inc. | (537 | ) | (43,110 | ) | ||||
|
| |||||||
Pharmaceuticals - (0.01%) | ||||||||
Endo International PLCA B | (105 | ) | (1,285 | ) | ||||
|
| |||||||
Total Health Care | (120,263 | ) | ||||||
|
| |||||||
INDUSTRIALS - (2.31%) | ||||||||
Aerospace & Defense - (0.47%) | ||||||||
Airbus SEB | (93 | ) | (6,308 | ) | ||||
Aircastle Ltd. | (1,378 | ) | (30,729 | ) | ||||
Boeing Co. | (53 | ) | (8,661 | ) | ||||
United Technologies Corp. | (320 | ) | (35,094 | ) | ||||
|
| |||||||
(80,792 | ) | |||||||
|
| |||||||
Air Freight & Couriers - (0.41%) | ||||||||
C.H. Robinson Worldwide, Inc. | (768 | ) | (58,414 | ) | ||||
United Parcel Service, Inc., Class B | (63 | ) | (6,875 | ) | ||||
XPO Logistics, Inc.B | (121 | ) | (5,414 | ) | ||||
|
| |||||||
(70,703 | ) | |||||||
|
| |||||||
Airlines - (0.01%) | ||||||||
American Airlines Group, Inc. | (48 | ) | (2,124 | ) | ||||
|
| |||||||
Diversified Manufacturing - (0.06%) | ||||||||
Eaton Corp., PLCA | (156 | ) | (11,042 | ) | ||||
|
| |||||||
Industrial Conglomerates - (0.46%) | ||||||||
3M Co. | (162 | ) | (28,321 | ) | ||||
General Electric Co. | (1,693 | ) | (50,282 | ) | ||||
|
| |||||||
(78,603 | ) | |||||||
|
| |||||||
Machinery - (0.15%) | ||||||||
Caterpillar, Inc. | (16 | ) | (1,531 | ) |
See accompanying notes
21
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
INDUSTRIALS - (2.31%) (continued) | ||||||||
Machinery - (0.15%) (continued) | ||||||||
Kone Oyj, Class B | (152 | ) | $ | (6,875 | ) | |||
PACCAR, Inc. | (250 | ) | (16,828 | ) | ||||
|
| |||||||
(25,234 | ) | |||||||
|
| |||||||
Marine - (0.09%) | ||||||||
Kirby Corp.B | (240 | ) | (15,468 | ) | ||||
|
| |||||||
Road & Rail - (0.40%) | ||||||||
Kansas City Southern | (306 | ) | (26,288 | ) | ||||
Ryder System, Inc. | (134 | ) | (10,398 | ) | ||||
Union Pacific Corp. | (157 | ) | (16,733 | ) | ||||
Werner Enterprises, Inc. | (530 | ) | (14,893 | ) | ||||
|
| |||||||
(68,312 | ) | |||||||
|
| |||||||
Trading Companies & Distributors - (0.26%) | ||||||||
WW Grainger, Inc. | (175 | ) | (44,200 | ) | ||||
|
| |||||||
Total Industrials | (396,478 | ) | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - (4.24%) | ||||||||
Communications Equipment - (0.58%) | ||||||||
Cisco Systems, Inc. | (9 | ) | (276 | ) | ||||
Corning, Inc. | (3,734 | ) | (98,914 | ) | ||||
|
| |||||||
(99,190 | ) | |||||||
|
| |||||||
Computers & Peripherals - (0.56%) | ||||||||
International Business Machines Corp. | (526 | ) | (91,798 | ) | ||||
Logitech International S.A. | (102 | ) | (2,912 | ) | ||||
NetApp, Inc. | (38 | ) | (1,456 | ) | ||||
Pure Storage Inc., Class AB | (30 | ) | (341 | ) | ||||
|
| |||||||
(96,507 | ) | |||||||
|
| |||||||
Electronic Equipment & Instruments - (0.33%) | ||||||||
Amphenol Corp., Class A | (823 | ) | (55,544 | ) | ||||
NVIDIA Corp. | (13 | ) | (1,419 | ) | ||||
|
| |||||||
(56,963 | ) | |||||||
|
| |||||||
Internet Software & Services - (0.85%) | ||||||||
Alibaba Group Holding Ltd., Sponsored ADRB C | (859 | ) | (87,025 | ) | ||||
Baidu, Inc., Sponsored ADRB C | (62 | ) | (10,854 | ) | ||||
Fortinet, Inc.B | (50 | ) | (1,663 | ) | ||||
MercadoLibre, Inc. | (170 | ) | (31,516 | ) | ||||
United Internet AG, Reg SI | (211 | ) | (8,814 | ) | ||||
Wirecard AG | (65 | ) | (3,144 | ) | ||||
Yahoo Japan Corp. | (758 | ) | (3,182 | ) | ||||
|
| |||||||
(146,198 | ) | |||||||
|
| |||||||
IT Consulting & Services - (0.47%) | ||||||||
Accenture PLC, Class AA | (20 | ) | (2,277 | ) | ||||
Infosys Technologies Ltd., Reg S, Sponsored ADRC I | (5,745 | ) | (79,109 | ) | ||||
|
| |||||||
(81,386 | ) | |||||||
|
| |||||||
Office Electronics - (0.07%) | ||||||||
Canon, Inc. | (389 | ) | (11,524 | ) | ||||
|
| |||||||
Software - (1.38%) | ||||||||
Activision Blizzard, Inc. | (1,098 | ) | (44,151 | ) | ||||
Adobe Systems, Inc.B | (199 | ) | (22,563 | ) | ||||
Check Point Software Technologies Ltd.B | (1 | ) | (99 | ) | ||||
Electronic Arts, Inc.B | (715 | ) | (59,652 | ) |
See accompanying notes
22
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
INFORMATION TECHNOLOGY - (4.24%) (continued) | ||||||||
Software - (1.38%) (continued) | ||||||||
Oracle Corp. | (1,326 | ) | $ | (53,186 | ) | |||
Square, Inc., Class AB | (249 | ) | (3,640 | ) | ||||
Symantec Corp. | (64 | ) | (1,763 | ) | ||||
Ultimate Software Group, Inc.B | (7 | ) | (1,356 | ) | ||||
VMware, Inc., Class AB | (24 | ) | (2,101 | ) | ||||
Workday, Inc., Class AB | (585 | ) | (48,608 | ) | ||||
|
| |||||||
(237,119 | ) | |||||||
|
| |||||||
Total Information Technology | (728,887 | ) | ||||||
|
| |||||||
MATERIALS - (0.52%) | ||||||||
Chemicals - (0.12%) | ||||||||
Axalta Coating Systems Ltd.B | (382 | ) | (11,078 | ) | ||||
Methanex Corp. | (219 | ) | (10,961 | ) | ||||
|
| |||||||
(22,039 | ) | |||||||
|
| |||||||
Metals & Mining - (0.20%) | ||||||||
Barrick Gold Corp. | (1,824 | ) | (33,635 | ) | ||||
|
| |||||||
Paper & Forest Products - (0.20%) | ||||||||
Domtar Corp. | (801 | ) | (34,996 | ) | ||||
|
| |||||||
Total Materials | (90,670 | ) | ||||||
|
| |||||||
REAL ESTATE - (0.50%) | ||||||||
AvalonBay Communities, Inc.F | (156 | ) | (27,036 | ) | ||||
Camden Property TrustF | (59 | ) | (4,931 | ) | ||||
Empire State Realty Trust, Inc.F | (164 | ) | (3,360 | ) | ||||
Equinix, Inc.F | (76 | ) | (29,258 | ) | ||||
Federal Realty Investment TrustF | (22 | ) | (3,089 | ) | ||||
GGP, Inc.F | (61 | ) | (1,515 | ) | ||||
HCP, Inc.F | (99 | ) | (3,002 | ) | ||||
Public Storage, Inc.F | (8 | ) | (1,720 | ) | ||||
Regency Centers Corp.F | (56 | ) | (3,905 | ) | ||||
Simon Property Group, Inc.F | (18 | ) | (3,308 | ) | ||||
UDR, Inc.F | (110 | ) | (3,845 | ) | ||||
|
| |||||||
Total Real Estate | (84,969 | ) | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - (0.15%) | ||||||||
Diversified Telecommunication Services - (0.08%) | ||||||||
AT&T, Inc. | (337 | ) | (14,208 | ) | ||||
|
| |||||||
Wireless Telecommunication Services - (0.07%) | ||||||||
Freenet AG | (121 | ) | (3,626 | ) | ||||
Millicom International Cellular S.A | (170 | ) | (8,408 | ) | ||||
|
| |||||||
(12,034 | ) | |||||||
|
| |||||||
Total Telecommunication Services | (26,242 | ) | ||||||
|
| |||||||
UTILITIES - (0.15%) | ||||||||
Consolidated Edison, Inc., | (344 | ) | (25,576 | ) | ||||
|
| |||||||
Total COMMON STOCKS (Proceeds $(3,142,878)) | (3,469,657 | ) | ||||||
|
| |||||||
EXCHANGE TRADED INSTRUMENTS - (8.27%) | ||||||||
EXCHANGE TRADED FUNDS - (8.27%) | ||||||||
Consumer Discretionary Select Sector SPDR Fund | $ | (2,547 | ) | (216,062 | ) | |||
Consumer Staples Select Sector SPDR Fund | (3,533 | ) | (185,800 | ) | ||||
Energy Select Sector SPDR Fund | (74 | ) | (5,395 | ) | ||||
Health Care Select Sector SPDR Fund | (1,271 | ) | (89,631 | ) | ||||
Industrial Select Sector SPDR Fund | (532 | ) | (33,718 | ) |
See accompanying notes
23
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
EXCHANGE TRADED FUNDS - (8.27%) (continued) | ||||||||
iShares 20+ Year Treasury Bond ETF | $ | (1,055 | ) | $ | (126,706 | ) | ||
iShares 7-10 Year Treasury Bond ETF | (560 | ) | (58,828 | ) | ||||
iShares EUR Govt Bond 7-10yr UCITS ETF EUR Dist | (540 | ) | (119,384 | ) | ||||
iShares Euro Government Bond Capped 10.5+yr UCITS ETF DE | (373 | ) | (56,074 | ) | ||||
iShares JP Morgan USD Emerging Markets Bond ETF | (481 | ) | (53,935 | ) | ||||
iShares MSCI Brazil Capped Fund | (1,193 | ) | (43,986 | ) | ||||
iShares MSCI China ETF | (2,299 | ) | (108,076 | ) | ||||
iShares MSCI Emerging Markets Fund | (258 | ) | (9,634 | ) | ||||
iShares Russell 2000 Growth Fund | (62 | ) | (9,687 | ) | ||||
iShares Russell 2000 Index Fund | (188 | ) | (25,423 | ) | ||||
iShares STOXX Europe 600 UCITS ETF DE | (843 | ) | (32,679 | ) | ||||
Materials Select Sector SPDR Fund | (203 | ) | (10,548 | ) | ||||
Real Estate Select Sector SPDR Fund | (588 | ) | (18,057 | ) | ||||
SPDR S&P Telecom Fund | (368 | ) | (26,093 | ) | ||||
Technology Select Sector SPDR Fund | (1,311 | ) | (65,655 | ) | ||||
Utilities Select Sector SPDR Fund | (822 | ) | (40,426 | ) | ||||
Vanguard REIT Fund | (1,013 | ) | (83,441 | ) | ||||
|
| |||||||
Total EXCHANGE TRADED INSTRUMENTS (Proceeds $(1,367,892)) | (1,419,238 | ) | ||||||
|
| |||||||
Total SECURITIES SOLD SHORT (Proceeds $(4,510,770)) | (4,888,895 | ) | ||||||
TOTAL INVESTMENTS IN SECURITIES (excludes securities sold short) - 93.98% (Cost $14,831,744) | 16,132,861 | |||||||
TOTAL PURCHASED OPTIONS - 0.07% (Cost $26,532) | 12,928 | |||||||
TOTAL WRITTEN OPTIONS - (0.01)% (Cost $(1,794)) | (1,890 | ) | ||||||
TOTAL SECURITIES SOLD SHORT - (28.48)% (Proceeds $(4,510,770)) | (4,888,895 | ) | ||||||
OTHER ASSETS, NET OF LIABILITIES - 34.44% | 5,911,748 | |||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 17,166,752 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | PLC - Public Limited Company. |
B | Non-income producing security. |
C | ADR - American Depositary Receipt. |
D | Non-voting participating shares. |
E | LP - Limited Partnership. |
F | REIT - Real Estate Investment Trust. |
G | Warrant. |
H | The Fund is affiliated by having the same investment advisor. |
I | Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. |
J | This security or a piece thereof is held as segregated collateral. |
See accompanying notes
24
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Total Return Swap Agreements outstanding on January 31, 2017:
Pay/Receive | Description | Reference Entity | Counterparty | Floating Rate (%) | Expiration Date | Reference Quantity | Notional Amount | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Pay | 1-Day HKD-HONIX | Air China Ltd. | MSC | 0.980 | % | 7/24/2017 | 14,936 | $ | 84,617 | $ | (126 | ) | ||||||||||||
Pay | 1-Month EUR-EURIB | Kering S.A. | MSC | 0.130 | % | 7/24/2017 | 66 | 15,167 | (685 | ) | ||||||||||||||
Pay | 1-Month EUR-LIBOR | Ryanair Holdings, PLC | MSC | 0.220 | % | 8/1/2017 | 2,529 | 27,864 | 9,097 | |||||||||||||||
Pay | 1-Day USD-FEDEF | NVR, Inc. | MSC | 1.160 | % | 10/2/2017 | 75 | 119,520 | 19,830 | |||||||||||||||
Pay | 1-Day USD-FEDEF | Brunswick Corp./De | MSC | 1.160 | % | 10/2/2017 | 1,147 | 53,223 | 15,436 | |||||||||||||||
Pay | 1-Day USD-FEDEF | Continental Resources, Inc./Ok | MSC | 1.160 | % | 10/2/2017 | 401 | 18,761 | 712 | |||||||||||||||
Pay | 1-Day USD-FEDEF | Monster Beverage Corp. | MSC | 1.160 | % | 10/2/2017 | 907 | 43,455 | (4,817 | ) | ||||||||||||||
Pay | 1-Day USD-FEDEF | Alphabet, Inc. | MSC | 1.160 | % | 10/2/2017 | 68 | 54,661 | 1,112 | |||||||||||||||
Pay | 1-Day USD-FEDEF | Rio Tinto, PLC | MSC | 1.160 | % | 10/2/2017 | 2,831 | 106,927 | 19,874 | |||||||||||||||
Pay | 1-Day USD-FEDEF | Take-Two Interactive Software, Inc. | MSC | 1.160 | % | 10/2/2017 | 2,116 | 93,850 | 19,673 | |||||||||||||||
Pay | 1-Day USD-FEDEF | Swift Transportation Co. | MSC | 1.160 | % | 10/2/2017 | 2,797 | 59,486 | 4,370 | |||||||||||||||
Pay | 1-Month GBP-LIBOR | Rio Tinto, PLC | MSC | 0.760 | % | 10/5/2017 | 1,462 | 34,787 | 20,445 | |||||||||||||||
Pay | 1-Month GBP-LIBOR | Anglo American, PLC | MSC | 0.760 | % | 10/5/2017 | 3,910 | 30,113 | 28,915 | |||||||||||||||
Pay | 1-Month EUR-EURIB | Peugeot S.A. | MSC | 0.130 | % | 10/5/2017 | 854 | 11,755 | 3,167 | |||||||||||||||
Pay | 1-Month GBP-LIBOR | Wizz Air Holdings, PLC | MSC | 0.760 | % | 10/5/2017 | 574 | 9,811 | 518 | |||||||||||||||
Pay | 1-Month GBP-LIBOR | Antofagasta, PLC | MSC | 0.760 | % | 10/5/2017 | 4,723 | 22,449 | 21,371 | |||||||||||||||
Pay | 1-Month EUR-EURIB | Moncler SpA | MSC | 0.130 | % | 10/5/2017 | 277 | 3,724 | 1,302 | |||||||||||||||
Pay | 1-Month EUR-EURIB | Accor S.A. | MSC | 0.130 | % | 10/5/2017 | 509 | 18,398 | 747 | |||||||||||||||
Pay | 1-Month EUR-EURIB | Cie Plastic Omnium S.A. | MSC | 0.130 | % | 10/5/2017 | 920 | 26,570 | 2,502 | |||||||||||||||
Pay | 1-Month EUR-EURIB | Air France-KLM | MSC | 0.130 | % | 10/5/2017 | 2,687 | 14,092 | (1,008 | ) | ||||||||||||||
Pay | 1-Month GBP-LIBOR | International Consolidated Airlines Group S.A. | MSC | 0.760 | % | 10/5/2017 | 4,617 | 19,575 | 3,063 | |||||||||||||||
Receive | 1-Day EUR-EONIA | Airbus Group SE | MSC | 0.400 | % | 10/5/2017 | 183 | 11,453 | (34 | ) | ||||||||||||||
Receive | 1-Day GBP-SONIA | Thomas Cook Group, PLC | MSC | 0.350 | % | 10/5/2017 | 4,088 | 2,865 | (876 | ) | ||||||||||||||
Receive | 1-Month GBP-LIBOR | Burberry Group, PLC | MSC | 0.350 | % | 10/5/2017 | 411 | 5,328 | (1,777 | ) | ||||||||||||||
Pay | 1-Day HKD-HONIX | Weichai Power Co. Ltd. | MSC | 0.980 | % | 11/16/2017 | 9,614 | 100,675 | 4,124 | |||||||||||||||
Receive | 1-Day USD-FEDEF | SPDR S&P500 ETF Trust | MSC | 0.310 | % | 2/22/2018 | 923 | 198,340 | (11,670 | ) | ||||||||||||||
Pay | 1-Day JPY-MUTSC | Dai-Ichi Life Holdings, Inc. | MSC | 0.350 | % | 9/3/2018 | 1,603 | 2,830,450 | 4,206 | |||||||||||||||
Pay | 1-Day JPY-MUTSC | Softbank Group Corp. | MSC | 0.350 | % | 9/3/2018 | 1,368 | 12,221,521 | (2,821 | ) | ||||||||||||||
Pay | 1-Day JPY-MUTSC | Taisei Corp. | MSC | 0.350 | % | 9/3/2018 | 3,768 | 2,888,367 | 1,183 | |||||||||||||||
Pay | 1-Day JPY-MUTSC | Komatsu Ltd. | MSC | 0.350 | % | 9/3/2018 | 1,128 | 2,673,493 | 3,236 | |||||||||||||||
Pay | 1-Day JPY-MUTSC | Hitachi Ltd. | MSC | 0.350 | % | 9/3/2018 | 4,794 | 2,557,564 | 4,845 | |||||||||||||||
Pay | 1-Day JPY-MUTSC | Mitsubishi Heavy Industries Ltd. | MSC | 0.350 | % | 9/3/2018 | 5,843 | 2,722,351 | 2,224 | |||||||||||||||
Pay | 1-Day AUD-RBACR | Qantas Airways Ltd. | MSC | 2.050 | % | 9/11/2018 | 4,159 | 14,502 | (243 | ) | ||||||||||||||
Pay | 1-Month USD-LIBOR | Taiwan Semiconductor Manufacturing Co. Ltd. | MSC | 0.980 | % | 1/3/2019 | 7,085 | 40,342 | 1,539 | |||||||||||||||
Pay | 1-Day EUR-EONIA | Accor S.A. | MSC | 0.550 | % | 1/17/2020 | 2,697 | 102,630 | (1,597 | ) | ||||||||||||||
Pay | 1-Day EUR-EONIA | Finecobank Banca Fineco SpA | MSC | 0.550 | % | 1/17/2020 | 12,656 | 71,533 | (2,215 | ) | ||||||||||||||
Receive | 1-Day GBP-SONIA | Ted Baker, PLC | MSC | 0.460 | % | 1/17/2020 | 33 | 1,002 | 81 | |||||||||||||||
Receive | 1-Day EUR-EONIA | Casino Guichard Perrachon S.A. | MSC | 0.970 | % | 1/17/2020 | 108 | 4,761 | (677 | ) | ||||||||||||||
Receive | 1-Day GBP-SONIA | J Sainsbury, PLC | MSC | 0.350 | % | 1/17/2020 | 1,913 | 4,562 | (466 | ) | ||||||||||||||
Receive | 1-Day EUR-EONIA | Eutelsat Communications S.A. | MSC | 0.430 | % | 1/17/2020 | 746 | 13,712 | 2,099 | |||||||||||||||
Receive | 1-Day TWD-FEDEF | China Steel Corp. | MSC | 1.750 | % | 1/21/2020 | 7,066 | 4,438 | (1,266 | ) | ||||||||||||||
Receive | 1-Day BRL-FEDEF | Telefonica Brasil S.A. | MSC | 1.090 | % | 1/21/2020 | 959 | 12,536 | (1,667 | ) | ||||||||||||||
Receive | 1-Day BRL-FEDEF | Raia Drogasil S.A. | MSC | 1.090 | % | 1/21/2020 | 41 | 897 | 45 | |||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | 27,352,127 | $ | 163,771 | |||||||||||||||||||||
|
|
|
|
See accompanying notes
25
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Purchased Options outstanding on January 31, 2017:
Exchange Traded Fund Options
Description | Expiration Date | Number of Contracts | Currency | Exercise Price | Premiums Paid | Fair Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Put - SPDR S&P 500 ETF Trust | 2/17/2017 | 29 | USD | 223.00 | $ | 9,684 | $ | 2,059 | $ | (7,625 | ) | |||||||||||||||||
Put - Financial Select Sector SPDR Fund | 4/21/2017 | 124 | USD | 21.00 | 4,001 | 2,356 | (1,645 | ) | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 13,685 | $ | 4,415 | $ | (9,270 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
Equity Options
Description | Expiration Date | Number of Contracts | Currency | Exercise Price | Premiums Paid | Fair Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Put - Apple, Inc. | 2/3/2017 | 2 | USD | 119.00 | $ | 554 | $ | 278 | $ | (276 | ) | |||||||||||||||
Call - Kate Spade & Co. | 2/17/2017 | 7 | USD | 20.00 | 378 | 252 | (126 | ) | ||||||||||||||||||
Call - Melco Crown Entertainment Ltd. | 2/17/2017 | 10 | USD | 15.68 | 848 | 1,400 | 552 | |||||||||||||||||||
Call - Melco Crown Entertainment Ltd. | 2/17/2017 | 12 | USD | 18.68 | 507 | 180 | (327 | ) | ||||||||||||||||||
Call - Nimble Storage, Inc. | 2/17/2017 | 9 | USD | 10.00 | 970 | 135 | (835 | ) | ||||||||||||||||||
Call - Palo Alto Networks, Inc. | 2/17/2017 | 1 | USD | 150.00 | 220 | 220 | — | |||||||||||||||||||
Put - Corning, Inc. | 2/17/2017 | 19 | USD | 24.00 | 1,534 | 57 | (1,477 | ) | ||||||||||||||||||
Put - Electronic Arts, Inc. | 2/17/2017 | 2 | USD | 77.50 | 604 | 140 | (464 | ) | ||||||||||||||||||
Put - International Business Machines Corp. | 2/17/2017 | 2 | USD | 165.00 | 956 | 100 | (856 | ) | ||||||||||||||||||
Call - Palo Alto Networks, Inc. | 3/17/2017 | 2 | USD | 160.00 | 446 | 682 | 236 | |||||||||||||||||||
Call - Realogy Holdings Corp. | 3/17/2017 | 16 | USD | 35.00 | 423 | 160 | (263 | ) | ||||||||||||||||||
Call - Red Hat, Inc. | 3/17/2017 | 5 | USD | 77.50 | 764 | 800 | 36 | |||||||||||||||||||
Put - Best Buy Co., Inc. | 4/21/2017 | 4 | USD | 39.00 | 424 | 472 | 48 | |||||||||||||||||||
Put - Infosys Ltd. | 4/21/2017 | 20 | USD | 14.00 | 1,521 | 1,700 | 179 | |||||||||||||||||||
Call - Koninklijke Ahold Delhaize NV | 6/16/2017 | 3 | EUR | 22.00 | 421 | 49 | (372 | ) | ||||||||||||||||||
Call - Koninklijke Ahold Delhaize NV | 12/15/2017 | 3 | EUR | 22.00 | 308 | 165 | (143 | ) | ||||||||||||||||||
Call - Procter & Gamble Co./The | 1/19/2018 | 3 | USD | 90.00 | 983 | 1,041 | 58 | |||||||||||||||||||
Call - Koninklijke Ahold Delhaize NV | 12/21/2018 | 4 | EUR | 22.00 | 847 | 431 | (416 | ) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 12,708 | $ | 8,262 | $ | (4,446 | ) | ||||||||||||||||||||
|
|
|
|
|
|
Over-the-Counter European Options
Description | Counterparty | Exercise Price | Expiration Date | Currency | Notional Amount (000’s) | Premiums Paid | Fair Value | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Put - OTC EPUT USD Versus CNH | MSC | 6.47 | 9/8/2017 | USD | 159 | $ | 139 | $ | 251 | $ | 112 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | 139 | $ | 251 | $ | 112 | |||||||||||||||||||||||||||
|
|
|
|
|
|
Written Options outstanding on January 31, 2017:
Equity Options
Description | Expiration Date | Number of Contracts | Currency | Exercise Price | Premiums Received | Fair Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Call - Vertex Pharmaceuticals, Inc. | 4/21/2017 | 2 | USD | 80.00 | $ | (1,794 | ) | $ | (1,890 | ) | $ | (96 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | (1,794 | ) | $ | (1,890 | ) | $ | (96 | ) | ||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
26
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Forward Currency Contracts Open on January 31, 2017:
Type | Currency | Principal Amount Covered by Contract | Settlement | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||||||||||||||
Buy | GBP | 8,548 | 2/28/2017 | MSC | $ | 87 | $ | — | $ | 87 | ||||||||||||
Buy | CAD | 4,973 | 2/28/2017 | MSC | 106 | — | 106 | |||||||||||||||
Buy | CAD | 5,488 | 2/28/2017 | MSC | 96 | — | 96 | |||||||||||||||
Buy | JPY | 11,650 | 2/28/2017 | MSC | 172 | — | 172 | |||||||||||||||
Buy | CAD | 4,610 | 2/28/2017 | MSC | 71 | — | 71 | |||||||||||||||
Buy | CAD | 3,991 | 2/28/2017 | MSC | 136 | — | 136 | |||||||||||||||
Buy | CAD | 7,160 | 2/28/2017 | MSC | 163 | — | 163 | |||||||||||||||
Buy | GBP | 5,494 | 2/28/2017 | MSC | 36 | — | 36 | |||||||||||||||
Sell | GBP | 53,461 | 2/28/2017 | MSC | 500 | — | 500 | |||||||||||||||
Sell | SEK | 42,371 | 2/28/2017 | MSC | — | (1,963 | ) | (1,963 | ) | |||||||||||||
Sell | EUR | 12,045 | 2/28/2017 | MSC | — | (174 | ) | (174 | ) | |||||||||||||
Sell | CAD | 5,454 | 2/28/2017 | MSC | — | (148 | ) | (148 | ) | |||||||||||||
Sell | GBP | 9,997 | 2/28/2017 | MSC | — | (341 | ) | (341 | ) | |||||||||||||
Sell | EUR | 6,064 | 2/28/2017 | MSC | — | (134 | ) | (134 | ) | |||||||||||||
Sell | CAD | 5,889 | 2/28/2017 | MSC | — | (79 | ) | (79 | ) | |||||||||||||
Sell | EUR | 14,620 | 2/28/2017 | MSC | — | (113 | ) | (113 | ) | |||||||||||||
Sell | GBP | 5,955 | 2/28/2017 | MSC | — | (129 | ) | (129 | ) | |||||||||||||
Sell | GBP | 6,141 | 2/28/2017 | MSC | — | (190 | ) | (190 | ) | |||||||||||||
Sell | CAD | 10,880 | 2/28/2017 | MSC | — | (115 | ) | (115 | ) | |||||||||||||
Sell | JPY | 11,650 | 2/28/2017 | MSC | — | (227 | ) | (227 | ) | |||||||||||||
Sell | CAD | 171,091 | 2/28/2017 | MSC | — | (1,470 | ) | (1,470 | ) | |||||||||||||
Sell | EUR | 21,803 | 2/28/2017 | MSC | — | (756 | ) | (756 | ) | |||||||||||||
Sell | GBP | 8,592 | 2/28/2017 | MSC | — | (39 | ) | (39 | ) | |||||||||||||
Sell | CAD | 2,595 | 2/28/2017 | MSC | — | (33 | ) | (33 | ) | |||||||||||||
Sell | EUR | 5,843 | 2/28/2017 | MSC | — | (41 | ) | (41 | ) | |||||||||||||
Sell | SEK | 5,320 | 2/28/2017 | MSC | — | (59 | ) | (59 | ) | |||||||||||||
Sell | CAD | 4,405 | 2/28/2017 | MSC | — | (25 | ) | (25 | ) | |||||||||||||
Buy | CHF | 2,651 | 4/20/2017 | MSC | 33 | — | 33 | |||||||||||||||
Buy | SEK | 8,349 | 4/20/2017 | MSC | 128 | — | 128 | |||||||||||||||
Sell | GBP | 140,580 | 4/20/2017 | MSC | — | (2,372 | ) | (2,372 | ) | |||||||||||||
Sell | EUR | 143,876 | 4/20/2017 | MSC | — | (1,289 | ) | (1,289 | ) | |||||||||||||
Sell | JPY | 89,423 | 4/20/2017 | MSC | — | (1,143 | ) | (1,143 | ) | |||||||||||||
Sell | CNH | 22,683 | 9/12/2017 | MSC | 626 | — | 626 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||
$ | 2,154 | $ | (10,840 | ) | $ | (8,686 | ) | |||||||||||||||
|
|
|
|
|
|
See accompanying notes
27
American Beacon Grosvenor Long/Short FundSM
Schedule of Investments
January 31, 2017
Glossary:
Counterparty Abbreviations | ||||||||||
MSC | Morgan Stanley & Co. Inc. | |||||||||
Currency Abbreviations: | ||||||||||
AUD | Australian Dollar | CNH | Yuan Renminbi-Offshore | JPY | Japanese Yen | |||||
BRL | Brazilian Real | EUR | Euro | SEK | Swedish Krona | |||||
CAD | Canadian Dollar | GBP | Pound Sterling | TWD | Taiwanese Dollar | |||||
CHF | Swiss Franc | HKD | Hong Kong Dollar | USD | United States Dollar | |||||
Other Abbreviations: | ||||||||||
EONIA | Euro Overnight Index Average | HONIX | Hong Kong Dollar Overnight Index | RBACR | Reserve Bank of Australia | |||||
Average | Overnight Rate | |||||||||
ETF | Exchange-Traded Fund | LIBOR | London Interbank Offered Rate | SONIA | Sterling Overnight Index Average | |||||
EURIB | Euro Interbank Offered Rate | MUTSC | Bank of Japan Estimate Unsecured | SPDR | Standard & Poor’s Depositary | |||||
Overnight Call Rate | Receipt | |||||||||
FEDEF | Effective Federal Fund Rates |
See accompanying notes
28
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
SECURITIES HELD LONG | ||||||||
COMMON STOCKS - 55.63% | ||||||||
CONSUMER DISCRETIONARY - 12.37% | ||||||||
Auto Components - 2.85% | ||||||||
Argan, Inc. | 9,500 | $ | 700,625 | |||||
BorgWarner, Inc. | 1,900 | 77,577 | ||||||
Horizon Global Corp.A | 7,400 | 144,818 | ||||||
Lear Corp. | 3,600 | 511,524 | ||||||
Stoneridge, Inc.A | 12,900 | 211,689 | ||||||
|
| |||||||
1,646,233 | ||||||||
|
| |||||||
Commercial Services - 0.31% | ||||||||
H&R Block, Inc. | 8,300 | 178,118 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure - 2.30% | ||||||||
Del Taco Restaurants, Inc.A | 33,100 | 451,484 | ||||||
Dick’s Sporting Goods, Inc. | 1,100 | 56,760 | ||||||
Domino’s Pizza, Inc. | 4,300 | 750,522 | ||||||
RCI Hospitality Holdings, Inc. | 2,500 | 43,875 | ||||||
Red Robin Gourmet Burgers, Inc.A | 500 | 23,775 | ||||||
|
| |||||||
1,326,416 | ||||||||
|
| |||||||
Household Durables - 0.61% | ||||||||
Beazer Homes USA, Inc.A | 21,000 | 299,460 | ||||||
La-Z-Boy, Inc. | 1,900 | 54,340 | ||||||
|
| |||||||
353,800 | ||||||||
|
| |||||||
Leisure Equipment & Products - 0.62% | ||||||||
American Outdoor Brands Corp.A | 2,400 | 51,120 | ||||||
MCBC Holdings, Inc. | 7,800 | 108,810 | ||||||
Vista Outdoor, Inc.A | 6,800 | 195,908 | ||||||
|
| |||||||
355,838 | ||||||||
|
| |||||||
Media - 0.16% | ||||||||
Gannett Co. Inc. | 2,100 | 20,202 | ||||||
TEGNA, Inc. | 3,100 | 71,021 | ||||||
|
| |||||||
91,223 | ||||||||
|
| |||||||
Multiline Retail - 0.34% | ||||||||
Macy’s, Inc. | 1,600 | 47,264 | ||||||
Nordstrom, Inc. | 3,400 | 150,348 | ||||||
|
| |||||||
197,612 | ||||||||
|
| |||||||
Specialty Retail - 4.77% | ||||||||
America’s Car-Mart, Inc.A | 5,000 | 209,750 | ||||||
Ascena Retail Group, Inc.A | 12,000 | 57,720 | ||||||
At Home Group, Inc.A | 9,300 | 141,732 | ||||||
Bed Bath & Beyond, Inc. | 700 | 28,245 | ||||||
Express, Inc. | 2,700 | 28,701 | ||||||
Finish Line, Inc., Class A | 15,900 | 273,480 | ||||||
Francesca’s Holdings Corp.A | 34,500 | 601,680 | ||||||
Gap, Inc. | 11,400 | 262,542 | ||||||
GNC Holdings, Inc., Class A | 2,600 | 23,062 | ||||||
MarineMax, Inc.A | 32,900 | 705,705 | ||||||
Office Depot, Inc. | 8,700 | 38,715 | ||||||
Ross Stores, Inc. | 1,900 | 125,609 | ||||||
Staples, Inc. | 3,900 | 35,880 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc. | 800 | 217,824 | ||||||
|
| |||||||
2,750,645 | ||||||||
|
| |||||||
Textiles & Apparel - 0.41% | ||||||||
Lululemon Athletica, Inc.A | 1,700 | 114,767 | ||||||
Unifirst Corp. | 300 | 38,370 |
See accompanying notes
29
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
CONSUMER DISCRETIONARY - 12.37% (continued) | ||||||||
Textiles & Apparel - 0.41% (continued) | ||||||||
Vera Bradley, Inc.A | 7,500 | $ | 85,950 | |||||
|
| |||||||
239,087 | ||||||||
|
| |||||||
Total Consumer Discretionary | 7,138,972 | |||||||
|
| |||||||
CONSUMER STAPLES - 3.13% | ||||||||
Food & Drug Retailing - 0.75% | ||||||||
Casey’s General Stores, Inc. | 400 | 45,960 | ||||||
CVS Caremark Corp. | 4,600 | 362,526 | ||||||
Village Super Market, Inc., Class A | 800 | 24,232 | ||||||
|
| |||||||
432,718 | ||||||||
|
| |||||||
Food Products - 1.47% | ||||||||
Flowers Foods, Inc. | 13,100 | 263,441 | ||||||
Fresh Del Monte Produce, Inc. | 3,400 | 194,650 | ||||||
TreeHouse Foods, Inc.A | 1,500 | 113,820 | ||||||
Tyson Foods, Inc., Class A | 4,400 | 276,276 | ||||||
|
| |||||||
848,187 | ||||||||
|
| |||||||
Personal Products - 0.91% | ||||||||
Medifast, Inc. | 12,400 | 522,908 | ||||||
|
| |||||||
Total Consumer Staples | 1,803,813 | |||||||
|
| |||||||
ENERGY - 3.39% | ||||||||
Energy Equipment & Services - 1.88% | ||||||||
Archrock, Inc. | 32,600 | 475,960 | ||||||
Atwood Oceanics, Inc.A | 12,200 | 148,352 | ||||||
Ensco PLC, Class A | 40,700 | 444,444 | ||||||
Independence Contract Drilling, Inc.A | 2,900 | 18,386 | ||||||
|
| |||||||
1,087,142 | ||||||||
|
| |||||||
Oil & Gas - 1.51% | ||||||||
Approach Resources, Inc.A | 5,000 | 16,250 | ||||||
Evolution Petroleum Corp. | 20,100 | 174,870 | ||||||
International Seaways, Inc.A | 11,700 | 203,346 | ||||||
Rex Stores Corp.A | 2,400 | 199,272 | ||||||
Scorpio Tankers, Inc. | 71,800 | 274,994 | ||||||
|
| |||||||
868,732 | ||||||||
|
| |||||||
Total Energy | 1,955,874 | |||||||
|
| |||||||
FINANCIALS - 2.35% | ||||||||
Banks - 0.03% | ||||||||
Independent Bank Corp. | 900 | 18,900 | ||||||
|
| |||||||
Consumer Finance - 0.44% | ||||||||
Regional Management Corp.A | 10,200 | 255,102 | ||||||
|
| |||||||
Diversified Financials - 0.68% | ||||||||
Ameriprise Financial, Inc. | 700 | 78,589 | ||||||
Goldman Sachs Group, Inc. | 400 | 91,728 | ||||||
KCG Holdings, Inc., Class AA | 11,000 | 153,670 | ||||||
Nicholas Financial, Inc. | 6,100 | 67,100 | ||||||
|
| |||||||
391,087 | ||||||||
|
| |||||||
Insurance - 1.13% | ||||||||
Assured Guaranty Ltd. | 9,400 | 365,754 | ||||||
CNO Financial Group, Inc. | 5,000 | 94,550 | ||||||
Voya Financial, Inc. | 4,700 | 189,034 | ||||||
|
| |||||||
649,338 | ||||||||
|
|
See accompanying notes
30
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
FINANCIALS - 2.35% (continued) | ||||||||
Real Estate - 0.07% | ||||||||
Forestar Group, Inc.A | 3,200 | $ | 41,760 | |||||
|
| |||||||
Total Financials | 1,356,187 | |||||||
|
| |||||||
HEALTH CARE - 5.22% | ||||||||
Biotechnology - 2.82% | ||||||||
Achillion Pharmaceuticals, Inc.A | 22,300 | 92,991 | ||||||
Acorda Therapeutics, Inc.A | 1,000 | 20,500 | ||||||
Alexion Pharmaceuticals, Inc.A | 300 | 39,204 | ||||||
AMAG Pharmaceuticals, Inc.A | 8,800 | 212,080 | ||||||
Amgen, Inc. | 700 | 109,676 | ||||||
Applied Genetic Technologies Corp.A | 10,700 | 77,575 | ||||||
BioSpecifics Technologies Corp.A | 5,500 | 282,095 | ||||||
Gilead Sciences, Inc. | 6,000 | 434,700 | ||||||
Myriad Genetics, Inc.A | 7,900 | 127,822 | ||||||
PDL BioPharma, Inc. | 94,000 | 206,800 | ||||||
SciClone Pharmaceuticals, Inc.A | 2,600 | 26,390 | ||||||
|
| |||||||
1,629,833 | ||||||||
|
| |||||||
Health Care Equipment & Supplies - 1.86% | ||||||||
C.R. Bard, Inc. | 800 | 189,864 | ||||||
Computer Programs and Systems, Inc. | 3,400 | 76,840 | ||||||
Haemonetics Corp.A | 2,000 | 79,720 | ||||||
Hill-Rom Holdings, Inc. | 400 | 23,548 | ||||||
Hologic, Inc.A | 1,400 | 56,742 | ||||||
Lantheus Holdings, Inc.A | 2,100 | 17,850 | ||||||
Orthofix International N.V.A | 7,100 | 255,174 | ||||||
Teleflex, Inc. | 1,700 | 285,141 | ||||||
VWR Corp.A | 3,400 | 88,094 | ||||||
|
| |||||||
1,072,973 | ||||||||
|
| |||||||
Health Care Providers & Services - 0.53% | ||||||||
Alere, Inc.A | 1,900 | 70,300 | ||||||
HCA Holdings, Inc. | 1,500 | 120,420 | ||||||
HealthSouth Corp. | 900 | 34,938 | ||||||
LifePoint Hospitals, Inc.A | 400 | 23,740 | ||||||
WellCare Health Plans, Inc.A | 400 | 58,216 | ||||||
|
| |||||||
307,614 | ||||||||
|
| |||||||
Total Health Care | 3,010,420 | |||||||
|
| |||||||
INDUSTRIALS - 5.95% | ||||||||
Aerospace & Defense - 0.13% | ||||||||
Aerovironment, Inc.A | 2,900 | 75,951 | ||||||
|
| |||||||
Airlines - 0.26% | ||||||||
Hawaiian Holdings, Inc.A | 2,900 | 147,755 | ||||||
|
| |||||||
Building Products - 0.42% | ||||||||
Atkore International Group, Inc.A | 9,000 | 240,480 | ||||||
|
| |||||||
Commercial & Professional Services - 0.32% | ||||||||
Barrett Business Services, Inc. | 3,100 | 186,341 | ||||||
|
| |||||||
Commercial Services & Supplies - 1.70% | ||||||||
Capella Education Co. | 3,900 | 333,450 | ||||||
CRA International, Inc. | 400 | 13,292 | ||||||
Insperity, Inc. | 2,800 | 200,200 | ||||||
Koppers Holdings, Inc.A | 900 | 36,405 | ||||||
ManpowerGroup, Inc. | 800 | 76,368 | ||||||
Marlin Business Services Corp. | 1,200 | 27,540 | ||||||
McGrath Rentcorp | 1,300 | 49,764 |
See accompanying notes
31
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
INDUSTRIALS - 5.95% (continued) | ||||||||
Commercial Services & Supplies - 1.70% (continued) | ||||||||
Monotype Imaging Holdings, Inc. | 5,400 | $ | 118,260 | |||||
Pitney Bowes, Inc. | 1,800 | 28,656 | ||||||
Quad Graphics, Inc. | 700 | 18,333 | ||||||
Robert Half International, Inc. | 1,700 | 80,002 | ||||||
|
| |||||||
982,270 | ||||||||
|
| |||||||
Construction & Engineering - 0.25% | ||||||||
MYR Group, Inc.A | 3,000 | 115,410 | ||||||
Willdan Group, Inc.A | 1,000 | 26,810 | ||||||
|
| |||||||
142,220 | ||||||||
|
| |||||||
Diversified Manufacturing - 0.01% | ||||||||
Barnes Group, Inc. | 100 | 4,813 | ||||||
|
| |||||||
Electrical Equipment - 0.52% | ||||||||
Babcock & Wilcox Enterprises, Inc.A | 8,000 | 133,120 | ||||||
Powell Industries, Inc. | 600 | 23,088 | ||||||
Regal-Beloit Corp. | 2,000 | 145,200 | ||||||
|
| |||||||
301,408 | ||||||||
|
| |||||||
Machinery - 0.04% | ||||||||
Columbus McKinnon Corp. | 800 | 21,992 | ||||||
|
| |||||||
Marine - 0.18% | ||||||||
Overseas Shipholding Group, Inc. | 21,100 | 103,601 | ||||||
|
| |||||||
Rental Auto/Equipment - 1.32% | ||||||||
United Rentals, Inc.A | 6,000 | 759,060 | ||||||
|
| |||||||
Road & Rail - 0.50% | ||||||||
ArcBest Corp. | 9,200 | 290,720 | ||||||
|
| |||||||
Trading Companies & Distributors - 0.28% | ||||||||
HD Supply Holdings, Inc.A | 3,800 | 160,740 | ||||||
|
| |||||||
Transportation & Logistics - 0.03% | ||||||||
Costamare, Inc. | 3,000 | 15,930 | ||||||
|
| |||||||
Total Industrials | 3,433,281 | |||||||
|
| |||||||
INFORMATION TECHNOLOGY - 4.52% | ||||||||
Communications Equipment - 0.06% | ||||||||
Network-1 Technologies, Inc. | 9,300 | 34,875 | ||||||
|
| |||||||
Computers & Peripherals - 0.58% | ||||||||
NetApp, Inc. | 5,800 | 222,256 | ||||||
Seagate Technology PLCB | 400 | 18,060 | ||||||
Super Micro Computer, Inc.A | 3,000 | 79,350 | ||||||
Western Digital Corp. | 200 | 15,946 | ||||||
|
| |||||||
335,612 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 0.09% | ||||||||
PC Mall, Inc.A | 200 | 4,490 | ||||||
VeriFone Systems, Inc.A | 1,200 | 21,804 | ||||||
Zebra Technologies Corp., Class AA | 300 | 25,101 | ||||||
|
| |||||||
51,395 | ||||||||
|
| |||||||
Internet Software & Services - 0.78% | ||||||||
Liquidity Services, Inc.A | 300 | 2,925 | ||||||
VeriSign, Inc. | 3,500 | 280,735 | ||||||
Web.com Group, Inc.A | 8,700 | 164,865 | ||||||
|
| |||||||
448,525 | ||||||||
|
| |||||||
IT Consulting & Services - 1.18% | ||||||||
Cognizant Technology Solutions Corp., Class AA | 3,500 | 184,065 |
See accompanying notes
32
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
INFORMATION TECHNOLOGY - 4.52% (continued) | ||||||||
IT Consulting & Services - 1.18% (continued) | ||||||||
CoreLogic, Inc.A | 1,900 | $ | 67,013 | |||||
Gartner, Inc. | 900 | 89,424 | ||||||
Total System Services, Inc. | 6,300 | 319,284 | ||||||
Virtusa Corp.A | 800 | 20,384 | ||||||
|
| |||||||
680,170 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 1.08% | ||||||||
Advanced Energy Industries, Inc.A | 5,300 | 311,852 | ||||||
Kulicke & Soffa Industries, Inc.A | 12,600 | 221,508 | ||||||
Lam Research Corp. | 800 | 91,888 | ||||||
|
| |||||||
625,248 | ||||||||
|
| |||||||
Software - 0.75% | ||||||||
Barracuda Networks, Inc.A | 5,500 | 129,195 | ||||||
Red Hat, Inc.A | 800 | 60,704 | ||||||
Synchronoss Technologies, Inc.A | 400 | 15,408 | ||||||
The Rubicon Project, Inc.A | 26,600 | 225,302 | ||||||
|
| |||||||
430,609 | ||||||||
|
| |||||||
Total Information Technology | 2,606,434 | |||||||
|
| |||||||
MATERIALS - 1.91% | ||||||||
Chemicals - 1.48% | ||||||||
Ashland Global Holdings, Inc. | 700 | 83,321 | ||||||
Core Molding Technologies, Inc. | 15,300 | 235,926 | ||||||
KMG Chemicals, Inc. | 4,600 | 169,556 | ||||||
OMNOVA Solutions, Inc.A | 300 | 2,730 | ||||||
Trinseo S.A. | 5,600 | 362,600 | ||||||
|
| |||||||
854,133 | ||||||||
|
| |||||||
Metals & Mining - 0.37% | ||||||||
Commercial Metals Co. | 1,600 | 32,688 | ||||||
Hallador Energy Co. | 2,600 | 24,440 | ||||||
Kaiser Aluminum Corp. | 1,600 | 125,536 | ||||||
Olympic Steel, Inc. | 1,400 | 31,500 | ||||||
|
| |||||||
214,164 | ||||||||
|
| |||||||
Paper & Forest Products - 0.05% | ||||||||
Clearwater Paper Corp.A | 500 | 31,450 | ||||||
|
| |||||||
Total Materials | 1,099,747 | |||||||
|
| |||||||
REAL ESTATE - 15.74% | ||||||||
Equity Real Estate Investment Trusts - 15.74% | ||||||||
American Homes 4 Rent, Class AC | 33,500 | 746,380 | ||||||
Care Capital Properties, Inc.C | 10,300 | 254,513 | ||||||
CBL & Associates Properties, Inc.C | 62,100 | 673,785 | ||||||
Communications Sales & Leasing, Inc.C | 17,500 | 459,900 | ||||||
CoreSite Realty Corp.C | 6,900 | 594,297 | ||||||
DuPont Fabros Technology, Inc.C | 6,400 | 303,872 | ||||||
Empire State Realty Trust, Inc.C | 33,900 | 694,611 | ||||||
Equity Lifestyle Properties, Inc.C | 5,700 | 421,458 | ||||||
Forest City Realty Trust, Inc.C | 27,800 | 629,392 | ||||||
GGP, Inc.C | 1,000 | 24,840 | ||||||
Hudson Pacific Properties, Inc.C | 16,200 | 573,642 | ||||||
NexPoint Residential Trust, Inc.C | 3,600 | 83,196 | ||||||
Pennsylvania Real Estate Investment TrustC | 36,700 | 657,297 | ||||||
QTS Realty Trust, Inc.C | 1,000 | 50,390 | ||||||
Ryman Hospitality Properties, Inc.C | 300 | 18,354 | ||||||
Select Income REITC | 27,900 | 697,779 | ||||||
Senior Housing Properties TrustC | 24,400 | 464,820 | ||||||
Simon Property Group, Inc.C | 3,900 | 716,703 | ||||||
SL Green Realty Corp.C | 3,100 | 337,807 |
See accompanying notes
33
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
REAL ESTATE - 15.74% (continued) | ||||||||
Equity Real Estate Investment Trusts - 15.74% (continued) | ||||||||
Taubman Centers, Inc.C | 9,700 | $ | 687,148 | |||||
|
| |||||||
Total Real Estate | 9,090,184 | |||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 0.05% | ||||||||
Diversified Telecommunication Services - 0.05% | ||||||||
magicJack VocalTec Ltd. A | 4,000 | 28,600 | ||||||
|
| |||||||
UTILITIES - 1.01% | ||||||||
Electric - 0.81% | ||||||||
CenterPoint Energy, Inc. | 17,900 | 469,159 | ||||||
|
| |||||||
Multi-Utilities - 0.19% | ||||||||
MDU Resources Group, Inc. | 3,800 | 111,530 | ||||||
|
| |||||||
Total Utilities | 580,689 | |||||||
|
| |||||||
Total COMMON STOCKS (Cost $31,873,745) | 32,104,201 | |||||||
|
| |||||||
EXCHANGE TRADED INSTRUMENTS - 7.88% | ||||||||
EXCHANGE TRADED FUNDS - 7.88% | ||||||||
Consumer Discretionary Select Sector SPDR Fund | 16,500 | 1,399,695 | ||||||
Financial Select Sector SPDR Fund D | 8,000 | 186,480 | ||||||
Industrial Select Sector SPDR Fund D | 38,700 | 2,452,806 | ||||||
Materials Select Sector SPDR Fund | 9,800 | 509,208 | ||||||
|
| |||||||
Total EXCHANGE TRADED INSTRUMENTS (Cost $4,551,970) | 4,548,189 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 6.81% (Cost $3,929,099) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class E | 3,929,099 | 3,929,099 | ||||||
|
| |||||||
Total Securities Held Long (Cost $40,354,814) | 40,581,489 | |||||||
|
| |||||||
SECURITIES HELD SHORT | ||||||||
COMMON STOCKS - (46.45%) | ||||||||
CONSUMER DISCRETIONARY - (10.93%) | ||||||||
Automobiles - (1.31%) | ||||||||
Tesla Motors, Inc.A | (3,000 | ) | (755,790 | ) | ||||
|
| |||||||
Hotels, Restaurants & Leisure - (2.35%) | ||||||||
Chipotle Mexican Grill, Inc.A | (1,820 | ) | (767,021 | ) | ||||
Wynn Resorts Ltd. | (5,800 | ) | (588,294 | ) | ||||
|
| |||||||
(1,355,315 | ) | |||||||
|
| |||||||
Internet & Catalog Retail - (0.32%) | ||||||||
Wayfair, Inc., Class AA | (4,400 | ) | (182,864 | ) | ||||
|
| |||||||
Leisure Equipment & Products - (0.51%) | ||||||||
Mattel, Inc. | (2,800 | ) | (73,388 | ) | ||||
Polaris Industries, Inc. | (2,600 | ) | (218,582 | ) | ||||
|
| |||||||
(291,970 | ) | |||||||
|
| |||||||
Media - (0.19%) | ||||||||
Liberty Global PLC LiLac Group, Tracking Stock AA F | (4,800 | ) | (110,496 | ) | ||||
|
| |||||||
Multiline Retail - (0.24%) | ||||||||
Michael Kors Holdings Ltd.A | (3,200 | ) | (136,992 | ) | ||||
|
| |||||||
Specialty Retail - (5.25%) | ||||||||
Buckle, Inc. | (30,400 | ) | (642,960 | ) | ||||
CarMax, Inc.A | (1,500 | ) | (100,065 | ) | ||||
Cato Corp., Class A | (13,200 | ) | (335,148 | ) | ||||
Chico’s FAS, Inc. | (17,100 | ) | (230,679 | ) |
See accompanying notes
34
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
CONSUMER DISCRETIONARY - (10.93%) (continued) | ||||||||
Specialty Retail - (5.25%) (continued) | ||||||||
Conn’s, Inc.A | (15,800 | ) | $ | (166,690 | ) | |||
Lumber Liquidators Holdings, Inc.A | (1,200 | ) | (18,792 | ) | ||||
Select Comfort Corp.A | (30,300 | ) | (611,454 | ) | ||||
Tailored Brands, Inc. | (20,100 | ) | (427,125 | ) | ||||
Tiffany & Co. | (6,300 | ) | (495,936 | ) | ||||
|
| |||||||
(3,028,849 | ) | |||||||
|
| |||||||
Textiles & Apparel - (0.77%) | ||||||||
Under Armour, Inc., Class AA | (19,800 | ) | (425,502 | ) | ||||
Under Armour, Inc., Class CA | (900 | ) | (17,298 | ) | ||||
|
| |||||||
(442,800 | ) | |||||||
|
| |||||||
Total Consumer Discretionary | (6,305,076 | ) | ||||||
|
| |||||||
CONSUMER STAPLES - (1.03%) | ||||||||
Personal Products - (0.99%) | ||||||||
Coty, Inc. | (29,900 | ) | (574,080 | ) | ||||
|
| |||||||
Tobacco - (0.03%) | ||||||||
Philip Morris International, Inc. | (200 | ) | (19,226 | ) | ||||
|
| |||||||
Total Consumer Staples | (593,306 | ) | ||||||
|
| |||||||
ENERGY - (2.23%) | ||||||||
Energy Equipment & Services - (1.28%) | ||||||||
Frank’s International N.V. | (2,900 | ) | (34,336 | ) | ||||
Schlumberger Ltd. | (8,400 | ) | (703,164 | ) | ||||
|
| |||||||
(737,500 | ) | |||||||
|
| |||||||
Oil & Gas - (0.95%) | ||||||||
Cheniere Energy, Inc.A | (2,100 | ) | (100,065 | ) | ||||
Pioneer Natural Resources Co. | (2,500 | ) | (450,575 | ) | ||||
|
| |||||||
(550,640 | ) | |||||||
|
| |||||||
Total Energy | (1,288,140 | ) | ||||||
|
| |||||||
FINANCIALS - (5.24%) | ||||||||
Diversified Financials - (1.63%) | ||||||||
CME Group, Inc. | (3,200 | ) | (387,456 | ) | ||||
Financial Engines, Inc. | (2,500 | ) | (96,375 | ) | ||||
Ladenburg Thalmann Financial Services, Inc.A | (94,238 | ) | (216,747 | ) | ||||
LendingTree, Inc. | (1,500 | ) | (167,850 | ) | ||||
OneMain Holdings, Inc.A | (3,200 | ) | (71,616 | ) | ||||
|
| |||||||
(940,044 | ) | |||||||
|
| |||||||
Insurance - (3.01%) | ||||||||
Markel Corp.A | (530 | ) | (490,250 | ) | ||||
RLI Corp. | (9,200 | ) | (546,664 | ) | ||||
Willis Towers Watson PLCB | (5,600 | ) | (700,728 | ) | ||||
|
| |||||||
(1,737,642 | ) | |||||||
|
| |||||||
Real Estate - (0.24%) | ||||||||
iStar Financial, Inc.A C | (12,300 | ) | (138,006 | ) | ||||
|
| |||||||
Specialty Finance - (0.36%) | ||||||||
LendingClub Corp.A | (33,400 | ) | (206,078 | ) | ||||
|
| |||||||
Total Financials | (3,021,770 | ) | ||||||
|
| |||||||
HEALTH CARE - (3.21%) | ||||||||
Biotechnology - (1.07%) | ||||||||
Tesaro, Inc.A | (3,800 | ) | (618,792 | ) | ||||
|
|
See accompanying notes
35
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
HEALTH CARE - (3.21%) (continued) | ||||||||
Health Care Equipment & Supplies - (0.90%) | ||||||||
Mesa Laboratories, Inc. | (100 | ) | $ | (11,914 | ) | |||
Penumbra, Inc.A | (5,900 | ) | (422,145 | ) | ||||
Wright Medical Group, N.V.A | (3,300 | ) | (83,094 | ) | ||||
|
| |||||||
(517,153 | ) | |||||||
|
| |||||||
Health Care Providers & Services - (1.24%) | ||||||||
AAC Holdings, Inc.A | (18,900 | ) | (150,255 | ) | ||||
Acadia Healthcare Co., Inc.A | (6,000 | ) | (230,220 | ) | ||||
HealthEquity, Inc.A | (1,400 | ) | (64,750 | ) | ||||
Teladoc, Inc.A | (9,100 | ) | (182,000 | ) | ||||
The Advisory Board Co.A | (1,900 | ) | (86,450 | ) | ||||
|
| |||||||
(713,675 | ) | |||||||
|
| |||||||
Total Health Care | (1,849,620 | ) | ||||||
|
| |||||||
INDUSTRIALS - (0.85%) | ||||||||
Commercial Services & Supplies - (0.16%) | ||||||||
Mobile Mini, Inc. | (2,900 | ) | (94,395 | ) | ||||
|
| |||||||
Machinery - (0.04%) | ||||||||
3D Systems Corp.A | (1,500 | ) | (24,735 | ) | ||||
|
| |||||||
Trading Companies & Distributors - (0.65%) | ||||||||
Fastenal Co. | (7,500 | ) | (372,600 | ) | ||||
|
| |||||||
Total Industrials | (491,730 | ) | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - (3.46%) | ||||||||
Communications Equipment - (0.84%) | ||||||||
ViaSat, Inc.A | (7,500 | ) | (486,825 | ) | ||||
|
| |||||||
Electronic Equipment & Instruments - (0.05%) | ||||||||
Universal Display Corp.A | (400 | ) | (26,400 | ) | ||||
|
| |||||||
Internet Software & Services - (1.38%) | ||||||||
Benefitfocus, Inc.A | (17,100 | ) | (517,275 | ) | ||||
comScore, Inc.A | (1,100 | ) | (36,905 | ) | ||||
Pandora Media, Inc.A | (18,600 | ) | (241,800 | ) | ||||
|
| |||||||
(795,980 | ) | |||||||
|
| |||||||
IT Consulting & Services - (1.00%) | ||||||||
Visa, Inc., Class A | (7,000 | ) | (578,970 | ) | ||||
|
| |||||||
Semiconductor Equipment & Products - (0.18%) | ||||||||
Cavium, Inc.A | (1,600 | ) | (105,936 | ) | ||||
|
| |||||||
Total Information Technology | (1,994,111 | ) | ||||||
|
| |||||||
MATERIALS - (2.29%) | ||||||||
Chemicals - (0.72%) | ||||||||
CF Industries Holdings, Inc. | (11,800 | ) | (416,422 | ) | ||||
|
| |||||||
Containers & Packaging - (1.22%) | ||||||||
Ball Corp. | (9,200 | ) | (701,592 | ) | ||||
|
| |||||||
Metals & Mining - (0.35%) | ||||||||
Freeport-McMoRan Copper & Gold, Inc.A | (12,200 | ) | (203,130 | ) | ||||
|
| |||||||
Total Materials | (1,321,144 | ) | ||||||
|
| |||||||
REAL ESTATE - (14.36%) | ||||||||
Equity Real Estate Investment Trusts - (14.27%) | ||||||||
Acadia Realty TrustC | (6,800 | ) | (216,512 | ) | ||||
Brandywine Realty TrustC | (15,300 | ) | (246,330 | ) |
See accompanying notes
36
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Shares | Fair Value | |||||||
REAL ESTATE - (14.36%) (continued) | ||||||||
Equity Real Estate Investment Trusts - (14.27%) (continued) | ||||||||
Chatham Lodging TrustC | (35,500 | ) | $ | (714,970 | ) | |||
Chesapeake Lodging TrustC | (19,900 | ) | (509,440 | ) | ||||
EPR PropertiesC | (8,500 | ) | (628,745 | ) | ||||
Equity ResidentalC | (4,100 | ) | (249,157 | ) | ||||
FelCor Lodging Trust, Inc.C | (59,100 | ) | (455,070 | ) | ||||
Getty Realty Corp.C | (24,900 | ) | (642,171 | ) | ||||
Global Net Lease, Inc.C | (12,100 | ) | (93,775 | ) | ||||
Government Properties Income TrustC | (21,400 | ) | (412,164 | ) | ||||
HCP, Inc.C | (24,200 | ) | (733,744 | ) | ||||
Hersha Hospitality TrustC | (33,500 | ) | (669,665 | ) | ||||
Investors Real Estate TrustC | (104,500 | ) | (672,980 | ) | ||||
Iron Mountain, Inc.C | (8,700 | ) | (311,460 | ) | ||||
Kimco Realty Corp.C | (10,300 | ) | (256,367 | ) | ||||
LaSalle Hotel PropertiesC | (2,200 | ) | (66,374 | ) | ||||
National Health Investors, Inc.C | (800 | ) | (59,192 | ) | ||||
New York REIT, Inc.A C | (52,900 | ) | (526,355 | ) | ||||
Realty Income Corp.C | (1,400 | ) | (83,482 | ) | ||||
Urstadt Biddle Properties, Inc., Class AC | (800 | ) | (17,960 | ) | ||||
WP Carey, Inc.C | (10,800 | ) | (668,952 | ) | ||||
|
| |||||||
(8,234,865 | ) | |||||||
|
| |||||||
Real Estate Management & Development - (0.09%) | ||||||||
Walter Investment Management Corp. | (13,600 | ) | (51,680 | ) | ||||
|
| |||||||
Total Real Estate | (8,286,545 | ) | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - (0.91%) | ||||||||
Frontier Communications Corp. | (46,700 | ) | (162,983 | ) | ||||
Straight Path Communications, Inc.A | (10,300 | ) | (360,912 | ) | ||||
|
| |||||||
Total Telecommunication Services | (523,895 | ) | ||||||
|
| |||||||
UTILITIES - (1.96%) | ||||||||
Electric - (0.80%) | ||||||||
Dominion Resources, Inc. | (5,300 | ) | (404,284 | ) | ||||
Southern Co. | (1,200 | ) | (59,316 | ) | ||||
|
| |||||||
(463,600 | ) | |||||||
|
| |||||||
Multi-Utilities - (1.16%) | ||||||||
TerraForm Power, Inc. | (31,400 | ) | (372,718 | ) | ||||
Vivint Solar, Inc.A | (96,722 | ) | (295,002 | ) | ||||
|
| |||||||
(667,720 | ) | |||||||
|
| |||||||
Total Utilities | (1,131,320 | ) | ||||||
|
| |||||||
Total COMMON STOCKS (Cost $(26,726,382)) | (26,806,657 | ) | ||||||
|
| |||||||
EXCHANGE TRADED INSTRUMENTS - (8.08%) | ||||||||
EXCHANGE TRADED FUNDS - (8.08%) | ||||||||
Consumer Staples Select Sector SPDR Fund | $ | (23,200 | ) | (1,220,088 | ) | |||
Health Care Select Sector SPDR Fund | (34,700 | ) | (2,447,044 | ) | ||||
Utilities Select Sector SPDR Fund | (20,300 | ) | (998,354 | ) | ||||
|
| |||||||
Total EXCHANGE TRADED INSTRUMENTS (Cost $(4,568,386)) | (4,665,486 | ) | ||||||
|
| |||||||
Total SECURITIES SOLD SHORT (Proceeds $(31,294,768)) | (31,472,143 | ) | ||||||
|
| |||||||
TOTAL INVESTMENTS IN SECURITIES (excludes securities sold short) - 70.32% (Cost $40,354,814) | 40,581,489 | |||||||
TOTAL SECURITIES SOLD SHORT - (54.54)% (Proceeds $(31,294,768)) | (31,472,143 | ) | ||||||
OTHER ASSETS, NET OF LIABILITIES - 84.21% | 48,599,051 | |||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 57,708,397 | ||||||
|
|
Percentages are stated as a percent of net assets.
See accompanying notes
37
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
A | Non-income producing security. |
B | PLC - Public Limited Company. |
C | REIT - Real Estate Investment Trust. |
D | This security or a piece thereof is held as segregated collateral. |
E | The Fund is affiliated by having the same investment advisor. |
F | Tracking Stock – A form of common stock that is issued by a parent company and tracks the performance of a specific division of that parent company. It allows investors the chance to invest in an individual sector of a company while the parent company maintains overall control. |
Futures Contracts Open on January 31, 2017:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Mini MSCI EAFE Index Futures | Long | 35 | March 2017 | $ | 3,024,700 | $ | 79,927 | |||||||||||||
Mini MSCI Emerging Markets Index Futures | Long | 76 | March 2017 | 3,477,380 | 152,183 | |||||||||||||||
S&P 500 E-Mini Index Futures | Short | 30 | March 2017 | 3,411,750 | (34,827 | ) | ||||||||||||||
|
|
|
| |||||||||||||||||
$ | 3,090,330 | $ | 197,283 | |||||||||||||||||
|
|
|
|
OTC Contracts for Difference outstanding on January 31, 2017:
OTC Contracts for Difference - Equity
Reference Entity | Counterparty | Long/Short | Currency | Notional Amount | Unrealized Appreciation (Depreciation) | |||||||||
Bobst Group, AG, Reg Shares | MSC | Long | CHF | 890 | $ | 699 | ||||||||
Gurit Holding AG-BR | MSC | Long | CHF | 771 | (19,146 | ) | ||||||||
Kardex AG | MSC | Long | CHF | 280 | 298 | |||||||||
Lonza AG-Reg | MSC | Long | CHF | 495 | (1,254 | ) | ||||||||
Orior AG | MSC | Long | CHF | 420 | 404 | |||||||||
Rieter Holding AG | MSC | Long | CHF | 799 | (891 | ) | ||||||||
Swiss Life Holding | MSC | Long | CHF | 627 | 2,479 | |||||||||
DFDS A/S | MSC | Long | DKK | 1,370 | 80 | |||||||||
GN Store Nord A/S | MSC | Long | DKK | 5,440 | 2,371 | |||||||||
Royal Unibrew A/S | MSC | Long | DKK | 4,410 | (545 | ) | ||||||||
ABC Arbitrage | MSC | Long | EUR | 50,400 | 6,536 | |||||||||
Advanced Metallurgical-W/I | MSC | Long | EUR | 28,290 | 8,866 | |||||||||
Aperam S.A. | MSC | Long | EUR | 15,720 | 12,826 | |||||||||
Ascopiave SpA | MSC | Long | EUR | 90,000 | (4,474 | ) | ||||||||
Barco N.V. | MSC | Long | EUR | 4,240 | 1,970 | |||||||||
BE Semiconductor Industries N.V. | MSC | Long | EUR | 20,800 | 3,147 | |||||||||
Bekaert N.V. | MSC | Long | EUR | 1,330 | 438 | |||||||||
Biotest AG | MSC | Long | EUR | 8,440 | 7,801 | |||||||||
Cewe Color Holding AG | MSC | Long | EUR | 5,950 | (20,898 | ) | ||||||||
Chargeurs S.A. | MSC | Long | EUR | 7,010 | 5,530 | |||||||||
Cie Automotive S.A. | MSC | Long | EUR | 13,570 | (20,018 | ) | ||||||||
Construcciones y Auxiliar de Ferrocarriles | MSC | Long | EUR | 5,120 | (5,423 | ) | ||||||||
Cramo PLC, B Shares | MSC | Long | EUR | 15,746 | (6,251 | ) | ||||||||
Deutsche Beteiligungs AG | MSC | Long | EUR | 3,900 | 5,416 | |||||||||
Deutsche Pfandbriefbank AG | MSC | Long | EUR | 7,700 | 50 | |||||||||
Deutz AG | MSC | Long | EUR | 43,500 | 18,287 | |||||||||
Evs Broadcast Equipment S.A. | MSC | Long | EUR | 2,690 | 29 | |||||||||
Gestevision Telecinco S.A. | MSC | Long | EUR | 37,920 | 5,532 | |||||||||
Ipsos S.A. | MSC | Long | EUR | 14,380 | 12,666 | |||||||||
Jacquet Metal Service | MSC | Long | EUR | 18,241 | (7,195 | ) | ||||||||
Mersen | MSC | Long | EUR | 750 | (128 | ) | ||||||||
Orange Belgium | MSC | Long | EUR | 4,760 | 129 | |||||||||
Ordina N.V. | MSC | Long | EUR | 188,400 | (3,665 | ) | ||||||||
PSA Peugeot Citroen | MSC | Long | EUR | 4,900 | 1,006 | |||||||||
Renault S.A. | MSC | Long | EUR | 4,380 | (12,260 | ) | ||||||||
Sanoma OYJ | MSC | Long | EUR | 7,400 | 480 |
See accompanying notes
38
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Reference Entity | Counterparty | Long/Short | Notional Amount | Unrealized Appreciation (Depreciation) | ||||||||||
Saras SpA | MSC | Long | EUR | 23,100 | $ | (3,245 | ) | |||||||
Stada Arzneimittel AG | MSC | Long | EUR | 797 | (530 | ) | ||||||||
Telecom Italia-RNC | MSC | Long | EUR | 335,200 | (13,222 | ) | ||||||||
Ubisoft Entertainment | MSC | Long | EUR | 9,040 | (1,908 | ) | ||||||||
Valmet Corp. | MSC | Long | EUR | 42,660 | 8,298 | |||||||||
Wuestenrot And Wuerttemberg AG | MSC | Long | EUR | 1,320 | — | |||||||||
3I Group, PLC | MSC | Long | GBP | 51,400 | (5,173 | ) | ||||||||
Avon Rubber, PLC | MSC | Long | GBP | 6,330 | (239 | ) | ||||||||
Bank of Georgia Holdings, PLC | MSC | Long | GBP | 12,000 | 23,472 | |||||||||
Bovis Homes Group, PLC | MSC | Long | GBP | 5,240 | 1,879 | |||||||||
Cineworld Group, PLC | MSC | Long | GBP | 7,800 | 2,110 | |||||||||
Dart Group, PLC | MSC | Long | GBP | 59,700 | 19,716 | |||||||||
Entertainment One Ltd. | MSC | Long | GBP | 51,100 | (2,700 | ) | ||||||||
Evraz, PLC | MSC | Long | GBP | 14,900 | 244 | |||||||||
Genus, PLC | MSC | Long | GBP | 1,910 | (216 | ) | ||||||||
Go-Ahead Group, PLC | MSC | Long | GBP | 2,670 | 1,948 | |||||||||
Gocompare.com Holdings Ltd. | MSC | Long | GBP | 107,781 | 7,964 | |||||||||
Greggs, PLC | MSC | Long | GBP | 22,570 | (9,938 | ) | ||||||||
Indivior, PLC | MSC | Long | GBP | 52,700 | (1,724 | ) | ||||||||
JD Sports Fashion, PLC | MSC | Long | GBP | 34,450 | 347 | |||||||||
Numis Corporation, PLC | MSC | Long | GBP | 5,809 | (149 | ) | ||||||||
Plus500 Ltd. | MSC | Long | GBP | 17,200 | 1,623 | |||||||||
Svg Capital, PLC | MSC | Long | GBP | 23,700 | — | |||||||||
Vedanta Resources, PLC | MSC | Long | GBP | 8,510 | 5,460 | |||||||||
Vertu Motors, PLC | MSC | Long | GBP | 839,194 | (15,837 | ) | ||||||||
Virgin Money Holdings UK, PLC | MSC | Long | GBP | 48,300 | 3,950 | |||||||||
Wizz Air Holdings, PLC | MSC | Long | GBP | 20,660 | (11,177 | ) | ||||||||
Austevoll Seafood ASA | MSC | Long | NOK | 62,000 | (16,955 | ) | ||||||||
Kvaerner ASA | MSC | Long | NOK | 323,264 | (31,432 | ) | ||||||||
Salmar ASA | MSC | Long | NOK | 1,440 | (1,268 | ) | ||||||||
Sparebank 1 Nord-Norge | MSC | Long | NOK | 38,400 | 4,667 | |||||||||
Sparebank 1 SR Bank ASA | MSC | Long | NOK | 42,600 | (3,883 | ) | ||||||||
Stolt-Nielsen S.A. | MSC | Long | NOK | 3,480 | (4,230 | ) | ||||||||
Telenor ASA | MSC | Long | NOK | 1,730 | (84 | ) | ||||||||
Boliden AB | MSC | Long | SEK | 5,010 | 272 | |||||||||
Granges AB | MSC | Long | SEK | 45,000 | 9,009 | |||||||||
Kappahl AB | MSC | Long | SEK | 5,100 | 438 | |||||||||
Tethys Oil AB | MSC | Long | SEK | 20,800 | (10,707 | ) | ||||||||
Burckhardt Compression Holding AG | MSC | Short | CHF | 1,206 | 611 | |||||||||
Cosmo Pharmaceuticals N.V. | MSC | Short | CHF | 1,282 | (1,299 | ) | ||||||||
Evolva Holdings S.A. | MSC | Short | CHF | 298,600 | 12,106 | |||||||||
Lindt And Spruengli AG-Pc | MSC | Short | CHF | 100 | 17,231 | |||||||||
VZ Holding AG | MSC | Short | CHF | 1,783 | 6,325 | |||||||||
Novozymes A/S, B Shares | MSC | Short | DKK | 1,120 | (3,564 | ) | ||||||||
Accor S.A. | MSC | Short | EUR | 6,440 | 4,176 | |||||||||
ADP Promesses | MSC | Short | EUR | 6,671 | 17,663 | |||||||||
Air Liquide | MSC | Short | EUR | 6,854 | 22,592 | |||||||||
Airbus SE | MSC | Short | EUR | 260 | 725 | |||||||||
Alstria Office Reit AG | MSC | Short | EUR | 5,720 | (1,236 | ) | ||||||||
Anheuser-Busch Inbev S.A./N.V. | MSC | Short | EUR | 4,643 | 13,046 | |||||||||
Bollore | MSC | Short | EUR | 184,400 | (1,794 | ) | ||||||||
Boskalis Westminster, CVA | MSC | Short | EUR | 3,880 | 2,212 | |||||||||
Bureau Veritas S.A. | MSC | Short | EUR | 5,640 | 1,114 | |||||||||
Cairn Homes Ltd. | MSC | Short | EUR | 525,419 | 11,356 | |||||||||
Caverion Corp. | MSC | Short | EUR | 16,698 | 4,283 | |||||||||
CNH Industrial N.V. | MSC | Short | EUR | 17,400 | 7,992 | |||||||||
Electricite de France | MSC | Short | EUR | 3,600 | 630 | |||||||||
Ferrovial S.A. SQ | MSC | Short | EUR | 39,600 | 17,118 | |||||||||
Fielmann AG | MSC | Short | EUR | 1,230 | (851 | ) |
See accompanying notes
39
American Beacon Numeric Integrated Alpha FundSM
Schedule of Investments
January 31, 2017
Reference Entity | Counterparty | Long/Short | Notional Amount | Unrealized Appreciation (Depreciation) | ||||||||||||||||
Heidelbergcement AG | MSC | Short | EUR | 1,090 | $ | (2,686 | ) | |||||||||||||
Morphosys AG | MSC | Short | EUR | 4,120 | 2,649 | |||||||||||||||
Nokia Oyj | MSC | Short | EUR | 154,900 | 50,890 | |||||||||||||||
Obrascon Huarte Lain S.A. | MSC | Short | EUR | 57,500 | 24,719 | |||||||||||||||
Parrot Promesses | MSC | Short | EUR | 5,905 | (1,683 | ) | ||||||||||||||
Slm Solutions Group AG | MSC | Short | EUR | 2,420 | (3,008 | ) | ||||||||||||||
Snam SpA | MSC | Short | EUR | 81,500 | 20,610 | |||||||||||||||
Tenaris S.A. | MSC | Short | EUR | 38,450 | 35,736 | |||||||||||||||
Vallourec S.A. | MSC | Short | EUR | 85,000 | 20,668 | |||||||||||||||
Yoox Net-A-Porter Group | MSC | Short | EUR | 11,610 | 34,755 | |||||||||||||||
Allied Minds, PLC | MSC | Short | GBP | 7,300 | 175 | |||||||||||||||
Astrazeneca, PLC | MSC | Short | GBP | 1,460 | 2,287 | |||||||||||||||
Capital And Counties Properties | MSC | Short | GBP | 167,700 | (5,275 | ) | ||||||||||||||
EasyJet, PLC | MSC | Short | GBP | 55,190 | 63,677 | |||||||||||||||
Essentra, PLC | MSC | Short | GBP | 105,700 | 44,283 | |||||||||||||||
Fresnillo PLC | MSC | Short | GBP | 12,650 | (5,474 | ) | ||||||||||||||
HSBC Holdings, PLC | MSC | Short | GBP | 38,900 | 979 | |||||||||||||||
NCC Group, PLC | MSC | Short | GBP | 249,526 | 57,658 | |||||||||||||||
Provident Financial, PLC | MSC | Short | GBP | 4,350 | 3,119 | |||||||||||||||
Purplebricks Group, PLC | MSC | Short | GBP | 48,892 | (21,836 | ) | ||||||||||||||
Randgold Resources Ltd. | MSC | Short | GBP | 2,460 | (1,238 | ) | ||||||||||||||
Royal Bank of Scotland Group | MSC | Short | GBP | 73,500 | (832 | ) | ||||||||||||||
Sirius Minerals, PLC | MSC | Short | GBP | 1,757,800 | (5,529 | ) | ||||||||||||||
Sound Oil, PLC | MSC | Short | GBP | 464,417 | (20,475 | ) | ||||||||||||||
Tullow Oil, PLC | MSC | Short | GBP | 19,700 | 2,057 | |||||||||||||||
Whitbread, PLC | MSC | Short | GBP | 1,030 | 2,527 | |||||||||||||||
B2Holding ASA | MSC | Short | NOK | 70,620 | 4,603 | |||||||||||||||
Norwegian Air Shuttle ASA | MSC | Short | NOK | 21,160 | 15,688 | |||||||||||||||
Hennes & Mauritz AB, B Shares | MSC | Short | SEK | 22,620 | (20,183 | ) | ||||||||||||||
|
| |||||||||||||||||||
$ | 380,969 | |||||||||||||||||||
|
|
Glossary:
Counterparty Abbreviations | ||||||
MSC | Morgan Stanley & Co. Inc. | |||||
Currency Abbreviations: | ||||||
CHF | Swiss Franc | GBP | Pound Sterling | |||
DKK | Danish Krone | NOK | Norwegian Krone | |||
EUR | Euro | SEK | Swedish Krona | |||
Other Abbreviations: | ||||||
OTC | Over the Counter |
See accompanying notes
40
Statements of Assets and Liabilities
January 31, 2017
Grosvenor Long/ | Numeric Integrated | |||||||
Short Fund | Alpha Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at fair value A | $ | 13,141,784 | $ | 36,652,390 | ||||
Investments in affiliated securities, at fair value B | 2,991,077 | 3,929,099 | ||||||
Purchased options, at fair value (Premiums paid $26,532) | 12,928 | — | ||||||
Foreign currency deposits with brokers, at fair value D | — | 296,787 | ||||||
Cash | 1,276,541 | 17,804,989 | ||||||
Cash due from broker | 4,648,932 | 29,980,452 | ||||||
Dividends and interest receivable | 11,035 | 33,502 | ||||||
Receivable for investments sold | 355,667 | 5,687,700 | ||||||
Receivable for fund shares sold | — | 87,680 | ||||||
Receivable for expense reimbursement (Note 2) | — | 88,829 | ||||||
Receivable for variation margin on open futures contracts | — | 218,524 | ||||||
Unrealized appreciation from swap agreements | 195,716 | 714,697 | ||||||
Unrealized appreciation from forward currency contracts | 2,154 | — | ||||||
Prepaid expenses | 22,491 | 50,273 | ||||||
|
|
|
| |||||
Total assets | 22,658,325 | 95,544,922 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Swap premium received | 2 | — | ||||||
Payable for investments purchased | 344,141 | 5,754,616 | ||||||
Payable for fund shares redeemed | — | 54,564 | ||||||
Payable for variation margin from open futures contracts | — | 20,959 | ||||||
Payable under excess expense reimbursement plan | 5,966 | — | ||||||
Foreign currency held at bank, at fair value C | 2,415 | — | ||||||
Foreign currency deposits with brokers, at fair value D | 94,588 | — | ||||||
Securities sold short, at value E | 4,888,895 | 31,472,143 | ||||||
Swap income payable | 210 | — | ||||||
Written options, at fair value (Premiums received $1,794) | 1,890 | — | ||||||
Dividend expense payable | 1,392 | 23,715 | ||||||
Management and investment advisory fees payable | 29,975 | 86,732 | ||||||
Administrative service and service fees payable | 358 | 21 | ||||||
Transfer agent fees payable | 4,186 | 4,826 | ||||||
Custody and fund accounting fees payable | 20,289 | 30,100 | ||||||
Professional fees payable | 51,968 | 44,096 | ||||||
Trustee fees payable | 206 | 215 | ||||||
Payable for prospectus and shareholder reports | 1,730 | 2,219 | ||||||
Unrealized depreciation from swap agreements | 31,945 | 333,728 | ||||||
Unrealized depreciation from forward currency contracts | 10,840 | — | ||||||
Other liabilities | 577 | 8,591 | ||||||
|
|
|
| |||||
Total liabilities | 5,491,573 | 37,836,525 | ||||||
|
|
|
| |||||
Net Assets | $ | 17,166,752 | $ | 57,708,397 | ||||
|
|
|
| |||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | $ | 16,157,285 | $ | 57,115,779 | ||||
Undistributed (overdistribution of) net investment income | (191,094 | ) | (82,585 | ) | ||||
Accumulated net realized gain | 130,603 | 45,188 | ||||||
Unrealized appreciation of investments | 1,331,892 | 226,675 | ||||||
Unrealized appreciation or (depreciation) of currency transactions | (34,234 | ) | 2,463 | |||||
Unrealized appreciation of futures contracts | — | 197,283 | ||||||
Unrealized appreciation of swap agreements | 163,771 | 380,969 | ||||||
Unrealized (depreciation) of options contracts | (13,700 | ) | — | |||||
Unrealized depreciation of short sales | (377,771 | ) | (177,375 | ) | ||||
|
|
|
| |||||
Net assets | $ | 17,166,752 | $ | 57,708,397 | ||||
|
|
|
|
See accompanying notes
41
American Beacon FundsSM
Statements of Assets and Liabilities
January 31, 2017
Grosvenor Long/ | Numeric Integrated | |||||||
Short Fund | Alpha Fund | |||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||
Institutional Class | 1,512,388 | 12,052 | ||||||
|
|
|
| |||||
Y Class | 26,254 | 10,000 | ||||||
|
|
|
| |||||
Investor Class | 34,197 | 10,000 | ||||||
|
|
|
| |||||
A Class | 17,527 | N/A | ||||||
|
|
|
| |||||
C Class | 20,897 | N/A | ||||||
|
|
|
| |||||
Ultra Class | N/A | 5,588,642 | ||||||
|
|
|
| |||||
Net assets: | ||||||||
Institutional Class | $ | 16,119,517 | $ | 123,935 | ||||
|
|
|
| |||||
Y Class | $ | 279,480 | $ | 102,596 | ||||
|
|
|
| |||||
Investor Class | $ | 362,643 | $ | 102,524 | ||||
|
|
|
| |||||
A Class | $ | 185,823 | $ | N/A | ||||
|
|
|
| |||||
C Class | $ | 219,289 | $ | N/A | ||||
|
|
|
| |||||
Ultra Class | $ | N/A | $ | 57,379,342 | ||||
|
|
|
| |||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 10.66 | $ | 10.28 | ||||
|
|
|
| |||||
Y Class | $ | 10.65 | $ | 10.26 | ||||
|
|
|
| |||||
Investor Class | $ | 10.60 | $ | 10.25 | ||||
|
|
|
| |||||
A Class | $ | 10.60 | N/A | |||||
|
|
|
| |||||
A Class (offering price) | $ | 11.25 | N/A | |||||
|
|
|
| |||||
C Class | $ | 10.49 | N/A | |||||
|
|
|
| |||||
Ultra Class | N/A | $ | 10.27 | |||||
|
|
|
| |||||
A Cost of investments in unaffiliated securities | $ | 11,840,667 | $ | 36,425,715 | ||||
B Cost of investments in affiliated securities | $ | 2,991,077 | $ | 3,929,099 | ||||
C Cost of foreign currency held at bank | $ | 2,542 | $ | — | ||||
D Cost of foreign currency deposits with brokers | $ | 100,070 | $ | 294,450 | ||||
E Proceeds of securities sold short | $ | 4,510,770 | $ | 31,294,768 |
See accompanying notes
42
American Beacon FundsSM
Statements of Operations
For the period ended January 31, 2017
Grosvenor Long/ Short Fund | Numeric Integrated Alpha FundC | |||||||
Investment income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 312,220 | $ | 141,319 | ||||
Dividend income from affiliated securities | 6,492 | 6,546 | ||||||
Interest income | 170,230 | 14 | ||||||
Other Income | — | 21,515 | ||||||
|
|
|
| |||||
Total investment income | 488,942 | 169,394 | ||||||
|
|
|
| |||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 286,794 | 175,689 | ||||||
Administrative service fees (Note 2): | ||||||||
Institutional Class | 14,054 | — | ||||||
Y Class | 162 | — | ||||||
Investor Class | 408 | — | ||||||
A Class | 245 | — | ||||||
C Class | 158 | — | ||||||
Transfer agent fees: | ||||||||
Institutional Class | 2,064 | 1,635 | ||||||
Y Class | 774 | 1,508 | ||||||
Investor Class | 1,957 | 1,818 | ||||||
A Class | 770 | — | ||||||
C Class | 765 | — | ||||||
Ultra Class | — | 1,508 | ||||||
Custody and fund accounting fees | 129,270 | 30,099 | ||||||
Professional fees | 68,738 | 130,185 | ||||||
Registration fees and expenses | 90,408 | 20,300 | ||||||
Service fees (Note 2): | ||||||||
Y Class | 194 | — | ||||||
Investor Class | 1,021 | 64 | ||||||
A Class | 323 | — | ||||||
C Class | 292 | — | ||||||
Distribution fees (Note 2): | ||||||||
A Class | 538 | — | ||||||
C Class | 1,949 | — | ||||||
Prospectus and shareholder report expenses | 6,970 | 9,978 | ||||||
Trustee fees | 1,360 | 216 | ||||||
Prime broker fees | 237,382 | 42,814 | ||||||
Dividends on securities sold short | 135,693 | 248,361 | ||||||
Other expenses | 15,270 | 2,284 | ||||||
|
|
|
| |||||
Total expenses | 997,559 | 666,459 | ||||||
|
|
|
| |||||
Net fees waived and expenses reimbursed (Note 2) | (281,244 | ) | (189,564 | ) | ||||
|
|
|
| |||||
Net expenses | 716,315 | 476,895 | ||||||
|
|
|
| |||||
Net investment (loss) | (227,373 | ) | (307,501 | ) | ||||
|
|
|
|
See accompanying notes
43
American Beacon FundsSM
Statements of Operations
For the period ended January 31, 2017
Grosvenor Long/ Short Fund | Numeric Integrated Alpha FundC | |||||||
Realized and unrealized gain (loss) from investments: | ||||||||
Net realized gain (loss) from B: | ||||||||
Investments | 702,821 | 603,378 | ||||||
Foreign currency transactions | 15,043 | 6,910 | ||||||
Futures contracts | — | (146,235 | ) | |||||
Swap agreements | (20,105 | ) | 177,405 | |||||
Short sales | — | (371,354 | ) | |||||
Options and swaptions contracts | (94,036 | ) | — | |||||
Change in net unrealized appreciation (depreciation) of: | ||||||||
Investments | 1,795,567 | 226,675 | ||||||
Foreign currency transactions | (27,797 | ) | 2,463 | |||||
Futures contracts | — | 197,283 | ||||||
Swap agreements | 150,775 | 380,969 | ||||||
Options and swaption contracts | (14,911 | ) | — | |||||
Short sales | (588,037 | ) | (177,375 | ) | ||||
|
|
|
| |||||
Net gain from investments | 1,919,320 | 900,119 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | $ | 1,691,947 | $ | 592,618 | ||||
|
|
|
| |||||
A Foreign taxes | $ | 1,721 | $ | — | ||||
B Net of foreign withholding taxes on capital gains | 1,044 | — | ||||||
C Commencement of operations, November 1, 2016 through January 31, 2017. |
See accompanying notes
44
American Beacon FundsSM
Statements of Changes in Net Assets
Grosvenor Long/Short Fund | Numeric Integrated Alpha Fund | |||||||||||
Year Ended January 31, 2017 | From October 1A to January 31, 2016 | From November 1A to January 31, 2017 | ||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||
Operations: | ||||||||||||
Net investment (loss) | $ | (227,373 | ) | $ | (125,593 | ) | $ | (307,501 | ) | |||
Net realized gain (loss) from investments, commission recapture, foreign currency transactions, and futures contracts | 603,723 | 17,095 | 270,104 | |||||||||
Change in net unrealized appreciation (depreciation) from investments, foreign currency transactions, futures contracts, and swap agreements | 1,315,597 | (245,640 | ) | 630,015 | ||||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 1,691,947 | (354,138 | ) | 592,618 | ||||||||
|
|
|
|
|
| |||||||
Net realized gain from investments: | ||||||||||||
Institutional Class | (309,752 | ) | — | — | ||||||||
Y Class | (4,695 | ) | — | — | ||||||||
Investor Class | (7,003 | ) | — | — | ||||||||
A Class | (3,589 | ) | — | — | ||||||||
C Class | (4,279 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Net distributions to shareholders | (329,318 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||||
Proceeds from sales of shares | 196,119 | 6,494,765 | 63,420,763 | |||||||||
Reinvestment of dividends and distributions | 329,318 | — | — | |||||||||
Cost of shares redeemed | (861,941 | ) | — | (11,304,984 | ) | |||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in net assets from capital share transactions | (336,504 | ) | 6,494,765 | 52,115,779 | ||||||||
|
|
|
|
|
| |||||||
Net increase in net assets | 1,026,125 | 6,140,627 | 52,708,397 | |||||||||
|
|
|
|
|
| |||||||
Net Assets: | ||||||||||||
Beginning of period | 16,140,627 | 10,000,000 | 5,000,000 | B | ||||||||
|
|
|
|
|
| |||||||
End of Period * | $ | 17,166,752 | $ | 16,140,627 | $ | 57,708,397 | ||||||
|
|
|
|
|
| |||||||
* Includes undistributed (overdistribution of) net investment income | $ | (191,094 | ) | $ | (10,968 | ) | $ | (82,585 | ) | |||
|
|
|
|
|
|
A | Commencement of operations. |
B | Seed capital. |
See accompanying notes
45
Notes to Financial Statements
January 31, 2017
1. | Organization and Significant Accounting Policies |
American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. As of January 31, 2017, the Trust consists of twenty-seven active series, two of which are presented in this filing (collectively, the “Funds” and each individually a “Fund”): Grosvenor Long/Short Fund (“Grosvenor Fund”) and American Beacon Numeric Integrated Alpha Fund (“Numeric Fund”). The remaining twenty-five active series are reported in separate filings.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Resolute Investment Managers, Inc., which is indirectly owned by investment funds affiliated with Kelso & Company, L.P. and Estancia
Capital Management, LLC, and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
New Accounting Pronouncement
In October 2016, the SEC adopted amendments to rules under the Investment Company Act of 1940 (“final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. The final rules amend Regulation S-X and require funds to provide standardized, enhanced derivative disclosure in fund financial statements in a format designed for individual investors. The amendments to Regulation S-X also update the disclosures for other investments and investments in, and advances to affiliates and amend the rules regarding the general form and content of fund financial statements. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the amendments and its impact, if any, on the fund’s financial statements.
Class Disclosure
November 1, 2016 is the inception date of the Institutional, Y, Investor, and Ultra classes of the American Beacon Numeric Integrated Alpha Fund.
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
Class | Eligible Investors | Minimum Initial Investments | ||||
Institutional | Large institutional investors - sold directly or through intermediary channels. | $ | 250,000 | |||
Y Class | Large institutional retirement plan investors - sold directly or through intermediary channels. | $ | 100,000 | |||
Investor | All investors using intermediary organizations such as broker-dealers or retirement plan sponsors - sold directly through intermediary channels. | $ | 2,500 | |||
A Class | All investors who invest through intermediary organizations, such as broker-dealers or third party administrator. Retail investors who invest directly through a financial intermediary such as a broker, bank, or registered investment advisor, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”). | $ | 2,500 | |||
C Class | Retail investors who invest directly through a financial intermediary such as a broker or employee directed benefit plans with applicable sales charges, which may include CDSC. | $ | 1,000 | |||
Ultra | Large institutional investors - sold directly or through intermediary channels. | $ | 350,000,000 |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include service, distribution and sub-transfer agent fees that vary amongst the classes as described more fully in Note 2.
46
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The following is a summary of significant accounting policies, consistently followed by the Fund in the preparation of the financial statements. The Funds are investment companies, and accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting
Standard Codification Topic 946, Financial Services - Investment Companies, which is part of the U.S. Generally
Accepted Accounting Principles (“U.S. GAAP”).
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the Net Asset Value (“NAV”). The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in fair values of securities held and is reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Dividends to Shareholders
Dividends from net investment income of the Funds generally will be declared daily and paid monthly. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
47
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Actual results may differ from those estimated.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
2. | Transactions with Affiliates |
Management Agreement
From February 1, 2016 to May 29, 2016 the Trust and the Manager were parties to a Management Agreement that obligated the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services for the Grosvenor Fund. As compensation for performing the duties required under the Management Agreement, the Manager received from the Fund an annualized fee equal to 0.05% of the average daily net assets. Effective May 29, 2016 the Fund and the Manager entered a Management Agreement that obligates the Manager to provide investment advisory, fund management, and administrative services to the Fund. As compensation for performing the duties under the Management Agreement, the Manager receives from the Fund an annualized fee of 1.85% as a percentage of average daily net assets. The Manager pays the unaffiliated investment advisor hired to direct investment activities of the Fund an annualized investment advisory fee based on a percentage of the fund’s average daily assets.
The Numeric Fund and the Manager entered into a management agreement that obligates the Manager to provide investment advisory, fund management, and administrative services to the Fund. As compensation for performing the duties under the Management Agreement, the Manager receives from the Fund an annualized fee at the following annual rates as a percentage of average daily net assets: 0.425% of the first $1 billion, 0.40% of the next $4 billion, 0.375% of the next $5 billion, and 0.35% over $10 billion. The Fund also pay the unaffiliated investment advisors hired to direct investment activities of the Fund an annualized investment advisory fee based on a percentage of the Fund’s average daily assets. Management fees paid by the Fund during the year ended January 31, 2017 were as follows:
Fund | Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | ||||||||||||||||
Grosvenor | 1.85 | % | $ | 286,794 | $ | — | $ | 286,794 | * | |||||||||||
Numeric | 1.78 | % | 175,689 | 133,477 | 42,212 |
* | Of this amount, $241,797 was paid by the Manager to the unaffiliated investment advisor. |
Administration Agreement
From February 1, 2016 to May 29, 2016, the Manager and the Trust were parties to an Administrative Agreement which obligated the Manager to provide or oversee administrative services to the Grosvenor Fund. As compensation for performing the duties required under the Administrative Agreement, the Manager received an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, A, and C Classes of the Fund.
48
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Distribution Plans
The Funds, except for the A and C Classes, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees will be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administration fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to separately compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Grosvenor Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annualized fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes of the Grosvenor Fund and the Investor class of the Numeric Fund. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of up to 0.10% of the average daily net assets of the Y Class, up to 0.25% of the average daily net assets of the A, and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.
Sub-Transfer Agent Fees
The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional Class of the Grosvenor Fund and the Institutional and Y classes of the Numeric Fund and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. Certain services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly by the Funds’ transfer agent. Accordingly, the Funds, pursuant to the Trust’s Board of Trustees (the “Board”) approval, have agreed to reimburse the Manager for all or a portion of the servicing fees paid to these intermediaries for the Institutional Class. The reimbursement amounts (sub-transfer agent fees) paid to the Manager are subject to a fee limit of up to 0.10% of an intermediary’s average net assets in the Institutional Class on an annual basis. For the period ended January 31, 2017, the sub-transfer agent fees, as reported in “Transfer agent fees” on the Statements of Operations, were as follows:
Fund | Sub-Transfer Agent Fees | |||
Grosvenor | $ | 703 | ||
Numeric | — |
As of January 31, 2017, the Funds owe the manager the following reimbursements of sub-transfer agent fees, as reported in the “Transfer agent fees payable” on the Statements of Assets and Liabilities:
Fund | Reimbursement of Sub-Transfer Agent Fees | |||
Grosvenor | $ | 76 | ||
Numeric | — |
49
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Investment in Affiliated Funds
The Funds may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). The Funds and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the USG Select Fund and receives management and administrative fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the period ended January 31, 2017, the Manager earned fees on the Funds’ direct investments in the USG Select Fund as shown below:
Fund | Direct Investments in USG Select Fund | |||
Grosvenor | $ | 2,371 | ||
Numeric | 1,775 |
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. For the period ended January 31, 2017, the Funds did not utilize the credit facility.
Expense Reimbursement Plan
The Manager contractually agreed to reimburse the classes of the Funds to the extent that total annual fund operating expenses exceeded each Funds’ expense cap. For the period ended January 31, 2017, the Manager waived or reimbursed expenses as follows:
Fund | Class | Expense Caps 2/1/2016- 1/31/2017* | Reimbursed Expenses | Expiration | ||||||||||
Grosvenor | Institutional | 2.10 | % | $ | 260,179 | 2020 | ||||||||
Grosvenor | Y | 2.20 | % | 4,066 | 2020 | |||||||||
Grosvenor | Investor | 2.48 | % | 8,434 | 2020 | |||||||||
Grosvenor | A | 2.50 | % | 4,491 | 2020 | |||||||||
Grosvenor | C | 3.25 | % | 4,074 | 2020 | |||||||||
Numeric | Institutional | 1.95 | % | 34,885 | 2020 | |||||||||
Numeric | Y | 2.05 | % | 1,943 | 2020 | |||||||||
Numeric | Investor | 2.33 | % | 2,243 | 2020 | |||||||||
Numeric | Ultra | 1.85 | % | 150,493 | 2020 |
* | Expense caps for the Numeric Fund are for the period 11/1/2016 - 1/31/2017. |
Of these amounts, $88,829 was disclosed as a receivable from the Manager at January 31, 2017 for the Numeric Fund and $5,966 was disclosed as a payable to the Manager at January 31, 2017 for the Grosvenor Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The reimbursed expenses above will expire in 2020. The Funds did not record a liability for potential reimbursement due to the current assessment that a reimbursement is unlikely.
50
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Excess Expense Carryover | Expiration of Reimbursed Expenses | ||||||
Grosvenor | $ | 426,070 | 2019 |
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the period ended January 31, 2017, Foreside collected $77 for the Grosvenor Fund from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the period ended January 31, 2017, there were no CDSC fees collected for Class A Shares of the Grosvenor Fund.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended January 31, 2017, there were no CDSC fees collected for Class C Shares of the Grosvenor Fund.
Concentration of Ownership
From time to time, the Funds may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of accounts that represent a controlling ownership of more than 5% of the Funds’ outstanding shares could have a material impact on the Funds. As of January 31, 2017, based on management’s evaluation of the shareholder account base, one account in the Grosvenor Fund has been identified as representing an affiliated controlling ownership of approximately 65% and one unaffiliated account of approximately 32% of the Fund’s outstanding shares.
Trustee Fees and Expenses
As compensation for their service to the Trust and the American Beacon Select Funds Trust, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.
3. | Security Valuation and Fair Value Measurements |
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4:00 p.m.
Eastern Time, each day that the Exchange is open for business. Equity securities, including closed-end funds and exchange-traded funds (“ETFs”), for which market quotations are available, are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
51
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Manager determines that developments between the earlier close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of its portfolio securities, the Manager will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Manager reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund’s pricing time of 4:00 p.m. Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. These securities are fair valued using a pricing service and are categorized as Level 2 in the fair value hierarchy. The pricing service, using methods approved by the Board, considers the correlation of the trading patterns of the foreign security to intraday trading in the U.S. markets, based on indices of domestic securities and other appropriate indicators such as prices of relevant ADRs and futures contracts. The Valuation Committee may also fair value securities in other situations, such as when a particular foreign market is closed but a Fund is open. The Fund uses outside pricing services to provide closing prices and information to evaluate and/or adjust those prices. As a means of evaluating its security valuation process, the Valuation Committee routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices.
Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, established by the Fund’s Board.
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the margin disclosed on the Statements of Assets and Liabilities.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
52
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Level 1 - | Quoted prices in active markets for identical securities. | |
Level 2 - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Fixed-income securities are generally considered Level 2 as they are valued using observable inputs. | |
Level 3 - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Common stocks, ETFs, and financial derivative instruments, such as futures contracts or options that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers. Depending on the product and the terms of the transaction, the fair value of the financial derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends, and exchange rates. Financial derivatives that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
53
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The Funds’ investments are summarized by level based on the inputs used to determine their values. As of
January 31, 2017, the investments were classified as described below:
Grosvenor Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Common Stock | $ | 12,750,742 | $ | — | $ | — | $ | 12,750,742 | ||||||||
Participatory Notes | 391,040 | — | — | 391,040 | ||||||||||||
Warrants | 2 | — | — | 2 | ||||||||||||
Short-Term Investments - Money Market Funds | 2,991,077 | — | — | 2,991,077 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities - Assets | $ | 16,132,861 | $ | — | $ | — | $ | 16,132,861 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Common Stock (Sold Short) | $ | (3,469,657 | ) | $ | — | $ | — | $ | (3,469,657 | ) | ||||||
Exchange Traded Instruments (Sold Short) | (1,419,238 | ) | — | — | (1,419,238 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities - Liabilities | (4,888,895 | ) | — | — | (4,888,895 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 11,243,966 | $ | — | $ | — | $ | 11,243,966 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivatives Instruments - Assets | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | 2,154 | $ | — | $ | 2,154 | ||||||||
Purchased Options | 12,928 | — | — | 12,928 | ||||||||||||
Total Return Swaps | — | 195,716 | — | 195,716 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 12,928 | $ | 197,870 | $ | — | $ | 210,798 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivatives Instruments - Liabilities | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | (10,840 | ) | $ | — | $ | (10,840 | ) | ||||||
Written Options | (1,890 | ) | — | — | (1,890 | ) | ||||||||||
Total Return Swaps | — | (31,945 | ) | — | (31,945 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | (1,890 | ) | $ | (42,785 | ) | $ | — | $ | (44,675 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Numeric Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Common Stock | $ | 32,104,201 | $ | — | $ | — | $ | 32,104,201 | ||||||||
Exchange Traded Instruments | 4,548,189 | — | — | 4,548,189 | ||||||||||||
Short-Term Investments - Money Markets | 3,929,099 | — | — | 3,929,099 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities - Assets | $ | 40,581,489 | $ | — | $ | — | $ | 40,581,489 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Common Stock (Sold Short) | $ | (26,806,657 | ) | $ | — | $ | — | $ | (26,806,657 | ) | ||||||
Exchange Traded Instruments (Sold Short) | (4,665,486 | ) | — | — | (4,665,486 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities - Liabilities | (31,472,143 | ) | — | — | (31,472,143 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 9,109,346 | $ | — | $ | — | $ | 9,109,346 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivatives Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 232,110 | $ | — | $ | — | $ | 232,110 | ||||||||
Swap Agreements | — | 714,697 | — | 714,697 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 232,110 | $ | 714,697 | $ | — | $ | 946,807 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivatives Instruments - Liabilities | ||||||||||||||||
Futures Contracts | $ | (34,827 | ) | $ | — | $ | — | $ | (34,827 | ) | ||||||
Swap Agreements | — | (333,728 | ) | — | (333,728 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | (34,827 | ) | $ | (333,728 | ) | $ | — | $ | (368,555 | ) | ||||||
|
|
|
|
|
|
|
|
(1) | Refer to Schedules of Investments for industry information. |
U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Funds’ assets and liabilities. As of January 31, 2017, the Grosvenor Fund transferred $387,682 of Common Stock and $(75,118) of Common Stock (Sold Short) from Level 2 to Level 1. These transfers from Level 2 to Level 1 were due to a prior year assessment that adjustments should be applied to certain securities due to significant movements in the market. There were no transfers between levels for the Numeric Fund.
54
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
4. | Securities and Other Investments |
American Depositary Receipts (“ADRs”)
ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Funds’ possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the Funds may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Funds to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
Common Stock
Common stock generally takes the form of shares in a corporation which represent an ownership interest. It ranks below preferred stock and debt securities in claims for dividends and for assets of the company in a liquidation or bankruptcy. The value of a company’s common stock may fall as a result of factors directly relating to that company, such as decisions made by its management or decreased demand for the company’s products or services. A stock’s value may also decline because of factors affecting not just the company, but also companies in the same industry or sector. The price of a company’s stock may also be affected by changes in financial markets that are relatively unrelated to the company, such as changes in interest rates, currency exchange rates or industry regulation. Companies that elect to pay dividends on their common stock generally only do so after they invest in their own business and make required payments to bondholders and on other debt and preferred stock. Therefore, the value of a company’s common stock will usually be more volatile than its bonds, other debt and preferred stock. Common stock may be exchange-traded or over-the-counter (“OTC”). OTC stock may be less liquid than exchange-traded stock.
Foreign Securities
The Funds may invest in U.S. dollar-denominated and non-U.S. dollar denominated equity and debt securities of foreign issuers and foreign branches of U.S. banks, including negotiable CDs, bankers’ acceptances, and commercial paper. Foreign issuers are issuers organized and doing business principally outside the United States and include corporations, banks, non-U.S. governments, and quasi-governmental organizations. While investments in foreign securities are intended to reduce risk by providing further diversification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political or social instability, nationalization, expropriation, or confiscatory taxation); the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States; different laws and customs governing securities tracking; and possibly limited access to the courts to enforce a Fund’s rights as an investor.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Illiquid and Restricted Securities
The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933 (the “Securities Act”). 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. Disposal of both illiquid and restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the period ended January 31, 2017 are disclosed in the Notes to the Schedules of Investments.
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 Funds, to purchase such unregistered securities if certain conditions are met.
Rights and Warrants
Rights are short-term warrants issued in conjunction with new stock or bond issues. 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. The percentage increase or decrease in the value of a warrant may be greater than the percentage increase or decrease in the value of the underlying common stock. Warrants may be purchased with values that vary depending on the change in value of one or more specified indices (“index warrants”). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of the exercise. The market for warrants or rights may be very limited and it may be difficult to sell them promptly at an acceptable price. There is no specific limit on the percentage of assets the Funds may invest in rights and warrants.
Real Estate Related Investment Trusts
The Funds may gain exposure to the real estate sector by investing in real estate investment trusts (“REITs”). REITs report information on the source of their distributions annually. The Funds re-characterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis, the re-characterization will be estimated based on available information which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year.
Short Sales
The Funds may enter into short sale transactions. A short sale is a transaction in which a Fund sells a security it does not own in anticipation of a decline in the market price of the security. Securities sold in short sale transactions and the dividends and interest payable on such securities, if any, are reflected as a liability on the Statements of Assets and Liabilities. A Fund is obligated to deliver the security at the market price at the time the short position is closed. The risk of loss on a short sale transaction is theoretically unlimited, because there is no limit to the cost of replacing the security sold short, whereas losses from purchase transactions cannot exceed the total amount invested. As of January 31, 2017, short positions were held by the Funds and are detailed in the Schedules of Investments.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Participatory Notes
Participatory Notes are structured as unsecured and unsubordinated debt securities designed to replicate exposure to the underlying referenced equity investment and are sold by a bank or broker-dealer in markets where the Fund is restricted from directly purchasing equity securities. The Fund may tender a participatory note for cash payment in an amount that reflects the current market value of the referenced underlying equity investments. There can, however, be no assurance that the trading price or value of the participatory notes will equal the value of the underlying value of the equity securities they seek to replicate. As of January 31, 2017, participatory notes were held by the Grosvenor Fund and are detailed in the Schedule of Investments.
Other Investment Company Securities and Other Exchange Traded Products
The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Funds become a shareholder of that investment company. As a result, the Funds’ shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Funds’ shareholders directly bear in connection with the Funds’ own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
Master Agreements
The Funds are a party to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties that govern transactions in over-the-counter derivative and foreign exchange contracts entered into by the Funds and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial derivative transactions have different mechanics and are sometimes traded out of different legal entities of particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors surrounding the settlement of certain forward settling transactions, such as delayed delivery or sale-buyback financing transactions by and between a Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral.
5. | Financial Derivative Instruments |
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Funds usually reflect this amount on the Schedules of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
During the period ended January 31, 2017, the Numeric Fund entered into future contracts primarily for exposing cash to markets.
The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Number of Futures Contracts Outstanding | ||||
Fund | Period ended January 31, 2017 | |||
Numeric | 141 |
Options Contracts
The Grosvenor Fund may write (1) call and put options on futures, swaps (“swaptions”), securities, commodities or currencies they own or in which they may invest and (2) inflation-capped options. Writing put options tends to increase the Fund’s exposure to unfavorable movements of the underlying instrument in exchange for an upfront premium. Writing call options tends to decrease the Fund’s exposure to favorable movements of the underlying instrument in exchange for an upfront premium. When the Fund writes a call, put, or inflation-capped option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. The purpose of inflation-capped options is to protect the buyer from inflation erosion above a certain rate on a given notional exposure. A floor can be used to give downside protection to investments in inflation-linked products. These liabilities are reflected as “Written Options, at fair value” on the Statements of Assets and Liabilities. Certain options may be written with premiums to be determined on a future date. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying futures, swap, security or currency transaction to determine the realized gain or loss when the underlying transaction is sold. The Fund as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market.
The Fund may also purchase put and call options. Purchasing call options tends to increase the Fund’s exposure to favorable movements of the underlying instrument in exchange for paying an upfront premium. Purchasing put options tends to decrease the Fund’s exposure to unfavorable movements of the underlying instrument. The Fund pays a premium which is included on the Fund’s Statements of Assets and Liabilities as an investment and subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss when the underlying transaction is sold.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
For the period ended January 31, 2017, the Fund purchased/sold options primarily for return enhancement and hedging.
The Fund’s option contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of options contracts. For the purpose of this disclosure, volume is measured by contracts outstanding at each quarter end.
Average Option Notional Amounts Outstanding | ||||||||
Period ended January 31, 2017 | ||||||||
Fund | Purchased Contracts | Written Contracts | ||||||
Grosvenor | $ | 111,029 | $ | 2,025 |
Forward Currency Contracts
The Grosvenor Fund may enter into forward currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Fund’s securities denominated in foreign currencies. Forward currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Fund may also use forward currency contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. The Fund bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Fund also bears the credit risk if the counterparty fails to perform under the contract.
For the period ended January 31, 2017, the Fund entered into forward currency contracts primarily for speculative purposes.
The Fund’s forward currency contract notional dollar values outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of foreign currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD.
Average Forward Currency Notional Amounts Outstanding | ||||||||
Period ended January 31, 2017 | ||||||||
Fund | Purchased Contracts | Sold Contracts | ||||||
Grosvenor | $ | 151,986 | $ | 731,684 |
Total Return Swap Agreements
The Grosvenor Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
The total return swap contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of total return swap contracts. For the purpose of this disclosure, volume is measured by contracts outstanding at each quarter end.
Average Total Return Swap Notional Amounts Outstanding | ||||
Fund | Period ended January 31, 2017 | |||
Grosvenor | $ | 12,138,985 |
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Contracts for Difference
The Numeric Fund may utilize equity-related securities including total return swaps based on individual companies (also referred to as contracts for difference (“CFDs”)). A CFD is a form of equity swap in which its value is based on the fluctuating value of some underlying asset (e.g., shares of a particular stock or a stock index). A CFD is a contract between two parties, buyer and seller, stipulating that the seller will pay to the buyer the difference between the nominal value of the underlying stock at the opening of the contract and the stock’s value at the close of the contract. The size of the contract and the contract’s expiration date are typically negotiated by the parties to the CFD transaction. CFDs enable the Funds to take short or long positions on an underlying stock and thus potentially capture gains on movements in the share prices of the stock without the need to own the underlying stock. 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 equity securities directly as well as the other risks associated with the investment in swaps. As with other types of swap transactions, CFDs also carry counterparty risk, i.e., the risk that the counterparty to the CFD transaction may be unable or unwilling to make payments or to otherwise honor its financial obligations under the terms of the contract. If the counterparty were to do so, the value of the contract, and of the Funds’ shares, may be reduced. Entry into a CFD transaction may, in certain circumstances, require the payment of an initial margin and adverse market movements against the underlying stock may require the buyer to make additional margin payments. The Fund’s use of swaps is intended to generate profits, adjust leverage, hedge exposures, and manage volatility.
The CFDs outstanding fluctuate throughout the operating year as required to meet strategic requirements.
The following table illustrates the average quarterly volume of these contracts. For the purpose of this disclosure, volume is measured by contracts outstanding at each quarter end.
Average Contracts for Difference Notional Amounts Outstanding | ||||
Fund | Period ended January 31, 2017 | |||
Numeric (1) | $ | 7,675,920 |
(1) | Averages presented are representative of the inception date to period end. |
The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure (1):
Grosvenor Fund
Fair Values of financial derivative instruments on the Statements of Assets and Liabilities as of January 31, 2017:
Derivatives not accounted for as hedging instruments | ||||||||||||
Assets: | Equity Contracts | Foreign Exchange Contracts | Total | |||||||||
Purchased options outstanding | $ | 12,677 | $ | 251 | $ | 12,928 | ||||||
Unrealized appreciation from forward currency contracts | — | 2,154 | 2,154 | |||||||||
Unrealized appreciation from swap agreements | 195,716 | — | 195,716 | |||||||||
|
|
|
|
|
| |||||||
$ | 208,393 | $ | 2,405 | $ | 210,798 | |||||||
|
|
|
|
|
|
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Liabilities: | Equity Contracts | Foreign Exchange Contracts | Total | |||||||||
Written options outstanding | $ | (1,890 | ) | $ | — | $ | (1,890 | ) | ||||
Unrealized depreciation from forward currency contracts | — | (10,840 | ) | (10,840 | ) | |||||||
Unrealized depreciation from swap agreements | (31,495 | ) | — | (31,945 | ) | |||||||
|
|
|
|
|
| |||||||
$ | (33,385 | ) | $ | (10,840 | ) | $ | (44,675 | ) | ||||
|
|
|
|
|
| |||||||
Realized gain (loss) from derivatives recognized as a result from operations: | Equity Contracts | Foreign Exchange Contracts | Total | |||||||||
Net realized gain (loss) from swap agreements | $ | (20,105 | ) | $ | — | $ | (20,105 | ) | ||||
Net realized gain (loss) from options contracts | (94,036 | ) | — | (94,036 | ) | |||||||
Net realized gain (loss) from foreign currency transactions | — | (3,005 | ) | (3,005 | ) | |||||||
|
|
|
|
|
| |||||||
Total realized gains (losses) on derivatives: | $ | (114,141 | ) | $ | (3,005 | ) | $ | (117,146 | ) | |||
|
|
|
|
|
| |||||||
Net change in unrealized appreciation (depreciation) of derivatives recognized as | Equity Contracts | Foreign Exchange Contracts | Total | |||||||||
Change in net unrealized appreciation (depreciation) of swap agreements | $ | 150,775 | $ | — | $ | 150,775 | ||||||
Change in net unrealized appreciation (depreciation) of options contracts | (15,023 | ) | 112 | (14,911 | ) | |||||||
Change in net unrealized appreciation (depreciation) of foreign currency transactions | — | (4,560 | ) | (4,560 | ) | |||||||
|
|
|
|
|
| |||||||
Total Net change in unrealized appreciation (depreciation): | $ | 135,752 | $ | (4,448 | ) | $ | 131,304 | |||||
|
|
|
|
|
|
Numeric Fund
Fair Values of financial derivative instruments not accounted for as hedging instruments as of January 31, 2017:
Assets: | Equity Contracts | |||
Receivable for variation margin from open futures contracts (2) | $ | 232,110 | ||
Unrealized appreciation from swap agreements | 714,697 | |||
|
| |||
$ | 946,807 | |||
|
| |||
Liabilities: | Equity Contracts | |||
Payable for variation margin from open futures contracts (2) | $ | (34,827 | ) | |
Unrealized depreciation from swap agreements | (333,728 | ) | ||
|
| |||
$ | (368,555 | ) | ||
|
| |||
Realized gain (loss) from derivatives recognized as a result from operations: | Equity Contracts | |||
Net realized gain (loss) from futures contracts | $ | (146,235 | ) | |
Net realized gain (loss) from swap agreements | 177,405 | |||
|
| |||
Total realized gains (losses) on derivatives: | $ | 31,170 | ||
|
|
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Net change in unrealized appreciation (depreciation) of derivatives recognized as a result | Equity Contracts | |||
Change in net unrealized appreciation (depreciation) of futures contracts | $ | 197,283 | ||
Change in net unrealized appreciation (depreciation) of swap agreements | 380,969 | |||
|
| |||
Total Net change in unrealized appreciation (depreciation): | $ | 578,252 | ||
|
|
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | Includes cumulative appreciation (depreciation) of futures contracts as reported in the Schedules of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
6. | Principal Risks |
Investing in the Funds may involve certain risks including, but not limited to, those described below.
Counterparty Risk
The Funds are 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 Funds.
Currency Risk
The Funds may have exposure to foreign currencies by making direct investments in non-U.S. currencies or in securities denominated in non-U.S. currencies, purchasing or selling forward currency exchange contracts in non-U.S. currencies, non-U.S. currency futures contracts and swaps for cross-currency investments. Foreign currencies will fluctuate, and may decline, in value relative to the U.S. dollar and other currencies and thereby affect the Funds’ investments in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, or in derivatives that provide exposure to, foreign (non-U.S.) currencies.
Derivatives Risk
Derivatives may involve significant risk. The use of derivative instruments may expose the Funds 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 Funds’ initial investment. Derivatives may be illiquid and may be more volatile than other types of investments. The Funds may buy or sell derivatives not traded on an exchange and 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. As a result, the Funds may obtain no recovery of 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.
Emerging Markets Risk
When investing in emerging markets, the risks of investing in foreign securities discussed below are heightened. Emerging 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 uncertainties; an economy’s dependence on revenues from particular commodities or on international aid or development assistance; currency transfer restrictions; a limited number of potential buyers for such securities; and delays and disruptions in securities settlement procedures.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Forward Currency Contracts Risk
Foreign currency forward contracts, including non-deliverable forwards, are derivative instruments pursuant to a contract with a counterparty to pay 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. The use of foreign currency forward contracts may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities or currencies underlying the foreign currency forward contract.
Futures Contract Risk
Futures contracts are derivative investments pursuant to a contract with a counterparty to pay 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 Funds to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. Futures contracts may experience dramatic price changes (losses) and imperfect correlation between the price of the contract and the underlying security or index which will increase the volatility of the Funds 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).
High Portfolio Turnover Risk
Portfolio turnover is a measure of the Funds’ trading activity over a one-year period. A portfolio turnover rate of 100% would indicate that the Funds sold and replaced the entire value of its securities holdings during the period. High portfolio turnover could increase the Funds’ transaction costs, have a negative impact on performance, and generate higher capital gain distributions to shareholders than if the Funds had a lower portfolio turnover rate.
Leverage Risk
The Fund’s use of futures, forward contracts, swaps, other derivative instruments and selling securities short will have the economic effect of financial leverage. Financial leverage magnifies the exposure to the swings in prices of an asset or class of assets underlying a derivative instrument and results in increased volatility, which means that the Funds will have the potential for greater losses than if the Funds do 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 to be volatile.
Liquidity Risk
Liquidity risk is the risk that the Funds may not be able to dispose of securities or close out derivatives transactions readily at a favorable time or prices (or at all) or at prices approximating those at which the Funds currently value them. For example, certain investments are subject to restrictions on resale, may trade in the over-the-counter market or in limited volume, or may not have an active trading market. Illiquid securities may trade at a discount from comparable, more liquid investments and may be subject to wide fluctuations in market value. It may be difficult for the Funds to value illiquid securities accurately. The market for certain investments may become illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer. Disposal of illiquid securities may entail registration expenses and other transaction costs that are higher than those for liquid securities. The Funds may seek to borrow money to meet its obligations (including among other things redemption obligations) if it is unable to dispose of illiquid investments, resulting in borrowing expenses and possible leveraging of the Funds. In some cases, due to unanticipated levels of illiquidity the Funds may choose to meet its redemption obligations wholly or in part by distributions of assets in-kind.
63
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Market Risk
Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in fixed income instruments experiencing unusual liquidity issues, increased price volatility and, in some cases, credit downgrades and increased likelihood of default. These events have reduced the willingness and ability of some lenders to extend credit, and have made it more difficult for some borrowers to obtain financing on attractive terms, if at all. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.
In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it is difficult to predict the impact on various markets of a significant rate increase, whether brought about by U.S. policy makers or by dislocations in world markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.
Multi-Manager Risk
The Grosvenor Fund’s performance depends on, among other things, the Lead Sub-Advisor’s success in monitoring and allocating the Fund’s assets among the Sub-Advisors. The Sub-Advisors investment styles may not always be complementary. The Sub-Advisors make investment decisions independently of one another, and may make conflicting investment decisions. The Fund’s multi-manager approach may result in the Fund investing a significant percentage of its assets in certain types of securities, which could be beneficial or detrimental to the Fund’s performance depending on the performance of those securities and the overall market environment. The Sub-Advisors may underperform the market generally or underperform other investment managers that could have been selected for the Fund. The Lead Sub-Advisor and the Sub-Advisors also may use proprietary or licensed strategies that are based on considerations and factors that are not fully disclosed to the Board, the Manager or the Lead Sub-Advisor. The success of a particular Sub-Advisor in implementing its investment strategy is dependent on the expertise of its portfolio managers, and certain Sub-Advisors may have a limited number of investment management professionals. The loss of one or more of a Sub-Advisor’s key investment professionals could have a materially adverse effect on the performance of the Fund. A Sub-Advisor may have little or no experience managing the assets of a registered investment company which, unlike the other accounts a Sub-Advisor may manage, is subject to daily inflows and outflows of investor cash and are subject to certain legal and tax-related restrictions on their investments and operations.
Non-Diversification Risk
The Funds are non-diversified, which means the Funds may focus its investments in the securities of a comparatively small number of issuers. Investments in securities of a limited number of issuers exposes the Funds to greater market risk and potential losses than if assets were diversified among the securities of a greater number of issuers.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Other Investment Companies Risk
The Funds may invest in shares of other registered investment companies, including exchange-traded funds (“ETFs”). To the extent that the Funds invest in shares of other registered investment companies, the shareholders will indirectly bear fees and expenses charged by the underlying funds in addition to the Funds’ direct fees and expenses and will be subject to the risks associated with investments in those funds. For example, ETF shares may trade at a premium or discount to their net asset value. An ETF that tracks an index may not precisely replicate the returns of its benchmark index.
Short Position Risk
The Funds will incur a loss as a result of a short position if the price of the instrument sold short increases in value between the date of the short sale and the date on which an offsetting position is purchased. Short positions may be considered speculative transactions and involve special risks, including greater reliance on the sub-advisor’s ability to accurately anticipate the future value of a security or instrument. The Funds’ losses are potentially unlimited in a short position transaction.
Valuation Risk
The Funds may value certain assets at a price different from the price at which they can be sold. This risk may be especially pronounced for investments, such as certain derivatives, which may be illiquid or which may become illiquid.
Offsetting Assets and Liabilities
The Funds are parties to enforceable master netting agreements between brokers and counterparties, which provide for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements such as repurchase agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of January 31, 2017.
65
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Grosvenor Fund
Offsetting of Financial Asset and Derivative Assets as of January 31, 2017:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Assets Presented in the Statements of Assets and Liabilities | |||||||||
Swap agreements | $ | 195,716 | $ | — | $ | 195,716 | ||||||
Purchased options outstanding | 12,928 | — | 12,928 | |||||||||
Forward currency contracts | 2,154 | — | 2,154 | |||||||||
|
|
|
|
|
| |||||||
$ | 210,798 | $ | — | $ | 210,798 | |||||||
|
|
|
|
|
|
Offsetting of Financial Liabilities and Derivative Liabilities as of January 31, 2017:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Liabilities Presented in the Statements of Assets and Liabilities | |||||||||
Swap agreements | $ | (31,945 | ) | $ | — | $ | (31,945 | ) | ||||
Written options outstanding | (1,890 | ) | — | (1,890 | ) | |||||||
Forward currency contracts | (10,840 | ) | — | (10,840 | ) | |||||||
|
|
|
|
|
| |||||||
$ | (44,675 | ) | $ | — | $ | (44,675 | ) | |||||
|
|
|
|
|
|
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of January 31, 2017:
Gross Amounts Offset in the Statements of Assets and Liabilities | ||||||||||||||||
Counterparty | Net Amount of Assets Presented in the Statement of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||
Morgan Stanley & Co, Inc. | $ | 166,123 | $ | 3,360,827 | $ | 1,216,144 | $ | 4,743,094 | ||||||||
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|
|
|
|
|
|
Numeric Fund
Offsetting of Financial Asset and Derivative Assets as of January 31, 2017:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Assets Presented in the Statements of Assets and Liabilities | |||||||||
Futures contracts (1) | $ | 232,110 | $ | — | $ | 232,110 | ||||||
Swap agreements | 714,697 | — | 714,697 | |||||||||
|
|
|
|
|
| |||||||
$ | 946,807 | $ | — | $ | 946,807 | |||||||
|
|
|
|
|
|
Offsetting of Financial Liabilities and Derivative Liabilities as of January 31, 2017:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Liabilities Presented in the Statements of Assets and Liabilities | |||||||||
Futures contracts (1) | $ | (34,827 | ) | $ | — | $ | (34,827 | ) | ||||
Swap agreements | (333,728 | ) | — | (333,728 | ) | |||||||
|
|
|
|
|
| |||||||
$ | (368,555 | ) | $ | — | $ | (368,555 | ) | |||||
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|
|
|
|
|
66
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of January 31, 2017:
Gross Amounts Offset in the Statements of Assets and Liabilities | ||||||||||||||||
Counterparty | Net Amount of Assets Presented in the Statement of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||
Morgan Stanley & Co, Inc. | $ | 578,252 | $ | 2,639,286 | $ | 17,775,000 | $ | 20,992,538 | ||||||||
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|
|
|
(1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
7. | Federal Income and Excise Taxes |
It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecorded tax liabilities in the accompanying financial statements. The tax for the period ended January 31, 2016 for the Grosvenor Fund remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
The tax character of distributions paid were as follows:
Grosvenor Fund | Numeric Fund | |||||||||||
Year Ended January 31, 2017 | Year Ended January 31, 2016 | Period Ended January 31, 2017 | ||||||||||
Distributions paid from: | ||||||||||||
Ordinary Income* | ||||||||||||
Institutional Class | $ | 294,627 | $ | — | $ | — | ||||||
Y Class | 4,466 | — | — | |||||||||
Investor Class | 6,661 | — | — | |||||||||
A Class | 3,414 | — | — | |||||||||
C Class | 4,070 | — | — | |||||||||
Ultra Class | — | — | — | |||||||||
Long-term capital gains | ||||||||||||
Institutional Class | 15,125 | — | — | |||||||||
Y Class | 229 | — | — | |||||||||
Investor Class | 342 | — | — | |||||||||
A Class | 175 | — | — | |||||||||
C Class | 209 | — | — | |||||||||
Ultra Class | — | — | — | |||||||||
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|
|
|
|
| |||||||
Total distributions paid | $ | 329,318 | $ | — | $ | — | ||||||
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|
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
67
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
As of January 31, 2017, the components of distributable earnings (deficit) on a tax basis were as follows:
Grosvenor Fund | Numeric Fund | |||||||
Cost basis of investments for federal income tax purposes | $ | 14,919,013 | $ | 40,458,503 | ||||
Unrealized appreciation | 1,485,739 | 1,192,665 | ||||||
Unrealized depreciation | (271,891 | ) | (1,069,679 | ) | ||||
|
|
|
| |||||
Net unrealized appreciation (depreciation) | 1,213,848 | 122,986 | ||||||
Undistributed ordinary income | 141,571 | 896,715 | ||||||
Undistributed long-term capital gains | 247,383 | 33,227 | ||||||
Accumulated capital and other losses | — | — | ||||||
Other temporary differences | (593,335 | ) | (460,310 | ) | ||||
|
|
|
| |||||
Distributable earnings (deficits) | $ | 1,009,467 | $ | 592,618 | ||||
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|
|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gain (losses) on certain derivative instruments, the realization for tax purposes of unrealized gain (losses) on investments in passive foreign investment companies, reclassifications of income from real estate investment securities and master limited partnerships, unsettled short positions, and straddles.
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from foreign currency, gains (losses) from sales of investments in passive foreign investment companies, reclassifications of income from real estate investment securities and master limited partnerships, and dividends that have been reclassified as of January 31, 2017 :
Grosvenor Fund | Numeric Fund | |||||||
Paid-in-capital | $ | (550 | ) | $ | — | |||
Undistributed (overdistribution of) net investment income | 47,247 | 224,916 | ||||||
Accumulated net realized gain (loss) | (46,698 | ) | (224,916 | ) | ||||
Unrealized appreciation (depreciation) of investments in futures contracts | 1 | — |
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by Funds are carried forward indefinitely and retain their character as short-term and/or long-term losses. The Funds do not have any capital loss carryforwards for the year ending January 31, 2017.
8. | Investment Transactions |
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the periods ended January 31, 2017 were as follows:
Grosvenor Fund | Numeric Fund | |||||||
Purchases (excluding U.S. government securities) | $ | 45,500,484 | $ | 59,445,934 | ||||
Sales and Maturities (excluding U.S. government securities) | 46,224,370 | 54,543,908 |
68
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
A summary of the Funds’ direct transactions in the USG Select Fund for the year ended January 31, 2017 were as follows:
Fund | January 31, 2016 Shares/Fair Value | Purchases | Sales | January 31, 2017 Shares/Fair Value | Dividend Income | |||||||||||||||
Grosvenor | $ | — | $ | 20,715,905 | $ | 17,724,828 | $ | 2,991,077 | $ | 6,492 | ||||||||||
Numeric | — | 49,155,732 | 45,226,633 | 3,929,099 | 6,546 |
9. | Option Contracts Written |
The premium amount and number of option contracts written by the Grosvenor Fund during the year ended January 31, 2017 were as follows:
Fund | Number of Contracts | Notional Amount | Amount of Premiums | |||||||||
Outstanding at January 31, 2016 | (1 | ) | $ | (100 | ) | $ | (133 | ) | ||||
Options written | (199 | ) | (19,900 | ) | (11,961 | ) | ||||||
Options expired | 143 | 14,300 | 6,688 | |||||||||
Options exercised | 2 | 200 | 263 | |||||||||
Options closed | 53 | 5,300 | 3,349 | |||||||||
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|
|
| |||||||
Outstanding at January 31, 2017 | (2 | ) | $ | (200 | ) | $ | (1,794 | ) | ||||
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|
|
10. | Capital Share Transactions |
The tables below summarize the activity in capital shares for each Class of the Fund:
Institutional Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | October 1 to January 31, 2016 | |||||||||||||||
Grosvenor Long/Short Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | — | $ | — | 601,571 | $ | 6,027,226 | ||||||||||
Reinvestment of dividends | 29,613 | 309,752 | — | — | ||||||||||||
Shares redeemed | (58,796 | ) | (572,526 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (29,183 | ) | $ | (262,774 | ) | 601,571 | $ | 6,027,226 | ||||||||
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|
|
|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | October 1 to January 31, 2016 | |||||||||||||||
Grosvenor Long/Short Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 9,255 | $ | 96,500 | 1,986 | $ | 20,000 | ||||||||||
Reinvestment of dividends | 449 | 4,695 | — | — | ||||||||||||
Shares redeemed | (436 | ) | (4,580 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 9,268 | $ | 96,615 | 1,986 | $ | 20,000 | ||||||||||
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|
|
| |||||||||
Investor Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | October 1 to January 31, 2016 | |||||||||||||||
Grosvenor Long/Short Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 3,471 | $ | 33,712 | 33,773 | $ | 338,112 | ||||||||||
Reinvestment of dividends | 673 | 7,003 | — | — | ||||||||||||
Shares redeemed | (18,720 | ) | (185,132 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (14,576 | ) | $ | (144,417 | ) | 33,773 | $ | 338,112 | ||||||||
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|
|
|
69
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
A Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | October 1 to January 31, 2016 | |||||||||||||||
Grosvenor Long/Short Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,211 | $ | 12,123 | 10,833 | $ | 109,427 | ||||||||||
Reinvestment of dividends | 345 | 3,589 | — | — | ||||||||||||
Shares redeemed | (9,862 | ) | (99,704 | ) | — | — | ||||||||||
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|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (8,306 | ) | $ | (83,992 | ) | 10,833 | $ | 109,427 | ||||||||
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| |||||||||
C Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | October 1 to January 31, 2016 | |||||||||||||||
Grosvenor Long/Short Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 5,482 | $ | 53,784 | — | $ | — | ||||||||||
Reinvestment of dividends | 415 | 4,279 | — | — | ||||||||||||
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|
|
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| |||||||||
Net increase in shares outstanding | 5,897 | $ | 58,063 | — | $ | — | ||||||||||
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|
Institutional Class | ||||||||
Year Ended January 31, 2017* | ||||||||
Numeric Integrated Alpha Fund | Shares (1) | Amount(1) | ||||||
Shares sold | 500,000 | $ | 5,000,000 | |||||
Shares redeemed | (957,948 | ) | (9,726,147 | ) | ||||
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|
|
| |||||
Net increase (decrease) in shares outstanding | (457,948 | ) | $ | (4,726,147 | ) | |||
|
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|
| |||||
Y Class | ||||||||
Year Ended January 31, 2017* | ||||||||
Numeric Integrated Alpha Fund | Shares(1) | Amount(1) | ||||||
Shares sold | — | $ | — | |||||
|
|
|
| |||||
Net increase in shares outstanding | — | $ | — | |||||
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| |||||
Investor Class | ||||||||
Year Ended January 31, 2017* | ||||||||
Numeric Integrated Alpha Fund | Shares(1) | Amount(1) | ||||||
Shares sold | — | $ | — | |||||
|
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|
| |||||
Net increase in shares outstanding | — | $ | — | |||||
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| |||||
Ultra Class | ||||||||
Year Ended January 31, 2017* | ||||||||
Numeric Integrated Alpha Fund | Shares(1) | Amount(1) | ||||||
Shares sold | 5,733,727 | $ | 58,420,763 | |||||
Shares redeemed | (155,085 | ) | (1,578,837 | ) | ||||
|
|
|
| |||||
Net increase in shares outstanding | 5,578,642 | $ | 56,841,926 | |||||
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|
* | For the period of November 1, 2016 through January 31, 2017. |
(1) | Seed capital has been received in the amounts of $4,700,000 for Institutional class and $100,000 each for the Y, Investor and Ultra classes, respectively. As a result, the shares were issued in the amounts of 470,000 for the Institutional Class and 10,000 for each remaining class respectively. |
11. | Subsequent Events |
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Funds financial statements through this date.
70
American Beacon Grosvenor Long/Short FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||
Year ended January 31, 2017 | October 1B to January 31, 2016 | Year ended January 31, 2017 | October 1B to January 31, 2016 | |||||||||||||
Net asset value, beginning of period | $ | 9.79 | $ | 10.00 | $ | 9.79 | $ | 10.00 | ||||||||
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| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.14 | ) | (0.02 | ) | (0.10 | ) | (0.01 | ) | ||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.22 | (0.19 | ) | 1.17 | (0.20 | ) | ||||||||||
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| |||||||||
Total income (loss) from investment operations | 1.08 | (0.21 | ) | 1.07 | (0.21 | ) | ||||||||||
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| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | — | — | — | — | ||||||||||||
Distributions from net realized gains | (0.21 | ) | — | (0.21 | ) | — | ||||||||||
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| |||||||||
Total distributions | (0.21 | ) | — | (0.21 | ) | — | ||||||||||
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| |||||||||
Redemption fees added to beneficial interests | — | — | — | — | ||||||||||||
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| |||||||||
Net asset value, end of period | $ | 10.66 | $ | 9.79 | $ | 10.65 | $ | 9.79 | ||||||||
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| |||||||||
Total return A | 11.06 | % | (2.10 | )%D | 10.96 | % | (2.10 | )%D | ||||||||
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| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 16,119,517 | $ | 15,098,172 | $ | 279,480 | $ | 166,300 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 6.13 | % | 11.84 | % C | 6.58 | % | 14.92 | % C | ||||||||
Expenses, before reimbursements, excluding non-operating expenses E | 3.82 | % | 9.99 | % C | 4.29 | % | 13.09 | % C | ||||||||
Expenses, net of reimbursements | 4.41 | % | 3.95 | % C | 4.49 | % | 4.03 | % C | ||||||||
Expenses, net of reimbursements, excluding non-operating expenses E | 2.10 | % | 2.10 | % C | 2.20 | % | 2.20 | % C | ||||||||
Net investment (loss), before expense reimbursements | (3.10 | )% | (10.23 | )% C | (3.57 | )% | (13.32 | )% C | ||||||||
Net investment (loss), net of reimbursements | (1.37 | )% | (2.34 | )% C | (1.48 | )% | (2.43 | )% C | ||||||||
Portfolio turnover rate | 250 | % | 77 | %D | 250 | % | 77 | %D | ||||||||
Investor Class | A Class | |||||||||||||||
Year ended January 31, 2017 | October 1B to January 31, 2016 | Year ended January 31, 2017 | October 1B to January 31, 2016 | |||||||||||||
Net asset value, beginning of period | $ | 9.78 | $ | 10.00 | $ | 9.78 | $ | 10.00 | ||||||||
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|
|
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| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | (0.21 | ) | (0.01 | ) | (0.23 | ) | (0.02 | ) | ||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.24 | (0.21 | ) | 1.26 | (0.20 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income (loss) from investment operations | 1.03 | (0.22 | ) | 1.03 | (0.22 | ) | ||||||||||
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| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | — | — | — | — | ||||||||||||
Distributions from net realized gains | (0.21 | ) | — | (0.21 | ) | — | ||||||||||
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| |||||||||
Total distributions | (0.21 | ) | — | (0.21 | ) | — | ||||||||||
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| |||||||||
Redemption fees added to beneficial interests | — | — | — | — | ||||||||||||
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|
| |||||||||
Net asset value, end of period | $ | 10.60 | $ | 9.78 | $ | 10.60 | $ | 9.78 | ||||||||
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|
| |||||||||
Total return A | 10.56 | % | (2.20 | )% D | 10.56 | % | (2.20 | )%D | ||||||||
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|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 362,643 | $ | 477,097 | $ | 185,823 | $ | 252,710 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 6.89 | % | 15.21 | % C | 6.96 | % | 14.66 | % C | ||||||||
Expenses, before reimbursements, excluding non-operating expenses E | 4.55 | % | 13.32 | % C | 4.59 | % | 12.80 | % C | ||||||||
Expenses, net of reimbursements | 4.82 | % | 4.37 | % C | 4.88 | % | 4.36 | % C | ||||||||
Expenses, net of reimbursements, excluding non-operating expenses E | 2.48 | % | 2.48 | % C | 2.50 | % | 2.50 | % C | ||||||||
Net investment (loss), before expense reimbursements | (3.80 | )% | (13.54 | )% C | (3.89 | )% | (13.03 | )% C | ||||||||
Net investment (loss), net of reimbursements | (1.73 | )% | (2.69 | )% C | (1.80 | )% | (2.74 | )% C | ||||||||
Portfolio turnover rate | 250 | % | 77 | %D | 250 | % | 77 | %D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
B | Commencement of operations. |
C | Annualized. |
D | Not annualized. |
E | Non-operating expenses consist of prime broker fees and dividends on securities sold short. |
71
American Beacon Grosvenor Long/Short FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||
Year ended January 31, 2017 | October 1B to January 31, 2016 | |||||||
Net asset value, beginning of period | $ | 9.76 | $ | 10.00 | ||||
|
|
|
| |||||
Income from investment operations: | ||||||||
Net investment (loss) | (0.22 | ) | (0.05 | ) | ||||
Net gains (losses) on investments (both realized and unrealized) | 1.16 | (0.19 | ) | |||||
|
|
|
| |||||
Total income (loss) from investment operations | 0.94 | (0.24 | ) | |||||
|
|
|
| |||||
Less distributions: | ||||||||
Dividends from net investment income | — | — | ||||||
Distributions from net realized gains | (0.21 | ) | — | |||||
Total distributions | (0.21 | ) | — | |||||
|
|
|
| |||||
Redemption fees added to beneficial interests | — | — | ||||||
|
|
|
| |||||
Net asset value, end of period | $ | 10.49 | $ | 9.76 | ||||
|
|
|
| |||||
Total return A | 9.66 | % | (2.40 | )%D | ||||
|
|
|
| |||||
Ratios and supplemental data: | ||||||||
Net assets, end of period | $ | 219,289 | $ | 146,348 | ||||
Ratios to average net assets: | ||||||||
Expenses, before reimbursements | 7.62 | % | 16.08 | % C | ||||
Expenses, before reimbursements, excluding non-operating expenses E | 5.33 | % | 14.23 | % C | ||||
Expenses, net of reimbursements | 5.53 | % | 5.10 | % C | ||||
Expenses, net of reimbursements, excluding non-operating expenses E | 3.25 | % | 3.25 | % C | ||||
Net investment (loss), before expense reimbursements | (4.61 | )% | (14.48 | )% C | ||||
Net investment (loss), net of reimbursements | (2.52 | )% | (3.49 | )% C | ||||
Portfolio turnover rate | 250 | % | 77 | %D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
B | Commencement of operations. |
C | Annualized. |
D | Not annualized. |
E | Non-operating expenses consist of prime broker fees and dividends on securities sold short. |
72
American Beacon Numeric Integrated Alpha FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | Investor Class | Ultra Class | |||||||||||||
November 1B to January 31, 2017 | November 1 B to January 31, 2017 | November 1 B to January 31, 2017 | November 1 B to January 31, 2017 | |||||||||||||
Net asset value, beginning of period | $ | 10.00 | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||||
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Income from investment operations: | ||||||||||||||||
Net investment (loss) | (4.25 | ) | (0.08 | ) | (0.08 | ) | (0.05 | ) | ||||||||
Net gains on investments (both realized and unrealized) | 4.53 | 0.34 | 0.33 | 0.32 | ||||||||||||
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Total income from investment operations | 0.28 | 0.26 | 0.25 | 0.27 | ||||||||||||
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Less distributions: | ||||||||||||||||
Dividends from net investment income | — | — | — | — | ||||||||||||
Distributions from net realized gains | — | — | — | — | ||||||||||||
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Total distributions | — | — | — | — | ||||||||||||
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Net asset value, end of period | $ | 10.28 | $ | 10.26 | $ | 10.25 | $ | 10.27 | ||||||||
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Total return A | 2.80 | %D | 2.60 | % D | 2.50 | % D | 2.70 | % D | ||||||||
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Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 123,935 | $ | 102,596 | $ | 102,524 | $ | 57,379,342 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 6.48 | % C | 12.24 | % C | 13.71 | % C | 6.74 | % C | ||||||||
Expenses, before reimbursements, excluding non-operating expenses E | 3.87 | % C | 9.68 | % C | 11.14 | % C | 3.72 | % C | ||||||||
Expenses, net of reimbursements | 4.56 | % C | 4.62 | % C | 4.90 | % C | 4.87 | % C | ||||||||
Expenses, net of reimbursements, excluding non-operating expenses E | 1.95 | % C | 2.05 | % C | 2.33 | % C | 1.85 | % C | ||||||||
Net investment (loss), before reimbursements | (4.74 | )% C | (10.64 | )%C | (12.11 | )% C | (5.04 | )% C | ||||||||
Net investment (loss), net of reimbursements | (2.82 | )% C | (3.02 | )%C | (3.30 | )% C | (3.17 | )% C | ||||||||
Portfolio turnover rate | 114 | % D | 114 | % D | 114 | % D | 114 | % D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
B | Commencement of operations. |
C | Annualized. |
D | Not annualized. |
E | Non-operating expenses consist of prime broker fees and dividends on securities sold short. |
73
Federal Tax Information
January 31, 2017 (Unaudited)
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended January 31, 2017. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2016.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2016. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Grosvenor Fund | Numeric Fund | |||||||
Corporate Dividends Received Deduction | 0.0 | % | 0.0 | % | ||||
Qualified Dividend Income | 0.0 | % | 0.0 | % | ||||
Long-term Capital Gain Distributions | $ | 16,080 | $ | — | ||||
Short-term Capital Gain Distributions | $ | 313,238 | $ | — |
Shareholders received notification in January 2017 of the applicable tax information necessary to prepare their 2016 income tax returns.
74
Disclosure Regarding Approval of the Management and
Investment Advisory Agreements (Unaudited)
Approvals Related to American Beacon Numeric Integrated Alpha Fund
At its August 3-4, 2016 meetings, the Board of Trustees (“Board”) considered: (1) the approval of the Management Agreement among American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Trust”), on behalf of the American Beacon Numeric Integrated Alpha Fund (“Fund”), a new series of the Trust, and (2) the approval of a new investment advisory agreement among the Manager, Numeric Investors, LLC (“Numeric”), and the Trust, on behalf of the Fund (the “Numeric Agreement”).
Approval of American Beacon Advisors, Inc.
Prior to the meeting, the Board reviewed information provided by the Manager in response to requests from the Board in connection with the Board’s consideration of the Management Agreement for the Fund, and the Investment Committee of the Board met with representatives of the Manager. The Board also considered information that had been provided by the Manager to the Board at its May 17, 2016 and June 7-8, 2016 meetings in connection with the review of the current Management Agreement between the Manager and the Trust as it related to the existing series of the Trust (“Existing Funds”).
Provided below is an overview of the primary factors the Board considered at its August 3-4, 2016 meetings at which the Board considered the approval of the Management Agreement with respect to the Fund. In determining whether to approve the Management Agreement, the Board considered, among other things, the following factors with respect to the Fund: (1) the nature and quality of the services to be provided; (2) the potential materiality of the estimated costs to be incurred by the Manager in rendering its services and the resulting profits or losses; (3) the extent to which economies of scale, if any, have been taken into account in setting the fee schedule; (4) whether fee levels reflect economies of scale, if any, for the benefit of investors; (5) comparisons of services and fees with contracts entered into by the Manager with the Existing Funds; and (6) any other benefits derived or anticipated to be derived by the Manager from its relationship with the Funds.
The Board did not identify any particular information that was most relevant to its consideration of the Management Agreement, and each Trustee may have afforded different weight to the various factors. Members of the Board’s Investment Committee posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the approval. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Management Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Management Agreement were reasonable and fair and that the approval of the Management Agreement was in the best interests of the Fund.
Nature, Extent and Quality of Services. The Board considered that it had reviewed the Management Agreement between the Manager and the Trust as it relates to the Existing Funds at its May 17, 2016 and June 7-8, 2016 meetings. At those meetings, the Board received detailed information regarding the Manager, including information with respect to the scope of services provided by the Manager to the Existing Funds and the background and experience of the Manager’s key investment personnel. At its May 17, 2016 and June 7-8, 2016 meetings, the Board also considered the Manager’s disciplined investment approach and goal to provide consistent above average long-term performance at a low cost on behalf of the Existing Funds and the Manager’s culture of compliance and support for compliance operations that reduces risks to the Existing Funds. The Board considered the Manager’s representation that the advisory, administrative and related services proposed to be provided to the Fund will be consistent with the services provided to the Existing Funds, except that the Fund is a single-manager fund and, therefore, the Manager will not allocate assets among multiple investment advisors, which it does for many of the Existing Funds. The Board also considered the background and experience of key investment personnel who will have primary responsibility for the day-to-day oversight of the Fund. Based on the foregoing information, the Board concluded that the nature, extent and quality of the services to be provided by the Manager were appropriate for the Fund.
75
Disclosure Regarding Approval of the Management and
Investment Advisory Agreements (Unaudited)
Investment Performance. The Board considered that the Fund is new and, therefore, had no historical performance for the Board to review with respect to the Manager. The Board also considered that it would review the performance of Numeric in connection with its consideration of the Numeric Agreement.
Costs of the Services Provided to the Fund and the Profits or Losses to be Realized by the Manager from its Relationship with the Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the estimated revenues to be earned and the expenses to be incurred by the Manager with respect to the Fund. The Board also considered that the Manager will receive any fees payable by the Funds pursuant to any future securities lending arrangement. The Board considered the Manager’s representation that its accounting system does not provide for cost allocation, except for those expenses which are specifically identifiable as expenses of the Fund. Accordingly, except for those expenses, the Manager created an allocation of expenses based upon the estimated percentage of time spent by its employees on non-distribution related business. The Board then considered that, at assumed asset levels, the Manager was projected to incur a pre-tax profit before and after distribution revenues and expenses from its first year of rendering services to the Fund. The Board also considered the amounts of those projected profits.
Comparisons of the amounts to be paid to the Manager under the Management Agreement and other funds in the relevant Morningstar category. In evaluating the Management Agreement, the Board reviewed the Manager’s proposed management fee schedule. The Board considered a comparison of the management fee rate to be charged by the Manager under the Management Agreement versus the fee rates charged by the Manager to comparable funds. The Board also considered that the management fee rate proposed by the Manager for the Fund, on a stand-alone basis, is lower than the average advisory fee rates paid by peer group funds in the Fund’s potential Morningstar, Inc. (“Morningstar”) categories. The Board considered that the management fee rate proposed by the Manager for the Fund, when combined with the proposed advisory fee rate to be paid to Numeric, is higher than the average advisory fee rate paid by peer group funds in the Fund’s potential Morningstar categories. In addition, the Board considered that the Manager has agreed to limit the expenses of the Fund for at least one year following the Fund’s inception date at levels that are higher than the average expense ratio paid by the peer group funds in the Fund’s potential Morningstar categories. The Board considered that Numeric would provide the Fund with a specialized investment process and that Numeric’s capacity in the Fund’s strategy was limited. This information assisted the Board in concluding that the management fee rate appeared to be within a reasonable range for the services to be provided to the Fund, in light of all the factors considered.
Economies of Scale. The Board considered the Manager’s representation that the proposed management fee rate for the Fund contains breakpoints, which the Manager believes properly reflect economies of scale for the benefit of the Fund’s shareholders.
Benefits to be Derived from the Relationship with the Fund. The Board considered the Manager’s representation that it does not anticipate any material “fall-out” benefits resulting from its proposed relationship with the Fund, except that the Manager’s overall relationship with the Trust has been and will continue to be a factor in helping the Manager attract separate account business. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationship with the Funds appear to be fair and reasonable.
Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Fund or the Manager, as that term is defined in the 1940 Act: (1) concluded that the proposed management fee is fair and reasonable with respect to the Fund; (2) determined that the Fund and its shareholders would benefit from the Manager’s management of the Fund; and (3) approved the Management Agreement on behalf of the Fund.
76
Disclosure Regarding Approval of the Management and
Investment Advisory Agreements (Unaudited)
Approval of Numeric Investors, LLC
Prior to the meeting, the Board reviewed information provided by Numeric in response to requests from the Board and/or the Manager in connection with the Board’s consideration of the Numeric Agreement, and the Investment Committee of the Board met with representatives of Numeric.
Provided below is an overview of the primary factors the Board considered at its August 3-4, 2016 meetings at which the Board considered the approval of the Numeric Agreement. In determining whether to approve the Numeric Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services to be provided; (2) the investment performance of Numeric; (3) the extent to which the potential materiality of the costs to be incurred by Numeric in rendering its services and the resulting profits or losses are relevant to the Board’s determination of whether to approve the Numeric Agreement; (4) the extent to which economies of scale, if any, have been taken into account in setting the fee schedule; (5) whether fee levels reflect these economies of scale, if any, for the benefit of investors; (6) comparisons of services and fees with contracts entered into by Numeric with other clients; and (7) any other benefits anticipated to be derived by Numeric from its relationship with the Fund.
The Board did not identify any particular information that was most relevant to its consideration of the Numeric Agreement, and each Trustee may have afforded different weight to the various factors. Members of the Board’s Investment Committee posed questions to various management personnel of Numeric regarding certain key aspects of the materials submitted in support of the approval. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Numeric Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Numeric Agreement were reasonable and fair and that the approval of the Numeric Agreement was in the best interests of the Fund.
Nature, extent and quality of the services to be provided by Numeric. The Board considered information regarding Numeric’s principal business activities, its reputation, financial condition and overall capabilities to perform the services under the Numeric Agreement. In addition, the Board considered the background and experience of the personnel who will be assigned responsibility for managing the Numeric Fund. The Board also considered Numeric’s investment resources, infrastructure and the adequacy of its compliance program. In addition, the Board took into consideration the Manager’s recommendation of Numeric. The Board considered Numeric’s representation regarding the strength of its financial condition and that its current staffing levels were adequate to service the Fund. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by Numeric were appropriate for the Fund in light of its investment objective, and, thus, supported a decision to approve the Numeric Agreement.
Performance of Numeric. The Board evaluated the information provided by Numeric and the Manager regarding the performance of the account currently managed in Numeric’s Integrated Alpha Strategy Composite (“Composite”) relative to the performance of the HFRI EH: Equity Market Neutral Index (“HFRI Index”), the BofA Merrill Lynch US 3-Month Treasury Bill Index (“BofA Index”) and the Morningstar Market Neutral Peer Group (“Peer Group”). The Board considered Numeric’s representation that the Composite outperformed the HFRI Index for the calendar year ended December 31, 2015, and the since-inception period ended May 31, 2016, and underperformed the HFRI Index for the 1-year and year-to-date periods ended May 31, 2016. The Board considered the Manager’s representation that the Composite outperformed the BofA Index and the Peer Group for the since-inception period ended June 30, 2016, and underperformed the BofA Index and the Peer Group for the one-year period ended June 30, 2016. Based on the foregoing information, the Board concluded that the historical investment performance record of Numeric supported approval of the Numeric Agreement.
Comparisons of the amounts to be paid under the Numeric Agreement with those under contracts between Numeric and its other clients. In evaluating the Numeric Agreement, the Board reviewed the proposed advisory
77
Disclosure Regarding Approval of the Management and
Investment Advisory Agreements (Unaudited)
fee rate for services to be performed by Numeric on behalf of the Fund. The Board considered that Numeric’s investment advisory fee rate under the Numeric Agreement would be paid to Numeric by the Fund. The Board considered the favorable nature of the advisory fee rate proposed for the Fund relative to the fee rates charged to a comparable client of Numeric. The Board also considered the Manager’s representation that, although the combined management and advisory fee rate to be paid to the Manager and Numeric was higher than the average advisory fee rate paid by peer group funds in the Fund’s comparable Morningstar categories, before and after fee waivers and/or expense reimbursements agreed to by the Manager through May 31, 2018, Numeric would provide the Fund with a specialized investment process and Numeric’s capacity in the Fund’s strategy was limited. After evaluating this information, the Board concluded that Numeric’s advisory fee rate under the Numeric Agreement was reasonable in light of the services to be provided to the Fund.
Costs of the services to be provided and profits to be realized by Numeric and its affiliates from its relationship with the Fund. The Board did not consider the costs of the services to be provided and profits to be realized by Numeric from its relationship with the Fund, noting instead the arm’s-length nature of the relationship between the Manager and Numeric with respect to the negotiation of the advisory fee rate on behalf of the Fund.
Economies of Scale. The Board considered Numeric’s representation that the fee schedule proposed for the Fund, which includes a breakpoint, reflects economies of scale as asset growth occurs.
Benefits to be derived by Numeric from the relationship with the Fund. The Board considered Numeric’s representation that it is not aware of any “fall-out” benefits that would accrue to Numeric from its relationship with the Fund, except that Numeric would benefit from soft dollar arrangements for third party and proprietary research. Based on the foregoing information, the Board concluded that the potential benefits accruing to Numeric by virtue of its relationship with the Fund appear to be fair and reasonable.
Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Fund, the Manager or Numeric, as that term is defined in the 1940 Act, concluded that the proposed investment advisory fee rate is fair and reasonable and that the approval of the Numeric Agreement is in the best interests of the Fund and approved the Numeric Agreement.
78
Trustees and Officers of the American Beacon FundsSM (Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees twenty-eight funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (80) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED | Term | |||
TRUSTEES | ||||
Lifetime of Trust until removal resignation or retirement* | ||||
Gilbert G. Alvarado (47) | Trustee since 2015 | Director, Kura MD, Inc. (local telehealth organization) (2015-present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present) Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-Present); Director, Sacramento Regional Technology Alliance (2011-Present); Director, Women’s Empowerment (2009-2014); Trustee, American Beacon Select Funds (2015-Present). | ||
Josephe B. Armes (54) | Trustee since 2015 | Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2013-Present); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Chief Operating Officer, Hicks Holdings, LLC (Hicks Family assets and investments) (2005-2010); Trustee, Baylor University Board of Regents (2001-2010); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present). | ||
Gerard J. Arpey (58) | Trustee since 2012 | Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003- 2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Brenda A. Cline (56) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc.(public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (62) | Trustee since 2008 | Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008- 2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). |
79
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
TRUSTEES (CONT.) | Term | |||
M. Dunning (74) | Trustee since 2008 | Chairman Emeritus (2008-Present); Lockton Dunning Benefits (consulting firm in employee benefits); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present) (software consulting); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard M. Massman (73) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (53) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (71) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
OFFICERS | ||||
Gene. L. Needles, Jr. (62) | President since 2009 Executive Vice President since 2009 | President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Resolute Investment Managers, Inc. (2015-Present); President, CEO and Director, Resolute Acquisition, Inc.(2015-Present); President, CEO and Director, Resolute Topco, Inc. (2015-Present), President, CEO and Director, Resolute Investment Holdings, LLC. (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc.; (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, L.L.C. (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). Chairman, President, and CEO, Alpha Quant Advisors (2016-Present). | ||
Rosemary K. Behan (57) | VP, Secretary and Chief Legal Officer since 2006 | Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Resolute Investment Managers, Inc. (2015-Present); Secretary, Resolute Acquisition, Inc. (2015-Present); Secretary, Resolute Topco, Inc. (2015-Present); Secretary, Resolute Investment Holdings, LLC. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, L.L.C. (2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). Secretary, Alpha Quant Advisors (2016-Present). | ||
Brian E. Brett (56) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Paul B. Cavazos (47) | VP since 2016 | Chief Investment Officer and Vice President, Asset Management, American Beacon Advisors, Inc. (2016-Present); Chief Investment Officer and Assistant Treasurer, DTE Energy (2007-2016); | ||
Erica Duncan (46) | VP since 2011 | Vice President, Marketing and Client Services, American Beacon Advisors, Inc. (2011-Present); Supervisor, Brand Marketing, Invesco (2010-2011); |
80
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
Melinda G. Heika (55) | Treasurer since 2010 | Treasurer, American Beacon Advisors, Inc. (2010-Present); Treasurer, Resolute Investment Managers, Inc. (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present); Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute Investment Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, L.L.C. (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). Treasurer, Alpha Quant Advisors (2016-Present). | ||
One Year | ||||
Terri L. McKinney (53) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (41) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Manager and Senior Vice President, American Private Equity Management, L.L.C. (2012-Present); Senior Vice President and Director, Resolute Investment Managers, Inc. (2015-Present); Senior Vice President and Director, Resolute Acquisition, Inc. (2015-Present); Senior Vice President and Director, Resolute Topco, Inc. (2015-Present), Senior Vice President and Director, Resolute Investment Holdings, LLC. (2015-Present); Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010). Executive Vice President, Alpha Quant Advisors (2016-Present). | ||
Samuel J. Silver (53) | VP since 2011 | Chief Fixed Income Officer (2016-Present), Vice President, Fixed Income Investments (2011-2016) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (45) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, L.L.C. (2012-Present). Chief Compliance Officer, Alpha Quant Advisors (2016-Present). | ||
Sonia L. Bates (60) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011-Present), Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer, Resolute Investment Managers, Inc. (2015-Present); Asst. Treasurer, Resolute Acquisition, Inc. (2015-Present); Asst. Treasurer, Resolute Topco, Inc. (2015-Present); Asst. Treasurer, Resolute Investment Holdings, LLC.; Asst. Treasurer, Lighthouse Holdings, Inc. (2011-2015); Asst. Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Asst. Treasurer, American Private Equity Management, L.L.C. (2012-Present). Asst. Treasurer, Alpha Quant Advisors (2016-Present). | ||
Shelley D. Abrahams (42) | Assistant Secretary since 2008 | Assistant Secretary, American Beacon Advisors, Inc. (2008-Present) | ||
Rebecca L. Harris (50) | Assistant Secretary since 2011 | Assistant Secretary, American Beacon Advisors, Inc. (2011-Present) | ||
Diana N. Lai (41) | Assistant Secretary since 2012 | Assistant Secretary, American Beacon Advisors, Inc. (2012-Present) | ||
Teresa A. Oxford (58) | Assistant Secretary since 2015 | Assistant Secretary, American Beacon Advisors, Inc. (2015-Present). Assistant Secretary, Alpha Quant Advisors (2016-Present). |
81
Trustees and Officers of the American Beacon FundsSM (Unaudited)
* | As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75. |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors. |
82
Privacy Policy
January 31, 2017 (Unaudited)
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
83
Delivery of Documents
eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your shareholder reports and summary prospectus on-line. Sign up at www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
![]() | ![]() | |
By E-mail: | On the Internet: | |
american_beacon.funds@ambeacon.com | Visit our website at www.americanbeaconfunds.com | |
| ||
![]() | ![]() | |
By Telephone: | By Mail: | |
Institutional, Y, Investor, A, C and Ultra Classes | American Beacon Funds | |
Call (800) 658-5811 | P.O. Box 219643 | |
Kansas City, MO 64121-9643 | ||
|
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately sixty days after the end of each quarter.
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www. sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Boston, MA | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds, American Beacon Grosvenor Long/Short Fund and American Beacon Numeric Integrated Alpha Fund are service marks of American Beacon Advisors, Inc.
AR 1/17
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
GLOBAL EVOLUTION FRONTIER MARKETS INCOME FUND
Investing in foreign, emerging and frontier market securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in derivative instruments involves liquidity, credit, interest rate and market risks. The use of fixed-income securities entails interest rate and credit risks. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
GLG TOTAL RETURN FUND
Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in derivative instruments involves liquidity, credit, interest rate and market risks. The use of fixed-income securities entails interest rate and credit risks. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | January 31, 2017 |
President’s Message | 1 | |||
Market and Performance Overviews | 2 | |||
Expense Examples | 8 | |||
Report of Independent Registered Public Accounting Firm | 10 | |||
Schedules of Investments: | ||||
American Beacon Global Evolution Frontier Markets Income Fund | 11 | |||
15 | ||||
Financial Statements | 20 | |||
Notes to Financial Statements | 25 | |||
Financial Highlights: | ||||
American Beacon Global Evolution Frontier Markets Income Fund | 55 | |||
58 | ||||
Federal Tax Information | 59 | |||
Trustees and Officers of the American Beacon Funds | 60 | |||
Privacy Policy | 64 | |||
Additional Fund Information | Back Cover |
![]() | Dear Shareholders, | |
In the weeks ahead of the U.S. presidential election on November 8, 2016, uncertainty about the outcome caused many investors to stay on the sidelines. Some investors questioned whether the election’s result would have negative consequences for their portfolios, although elections have rarely had a lasting effect on the market. | ||
Following the election, the markets responded positively to aspects of the incoming administration’s proposed plans for economic growth; i.e., repatriating jobs from overseas, relaxing regulations, lowering taxes and increasing infrastructure spending. From Election Day 2016 to Inauguration Day 2017, the S&P 500 Index – a broad measure of the performance of large U.S. companies – climbed approximately 6%. |
In December 2016, the Federal Reserve increased short-term interest rates by 0.25% to a range of 0.50% and 0.75%, signifying the Federal Open Market Committee’s confidence in an improving economy. It was the second rate increase in a decade; the first rate increase occurred in December 2015. Economists anticipate more rate increases this year.
For the 12-month period that ended January 31, 2017, the Dow Jones Industrial Average – which follows the performance of 30 significant stocks trading on the New York Stock Exchange and The NASDAQ Stock Market – gained 23.89%. The S&P 500 Index, a domestic equity bellwether, grew 20.04%. The MSCI EAFE Index, which measures the world’s developed market, increased 12.03%.
• | For the 12 months ended January 31, 2017, the American Beacon Global Evolution Frontier Markets Income Fund (Investor Class) returned 15.28%. |
• | From its inception on May 20, 2016, through January 31, 2017, the American Beacon GLG Total Return Fund (Investor Class) returned 7.65%. |
At American Beacon Advisors, we are proud to offer a broad range of global equity and fixed-income funds sub-advised by experienced asset managers who employ distinctive investment processes to manage assets through a variety of economic and market conditions. Together, we work diligently to help our shareholders meet their long-term financial goals.
Thank you for your continued interest in American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, | ||||
![]() | ||||
Gene L. Needles, Jr. | ||||
President | ||||
American Beacon Funds |
1
Global Fixed-Income Market Overview
January 31, 2017 (Unaudited)
The global bond market produced mixed results during the period as high-quality government issuers posted low or negative returns and high-yield outperformed. The Bloomberg Barclays Global Treasury Index returned 1.8% while the Bloomberg Barclays Global High Yield Index returned 18.2%.
The period began with a weak economic outlook as equity markets declined, commodity prices softened and interest rates drifted lower. Central banks across the globe emphasized their commitment to economic recovery and followed with a variety of accommodative actions.
In the summer of 2016, the markets were again tested as the U.K.’s Brexit vote to leave the European Union sent shockwaves through the markets. Record amounts of government bonds (primarily in Europe and Japan) traded into negative yields, and safe-haven U.S. Treasury yields dropped below the levels seen during the financial crisis of 2008 and the European debt crisis of 2012. As a result, total returns from government bonds were very strong during the first half of the period.
The volatility was short lived, however, as policy makers remained accommodative and hints of improved economic growth eventually began to surface. Commodity prices stabilized as equity markets regained their footing.
The final months of the year proved most pivotal as Donald Trump’s surprise victory in the U.S. presidential election provoked a risk-on rally into year end. Developed market equities rose sharply in hopes of growth-friendly initiatives from the new president, and government bond prices rolled over (yields rose). Emerging market bonds weakened against criticism of trade and immigration policies, but they still managed to finish the year with solid returns overall. The JPMorgan Emerging Market Bond Indexes (both hard and local currency) returned 12.0%. Mexico was particularly hard hit (down 1.8%) as talk of building walls and limiting trade was most pronounced.
The smaller, frontier economies also produced strong results as their commodity-export economies were viewed as less susceptible to trade sanctions, as compared to manufacturing exporters, and they avoided the mainstream selling in emerging markets. The JPMorgan NEXGEM Index returned 19.2%.
U.S. high-yield bonds outperformed investment-grade bonds as investors sought greater income and protection from rising interest rates. The rising stock markets were also helpful for high-yield bonds as they tend to be positively correlated. The Energy and Materials sectors led with returns of more than 50.0%, according to the Bloomberg Barclays High Yield Index. By comparison, investment-grade corporate bonds returned 6.1%, according to the Bloomberg Barclays Corporate Bond Index.
The period ended with optimism that the U.S. would continue to recover, Europe would pull out of its malaise and the worst of the commodity rout was behind. The Federal Reserve had already begun to reduce its monetary policy accommodation. Investors, however, were also beginning to look cautiously at the upcoming elections in Europe and at central bank actions in Japan and China. Likewise, the non-traditional administration in the U.S. was likely to have a few surprises of its own.
2
American Beacon Global Evolution Frontier Markets Income FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Investor Class of the American Beacon Global Evolution Frontier Markets Income Fund (the “Fund”) returned 15.28% for the twelve-month period ending January 31, 2017. The Fund outperformed the JPMorgan EMBI Global Diversified Index (the “Index”) (hard currency) return of 11.95% for the period. For additional comparison, the JPMorgan GBI-EM Global Diversified Index (local currency) returned 12.03%, and the JP Morgan NEXGEM Index (local currency frontier markets) returned 19.15%.
Comparison of Change in Value of a $10,000 Investment for the period from 2/25/2014 through 1/31/2017
Total Returns for the Period ended January 31, 2017
Ticker | 1 Year | Since Inception 2/25/2014 | Value of $10,000 2/25/2014- 1/31/2017 | |||||||||||||
Institutional Class (1,3) | AGEIX | 15.78 | % | 3.65 | % | $ | 11,105 | |||||||||
Y Class (1,3) | AGEYX | 15.55 | % | 3.54 | % | $ | 11,070 | |||||||||
Investor Class (1,3) | AGEPX | 15.28 | % | 3.26 | % | $ | 10,985 | |||||||||
A without Sales Charge (1,3) | AGUAX | 15.36 | % | 3.26 | % | $ | 10,985 | |||||||||
A with Sales Charge (1,3) | AGUAX | 9.85 | % | 1.55 | % | $ | 10,985 | |||||||||
C without Sales Charge (1,3) | AGECX | 14.49 | % | 2.44 | % | $ | 10,732 | |||||||||
C with Sales Charge (1,3) | AGECX | 13.49 | % | 2.44 | % | $ | 10,732 | |||||||||
JPMorgan EMBI Global Diversified Index (2) | 11.95 | % | 6.29 | % | $ | 11,961 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A portion of the fees charged to each Class of the Fund was waived and partially recovered in 2015. Performance prior to waiving fees was lower than the actual returns shown. A Class shares have a maximum sales charge of 4.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase. |
3
American Beacon Global Evolution Frontier Markets Income FundSM
Performance Overview
January 31, 2017 (Unaudited)
2. | The JPMorgan EMBI Global Diversified Index is an emerging market debt benchmark that tracks dollar-denominated bonds issued by frontier and emerging market governments. One cannot directly invest in an index. |
3. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 1.15%, 1.19%, 1.45%, 1.53%, and 2.32%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
Throughout 2016, the recovery in commodity prices proved very supportive of frontier markets. Despite rhetoric from the new Trump administration against trade and immigration policies with emerging economies, commodity-exporting frontier countries were viewed as less susceptible than manufacturing exporters. Unlike manufactured goods, most commodities cannot be replaced locally.
The Fund’s exposures to countries primarily in Africa and Latin America contributed the most to returns, including Zambia, Ecuador, Ghana, Venezuela and Iraq – all benefitted from the improvement in oil prices. Select countries also benefitted from improved fiscal situations, government policies and support from the International Monetary Fund.
The Fund also began the period with an overweight position in hard-currency debt given the strength of the U.S. dollar. As the dollar leveled out during the period, the Fund gradually shifted its exposure into local-currency debt to benefit from the commodity-price trends and positive investor sentiment. The Fund ended the period with approximately 57% of assets in local currency exposure.
The largest detractors during the period were from positions in Mozambique, Azerbaijan, Mongolia and Georgia. The consistent theme across these countries relates to the inherent risk of investing in smaller, less-developed countries. In Mozambique, for example, the government restructured its debt but then identified an additional $1 billion of obligations previously unreported. In Azerbaijan, despite improving oil prices, the government’s mismanagement of the country and fiscal deficits led to currency devaluation. The sub-advisor’s approach to diversification in country and currency exposures helps the Fund to manage risk associated with these situations.
The sub-advisor’s investment process involves a top-down approach to assess macroeconomic factors affecting the relationships between developed, emerging and frontier countries, and a bottom-up process to identify fundamentally attractive investments. The sub-advisor also examines relative valuations across countries to identify appropriate risk-adjusted opportunities. This investment process has remained consistent since the Fund’s inception.
Top Ten Holdings (% Net Assets) | ||||||||
Ivory Coast Government Bond, 5.75%, Due 12/31/2032 | 3.7 | |||||||
Dominican Republic, 11.50%, Due 5/10/2024 | 3.7 | |||||||
Uruguay Government International Bond, Inflation Indexed, 5.00%, Due 9/14/2018 | 3.6 | |||||||
Mongolia Ministry of Finance (Issuer ING Bank NV), 13.175%, Due 3/25/2017 | 3.2 | |||||||
Empresa Administradora de Aeropuertos Internacionales (Issuer Zambezi BV), 8.25%, Due 4/8/2024, 144A | 3.1 | |||||||
Republic of Iraq, 5.80%, Due 1/15/2028 | 3.0 | |||||||
Uganda Government Bond, 16.50%, Due 5/13/2021 | 2.8 | |||||||
Zambia Government Bond, 11.00%, Due 5/26/2020 | 2.7 | |||||||
Republic of Cameroon, 9.50%, Due 11/19/2025 | 2.6 | |||||||
Republic of Argentina, 30.467%, Due 10/9/2017 | 2.5 | |||||||
Total Fund Holdings | 63 |
4
American Beacon Global Evolution Frontier Markets Income FundSM
Performance Overview
January 31, 2017 (Unaudited)
Asset Allocation (% Net Assets) | ||||
Fixed-Income | 95.5 | |||
Cash Equivalent | 4.5 | |||
Country Allocation (% Investments) | ||||
Zambia | 5.3 | |||
Argentina | 5.1 | |||
Egypt | 4.9 | |||
Kazakhstan | 4.8 | |||
Uganda | 4.4 | |||
Sri Lanka | 4.4 | |||
Ghana | 4.3 | |||
Nicaragua | 4.2 | |||
Kenya | 4.2 | |||
Dominican Republic | 4.2 | |||
Uruguay | 4.1 | |||
Ivory Coast | 4.1 | |||
Angola | 3.9 | |||
Nigeria | 3.8 | |||
Mongolia | 3.6 | |||
Iraq | 3.3 | |||
Ecuador | 3.1 | |||
Cameroon | 2.9 | |||
Armenia | 2.7 | |||
Supranational | 2.7 | |||
Malawi | 2.0 | |||
Mozambique | 2.0 | |||
Georgia | 2.0 | |||
Gambia | 2.0 | |||
Tunisia | 1.7 | |||
Ethiopia | 1.6 | |||
Rwanda | 1.4 | |||
Congo | 1.3 | |||
Senegal | 1.3 | |||
Seychelles | 1.1 | |||
Surinam | 1.1 | |||
Gabon | 1.0 | |||
Bosnia and Herzegovina | 0.6 | |||
Pakistan | 0.5 | |||
Venezuela | 0.4 |
5
American Beacon GLG Total Return FundSM
Performance Overview
January 31, 2017 (Unaudited)
The Investor Class of the American Beacon GLG Total Return Fund (the “Fund”) returned 7.65% for the eight-month period from inception, on May 20, 2016, through January 31, 2017. For comparison, the JPMorgan EMBI Global Index (hard currency) returned 6.87%.
Comparison of Change in Value of a $10,000 Investment for the period from 5/20/2016 through 1/31/2017
Total Returns for the Period ended January 31, 2017
Ticker | 6 Months* | Since Inception 5/20/2016* | Value of $10,000 5/20/2016- 1/31/2017 | |||||||||||||
Institutional Class (1,3) | GLGIX | 5.47 | % | 7.95 | % | $ | 10,795 | |||||||||
Y Class (1,3) | GLGYX | 5.38 | % | 7.85 | % | $ | 10,785 | |||||||||
Investor Class (1,3) | GLGPX | 5.28 | % | 7.65 | % | $ | 10,765 | |||||||||
A without Sales Charge (1,3) | GLGAX | 5.28 | % | 7.65 | % | $ | 10,765 | |||||||||
A Class with Sales Charge (1,3) | GLGAX | 0.28 | % | 2.52 | % | $ | 10,252 | |||||||||
C without Sales Charge (1,3) | GLGCX | 4.80 | % | 7.15 | % | $ | 10,705 | |||||||||
C Class with Sales Charge (1,3) | GLGCX | 3.80 | % | 6.05 | % | $ | 10,605 | |||||||||
Ultra Class (1,3) | GLGUX | 5.47 | % | 7.95 | % | $ | 10,795 | |||||||||
BofA Merril Lynch 3-Month Libor Constant Maturity Index (2) | 0.40 | % | 0.72 | % | $ | 10,072 | ||||||||||
JPMorgan EMBI Global Index (2) | - 0.75 | % | 6.87 | % | $ | 10,687 |
* | Not Annualized. |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A portion of the fees charged to each Class of the Fund has been waived since Fund inception. Performance prior to waiving fees was lower than the actual returns shown since inception. A Class shares have a maximum sales charge of 4.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase. |
6
American Beacon GLG Total Return FundSM
Performance Overview
January 31, 2017 (Unaudited)
2. | The BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Index represents the London Interbank Offered Rate (LIBOR) with a constant 3-month average maturity. LIBOR is a composite of the rates of interest at which banks borrow from one another in the London market, and it is a widely used benchmark for short-term interest rates. The JPMorgan EMBI Global Index is an emerging market debt benchmark that tracks dollar-denominated bonds issued by emerging market governments. One cannot directly invest in an index. |
3. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and Ultra Class shares was 1.66%, 1.76%, 2.04%, 2.06, 2.81%, and 1.56%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
Not only did the Fund perform well during the period, it did so with approximately half the volatility of traditional emerging market bonds and exemplified the sub-advisor’s approach toward emerging market investing. The Fund’s flexible investment strategy allows for greater means to protect the portfolio from market volatility; a large portion of outperformance during the period came during Trump’s surprise election results. Currency exposures were minimized just prior to the election, and the Fund did not suffer the brief, downward move in emerging markets that followed.
Overall, the Fund was overweight local currency issues to avoid trade-protection fears following Trump’s campaign rhetoric. Early 2016 was the first time in several years the sub-advisor became optimistic regarding local currency. Previously, the strong U.S. dollar, weakening commodity prices and uncertainty in large emerging countries, such as China and Brazil, put downward pressure on markets overall – particularly local-currency bonds. However, given recent stabilization in the U.S. dollar, improving commodity prices, flexible exchange rates and sound fiscal positions, local emerging markets began to look attractive again.
Additionally, investors on average had become underweight emerging markets, which meant that sentiment was positive as investors rebuilt exposures – particularly in local issuance. Hard currency represents a larger, more heavily followed segment of the market, but they are typically more volatile as well.
Corporate emerging market bonds also outperformed during the period, particularly for high-yield local-currency issues, as credit spreads tightened given positive investor sentiment. The Fund’s holdings in the energy sector were the largest contributors given commodity price stabilization and tighter credit spreads.
The sub-advisor’s consistent top-down and bottom-up approaches to emerging-market fixed-income investing seek to add value over market cycles with less volatility than that of common indices.
Top Ten Holdings (% Net Assets) | ||||||||
Indonesia Government Bond, 11.625%, Due 3/4/2019 | 8.4 | |||||||
Turkey Government International Bond, 6.75%, Due 4/3/2018 | 7.4 | |||||||
U.S. Treasury Bill, 0.108%, Due 3/16/2017 | 6.6 | |||||||
Turkey Government International Bond, 7.50%, Due 7/14/2017 | 5.7 | |||||||
Petroleos Mexicanos, 5.50%, Due 2/4/2019 | 5.1 | |||||||
CNOOC Finance 2013 Ltd., 1.75%, Due 5/9/2018 | 4.7 | |||||||
South Africa Government Bond, 6.875%, Due 5/27/2019 | 4.0 | |||||||
Mexican Bonos, 5.75%, Due 3/5/2026 | 3.5 | |||||||
Colombia Government Bond, 7.375%, Due 3/18/2019 | 2.8 | |||||||
Itau CorpBanca, 3.125%, Due 1/15/2018 | 2.3 | |||||||
Total Fund Holdings | 29 | |||||||
Sector Weightings (% Investments) | ||||||||
Foreign Sovereign | 44.1 | |||||||
U.S. Treasury | 31.1 | |||||||
Cash Equivalent | 9.7 | |||||||
Energy | 6.5 | |||||||
Electric | 4.5 | |||||||
Finance | 4.1 |
7
Expense Examples
January 31, 2017 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The Examples are intended to help you understand the ongoing cost (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from August 1, 2016 through January 31, 2017.
Actual Expenses
The “Actual” lines on the tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” line of the tables provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Funds with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and Investor Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Funds, such as sales charges (loads) or redemption fees, as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
8
American Beacon FundsSM
Expense Examples
January 31, 2017 (Unaudited)
Global Evolution Frontier Markets Income Fund
Beginning Account Value 8/1/2016 | Ending Account Value 1/31/2017 | Expenses Paid During Period 8/1/2016-1/31/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,047.11 | $ | 6.54 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.75 | $ | 6.44 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.55 | $ | 7.04 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.27 | $ | 6.95 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,044.22 | $ | 8.38 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,016.92 | $ | 8.26 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,044.96 | $ | 8.58 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,016.72 | $ | 8.47 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,041.06 | $ | 11.80 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,013.56 | $ | 11.64 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 1.27%, 1.37%, 1.63%, 1.67%, and 2.30% for the Institutional, Y, Investor, A and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. |
** | 5% return before expenses. |
GLG Total Return Fund
Beginning Account Value 8/1/2016 | Ending Account Value 1/31/2017 | Expenses Paid During Period 8/1/2016-1/31/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,054.74 | $ | 5.37 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.90 | $ | 5.28 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,053.75 | $ | 5.89 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.41 | $ | 5.79 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,052.82 | $ | 7.33 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.02 | $ | 7.20 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,052.82 | $ | 7.38 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,017.92 | $ | 7.25 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,047.97 | $ | 11.22 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,014.20 | $ | 11.04 | ||||||
Ultra Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,054.74 | $ | 4.91 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.38 | $ | 4.82 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 1.04%, 1.14%, 1.42%, 1.43%, 2.18%, and 0.95% for the Institutional, Y, Investor, A, C and Ultra Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. |
** | 5% return before expenses. |
9
American Beacon FundsSM
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of
American Beacon Global Evolution Frontier Markets Income Fund and American Beacon GLG Total Return Fund:
In our opinion, the (i) accompanying statement of assets and liabilities, including the schedule of investments, as of January 31, 2017, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights for the year then ended present fairly, in all material respects, the financial position of American Beacon Global Evolution Frontier Markets Income Fund as of January 31, 2017, the results of its operations, the changes in its net assets, its cash flows and its financial highlights for the year then ended, and (ii) accompanying statement of assets and liabilities, including the schedule of investments, as of January 31, 2017, and the related statements of operations and of changes in net assets and the financial highlights for the period then ended present fairly, in all material respects, the financial position of American Beacon GLG Total Return Fund as of January 31, 2017, the results of its operations, the changes in its net assets and its financial highlights for the period May 20, 2016 (commencement of operations) through January 31, 2017, (two of the series constituting American Beacon Funds, hereafter referred to as the “Funds”), in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of January 31, 2017 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies were not received, provides a reasonable basis for our opinions. With respect to the American Beacon Global Evolution Frontier Markets Income Fund, the financial statements as of and for the year ended January 31, 2016 and the financial highlights for each of the periods ended on or prior to January 31, 2016 (not presented herein, other than the statement of changes in net assets and the financial highlights) were audited by other auditors whose report dated March 31, 2016 expressed an unqualified opinion on those financial statements and financial highlights.
PricewaterhouseCoopers
Boston, Massachusetts
March 30, 2017
10
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount* | Fair Value | |||||||
Angola - 3.48% | ||||||||
Foreign Government Obligations - 1.51% | ||||||||
Angolan Government International Bond, 9.50%, Due 11/12/2025A | $ | 1,000,000 | $ | 954,640 | ||||
|
| |||||||
Structured Notes - 1.97% | ||||||||
Republic of Angola (Issuer Aurora Australis BV), 7.016%, Due 12/19/2023A B | 1,312,500 | 1,235,279 | ||||||
|
| |||||||
Total Angola (Cost $2,297,873) | 2,189,919 | |||||||
|
| |||||||
Argentina - 4.56% | ||||||||
Foreign Government Obligations - 4.56% | ||||||||
Republic of Argentina Bonds, | ||||||||
29.198%, Due 3/28/2017B | ARS | 5,400,000 | 340,105 | |||||
30.467%, Due 10/9/2017B | ARS | 24,800,000 | 1,571,193 | |||||
22.75%, Due 3/5/2018 | ARS | 8,000,000 | 520,149 | |||||
16.00%, Due 10/17/2023 | ARS | 5,450,000 | 356,209 | |||||
|
| |||||||
Total Argentina (Cost $3,083,927) | 2,787,656 | |||||||
|
| |||||||
Armenia - 2.44% (Cost $1,500,000) | ||||||||
Structured Notes - 2.44% | ||||||||
Armeniian Treasury Bond (Issuer Frontera Capital BV), 10.00%, Due 5/7/2021 I | 1,500,000 | 1,501,414 | ||||||
|
| |||||||
Bosnia and Herzegovina - 0.52% | ||||||||
Foreign Government Obligations - 0.52% | ||||||||
Bosnia & Herzegovina Government Bond, | ||||||||
0.563%, Due 12/11/2017B | EUR | 280,000 | 146,043 | |||||
0.563%, Due 12/11/2021A B | EUR | 416,667 | 186,280 | |||||
|
| |||||||
Total Bosnia and Herzegovina (Cost $433,548) | 332,323 | |||||||
|
| |||||||
Cameroon - 2.55% (Cost $1,478,198) | ||||||||
Foreign Government Obligations - 2.55% | ||||||||
Republic of Cameroon, 9.50%, Due 11/19/2025A | 1,500,000 | 1,615,470 | ||||||
|
| |||||||
Congo - 1.18% (Cost $918,508) | ||||||||
Foreign Government Obligations - 1.18% | ||||||||
Republic of Congo, 6.00%, Due 6/30/2029A C | 1,170,923 | 749,390 | ||||||
|
| |||||||
Dominican Republic - 3.71% (Cost $2,526,808) | ||||||||
Foreign Government Obligations - 3.71% | ||||||||
Dominican Republic International Bond, 11.50%, Due 5/10/2024A | DOP | 105,000,000 | 2,347,377 | |||||
|
| |||||||
Ecuador - 2.75% | ||||||||
Foreign Government Obligations - 2.75% | ||||||||
Ecuador Government International Bond, | ||||||||
10.50%, Due 3/24/2020A | 1,400,000 | 1,529,500 | ||||||
9.65%, Due 12/13/2026A | 200,000 | 211,000 | ||||||
|
| |||||||
Total Ecuador (Cost $1,547,470) | 1,740,500 | |||||||
|
| |||||||
Egypt - 4.36% | ||||||||
Foreign Government Obligations - 4.36% | ||||||||
Arab Republic of Egypt, 5.875%, Due 6/11/2025A | 1,600,000 | 1,473,040 | ||||||
Egypt Treasury Bills, 0.01%, Due 11/14/2017 | EGP | 28,000,000 | 1,281,565 | |||||
|
| |||||||
Total Egypt (Cost $2,907,191) | 2,754,605 | |||||||
|
| |||||||
Ethiopia - 1.42% (Cost $935,435) | ||||||||
Foreign Government Obligations - 1.42% | ||||||||
Federal Democratic Republic of Ethiopia, 6.625%, Due 12/11/2024A | 1,000,000 | 899,280 | ||||||
|
| |||||||
Gabon - 0.87% (Cost $525,816) | ||||||||
Foreign Government Obligations - 0.87% | ||||||||
Republic of Gabon, 6.375%, Due 12/12/2024A | 600,000 | 550,806 | ||||||
|
| |||||||
Gambia - 1.79% (Cost $1,161,386) | ||||||||
Structured Notes - 1.79% | ||||||||
Central Bank of Gambia (Issuer Frontera Capital BV), 15.00%, Due 8/9/2017 H I | GMB | 1,070,000 | 1,135,163 | |||||
|
|
See accompanying notes
11
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount* | Fair Value | |||||||
Georgia - 1.76% (Cost $1,250,000) | ||||||||
Structured Notes - 1.76% | ||||||||
Georgia Government (Issuer Frontera Capital BV), 10.00%, Due 8/4/2021A I | GEL | 1,250,000 | $ | 1,087,315 | ||||
|
| |||||||
Ghana - 3.86% | ||||||||
Foreign Government Obligations - 3.86% | ||||||||
Ghana Government Bond, | ||||||||
21.00%, Due 3/23/2020 | GHS | 1,000,000 | 238,185 | |||||
24.75%, Due 3/1/2021 | GHS | 3,900,000 | 1,022,815 | |||||
24.75%, Due 7/19/2021 | GHS | 1,500,000 | 403,034 | |||||
19.00%, Due 11/2/2026 | GHS | 3,300,000 | 772,496 | |||||
|
| |||||||
Total Ghana (Cost $2,481,128) | 2,436,530 | |||||||
|
| |||||||
Iraq - 2.95% (Cost $1,707,430) | ||||||||
Foreign Government Obligations - 2.95% | ||||||||
Republic of Iraq, 5.80%, Due 1/15/2028A | $ | 2,250,000 | 1,866,105 | |||||
|
| |||||||
Ivory Coast - 3.66% (Cost $2,340,878) | ||||||||
Foreign Government Obligations - 3.66% | ||||||||
Ivory Coast Government Bond, 5.75%, Due 12/31/2032A B | 2,499,000 | 2,314,024 | ||||||
|
| |||||||
Kazakhstan - 4.26% | ||||||||
Structured Notes - 4.26% | ||||||||
National Bank of Kazakhstan (Issuer Citigroup Global Markets), | ||||||||
14.00%, Due 4/3/2017A | KZT | 221,250,000 | 672,567 | |||||
10.53%, Due 9/3/2017A | KZT | 120,000,000 | 348,735 | |||||
9.67%, Due 10/8/2017A | KZT | 250,000,000 | 723,747 | |||||
10.05%, Due 10/9/2017 | KZT | 330,000,000 | 955,346 | |||||
|
| |||||||
Total Kazakhstan (Cost $2,606,402) | 2,700,395 | |||||||
|
| |||||||
Kenya - 3.78% | ||||||||
Foreign Government Obligations - 3.78% | ||||||||
Kenya Infrastructure Bond, | ||||||||
12.00%, Due 9/18/2023 | KES | 57,400,000 | 530,169 | |||||
11.00%, Due 12/2/2024 | KES | 75,000,000 | 660,747 | |||||
12.50%, Due 5/12/2025 | KES | 36,000,000 | 330,090 | |||||
12.00%, Due 10/6/2031 | KES | 103,000,000 | 875,641 | |||||
|
| |||||||
Total Kenya (Cost $2,616,850) | 2,396,647 | |||||||
|
| |||||||
Malawi - 1.83% (Cost $997,138) | ||||||||
Structured Notes - 1.83% | ||||||||
Republic of Malawi (Issuer Frontera Capital BV), 24.00%, Due 9/7/2018 B G I | 1,000,000 | 921,128 | ||||||
|
| |||||||
Mongolia - 3.23% (Cost $2,688,812) | ||||||||
Structured Notes - 3.23% | ||||||||
Mongolia Ministry of Finance (Issuer ING Bank NV), 13.175%, Due 3/25/2017 I | 2,700,000 | 1,948,993 | ||||||
|
| |||||||
Mozambique - 1.80% (Cost $1,773,079) | ||||||||
Foreign Government Obligations - 1.80% | ||||||||
Republic of Mozambique, 10.50%, Due 1/18/2023AJ | 1,900,000 | 1,140,000 | ||||||
|
| |||||||
Nicaragua - 3.78% | ||||||||
Foreign Government Obligations - 0.63% | ||||||||
Republic of Nicaragua, 5.00%, Due 2/1/2019B | 413,751 | 397,201 | ||||||
|
| |||||||
Structured Notes - 3.15% | ||||||||
Empresa Administradora de Aeropuertos Internacionales (Issuer Zambezi BV), 8.25%, Due 4/8/2024 D I | 2,000,000 | 1,942,267 | ||||||
|
| |||||||
Total Nicaragua (Cost $2,404,198) | 2,339,468 | |||||||
|
| |||||||
Nigeria - 3.42% | ||||||||
Foreign Government Obligations - 1.16% | ||||||||
Nigeria Treasury Bill, 0.054%, Due 8/31/2017 I | NGN | 250,000,000 | 732,545 | |||||
|
|
See accompanying notes
12
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount* | Fair Value | |||||||
Structured Notes - 2.26% | ||||||||
Nigeria OMO Treasury Bill (Issuer Standard Chartered Bank), 19.25%, Due 9/20/2017H I | $ | 1,000,000 | $ | 1,426,700 | ||||
|
| |||||||
Total Nigeria (Cost $1,743,136) | 2,159,245 | |||||||
|
| |||||||
Pakistan - 0.46% (Cost $262,123) | ||||||||
Foreign Government Obligations - 0.46% | ||||||||
Islamic Republic of Pakistan, 7.875%, Due 3/31/2036A | 300,000 | 293,690 | ||||||
|
| |||||||
Rwanda - 1.25% (Cost $758,994) | ||||||||
Foreign Government Obligations - 1.25% | ||||||||
Republic of Rwanda, 6.625%, Due 5/2/2023A | 800,000 | 791,776 | ||||||
|
| |||||||
Senegal - 1.17% (Cost $711,763) | ||||||||
Foreign Government Obligations - 1.17% | ||||||||
Republic of Senegal, 6.25%, Due 7/30/2024A | 750,000 | 738,585 | ||||||
|
| |||||||
Seychelles - 1.00% (Cost $581,020) | ||||||||
Foreign Government Obligations - 1.00% | ||||||||
Republic of Seychelles, 7.00%, Due 1/1/2026A B C | 630,000 | 629,849 | ||||||
|
| |||||||
Sri Lanka - 3.94% | ||||||||
Foreign Government Obligations - 3.94% | ||||||||
Sri Lanka Government Bond, | ||||||||
11.00%, Due 8/1/2021 | LKR | 200,000,000 | 1,263,968 | |||||
11.40%, Due 1/1/2024 | LKR | 10,000,000 | 63,139 | |||||
11.00%, Due 8/1/2024 | LKR | 90,000,000 | 553,007 | |||||
11.50%, Due 9/1/2028 | LKR | 100,000,000 | 614,439 | |||||
|
| |||||||
Total Sri Lanka (Cost $2,636,207) | 2,494,553 | |||||||
|
| |||||||
Supranational - 2.44% (Cost $3,000,000) | ||||||||
Foreign Government Obligations - 2.44% | ||||||||
European Bank for Reconstruction & Development, 7.80%, Due 7/24/2017A | 3,000,000 | 1,543,986 | ||||||
|
| |||||||
Surinam - 0.96% (Cost $608,229) | ||||||||
Foreign Government Obligations - 0.96% | ||||||||
Republic of Suriname, 9.25%, Due 10/26/2026A | 600,000 | 605,658 | ||||||
|
| |||||||
Tunisia - 1.49% (Cost $907,924) | ||||||||
Foreign Government Obligations - 1.49% | ||||||||
Banque Centrale de Tunisie International Bond, 5.75%, Due 1/30/2025A | 1,000,000 | 942,260 | ||||||
|
| |||||||
Uganda - 3.93% | ||||||||
Foreign Government Obligations - 3.93% | ||||||||
Uganda Government Bond, | ||||||||
16.125%, Due 3/22/2018 | UGX | 800,000,000 | 225,757 | |||||
10.75%, Due 9/6/2018 | UGX | 1,925,000,000 | 506,442 | |||||
16.50%, Due 5/13/2021 | UGX | 6,400,000,000 | 1,750,506 | |||||
|
| |||||||
Total Uganda (Cost $2,667,465) | 2,482,705 | |||||||
|
| |||||||
Uruguay - 3.62% (Cost $2,732,881) | ||||||||
Foreign Government Obligations - 3.62% | ||||||||
Uruguay Government International Bond, Inflation Indexed, 5.00%, Due 9/14/2018E | UYU | 65,130,524 | 2,290,170 | |||||
|
| |||||||
Venezuela - 0.36% (Cost $162,336) | ||||||||
Foreign Government Obligations - 0.36% | ||||||||
Republic of Venezuela, 9.00%, Due 5/7/2023A | 450,000 | 227,835 | ||||||
|
| |||||||
Zambia - 4.64% | ||||||||
Foreign Government Obligations - 4.64% | ||||||||
Zambia Government Bond, | ||||||||
11.00%, Due 9/1/2019 | ZMW | 4,800,000 | 370,120 | |||||
11.00%, Due 2/16/2020 | ZMW | 500,000 | 37,590 | |||||
11.00%, Due 5/26/2020 | ZMW | 23,100,000 | 1,699,019 | |||||
12.00%, Due 5/23/2023 | ZMW | 6,100,000 | 381,193 | |||||
12.00%, Due 11/21/2023 | ZMW | 2,400,000 | 149,562 |
See accompanying notes
13
American Beacon Global Evolution Frontier Markets Income FundSM
Schedule of Investments
January 31, 2017
Principal Amount* | Fair Value | |||||||
8.97%, Due 7/30/2027A | $ | 300,000 | $ | 299,640 | ||||
|
| |||||||
Total Zambia (Cost $3,304,252) | 2,937,124 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 4.25% (Cost $2,688,411) | ||||||||
Short-Term Investments - 4.25% | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassF | 2,688,411 | 2,688,411 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 93.47% (Cost $62,946,816) | 58,580,355 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 6.53% | 4,676,728 | |||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 63,257,083 | ||||||
|
|
Percentages are stated as a percent of net assets.
* | In U.S. Dollars unless otherwise noted. |
A | Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. |
B | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
C | Step Up/Down – A zero coupon bond that converts to a fixed rate or variable interest rate at a designated future date. The rate disclosed represents the coupon rate at January 31, 2017. The maturity date disclosed represents the final maturity date. |
D | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $1,942,267 or 3.07% of net assets. The Fund has no right to demand registration of these securities. |
E | Inflation-Indexed Note. |
F | The Fund is affiliated by having the same investment advisor. |
G | Non-income producing security, but current with respect to interest/principal. |
H | Rate represents the yield to maturity of reference entity. |
I | Interest income may vary depending on foreign currency exchange rate. |
J | Default Security. At period end, the amount of securities in default was $1,140,000 or 1.80% of net assets. |
Forward Currency Contracts Open on January 31, 2017:
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Sell | EUR | 540,759 | 3/17/2017 | SSB | $ | — | $ | (6,679) | $ | (6,679) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | — | $ | (6,679) | $ | (6,679) | |||||||||||||||||||||||
|
|
|
|
|
|
Glossary | ||
Counterparty Abbreviations | ||
SSB | State Street Bank & Trust |
Currency Abbreviations: | ||||||||||
ARS | Argentine Peso | GHS | Ghanaian Cedi | NGN | Nigerian Naira | |||||
DOP | Dominican Peso | GMB | Gambian Dalasi | UGX | Ugandan Shilling | |||||
EGP | Egyptian Pound | KES | Kenyan Shilling | UYU | Uruguayan Peso | |||||
EUR | Euro | KZT | Kazakhstani Tenge | ZMW | Zambian Kwacha | |||||
GEL | Georgian Lari | LKR | Sri Lankan Rupee |
See accompanying notes
14
American Beacon GLG Total Return FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Argentina - 0.20% (Cost $148,670) | ||||||||
Foreign Government Obligations - 0.20% | ||||||||
Argentine Republic Government International Bond, 6.875%, Due 1/26/2027A | $ | 150,000 | $ | 148,500 | ||||
|
| |||||||
Brazil - 1.62% | ||||||||
Corporate Obligations - 0.27% | ||||||||
Itau Unibanco Holding SA/Cayman Island, 2.85%, Due 5/26/2018B | 200,000 | 200,900 | ||||||
Foreign Government Obligations - 1.35% | ||||||||
Banco Nacional de Desenvolvimento Economico e Social, 6.369%, Due 6/16/2018B | 970,000 | 1,013,165 | ||||||
|
| |||||||
Total Brazil (Cost $1,215,721) | 1,214,065 | |||||||
|
| |||||||
British Virgin Islands - 6.27% | ||||||||
Corporate Obligations - 6.27% | ||||||||
CNOOC Finance 2013 Ltd., 1.75%, Due 5/9/2018 | 3,534,000 | 3,516,475 | ||||||
CNPC General Capital Ltd., | ||||||||
2.75%, Due 4/19/2017B | 200,000 | 200,412 | ||||||
1.95%, Due 11/25/2017B | 500,000 | 500,392 | ||||||
2.75%, Due 5/14/2019B | 250,000 | 251,994 | ||||||
Sinopec Group Overseas Development 2016 Ltd., 2.125%, Due 5/3/2019B | 250,000 | 249,615 | ||||||
|
| |||||||
Total British Virgin Islands (Cost $4,730,821) | 4,718,888 | |||||||
|
| |||||||
Chile - 2.33% (Cost $1,771,787) | ||||||||
Corporate Obligations - 2.33% | ||||||||
Itau CorpBanca, 3.125%, Due 1/15/2018 | 1,750,000 | 1,760,357 | ||||||
|
| |||||||
Colombia - 2.76% (Cost $2,068,582) | ||||||||
Foreign Government Obligations - 2.76% | ||||||||
Colombia Government Bond, 7.375%, Due 3/18/2019 | 1,875,000 | 2,077,500 | ||||||
|
| |||||||
Indonesia - 8.40% (Cost $6,330,758) | ||||||||
Foreign Government Obligations - 8.40% | ||||||||
Indonesia Government Bond, 11.625%, Due 3/4/2019B | 5,300,000 | 6,336,866 | ||||||
|
| |||||||
Israel - 2.28% (Cost $1,719,853) | ||||||||
Corporate Obligations - 2.28% | ||||||||
Israel Electric Corp Ltd., 5.625%, Due 6/21/2018B | 1,650,000 | 1,717,452 | ||||||
|
| |||||||
Mexico - 10.71% | ||||||||
Foreign Government Obligations - 10.71% | ||||||||
Mexican Bonos, 5.75%, Due 3/5/2026 | MXN 62,521,800 | 2,667,971 | ||||||
Petroleos Mexicanos, | ||||||||
3.50%, Due 7/18/2018 | 1,000,000 | 1,009,700 | ||||||
5.50%, Due 2/4/2019 | 3,700,000 | 3,876,120 | ||||||
6.50%, Due 3/13/2027A | 500,000 | 514,225 | ||||||
|
| |||||||
Total Mexico (Cost $8,193,660) | 8,068,016 | |||||||
|
| |||||||
Netherlands - 2.34% | ||||||||
Corporate Obligation - 2.00% | ||||||||
Utilities - 2.00% | ||||||||
Majapahit Holding BV, 7.25%, Due 6/28/2017 B | 1,475,000 | 1,504,500 | ||||||
|
| |||||||
Foreign Government Obligation - 0.34% | ||||||||
Foreign Sovereign - 0.34% | ||||||||
Petrobras Global Finance BV, 5.875%, Due 3/1/2018 | 250,000 | 259,025 | ||||||
|
| |||||||
Total Netherlands (Cost $1,765,455) | 1,763,525 | |||||||
|
| |||||||
South Africa - 5.82% | ||||||||
Foreign Government Obligations - 5.82% | ||||||||
South Africa Government Bond, 6.875%, Due 5/27/2019 | 2,750,000 | 2,994,414 | ||||||
South Africa Government International Bond, 5.50%, Due 3/9/2020 | 1,300,000 | 1,385,374 | ||||||
|
| |||||||
Total South Africa (Cost $4,408,400) | 4,379,788 | |||||||
|
|
See accompanying notes
15
American Beacon GLG Total Return FundSM
Schedule of Investments
January 31, 2017
Principal Amount | Fair Value | |||||||
Foreign Sovereign - 0.34% (continued) | ||||||||
Turkey - 13.36% | ||||||||
Foreign Government Obligations - 13.36% | ||||||||
Turkey Government International Bond, | ||||||||
7.50%, Due 7/14/2017 | $ | 4,200,000 | $ | 4,305,000 | ||||
6.75%, Due 4/3/2018 | 5,350,000 | 5,558,650 | ||||||
7.50%, Due 11/7/2019 | 180,000 | 195,300 | ||||||
|
| |||||||
Total Turkey (Cost $10,100,764) | 10,058,950 | |||||||
|
| |||||||
United States - 29.85% | ||||||||
U.S. Treasury Obligations - 29.85% | ||||||||
U.S. Treasury Notes/Bonds, | ||||||||
0.75%, Due 7/15/2019 | 400,000 | 394,234 | ||||||
0.875%, Due 9/15/2019 | 500,000 | 493,438 | ||||||
1.00%, Due 10/15/2019 | 3,000,000 | 2,967,891 | ||||||
1.25%, Due 10/31/2021 | 3,000,000 | 2,912,694 | ||||||
1.75%, Due 11/30/2021 | 15,750,000 | 15,647,877 | ||||||
2.00%, Due 11/15/2026 | 68,000 | 65,346 | ||||||
|
| |||||||
Total United States (Cost $22,466,881) | 22,481,480 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 8.87% | ||||||||
Short-Term Investments - 2.22% | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassC | 1,673,669 | 1,673,669 | ||||||
|
| |||||||
Principal Amount | ||||||||
U.S. Treasury Bills - 6.65% | ||||||||
0.108%, Due 3/16/2017 | $ | 5,000,000 | $ | 4,997,425 | ||||
|
| |||||||
Total Short-Term Investments (Cost $6,671,131) | 6,671,094 | |||||||
|
| |||||||
TOTAL INVESTMENTS - 94.81% (Cost $71,592,483) | 71,396,481 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 5.19% | 3,945,480 | |||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 75,341,961 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $662,725 or 0.88% of net assets. The Fund has no right to demand registration of these securities. |
B | Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. |
C | The Fund is affiliated by having the same investment advisor. |
See accompanying notes
16
American Beacon GLG Total Return FundSM
Schedule of Investments
January 31, 2017
OTC Swap Agreements Outstanding on January 31, 2017:
Credit Default Swaps on Corporate and Sovereign Securities - Buy Protection (1)
Reference Entity | Counter- party | Fixed Rate (%) | Expiration Date | Implied Credit Spread at January 31, 2017 (%)(3) | Curr | Notional Amount (4) (000’s) | Premiums Paid (Received) | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Lebanese Republic | BRC | 1.00 | 12/20/2019 | 3.1211 | USD | 150 | $ | 13,204 | $ | 10,663 | $ | (2,541 | ) | |||||||||||||||||||||||
Lebanese Republic | BRC | 1.00 | 6/20/2021 | 3.8962 | USD | 200 | 28,631 | 25,373 | (3,258 | ) | ||||||||||||||||||||||||||
Lebanese Republic | BRC | 1.00 | 6/20/2021 | 3.8962 | USD | 275 | 42,066 | 34,888 | (7,178 | ) | ||||||||||||||||||||||||||
Republic of Chile | BRC | 1.00 | 6/20/2021 | 0.5766 | USD | 500 | (6,569 | ) | (5,212 | ) | 1,357 | |||||||||||||||||||||||||
Russian Federation | BRC | 1.00 | 6/20/2021 | 1.2358 | USD | 500 | 27,316 | 13,339 | (13,977 | ) | ||||||||||||||||||||||||||
Republic of Kazakhstan | BCC | 1.00 | 12/20/2021 | 1.2619 | USD | 800 | 23,428 | 21,956 | (1,472 | ) | ||||||||||||||||||||||||||
Lebanese Republic | BCC | 1.00 | 12/20/2021 | 4.0824 | USD | 800 | 119,661 | 116,673 | (2,988 | ) | ||||||||||||||||||||||||||
Republic of South Africa | BCC | 1.00 | 12/20/2021 | 1.7200 | USD | 2,000 | 97,638 | 99,467 | 1,829 | |||||||||||||||||||||||||||
Republic of Indonesia | BCC | 1.00 | 12/20/2021 | 1.2104 | USD | 800 | 18,883 | 18,883 | — | |||||||||||||||||||||||||||
Republic of Indonesia | BCC | 1.00 | 12/20/2021 | 1.2104 | USD | 1,000 | 24,910 | 24,910 | — | |||||||||||||||||||||||||||
Republic of Korea | BRC | 1.00 | 12/20/2021 | 0.3628 | USD | 500 | (13,558 | ) | (12,275 | ) | 1,283 | |||||||||||||||||||||||||
Republic of Kazakhstan | BRC | 1.00 | 12/20/2021 | 1.2619 | USD | 250 | 11,560 | 6,861 | (4,699 | ) | ||||||||||||||||||||||||||
Republic of Chile | BRC | 1.00 | 12/20/2021 | 0.6445 | USD | 2,500 | (11,659 | ) | (20,177 | ) | (8,518 | ) | ||||||||||||||||||||||||
Republic of Kazakhstan | BRC | 1.00 | 12/20/2021 | 1.2619 | USD | 3,000 | 134,838 | 82,334 | (52,504 | ) | ||||||||||||||||||||||||||
Lebanese Republic | BRC | 1.00 | 12/20/2021 | 4.0824 | USD | 3,000 | 531,934 | 437,522 | (94,411 | ) | ||||||||||||||||||||||||||
Republic of Kazakhstan | CBK | 1.00 | 12/20/2021 | 1.2619 | USD | 300 | 12,810 | 8,233 | (4,577 | ) | ||||||||||||||||||||||||||
Russian Federation | CBK | 1.00 | 12/20/2021 | 1.4381 | USD | 3,000 | 165,868 | 112,018 | (53,850 | ) | ||||||||||||||||||||||||||
Republic of Korea | HUB | 1.00 | 12/20/2021 | 0.3628 | USD | 3,000 | (76,386 | ) | (73,649 | ) | 2,737 | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | 1,144,574 | $ | 901,807 | $ | (242,767 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
Credit Default Swaps on Corporate and Sovereign Securities - Sell Protection (2)
Reference Entity | Counter- party | Fixed Rate (%) | Expiration Date | Implied Credit Spread at January 31, 2017 (%)(3) | Curr | Notional Amount (4) (000’s) | Premiums Paid (Received) | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
United Mexican States | BRC | 1.00 | 6/20/2017 | 0.3827 | USD | 500 | $ | 1,159 | $ | 1,118 | $ | (41 | ) | |||||||||||||||||||||||
United Mexican States | HUS | 1.00 | 6/20/2019 | 0.6068 | USD | 400 | 937 | 735 | (202 | ) | ||||||||||||||||||||||||||
Republic of Philippines | BCC | 1.00 | 12/20/2019 | 0.3536 | USD | 3,000 | 31,450 | 35,229 | 3,779 | |||||||||||||||||||||||||||
Republic of Philippines | BRC | 1.00 | 12/20/2019 | 0.3536 | USD | 500 | 3,954 | 5,872 | 1,918 | |||||||||||||||||||||||||||
Republic of Colombia | BRC | 1.00 | 12/20/2019 | 0.6495 | USD | 4,000 | (4,510 | ) | 12,914 | 17,424 | ||||||||||||||||||||||||||
United Mexican States | BRC | 1.00 | 12/20/2019 | 0.7353 | USD | 2,500 | 7,775 | (3,112 | ) | (10,887 | ) | |||||||||||||||||||||||||
Federal Republic of | ||||||||||||||||||||||||||||||||||||
Brazil | BRC | 1.00 | 12/20/2021 | 1.9491 | USD | 3,500 | (303,233 | ) | (230,073 | ) | 73,160 | |||||||||||||||||||||||||
United Mexican States | HUB | 1.00 | 12/20/2021 | 1.3356 | USD | 1,250 | (41,574 | ) | (37,356 | ) | 4,218 | |||||||||||||||||||||||||
Federal Republic of | ||||||||||||||||||||||||||||||||||||
Brazil | HUB | 1.00 | 12/20/2021 | 1.9491 | USD | 2,000 | (175,881 | ) | (131,470 | ) | 44,411 | |||||||||||||||||||||||||
Republic of Korea | UAG | 1.00 | 12/20/2021 | 1.1848 | USD | 800 | (32,536 | ) | (19,444 | ) | 13,092 | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | (512,459 | ) | $ | (365,587 | ) | $ | 146,872 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
(1) | If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
(2) | If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
(3) | Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swaps agreements on corporate issues and sovereign issues of an emerging country as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
(4) | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
See accompanying notes
17
American Beacon GLG Total Return FundSM
Schedule of Investments
January 31, 2017
Forward Currency Contracts Open on January 31, 2017:
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Buy | BRL | 576,793 | 2/2/2017 | BRC | $ | 36,793 | $ | — | $ | 36,793 | ||||||||||||||||||
Buy | ZAR | 4,625,506 | 4/19/2017 | BRC | 112,004 | — | 112,004 | |||||||||||||||||||||
Buy | CLP | 4,747,195 | 6/13/2017 | BRC | 44,565 | — | 44,565 | |||||||||||||||||||||
Sell | PEN | 1,913,206 | 6/13/2017 | BRC | — | (15,206 | ) | (15,206 | ) | |||||||||||||||||||
Sell | MXN | 498,574 | 3/21/2017 | CBK | 1,426 | — | 1,426 | |||||||||||||||||||||
Sell | ZAR | 624,292 | 4/19/2017 | CBK | — | (24,292 | ) | (24,292 | ) | |||||||||||||||||||
Sell | COP | 514,040 | 6/15/2017 | CBK | — | (14,040 | ) | (14,040 | ) | |||||||||||||||||||
Sell | BRL | 5,021,921 | 2/2/2017 | HUB | — | (388,078 | ) | (388,078 | ) | |||||||||||||||||||
Buy | TRY | 373,690 | 2/6/2017 | HUB | — | (76,310 | ) | (76,310 | ) | |||||||||||||||||||
Buy | TRY | 1,294 | 2/6/2017 | HUB | — | (91 | ) | (91 | ) | |||||||||||||||||||
Buy | TRY | 587,608 | 2/6/2017 | HUB | — | (122,391 | ) | (122,391 | ) | |||||||||||||||||||
Buy | TRY | 683,627 | 2/6/2017 | HUB | — | (116,373 | ) | (116,373 | ) | |||||||||||||||||||
Buy | TRY | 298,531 | 2/6/2017 | HUB | — | (51,469 | ) | (51,469 | ) | |||||||||||||||||||
Buy | TRY | 335,925 | 2/6/2017 | HUB | — | (58,075 | ) | (58,075 | ) | |||||||||||||||||||
Sell | TRY | 433,678 | 2/6/2017 | HUB | 86,322 | — | 86,322 | |||||||||||||||||||||
Sell | TRY | 594,056 | 2/6/2017 | HUB | 119,944 | — | 119,944 | |||||||||||||||||||||
Sell | TRY | 673,193 | 2/6/2017 | HUB | 156,807 | — | 156,807 | |||||||||||||||||||||
Sell | TRY | 329,745 | 2/6/2017 | HUB | 70,255 | — | 70,255 | |||||||||||||||||||||
Buy | EUR | 6,167,620 | 2/14/2017 | HUB | 40,916 | — | 40,916 | |||||||||||||||||||||
Sell | EUR | 6,142,781 | 2/14/2017 | HUB | 145,019 | — | 145,019 | |||||||||||||||||||||
Buy | MXN | 419,529 | 3/21/2017 | HUB | 17,529 | — | 17,529 | |||||||||||||||||||||
Sell | MXN | 577,612 | 3/21/2017 | HUB | 2,388 | — | 2,388 | |||||||||||||||||||||
Buy | TRY | 1,959,413 | 4/12/2017 | HUB | — | (587 | ) | (587 | ) | |||||||||||||||||||
Buy | PLN | 3,817,579 | 6/1/2017 | HUB | 43,579 | — | 43,579 | |||||||||||||||||||||
Buy | COP | 5,918,498 | 6/15/2017 | HUB | 167,274 | — | 167,274 | |||||||||||||||||||||
Buy | BRL | 4,857,532 | 6/20/2017 | HUB | 378,329 | — | 378,329 | |||||||||||||||||||||
Sell | BRL | 2,678,843 | 6/20/2017 | HUB | — | (62,843 | ) | (62,843 | ) | |||||||||||||||||||
Sell | BRL | 2,677,746 | 6/20/2017 | HUB | — | (73,746 | ) | (73,746 | ) | |||||||||||||||||||
Buy | CNY | 9,610,400 | 11/14/2017 | HUB | 153,400 | — | 153,400 | |||||||||||||||||||||
Sell | CNY | 4,824,854 | 11/14/2017 | HUB | 8,146 | — | 8,146 | |||||||||||||||||||||
Sell | CNY | 4,835,239 | 11/14/2017 | HUB | — | (2,239 | ) | (2,239 | ) | |||||||||||||||||||
Buy | BRL | 4,135,183 | 2/2/2017 | UAG | 363,183 | — | 363,183 | |||||||||||||||||||||
Buy | BRL | 882,232 | 2/2/2017 | UAG | 82,232 | — | 82,232 | |||||||||||||||||||||
Sell | BRL | 572,286 | 2/2/2017 | UAG | — | (32,286 | ) | (32,286 | ) | |||||||||||||||||||
Buy | TRY | 456,893 | 2/6/2017 | UAG | — | (93,107 | ) | (93,107 | ) | |||||||||||||||||||
Sell | TRY | 426,361 | 2/6/2017 | UAG | 84,639 | — | 84,639 | |||||||||||||||||||||
Sell | TRY | 280,535 | 2/6/2017 | UAG | 59,465 | — | 59,465 | |||||||||||||||||||||
Buy | MXN | 8,904,293 | 3/21/2017 | UAG | — | (169,580 | ) | (169,580 | ) | |||||||||||||||||||
Buy | TRY | 1,902,622 | 4/12/2017 | UAG | 55,871 | — | 55,871 | |||||||||||||||||||||
Sell | PEN | 1,893,612 | 6/13/2017 | UAG | — | (15,612 | ) | (15,612 | ) | |||||||||||||||||||
Buy | COP | 5,918,498 | 6/15/2017 | UAG | 167,274 | — | 167,274 | |||||||||||||||||||||
Sell | COP | 230,453 | 6/15/2017 | UAG | — | (453 | ) | (453 | ) | |||||||||||||||||||
Buy | BRL | 4,222,435 | 6/20/2017 | UAG | 40,767 | — | 40,767 | |||||||||||||||||||||
Sell | BRL | 1,957,787 | 6/20/2017 | UAG | — | (46,787 | ) | (46,787 | ) | |||||||||||||||||||
Sell | BRL | 1,918,846 | 6/20/2017 | UAG | — | (52,846 | ) | (52,846 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 2,438,127 | $ | (1,416,411 | ) | $ | 1,021,716 | ||||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
18
American Beacon GLG Total Return FundSM
Schedule of Investments
January 31, 2017
Glossary | ||||||||||||||||||
Counterparty Abbreviations | ||||||||||||||||||
BCC | Barclays Capital | CBK | Citibank, N.A. | HUS | HSBC Bank USA | |||||||||||||
BRC | Barclays PLC | HUB | HSBC Bank PLC | UAG | UBS AG | |||||||||||||
Currency Abbreviations: | ||||||||||||||||||
BRL | Brazilian Real | EUR | Euro | TRY | Turkish New Lira | |||||||||||||
CLP | Chilean Peso | MXN | Mexican Peso | USD | United States Dollar | |||||||||||||
CNY | Yuan Renminbi | PEN | Peruvian Sol | ZAR | South African Rand | |||||||||||||
COP | Colombian Peso | PLN | Polish Zloty |
See accompanying notes
19
Statements of Assets and Liabilities
January 31, 2017
Global Evolution Frontier Markets Income Fund | GLG Total Return Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at fair value A | $ | 55,891,944 | $ | 69,722,812 | ||||
Investments in affiliated securities, at fair value B | 2,688,411 | 1,673,669 | ||||||
Foreign currency, at fair value C | 498,135 | 208,489 | ||||||
Cash collateral held at custodian for the benefit of the broker | 611 | 160,000 | ||||||
Cash | — | 663,009 | ||||||
Swap premium paid | — | 1,298,021 | ||||||
Swap Income receivable | — | 22,038 | ||||||
Dividends and interest receivable | 1,492,971 | 810,244 | ||||||
Receivable for investments sold | 239,175 | 3,657,139 | ||||||
Receivable for fund shares sold | 2,663,031 | 8,204 | ||||||
Receivable for expense reimbursement (Note 2) | 13,662 | 39,705 | ||||||
Unrealized appreciation from swap agreements | — | 165,208 | ||||||
Unrealized appreciation from forward currency contracts | — | 2,438,127 | ||||||
Prepaid expenses | 38,787 | 27,985 | ||||||
|
|
|
| |||||
Total assets | 63,526,727 | 80,894,650 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Swap premium received | — | 665,906 | ||||||
Payable for investments purchased | — | 3,010,811 | ||||||
Payable for fund shares redeemed | 104,614 | 40,015 | ||||||
Swap income payable | — | 26,965 | ||||||
Management and investment advisory fees payable | 50,619 | 61,480 | ||||||
Administrative service and service fees payable | 6,421 | 175 | ||||||
Transfer agent fees payable | 1,039 | 3,284 | ||||||
Custody and fund accounting fees payable | 14,168 | 3,938 | ||||||
Professional fees payable | 76,903 | 57,103 | ||||||
Trustee fees payable | 2,307 | 84 | ||||||
Payable for prospectus and shareholder reports | 6,328 | 80 | ||||||
Unrealized depreciation from swap agreements | — | 261,103 | ||||||
Unrealized depreciation from forward currency contracts | 6,679 | 1,416,411 | ||||||
Other liabilities | 566 | 5,334 | ||||||
|
|
|
| |||||
Total liabilities | 269,644 | 5,552,689 | ||||||
|
|
|
| |||||
Net Assets | $ | 63,257,083 | $ | 75,341,961 | ||||
|
|
|
| |||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | $ | 81,915,057 | $ | 73,698,496 | ||||
Undistributed (overdistribution of) net investment income | 6,679 | 609,498 | ||||||
Accumulated net realized gain (loss) | (14,285,278 | ) | 304,398 | |||||
Unrealized (depreciation) of investments | (2,517,095 | ) | (153,590 | ) | ||||
Unrealized appreciation or (depreciation) of currency transactions | (1,862,280 | ) | 979,054 | |||||
Unrealized (depreciation) of swap agreements | — | (95,895 | ) | |||||
|
|
|
| |||||
Net assets | $ | 63,257,083 | $ | 75,341,961 | ||||
|
|
|
|
See accompanying notes
20
American Beacon FundsSM
Statements of Assets and Liabilities
January 31, 2017
Global Evolution Frontier Markets Income Fund | GLG Total Return Fund | |||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||
Institutional Class | 1,456,570 | 707,162 | ||||||
|
|
|
| |||||
Y Class | 2,645,223 | 10,098 | ||||||
|
|
|
| |||||
Investor Class | 2,247,166 | 12,078 | ||||||
|
|
|
| |||||
A Class | 519,106 | 10,098 | ||||||
|
|
|
| |||||
C Class | 193,129 | 10,099 | ||||||
|
|
|
| |||||
Ultra Class | N/A | 6,295,646 | ||||||
|
|
|
| |||||
Net assets: | ||||||||
Institutional Class | $ | 13,047,515 | $ | 7,560,278 | ||||
|
|
|
| |||||
Y Class | $ | 23,715,300 | $ | 107,884 | ||||
|
|
|
| |||||
Investor Class | $ | 20,120,332 | $ | 128,790 | ||||
|
|
|
| |||||
A Class | $ | 4,648,954 | $ | 107,660 | ||||
|
|
|
| |||||
C Class | $ | 1,724,982 | $ | 107,101 | ||||
|
|
|
| |||||
Ultra Class | $ | N/A | $ | 67,330,248 | ||||
|
|
|
| |||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 8.96 | $ | 10.69 | ||||
|
|
|
| |||||
Y Class | $ | 8.97 | $ | 10.68 | ||||
|
|
|
| |||||
Investor Class | $ | 8.95 | $ | 10.66 | ||||
|
|
|
| |||||
A Class | $ | 8.96 | $ | 10.66 | ||||
|
|
|
| |||||
A Class (offering price) | $ | 9.41 | $ | 11.19 | ||||
|
|
|
| |||||
C Class | $ | 8.93 | $ | 10.61 | ||||
|
|
|
| |||||
Ultra Class | N/A | $ | 10.69 | |||||
|
|
|
| |||||
A Cost of investments in unaffiliated securities | $ | 60,258,405 | $ | 69,918,814 | ||||
B Cost of investments in affiliated securities | $ | 2,688,411 | $ | 1,673,669 | ||||
C Cost of foreign currency | $ | 493,893 | $ | 208,449 |
See accompanying notes
21
American Beacon FundsSM
Statements of Operations
For the period ended January 31, 2017
Global Evolution Frontier Markets Income Fund | GLG Total Return FundB | |||||||
Investment income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 414 | $ | — | ||||
Dividend income from affiliated securities | 6,877 | 7,368 | ||||||
Interest income | 6,545,621 | 592,591 | ||||||
|
|
|
| |||||
Total investment income | 6,552,912 | 599,959 | ||||||
|
|
|
| |||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 426,510 | 217,750 | ||||||
Administrative service fees (Note 2): | ||||||||
Institutional Class | 9,905 | — | ||||||
Y Class | 20,458 | — | ||||||
Investor Class | 14,892 | — | ||||||
A Class | 5,836 | — | ||||||
C Class | 1,960 | — | ||||||
Transfer agent fees: | ||||||||
Institutional Class | 2,800 | 1,780 | ||||||
Y Class | 1,083 | 2,271 | ||||||
Investor Class | 2,021 | 2,342 | ||||||
A Class | 364 | 2,271 | ||||||
C Class | 257 | 2,269 | ||||||
Ultra Class | — | 5,593 | ||||||
Custody and fund accounting fees | 68,993 | 16,010 | ||||||
Professional fees | 109,887 | 150,776 | ||||||
Registration fees and expenses | 76,781 | 66,350 | ||||||
Service fees (Note 2): | ||||||||
Y Class | 21,809 | 72 | ||||||
Investor Class | 51,309 | 207 | ||||||
A Class | 9,186 | 108 | ||||||
C Class | 2,818 | 108 | ||||||
Distribution fees (Note 2): | ||||||||
A Class | 15,309 | 180 | ||||||
C Class | 18,788 | 719 | ||||||
Prospectus and shareholder report expenses | 26,419 | 16,686 | ||||||
Trustee fees | 6,352 | 912 | ||||||
Other expenses | 7,882 | 3,839 | ||||||
|
|
|
| |||||
Total expenses | 901,619 | 490,243 | ||||||
|
|
|
| |||||
Net fees waived and expenses reimbursed (Note 2) | (63,671 | ) | (263,682 | ) | ||||
|
|
|
| |||||
Net expenses | 837,948 | 226,561 | ||||||
|
|
|
| |||||
Net investment income | 5,714,964 | 373,398 | ||||||
|
|
|
| |||||
Realized and unrealized gain (loss) from investments: | ||||||||
Net realized gain (loss) from: | ||||||||
Investments | (1,645,860 | ) | 152,666 | |||||
Foreign currency transactions | (1,499,072 | ) | 802,967 | |||||
Futures contracts | — | 18,269 | ||||||
Swap agreements | — | 176,504 | ||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||
Investments | 4,112,480 | (153,590 | ) | |||||
Foreign currency transactions | 1,328,518 | 979,054 | ||||||
Swap agreements | — | (95,895 | ) | |||||
|
|
|
| |||||
Net gain from investments | 2,296,066 | 1,879,975 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | $ | 8,011,030 | $ | 2,253,373 | ||||
|
|
|
| |||||
A Foreign taxes | $ | 160,683 | $ | — | ||||
B Commencement of operations, May 20, 2016 through January 31, 2017. |
See accompanying notes
22
American Beacon FundsSM
Statements of Changes in Net Assets
Global Evolution Frontier Markets Income Fund | GLG Total Return Fund | |||||||||||
Year Ended January 31, 2017 | Year Ended January 31, 2016 | From May 20 A to January 31, 2017 | ||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 5,714,964 | $ | 12,194,301 | $ | 373,398 | ||||||
Net realized gain (loss) from investments, foreign currency transactions, futures contracts, and swap agreements | (3,144,932 | ) | (18,976,438 | ) | 1,150,406 | |||||||
Change in net unrealized appreciation (depreciation) from investments, foreign currency transactions, and swap agreements | 5,440,998 | (2,019,764 | ) | 729,569 | ||||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 8,011,030 | (8,801,901 | ) | 2,253,373 | ||||||||
|
|
|
|
|
| |||||||
Net investment income: | ||||||||||||
Institutional Class | (95,303 | ) | (574,071 | ) | (93,409 | ) | ||||||
Y Class | (188,232 | ) | (7,362,509 | ) | (953 | ) | ||||||
Investor Class | (128,864 | ) | (955,482 | ) | (1,131 | ) | ||||||
A Class | (52,461 | ) | (581,495 | ) | (953 | ) | ||||||
C Class | (14,541 | ) | (84,638 | ) | (953 | ) | ||||||
Ultra Class | — | — | (459,958 | ) | ||||||||
Net realized gain from investments: | ||||||||||||
Institutional Class | — | — | (6,972 | ) | ||||||||
Y Class | — | — | (71 | ) | ||||||||
Investor Class | — | — | (85 | ) | ||||||||
A Class | — | — | (71 | ) | ||||||||
C Class | — | — | (71 | ) | ||||||||
Ultra Class | — | — | (45,281 | ) | ||||||||
Return of capital: | ||||||||||||
Institutional Class | (769,911 | ) | (174,074 | ) | — | |||||||
Y Class | (1,520,652 | ) | (2,232,508 | ) | — | |||||||
Investor Class | (1,041,038 | ) | (289,727 | ) | — | |||||||
A Class | (423,814 | ) | (176,325 | ) | — | |||||||
C Class | (117,474 | ) | (25,664 | ) | — | |||||||
Ultra Class | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Net distributions to shareholders | (4,352,290 | ) | (12,456,493 | ) | (609,908 | ) | ||||||
|
|
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||||
Proceeds from sales of shares | 25,553,537 | 60,311,575 | 78,842,000 | |||||||||
Reinvestment of dividends and distributions | 4,251,801 | 12,341,054 | 105,707 | |||||||||
Cost of shares redeemed | (35,677,428 | ) | (164,282,329 | ) | (10,249,211 | ) | ||||||
Redemption fees | 7,270 | 28,327 | — | |||||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in net assets from capital share transactions | (5,864,820 | ) | (91,601,373 | ) | 68,698,496 | |||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in net assets | (2,206,080 | ) | (112,859,767 | ) | 70,341,961 | |||||||
|
|
|
|
|
| |||||||
Net Assets: | ||||||||||||
Beginning of period | 65,463,163 | 178,322,930 | 5,000,000 | (B) | ||||||||
|
|
|
|
|
| |||||||
End of Period * | $ | 63,257,083 | $ | 65,463,163 | $ | 75,341,961 | ||||||
|
|
|
|
|
| |||||||
*Includes undistributed (overdistribution of) net investment income | $ | 6,679 | $ | (4,431,727 | ) | $ | 609,498 | |||||
|
|
|
|
|
|
A | Commencement of operations. |
B | Seed capital. |
See accompanying notes
23
American Beacon Global Evolution Frontier Markets Income FundSM
Statement of Cash Flows
For the year ended January 31, 2017
Cash flows used in operating activities: | ||||
Net increase in net assets resulting from operations | $ | 8,011,030 | ||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: | ||||
Purchases of long-term securities | (36,264,553 | ) | ||
Proceeds from sales of long-term securities | 47,303,829 | |||
Purchases from short-term portfolio investments, net | (2,574,028 | ) | ||
Net realized loss of investments | 1,645,860 | |||
Net realized loss from foreign currency transactions | 1,499,072 | |||
Net change in unrealized depreciation of investments | (4,112,480 | ) | ||
Net change in unrealized depreciation of foreign currency transactions | (1,328,518 | ) | ||
Net amortization and basis adjustments | (1,609,038 | ) | ||
(Increase) decrease in operating assets: | ||||
Increase in dividend and interest receivable | (45,906 | ) | ||
Decrease in receivable for investments sold | 3,213,621 | |||
Increase in receivable for expense reimbursement | (13,662 | ) | ||
Increase in prepaid expenses | (12,232 | ) | ||
Increase (decrease) in operating liabilities: | ||||
Decrease in payable for investments purchased | (2,412,750 | ) | ||
Decrease in payable for excess expense reimbursement | (60,785 | ) | ||
Increase in management and investment advisory fees payable | 15,757 | |||
Decrease in administrative service and service fees payable | (25,170 | ) | ||
Decrease in transfer agent fees payable | (433 | ) | ||
Increase in custody and fund accounting fees payable | 6,884 | |||
Increase in professional fees payable | 6,163 | |||
Increase in trustee fees payable | 2,162 | |||
Increase in payable for prospectus and shareholder reports | 207 | |||
Decrease in other liabilities | (2,019 | ) | ||
|
| |||
Net cash provided by operating activities | 13,243,011 | |||
|
| |||
Cash flows used in financing activities: | ||||
Proceeds from shares sold | 22,983,853 | |||
Cost of shares redeemed | (35,817,497 | ) | ||
Proceeds from redemption fees | 7,270 | |||
Cash dividends paid | (111,324 | ) | ||
|
| |||
Net cash used in financing activities | (12,937,698 | ) | ||
|
| |||
Cash and foreign currency: | ||||
Net increase in cash and foreign currency | 305,313 | |||
Cash impact from foreign exchange fluctuations | 4,242 | |||
Beginning cash and foreign currency | 189,191 | |||
|
| |||
Ending cash and foreign currency: | 498,746 | |||
|
| |||
Supplemental Disclosure of Cash Flow and Non-Cash Information: | ||||
Reinvestment of dividends | $ | 4,251,801 | ||
|
|
See accompanying notes
24
American Beacon FundsSM
January 31, 2017
1. Organization
American Beacon Funds (the “Trust”) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”) as a diversified, open-end management investment company. As of January 31, 2017, the Trust consists of twenty-seven active series, two of which are presented in this filing (collectively, the “Funds” and each individually a “Fund”): American Beacon Global Evolution Frontier Markets Income Fund (“Global Evolution Fund”) and American Beacon GLG Total Return Fund (“GLG Fund”). The remaining twenty-five active series are reported in separate filings.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Resolute Investment Managers, Inc., which is indirectly owned by investment funds affiliated with Kelso & Company, L.P. and Estancia Capital Management, LLC, and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
New Accounting Pronouncement
In October 2016, the SEC adopted amendments to rules under the Investment Company Act of 1940 (“final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. The final rules amend Regulation S-X and require funds to provide standardized, enhanced derivative disclosure in fund financial statements in a format designed for individual investors. The amendments to Regulation S-X also update the disclosures for other investments and investments in, and advances to affiliates and amend the rules regarding the general form and content of fund financial statements. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the amendments and its impact, if any, on the fund’s financial statements.
Class Disclosure
The inception date for all classes of the GLG Fund is May 20, 2016.
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
Class | Eligible Investors | Minimum Initial Investments | ||||
Institutional | Large institutional investors—sold directly or through intermediary channels. | $ | 250,000 | |||
Y Class | Large institutional retirement plan investors—sold directly or through intermediary channels. | $ | 100,000 | |||
Investor | All investors using intermediary organizations such as broker-dealers or retirement plan sponsors—sold directly through intermediary channels. | $ | 2,500 | |||
A Class | All investors who invest through intermediary organizations, such as broker-dealers or third party administrator. Retail investors who invest directly through a financial intermediary such as a broker, bank, or registered investment advisor, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”). | $ | 2,500 | |||
C Class | Retail investors who invest directly through a financial intermediary such as a broker or employee directed benefit plans with applicable sales charges, which may include CDSC. | $ | 1,000 | |||
Ultra | Large institutional investors—sold directly or through intermediary channels. | $ | 500,000,000 |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include service, distribution and sub-transfer agent fees that vary amongst the classes as described more fully in Note 2.
25
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The following is a summary of significant accounting policies, consistently followed by the Fund in the preparation of the financial statements. The Funds are investment companies, and accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946, Financial Services—Investment Companies, which is part of the U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the Net Asset Value (“NAV”). The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in fair values of securities held and is reported with all other foreign currency gains and losses in the Fund’s Statement of Operations.
Dividends to Shareholders
Dividends from net investment income of the Funds generally will be declared daily and paid monthly. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
26
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Redemption Fees
All Classes of the Global Evolution Fund impose a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Fund. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Fund pro-rata based on their respective net assets.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
2. Transactions with Affiliates
Management Agreement
From February 1, 2016 to May 29, 2016, the Trust and the Manager were parties to a Management Agreement that obligated the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services for the Global Evolution Fund. As compensation for performing the duties required under the Management Agreement, the Manager received from the Fund an annualized fee equal to 0.05% of the average daily net assets. Effective May 29, 2016, for the Global Evolution Fund and May 20, 2016 for the GLG Fund, the Fund and the Manager entered into a management agreement that obligates the Manager to provide investment advisory, fund management, and administrative services to the Fund. As compensation for performing the duties under the Management Agreement, the Manager receives from the Funds an annualized fee at the following annual rates as a percentage of average net assets: 0.35% of the first $5 billion, 0.325% of the next $5 billion, 0.30% of the next $10 billion, and 0.275% over $20 billion. The Funds also pay the unaffiliated investment advisors hired to direct investment activities of the Funds an annualized investment advisory fee based on a percentage of the Funds’ average daily assets. Management fees paid by the Funds during the periods ended January 31, 2017 were as follows:
Fund | Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | ||||||||||||
Global Evolution | 0.85 | % | $ | 426,510 | $ | 281,800 | $ | 144,710 | ||||||||
GLG | 0.95 | % | 217,750 | 138,005 | 79,745 |
Administration Agreement
From February 1, 2016 to May 29, 2016, the Manager and the Trust were parties to an Administrative Agreement which obligated the Manager to provide or oversee administrative services to the Global Evolution Fund.
As compensation for performing the duties required under the Administrative Agreement, the Manager received an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, A, and C Classes of the Fund.
27
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Distribution Plans
The Funds, except for the A and C Classes, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees will be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administration fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to separately compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annualized fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of up to 0.10% of the average daily net assets of the Y Class, up to 0.25% of the average daily net assets of the A, and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.
Sub-Transfer Agent Fees
The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional Class of the Funds and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. Certain services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly by the Funds’ transfer agent. Accordingly, the Funds, pursuant to the Trust’s Board of Trustees (the “Board”) approval, have agreed to reimburse the Manager for all or a portion of the servicing fees paid to these intermediaries for the Institutional Class. The reimbursement amounts (sub-transfer agent fees) paid to the Manager are subject to a fee limit of up to 0.10% of an intermediary’s average net assets in the Institutional Class on an annual basis. For the period ended January 31, 2017, the sub-transfer agent fees, as reported in “Transfer agent fees” on the Statements of Operations, were as follows:
Fund | Sub-Transfer Agent Fees | |||
Global Evolution | $ | 1,918 | ||
GLG | — |
As of January 31, 2017, the Funds owe the manager the following reimbursements of sub-transfer agent fees, as reported in “Transfer agent fees payable” on the Statements of Assets and Liabilities:
Fund | Reimbursement of Sub-Transfer Agent Fees | |||
Global Evolution | $ | 125 | ||
GLG | — |
28
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Investment in Affiliated Funds
The Funds may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). The Funds and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the USG Select Fund and receives management and administration fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the period ended January 31, 2017, the Manager earned fees on the Funds’ direct investments in the USG Select Fund as shown below:
Fund | Direct Investments in USG Select Fund | |||
Global Evolution | $ | 2,414 | ||
GLG | 2,225 |
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. For the period ended January 31, 2017, the Funds did not utilize the credit facility.
Expense Reimbursement Plan
The Manager voluntarily and contractually agreed to reimburse the classes of the Funds to the extent that total annual fund operating expenses exceeded each Funds’ expense cap. For the period ended January 31, 2017, the Manager waived or reimbursed expenses as follows:
Fund | Class | Expense Cap 2/1/16 to 1/31/17(2) | Reimbursed Expenses | (Recouped) Expenses | Expiration of Reimbursements | |||||||||||||
Global Evolution | Institutional | 1.15 | %(1) | $ | 14,949 | $ | (1,045 | ) | 2020 | |||||||||
Global Evolution | Y | 1.25 | %(1) | 26,673 | (1,974 | ) | 2020 | |||||||||||
Global Evolution | Investor | 1.53 | %(1) | 15,152 | (1,251 | ) | 2020 | |||||||||||
Global Evolution | A | 1.55 | %(1) | 8,362 | (1,770 | ) | 2020 | |||||||||||
Global Evolution | C | 2.30 | % | 4,575 | — | 2020 | ||||||||||||
GLG | Institutional | 1.05 | % | 72,974 | — | 2020 | ||||||||||||
GLG | Y | 1.15 | % | 3,005 | — | 2020 | ||||||||||||
GLG | Investor | 1.43 | % | 3,077 | — | 2020 | ||||||||||||
GLG | A | 1.45 | % | 3,004 | — | 2020 | ||||||||||||
GLG | C | 2.20 | % | 3,000 | — | 2020 | ||||||||||||
GLG | Ultra | 0.95 | % | 178,622 | — | 2020 |
(1) | Voluntary reimbursement. |
(2) | For the GLG Fund the Expense Caps are for the period 5/22/2016 (commencement of operations) – 1/31/2017. Contractual expense caps were removed from the Institutional, Y, Investor, and A Classes on May 29, 2016. Voluntary expense caps were reinstated November 29, 2016 for the Institutional, Y, Investor, and A Classes. |
Of these amounts $13,662 and $39,705 were disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at January 31, 2017 for the Global Evolution Fund and GLG Fund, respectively. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’s average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The reimbursed expenses above will expire in 2020. The Funds did not record a liability for potential reimbursements due to the current assessment that reimbursements are unlikely.
29
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||||
Global Evolution | $ | 124,631 | $ | 231,060 | 2018 | |||||||
Global Evolution | 6,040 | 18,592 | 2019 |
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the period ended January 31, 2017, Foreside collected $2,055 for the Global Evolution Fund from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the period ended January 31, 2017, there were no CDSC fees collected for Class A Shares of the Funds.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the period ended January 31, 2017, CDSC fees of $1,205 were collected for the Global Evolution Fund.
Concentration of Ownership
From time to time, the Funds may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of accounts that represent a controlling ownership of more than 5% of the Funds’ outstanding shares could have a material impact on the Funds. As of January 31, 2017, based on management’s evaluation of the shareholder account base, one account in the GLG Fund has been identified as representing an affiliated controlling ownership of approximately 7% of the Fund’s outstanding shares and one account representing a non-affiliated controlling ownership of approximately 8% of the Fund’s outstanding shares.
Trustee Fees and Expenses
As compensation for their service to the Trust and the American Beacon Select Funds, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board of Trustee meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally at 4:00 p.m. Eastern Time, each day that the Exchange is open for business. Equity securities, including shares of closed-end funds and exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
30
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Debt securities normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. Prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board.
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Manager determines that developments between the close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of its portfolio securities, the Manager will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Manager reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. In addition, the Funds may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Funds’ pricing time of 4:00 p.m. Eastern time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. These securities are fair valued using a pricing service and are categorized as Level 2 in the fair value hierarchy. The pricing service, using methods approved by the Board, considers the correlation of the trading patterns of the foreign security to intraday trading in the U.S. markets, based on indices of domestic securities and other appropriate indicators such as prices of relevant ADRs and futures contracts. The Valuation Committee may also fair value securities in other situations, such as when a particular foreign market is closed but a Fund is open. The Funds use outside pricing services to provide closing prices and information to evaluate and/or adjust those prices. As a means of evaluating its security valuation process, the Valuation Committee routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices.
Other investments, including restricted securities, and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined by the Valuation Committee.
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Funds. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.
Forward currency exchange contracts are valued using the prevailing forward exchange rate and are categorized as Level 2 in the fair value heirachy. Swap contracts are valued at prices furnished by independent swap dealers or by an independent pricing service and are generally categorized as a Level 2 in the fair value hierarchy. Foreign currency exchange contracts and swap contracts involve, to varying degrees, risk of loss in excess of the unrealized appreciation (depreciation) disclosed on the Statements of Assets and Liabilities.
31
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 – | Quoted prices in active markets for identical securities. | |
Level 2 – | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Fixed-income securities are generally considered Level 2 as they are valued using observable inputs. | |
Level 3 – | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Fixed-income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Fixed-income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date and are categorized as Level 2 of the fair value hierarchy.
Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities using valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts and structured notes, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers. Depending on the product and the terms of the transaction, the fair value of the financial derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends, and exchange rates. Financial derivatives that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
32
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Level 3 trading assets and trading liabilities, at fair value
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows:
Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and may be categorized as Level 3 of the fair value hierarchy.
Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.
The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.
When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the Trust cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in and out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included below.
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of January 31, 2017, the investments were classified as described below:
Global Evolution Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Foreign Government Obligations | ||||||||||||||||
Angola | $ | — | $ | 954,640 | $ | — | $ | 954,640 | ||||||||
Argentina | — | 2,787,656 | — | 2,787,656 | ||||||||||||
Bosnia and Herzegovina | — | — | 332,323 | 332,323 | ||||||||||||
Cameroon | — | 1,615,470 | — | 1,615,470 | ||||||||||||
Congo | — | 749,390 | — | 749,390 | ||||||||||||
Dominican Republic | — | 2,347,377 | — | 2,347,377 | ||||||||||||
Ecuador | — | 1,740,500 | — | 1,740,500 | ||||||||||||
Egypt | — | 2,754,605 | — | 2,754,605 | ||||||||||||
Ethiopia | — | 899,280 | — | 899,280 | ||||||||||||
Gabon | — | 550,806 | — | 550,806 | ||||||||||||
Ghana | — | 2,436,530 | — | 2,436,530 |
33
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Global Evolution Fund (1) (continued) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Iraq | $ | — | $ | 1,866,105 | $ | — | $ | 1,866,105 | ||||||||
Ivory Coast | — | 2,314,024 | — | 2,314,024 | ||||||||||||
Kenya | — | 2,396,647 | — | 2,396,647 | ||||||||||||
Mozambique | — | 1,140,000 | — | 1,140,000 | ||||||||||||
Nicaragua | — | — | 397,201 | 397,201 | ||||||||||||
Nigeria | — | 732,545 | — | 732,545 | ||||||||||||
Pakistan | — | 293,690 | — | 293,690 | ||||||||||||
Rwanda | — | 791,776 | — | 791,776 | ||||||||||||
Senegal | — | 738,585 | — | 738,585 | ||||||||||||
Seychelles | — | 629,849 | — | 629,849 | ||||||||||||
Sri Lanka | — | 2,494,553 | — | 2,494,553 | ||||||||||||
Supranational | — | — | 1,543,986 | 1,543,986 | ||||||||||||
Surinam | — | 605,658 | — | 605,658 | ||||||||||||
Tunisia | — | 942,260 | — | 942,260 | ||||||||||||
Uganda | — | 2,482,705 | — | 2,482,705 | ||||||||||||
Uruguay | — | 2,290,170 | — | 2,290,170 | ||||||||||||
Venezuela | — | 227,835 | — | 227,835 | ||||||||||||
Zambia | — | 2,937,124 | — | 2,937,124 | ||||||||||||
Structured Notes | ||||||||||||||||
Angola | — | — | 1,235,279 | 1,235,279 | ||||||||||||
Armenia | — | — | 1,501,414 | 1,501,414 | ||||||||||||
Gambia | — | — | 1,135,163 | 1,135,163 | ||||||||||||
Georgia | — | — | 1,087,315 | 1,087,315 | ||||||||||||
Kazakhstan | — | — | 2,700,395 | 2,700,395 | ||||||||||||
Malawi | — | — | 921,128 | 921,128 | ||||||||||||
Mongolia | — | — | 1,948,993 | 1,948,993 | ||||||||||||
Nicaragua | — | — | 1,942,267 | 1,942,267 | ||||||||||||
Nigeria | — | — | 1,426,700 | 1,426,700 | ||||||||||||
Short-Term Investments —Money Market Funds | 2,688,411 | — | — | 2,688,411 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 2,688,411 | $ | 39,719,780 | $ | 16,172,164 | $ | 58,580,355 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial Derivative Instruments—Liabilities | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | (6,679 | ) | $ | — | $ | (6,679 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | (6,679 | ) | $ | — | $ | (6,679 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
GLG Total Return Fund(1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | ||||||||||||||||
Brazil | $ | — | $ | 200,900 | $ | — | $ | 200,900 | ||||||||
British Virgin Islands | — | 4,718,888 | — | 4,718,888 | ||||||||||||
Chile | — | 1,760,357 | — | 1,760,357 | ||||||||||||
Israel | — | 1,717,452 | — | 1,717,452 | ||||||||||||
Netherlands | — | 1,504,500 | — | 1,504,500 | ||||||||||||
Foreign Government Obligations | ||||||||||||||||
Argentina | — | 148,500 | — | 148,500 | ||||||||||||
Brazil | — | 1,013,165 | — | 1,013,165 | ||||||||||||
Colombia | — | 2,077,500 | — | 2,077,500 |
34
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
GLG Total Return Fund(1) (continued) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Indonesia | $ | — | $ | 6,336,866 | $ | — | $ | 6,336,866 | ||||||||
Mexico | — | 8,068,016 | — | 8,068,016 | ||||||||||||
Netherlands | — | 259,025 | — | 259,025 | ||||||||||||
South Africa | — | 4,379,788 | — | 4,379,788 | ||||||||||||
Turkey | — | 10,058,950 | — | 10,058,950 | ||||||||||||
U.S. Treasury Obligations | — | 22,481,480 | — | 22,481,480 | ||||||||||||
Short-Term Investments: | ||||||||||||||||
Money Market Funds | 1,673,669 | — | — | 1,673,669 | ||||||||||||
U.S. Treasury Bills | — | 4,997,425 | — | 4,997,425 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,673,669 | $ | 69,722,812 | $ | — | $ | 71,396,481 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial Derivative Instruments—Assets | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | 2,438,127 | $ | — | $ | 2,438,127 | ||||||||
Swap Agreements | — | 165,208 | — | 165,208 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | 2,603,335 | $ | — | $ | 2,603,335 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial Derivative Instruments—Liabilities | ||||||||||||||||
Forward Currency Contracts | $ | — | $ | (1,416,411) | $ | — | $ | (1,416,411) | ||||||||
Swap Agreements | — | (261,103) | — | (261,103) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | (1,677,514) | $ | — | $ | (1,677,514) | |||||||||
|
|
|
|
|
|
|
|
(1) | Refer to Schedules of Investments for Industry Information. |
U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Funds’ assets and liabilities. As of January 31, 2017, there were no transfers between Level 1 and Level 2, and there were Foreign Government Obligations transferred with a value of $332,323 from Level 2 to Level 3 for the Global Evolution Fund. This was due to limited market transparency as noted in the table below. There were no transfers between levels for the GLG Fund.
The following table is a reconciliation of Level 3 assets within the Global Evolution Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:
Global Evolution Fund | Foreign Government Obligations | Structured Notes | Totals | |||||||||
Balance as of 1/31/2016 | $ | 5,178,890 | $ | 11,669,391 | $ | 16,848,281 | ||||||
Net Purchases | — | 6,933,798 | 6,933,798 | |||||||||
Net Sales | 3,068,307 | 4,741,691 | 7,809,998 | |||||||||
Realized gain (loss) | (162,415 | ) | 159,588 | (2,827 | ) | |||||||
Change in unrealized (depreciation) | (6,981 | ) | (122,432 | ) | (129,413 | ) | ||||||
Transfer into Level 3 | 332,323 | — | 332,323 | |||||||||
Transfer out of Level 3 | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Balance as of 1/31/2017 | $ | 2,273,510 | $ | 13,898,654 | $ | 16,172,164 | ||||||
|
|
|
|
|
| |||||||
Change in unrealized (depreciation) at period end** | $ | (6,981 | ) | $ | (122,432 | ) | $ | (129,413 | ) | |||
|
|
|
|
|
|
** | Change in unrealized (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation (depreciation) on the Statements of Operations. |
35
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The foreign government obligations and structured notes, classified as Level 3 were valued using single broker quotes. These securities are included in the Level 3 category due to limited market transparency and/or lack of corroboration to support the quoted prices.
4. Securities and Other Investments
Fixed-Income Investments
The Funds may hold debt, including government and corporate debt, and other fixed-income securities. Typically, the values of fixed-income securities change inversely with prevailing interest rates. Therefore, a fundamental risk of fixed-income securities is interest rate risk, which is the risk that their value will generally decline as prevailing interest rates rise, which may cause the Fund’s net asset value to likewise decrease, and vice versa. How specific fixed-income securities may react to changes in interest rates will depend on the specific characteristics of each security. For example, while securities with longer maturities tend to produce higher yields, they also tend to be more sensitive to changes in prevailing interest rates and are therefore more volatile than shorter-term securities and are subject to greater market fluctuations as a result of changes in interest rates. Fixed-income securities are also subject to credit risk, which is the risk that the credit strength of an issuer of a fixed-income security will weaken and/or that the issuer will be unable to make timely principal and interest payments and that the security may go into default. In addition, there is prepayment risk, which is the risk that during periods of falling interest rates, certain fixed-income securities with higher interest rates, such as mortgage- and asset-backed securities, may be prepaid by their issuers thereby reducing the amount of interest payments. This may result in the Funds having to reinvest its proceeds in lower yielding securities. Securities underlying mortgage- and asset-backed securities, which may include subprime mortgages, also may be subject to a higher degree of credit risk, valuation risk, and liquidity risk.
Foreign Debt Securities
The Funds may invest in foreign fixed and floating rate income securities (including emerging market securities) all or a portion of which may be non-U.S. dollar denominated and which include: (a) debt obligations issued or guaranteed by foreign national, provincial, state, municipal or other governments with taxing authority or by their agencies or instrumentalities, including Brady Bonds; (b) debt obligations of supranational entities; (c) debt obligations of the U.S. Government issued in non-dollar securities; (d) debt obligations and other fixed income securities of foreign corporate issuers (both dollar and non-dollar denominated); and (e) U.S. corporate issuers (both Eurodollar and non-dollar denominated). Investing in the securities of foreign issuers involves special considerations that are not typically associated with investing in the securities of U.S. issuers. In addition, emerging markets are markets that have risks that are different and higher than those in more developed markets.
Foreign Equity Securities
The Funds may invest in U.S. dollar-denominated and non-U.S. dollar denominated equity and debt securities of foreign issuers and foreign branches of U.S. banks, including negotiable CDs, bankers’ acceptances, and commercial paper. Foreign issuers are issuers organized and doing business principally outside the United States and include corporations, banks, non-U.S. governments, and quasi-governmental organizations. While investments in foreign securities are intended to reduce risk by providing further diversification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political or social instability, nationalization, expropriation, or confiscatory taxation); the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States; different laws and customs governing securities tracking; and possibly limited access to the courts to enforce a Fund’s rights as an investor.
36
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Frontier and Emerging Market Investments
The Funds may invest in the securities and derivatives with exposure to various countries with emerging capital markets. Investments in the securities and derivatives with exposure to countries with emerging capital markets involve significantly higher risks not involved in investments in securities in more developed capital markets, such as (i) low or non-existent trading volume, resulting in a lack of liquidity and increased volatility in prices for such securities, as compared to securities from more developed capital markets, (ii) uncertain national policies and social, political and economic instability, increasing the potential for expropriation of assets, confiscatory taxation, high rates of inflation or unfavorable diplomatic developments, (iii) possible fluctuations in exchange rates, differing legal systems and the existence or possible imposition of exchange controls, custodial restrictions or other non-U.S. or U.S. governmental laws or restrictions applicable to such investments, (iv) national policies that may limit the Fund’s investment opportunities such as restrictions on investment in issuers or industries deemed sensitive to national interests, (v) the lack or relatively early development of legal structures governing private and foreign investments and private property, and (vi) less diverse or immature economic structures. In addition to withholding taxes on investment income, some countries with emerging capital markets may impose differential capital gain taxes on foreign investors.
High-Yield Securities
Non-investment-grade securities are rated below the four highest credit grades by at least one of the public rating agencies (or are unrated if not publicly rated). Participation in high-yielding securities transactions generally involves greater returns in the form of higher average yields. However, participation in such transactions involves greater risks, including sensitivity to economic changes, solvency, and relative liquidity in the secondary trading market. Lower ratings may reflect a greater possibility that the financial condition of the issuer, or adverse changes in general economic conditions, or both, may impair the ability of the issuer to make payments of interest and principal. The prices and yields of lower-rated securities generally fluctuate more than higher-quality securities, and such prices may decline significantly in periods of general economic difficulty or rising interest rates.
Illiquid and Restricted Securities
The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933 (the “Securities Act”). 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. Disposal of both illiquid and restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the period ended January 31, 2017 are disclosed in the Notes to the Schedules of Investments.
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 Funds, to purchase such unregistered securities if certain conditions are met.
Inflation-Indexed Bonds
The Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted based on the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statements of Operations, even though investors do not receive their principal until maturity.
37
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Other Investment Company Securities and Other Exchange Traded Products
The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Funds become a shareholder of that investment company. As a result, the Funds’ shareholders indirectly will bear a Funds’ proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Funds’ shareholders directly bear in connection with the Funds’ own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Funds in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
Sovereign and Quasi-Sovereign Government and Supranational Debt
The Funds can invest in debt securities issued or guaranteed by foreign governments and their political subdivisions or agencies involve special risks. Sovereign debt differs from debt obligations issued by private entities in that, generally, remedies for defaults must be pursued in the courts of the defaulting party. Sovereign debt securities may include: debt securities issued or guaranteed by governments, governmental agencies or instrumentalities and political subdivisions located in emerging market countries; debt securities issued by government owned, controlled or sponsored entities located in emerging market countries; interests in entities organized and operated for the purpose of restructuring the investment characteristics of instruments issued by any of the above issuers; participations in loans between emerging market governments and financial institutions; and Brady Bonds, which are debt securities issued under the framework of the Brady Plan as a means for debtor nations to restructure their outstanding external indebtedness.
Supranational entities may also issue debt securities. Supranational organizations are entities designated or supported by a government or governmental group to promote economic development. Included among these organizations are the Asian Development Bank, the European Investment Bank, the Inter-American Development Bank, the International Monetary Fund, the United Nations, the World Bank and the European Bank for Reconstruction and Development. Supranational organizations have no taxing authority and are dependent on their members for payments of interest and principal to the extent their assets are insufficient. Further, the lending activities of such entities are limited to a percentage of their total capital, reserves and net income.
Structured Products
The Global Evolution Fund may invest in structured products, including instruments such as credit-linked securities, and structured notes, which are potentially high-risk derivative-like securities. For example, a structured product may combine a traditional stock or bond with an option or forward contract. Generally, the principal amount, amount payable upon maturity or redemption, or interest rate of a structured product is tied (positively or negatively) to the price of some currency or securities index or another interest rate or some other economic factor (each a “benchmark”). The interest rate or (unlike most fixed income securities) the principal amount payable at maturity of a structured product may be increased or decreased, depending on changes in the value of the benchmark. The Global Evolution Fund invested in structured notes to obtain a customized exposure and return structure that was not otherwise available.
Credit-Linked Securities—The Fund may invest in credit-linked securities (CLSs). CLSs are 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 Fund may invest in CLSs when the Fund’s 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.
38
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Structured Notes—The Fund may invest in structured notes, which are derivative-like 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. 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. The change in the principal amount payable with respect to, or the interest rate of, a structured note may be a multiple of the percentage change (positive or negative) in the value of the underlying reference instrument or instruments.
Structured notes are hybrid securities that combine a debt obligation with an embedded derivative component. The derivative component is linked to changes in the value of an underlying reference asset or index so as to modify the return characteristics of the debt obligation. During the period, the Global Evolution Fund invested in structured notes to obtain a customized exposure and return structure that was not otherwise available.
Fluctuations in the value of structured notes are recorded as unrealized gains and losses. Net payments are recorded as net realized gains and losses. At maturity, or when the note is sold, the Fund records a realized gain or loss. Structured notes may be leveraged, increasing the volatility of each note’s value relative to the change in the underlying reference asset or index. These notes may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of a decline in the value of the underlying reference asset or index in addition to counterparty risk. Structured notes may also be more volatile, less liquid, and more difficult to accurately price than less complex or more traditional debt securities. These notes are subject to prepayment, credit, and interest rate risks similar to those of conventional fixed income securities.
Variable or Floating Rate Obligations
The interest rates payable on certain fixed income securities in which the Funds may invest are not fixed and may fluctuate based upon changes in market rates. A variable rate obligation has an interest rate which is adjusted at predesignated periods in response to changes in the market rate of interest on which the interest rate is based. Variable and floating rate obligations are less effective than fixed rate instruments at locking in a particular yield. Nevertheless, such obligations 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.
Master Agreements
The Global Evolution and GLG Funds are parties to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties that govern transactions in over-the-counter derivative and foreign exchange contracts entered into by the Funds and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors surrounding the settlement of certain forward settling transactions, such as delayed delivery or sale-buyback financing transactions by and between a Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral.
5. Financial Derivative Instruments
Forward Currency Contracts
The Funds may enter into forward currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Fund’s securities denominated in foreign currencies. Forward currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Funds bear the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Funds also bear the credit risk if the counterparty fails to perform under the contract.
For the period ended January 31, 2017, the Funds entered into forward currency exchange contracts primarily for hedging.
The Funds’ forward currency contract notional dollar values outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following tables illustrate the average quarterly volume of foreign currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD.
Average Forward Currency Notional Amount Outstanding Period ended January 31, 2017 | ||||||||
Fund | Purchased Contracts | Sold Contracts | ||||||
Global Evolution | $ | 411,689 | $ | 1,816,767 | ||||
GLG | 35,014,263 | 22,985,561 |
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Funds usually reflect this amount on the Schedules of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
During the period ended January 31, 2017, the GLG Fund entered into future contracts primarily for exposing cash to markets.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Fund | Average Futures Contracts Outstanding Period ended January 31, 2017 | |
GLG | 3 |
Swap Agreements
The GLG Fund may invest in swap agreements. Swap agreements are negotiated between the Fund and a counterparty to exchange or swap investment cash flows, assets, foreign currencies, or market-linked returns at specified, future intervals. Swap contracts are either privately negotiated in the over-the-counter market (“OTC Swaps”) or cleared in a central clearing house (“Centrally Cleared Swaps”). The Fund may enter into credit default, cross-currency, interest rate and other forms of swap agreements to manage its exposure to credit, currency, interest rate, and inflation risk. In connection with these agreements, securities or cash may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.
Swaps are marked-to-market daily based upon values from third party vendors or quotations from market makers to the extent available and the change in value, if any, is recorded as an unrealized gain or loss on the Statements of Assets and Liabilities. In the event that market quotes are not readily available and the swap cannot be valued pursuant to one of the valuation methods, the value of the swap will be determined in good faith by the Valuation Committee pursuant to procedures approved by the Board.
Payments received or made at the beginning of the measurement period are reflected as such on the Statements of Assets and Liabilities and represent payments made or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gains or losses on the Statements of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss on the Statements of Operations. Net periodic payments received or paid by the Fund are included as part of realized gains or losses on the Statements of Operations.
Entering into these agreements involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements and that there may be unfavorable changes in interest rates.
The Funds’ maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. The risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral to the Fund to cover the Fund’s exposure to the counterparty.
Credit Default Swap Agreements
Credit default swap agreements involve one party making a stream of payments (referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a default or other credit event for the referenced entity, obligation or index. As a seller of protection on credit default swap agreements, the Funds will generally receive from the buyer of protection a fixed rate of periodic premium throughout the term of the swap provided that there is no credit event. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Funds would be subject to investment exposure up to the notional amount of the swap.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
If the Funds is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Funds will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. If the Funds is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Funds will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are estimated by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value.
Credit default swap agreements on corporate issues, sovereign issues of an emerging country or U.S. municipal issues involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection’s right to choose the deliverable obligation with the lowest value following a credit event). The Funds may use credit default swaps on corporate issues, sovereign issues of an emerging country or U.S. municipal issues to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer’s default.
Credit default swap agreements on asset-backed securities involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. Unlike credit default swaps on corporate issues, sovereign issues of an emerging country or U.S. municipal issues, deliverable obligations in most instances would be limited to the specific referenced obligation as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedown or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap agreement will be adjusted by corresponding amounts. The Funds may use credit default swaps on asset-backed securities to provide a measure of protection against defaults of the referenced obligation that the Funds owns or to take an active long or short position with respect to the likelihood of a particular referenced obligation’s default that the Fund does not own.
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes periodically, usually every six months, and for most
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
indices, each name has an equal weight in the index. The Fund may use credit default swaps on credit indices to hedge a portfolio of credit default swaps or bonds, which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. Credit default swaps on indices are benchmarks for protecting investors owning bonds against default, and traders use them to speculate on changes in credit quality.
Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues, sovereign issues of an emerging country or U.S. municipal issues as of period end are disclosed in the Notes to the Schedule of Investments and serve as an indicator of the current status of the payment/performance risk and represent a market participant view of the likelihood or risk of default for the underlying referent security to credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The maximum potential amount of future payments (undiscounted) that the Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of each individual credit default swap agreements outstanding as of January 31, 2017 for which the Fund is the seller of protection is disclosed in the Notes to the Schedule of Investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.
For the period ended January 31, 2017, the GLG Fund entered into credit default swaps primarily for return enhancement, hedging and exposing cash to markets.
The Fund’s credit default swap contract notional amounts outstanding fluctuate throughout the operating year as required to meet the strategic requirements. The following table illustrates the average quarterly volume of credit default swap contracts. For the purpose of this disclosure, the volume is measured by the notional amounts outstanding at each quarter end.
Fund | Average Credit Default Swap Notional Amounts Outstanding Period ended January 31, 2017 | |||
GLG (1) | $ | 16,833,333 |
(1) | Averages presented are representative of the inception date to period end. |
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure(1).
Fair values of financial instruments on the Statements of Assets and Liabilities as of January 31, 2017:
Derivatives not accounted for as hedging instruments | ||||||||||
Assets: | Derivatives | Global Evolution | GLG | |||||||
Unrealized appreciation from forward currency contracts | Foreign Exchange Contracts | $ | — | $ | 2,438,127 | |||||
Unrealized appreciation from swap agreements | Credit Default Contracts | — | 165,208 | |||||||
Liabilities: | ||||||||||
Unrealized depreciation from forward currency contracts | Foreign Exchange Contracts | $ | (6,679 | ) | $ | (1,416,411 | ) | |||
Unrealized depreciation from swap agreements | Credit Default Contracts | — | (261,103 | ) |
Fair values of financial instruments on the Statements of Operations as of January 31, 2017:
Derivatives not accounted for as hedging instruments | ||||||||||
Realized gain (loss) of derivatives recognized as a result from operations: | Derivatives | Global Evolution | GLG | |||||||
Net realized gain from futures contracts | Interest Rate Contracts | $ | — | $ | 18,269 | |||||
Net realized gain from swap agreements | Credit Default Contracts | — | 176,504 | |||||||
Net realized gain (loss) from foreign currency transactions | Foreign Exchange Contracts | (85,193 | ) | 563,678 | ||||||
Net change in unrealized appreciation or (depreciation) of derivatives recognized as a result | Derivatives | Global Evolution | GLG | |||||||
Change in net unrealized (depreciation) from swap agreements | Credit Default Contracts | $ | — | $ | (95,895 | ) | ||||
Change in net unrealized appreciation (depreciation) from foreign currency transactions | Foreign Exchange Contracts | | (32,974 | ) | | 1,021,716 | |
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
6. Principal Risks
Investing in the Funds may involve certain risks including, but not limited to, those described below.
Counterparty Credit Risk
A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Funds do not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as “Deposits with brokers for futures contracts” and/or “Payable to brokers for futures contracts”, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Funds and additional required collateral is delivered to/pledged by the Funds on the next business day. To the extent amounts due to the Funds from its counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Credit Risk
The Funds are subject to the risk that the issuer or guarantor of a debt security, or the counterparty to a derivatives contract or a loan will fail to make timely payment of interest or principal or otherwise honor its obligations or default completely. Credit risk is typically greater for securities with ratings that are below investment grade (commonly referred to as “junk bonds”). Since the Funds can invest significantly in lower-quality debt securities considered speculative in nature, this risk will be substantial.
Currency Risk
The Funds may have exposure to foreign currencies by making direct investments in non-U.S. currencies or in securities denominated in non-U.S. currencies, purchasing or selling forward currency exchange contracts in non-U.S. currencies, non-U.S. currency futures contracts and swaps for cross-currency investments. Foreign currencies will fluctuate, and may decline, in value relative to the U.S. dollar and other currencies and thereby affect the Funds’ investments in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, or in derivatives that provide exposure to, foreign (non-U.S.) currencies.
Custody Risk
The Funds may invest in markets that are less developed than those in the U.S., which may expose the Funds to risks in the process of clearing and settling trades and the holding of securities by foreign banks, agents and depositories. Investments in frontier and emerging markets may be subject to greater custody risks than investments in more developed markets.
Derivatives Risk
Derivatives may involve significant risk. The use of derivative instruments may expose the Funds 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 Funds’ initial investment. Derivatives may be illiquid and may be more volatile than other types of investments. The Funds may buy or sell derivatives not traded on an exchange and 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. As a result, the Funds may obtain no recovery of 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.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Emerging Markets Risk
When investing in emerging markets, the risks of investing in foreign securities discussed below are heightened. Emerging 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 uncertainties; an economy’s dependence on revenues from particular commodities or on international aid or development assistance; currency transfer restrictions; a limited number of potential buyers for such securities; and delays and disruptions in securities settlement procedures.
Forward Currency Contracts Risk
Foreign currency forward contracts, including non-deliverable forwards, are derivative instruments pursuant to a contract with a counterparty to pay 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. The use of foreign currency forward contracts may expose the Funds to additional risks that it would not be subject to if it invested directly in the securities or currencies underlying the forward currency contract.
Futures Contract Risk
Futures contracts are derivative investments pursuant to a contract with a counterparty to pay 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 Funds to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. Futures contracts may experience dramatic price changes (losses) and imperfect correlation between the price of the contract and the underlying security or index which will increase the volatility of the Funds 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).
High Portfolio Turnover Risk
Portfolio turnover is a measure of the Funds’ trading activity over a one-year period. A portfolio turnover rate of 100% would indicate that the Funds sold and replaced the entire value of its securities holdings during the period. High portfolio turnover could increase the Funds’ transaction costs, have a negative impact on performance, and generate higher capital gain distributions to shareholders than if the Funds had a lower portfolio turnover rate.
Interest Rate Risk
The Funds are subject to the risk that the market value of fixed income securities or derivatives it holds will decline due to rising interest rates. As of the date of this Prospectus, interest rates are near historic lows, but may rise substantially and/or rapidly, potentially resulting in substantial losses to the Funds. Generally, the value of investments with interest rate risk, such as fixed income securities, will move in the opposite direction as movements in 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. For example, if a bond has a duration of five years, a 1% increase in interest rates could be expected to result in a 5% decrease in the value of the bond. Significant upward pressure on domestic interest rates and a corresponding widening of credit spreads could negatively impact the market price of emerging debt investments. An increase in interest rates can impact markets broadly as well.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Leverage Risk
The Fund’s use of futures, forward contracts, swaps, other derivative instruments and selling securities short will have the economic effect of financial leverage. Financial leverage magnifies the exposure to the swings in prices of an asset or class of assets underlying a derivative instrument and results in increased volatility, which means that the Funds will have the potential for greater losses than if the Funds do 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 to be volatile.
Liquidity Risk
Liquidity risk is the risk that the Funds may not be able to dispose of securities or close out derivatives transactions readily at a favorable time or prices (or at all) or at prices approximating those at which the Funds currently value them. For example, certain investments are subject to restrictions on resale, may trade in the over-the-counter market or in limited volume, or may not have an active trading market. Illiquid securities may trade at a discount from comparable, more liquid investments and may be subject to wide fluctuations in market value. It may be difficult for the Funds to value illiquid securities accurately. The market for certain investments may become illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer. Disposal of illiquid securities may entail registration expenses and other transaction costs that are higher than those for liquid securities. The Funds may seek to borrow money to meet its obligations (including among other things redemption obligations) if it is unable to dispose of illiquid investments, resulting in borrowing expenses and possible leveraging of the Funds. In some cases, due to unanticipated levels of illiquidity the Funds may choose to meet its redemption obligations wholly or in part by distributions of assets in-kind.
Market Risk
Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in fixed income instruments experiencing unusual liquidity issues, increased price volatility and, in some cases, credit downgrades and increased likelihood of default. These events have reduced the willingness and ability of some lenders to extend credit, and have made it more difficult for some borrowers to obtain financing on attractive terms, if at all. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.
In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it is difficult to predict the impact on various markets of a significant rate increase, whether brought about by U.S. policy makers or by dislocations in world markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.
Market Timing Risk
Because the Funds invest in foreign securities or it has exposure to foreign securities through the derivatives it holds, it is particularly subject to the risk of market timing activities. Frequent trading by Funds shareholders poses risks to other shareholders in the Funds, including (i) the dilution of the Funds’ NAV, (ii) an increase in the Funds’ expenses, and (iii) interference with the portfolio managers’ ability to execute efficient investment strategies. Because of specific securities in which the Funds may invest, it could be subject to the risk of market timing activities by shareholders.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Non-Diversification Risk
The Funds are non-diversified, which means the Funds may focus its investments in the securities of a comparatively small number of issuers. Investments in securities of a limited number of issuers exposes the Funds to greater market risk and potential losses than if assets were diversified among the securities of a greater number of issuers.
Other Investment Companies Risk
The Funds may invest in shares of other registered investment companies, including exchange-traded funds (“ETFs”). To the extent that the Funds invest in shares of other registered investment companies, the shareholders will indirectly bear fees and expenses charged by the underlying funds in addition to the Funds’ direct fees and expenses and will be subject to the risks associated with investments in those funds. For example, ETF shares may trade at a premium or discount to their net asset value. An ETF that tracks an index may not precisely replicate the returns of its benchmark index.
Sovereign and Quasi Sovereign Debt Risk
Sovereign or quasi-sovereign debt securities are subject to risk of payment delays or defaults due to (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 frontier and emerging markets. A governmental entity that defaults on an obligation may request additional time in which to pay or 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 emerging and frontier markets issuers, which are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging 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.
Variable and Floating Rate Securities Risk
The interest rates payable on variable and floating rate securities are not fixed and may fluctuate based upon changes in market rates. The interest rate on a floating rate security is a variable rate which is tied to another interest rate, such as a money-market index or Treasury bill rate. Variable and floating securities are subject to interest rate risk and credit risk. As short-term interest rates decline, interest payable on floating rate securities typically should decrease. Alternatively, during periods of increasing interest rates, changes in the interest rates of floating rate securities may lag behind changes in market rates or may have limits on the maximum increases in interest rates. The value of floating rate securities may decline if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline.
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American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Offsetting Assets and Liabilities
The Funds are parties to enforceable master netting agreements between brokers and counterparties, such as ISDA Agreements, and Master Forward Agreements, which provide for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and has elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements such as repurchase agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, January 31, 2017.
Global Evolution Fund
Offsetting of Financial Liabilities and Derivative Liabilities as of January 31, 2017:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Liabilities Presented in the Statements of Assets and Liabilities | |||||||||
Forward currency contracts | $ | (6,679 | ) | $ | — | $ | (6,679 | ) | ||||
|
|
|
|
|
| |||||||
$ | (6,679 | ) | $ | — | $ | (6,679 | ) | |||||
|
|
|
|
|
|
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty as of January 31, 2017:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||
Counterparty | Net Amount of Liabilities Presented in the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||
State Street Bank | $ | (6,679 | ) | $ | — | $ | — | $ | (6,679 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
$ | (6,679 | ) | $ | — | $ | — | $ | (6,679 | ) | |||||||
|
|
|
|
|
|
|
|
49
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
GLG Fund
Offsetting of Financial Assets and Derivative Assets as of January 31, 2017:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Assets Presented in the Statements of Assets and Liabilities | |||||||||
Forward currency contracts | $ | 2,438,127 | $ | — | $ | 2,438,127 | ||||||
Swap agreements | 165,208 | — | 165,208 | |||||||||
|
|
|
|
|
| |||||||
$ | 2,603,335 | $ | — | $ | 2,603,335 | |||||||
|
|
|
|
|
|
Offsetting of Financial Liabilities and Derivative Liabilities as of January 31, 2017:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amount of Liabilities Presented in the Statements of Assets and Liabilities | |||||||||
Forward currency contracts | $ | (1,416,411 | ) | $ | — | $ | (1,416,411 | ) | ||||
Swap agreements | (261,103 | ) | — | (261,103 | ) | |||||||
|
|
|
|
|
| |||||||
$ | (1,677,514 | ) | $ | — | $ | (1,677,514 | ) | |||||
|
|
|
|
|
|
Financial Asset, Derivative Assets, and Collateral Pledged by Counterparty as of January 31, 2017:
Gross Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||
Counterparty | Net Amount of Assets Presented in the Statements of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||
Barclays Bank PLC | $ | 178,156 | $ | — | $ | — | $ | 178,156 | ||||||||
Barclays Capital | (101,724 | ) | — | — | (101,724 | ) | ||||||||||
Citibank N.A. | (58,427 | ) | — | — | (58,427 | ) | ||||||||||
Citigroup | (36,906 | ) | — | — | (36,906 | ) | ||||||||||
HSBC Bank PLC | 488,870 | — | — | 488,870 | ||||||||||||
UBS AG | 455,852 | — | 160,000 | 615,852 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 925,821 | $ | — | $ | 160,000 | $ | 1,085,821 | |||||||||
|
|
|
|
|
|
|
|
7. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecorded tax liabilities in the accompanying financial statements. The tax year ended January 31, 2015 and 2016 for the Global Evolution Fund are subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
The Funds may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
50
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The Funds also utilize earnings and profits distributed to shareholders on redemptions of shares as part of the dividends paid deduction.
The tax character of distributions paid were as follows:
Global Evolution Fund | GLG Fund | |||||||||||
Year Ended January 31, 2017 | Year Ended January 31, 2016 | Period Ended January 31, 2017 | ||||||||||
Distributions paid from: | ||||||||||||
Ordinary Income* | ||||||||||||
Institutional Class | $ | 95,303 | $ | 574,071 | $ | 99,988 | ||||||
Y Class | 188,232 | 7,362,509 | 1,020 | |||||||||
Investor Class | 128,864 | 955,482 | 1,211 | |||||||||
A Class | 52,461 | 581,495 | 1,020 | |||||||||
C Class | 14,541 | 84,638 | 1,020 | |||||||||
Ultra Class | — | — | 502,688 | |||||||||
Long-term capital gains | ||||||||||||
Institutional Class | — | — | 393 | |||||||||
Y Class | — | — | 4 | |||||||||
Investor Class | — | — | 5 | |||||||||
A Class | — | — | 4 | |||||||||
C Class | — | — | 4 | |||||||||
Ultra Class | — | — | 2,551 | |||||||||
Return of Capital | ||||||||||||
Institutional Class | 769,911 | 174,074 | — | |||||||||
Y Class | 1,520,652 | 2,232,508 | — | |||||||||
Investor Class | 1,041,038 | 289,727 | — | |||||||||
A Class | 423,814 | 176,325 | — | |||||||||
C Class | 117,474 | 25,664 | — | |||||||||
Ultra Class | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total distributions paid | $ | 4,352,290 | $ | 12,456,493 | $ | 609,908 | ||||||
|
|
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of January 31, 2017, the components of distributable earnings (deficits) on a tax basis were as follows:
Global Evolution Fund | GLG Fund | |||||||
Cost basis of investments for federal income tax purposes | $ | 62,424,401 | $ | 72,226,162 | ||||
Unrealized appreciation | 1,763,836 | 329,292 | ||||||
Unrealized depreciation | (5,607,882 | ) | (622,752 | ) | ||||
|
|
|
| |||||
Net unrealized appreciation (depreciation) | (3,844,046 | ) | (293,460 | ) | ||||
Undistributed ordinary income | $ | — | $ | 1,866,124 | ||||
Undistributed long-term capital gains | — | 8,001 | ||||||
Accumulated capital and other losses | (14,262,687 | ) | — | |||||
Other temporary differences | (551,241 | ) | 62,800 | |||||
|
|
|
| |||||
Distributable earnings (deficits) | $ | (18,657,974 | ) | $ | 1,643,465 | |||
|
|
|
|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation (depreciation) are attributable primarily to the tax deferral of losses from wash sales and the realization for tax purposes of unrealized gains (losses) on certain derivative instruments.
51
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from foreign currency reclasses, and dividends reclassed to return of capital, as of January 31, 2017:
Global Evolution Fund | GLG Fund | |||||||
Paid-in-capital | $ | (4,367,267 | ) | $ | — | |||
Undistributed (overdistribution of) net investment income | 3,075,732 | 793,457 | ||||||
Accumulated net realized gain (loss) | 1,291,535 | (793,457 | ) | |||||
Unrealized appreciation (depreciation) of investments in futures contracts | — | — |
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by the Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.
As of January 31, 2017, the Global Evolution Fund has $4,648,074 of short-term capital loss carryforwards and $9,614,613 of long-term capital loss carryforwards. The GLG Fund does not have any capital loss carryforwards.
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales and maturities of long-term investments, excluding short-term obligations, for the year ended January 31, 2017, were as follows:
Fund | Purchases | Sales | ||||||
Global Evolution | $ | 36,264,553 | $ | 47,303,829 | ||||
GLG | 161,021,803 | 91,136,987 |
A summary of the Funds’ direct transactions in the USG Select fund for the year ended January 31, 2017, were as follows:
Fund | January 31, 2016 Shares/Fair Value | Purchases | Sales | January 31, 2017 Shares/Fair Value | Dividend Income | |||||||||||||||
Global Evolution | $ | — | $ | 28,952,108 | $ | 26,263,697 | $ | 2,688,411 | $ | 6,877 | ||||||||||
GLG | — | 73,387,685 | 71,714,016 | 1,673,669 | 7,368 |
52
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
9. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds:
Institutional Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Global Evolution Frontier Markets Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 493,702 | $ | 4,414,663 | 522,244 | $ | 4,848,053 | ||||||||||
Redemption Fees | — | 1,420 | — | 1,713 | ||||||||||||
Reinvestment of dividends | 95,060 | 846,663 | 78,601 | 722,738 | ||||||||||||
Shares redeemed | (393,043 | ) | (3,450,022 | ) | (292,929 | ) | (2,703,229 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 195,719 | $ | 1,812,724 | 307,916 | $ | 2,869,275 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Global Evolution Frontier Markets Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 961,556 | $ | 8,569,138 | 4,086,342 | $ | 38,393,620 | ||||||||||
Redemption Fees | — | 2,746 | — | 21,668 | ||||||||||||
Reinvestment of dividends | 186,466 | 1,661,715 | 1,027,214 | 9,572,629 | ||||||||||||
Shares redeemed | (2,031,446 | ) | (17,271,103 | ) | (15,834,212 | ) | (141,404,872 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (883,424 | ) | $ | (7,037,504 | ) | (10,720,656 | ) | $ | (93,416,955 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Global Evolution Frontier Markets Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,143,932 | $ | 10,163,789 | 1,222,535 | $ | 11,594,358 | ||||||||||
Redemption Fees | — | 2,061 | — | 2,897 | ||||||||||||
Reinvestment of dividends | 129,099 | 1,148,901 | 131,889 | 1,214,756 | ||||||||||||
Shares redeemed | (933,950 | ) | (8,233,420 | ) | (891,171 | ) | (8,157,917 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 339,081 | $ | 3,081,331 | 463,253 | $ | 4,654,094 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Global Evolution Frontier Markets Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 232,584 | $ | 2,079,763 | 423,815 | $ | 4,022,725 | ||||||||||
Redemption Fees | — | 792 | — | 1,763 | ||||||||||||
Reinvestment of dividends | 52,708 | 469,460 | 79,023 | 732,402 | ||||||||||||
Shares redeemed | (665,786 | ) | (5,800,487 | ) | (1,233,040 | ) | (11,573,203 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (380,494 | ) | $ | (3,250,472 | ) | (730,202 | ) | $ | (6,816,313 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Global Evolution Frontier Markets Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 36,625 | $ | 326,184 | 154,983 | $ | 1,452,819 | ||||||||||
Redemption Fees | — | 251 | — | 286 | ||||||||||||
Reinvestment of dividends | 14,074 | 125,062 | 10,813 | 98,529 | ||||||||||||
Shares redeemed | (103,328 | ) | (922,396 | ) | (48,805 | ) | (443,108 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (52,629 | ) | $ | (470,899 | ) | 116,991 | $ | 1,108,526 | ||||||||
|
|
|
|
|
|
|
|
53
American Beacon FundsSM
Notes to Financial Statements
January 31, 2017
Institutional Class | ||||||||
Year Ended January 31, 2017* | ||||||||
GLG Total Return Fund | Shares | Amount | ||||||
Shares sold | 530,000 | (1) | $ | 5,300,000 | (1) | |||
Reinvestment of dividends | 9,624 | 100,381 | ||||||
Shares redeemed | (282,462 | ) | (3,000,000 | ) | ||||
|
|
|
| |||||
Net increase in shares outstanding | 257,162 | $ | 2,400,381 | |||||
|
|
|
| |||||
Y Class | ||||||||
Year Ended January 31, 2017* | ||||||||
GLG Total Return Fund | Shares | Amount | ||||||
Shares sold | — | (1) | $ | — | (1) | |||
Reinvestment of dividends | 98 | 1,024 | ||||||
|
|
|
| |||||
Net increase in shares outstanding | 98 | $ | 1,024 | |||||
|
|
|
| |||||
Investor Class | ||||||||
Year Ended January 31, 2017* | ||||||||
GLG Total Return Fund | Shares | Amount | ||||||
Shares sold | 1,961 | (1) | $ | 20,010 | (1) | |||
Reinvestment of dividends | 116 | 1,216 | ||||||
|
|
|
| |||||
Net increase in shares outstanding | 2,077 | $ | 21,226 | |||||
|
|
|
| |||||
A Class | ||||||||
Year Ended January 31, 2017* | ||||||||
GLG Total Return Fund | Shares | Amount | ||||||
Shares sold | — | (1) | $ | — | (1) | |||
Reinvestment of dividends | 98 | 1,024 | ||||||
|
|
|
| |||||
Net increase in shares outstanding | 98 | $ | 1,024 | |||||
|
|
|
| |||||
C Class | ||||||||
Year Ended January 31, 2017* | ||||||||
GLG Total Return Fund | Shares | Amount | ||||||
Shares sold | — | (1) | $ | — | (1) | |||
Reinvestment of dividends | 99 | 1,024 | ||||||
|
|
|
| |||||
Net increase in shares outstanding | 99 | $ | 1,024 | |||||
|
|
|
| |||||
Ultra Class | ||||||||
Year Ended January 31, 2017* | ||||||||
GLG Total Return Fund | Shares | Amount | ||||||
Shares sold | 6,974,431 | (1) | $ | 73,521,990 | (1) | |||
Reinvestment of dividends | 99 | 1,038 | ||||||
Shares redeemed | (688,884 | ) | (7,249,211 | ) | ||||
|
|
|
| |||||
Net increase in shares outstanding | 6,285,646 | $ | 66,273,817 | |||||
|
|
|
|
* | For the period of May 20, 2016 through January 31, 2017. |
(1) | Seed capital has been received in the amounts of $4,500,000 for the Institutional class and $100,000 each for Y, Investor, A, C, and Ultra classes, respectively. As a result, the shares were issued in the amounts of 450,000 for the Institutional class and 10,000 for each remaining class respectively. |
10. Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Funds financial statements through this date.
54
American Beacon Global Evolution Frontier Markets Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||
Year Ended January 31, | February 25A to January 31, 2015 | |||||||||||
2017 | 2016 | |||||||||||
Net asset value, beginning of period | $ | 8.35 | $ | 9.68 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.88 | 0.67 | 0.59 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.44 | (1.30 | ) | (0.30 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.32 | (0.63 | ) | 0.29 | ||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.08 | ) | (0.50 | ) | (0.59 | ) | ||||||
Distributions from net realized gains | — | — | (0.02 | ) | ||||||||
Distribution from return of capital | (0.63 | ) | (0.20 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total distributions | (0.71 | ) | (0.70 | ) | (0.61 | ) | ||||||
|
|
|
|
|
| |||||||
Redemption fees added to beneficial interests F | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 8.96 | $ | 8.35 | $ | 9.68 | ||||||
|
|
|
|
|
| |||||||
Total return B | 16.20 | % | (6.98 | )% | 2.76 | %C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 13,047,515 | $ | 10,531,288 | $ | 9,225,629 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.40 | % | 1.14 | % | 1.95 | %D | ||||||
Expenses, net of reimbursements | 1.27 | %G | 1.15 | % | 1.15 | %D | ||||||
Net investment income, before expense reimbursements | 9.98 | % | 7.14 | % | 5.43 | %D | ||||||
Net investment income, net of reimbursements | 10.11 | % | 7.13 | % | 6.22 | %D | ||||||
Portfolio turnover rate | 69 | % | 68 | % | 23 | %E | ||||||
Y Class | ||||||||||||
Year Ended January 31, | February 25 A to January 31, 2015 | |||||||||||
2017 | 2016 | |||||||||||
Net asset value, beginning of period | $ | 8.34 | $ | 9.69 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.90 | 0.61 | 0.58 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.44 | (1.28 | ) | (0.28 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.34 | (0.67 | ) | 0.30 | ||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.08 | ) | (0.50 | ) | (0.59 | ) | ||||||
Distributions from net realized gains | — | — | (0.02 | ) | ||||||||
Distribution from return of capital | (0.63 | ) | (0.18 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total distributions | (0.71 | ) | (0.68 | ) | (0.61 | ) | ||||||
|
|
|
|
|
| |||||||
Redemption fees added to beneficial interestsF | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 8.97 | $ | 8.34 | $ | 9.69 | ||||||
|
|
|
|
|
| |||||||
Total return B | 16.37 | % | (7.40 | )% | 2.87 | %C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 23,715,300 | $ | 29,434,613 | $ | 138,082,358 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.48 | % | 1.18 | % | 1.50 | %D | ||||||
Expenses, net of reimbursements | 1.37 | %G | 1.25 | % | 1.25 | %D | ||||||
Net investment income, before expense reimbursements | 10.49 | % | 7.35 | % | 6.33 | %D | ||||||
Net investment income, net of reimbursements | 10.61 | % | 7.28 | % | 6.59 | %D | ||||||
Portfolio turnover rate | 69 | % | 68 | % | 23 | %E |
A | February 25, 2014 is the inception date of the Global Evolution Frontier Markets Income Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from February 25, 2014 to January 31, 2015 and is not annualized. |
F | Amount represents less than $0.01 per share. |
G | Voluntary expense cap. See Note 2 of the Notes to the Financial Statements. |
55
American Beacon Global Evolution Frontier Markets Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||
Year Ended January 31, | February 25 A to January 31, 2015 | |||||||||||
2017 | 2016 | |||||||||||
Net asset value, beginning of period | $ | 8.35 | $ | 9.68 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.85 | 0.63 | 0.55 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.43 | (1.30 | ) | (0.29 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.28 | (0.67 | ) | 0.26 | ||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.07 | ) | (0.47 | ) | (0.56 | ) | ||||||
Distributions from net realized gains | — | — | (0.02 | ) | ||||||||
Distribution from return of capital | (0.61 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total distributions | (0.68 | ) | (0.66 | ) | (0.58 | ) | ||||||
|
|
|
|
|
| |||||||
Redemption fees added to beneficial interests F | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 8.95 | $ | 8.35 | $ | 9.68 | ||||||
|
|
|
|
|
| |||||||
Total return B | 15.69 | % | (7.33 | )% | 2.47 | %C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 20,120,332 | $ | 15,934,048 | $ | 13,987,805 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.72 | % | 1.44 | % | 1.78 | %D | ||||||
Expenses, net of reimbursements | 1.63 | %G | 1.53 | % | 1.53 | %D | ||||||
Net investment income, before expense reimbursements | 9.62 | % | 6.84 | % | 5.86 | %D | ||||||
Net investment income, net of reimbursements | 9.71 | % | 6.76 | % | 6.12 | %D | ||||||
Portfolio turnover rate | 69 | % | 68 | % | 23 | %E | ||||||
A Class | ||||||||||||
Year Ended January 31, | February 25 A to January 31, 2015 | |||||||||||
2017 | 2016 | |||||||||||
Net asset value, beginning of period | $ | 8.35 | $ | 9.68 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.90 | 0.62 | 0.54 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.39 | (1.29 | ) | (0.29 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.29 | (0.67 | ) | 0.25 | ||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.07 | ) | (0.47 | ) | (0.55 | ) | ||||||
Distributions from net realized gains | — | — | (0.02 | ) | ||||||||
Distribution from return of capital | (0.61 | ) | (0.19 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total distributions | (0.68 | ) | (0.66 | ) | (0.57 | ) | ||||||
|
|
|
|
|
| |||||||
Redemption fees added to beneficial interests F | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 8.96 | $ | 8.35 | $ | 9.68 | ||||||
|
|
|
|
|
| |||||||
Total return B | 15.77 | % | (7.36 | )% | 2.42 | %C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 4,648,954 | $ | 7,513,980 | $ | 15,782,502 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 1.78 | % | 1.52 | % | 1.88 | %D | ||||||
Expenses, net of reimbursements | 1.67 | %G | 1.55 | % | 1.55 | %D | ||||||
Net investment income, before expense reimbursements | 9.85 | % | 6.89 | % | 5.82 | %D | ||||||
Net investment income, net of reimbursements | 9.96 | % | 6.86 | % | 6.15 | %D | ||||||
Portfolio turnover rate | 69 | % | 68 | % | 23 | %E |
A | February 25, 2014 is the inception date of the Global Evolution Frontier Markets Income Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from February 25, 2014 to January 31, 2015 and is not annualized. |
F | Amount represents less than $0.01 per share. |
G | Voluntary expense cap. See Note 2 of the Notes to the Financial Statements. |
56
American Beacon Global Evolution Frontier Markets Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||
Year Ended January 31, | February 25A to January 31, 2015 | |||||||||||
2017 | 2016 | |||||||||||
Net asset value, beginning of period | $ | 8.34 | $ | 9.67 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.83 | 0.56 | 0.47 | |||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.39 | (1.30 | ) | (0.30 | ) | |||||||
|
|
|
|
|
| |||||||
Total income (loss) from investment operations | 1.22 | (0.74 | ) | 0.17 | ||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.07 | ) | (0.42 | ) | (0.48 | ) | ||||||
Distributions from net realized gains | — | — | (0.02 | ) | ||||||||
Distribution from return of capital | (0.56 | ) | (0.17 | ) | — | |||||||
|
|
|
|
|
| |||||||
Total distributions | (0.63 | ) | (0.59 | ) | (0.50 | ) | ||||||
|
|
|
|
|
| |||||||
Redemption fees added to beneficial interestsF | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 8.93 | $ | 8.34 | $ | 9.67 | ||||||
|
|
|
|
|
| |||||||
Total return B | 14.90 | % | (8.06 | )% | 1.60 | %C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 1,724,982 | $ | 2,049,234 | $ | 1,244,636 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 2.55 | % | 2.31 | % | 3.01 | %D | ||||||
Expenses, net of reimbursements | 2.30 | % | 2.30 | % | 2.31 | %D | ||||||
Net investment income, before expense reimbursements | 8.90 | % | 5.89 | % | 4.62 | %D | ||||||
Net investment income, net of reimbursements | 9.14 | % | 5.90 | % | 5.33 | %D | ||||||
Portfolio turnover rate | 69 | % | 68 | % | 23 | %E |
A | February 25, 2014 is the inception date of the Global Evolution Frontier Markets Income Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from February 25, 2014 to January 31, 2015 and is not annualized. |
F | Amount represents less than $0.01 per share. |
57
American Beacon GLG Total Return FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | Investor Class | ||||||||||
May 20 B to January 31, 2017 | May 20 B to January 31, 2017 | May 20 B to January 31, 2017 | ||||||||||
Net asset value, beginning of period | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.07 | 0.07 | 0.05 | |||||||||
Net gains on investments (both realized and unrealized) | 0.73 | 0.72 | 0.72 | |||||||||
|
|
|
|
|
| |||||||
Total income from investment operations | 0.80 | 0.79 | 0.77 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.10 | ) | (0.10 | ) | (0.10 | ) | ||||||
Distributions from net realized gains | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
|
|
|
|
|
| |||||||
Total distributions | (0.11 | ) | (0.11 | ) | (0.11 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 10.69 | $ | 10.68 | $ | 10.66 | ||||||
|
|
|
|
|
| |||||||
Total return A | 7.95 | % C | 7.85 | % C | 7.65 | % C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 7,560,278 | $ | 107,884 | $ | 128,790 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 2.09 | % D | 5.31 | % D | 5.14 | % D | ||||||
Expenses, net of reimbursements | 1.05 | % D | 1.15 | % D | 1.43 | % D | ||||||
Net investment income (loss), before reimbursements | 0.01 | % D | (3.21 | )%D | (3.04 | )% D | ||||||
Net investment income, net of reimbursements | 1.05 | % D | 0.95 | % D | 0.67 | % D | ||||||
Portfolio turnover rate | 311 | % E | 311 | % E | 311 | % E | ||||||
A Class | C Class | Ultra Class | ||||||||||
May 20 B to January 31, 2017 | May 20 B to January 31, 2017B | May 20 B to January 31, 2017 | ||||||||||
Net asset value, beginning of period | $ | 10.00 | $ | 10.00 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income from investment operations: | ||||||||||||
Net investment income (loss) | 0.05 | (0.01 | ) | 0.07 | ||||||||
Net gains on investments (both realized and unrealized) | 0.72 | 0.73 | 0.73 | |||||||||
|
|
|
|
|
| |||||||
Total income from investment operations | 0.77 | 0.72 | 0.80 | |||||||||
|
|
|
|
|
| |||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.10 | ) | (0.10 | ) | (0.10 | ) | ||||||
Distributions from net realized gains | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||
|
|
|
|
|
| |||||||
Total distributions | (0.11 | ) | (0.11 | ) | (0.11 | ) | ||||||
|
|
|
|
|
| |||||||
Net asset value, end of period | $ | 10.66 | $ | 10.61 | $ | 10.69 | ||||||
|
|
|
|
|
| |||||||
Total return A | 7.65 | % C | 7.15 | % C | 7.95 | % C | ||||||
|
|
|
|
|
| |||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 107,660 | $ | 107,101 | $ | 67,330,248 | ||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements | 5.62 | % D | 6.37 | % D | 2.09 | % D | ||||||
Expenses, net of reimbursements | 1.45 | % D | 2.20 | % D | 0.95 | % D | ||||||
Net investment income (loss), before reimbursements | (3.51 | )% D | (4.27 | )% D | 0.76 | % D | ||||||
Net investment income (loss), net of reimbursements | 0.65 | % D | (0.10 | )% D | 1.91 | % D | ||||||
Portfolio turnover rate | 311 | % E | 311 | % E | 311 | % E |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with 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 from shareholder transactions. |
B | May 20, 2016 is the inception date of the GLG Total Return Fund. |
C | Not Annualized. |
D | Annualized. |
E | Portfolio turnover is for the period from May 20, 2016 to January 31, 2017. |
58
American Beacon FundsSM
January 31, 2017 (Unaudited)
Certain tax information regarding the Funds are required to be provided to shareholders based upon the Funds’ income and distribution for the taxable year ended January 31, 2017. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2016.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2016. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Global Evolution Frontier Markets Income Fund | ||||||||
GLG Total Return Fund | ||||||||
Corporate Dividends Received Deduction | 0.0 | % | 0.0 | % | ||||
Qualified Dividend Income | 0.0 | % | 0.0 | % | ||||
Long-Term Capital Gain Distributions | $ | — | $ | 2,960 | ||||
Short-Term Capital Gain Distributions | $ | — | $ | 49,591 |
Shareholders received notification in January 2017 of the applicable tax information necessary to prepare their 2016 income tax returns.
59
Trustees and Officers of the American Beacon FundsSM (Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees twenty-eight funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of | Principal Occupation(s) During Past 5 Years | ||
INTERESTED TRUSTEES | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (80) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal resignation or retirement* | ||||
Gilbert G. Alvarado (47) | Trustee since 2015 | Director, Kura MD, Inc. (local telehealth organization) (2015-present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present) Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-Present); Director, Sacramento Regional Technology Alliance (2011-Present); Director, Women’s Empowerment (2009-2014); Trustee, American Beacon Select Funds (2015-Present). | ||
Josephe B. Armes (54) | Trustee since 2015 | Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2013-Present); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Chief Operating Officer, Hicks Holdings, LLC (Hicks Family assets and investments) (2005-2010); Trustee, Baylor University Board of Regents (2001-2010); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present). | ||
Gerard J. Arpey (58) | Trustee since 2012 | Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003- 2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Brenda A. Cline (56) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc.(public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (62) | Trustee since 2008 | Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008- 2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). |
60
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
TRUSTEES (CONT.) | Term | |||
M. Dunning (74) | Trustee since 2008 | Chairman Emeritus (2008-Present); Lockton Dunning Benefits (consulting firm in employee benefits); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present) (software consulting); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard M. Massman (73) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (53) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (71) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
OFFICERS | ||||
Gene. L. Needles, Jr. (62) | President since 2009 Executive Vice President since 2009 | President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Resolute Investment Managers, Inc. (2015-Present); President, CEO and Director, Resolute Acquisition, Inc.(2015-Present); President, CEO and Director, Resolute Topco, Inc. (2015-Present), President, CEO and Director, Resolute Investment Holdings, LLC. (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc.; (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, L.L.C. (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). Chairman, President, and CEO, Alpha Quant Advisors (2016-Present). | ||
Rosemary K. Behan (57) | VP, Secretary and Chief Legal Officer since 2006 | Secretary, American Beacon Advisors, Inc. (2006- Present); Secretary, Resolute Investment Managers, Inc. (2015-Present); Secretary, Resolute Acquisition, Inc. (2015- Present); Secretary, Resolute Topco, Inc. (2015-Present); Secretary, Resolute Investment Holdings, LLC. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, L.L.C.(2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). Secretary, Alpha Quant Advisors (2016-Present). | ||
Brian E. Brett (56) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Paul B. Cavazos (47) | VP since 2016 | Chief Investment Officer and Vice President, Asset Management, American Beacon Advisors, Inc. (2016-Present); Chief Investment Officer and Assistant Treasurer, DTE Energy (2007-2016); | ||
Erica Duncan (46) | VP since 2011 | Vice President, Marketing and Client Services, American Beacon Advisors, Inc. (2011-Present); Supervisor, Brand Marketing, Invesco (2010-2011); |
61
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
Melinda G. Heika (55) | Treasurer since 2010 | Treasurer, American Beacon Advisors, Inc. (2010-Present); Treasurer, Resolute Investment Managers, Inc. (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present); Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute Investment Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, L.L.C. (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present). Treasurer, Alpha Quant Advisors (2016-Present). | ||
One Year | ||||
Terri L. McKinney (53) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (41) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Manager and Senior Vice President, American Private Equity Management, L.L.C. (2012-Present); Senior Vice President and Director, Resolute Investment Managers, Inc. (2015-Present); Senior Vice President and Director, Resolute Acquisition, Inc. (2015-Present); Senior Vice President and Director, Resolute Topco, Inc. (2015-Present), Senior Vice President and Director, Resolute Investment Holdings, LLC. (2015-Present); Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010). Executive Vice President, Alpha Quant Advisors (2016-Present). | ||
Samuel J. Silver (53) | VP since 2011 | Chief Fixed Income Officer (2016-Present), Vice President, Fixed Income Investments (2011-2016) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (45) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, L.L.C. (2012-Present). Chief Compliance Officer, Alpha Quant Advisors (2016-Present). | ||
Sonia L. Bates (60) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011-Present), Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer, Resolute Investment Managers, Inc. (2015-Present); Asst. Treasurer, Resolute Acquisition, Inc. (2015-Present); Asst. Treasurer, Resolute Topco, Inc. (2015-Present); Asst. Treasurer, Resolute Investment Holdings, LLC.; Asst. Treasurer, Lighthouse Holdings, Inc. (2011-2015); Asst. Treasurer, Lighthouse Holdings Parent Inc. (2011- 2015); Asst. Treasurer, American Private Equity Management, L.L.C. (2012-Present). Asst. Treasurer, Alpha Quant Advisors (2016-Present). | ||
Shelley D. Abrahams (42) | Assistant Secretary since 2008 | Assistant Secretary, American Beacon Advisors, Inc. (2008-Present) | ||
Rebecca L. Harris (50) | Assistant Secretary since 2011 | Assistant Secretary, American Beacon Advisors, Inc. (2011-Present) | ||
Diana N. Lai (41) | Assistant Secretary since 2012 | Assistant Secretary, American Beacon Advisors, Inc. (2012-Present) | ||
Teresa A. Oxford (58) | Assistant Secretary since 2015 | Assistant Secretary, American Beacon Advisors, Inc. (2015-Present). Assistant Secretary, Alpha Quant Advisors (2016-Present). |
62
Trustees and Officers of the American Beacon FundsSM (Unaudited)
* | As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75. |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors. |
63
American Beacon FundsSM
January 31, 2017 (Unaudited)
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
64
eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your shareholder reports and summary prospectus on-line. Sign up at www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
![]() | ![]() | |
By E-mail: | On the Internet: | |
american_beacon.funds@ambeacon.com | Visit our website at www.americanbeaconfunds.com | |
![]() | ![]() | |
By Telephone: | By Mail: | |
Institutional, Y, Investor, Advisor, A, C and Ultra Classes | American Beacon Funds | |
Call (800) 658-5811 | P.O. Box 219643 | |
Kansas City, MO 64121-9643 | ||
Availability of Quarterly Portfolio Schedules | Availability of Proxy Voting Policy and Records | |
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-2736. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month. |
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www. sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Boston, MA | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds, American Beacon Global Evolution Frontier Markets Income Fund and American Beacon GLG Total Return Fund are service marks of American Beacon Advisors, Inc.
AR 1/17
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the “Code”). The trust amended its code November 12, 2003 to disclose the removal of terminated Investment Companies. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE.ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust’s Board of Trustees has determined that Ms. Brenda A. Cline, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Ms. Brenda Cline is “independent” as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) | ||||||
Audit Fees | Fiscal Year Ended | |||||
$ | 219,621 | * | 1/31/2016 | |||
$ | 295,750 | 1/31/2017 | ||||
(b) | ||||||
Audit-Related Fees | Fiscal Year Ended | |||||
$ | 0 | * | 1/31/2016 | |||
$ | 0 | 1/31/2017 | ||||
(c) | ||||||
Tax Fees | Fiscal Year Ended | |||||
$ | 59,912 | * | 1/31/2016 | |||
$ | 132,995 | 1/31/2017 | ||||
(d) | ||||||
All Other Fees | Fiscal Year Ended | |||||
$ | 0 | * | 1/31/2016 | |||
$ | 0 | 1/31/2017 |
* | Fees are associated with Ernst & Young, LLP. |
e)(1) Pursuant to its charter, the Trust’s Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust’s principal accountant:
- to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts’ financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors;
- to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser (“adviser affiliate”) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts;
- to consider whether the non-audit services provided by a Trust’s auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor’s independence;
- to review the arrangements for and scope of the annual audit and any special audits; and
- to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)
Aggregate Non-Audit Fees for Services Rendered to the:
Registrant | Adviser | Adviser’s Affiliates Providing Ongoing Services to Registrant | Fiscal Year Ended | |||||||||
$ | 59,912 | * | $ | 46,065 | * | N/A | 1/31/2016 | |||||
$ | 132,995 | $ | 215,882 | * | N/A | 1/31/2017 |
* | Fees are associated with Ernst & Young, LLP. |
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the shareholder reports presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President | ||
American Beacon Funds | ||
Date: April 10, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President | ||
American Beacon Funds | ||
Date: April 10, 2017 | ||
By | /s/ Melinda G. Heika | |
Melinda G. Heika | ||
Treasurer | ||
American Beacon Funds | ||
Date: April 10, 2017 |