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: August 31, 2017
Date of reporting period: February 28, 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.
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.
SiM HIGH YIELD OPPORTUNITIES FUND
Investments in high-yield securities are subject to greater levels of credit, interest rate, market and liquidity risks than investment-grade securities. 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.
SOUND POINT FLOATING RATE 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. In addition, loans are subject to the risk that the Fund may not be able to obtain the collateral securing the loan in a timely manner, and the value of the collateral may not cover the amount owed on the loan.
Please see the prospectus for a complete discussion of the Funds’ risks. There can be no assurances that the investment objectives of these Funds will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each 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 | February 28, 2017 |
Contents
1 | ||||
2 | ||||
6 | ||||
Schedules of Investments: | ||||
8 | ||||
12 | ||||
18 | ||||
22 | ||||
Financial Highlights: | ||||
45 | ||||
48 | ||||
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%. From Inauguration Day to February 28, it gained approximately 4%. |
Economists anticipated the Federal Reserve would increase the federal funds rate – perhaps as early as mid-March. The Federal Open Market Committee’s confidence in the improving U.S. economy was exhibited in December 2016 when short-term interest rates increased by 0.25% to a range of 0.50% to 0.75%. It was the second increase since 2008; the first increase occurred in December 2015.
For the six-month period that ended February 28, 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 14.51%; and the S&P 500 Index, a domestic equity bellwether, grew 10.01%. In contrast, during the same period, the Bloomberg Barclays U.S. Aggregate Index, a benchmark for domestic corporate and government bonds, returned -2.19%; the Bank of America Merrill Lynch U.S. High Yield Master II Index, which represents domestic, below-investment-grade corporate debt, returned 5.54%; and the Credit Suisse Leveraged Loan Index, which represents the U.S.denominated, leveraged-loan market, returned 4.30%.
For the 6 months ended February 28, 2017:
• | American Beacon SiM High Yield Opportunities Fund (Investor Class) returned 5.55%. |
• | American Beacon Sound Point Floating Rate Income Fund (Investor Class) returned 3.86%. |
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
American Beacon SiM High Yield Opportunities FundSM
February 28, 2017 (Unaudited)
The Investor Class of the American Beacon SiM High Yield Opportunities Fund (the “Fund”) returned 5.55% for the six months ended February 28, 2017. The Fund outperformed the Bank of America Merrill Lynch U.S. High Yield Master II Index (the “Index”) return of 5.54% for the same period.
Total Returns for the Period ended February 28, 2017
Ticker | 6 Months* | 1 Year | 3 Years | 5 Years | Since Inception 2/14/2011 | |||||||||||||||||||
Institutional Class (1,2,4) | SHOIX | 5.58 | % | 19.87 | % | 5.05 | % | 7.70 | % | 7.42 | % | |||||||||||||
Y Class (1,2,4) | SHOYX | 5.67 | % | 19.95 | % | 5.01 | % | 7.63 | % | 7.32 | % | |||||||||||||
Investor Class (1,2,4) | SHYPX | 5.55 | % | 19.57 | % | 4.72 | % | 7.37 | % | 7.01 | % | |||||||||||||
A without Sales Charge (1,2,4) | SHOAX | 5.50 | % | 19.43 | % | 4.67 | % | 7.24 | % | 6.93 | % | |||||||||||||
A with Sales Charge (1,2,4) | SHOAX | 0.52 | % | 13.77 | % | 3.00 | % | 6.21 | % | 6.07 | % | |||||||||||||
C without Sales Charge (1,2,4) | SHOCX | 5.11 | % | 18.63 | % | 3.90 | % | 6.47 | % | 6.17 | % | |||||||||||||
C with Sales Charge (1,2,4) | SHOCX | 4.11 | % | 17.63 | % | 3.90 | % | 6.47 | % | 6.17 | % | |||||||||||||
BofA Merrill Lynch U.S. High Yield Master II Index (3) | 5.54 | % | 22.30 | % | 4.78 | % | 6.87 | % | 6.79 | % |
* | 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 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 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. |
2. | A portion of the fees charged to the Institutional Class of the Fund has been waived since inception. Performance prior to waiving fees was lower than actual returns shown. A portion of the fees charged to the Investor Class of the Fund was waived in 2011 and 2012 and partially recovered in 2013 and 2016. Performance prior to waiving fees was lower than actual returns shown in 2011 and 2012. A portion of the fees charged to the A, and C Classes of the Fund was waived from 2011 through 2014 and partially recovered in 2015 and 2016. Performance prior to waiving fees was lower than the actual returns shown from 2011 through 2014. A portion of the fees charged to the Y Class of the Fund was waived from 2011 through 2013, partially recovered in 2015 and waived in 2016. Performance prior to waving fees was lower than actual returns shown from 2011 through 2013 and in 2016. |
3. | The BofA Merrill Lynch U.S. High Yield Master II Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. Qualifying securities must have a below-investment-grade rating and an investment-grade rated country of risk. In addition, qualifying securities must have at least one year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $100 million. Defaulted securities and securities eligible for the dividends-received deduction are excluded from the Index. One cannot directly invest in an index. |
4. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.92%, 0.92%, 1.18%, 1.24%, and 1.98%, 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 sector selection perspective, the Fund’s Energy, Finance, and Consumer sector holdings added to the Fund’s outperformance. On the other hand, issue selection within the Fund’s Service and Manufacturing sectors detracted from relative returns.
From a sector allocation standpoint, overweighting the Consumer sector detracted from Fund performance. Conversely, an overweight to the Energy sector contributed positively to relative returns.
From a credit quality selection perspective, the Fund’s relative performance was hindered by poor security selection in the CCC-rated credit category. This was partially offset by positive issue selection within the below C-rated and BB-rated credit categories, which were additive to Fund performance.
From a credit quality allocation standpoint, the Fund’s underweight to the BB-rated and overweight to the CCC-rated credit categories contributed positively to the Fund’s relative performance. In contrast, null weighting the CC-rated credit category detracted from the Fund’s returns.
2
American Beacon SiM High Yield Opportunities FundSM
Performance Overview
February 28, 2017 (Unaudited)
The Fund has the flexibility to utilize derivative instruments and will do so to enhance return, hedge risk, manage liquidity, or to gain efficient exposure to an asset class. When considering the Fund’s use of derivatives, it is important to note that the Fund does not use derivatives for the purpose of creating financial leverage. During the period, the Fund experienced gains from the use of derivatives.
The sub-advisor’s investment process of identifying long-term secular themes and seeking out of favor sectors through bottom-up fundamental research remains in place.
Top Ten Holdings (% Net Assets) | ||||||||
MEG Energy Corp., 7.00%, Due 3/31/2024, 144A | 2.5 | |||||||
Northern Blizzard Resources, Inc., 7.25%, Due 2/1/2022, 144A | 2.2 | |||||||
Simmons Foods, Inc., 7.875%, Due 10/1/2021, 144A | 2.0 | |||||||
Kissner Holdings LP / Kissner Milling Co. Ltd / BSC Holding Inc / Kissner USA, 8.375%, Due 12/1/2022, 144A | 1.9 | |||||||
Ithaca Energy, Inc., 8.125%, Due 7/1/2019, 144A | 1.9 | |||||||
Tenet Healthcare Corp., 4.50%, Due 4/1/21 | 1.8 | |||||||
DaVita HealthCare Partners, Inc., 5.00%, Due 5/1/2025 | 1.8 | |||||||
Acadia Healthcare Co., Inc., 5.125%, Due 7/1/2022 | 1.7 | |||||||
Manitowoc Foodservice, Inc., 9.50%, Due 2/15/2024 | 1.7 | |||||||
Prime Security Services Borrower LLC / Prime Finance, Inc., 9.25%, Due 5/15/2023, 144A | 1.6 | |||||||
Total Fund Holdings | 96 | |||||||
Sector Allocation (% Investments) | ||||||||
Service | 35.5 | |||||||
Manufacturing | 25.2 | |||||||
Energy | 17.2 | |||||||
Consumer | 10.2 | |||||||
Transportation | 3.3 | |||||||
Utilities | 2.7 | |||||||
Financials | 2.6 | |||||||
Telecommunications | 1.2 | |||||||
Foreign Sovereign | 1.1 | |||||||
Information Technology | 0.5 | |||||||
Real Estate | 0.3 | |||||||
Country Allocation (% Equities) | ||||||||
United States | 69.8 | |||||||
Canada | 15.2 | |||||||
United Kingdom | 4.5 | |||||||
Luxembourg | 3.4 | |||||||
Bermuda | 2.9 | |||||||
Netherlands | 1.4 | |||||||
Mexico | 1.3 | |||||||
Greece | 0.5 | |||||||
Brazil | 0.4 | |||||||
Marshall Islands | 0.3 | |||||||
Norway | 0.2 | |||||||
Spain | 0.1 |
S&P credit ratings for long-term obligations (or issuers thereof) are AAA, AA, A, BBB, BB, B, CCC, CC, C, and D in decreasing order. For example, obligations rated AAA are judged to be of the highest quality, BBB to be of medium grade, CCC are judged to be speculative and obligations rated D are in default. Obligations rated in one of the four highest categories are considered to be investment grade while all other ratings are considered non-investment grade.
3
American Beacon Sound Point Floating Rate Income FundSM
Performance Overview
February 28, 2017 (Unaudited)
The Investor Class of the American Beacon Sound Point Floating Rate Income Fund (the “Fund”) returned 3.86% for the six months ended February 28, 2017. The Fund underperformed the Credit Suisse Leveraged Loan Index (the “Index”) return of 4.30% for the same period.
Total Returns for the Period ended February 28, 2017
Ticker | 6 Months* | 1 Year | 3 Years | Since Inception | ||||||||||||||||
Institutional Class (1,2,6) | SPFLX | 3.97 | % | 9.19 | % | 5.50 | % | 6.44 | % | |||||||||||
Y Class (1,2,3,6) | SPFYX | 3.92 | % | 9.11 | % | 5.39 | % | 6.37 | % | |||||||||||
Investor Class (1,2,3,6) | SPFPX | 3.86 | % | 8.90 | % | 5.30 | % | 6.30 | % | |||||||||||
A without Sales Charge (1,2,3,6) | SOUAX | 3.75 | % | 8.75 | % | 5.26 | % | 6.27 | % | |||||||||||
A with Sales Charge (1,2,3,6) | SOUAX | 1.17 | % | 5.99 | % | 4.37 | % | 5.63 | % | |||||||||||
C without Sales Charge (1,2,3,6) | SOUCX | 3.46 | % | 8.04 | % | 4.97 | % | 6.06 | % | |||||||||||
C with Sales Charge (1,2,3,6) | SOUCX | 2.46 | % | 7.04 | % | 4.97 | % | 6.06 | % | |||||||||||
SP Class (1,2,4,6) | SPFRX | 3.84 | % | 8.91 | % | 5.23 | % | 6.25 | % | |||||||||||
Credit Suisse Leveraged Loan Index (5) | 4.30 | % | 12.55 | % | 3.82 | % | 4.54 | % |
* | 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 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. | 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 actual returns shown. |
3. | Fund performance represents the returns achieved by the Institutional Class from 12/3/12 up to 12/11/15, the inception date of the Y, Investor, A, and C Classes, and the returns of each Class since its inception. Expenses of the Institutional Class are lower than the other Classes. Therefore, total returns shown may be higher than they would have been had each Class been in existence since 12/3/12. |
4. | Fund performance represents the returns achieved by the Institutional Class from 12/3/12 up to 5/30/14, the inception date of the SP Class, and the returns of the SP Class since its inception. Expenses of the Institutional Class are lower than the SP Class. Therefore, total returns shown may be higher than they would have been had the SP Class been in existence since 12/3/12. |
5. | The Credit Suisse Leveraged Loan Index is an index designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. One cannot directly invest in an index. |
6. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and SP Class shares was 1.28%, 1.44%, 1.33%, 1.69%, 2.57%, and 1.51%, 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 underweight position in the commodity-sensitive sectors, primarily Energy and Metals/Materials, was the main source of underperformance as those sectors significantly outperformed the broader market. Stabilization in commodity prices during 2016 allowed the sectors to recover following a two-year correction, and an improved economic outlook gave investors confidence going forward. The Fund has been underweight these sectors since late-2014 when commodity prices first started deteriorating. The Fund’s significant outperformance in 2014 and 2015 was due to that positioning. In 2016, however, when the commodity markets turned, the Fund began to underperform.
The sub-advisor’s strategy seeks to avoid highly-leveraged, cyclical sectors (such as energy, mining, retail, and lodging) as they inevitably experience volatile corrections. Likewise, the strategy also avoids overly-hyped sectors (such as that which Health Care recently experienced) as market valuations became unattractive.
Also during the six-month period ended February 28, 2017, the Fund’s total assets increased from $110 million to $543 million as investors were encouraged by the floating-rate nature of the Fund and its incremental
4
American Beacon Sound Point Floating Rate Income FundSM
Performance Overview
February 28, 2017 (Unaudited)
yield. During this time, a significant amount of assets was invested in new holdings, and a portion was held in cash to help provide liquidity, if needed. These factors detracted slightly from returns as nearly all sectors of the bank loan market were positive during the period.
Top Ten Holdings (% Net Assets) | ||||||||
Change Healthcare Holdings, Inc., Term Loan B8, 3.75%, Due 2/8/2024 | 1.8 | |||||||
Interior Logic Group, Inc., 2017 Term Loan B, 7.00%, Due 2/27/2024 | 1.4 | |||||||
DTI Holdco, Inc., 2016 Term Loan B, 1.00%, Due 9/21/2023 | 1.3 | |||||||
TPF II Power LLC, Syndicated Term Loan B, 5.50%, Due 10/2/2021 | 1.1 | |||||||
Global Tel Link Corp., Term Loan, 5.00%, Due 5/23/2020 | 1.1 | |||||||
Freedom Mortgage Corp., First Lien Term Loan B, VR, 6.50%, Due 2/16/2022 | 1.1 | |||||||
Confie Seguros Holding II Co., First Lien Term Loan B, VR, 5.75%, Due 4/19/2022 | 1.1 | |||||||
Blackboard, Inc., First Lien Term Loan B4, VR, 6.023%, Due 6/30/2021 | 0.9 | |||||||
Worldwide Express Operations LLC, First Lien Term Loan, VR, 5.53%, Due 1/31/2024 | 0.9 | |||||||
Greenway Medical Technologies, Inc., 2017 First Lien Term Loan, VR, 5.75%, Due 2/14/2024 | 0.9 | |||||||
Total Fund Holdings | 264 | |||||||
Sector Weightings (% Investments) | ||||||||
Manufacturing | 34.2 | |||||||
Service | 31.4 | |||||||
Financials | 13.7 | |||||||
Telecommunications | 7.6 | |||||||
Utilities | 4.1 | |||||||
Transportation | 4.0 | |||||||
Consumer | 2.9 | |||||||
Energy | 2.1 |
5
American Beacon Bond FundsSM
February 28, 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 costs (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 September 1, 2016 through February 28, 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.
6
American Beacon Bond FundsSM
Expense Examples
February 28, 2017 (Unaudited)
SiM High Yield Opportunities Fund
Beginning Account Value 9/1/2016 | Ending Account Value 2/28/2017 | Expenses Paid During Period 9/1/2016-2/28/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,055.79 | $ | 4.28 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.64 | $ | 4.21 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,056.70 | $ | 4.49 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.45 | $ | 4.41 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,055.50 | $ | 5.71 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.23 | $ | 5.61 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,055.02 | $ | 6.06 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.89 | $ | 5.96 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,051.08 | $ | 9.87 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,015.20 | $ | 9.69 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.84%, 0.88%, 1.12%, 1.19%, and 1.94% 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 (181) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
Sound Point Floating Rate Income Fund
Beginning Account Value 9/1/2016 | Ending Account Value 2/28/2017 | Expenses Paid During Period 9/1/2016-2/28/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.72 | $ | 4.20 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.66 | $ | 4.16 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.17 | $ | 4.45 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.41 | $ | 4.41 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.56 | $ | 5.21 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.68 | $ | 5.16 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,037.46 | $ | 6.11 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.81 | $ | 6.06 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.57 | $ | 9.74 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,015.20 | $ | 9.64 | ||||||
SP Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.45 | $ | 5.61 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.29 | $ | 5.56 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.83%, 0.88%, 1.03%, 1.21%, 1.93%, and 1.11% for the Institutional, Y, Investor, A, C, and SP 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 (181) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
7
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
COMMON STOCK - 1.75% | ||||||||
ENERGY- 0.78% | ||||||||
Oil & Gas - 0.78% | ||||||||
Granite Oil Corp. | 1,040,109 | $ | 4,565,454 | |||||
Northern Blizzard Resources, Inc. | 2,023,750 | 5,119,560 | ||||||
|
| |||||||
Total Energy | 9,685,014 | |||||||
|
| |||||||
FINANCIALS- 0.24% | ||||||||
Other Finance - 0.24% | ||||||||
Oslo Bors VPS Holdings ASA | 269,988 | 2,995,036 | ||||||
|
| |||||||
MANUFACTURING- 0.08% | ||||||||
Basic Materials - 0.08% | ||||||||
CVR Partners LP A | 198,118 | 1,028,232 | ||||||
|
| |||||||
REAL ESTATE- 0.32% | ||||||||
Mortage Real Estate Investment Trusts - 0.32% | ||||||||
Annaly Capital Management, Inc. B | 359,000 | 3,984,900 | ||||||
|
| |||||||
TRANSPORTATION- 0.33% | ||||||||
Other Transportation - 0.33% | ||||||||
Knot Offshore Partners LP A | 183,340 | 4,042,647 | ||||||
|
| |||||||
Total Common Stock (Cost $23,531,918) | 21,735,829 | |||||||
|
| |||||||
Principal Amount* | ||||||||
DOMESTIC BANK LOAN OBLIGATIONS - 0.95% (Cost $11,369,091) | ||||||||
Transportation - 0.95% | ||||||||
Gol Luxco S.A., Term Loan, 6.50%, Due 8/31/2020 H | $ | 11,450,000 | 11,721,937 | |||||
|
| |||||||
DOMESTIC CONVERTIBLE OBLIGATIONS - 0.81% (Cost $9,658,001) | ||||||||
Transportation - 0.81% | ||||||||
Titan Machinery, Inc., 3.75%, Due 5/1/2019 | 10,770,000 | 10,069,950 | ||||||
|
| |||||||
CORPORATE OBLIGATIONS - 89.93% | ||||||||
Consumer - 9.83% | ||||||||
AdvancePierre Foods Holdings, Inc., 5.50%, Due 12/15/2024C | 11,400,000 | 11,599,500 | ||||||
Hearthside Group Holdings LLC/Hearthside Finance Co., 6.50%, Due 5/1/2022C D | 14,347,000 | 14,382,868 | ||||||
JBS USA LLC / JBS USA Finance, Inc., 5.875%, Due 7/15/2024C D | 16,445,000 | 17,185,025 | ||||||
Kronos Acquisition Holdings, Inc., 9.00%, Due 8/15/2023C | 13,570,000 | 13,858,362 | ||||||
Minerva Luxembourg S.A., 6.50%, Due 9/20/2026C | 13,000,000 | 12,902,500 | ||||||
Post Holdings, Inc., 5.00%, Due 8/15/2026C | 17,085,000 | 16,518,974 | ||||||
Simmons Foods, Inc., 7.875%, Due 10/1/2021C | 23,220,000 | 24,439,050 | ||||||
TreeHouse Foods, Inc., 6.00%, Due 2/15/2024C | 10,444,000 | 10,992,310 | ||||||
|
| |||||||
121,878,589 | ||||||||
|
| |||||||
Energy - 15.95% | ||||||||
California Resources Corp., | ||||||||
5.50%, Due 9/15/2021 M | 11,043,000 | 8,337,465 | ||||||
8.00%, Due 12/15/2022C | 10,174,000 | 8,698,770 | ||||||
CVR Refining LLC / Coffeyville Finance, Inc., 6.50%, Due 11/1/2022 D | 11,144,000 | 11,255,440 | ||||||
Denbury Resources, Inc., 5.50%, Due 5/1/2022 | 10,250,000 | 8,456,250 | ||||||
Energen Corp., 7.125%, Due 2/15/2028 | 5,410,000 | 5,558,775 | ||||||
Ithaca Energy, Inc., 8.125%, Due 7/1/2019C | 22,852,000 | 23,737,515 | ||||||
MEG Energy Corp., 7.00%, Due 3/31/2024C | 34,943,000 | 31,448,700 | ||||||
Murphy Oil Corp., | ||||||||
6.875%, Due 8/15/2024 | 1,799,000 | 1,925,830 | ||||||
7.05%, Due 5/1/2029 | 6,150,000 | 6,595,875 | ||||||
6.125%, Due 12/1/2042 | 11,166,000 | 10,496,040 | ||||||
Northern Blizzard Resources, Inc., 7.25%, Due 2/1/2022C | 27,347,000 | 27,483,735 |
See accompanying notes
8
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||
Energy - 15.95% (continued) | ||||||||
Northern Tier Energy LLC / Northern Tier Finance Corp., 7.125%, Due 11/15/2020D | $ | 13,975,000 | $ | 14,516,531 | ||||
Oasis Petroleum, Inc., 6.875%, Due 1/15/2023 | 4,033,000 | 4,088,454 | ||||||
Teine Energy Ltd., 6.875%, Due 9/30/2022C | 15,687,000 | 16,314,480 | ||||||
Whiting Petroleum Corp., 5.75%, Due 3/15/2021 | 18,975,000 | 18,880,125 | ||||||
|
| |||||||
197,793,985 | ||||||||
|
| |||||||
Finance - 2.29% | ||||||||
DFC Finance Corp., 10.50%, Due 6/16/2020C E | 12,145,708 | 7,651,796 | ||||||
Iron Mountain US Holdings, Inc., 5.375%, Due 6/1/2026C | 7,205,000 | 7,168,975 | ||||||
Tervita Escrow Corp., 7.625%, Due 12/1/2021C | 13,000,000 | 13,585,000 | ||||||
|
| |||||||
28,405,771 | ||||||||
|
| |||||||
Information Technology - 0.53% | ||||||||
Leidos, Inc., 5.50%, Due 7/1/2033 | 6,996,000 | 6,510,246 | ||||||
|
| |||||||
Manufacturing - 24.40% | ||||||||
Actuant Corp., 5.625%, Due 6/15/2022 | 13,285,000 | 13,700,156 | ||||||
Airxcel, Inc., 8.50%, Due 2/15/2022C | 7,650,000 | 7,879,500 | ||||||
ATS Automation Tooling Systems, Inc., 6.50%, Due 6/15/2023C | 15,309,000 | 15,997,905 | ||||||
Ball Corp., 4.00%, Due 11/15/2023 | 7,750,000 | 7,740,313 | ||||||
CBC Ammo LLC / CBC FinCo, Inc., 7.25%, Due 11/15/2021C D | 18,518,000 | 18,286,525 | ||||||
Crown Americas LLC / Crown Americas Capital Corp., IV, 4.50%, Due 1/15/2023D | 15,925,000 | 16,343,031 | ||||||
CVR Partners LP / CVR Nitrogen Finance Corp., 9.25%, Due 6/15/2023C F | 17,915,000 | 19,169,050 | ||||||
Engility Corp., 8.875%, Due 9/1/2024C | 16,705,000 | 17,957,875 | ||||||
Kissner Holdings LP / Kissner Milling Co. Ltd / BSC Holding Inc / Kissner USA, 8.375%, Due 12/1/2022C F | 22,605,000 | 23,396,175 | ||||||
Leidos, Inc., 7.125%, Due 7/1/2032 | 10,336,000 | 11,146,601 | ||||||
LSB Industries, Inc., 8.50%, Due 8/1/2019 I | 16,127,000 | 15,764,143 | ||||||
Manitowoc Foodservice, Inc., 9.50%, Due 2/15/2024 | 18,221,000 | 21,068,031 | ||||||
MasTec, Inc., 4.875%, Due 3/15/2023 | 17,090,000 | 17,090,000 | ||||||
Microsemi Corp., 9.125%, Due 4/15/2023C | 15,305,000 | 17,639,012 | ||||||
Qorvo, Inc., 7.00%, Due 12/1/2025 | 15,636,000 | 17,277,780 | ||||||
Sealed Air Corp., 5.125%, Due 12/1/2024C | 7,612,000 | 7,954,540 | ||||||
Sensata Technologies BV, 4.875%, Due 10/15/2023C | 16,705,000 | 17,059,981 | ||||||
Servicios Corporativos Javer S.A.P. de C.V., 9.875%, Due 4/6/2021C | 7,673,000 | 7,918,536 | ||||||
Techniplas LLC, 10.00%, Due 5/1/2020C D | 14,320,000 | 13,639,800 | ||||||
Titan International, Inc., 6.875%, Due 10/1/2020 | 15,195,000 | 15,612,863 | ||||||
|
| |||||||
302,641,817 | ||||||||
|
| |||||||
Service - 32.36% | ||||||||
Acadia Healthcare Co., Inc., 5.125%, Due 7/1/2022 | 21,155,000 | 21,313,663 | ||||||
Carlson Travel, Inc., 9.50%, Due 12/15/2024C | 10,420,000 | 11,149,400 | ||||||
Churchill Downs, Inc., 5.375%, Due 12/15/2021 | 8,800,000 | 9,163,000 | ||||||
Codere Finance 2 Luxembourg S.A., 7.625%, Due 11/1/2021C | 15,750,000 | 15,009,750 | ||||||
Constellis Holdings LLC / Constellis Finance Corp., 9.75%, Due 5/15/2020C D | 17,350,000 | 18,564,500 | ||||||
DaVita HealthCare Partners, Inc., 5.00%, Due 5/1/2025 | 22,085,000 | 22,221,706 | ||||||
Envision Healthcare Corp., 5.125%, Due 7/1/2022C | 12,750,000 | 13,052,812 | ||||||
Golden Nugget Escrow, Inc., 8.50%, Due 12/1/2021C | 15,980,000 | 17,058,650 | ||||||
Halyard Health, Inc., 6.25%, Due 10/15/2022 | 16,935,000 | 17,527,725 | ||||||
HCA, Inc., | ||||||||
4.75%, Due 5/1/2023 | 8,394,000 | 8,803,208 | ||||||
4.50%, Due 2/15/2027 | 9,441,000 | 9,417,398 | ||||||
IHS Markit, Ltd., 5.00%, Due 11/1/2022C | 15,819,000 | 16,629,723 | ||||||
Kindred Healthcare, Inc., 6.375%, Due 4/15/2022 | 18,659,000 | 17,236,251 | ||||||
LifePoint Health, Inc., 5.375%, Due 5/1/2024C | 17,000,000 | 17,127,500 | ||||||
Live Nation Entertainment, Inc., 4.875%, Due 11/1/2024C | 5,715,000 | 5,700,713 | ||||||
MGM Resorts International, 7.75%, Due 3/15/2022 | 14,355,000 | 16,759,462 | ||||||
Prime Security Services Borrower LLC / Prime Finance, Inc., 9.25%, Due 5/15/2023C D | 18,120,000 | 19,818,750 | ||||||
QVC, Inc., 4.45%, Due 2/15/2025 | 5,671,000 | 5,591,804 | ||||||
Select Medical Corp., 6.375%, Due 6/1/2021 | 16,960,000 | 17,066,000 |
See accompanying notes
9
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||||||
Service - 32.36% (continued) | ||||||||||||
Southern Graphics, Inc., 8.375%, Due 10/15/2020C | $ | 18,015,000 | $ | 18,510,413 | ||||||||
Station Casinos LLC, 7.50%, Due 3/1/2021D | 14,637,000 | 15,259,073 | ||||||||||
Tenet Healthcare Corp., 4.50%, Due 4/1/2021 | 21,892,000 | 22,165,650 | ||||||||||
Univision Communications, Inc., 5.125%, Due 2/15/2025C | 18,950,000 | 18,689,437 | ||||||||||
Viking Cruises Ltd., 8.50%, Due 10/15/2022C | 17,680,000 | 18,475,600 | ||||||||||
Virgin Media Finance PLC, | ||||||||||||
6.375%, Due 4/15/2023C G | 10,522,000 | 11,048,100 | ||||||||||
6.00%, Due 10/15/2024C G | 17,100,000 | 17,976,375 | ||||||||||
|
| |||||||||||
401,336,663 | ||||||||||||
|
| |||||||||||
Telecommunications - 1.16% | ||||||||||||
CPI International, Inc., 8.75%, Due 2/15/2018 | 14,225,000 | 14,402,813 | ||||||||||
|
| |||||||||||
Transportation - 0.75% | ||||||||||||
Gol Linhas Aereas S.A., 10.75%, Due 2/12/2023C L | 5,000,000 | 4,375,000 | ||||||||||
Gol LuxCo S.A., 8.50%, Due 7/20/2021C E | 1,833,778 | 1,467,022 | ||||||||||
United Continental Holdings, Inc., 6.00%, Due 12/1/2020 | 3,175,000 | 3,393,281 | ||||||||||
|
| |||||||||||
9,235,303 | ||||||||||||
|
| |||||||||||
Utilities - 2.66% | ||||||||||||
Energen Corp., 4.625%, Due 9/1/2021 | 16,599,000 | 16,557,503 | ||||||||||
Stoneway Capital Corp., 10.00%, Due 3/1/2027C | 16,225,000 | 16,387,250 | ||||||||||
|
| |||||||||||
32,944,753 | ||||||||||||
|
| |||||||||||
Total Corporate Obligations (Cost $1,086,053,610) | 1,115,149,940 | |||||||||||
|
| |||||||||||
FOREIGN CONVERTIBLE OBLIGATIONS - 0.07% | ||||||||||||
Consumer - 0.07% | ||||||||||||
Pescanova S.A., | ||||||||||||
5.125%, Due 4/20/2017 L M | 7,450,000 | 437,246 | ||||||||||
8.75%, Due 2/17/2019 L M N | 6,600,000 | 387,359 | ||||||||||
|
| |||||||||||
Total Foreign Convertible Obligations (Cost $10,076,437) | 824,605 | |||||||||||
|
| |||||||||||
FOREIGN CORPORATE AND SOVEREIGN OBLIGATIONS - 3.54% | ||||||||||||
Sovereign – 1.11% | ||||||||||||
Greece, Hellenic Republic, 3.00%, Due 2/24/2023 I J N | EUR | 7,500,000 | 6,511,390 | |||||||||
Mexican Bonos Desarr, 6.50%, Due 6/10/2021 | MXN | 147,500,000 | 7,213,526 | |||||||||
|
| |||||||||||
13,724,916 | ||||||||||||
|
| |||||||||||
Service - 2.04% | ||||||||||||
Ladbrokes Group Finance PLC, 5.125%, Due 9/8/2023 G N | GBP | 9,700,000 | 11,554,797 | |||||||||
William Hill PLC, 4.875%, Due 9/7/2023G N | GBP | 10,800,000 | 13,769,716 | |||||||||
|
| |||||||||||
25,324,513 | ||||||||||||
|
| |||||||||||
Transportation - 0.39% | ||||||||||||
Entertainment One Ltd., 6.875%, Due 12/15/2022 C | GBP | 3,600,000 | 4,873,563 | |||||||||
|
| |||||||||||
Total Foreign Obligations (Cost $46,755,078) | 43,922,992 | |||||||||||
|
| |||||||||||
Shares | ||||||||||||
SHORT-TERM INVESTMENTS - 0.91% (Cost $11,302,321) | ||||||||||||
Short-Term Investments - 0.91% | ||||||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class K | 11,302,321 | 11,302,321 | ||||||||||
|
| |||||||||||
TOTAL INVESTMENTS - 97.96% (Cost $1,198,746,456) | 1,214,727,574 | |||||||||||
OTHER ASSETS, NET OF LIABILITIES - 2.04% | 25,314,503 | |||||||||||
|
| |||||||||||
TOTAL NET ASSETS - 100.00% | $ | 1,240,042,077 | ||||||||||
|
|
Percentages are stated as a percent of net assets.
* | In U.S. Dollars unless otherwise noted. |
See accompanying notes
10
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
A | MLP - Master Limited Partnership. |
B | REIT - Real Estate Investment Trust. |
C | 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 $670,781,017 or 54.09% of net assets. The Fund has no right to demand registration of these securities. |
D | LLC - Limited Liability Company. |
E | PIK - Payment in Kind. |
F | LP - Limited Partnership. |
G | PLC - Public Limited Company. |
H | Term Loan. |
I | Variable rate. |
J | Step Up/Down - A scheduled increase in the exercise or conversion price at which a warrant, an option, or a convertible security may be used to acquire shares of common stock. |
K | The Fund is affiliated by having the same investment advisor. |
L | Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the fair valued securities amounted to $5,199,605 or 0.42% of net assets. |
M | Default Security. At period end, the amount of securities in default was $9,162,070 or 0.74% of net assets. |
N | 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. |
Futures Contracts Open on February 28, 2017:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
British Pound Currency Futures | Short | 398 | March 2017 | $ | 30,857,437 | $ | 222,670 | |||||||||||||
Euro Currency Futures | Short | 57 | March 2017 | 7,550,719 | 48,118 | |||||||||||||||
|
|
|
| |||||||||||||||||
$ | 38,408,156 | $ | 270,788 | |||||||||||||||||
|
|
|
|
Glossary | ||||||||||
Currency Abbreviations: | ||||||||||
EUR | Euro | |||||||||
GBP | British Pound | |||||||||
MXN | Mexican Peso |
See accompanying notes
11
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
COMMON STOCKS - 0.04% (Cost $36,380) | ||||||||
FINANCE- 0.04% | ||||||||
Other Finance - 0.04% | ||||||||
Aretec Group, Inc.A | 15,975 | $ | 231,638 | |||||
RCS 2L EscrowA B | 667 | — | ||||||
|
| |||||||
Total Finance | 231,638 | |||||||
|
| |||||||
Total Common Stocks (Cost $36,380) | 231,638 | |||||||
|
| |||||||
WARRANTS - 0.00% (Cost $0) | ||||||||
MATERIALS- 0.00% | ||||||||
Building Products - 0.00% | ||||||||
Euramax Holdings, Inc.A B G | 21 | — | ||||||
|
| |||||||
Principal Amount | ||||||||
BANK LOAN OBLIGATIONS - 83.66% | ||||||||
Consumer - 2.47% | ||||||||
AMF Bowling Centers, Inc., 2016 2nd LienTerm Loan, VR, 11.00%, Due 2/16/2024C | $ | 2,089,000 | 2,130,780 | |||||
AMF Bowling Centers, Inc., First Lien Term Loan, VR, 6.00%, Due 8/17/2023C D | 4,170,874 | 4,184,763 | ||||||
Amplfy Snack Brands Inc., First LienTerm Loan, VR, 6.50%, Due 8/24/2023C D | 463,838 | 451,662 | ||||||
ASP MSG Acquisition Co., Inc., Initial Term Loan, VR, 6.00%, Due 8/16/2023C D | 120,698 | 121,552 | ||||||
Brown Jordan International, Inc., Term Loan B, VR, 6.789%, Due 1/27/2023 C | 1,258,000 | 1,251,710 | ||||||
Candy Intermediate Holdings, Inc., Term Loan B, VR, 5.50%, Due 6/15/2023C D | 302,480 | 304,498 | ||||||
Dairyland USA Corp., Term Loan, VR, 6.75%, Due 6/22/2022C D | 936,494 | 943,517 | ||||||
Del Monte Foods, Inc., First Lien Term Loan, VR, 4.307%, Due 2/18/2021 C D | 307,573 | 280,279 | ||||||
Floor and Decor Outlet of America, Term Loan, VR, 5.25%, Due 9/30/2023C D | 1,405,478 | 1,405,478 | ||||||
Give + Go Prepared Foods Corp., First Lien Term Loan, VR, 6.50%, Due 7/29/2023C D | 571,568 | 581,570 | ||||||
KIK Custom Products, Inc., 2015 Term Loan B, VR, 5.50%, Due 8/26/2022C D | 771,831 | 779,071 | ||||||
Raley’s, Term Loan, VR, 7.25%, Due 5/18/2022C | 845,207 | 851,546 | ||||||
Shearers Foods, Inc., Incremental Term Loan, VR, 5.25%, Due 6/30/2021C D | 248,744 | 249,987 | ||||||
|
| |||||||
13,536,413 | ||||||||
|
| |||||||
Energy - 1.77% | ||||||||
Expro FinServices Sarl, Term Loan B, VR, 5.75%, Due 9/2/2021C | 2,500,000 | 2,021,875 | ||||||
Gulf Finance LLC, Term Loan B, VR, 6.25%, Due 8/25/2023C D E | 2,702,985 | 2,742,395 | ||||||
HFOTCO LLC, First LienTerm Loan B, VR, 4.25%, Due 8/19/2021C D E | 1,143,077 | 1,134,503 | ||||||
Navios Maritime Midstream Partners LP, Term Loan B, VR, 5.50%, Due 6/18/2020C F | 74,860 | 74,579 | ||||||
Southcross Energy Partners LP, First Lien Term Loan, VR, 5.25%, Due 8/4/2021C D F | 3,959,000 | 3,350,304 | ||||||
Western Refining, Inc., Term Loan B2, VR, 5.50%, Due 6/23/2023C | 379,205 | 380,627 | ||||||
|
| |||||||
9,704,283 | ||||||||
|
| |||||||
Finance - 11.56% | ||||||||
Alinta Energy Finance PTY Ltd., Delayed Draw Term Loan, VR, 6.375%, Due 8/13/2018C | 170,972 | 171,969 | ||||||
Alinta Energy Finance PTY Ltd., First LienTerm Loan, VR, 6.375%, Due 8/13/2019 C | 2,571,929 | 2,586,923 | ||||||
Amerilife Group LLC, First Lien Term Loan, VR, 5.75%, Due 6/18/2022C E | 1,505,119 | 1,459,966 | ||||||
Amerilife Group LLC, Second Lien Term Loan, VR, 9.75%, Due 1/10/2023C E | 186,000 | 180,420 | ||||||
Amwins Group LLC, 2017 Second Lien Term Loan, VR, 7.75%, Due 1/25/2025C E | 1,000,000 | 1,016,250 | ||||||
Aptean, Inc., 2016 First Lien Term Loan, VR, 6.00%, Due 12/20/2022C | 3,000,000 | 3,041,250 | ||||||
Aptean, Inc., 2016 Second Lien Term Loan, VR, 10.50%, Due 12/14/2023C | 1,000,000 | 998,130 | ||||||
AqGen Ascensus, Inc., 2017 First Lien Term Loan, VR, 5.024%, Due 12/3/2022C D | 742,941 | 746,610 | ||||||
Aretec Group, Inc., First Lien Term Loan, VR, 8.00%, Due 11/23/2020C D | 856,695 | 859,907 | ||||||
Ascensus, Inc., Term Loan, VR, 5.50%, Due 12/3/2022C D | 742,941 | 744,799 | ||||||
Cision US Inc., Term Loan B, VR, 7.00%, Due 6/16/2023C | 2,315,377 | 2,328,876 | ||||||
Confie Seguros Holding II Co., First Lien Term Loan B, VR, 5.75%, Due 4/19/2022C D | 6,056,000 | 6,079,982 | ||||||
Confie Seguros Holding II Co., Second Lien Term Loan B, VR, 10.25%, Due 5/8/2019C D | 2,938,000 | 2,911,059 | ||||||
Cunningham Lindsay U.S. Inc., First Lien Term Loan B, VR, 5.00%, Due 12/10/2019C D | 160,573 | 140,702 | ||||||
Duff & Phelps Investment Management Co. 2nd Lien Term Loan, VR, 9.50%, Due 4/23/2021C D | 525,000 | 527,625 | ||||||
Emerald US, Inc., Term Loan, VR, 5.00%, Due 5/9/2021C | 187,000 | 177,650 | ||||||
FHC Health Systems, Inc., 2014 Term Loan, VR, 5.00%, Due 12/23/2021C D | 622,899 | 597,983 | ||||||
First Eagle Investment Management LLC, Term Loan, VR, 4.998%, Due 12/1/2022C D E | 638,774 | 642,370 | ||||||
Freedom Mortgage Corp., First Lien Term Loan B, VR, 6.50%, Due 2/16/2022C D | 6,000,000 | 6,075,000 |
See accompanying notes
12
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount | Fair Value | |||||||
Finance - 11.56% (continued) | ||||||||
Higginbotham & Associates LLC, Term Loan, VR, 6.00%, Due 11/25/2021C E | $ | 2,073,253 | $ | 2,078,436 | ||||
HNC Holdings, Inc., Term Loan, VR, 5.50%, Due 10/5/2023C D | 1,216,000 | 1,228,926 | ||||||
Hyperion Insurance Group Ltd., 2015 Term Loan B, VR, 5.50%, Due 4/29/2022C D | 4,927,462 | 4,935,691 | ||||||
IG Investment Holdings LLC, Term Loan B, VR, 6.00%, Due 10/29/2021C E | 2,202,149 | 2,215,912 | ||||||
LBM Borrower LLC, First Lien Term Loan, VR, 6.304%, Due 8/20/2022C D E G | 1,632,043 | 1,635,618 | ||||||
Lightstone Generation LLC, Term Loan B, VR, 6.539%, Due 1/30/2024C E | 4,739,609 | 4,806,769 | ||||||
Lightstone Generation LLC, Term Loan C, VR, 6.539%, Due 1/30/2024C E | 451,391 | 457,788 | ||||||
Lonestar Intermediate Super Holdings, LLC, PIK Term Loan B, VR, 10.00%, Due 8/31/2021C E G | 2,300,000 | 2,397,750 | ||||||
NXT Capital, Inc., First Lien Term Loan, VR, 5.50%, Due 11/22/2022C | 2,667,000 | 2,703,671 | ||||||
SAI Global Ltd., USD First Lien Term Loan, VR, 5.50%, Due 11/18/2023C | 1,000,000 | 1,015,000 | ||||||
Stratose Intermediate Holding II, First Lien Term Loan B, VR, 6.00%, Due 1/21/2022C | 2,984,962 | 2,999,887 | ||||||
TKC Holdings, Inc., 2017 First Lien Term Loan, VR, 4.75%, Due 2/1/2023C D | 897,000 | 903,727 | ||||||
TKC Holdings, Inc., 2017 Second Lien Term Loan, VR, 8.50%, Due 2/1/2024C | 3,206,000 | 3,212,027 | ||||||
UFC Holdings LLC, First Lien Term Loan, VR, 4.25%, Due 8/18/2023C D E | 363,090 | 365,555 | ||||||
UFC Holdings LLC, Second Lien Term Loan B, VR, 8.50%, Due 8/18/2024C D E | 1,000,000 | 1,025,000 | ||||||
|
| |||||||
63,269,228 | ||||||||
|
| |||||||
Manufacturing - 28.76% | ||||||||
4L Technologies, Inc., Term Loan B, VR, 5.27%, Due 5/8/2020C D | 488,232 | 468,703 | ||||||
Accudyne Industries Borrower SCA, Term Loan, VR, 4.00%, Due 12/13/2019C D E | 2,338,000 | 2,228,885 | ||||||
Accuride Corp., Term Loan B, VR, 8.00%, Due 10/21/2023C | 277,682 | 274,558 | ||||||
Aclara Technologies, Term Loan B, VR, 6.80%, Due 8/29/2023C | 686,280 | 700,006 | ||||||
Advanced Integration Technology LP, First Lien Term Loan, VR, 6.50%, Due | 315,210 | 315,998 | ||||||
Alion Science and Technology Corp., Term Loan B, VR, 5.50%, Due 8/19/2021C D | 2,842,281 | 2,838,728 | ||||||
American Bath Group LLC, 2016 Second Lien Term Loan, VR, 10.75%, Due 9/27/2024C E | 537,000 | 515,520 | ||||||
American Bath Group LLC, 2017 First Lien Add On Term Loan, VR, 6.25%, Due 9/30/2023C E | 3,827,321 | 3,857,212 | ||||||
American Bath Group LLC, 2017 Term Loan B, VR, 6.25%, Due 9/30/2023C E | 1,257,848 | 1,267,671 | ||||||
American Bath Group LLC, Delayed Draw Term Loan, VR, 6.25%, Due 9/30/2023C E H | 398,679 | 401,793 | ||||||
Arclin US Holdings, Inc., First Lien Term Loan, 5.25%, Due 2/1/2024C | 2,000,000 | 2,022,500 | ||||||
Arclin US Holdings, Inc., Second Lien Term Loan, 9.75%, Due 2/1/2025C | 2,000,000 | 2,017,500 | ||||||
Aricent Technologies, First Lien Term Loan, VR, 5.50%, Due 4/14/2021C D | 4,263,000 | 4,253,408 | ||||||
Aricent Technologies, Second Lien Term Loan, VR, 9.25%, Due 4/14/2022C D | 1,000,000 | 975,630 | ||||||
Atotech B.V., 2017 Term Loan B1, VR, 4.00%, Due 1/31/2024C | 4,000,000 | 4,040,000 | ||||||
Avantor Performance Materials Holdings, Inc., First Lien Term Loan, VR, 6.00%, Due 6/21/2022C D | 951,043 | 962,931 | ||||||
Blackboard, Inc., First Lien Term Loan B4, VR, 6.023%, Due 6/30/2021C D | 5,146,620 | 5,173,949 | ||||||
Blount International, Inc., Initial Term Loan, VR, 7.25%, Due 4/12/2023C D | 437,401 | 440,681 | ||||||
CH Holding Corp. (aka Caliber Collision), Second Lien Term Loan, VR, 8.25%, Due 2/1/2025C | 1,500,000 | 1,526,250 | ||||||
Compuware Corp., First Lien Term Loan B3, VR, 5.25%, Due 12/15/2021C D | 4,871,877 | 4,869,441 | ||||||
Contextmedia Health LLC, Term Loan B, VR, 7.50%, Due 12/9/2021C E | 2,399,000 | 2,333,027 | ||||||
Cortes NP Acquisition Corp., (aka Vertiv Co.) First Lien Term Loan, VR, 6.039%, Due 11/30/2023C | 3,943,265 | 3,971,183 | ||||||
CPI Buyer LLC, First Lien Term Loan, VR, 5.50%, Due 8/15/2021C D E | 236,670 | 236,670 | ||||||
CT Technologies Intermediate Holdings, Inc., New Term Loan, VR, 5.25%, Due 12/1/2021C D | 52,205 | 49,334 | ||||||
DTI Holdco, Inc., Term Loan B, VR, 6.092%, Due 9/21/2023C D | 6,907,528 | 6,887,357 | ||||||
Duke Finance LLC, 2017 First Lien Term Loan, VR, 6.00%, Due 2/21/2024C E | 2,201,876 | 2,218,390 | ||||||
Eagleview Technology Corp., First Lien Term Loan, VR, 5.28%, Due 7/22/2022C D | 284,280 | 284,516 | ||||||
Eastman Kodak Co., First Lien Term Loan, VR, 7.25%, Due 9/3/2019C D | 1,370,344 | 1,372,057 | ||||||
Euramax International, Inc., Unsecured Term Loan, VR, 16.00%, Due 2/6/2021C G | 282,009 | 231,247 | ||||||
Evo Payments International LLC, First Lien Term Loan B, VR, 6.00%, Due 12/22/2023C E | 4,500,000 | 4,556,250 | ||||||
Genesys Telecommunications Laboratories, Inc., First Lien Term Loan B, VR, 5.025%, | ||||||||
Due 12/1/2023C D | 2,500,000 | 2,528,575 | ||||||
Global Brass & Copper, Inc., Term Loan B, VR, 5.25%, Due 7/18/2023C | 1,995,000 | 2,024,925 | ||||||
Global Cash Access LLC, New Term Loan B, VR, 6.304%, Due 12/18/2020C D E | 2,039,707 | 2,042,257 | ||||||
Greenway Medical Technologies, Inc., 2017 First Lien Term Loan, VR, 5.75%, Due 2/14/2024C | 5,000,000 | 5,025,000 | ||||||
Harland Clarke Holdings Corp., Term Loan B6, 6.50%, Due 2/2/2022C | 4,000,000 | 4,025,000 | ||||||
Hi-Crush Partners LP, Term Loan B, VR, 4.75%, Due 4/28/2021C D F | 3,748,077 | 3,649,690 | ||||||
Horizon Global Corp., Term Loan B, VR, 7.00%, Due 6/30/2021C D | 65,832 | 66,655 | ||||||
Huntsman International LLC, First Lien Term Loan B, VR, 3.78%, Due 4/1/2023C E | 642,390 | 649,084 | ||||||
Ineos US Finance LLC, 2024 USD Term Loan, VR, 2.75%, Due 3/31/2024C E | 2,000,000 | 2,011,660 | ||||||
Information Resources, Inc., First Lien Term Loan, VR, 5.25%, Due 1/18/2024C | 4,500,000 | 4,553,460 | ||||||
Inteva Products LLC, Term Loan B, VR, 9.75%, Due 9/8/2021C E | 988,889 | 993,833 |
See accompanying notes
13
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount | Fair Value | |||||||||
Manufacturing - 28.76% (continued) | ||||||||||
IPS Intermediate Holdings Corp., First Lien Term Loan, VR, 6.25%, Due 12/20/2023C D | $ | 3,000,000 | $ | 3,022,500 | ||||||
IQOR US, Inc., Second Lien Term Loan, VR, 9.75%, Due 4/1/2022C D | 46,667 | 40,095 | ||||||||
Kraton Polymers LLC, Replacement Term Loan, VR, 5.00%, Due 1/6/2022C D E | 802,000 | 812,410 | ||||||||
Landslide Holdings, Inc., 2017 Second Lien Term Loan, VR, 10.00%, Due 1/20/2025C | 2,828,000 | 2,794,064 | ||||||||
Landslide Holdings, Inc., 2017 Term Loan B, VR, 5.25%, Due 1/20/2024C | 1,500,000 | 1,507,230 | ||||||||
Marine Acquisition Corp., New Term Loan B, VR, 4.75%, Due 1/30/2021C D | 289,400 | 290,485 | ||||||||
Mirion Technologies, Inc., Term Loan B, VR, 5.75%, Due 3/31/2022C D | 822,918 | 819,832 | ||||||||
Netsmart Technologies, Inc., Second Lien Term Loan, VR, 10.554%, Due 10/5/2023C D | 354,000 | 352,230 | ||||||||
Netsmart Technologies, Inc.,Term Loan C 1, VR, 5.50%, Due 4/19/2023C D | 1,624,117 | 1,635,291 | ||||||||
NN, Inc., Term Loan B, VR, 5.031%, Due 10/19/2022C D | 930,989 | 938,260 | ||||||||
Novetta Solutions LLC, Term Loan, VR, 6.00%, Due 10/16/2022C D E | 474,210 | 452,871 | ||||||||
Oak Parent, Inc., First Lien Term Loan, VR, 5.28%, Due 10/26/2023C | 656,810 | 661,736 | ||||||||
Optiv Security, Inc. (aka AF Borrower), Second Lien Term Loan, VR, 8.25%, Due 2/1/2025C | 1,000,000 | 1,012,080 | ||||||||
Peabody Energy Corp., Exit Term Loan, VR, 5.50%, Due 1/30/2022C | 1,000,000 | 1,007,080 | ||||||||
PGT, Inc., 2016 Term Loan, VR, 5.75%, Due 2/16/2022C | 988,843 | 994,202 | ||||||||
PlZ Aeroscience Corp., Term Loan, VR, 5.25%, Due 7/31/2022C | 4,340,076 | 4,356,351 | ||||||||
Power Products LLC, Term Loan, VR, 5.50%, Due 12/20/2022C E | 994,000 | 1,002,081 | ||||||||
Precyse Acquisition Corp., 2016 First Lien Term Loan, VR, 6.50%, Due 10/20/2022C D | 2,072,610 | 2,098,518 | ||||||||
Project Ruby Ultimate Parent Corp., Term Loan B, VR, 4.75%, Due 2/2/2024C | 5,000,000 | 5,012,500 | ||||||||
Prolampac PG Borrower LLC, 2016 Second Lien Term Loan, VR, 9.556%, Due 11/18/2024C E | 1,750,000 | 1,776,250 | ||||||||
Q Holding Company, Term Loan B, VR, 6.00%, Due 12/16/2021C D | 3,273,626 | 3,298,179 | ||||||||
Quickcrete Holdings, Inc., First Lien Term Loan, VR, 4.022%, Due 11/15/2023C | 3,228,000 | 3,265,316 | ||||||||
Ramundensen Holdings LLC, First Lien Term Loan B, VR, 5.25%, Due 1/13/2024C E | 1,563,000 | 1,578,630 | ||||||||
Safway Group Holdings LLC, Term Loan B, VR, 5.75%, Due 8/19/2023C E | 4,496,250 | 4,552,453 | ||||||||
Sitel Worldwide Corp., USD First Lien Term Loan B1, VR, 6.563%, Due 9/18/2021C | 380,036 | 377,425 | ||||||||
SolarWinds, Inc., Incremental Term Loan B, VR, 4.50%, Due 2/5/2023C | 3,957,165 | 3,962,626 | ||||||||
Stratus Technologies, Inc., First Lien Term Loan, VR, 6.00%, Due 4/28/2021C D | 3,166,367 | 3,146,578 | ||||||||
Systems Maintenance Services I, First Lien Term Loan, VR, 6.00%, Due 10/11/2023C | 4,875,000 | 4,883,141 | ||||||||
Tensar Corp., First Lien Term Loan, VR, 5.75%, Due 7/9/2021C D | 748,703 | 681,941 | ||||||||
Tessera Holding Corp., Term Loan B, VR, 4.03%, Due 12/1/2023C | 2,396,000 | 2,419,960 | ||||||||
U.S. Farathane LLC, Reprice Term Loan, 5.00%, Due 12/23/2021C E | 1,000,000 | 1,012,500 | ||||||||
U.S. Farathane LLC, Term Loan B2, VR, 5.75%, Due 12/23/2021C D E | 588,088 | 595,439 | ||||||||
Vantage Specialties, Inc., Term Loan B, VR, 5.50%, Due 2/5/2021C D | 196,013 | 197,483 | ||||||||
VC GB Holdings, Inc., First Lien Term Loan, VR, 4.75%, Due 2/9/2024C | 3,000,000 | 3,015,000 | ||||||||
VC GB Holdings, Inc., Second Lien Term Loan, VR, 9.00%, Due 2/9/2025C | 3,000,000 | 2,985,000 | ||||||||
Winnebago Industries, Inc., Term Loan, VR, 5.50%, Due 10/28/2023C | 1,916,000 | 1,942,345 | ||||||||
|
| |||||||||
157,361,616 | ||||||||||
|
| |||||||||
Service - 25.84% | ||||||||||
21st Century Oncology Holdings, Inc., Term Loan, VR, 7.125%, Due 4/30/2022C D I | 1,054,257 | 976,242 | ||||||||
84 Lumber Company, Term Loan B, VR, 6.75%, Due 10/4/2023C D | 3,927,000 | 3,946,635 | ||||||||
Access CIG LLC, First LienTerm Loan, VR, 6.06%, Due 10/18/2021C D E | 371,000 | 372,855 | ||||||||
Active Networks, Inc., First Lien Term Loan, VR, 5.78%, Due 11/15/2020C | 377,332 | 376,389 | ||||||||
Alvogen Pharmaceuticals U.S.A. Inc., Term Loan, VR, 6.00%, Due 4/2/2022C D | 750,743 | 741,359 | ||||||||
Amaya Holdings B.V., First Lien Term Loan, VR, 5.00%, Due 8/1/2021C | 2,235,560 | 2,236,969 | ||||||||
Ancestry.com Operations, Inc., 2017 First Lien Term Loan B, VR, 4.25%, Due 10/19/2023C D | 3,045,000 | 3,079,256 | ||||||||
Answers Corp., First Lien Syndicated Loans, VR, %, Due 10/3/2021C D I | 160,345 | 80,172 | ||||||||
AP NMT Acquisition BV, Term Loan B, VR, 6.75%, Due 8/13/2021C D | 741,545 | 665,011 | ||||||||
Arbor Pharmaceuticals Inc., Term Loan B, VR, 6.00%, Due 7/5/2023C | 571,406 | 581,406 | ||||||||
Ardent Legacy Acquisitions, Inc., Term Loan B, VR, 6.50%, Due 8/4/2021C D | 493,750 | 491,898 | ||||||||
At Home Holding III, Inc., Term Loan, VR, 4.539%, Due 6/3/2022C D | 994,937 | 992,449 | ||||||||
Auction.com LLC, Term Loan B, VR, 6.00%, Due 5/12/2019C D E | 262,328 | 264,295 | ||||||||
BDF Acquisition Corp., First Lien Term Loan, VR, 5.75%, Due 2/12/2021C D | 397,800 | 395,067 | ||||||||
Beasley Mezzanine Holdings LLC, Term Loan B, VR, 7.00%, Due 9/27/2023C E | 209,260 | 210,830 | ||||||||
BioClinica, Inc., First Lien Term Loan, VR, 5.25%, Due 10/20/2023C | 563,000 | 567,577 | ||||||||
Casablanca US Holdings, Inc., (aka Apple Leisure)First Lien Term Loan VR, 5.00%, Due 3/15/2024C D | 5,000,000 | 4,925,000 | ||||||||
Casablanca US Holdings, Inc., (aka Apple Leisure)Second Lien Term Loan VR, 10.00%, Due 3/15/2025C D | 3,000,000 | 2,917,500 | ||||||||
CDS US Intermediate Holding, Inc., Second Lien Term Loan, VR, 9.25%, Due 7/10/2023C D | 639,796 | 631,799 |
See accompanying notes
14
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount | Fair Value | |||||||
Service - 25.84% (continued) | ||||||||
CDS US Intermediate Holdings, Inc., Term Loan, VR, 5.00%, Due 7/8/2022C D | $ | 93,291 | $ | 94,011 | ||||
Ceasars Entertainment Resort Properties LLC, First Lien Term Loan B, VR, 7.00%, | 739,237 | 745,395 | ||||||
Cengage Learning Acquisitions, Inc., Term Loan B, VR, 5.25%, Due 6/7/2023C D | 1,576,396 | 1,487,976 | ||||||
Change Healthcare Holdings, Inc., Term Loan B8, 3.75%, Due 2/8/2024C | 10,000,000 | 10,041,700 | ||||||
Cheddars Scratch Kitchen, Inc., Term Loan A, VR, 4.277%, Due 12/20/2023C | 2,174,000 | 2,163,130 | ||||||
Comfort Holdings LLC, First Lien Term Loan, VR, 5.75%, Due 2/5/2024C E | 4,860,000 | 4,853,925 | ||||||
Comfort Holdings LLC, Second Lien Term Loan, VR, 11.00%, Due 1/17/2025C E | 1,000,000 | 962,500 | ||||||
Curo Health Services LLC, Term Loan, VR, 6.50%, Due 2/7/2022C D E | 1,000,000 | 1,003,749 | ||||||
CWGS Group LLC, 2016 First Lien Term Loan B, VR, 4.52%, Due 11/8/2023C E | 1,319,000 | 1,328,892 | ||||||
Delta 2 Lux Sarl, 2017 Bridge Term Loan, 4.25%, Due 2/1/2024C | 3,000,000 | 3,006,660 | ||||||
Deluxe Entertainment Services, Group, Inc., Term Loan, VR, 6.539%, | 1,281,390 | 1,279,250 | ||||||
Diamond Resorts International, Inc., Term Loan B, VR, 7.00%, Due 8/11/2023C D | 1,459,343 | 1,473,031 | ||||||
Electro Rent Corp., Term Loan B1, VR, 6.00%, Due 1/19/2024C | 2,389,000 | 2,430,807 | ||||||
Encompass Digital Media, Inc., Term Loan, VR, 5.50%, Due 6/6/2021C D | 747,860 | 704,858 | ||||||
Extreme Reach, Inc., First Lien Term Loan B, VR, 7.25%, Due 2/7/2020C D | 448,263 | 451,065 | ||||||
Extreme Reach, Inc., Second Lien Term Loan, VR, 11.00%, Due 1/24/2021C | 217,000 | 207,597 | ||||||
Garda World Security Corp., Delayed Draw Term Loan B, VR, 4.00%, | 111,001 | 111,417 | ||||||
Garda World Security Corp., New Term Loan B, VR, 4.00%, Due 11/6/2020C D | 637,353 | 639,743 | ||||||
GCA Services Group, Inc., 2016 Term Loan, VR, 6.068%, Due 3/1/2023C D | 738,350 | 745,423 | ||||||
Genoa a QoL Healthcare Co. LLC, 2016 First Lien Term Loan, VR, 4.75%, Due 10/28/2023C D E | 337,155 | 338,841 | ||||||
Global Eagle Entertainment, Inc., First Lien Term Loan, VR, 7.00%, Due 1/6/2023C D | 3,000,000 | 2,990,010 | ||||||
Global Healthcare Exchange LLC, Term Loan, VR, 5.25%, Due 8/15/2022C D E | 1,127,380 | 1,140,537 | ||||||
GlobalLogic Holdings, Inc., 2016 Term Loan B, VR, 5.50%, Due 6/13/2022C | 4,000,000 | 4,010,000 | ||||||
Go Daddy Operating Co. LLC, First Lien Delayed Draw Term Loan, VR, 2.50%, Due 2/10/2024C D E H | 1,711,712 | 1,715,512 | ||||||
Go Daddy Operating Co. LLC, Term Loan B, VR, 3.27%, Due 2/2/2024C E | 1,288,288 | 1,291,148 | ||||||
Harbor Freight Tools USA, Inc., Initial Term Loan, VR, 3.778%, Due 8/19/2023C D | 1,994,987 | 1,996,125 | ||||||
Harbortouch Payments LLC, First Lien Term Loan, VR, 5.75%, Due 10/11/2023C E | 1,270,000 | 1,277,150 | ||||||
Highland Acquisitions Holdings LLC, Term Loan B, VR, 6.50%, Due 11/30/2022C E | 2,419,000 | 2,382,715 | ||||||
HLF Financing Sarl, Term Loan B, VR, 6.25%, Due 2/13/2023C | 4,000,000 | 4,003,320 | ||||||
Imagine Print Solutions Inc., Term Loan B, VR, 7.00%, Due 3/30/2022C D | 781,500 | 787,361 | ||||||
Innovative Xcessories and Services, First Lien Term Loan B, VR, 5.75%, Due 11/29/2022C | 3,877,000 | 3,906,077 | ||||||
Interior Logic Group, Inc., 2017 Term Loan B, 7.00%, Due 2/27/2024C | 8,000,000 | 7,760,000 | ||||||
Jacks Family Restaurants, Inc., Term Loan, VR, 5.75%, Due 7/1/2022C D | 462,702 | 462,702 | ||||||
Jackson Hewitt, Inc., Term Loan B, VR, 8.039%, Due 7/24/2020C D | 266,560 | 252,566 | ||||||
Leslies Poolmart, Inc., First Lien Term Loan, VR, 4.75%, Due 8/16/2023C D | 2,000,000 | 2,006,300 | ||||||
Lions Gate Entertainment Corp., 2016 First Lien Term Loan, VR, 3.773%, Due 12/8/2023C | 2,332,000 | 2,349,490 | ||||||
Long Term Care Group Holdings Corp., Term Loan, VR, 6.00%, Due 6/6/2020C D | 354,821 | 329,984 | ||||||
LSC Communications, Inc., Term Loan B, VR, 7.00%, Due 9/26/2022C D | 1,451,800 | 1,459,059 | ||||||
McGraw-Hill Global Education Holdings LLC, 2016 Term Loan B, VR, 5.00%, Due 5/4/2022C E | 1,724,241 | 1,692,997 | ||||||
MergerMarket USA, Inc., Initial Term Loan, VR, 4.554%, Due 2/4/2021C D | 179,913 | 179,463 | ||||||
Merrill Communications LLC, Term Loan, VR, 6.289%, Due 6/1/2022C D E | 43,308 | 43,236 | ||||||
Mister Car Wash Holdings, Inc., Term Loan B, VR, 5.25%, Due 8/20/2021C D | 348,236 | 348,960 | ||||||
Mohegan Tribal Gaming Authority, Term Loan B, VR, 5.50%, Due 9/28/2023C D | 2,028,915 | 2,043,401 | ||||||
Navex Global, Inc., First Lien Term Loan, VR, 5.99%, Due 11/19/2021C D | 10,780 | 10,726 | ||||||
NEP Supershooters LP, Second Lien Term Loan, VR, 10.00%, Due 7/22/2020C D F | 840,000 | 849,450 | ||||||
New Millennium Holdco Inc., Exit Term Loan, VR, 7.50%, Due 12/21/2020C D | 1,001,211 | 505,612 | ||||||
NMSC Holdings Inc., 1st Lien Term Loan, VR, 6.00%, Due 4/19/2023C | 233,578 | 235,913 | ||||||
PAE Holding Corp., First Lien Term Loan, VR, 6.50%, Due 10/20/2022C | 3,053,000 | 3,085,453 | ||||||
Playpower, Inc., First Lien Term Loan, VR, 5.75%, Due 6/23/2021C | 690,154 | 686,703 | ||||||
ProQuest LLC, New Term Loan B, VR, 5.25%, Due 10/24/2021C D E G | 3,237,986 | 3,267,322 | ||||||
Quincy Newspapers, Inc., Term Loan B, VR, 5.00%, Due 10/13/2022C D | 219,114 | 219,114 | ||||||
Quorum Health Corp., Term Loan B, VR, 6.789%, Due 4/29/2022C D | 1,978,638 | 1,970,803 | ||||||
Research Now Group, Inc., First Lien Term Loan, VR, 5.50%, Due 3/18/2021C | 1,496,193 | 1,470,010 | ||||||
Research Now Group, Inc., Second Lien Term Loan, VR, 9.75%, Due 3/18/2022C D | 48,000 | 46,560 | ||||||
Ryan LLC, Term Loan B, VR, 6.75%, Due 8/7/2020C E | 1,030,953 | 1,021,932 | ||||||
SiteOne Landscape Supply, Inc., Reprice Term Loan B, VR, 5.50%, Due 4/29/2022C | 365,245 | 368,671 | ||||||
St. Georges University Scholastic Service, 2016 Term Loan B, VR, 6.25%, Due 7/6/2022C D | 1,881,513 | 1,902,680 | ||||||
Sterling Infosystems, Inc., First Lien Term Loan B, VR, 5.75%, Due 6/20/2022C D | 2,244,329 | 2,233,108 |
See accompanying notes
15
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount | Fair Value | |||||||
Service - 25.84% (continued) | ||||||||
Surveymonkey.com LLC, Term Loan B, VR, 6.25%, Due 2/5/2019C E | $ | 953,508 | $ | 963,043 | ||||
Team Health, Inc., First Lien Term Loan, VR, 3.75%, Due 2/6/2024C | 625,000 | 623,050 | ||||||
Tigerluxone Sarl, First Lien Term Loan B, 5.75%, Due 2/16/2024C | 3,000,000 | 2,994,990 | ||||||
TouchTunes Interactive Network, Inc., First Lien Term Loan, VR, 5.75%, Due 5/29/2021C D | 899,791 | 902,041 | ||||||
Travel Leaders Group LLC, 2017 First Lien Term Loan, VR, 6.028%, Due 1/25/2024C E | 2,281,000 | 2,309,513 | ||||||
Tweddle Group, Inc., 2016 Term Loan, VR, 7.039%, Due 10/24/2022C | 1,225,000 | 1,221,938 | ||||||
Twentyeighty, Inc., PIK Term Loan B, VR, 8.00%, Due 3/31/2020C G | 46,562 | 27,937 | ||||||
Twentyeighty, Inc., PIK Term Loan C, VR, 9.00%, Due 3/31/2020C G | 44,451 | 26,671 | ||||||
USS Acquisition Corp., 2016 Delayed Draw Term Loan, VR, 5.50%, Due | 23,554 | 23,633 | ||||||
USS Parent Holding Corp., 2016 Term Loan, VR, 5.50%, Due 7/26/2023C | 160,009 | 160,542 | ||||||
Valeant Pharmaceuticals International, Inc., Term Loan Series E Tranche B, VR, 5.25%, Due 8/5/2020C D | 1,000,000 | 1,005,690 | ||||||
Verisk Analytics, Inc., First Lien Term Loan, VR, 6.00%, Due 5/10/2023C | 783,065 | 781,107 | ||||||
Vestcom Parent Holdings, Inc., First Lien Term Loan, VR, 5.25%, Due 12/19/2023C | 4,000,000 | 4,037,520 | ||||||
William Morris Endeavor Entertainment LLC, Term Loan B, VR, 5.25%, Due 5/6/2021C E | 2,500,000 | 2,506,775 | ||||||
World Triathlon Corp., Term Loan, VR, 5.25%, Due 6/26/2021C D | 2,992,327 | 2,984,847 | ||||||
|
| |||||||
141,394,146 | ||||||||
|
| |||||||
Telecommunications - 6.44% | ||||||||
CenturyLink, Inc., Bridge Term Loan, 5.00%, Due 2/17/2018C | 4,000,000 | 3,980,000 | ||||||
ConvergeOne Holdings Corp., First Lien Term Loan, VR, 6.375%, Due 6/17/2020C D | 1,885,910 | 1,878,837 | ||||||
Fairpoint Communications, Inc., Refi Term Loan, VR, 7.50%, Due 2/14/2019C D | 1,138,311 | 1,150,173 | ||||||
Global Tel Link Corp., First Lien Term Loan, VR, 5.00%, Due 5/23/2020C | 5,968,290 | 5,938,449 | ||||||
Global Tel Link Corp., Term Loan Second Lien, VR, 9.00%, Due 11/23/2020C | 1,288,000 | 1,252,258 | ||||||
Internap Network Services Corp., Term Loan, VR, 7.00%, Due 11/26/2019C | 4,741,681 | 4,706,119 | ||||||
Onvoy LLC, 2017 First Lien Term Loan B, VR, 5.50%, Due 2/10/2024C E | 4,996,000 | 4,983,510 | ||||||
Polycom, Inc., First Lien Term Loan, VR, 6.25%, Due 9/27/2023C | 2,940,729 | 2,961,314 | ||||||
Sable International Finance Ltd. /Coral US Co-Borrower LLC, Term Loan B1, VR, 5.528%, Due 12/30/2022C E | 1,000,000 | 1,014,380 | ||||||
Securus Technologies Holdings, Inc., Incremental Term Loan B2, VR, 5.25%, Due 4/30/2020C D | 249,370 | 249,682 | ||||||
Securus Technologies, Inc., Second Lien Term Loan, VR, 9.00%, Due 4/30/2021C D | 2,746,000 | 2,719,227 | ||||||
Securus Technologies, Inc., Term Loan, VR, 4.75%, Due 4/30/2020C D | 1,458,861 | 1,460,684 | ||||||
Telesat Canada, 2017 First Lien Term Loan B, VR, 3.85%, Due 11/17/2023C | 649,373 | 655,866 | ||||||
Xplornet Communications, Inc., Term Loan B, VR, 7.00%, Due 9/9/2021C | 2,253,113 | 2,275,644 | ||||||
|
| |||||||
35,226,143 | ||||||||
|
| |||||||
Transportation - 3.37% | ||||||||
ABB Concise Optical Group LLC, Term Loan B, VR, 6.00%, Due 6/15/2023C D E | 246,158 | 248,004 | ||||||
Daseke, Inc., 2017 First Lien Term Loan, 6.50%, Due 2/2/2024C | 2,142,857 | 2,153,571 | ||||||
Daseke, Inc., Delayed Draw Term Loan, 6.50%, Due 2/2/2024C | 857,143 | 861,429 | ||||||
G III Apparel Group Ltd., First LienTerm Loan B, VR, 6.25%, Due 12/1/2022C D | 1,304,571 | 1,289,895 | ||||||
Goodpack Ltd, First Lien Term Loan B, VR, 4.985%, Due 9/9/2021C D | 1,496,193 | 1,470,638 | ||||||
Gruden Acquisitions, Inc., First Lien Term Loan, VR, 5.75%, Due 8/18/2022C D | 882,199 | 864,555 | ||||||
Livingston International, Inc., First Lien Term Loan B1, VR, 5.50%, Due 4/18/2019C | 234,393 | 231,268 | ||||||
Livingston International, Inc., Second Lien Term Loan, VR, 9.50%, Due 4/18/2020C | 750,000 | 696,878 | ||||||
Navios Maritime Partners LP, Term Loan, VR, 5.25%, Due 6/27/2018C D F | 2,911,488 | 2,889,652 | ||||||
O2 Partners LLC, Term Loan B, VR, 6.00%, Due 10/4/2022C E | 582,540 | 583,268 | ||||||
Sirva Worldwide, Inc., 2016 Term Loan, VR, 7.50%, Due 11/14/2022C | 2,000,000 | 1,955,000 | ||||||
Worldwide Express Operations LLC, First Lien Term Loan, VR, 5.53%, Due 1/31/2024C E | 5,155,000 | 5,193,663 | ||||||
|
| |||||||
18,437,821 | ||||||||
|
| |||||||
Utilities - 3.44% | ||||||||
Astoria Energy LLC, Term Loan B, VR, 5.00%, Due 12/24/2021C D E | 1,078,200 | 1,080,896 | ||||||
Entergy Rhode Island State Energy LP, Term Loan B, VR, 5.75%, Due | 150,480 | 151,608 | ||||||
Invenergy Thermal Operating I LLC, 2015 Term Loan B, VR, 6.50%, Due 10/19/2022C D E | 483,237 | 463,908 | ||||||
Primeline Utility Services LLC, Term Loan, VR, 6.50%, Due 11/12/2022C D E | 165,160 | 166,811 | ||||||
Southeast Powergen LLC, Term Loan B, VR, 4.50%, Due 12/2/2021C D E | 2,000,000 | 1,975,000 | ||||||
Star West Generation LLC, 2015 Term Loan B, VR, 5.75%, Due 3/13/2020C D E | 2,000,000 | 1,810,000 | ||||||
Tex Operations Co. LLC, Exit Term Loan C, VR, 3.53%, Due 8/4/2023C D E | 889,757 | 893,761 | ||||||
Tex Operations Co. LLC, Exit Term Loan, VR, 3.53%, Due 8/4/2023C D E | 3,901,243 | 3,918,798 |
See accompanying notes
16
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount | Fair Value | |||||||
Utilities - 3.44% (continued) | ||||||||
TPF II Power LLC, Syndicated Term Loan B, VR, 5.00%, Due 10/2/2021C E | $ | 5,756,390 | $ | 5,807,680 | ||||
Western Generation Partners LLC, Term Loan B, VR, 5.00%, Due 11/15/2023C E | 2,523,122 | 2,548,354 | ||||||
|
| |||||||
18,816,816 | ||||||||
|
| |||||||
Total Bank Loan Obligations (Cost $455,462,248) | 457,746,466 | |||||||
|
| |||||||
CORPORATE OBLIGATIONS - 1.02% | ||||||||
Manufacturing - 0.23% | ||||||||
Peabody Securities Finance Corp., | ||||||||
6.00%, Due 3/31/2022J | 562,000 | 573,240 | ||||||
6.375%, Due 3/31/2025J | 658,000 | 671,160 | ||||||
|
| |||||||
1,244,400 | ||||||||
|
| |||||||
Service - 0.79% | ||||||||
Constellis Holdings LLC / Constellis Finance Corp., 9.75%, Due 5/15/2020E J | 3,219,000 | 3,444,330 | ||||||
LSC Communications, Inc., 8.75%, Due 10/15/2023J | 845,000 | 880,913 | ||||||
|
| |||||||
4,325,243 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $5,442,904) | 5,569,643 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 42.00% (Cost $229,811,970) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassK | 229,811,970 | 229,811,970 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 126.72% (Cost $690,753,501) | 693,359,717 | |||||||
LIABILITIES, NET OF OTHER ASSETS - (26.72%) | (146,180,677 | ) | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 547,179,040 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $ or % of net assets. |
C | Term Loan. |
D | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
E | LLC - Limited Liability Company. |
F | LP - Limited Partnership. |
G | PIK - Payment-in-Kind. |
H | Unfunded Loan Commitments. At period end, the amount of unfunded loan commitments was $1,931,619 or 0.35% of net assets. Of this amount, $1,711,712, $9,908 and $209,999 relate to Go Daddy Operating Co., LLC, USS Acquisition Corp., and American Bath Group, LLC, respectively. |
I | Defaulted Security. |
J | 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 $5,569,643 or 1.02% of net assets. The Fund has no right to demand registration of these securities. |
K | The Fund is affiliated by having the same investment advisor. |
See accompanying notes
17
American Beacon FundsSM
Statements of Assets and Liabilities
February 28, 2017 (Unaudited)
SiM High Yield | Sound Point Floating | |||||||
Opportunities Fund | Rate Income Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at fair value A | $ | 1,203,425,253 | $ | 463,547,747 | ||||
Investments in affiliated securities, at fair value B | 11,302,321 | 229,811,970 | ||||||
Cash | 1,252,524 | 5,622,769 | ||||||
Dividends and interest receivable | 21,328,708 | 1,825,169 | ||||||
Receivable for investments sold | 13,407,621 | 30,426,785 | ||||||
Receivable for fund shares sold | 4,211,176 | 18,945,629 | ||||||
Receivable for variation margin on open futures contracts | 8,975,338 | — | ||||||
Prepaid expenses | 173,459 | 137,287 | ||||||
|
|
|
| |||||
Total assets | 1,264,076,400 | 750,317,356 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Payable for investments purchased | 6,432,538 | 192,826,879 | ||||||
Payable for fund shares redeemed | 7,597,782 | 7,900,971 | ||||||
Payable for variation margin from open futures contracts | 8,702,308 | — | ||||||
Payable under excess expense reimbursement plan (Note 2) | — | 6,667 | ||||||
Dividends payable | 376,152 | 119,257 | ||||||
Unfunded loan commitments | — | 1,931,619 | ||||||
Management and investment advisory fees payable | 665,496 | 228,257 | ||||||
Administrative service and service fees payable | 165,089 | 47,298 | ||||||
Transfer agent fees payable | 15,958 | 4,195 | ||||||
Custody and fund accounting fees payable | 4,122 | 2,927 | ||||||
Professional fees payable | 30,363 | 33,666 | ||||||
Payable for prospectus and shareholder reports | 40,041 | — | ||||||
Other liabilities | 4,474 | 36,580 | ||||||
|
|
|
| |||||
Total liabilities | 24,034,323 | 203,138,316 | ||||||
|
|
|
| |||||
Net Assets | $ | 1,240,042,077 | $ | 547,179,040 | ||||
|
|
|
| |||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | $ | 1,240,191,686 | $ | 543,831,380 | ||||
Undistributed (overdistribution of) net investment income | 496,669 | (37,131 | ) | |||||
Accumulated net realized gain (loss) | (16,899,641 | ) | 778,575 | |||||
Unrealized appreciation of investments | 21,633,845 | 2,606,216 | ||||||
Unrealized (depreciation) of currency transactions | (5,651,270 | ) | — | |||||
Unrealized appreciation of futures contracts | 270,788 | — | ||||||
|
|
|
| |||||
Net assets | $ | 1,240,042,077 | $ | 547,179,040 | ||||
|
|
|
|
See accompanying notes
18
American Beacon FundsSM
Statements of Assets and Liabilities
February 28, 2017 (Unaudited)
SiM High Yield | Sound Point Floating | |||||||
Opportunities Fund | Rate Income Fund | |||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||
Institutional Class | 36,460,925 | 15,116,621 | ||||||
|
|
|
| |||||
Y Class | 60,316,039 | 24,317,000 | ||||||
|
|
|
| |||||
Investor Class | 13,961,924 | 8,063,528 | ||||||
|
|
|
| |||||
A Class | 9,199,561 | 2,427,041 | ||||||
|
|
|
| |||||
C Class | 7,648,758 | 2,062,308 | ||||||
|
|
|
| |||||
SP Class | N/A | 877,613 | ||||||
|
|
|
| |||||
Net assets: | ||||||||
Institutional Class | $ | 354,556,632 | $ | 156,473,584 | ||||
|
|
|
| |||||
Y Class | $ | 585,996,985 | $ | 251,868,199 | ||||
|
|
|
| |||||
Investor Class | $ | 135,291,350 | $ | 83,283,879 | ||||
|
|
|
| |||||
A Class | $ | 89,500,705 | $ | 25,122,644 | ||||
|
|
|
| |||||
C Class | $ | 74,696,405 | $ | 21,354,688 | ||||
|
|
|
| |||||
SP Class | N/A | $ | 9,076,046 | |||||
|
|
|
| |||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 9.72 | $ | 10.35 | ||||
|
|
|
| |||||
Y Class | $ | 9.72 | $ | 10.36 | ||||
|
|
|
| |||||
Investor Class | $ | 9.69 | $ | 10.33 | ||||
|
|
|
| |||||
A Class | $ | 9.73 | $ | 10.35 | ||||
|
|
|
| |||||
A Class (offering price) | $ | 10.22 | $ | 10.62 | ||||
|
|
|
| |||||
C Class | $ | 9.77 | $ | 10.35 | ||||
|
|
|
| |||||
SP Class | N/A | $ | 10.34 | |||||
|
|
|
| |||||
A Cost of investments in unaffiliated securities | $ | 1,187,444,135 | $ | 460,941,531 | ||||
B Cost of investments in affiliated securities | $ | 11,302,321 | $ | 229,811,970 |
See accompanying notes
19
American Beacon FundsSM
Statements of Operations
For the six months ended February 28, 2017 (Unaudited)
SiM High Yield | Sound Point | |||||||
Opportunities | Floating Rate | |||||||
Fund | Income Fund | |||||||
Investment income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 702,810 | $ | — | ||||
Dividend income from affiliated securities | 30,793 | 141,843 | ||||||
Interest income | 39,499,183 | 5,673,808 | ||||||
|
|
|
| |||||
Total investment income | 40,232,786 | 5,815,651 | ||||||
|
|
|
| |||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 4,188,632 | 795,995 | ||||||
Transfer agent fees: | ||||||||
Institutional Class | 125,534 | 17,505 | ||||||
Y Class | 5,622 | 986 | ||||||
Investor Class | 3,380 | 1,472 | ||||||
A Class | 6,886 | 834 | ||||||
C Class | 2,639 | 796 | ||||||
SP Class | — | 1,497 | ||||||
Custody and fund accounting fees | 51,739 | 31,826 | ||||||
Professional fees | 39,068 | 32,709 | ||||||
Registration fees and expenses | 82,124 | 43,021 | ||||||
Service fees (Note 2): | ||||||||
Y Class | 235,604 | 41,855 | ||||||
Investor Class | 223,757 | 35,299 | ||||||
A Class | 63,090 | 9,417 | ||||||
C Class | 54,933 | 7,264 | ||||||
Distribution fees (Note 2): | ||||||||
A Class | 105,150 | 15,695 | ||||||
C Class | 366,221 | 48,426 | ||||||
SP Class | — | 12,842 | ||||||
Prospectus and shareholder report expenses | 49,177 | 6,313 | ||||||
Trustee fees | 26,220 | 2,436 | ||||||
Insurance Expense | 6,428 | — | ||||||
Other expenses | 16,551 | 6,368 | ||||||
|
|
|
| |||||
Total expenses | 5,652,755 | 1,112,556 | ||||||
|
|
|
| |||||
Net fees waived and expenses reimbursed (Note 2) | — | (7,479 | ) | |||||
|
|
|
| |||||
Net expenses | 5,652,755 | 1,105,077 | ||||||
|
|
|
| |||||
Net investment income | 34,580,031 | 4,710,574 | ||||||
|
|
|
| |||||
Realized and unrealized gain (loss) from investments: | ||||||||
Net realized gain (loss) from: | ||||||||
Investments | 6,330,517 | 1,069,912 | ||||||
Foreign currency transactions | (8,044,721 | ) | — | |||||
Futures contracts | 7,149,069 | — | ||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||
Investments | 24,471,871 | 2,547,554 | ||||||
Foreign currency transactions | 2,740,745 | — | ||||||
Futures contracts | (3,458,840 | ) | — | |||||
|
|
|
| |||||
Net gain from investments | 29,188,641 | 3,617,466 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | $ | 63,768,672 | $ | 8,328,040 | ||||
|
|
|
| |||||
A Foreign taxes | $ | 56,333 | $ | — |
See accompanying notes
20
American Beacon FundsSM
Statements of Changes in Net Assets
Sound Point Floating Rate | ||||||||||||||||
SiM High Yield Opportunities Fund | Income Fund | |||||||||||||||
Six Months Ended | Year Ended | Six Months Ended | Year Ended | |||||||||||||
February 28, | August 31, | February 28, | August 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 34,580,031 | $ | 52,094,516 | $ | 4,710,574 | $ | 3,713,537 | ||||||||
Net realized gain (loss) from investments, foreign currency transactions, and futures contracts | 5,434,865 | (27,419,311 | ) | 1,069,912 | 180,741 | |||||||||||
Change in net unrealized appreciation (depreciation) from investments, foreign currency transactions, and futures contracts | 23,753,776 | 38,725,649 | 2,547,554 | 48 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets resulting from operations | 63,768,672 | 63,400,854 | 8,328,040 | 3,894,326 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (12,169,951 | ) | (15,212,818 | ) | (1,834,624 | ) | (2,520,762 | ) | ||||||||
Y Class | (14,318,381 | ) | (17,027,838 | ) | (1,723,275 | ) | (238,133 | ) | ||||||||
Investor Class | (3,819,333 | ) | (5,991,314 | ) | (557,102 | ) | (400,495 | ) | ||||||||
A Class | (2,423,466 | ) | (3,828,770 | ) | (241,480 | ) | (110,249 | ) | ||||||||
C Class | (1,846,452 | ) | (3,237,252 | ) | (145,785 | ) | (34,369 | ) | ||||||||
SP Class | — | — | (224,332 | ) | (645,514 | ) | ||||||||||
Net realized gain from investments: | ||||||||||||||||
Institutional Class | — | — | (147,428 | ) | (137,448 | ) | ||||||||||
Y Class | — | — | (190,454 | ) | (366 | ) | ||||||||||
Investor Class | — | — | (69,215 | ) | (367 | ) | ||||||||||
A Class | — | — | (24,053 | ) | (367 | ) | ||||||||||
C Class | — | — | (23,779 | ) | (367 | ) | ||||||||||
SP Class | — | — | (17,010 | ) | (53,752 | ) | ||||||||||
Return of Capital: | ||||||||||||||||
Institutional Class | — | (2,546,029 | ) | — | — | |||||||||||
Y Class | — | (2,703,885 | ) | — | — | |||||||||||
Investor Class | — | (772,676 | ) | — | — | |||||||||||
A Class | — | (467,780 | ) | — | — | |||||||||||
C Class | — | (378,573 | ) | — | — | |||||||||||
SP Class | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (34,577,583 | ) | (52,166,935 | ) | (5,198,537 | ) | (4,142,189 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 402,688,008 | 640,680,660 | 486,998,590 | 137,502,090 | ||||||||||||
Reinvestment of dividends and distributions | 32,281,735 | 48,182,689 | 4,616,017 | 3,205,179 | ||||||||||||
Cost of shares redeemed | (372,640,719 | ) | (433,324,385 | ) | (58,846,885 | ) | (72,206,459 | ) | ||||||||
Redemption fees | 861 | 157,230 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets from capital share transactions | 62,329,885 | 255,696,194 | 432,767,722 | 68,500,810 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets | 91,520,974 | 266,930,113 | 435,897,225 | 68,252,947 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 1,148,521,103 | 881,590,990 | 111,281,815 | 43,028,868 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 1,240,042,077 | $ | 1,148,521,103 | $ | 547,179,040 | $ | 111,281,815 | ||||||||
|
|
|
|
|
|
|
| |||||||||
*Includes undistributed (overdistribution of) net investment income | $ | 496,669 | $ | (5,226,981 | ) | $ | (37,131 | ) | $ | (21,107 | ) | |||||
|
|
|
|
|
|
|
|
See accompanying notes
21
American Beacon FundsSM
February 28, 2017 (Unaudited)
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust. The Funds, each a series within the Trust, are registered under the Investment Company Act of 1940, as amended (the “Act”), as non-diversified, open-end management investment companies. As of February 28, 2017, the Trust consists of twenty-seven active series, two of which is presented in this filing (collectively, the “Funds” and each individually a “Fund”): American Beacon SiM High Yield Opportunities Fund (“SiM HYO Fund”) and the American Beacon Sound Point Floating Rate Income Fund (“Sound Point 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 the impact, if any, on the fund’s financial statements.
Class Disclosure
The Funds have multiple classes of shares designed to meet the needs of different groups of investors; however, not all of the Funds offer all classes. The following table sets forth the differences amongst the classes:
Minimum Initial | ||||||
Class | Eligible Investors | 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 | |||
SP | Retail investors who invest directly through a financial intermediary such as a broker, or through employee directed benefit plans and were formerly shareholders of the Investor Class Shares of the Sound Point Floating Rate Fund prior to its reorganization. | $ | 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
22
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 Funds 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”).
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 the 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 market values of securities held and is reported with all other foreign currency gains and losses in the Funds’ Statements of Operations.
Dividends to Shareholders
Dividends from net investment income of the Funds 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.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Funds. This amount is reported with the net realized gain in the Funds’ Statements of Operations, if applicable. For the six months ended February 28, 2017, the Funds did not have commission recapture income.
23
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 SiM HYO 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. Effective December 29, 2016, the redemption fee was terminated by the Trust’s Board of Trustees (the “Board”).
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
The Funds and the Manager are parties to 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 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 six months ended February 28, 2017 were as follows:
Amounts paid | ||||||||||||||||
Management Fee | Management | to Investment | Amounts Paid | |||||||||||||
Fund | Rate | Fee | Advisors | to Manager | ||||||||||||
SiM HYO | 0.75 | % | $ | 4,188,632 | $ | 2,166,855 | $ | 2,021,777 | ||||||||
Sound Point | 0.70 | % | 795,995 | 397,998 | 397,997 |
Distribution Plans
The Funds, except for the A, C, and SP 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 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
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American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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, C, and SP 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, and SP Classes and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee 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. Intermediary’s transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Fund(s). 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 Board approval, have agreed to reimburse the Manager for all or a portion of the servicing fees paid to these intermediary’s 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 February 28, 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 | |||
SiM HYO | $ | 119,995 | ||
Sound Point | 15,056 |
As of February 28, 2017, the Funds owed the Manager the following reimbursements of sub-transfer agent fees, as included in “Transfer agent fees payable” on the Statements of Assets and Liabilities:
Reimbursement of | ||||
Fund | Sub-Transfer Agent Fees | |||
SiM HYO | $ | 15,958 | ||
Sound Point | 1,540 |
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 the investment advisor to the USG Select Fund and receives management fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the period ended February 28, 2017, the Manager earned fees on the Funds’ direct investments in the USG Select Fund as shown below:
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American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Fund | Direct Investments in USG Select Funds | |||
SiM HYO | $ | 7,816 | ||
Sound Point | 33,287 |
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 period ended February 28, 2017, the SiM High Yield Opportunities Fund borrowed on average $3,088,289 for 4 days at an average rate of 1.01% with interest charges of $340. This amount is recorded within “Other expenses” on the accompanying Statements of Operations.
Expense Reimbursement Plan
The Manager contractually agreed to reimburse the classes of the Funds to the extent that total annual fund operating expenses exceeded the Funds’ expense cap. For the six months ended February 28, 2017, the Manager waived or reimbursed expenses as follows:
Fund | Class | Expense Cap 9/1/2016 to 2/28/2017 | Reimbursed Expenses | Expiration | ||||||||||||
SiM HYO | Institutional | 0.84 | % | $ | — | 2020 | ||||||||||
Sound Point | Institutional | 0.84 | % | 7,479 | 2020 |
Of these amounts, $6,667 was disclosed as a payable to the Manager on the Statements of Assets and Liabilities at February 28, 2017 for the Sound Point 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 listed above will expire in 2020. The Funds did not record a liability for potential reimbursements, due to the current assessment that a reimbursement is unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||||
SiM HYO | $ | — | $ | 23,730 | 2017 | |||||||
SiM HYO | — | 60,056 | 2018 | |||||||||
SiM HYO | — | 175,131 | 2019 | |||||||||
Sound Point | — | 236,521 | 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 six months ended February 28, 2017, Foreside collected $16,202 and $33,336 in sales commissions from the sale of A Class shares for SiM HYO and Sound Point Funds, respectively.
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 six months ended February, 28, 2017, fees of $650 were collected for the
26
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Class A Shares of the SIM HYO 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 period ended February 28, 2017, CDSC fees of $4,105 and $5,437 were collected from the Class C Shares of the SiM HYO and Sound Point 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 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 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 Trust’s Board.
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Funds are 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.
27
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 American Depository Receipts (“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 may 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 in good faith by the Valuation Committee, established by the Funds’ Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 - | Quoted prices in active markets for identical securities. | |
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 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.
Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker
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American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows and market-based yield spreads for each tranche, and incorporate deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Common stocks, ETFs and financial derivative instruments, such as futures contracts, are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts, options contracts, or swaps agreements, 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 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,
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American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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, has been included below.
The Funds’ investments are summarized by level based on the inputs used to determine their values. As of February 28, 2017, the investments were classified as described below:
SiM HYO Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 21,735,829 | $ | — | $ | — | $ | 21,735,829 | ||||||||
Domestic Bank Loan Obligations | — | 11,721,937 | — | 11,721,937 | ||||||||||||
Domestic Convertible Obligations | — | 10,069,950 | — | 10,069,950 | ||||||||||||
Corporate Obligations | — | 1,110,774,940 | 4,375,000 | 1,115,149,940 | ||||||||||||
Foreign Convertible Obligations | — | — | 824,605 | 824,605 | ||||||||||||
Foreign Corporate and Sovereign Obligations | — | 43,922,992 | — | 43,922,992 | ||||||||||||
Short-Term Investments - Money Market Funds | 11,302,321 | — | — | 11,302,321 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 33,038,150 | $ | 1,176,489,819 | $ | 5,199,605 | $ | 1,214,727,574 | ||||||||
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|
|
|
|
|
|
| |||||||||
Other Financial instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 270,788 | $ | — | $ | — | $ | 270,788 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Other Financial instruments - Assets | $ | 270,788 | $ | — | $ | — | $ | 270,788 | ||||||||
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|
|
|
|
|
|
| |||||||||
Sound Point Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 231,638 | $ | — | $ | — | $ | 231,638 | ||||||||
Warrants | — | — | — | — | ||||||||||||
Bank Loan Obligations (2) | — | 457,746,466 | — | 457,746,466 | ||||||||||||
Corporate Obligations | — | 5,569,643 | — | 5,569,643 | ||||||||||||
Short-Term Investments - Money Market Funds | 229,811,970 | — | — | 229,811,970 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 230,043,608 | $ | 463,316,109 | $ | — | $ | 693,359,717 | ||||||||
|
|
|
|
|
|
|
|
(1) | Refer to the Schedule of Investments for Industry Information. |
(2) | Unfunded Loan Commitments represent $1,931,619 at period end. |
U.S. GAAP also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the six months ended February 28, 2017, there were no transfers between levels for the Sound Point Fund.
30
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
The following is a reconciliation of Level 3 assets of the SiM HYO 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.
Domestic Obligations | Foreign Convertible Obligations | Total | ||||||||||
Beginning Balance as of 8/31/2016 | $ | 4,608,500 | $ | 1,097,045 | $ | 5,705,545 | ||||||
Purchases | 9,779 | — | 9,779 | |||||||||
Sales | — | — | — | |||||||||
Accrued Discounts (Premiums) | (314,443 | ) | — | (314,443 | ) | |||||||
Realized Gain (Loss) | — | — | — | |||||||||
Net Change in Unrealized Appreciation (Depreciation) | 1,538,186 | (272,440 | ) | 1,265,746 | ||||||||
Transfers into Level 3 | — | — | — | |||||||||
Transfers out of Level 3 | 1,467,022 | — | 1,467,022 | |||||||||
|
|
|
|
|
| |||||||
Ending Balance 2/28/2017 | $ | 4,375,000 | $ | 824,605 | $ | 5,199,605 | ||||||
|
|
|
|
|
| |||||||
Net Change in Unrealized Appreciation (Depreciation) on Investments Held at 2/28/2017(1) | $ | 1,538,186 | $ | (272,440 | ) | $ | 1,265,746 |
(1) | 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 following is a summary of significant unobservable inputs used in the fair valuation of the asset categorized within Level 3 of the fair value hierarchy:
Security Type | Fair Value At 2/28/2017 | Valuation Technique | Unobservable Inputs | Input Assumptions | Fair Value at 2/28/2017 per share | |||||||
Foreign Convertible Obligations | $ | 824,605 | Expected Debt for Equity Swap in Recapitalization | Projected EBITDA, EBITDA Multiple, discount rate for uncertainty | Projected EBITDA, Valuation Multiple, Liquidity discount (2) | 5.54 EUR/ 5.87 USD | ||||||
Corporate Obligations | $ | 4,375,000 | Comparison of Yield to similar Debt Instruments | Comparative yields, Liquidity Discount | Comparative yields, Liquidity Discount (3) | 87.50 USD |
(2) | These obligations are placeholders for a package of notes received in the bankruptcy restructuring. The key assumptions used in the valuation include projected EBITDA of 70 million Euro, 8x EBITDA multiple based on comparable companies, and a 15% liquidity discount. The valuation estimate will change if the debt for equity swap does not occur or if any of the assumptions change. |
(3) | These obligations are secured by collateral. Valuation may change if the yields of comparative bonds change, or the level of collateral coverage declines, or if the market imputes a higher liquidity discount to these bonds than presently incorporated into the fair value. |
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 a 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, a Fund may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material
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Notes to Financial Statements
February 28, 2017 (Unaudited)
information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle a Fund to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
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, a 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 of the agent’s general or secured creditors, a Fund might incur certain costs and delays in realizing payment on a loan or suffer a loss of principal and/or interest. A 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 Funds 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 Funds 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 Funds 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 Funds will acquire direct rights against the borrower on the loan.
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.
Convertible Securities
Convertible securities include corporate bonds, notes, preferred stock or other securities that may be converted into or exchanged for a prescribed amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive
32
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
interest paid or accrued on debt or dividends paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. While no securities investment is without some risk, investments in convertible securities generally entail less risk than the issuer’s common stock, although the extent to which such risk is reduced depends in large measure upon the degree to which the convertible security sells above its value as a fixed-income security. The market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. While convertible securities generally offer lower interest or dividend yields than nonconvertible debt securities of similar quality, they do enable the investor to benefit from increases in the market price of the underlying common stock. Holders of convertible securities have a claim on the assets of the issuer prior to the common stockholders, but may be subordinated to holders of similar non-convertible securities of the same issuer. Because of the conversion feature, certain convertible securities may be considered equity equivalents.
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. 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.
Delayed Funding Loans and Revolving Credit Facilities
A Fund may enter into, or acquire participations in, delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. A revolving credit facility differs from a delayed funding loan in that as the borrower repays the loan, an amount equal to the repayment may be borrowed again during the term of the revolving credit facility. Delayed funding loans and revolving credit facilities usually provide for floating or variable rates of interest. These commitments may have the effect of requiring a Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will at all times segregate or “earmark” assets, determined to be liquid in accordance with procedures established by the Trust’s Board, in an amount sufficient to meet such commitments.
A Fund may invest in delayed funding loans and revolving credit facilities with credit quality comparable to that of issuers of its securities investments. Delayed funding loans and revolving credit facilities may be subject to restrictions on transfer, and only limited opportunities may exist to resell such instruments. As a result, a Fund may be unable to sell such investments at an opportune time or may have to resell them at less than fair market value.
Floating Rate Loan Interests
Floating rate loan interests held by the Funds 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 Funds 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 Funds considers these investments to be investments in debt securities for purposes of its investment policies.
33
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
When the Funds purchase 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 Funds 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 Funds upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. The Funds may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.
Floating rate loan interests are usually freely callable at the borrower’s option. The Funds 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 Funds having a contractual relationship only with the lender, not with the borrower. The Funds 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 Funds 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 Funds may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Funds will assume the credit risk of both the borrower and the lender that is selling the Participation. The Funds’ 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 Funds 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 Funds having a direct contractual relationship with the borrower, and the Funds may enforce compliance by the borrower with the terms of the loan agreement.
In connection with floating rate loan interests, the Funds may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, the Funds earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in “Interest income” in the Statements 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 Statements of Assets and Liabilities and Statements of Operations.
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 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
34
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
Payment-In-Kind Securities
The SiM HYO Fund may invest in payment-in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the “Unrealized appreciation (depreciation) of investments” to “Dividend and interest receivable” in the Statements of Assets and Liabilities.
Inflation-Indexed Bonds
The SiM HYO Fund 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 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.
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 February 28, 2017 are disclosed in the Notes to the Schedules of Investments.
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.
35
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
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, a Fund becomes a shareholder of that investment company. As a result, the Fund’s shareholders indirectly will bear the Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Fund’s shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for each Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
5. Financial Derivative Instruments
The Funds may utilize derivative instruments to manage liquidity. 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 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 Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
For the period ended February 28, 2017, the SIM HYO Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
36
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
SiM HYO | 611 |
The following is a summary of the SIM HYO Fund’s derivative financial instruments categorized by risk exposure(1):
Fair Values of financial derivative instruments not accounted for as hedging instruments as of February 28, 2017:
Statement of Assets and Liabilities: | Foreign exchange contracts | |||
Receivable for variation margin from open futures contracts(2) | $ | 270,788 |
The effect financial derivative instruments not accounted for as hedging instruments for the period ended February 28, 2017:
Statement of Operations: | Foreign exchange contracts | |||
Realized gain (loss) from derivatives recognized as a result from operations: | ||||
Net realized gain (loss) from futures contracts | $ | 7,149,069 | ||
Net change in unrealized appreciation (depreciation) of derivatives recognized as a result from operations: | ||||
Change in net unrealized appreciation (depreciation) of futures contracts | $ | (3,458,840 | ) |
(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 Fund’s Schedules of Investment 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:
Callable Securities Risk
The Funds may invest in fixed-income securities with call features. A call feature allows the issuer of the security to redeem or call the security prior to its stated maturity date. In periods of falling interest rates, issuers may be more likely to call in securities that are paying higher coupon rates than prevailing interest rates. In the event of a call, the Funds would lose the income that would have been earned to maturity on that security, and the proceeds received by the Funds may be invested in securities paying lower coupon rates and may not benefit from any increase in value that might otherwise result from declining interest rates.
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.
37
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Futures Contracts Risk
Futures contracts are derivative instruments where one party pays 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).
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 decreases. Alternatively, during periods of rising interest rates, interest payable on floating-rate securities typically increases. 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.
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.
Interest Rate Risk
The Funds are subject to the risk that the market value of fixed-income securities it holds will decline due to rising interest rates. 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 Federal Reserve raised the federal funds rate in December 2016, marking only the second such interest rate hike in nearly a decade. The Federal Reserve has signaled additional increases in 2017. Interest rates may rise, perhaps significantly and/or rapidly, potentially resulting in substantial losses to the Fund. 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.
Liquidity Risk
The Funds are susceptible to the risk that certain of the floating rate debt securities held by the Funds, such as structured notes and other derivative instruments, may have limited marketability or be subject to restrictions on sale, and may be difficult or impossible to purchase or 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. The Funds may be required to dispose of investments at unfavorable times or prices to satisfy obligations, which may result in losses or may be costly to the Funds. For example, the Funds may be forced to sell certain investments at unfavorable prices to meet redemption requests or other cash needs. Judgment plays a greater role in pricing illiquid investments than in investments with more active markets.
38
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Loan Interests Risk
Unlike publicly traded common stocks which trade on national exchanges, there is no central place or exchange for loans, including bank loans and senior 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 a 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 loans may impair the ability of a Fund to sell its loan interests at a time when it may otherwise be desirable to do so or may require a Fund to sell them at prices that are less than what a 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 a Fund’s loan interest is a participation, the Fund is subject to the risk that the party selling the participation interest will not remit a 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 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 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 those investment companies in addition to the Fund’s direct fees and expenses and will be subject to the risks associated with investments in those funds. Money market funds are subject to interest rate risk, credit risk, and market risk.
39
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Prepayment Risk
Prepayment risk is the risk that the principal amount of a bond 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 otherwise prepaid before maturity. If this occurs, no additional interest will be paid on the investment and a 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. Variable and floating rate securities may be less sensitive to prepayment risk.
Unrated Securities Risk
Because the Funds may purchase securities that are not rated by any rating organization, the sub-advisor, after assessing their credit quality, may internally assign ratings to certain of those securities in categories similar to those of rating organizations. Some unrated securities may not have an active trading market or may be difficult to value, which means a Fund might have difficulty selling them promptly at an acceptable price. Unrated securities may be subject to greater liquidity risk and price volatility.
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 the report date, February 28, 2017.
SiM High Yield Opportunities Fund
Offsetting of Financial and Derivative Assets as of February 28, 2017:
Description | Gross Amount of Recognized Assets | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amounts of Assets Presented in the Statements of Assets and Liabilities | |||||||||
Futures contracts(1) | $ | 270,788 | $ | — | $ | 270,788 |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of February 28, 2017:
Counterparty | Net amount of Assets Presented in the Statements of Assets and Liabilities | Gross Amounts Not Offset in the Statements of Assets and Liabilities | Net Amount | |||||||||||||
Financial Instruments | Cash Collateral Pledged | |||||||||||||||
ADM Investor Services, Inc. (1) | $ | 270,788 | $ | — | $ | — | $ | 270,788 |
(1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
40
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 years for the periods ended August 31, 2013, 2014, 2015, and 2016 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.
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:
SiM HYO Fund | Sound Point Fund | |||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary Income* | ||||||||||||||||
Institutional Class | $ | 12,169,951 | $ | 14,904,290 | $ | 1,982,052 | $ | 2,658,210 | ||||||||
Y Class | 14,318,381 | 16,700,181 | 1,913,729 | 238,499 | ||||||||||||
Investor Class | 3,819,333 | 5,897,681 | 626,317 | 400,862 | ||||||||||||
A Class | 2,423,466 | 3,772,084 | 265,533 | 110,616 | ||||||||||||
C Class | 1,846,452 | 3,191,376 | 169,564 | 34,736 | ||||||||||||
SP Class A | — | — | 241,342 | 699,266 | ||||||||||||
Long-term capital gains | ||||||||||||||||
Institutional Class | — | 308,528 | — | — | ||||||||||||
Y Class | — | 327,657 | — | — | ||||||||||||
Investor Class | — | 93,633 | — | — | ||||||||||||
A Class | — | 56,686 | — | — | ||||||||||||
C Class | — | 45,876 | — | — | ||||||||||||
SP Class A | — | — | — | — | ||||||||||||
Tax Return of Capital | ||||||||||||||||
Institutional Class | — | 2,546,029 | — | — | ||||||||||||
Y Class | — | 2,703,885 | — | — | ||||||||||||
Investor Class | — | 772,676 | — | — | ||||||||||||
A Class | — | 467,780 | — | — | ||||||||||||
C Class | — | 378,573 | — | — | ||||||||||||
SP Class A | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions paid | $ | 34,577,583 | $ | 52,166,935 | $ | 5,198,537 | $ | 4,412,189 | ||||||||
|
|
|
|
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
A | Formally known as Investor class. |
41
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
As of February 28, 2017, the components of distributable earnings (deficit) on a tax basis were as follows:
SiM HYO Fund | Sound Point Fund | |||||||
Cost basis of investments for federal income tax purposes | $ | 1,199,720,804 | $ | 690,866,892 | ||||
Unrealized appreciation | 41,416,912 | 3,952,686 | ||||||
Unrealized depreciation | (26,410,142 | ) | (1,459,861 | ) | ||||
|
|
|
| |||||
Net unrealized appreciation (depreciation) | 15,006,770 | 2,492,825 | ||||||
Undistributed ordinary income | — | 974,091 | ||||||
Undistributed long-term capital gains | — | — | ||||||
Accumulated capital and other losses | (14,781,684 | ) | — | |||||
Other temporary differences | (374,695 | ) | (119,256 | ) | ||||
|
|
|
| |||||
Distributable earnings (deficits) | $ | (149,609 | ) | $ | 3,347,660 | |||
|
|
|
|
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, the realization for tax purposes of unrealized gains (losses) on certain derivative instruments, the realization for tax purposes of unrealized gains (losses) on investments in passive foreign investment companies, and reclassifications of income from real estate investment securities and 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.
Accordingly, the following reclassified amounts represent current year permanent differences derived from foreign currency, reclassifications of income from real estate investment securities and publicly traded partnerships, dividend reclasses, and return of capital distributions as of February 28, 2017:
SiM HYO Fund | Sound Point Fund | |||||||
Paid-in-capital | $ | (6,334,151 | ) | $ | — | |||
Undistributed net investment income (loss) | 5,721,202 | — | ||||||
Accumulated net realized gain (loss) | 612,949 | — | ||||||
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 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 February 28, 2017, SiM HYO Fund has $3,042,166 of short-term and $11,739,518 of long term post RIC MOD capital loss carryforwards. The Fund utilized $2,588,974 short-term post RIC MOD capital loss carryforwards.
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended February 28, 2017 were as follows:
Purchases | Sales | |||||||
SiM HYO Fund (excluding U.S. Government Securities) | $ | 400,323,396 | $ | 331,168,857 | ||||
Sound Point Fund (excluding U.S. Government Securities) | 485,845,315 | 127,468,390 |
42
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
A summary of the Funds’ direct transactions in the USG Select Fund for the six months ended February 28, 2017, were as follows:
August 31, | February 28, | |||||||||||||||||||
2016 | 2017 | |||||||||||||||||||
Fund | Shares/Fair Value | Purchases | Sales | Shares/Fair Value | Dividend Income | |||||||||||||||
SiM HYO | $ | 15,615,239 | $ | 219,656,401 | $ | 223,969,319 | $ | 11,302,321 | $ | 30,793 | ||||||||||
Sound Point | 17,644,246 | 316,284,604 | 104,116,880 | 229,811,970 | 141,843 |
9. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds:
Institutional Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 8,688,717 | $ | 82,911,352 | 29,098,011 | $ | 265,319,517 | ||||||||||
Reinvestment of dividends | 1,259,790 | 12,030,490 | 1,922,570 | 17,530,484 | ||||||||||||
Shares redeemed | (17,660,232 | ) | (169,216,624 | ) | (11,269,780 | ) | (101,717,347 | ) | ||||||||
Redemption Fees | — | 1,030 | — | 52,977 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | (7,711,725 | ) | $ | (74,273,752 | ) | 19,750,801 | $ | 181,185,631 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 25,733,970 | $ | 246,654,188 | 27,765,315 | $ | 252,822,449 | ||||||||||
Reinvestment of dividends | 1,374,923 | 13,140,762 | 1,963,256 | 17,908,686 | ||||||||||||
Shares redeemed | (13,892,403 | ) | (132,347,068 | ) | (14,476,514 | ) | (130,154,658 | ) | ||||||||
Redemption Fees | — | (627 | ) | — | 57,606 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 13,216,490 | $ | 127,447,255 | 15,252,057 | $ | 140,634,083 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 4,244,778 | $ | 40,357,674 | 8,609,802 | $ | 78,138,524 | ||||||||||
Reinvestment of dividends | 385,209 | 3,668,750 | 725,197 | 6,604,510 | ||||||||||||
Shares redeemed | (4,367,600 | ) | (41,565,571 | ) | (16,589,602 | ) | (149,870,501 | ) | ||||||||
Redemption Fees | — | 318 | — | 19,068 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 262,387 | $ | 2,461,171 | (7,254,603 | ) | $ | (65,108,399 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 2,694,365 | $ | 25,758,441 | 3,311,111 | $ | 30,339,773 | ||||||||||
Reinvestment of dividends | 197,614 | 1,889,883 | 344,844 | 3,141,370 | ||||||||||||
Shares redeemed | (2,113,117 | ) | (20,154,775 | ) | (3,836,439 | ) | (34,733,101 | ) | ||||||||
Redemption Fees | — | (44 | ) | — | 14,139 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | 778,862 | $ | 7,493,505 | (180,484 | ) | $ | (1,237,819 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 730,374 | $ | 7,006,353 | 1,532,505 | $ | 14,060,397 | ||||||||||
Reinvestment of dividends | 161,692 | 1,551,850 | 328,087 | 2,997,639 | ||||||||||||
Shares redeemed | (976,080 | ) | (9,356,681 | ) | (1,858,565 | ) | (16,848,778 | ) | ||||||||
Redemption Fees | — | 184 | — | 13,440 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | (84,014 | ) | $ | (798,294 | ) | 2,027 | $ | 222,698 | ||||||||
|
|
|
|
|
|
|
|
43
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Institutional Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 12,480,121 | $ | 128,864,386 | 5,694,462 | $ | 57,882,223 | ||||||||||
Reinvestment of dividends | 146,398 | 1,507,991 | 196,489 | 1,988,198 | ||||||||||||
Shares redeemed | (3,698,604 | ) | (38,210,395 | ) | (3,834,677 | ) | (39,224,396 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 8,927,915 | $ | 92,161,982 | 2,056,274 | $ | 20,646,025 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 B | |||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 22,591,084 | $ | 233,141,660 | 2,273,967 | $ | 23,121,921 | ||||||||||
Reinvestment of dividends | 177,501 | 1,832,682 | 22,103 | 225,161 | ||||||||||||
Shares redeemed | (699,347 | ) | (7,211,928 | ) | (48,307 | ) | (492,031 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 22,069,238 | $ | 227,762,414 | 2,247,763 | $ | 22,855,051 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 B | |||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 8,118,437 | $ | 83,514,000 | 2,785,550 | $ | 27,979,631 | ||||||||||
Reinvestment of dividends | 60,683 | 624,917 | 39,466 | 399,746 | ||||||||||||
Shares redeemed | (473,239 | ) | (4,866,162 | ) | (2,467,368 | ) | (25,036,083 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 7,705,881 | $ | 79,272,755 | 357,648 | $ | 3,343,294 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 B | |||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 2,056,422 | $ | 21,188,257 | 752,395 | $ | 7,626,353 | ||||||||||
Reinvestment of dividends | 25,662 | 264,570 | 10,835 | 110,257 | ||||||||||||
Shares redeemed | (326,301 | ) | (3,350,091 | ) | (91,976 | ) | (935,595 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | 1,755,783 | $ | 18,102,736 | 671,257 | $ | 6,801,015 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 B | |||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,831,781 | $ | 18,874,329 | 312,358 | $ | 3,171,177 | ||||||||||
Reinvestment of dividends | 14,008 | 144,540 | 3,263 | 33,184 | ||||||||||||
Shares redeemed | (81,215 | ) | (838,895 | ) | (17,766 | ) | (180,234 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 1,764,574 | $ | 18,179,974 | 297,855 | $ | 3,024,127 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
SP Class A | ||||||||||||||||
Six months ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 137,817 | $ | 1,415,958 | 1,717,328 | $ | 17,720,785 | ||||||||||
Reinvestment of dividends | 23,477 | 241,317 | 44,391 | 448,633 | ||||||||||||
Shares redeemed | (426,685 | ) | (4,369,414 | ) | (630,811 | ) | (6,338,120 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | (265,391 | ) | $ | (2,712,139 | ) | 1,130,908 | $ | 11,831,298 | ||||||||
|
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|
|
|
|
|
A | Formally known as Investor Class. |
B | For the period of December 11, 2015 through August 31, 2016. |
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.
44
American Beacon SiM High Yield Opportunities FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||
Six Months | Year Ended August 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
February 28, | ||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.49 | $ | 9.43 | $ | 10.35 | $ | 10.16 | $ | 9.93 | $ | 9.42 | ||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.29 | 0.59 | 0.57 | 0.64 | 0.75 | 0.77 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.23 | 0.05 | (0.65 | ) | 0.47 | 0.26 | 0.51 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.52 | 0.64 | (0.08 | ) | 1.11 | 1.01 | 1.28 | |||||||||||||||||
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|
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|
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|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.29 | ) | (0.52 | ) | (0.55 | ) | (0.69 | ) | (0.75 | ) | (0.77 | ) | ||||||||||||
Distributions from net realized gains | — | — | (0.29 | ) | (0.23 | ) | (0.03 | ) | — | |||||||||||||||
Tax Return of Capital | — | (0.06 | )A | — | — | — | — | |||||||||||||||||
|
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|
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|
|
|
|
|
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| |||||||||||||
Total distributions | (0.29 | ) | (0.58 | ) | (0.84 | ) | (0.92 | ) | (0.78 | ) | (0.77 | ) | ||||||||||||
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| |||||||||||||
Redemption fees added to beneficial interests E | — | — | — | — | — | — | ||||||||||||||||||
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|
|
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| |||||||||||||
Net asset value, end of period | $ | 9.72 | $ | 9.49 | $ | 9.43 | $ | 10.35 | $ | 10.16 | $ | 9.93 | ||||||||||||
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|
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| |||||||||||||
Total return B | 5.58 | %C | 7.28 | % | (0.78 | )% | 11.34 | % | 10.29 | % | 14.19 | % | ||||||||||||
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| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 354,556,632 | $ | 419,036,240 | $ | 230,287,454 | $ | 75,388,828 | $ | 45,471,117 | $ | 62,790,154 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 0.84 | %D | 0.91 | % | 0.88 | % | 0.86 | % | 0.93 | % | 1.06 | % | ||||||||||||
Expenses, net of reimbursements | 0.84 | %D | 0.84 | % | 0.84 | % | 0.84 | % | 0.84 | % | 0.84 | % | ||||||||||||
Net investment income, before reimbursements | 6.17 | %D | 6.30 | % | 5.38 | % | 5.88 | % | 7.11 | % | 7.90 | % | ||||||||||||
Net investment income, net of reimbursements | 6.17 | %D | 6.37 | % | 5.41 | % | 5.90 | % | 7.20 | % | 8.12 | % | ||||||||||||
Portfolio turnover rate | 29 | %C | 57 | % | 43 | % | 38 | % | 65 | % | 43 | % | ||||||||||||
Y Class | ||||||||||||||||||||||||
Six Months | Year Ended August 31, | |||||||||||||||||||||||
Ended February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.48 | $ | 9.42 | $ | 10.34 | $ | 10.14 | $ | 9.92 | $ | 9.41 | ||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.29 | 0.59 | 0.53 | 0.64 | 0.73 | 0.76 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.24 | 0.05 | (0.62 | ) | 0.46 | 0.25 | 0.51 | |||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.53 | 0.64 | (0.09 | ) | 1.10 | 0.98 | 1.27 | |||||||||||||||||
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|
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| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.29 | ) | (0.52 | ) | (0.54 | ) | (0.67 | ) | (0.73 | ) | (0.76 | ) | ||||||||||||
Distributions from net realized gains | — | — | (0.29 | ) | (0.23 | ) | (0.03 | ) | — | |||||||||||||||
Tax Return of Capital | — | (0.06 | )A | — | — | — | — | |||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.29 | ) | (0.58 | ) | (0.83 | ) | (0.90 | ) | (0.76 | ) | (0.76 | ) | ||||||||||||
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|
| |||||||||||||
Redemption fees added to beneficial interests E | — | — | — | — | — | — | ||||||||||||||||||
|
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|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.72 | $ | 9.48 | $ | 9.42 | $ | 10.34 | $ | 10.14 | $ | 9.92 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 5.67 | %C | 7.21 | % | (0.87 | )% | 11.33 | % | 10.08 | % | 14.09 | % | ||||||||||||
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|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 585,996,985 | $ | 446,395,255 | $ | 300,014,547 | $ | 247,179,395 | $ | 87,638,664 | $ | 19,129,077 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 0.88 | %D | 0.91 | % | 0.91 | % | 0.94 | % | 0.99 | % | 1.09 | % | ||||||||||||
Expenses, net of reimbursements | 0.88 | %D | 0.91 | % | 0.93 | % | 0.94 | % | 0.93 | % | 0.94 | % | ||||||||||||
Net investment income, before reimbursements | 6.08 | %D | 6.28 | % | 5.32 | % | 5.77 | % | 6.77 | % | 7.92 | % | ||||||||||||
Net investment income, net of reimbursements | 6.08 | %D | 6.29 | % | 5.30 | % | 5.77 | % | 6.82 | % | 8.07 | % | ||||||||||||
Portfolio turnover rate | 29 | %C | 57 | % | 43 | % | 38 | % | 65 | % | 43 | % |
A | The tax return of capital is calculated based on shares outstanding at time of distribution. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not Annualized. |
D | Annualized. |
E | Amount represents less than $0.01 per share. |
45
American Beacon SiM High Yield Opportunities FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||
Six Months | Year Ended August 31, | |||||||||||||||||||||||
Ended February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.45 | $ | 9.40 | $ | 10.32 | $ | 10.12 | $ | 9.90 | $ | 9.38 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.28 | 0.50 | 0.50 | 0.56 | 0.71 | 0.73 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.24 | 0.10 | (0.61 | ) | 0.52 | 0.25 | 0.52 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.52 | 0.60 | (0.11 | ) | 1.08 | 0.96 | 1.25 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.28 | ) | (0.49 | ) | (0.52 | ) | (0.65 | ) | (0.71 | ) | (0.73 | ) | ||||||||||||
Distributions from net realized gains | — | — | (0.29 | ) | (0.23 | ) | (0.03 | ) | — | |||||||||||||||
Tax Return of Capital | — | (0.06 | ) A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.28 | ) | (0.55 | ) | (0.81 | ) | (0.88 | ) | (0.74 | ) | (0.73 | ) | ||||||||||||
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|
| |||||||||||||
Redemption fees added to beneficial interests E | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.69 | $ | 9.45 | $ | 9.40 | $ | 10.32 | $ | 10.12 | $ | 9.90 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 5.55 | %C | 6.82 | % | (1.14 | )% | 11.08 | % | 9.84 | % | 13.92 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 135,291,350 | $ | 129,503,495 | $ | 196,928,349 | $ | 199,533,521 | $ | 248,052,347 | $ | 150,395,958 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.12 | %D | 1.17 | % | 1.19 | % | 1.11 | % | 1.15 | % | 1.23 | % | ||||||||||||
Expenses, net of reimbursements | 1.12 | %D | 1.18 | % | 1.19 | % | 1.11 | % | 1.17 | % | 1.19 | % | ||||||||||||
Net investment income, before reimbursements | 5.86 | %D | 5.97 | % | 5.05 | % | 5.68 | % | 6.81 | % | 7.74 | % | ||||||||||||
Net investment income, net of reimbursements | 5.86 | %D | 5.96 | % | 5.05 | % | 5.68 | % | 6.79 | % | 7.78 | % | ||||||||||||
Portfolio turnover rate | 29 | %C | 57 | % | 43 | % | 38 | % | 65 | % | 43 | % | ||||||||||||
A Class | ||||||||||||||||||||||||
Six Months | Year Ended August 31, | |||||||||||||||||||||||
Ended February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.49 | $ | 9.43 | $ | 10.36 | $ | 10.15 | $ | 9.92 | $ | 9.41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.28 | 0.54 | 0.49 | 0.57 | 0.69 | 0.72 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.23 | 0.07 | (0.62 | ) | 0.49 | 0.26 | 0.51 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.51 | 0.61 | (0.13 | ) | 1.06 | 0.95 | 1.23 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.27 | ) | (0.49 | ) | (0.51 | ) | (0.62 | ) | (0.69 | ) | (0.72 | ) | ||||||||||||
Distributions from net realized gains | — | — | (0.29 | ) | (0.23 | ) | (0.03 | ) | — | |||||||||||||||
Tax Return of Capital | — | (0.06 | )A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.27 | ) | (0.55 | ) | (0.80 | ) | (0.85 | ) | (0.72 | ) | (0.72 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Redemption fees added to beneficial interests E | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.73 | $ | 9.49 | $ | 9.43 | $ | 10.36 | $ | 10.15 | $ | 9.92 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 5.50 | %C | 6.87 | % | (1.27 | )% | 10.87 | % | 9.74 | % | 13.63 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 89,500,705 | $ | 79,917,424 | $ | 81,147,262 | $ | 93,060,715 | $ | 76,146,389 | $ | 42,832,447 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.19 | % D | 1.23 | % | 1.22 | % | 1.33 | % | 1.41 | % | 1.53 | % | ||||||||||||
Expenses, net of reimbursements | 1.19 | % D | 1.24 | % | 1.24 | % | 1.32 | % | 1.35 | % | 1.34 | % | ||||||||||||
Net investment income, before reimbursements | 5.77 | % D | 5.99 | % | 5.01 | % | 5.44 | % | 6.53 | % | 7.44 | % | ||||||||||||
Net investment income, net of reimbursements | 5.77 | % D | 5.98 | % | 4.99 | % | 5.45 | % | 6.60 | % | 7.62 | % | ||||||||||||
Portfolio turnover rate | 29 | %C | 57 | % | 43 | % | 38 | % | 65 | % | 43 | % |
A | The tax return of capital is calculated based on shares outstanding at time of distribution. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not Annualized |
D | Annualized. |
E | Amount represents less than $0.01 per share. |
46
American Beacon SiM High Yield Opportunities FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||
Six Months | Year Ended August 31, | |||||||||||||||||||||||
Ended February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.53 | $ | 9.47 | $ | 10.40 | $ | 10.16 | $ | 9.94 | $ | 9.42 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.24 | 0.48 | 0.42 | 0.49 | 0.62 | 0.65 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.24 | 0.06 | (0.62 | ) | 0.50 | 0.25 | 0.52 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.48 | 0.54 | (0.20 | ) | 0.99 | 0.87 | 1.17 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.24 | ) | (0.48 | ) | (0.44 | ) | (0.52 | ) | (0.62 | ) | (0.65 | ) | ||||||||||||
Distributions from net realized gains | — | — | (0.29 | ) | (0.23 | ) | (0.03 | ) | — | |||||||||||||||
Tax Return of Capital | — | (0.05 | )A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.24 | ) | (0.48 | ) | (0.73 | ) | (0.75 | ) | (0.65 | ) | (0.65 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Redemption fees added to beneficial interests E | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.77 | $ | 9.53 | $ | 9.47 | $ | 10.40 | $ | 10.16 | $ | 9.94 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 5.11 | %C | 6.08 | % | (1.98 | )% | 10.12 | % | 8.81 | % | 12.90 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 74,696,405 | $ | 73,668,689 | $ | 73,213,378 | $ | 76,536,190 | $ | 60,829,392 | $ | 26,678,852 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.94 | % D | 1.97 | % | 1.97 | % | 2.08 | % | 2.15 | % | 2.26 | % | ||||||||||||
Expenses, net of reimbursements | 1.94 | % D | 1.99 | % | 1.99 | % | 2.07 | % | 2.09 | % | 2.09 | % | ||||||||||||
Net investment income, before reimbursements | 5.06 | % D | 5.26 | % | 4.26 | % | 4.68 | % | 5.76 | % | 6.70 | % | ||||||||||||
Net investment income, net of reimbursements | 5.06 | % D | 5.25 | % | 4.24 | % | 4.69 | % | 5.82 | % | 6.87 | % | ||||||||||||
Portfolio turnover rate | 29 | %C | 57 | % | 43 | % | 38 | % | 65 | % | 43 | % |
A | The tax return of capital is calculated based on shares outstanding at time of distribution. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not Annualized. |
D | Annualized. |
E | Amount represents less than $0.01 per share. |
47
American Beacon Sound Point Floating Rate Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Six Months | Year Ended August 31, | December 3, | ||||||||||||||||||
Ended | 2012F to | |||||||||||||||||||
February 28, | August 31, | |||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.20 | $ | 10.38 | $ | 10.49 | $ | 10.58 | $ | 10.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.23 | 0.51 | 0.52 | D | 0.57 | 0.14 | ||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.17 | (0.10 | ) | 0.06 | 0.14 | 0.50 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total income from investment operations | 0.40 | 0.41 | 0.58 | 0.71 | 0.64 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.23 | ) | (0.55 | ) | (0.52 | ) | (0.58 | ) | (0.06 | ) | ||||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | (0.17 | ) | (0.22 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total distributions | (0.25 | ) | (0.59 | ) | (0.69 | ) | (0.80 | ) | (0.06 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of period | $ | 10.35 | $ | 10.20 | $ | 10.38 | $ | 10.49 | $ | 10.58 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total return A | 3.97 | %B | 4.12 | % | 5.75 | % | 6.92 | % | 6.40 | %B | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period | $ | 156,473,584 | $ | 63,147,618 | $ | 42,903,291 | $ | 19,578,492 | $ | 17,179,147 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.85 | %C | 1.26 | % | 1.88 | % | 2.37 | % | 3.33 | % C | ||||||||||
Expenses, net of reimbursements | 0.83 | %C | 0.92 | % H | 0.90 | % | 1.58 | % I | 2.08 | % C | ||||||||||
Net investment income (loss), before reimbursements | 4.36 | %C | 4.78 | % | 4.06 | % | 4.56 | % | (0.86 | )% C | ||||||||||
Net investment income, net of reimbursements | 4.38 | %C | 5.12 | % | 5.04 | % | 5.35 | % | 2.11 | % C | ||||||||||
Portfolio turnover rate | 57 | %B | 168 | % | 196 | % | 165 | % | 197 | %B | ||||||||||
Y Class | Investor Class | |||||||||||||||||||
Six Months | December 11, | Six Months | December 11, | |||||||||||||||||
Ended | 2015G to | Ended | 2015G to | |||||||||||||||||
February 28, | August 31, | February 28, | August 31, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.21 | $ | 10.34 | $ | 10.18 | $ | 10.33 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.22 | 0.53 | 0.24 | 0.50 | ||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.18 | (0.09 | ) | 0.15 | (0.09 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total income from investment operations | 0.40 | 0.44 | 0.39 | 0.41 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.23 | ) | (0.53 | ) | (0.22 | ) | (0.52 | ) | ||||||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | (0.02 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.25 | ) | (0.57 | ) | (0.24 | ) | (0.56 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 10.36 | $ | 10.21 | $ | 10.33 | $ | 10.18 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 3.92 | %B | 4.37 | %B | 3.86 | %B | 4.16 | %B | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period | $ | 251,868,199 | $ | 22,952,034 | $ | 83,283,879 | $ | 3,641,581 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.88 | %C | 1.42 | % C | 1.03 | % C | 1.31 | % C | ||||||||||||
Expenses, net of reimbursements | 0.88 | %C | 0.94 | % C | 1.03 | % C | 1.22 | % C | ||||||||||||
Net investment income, before reimbursements | 4.04 | %C | 4.64 | % C | 3.84 | % C | 4.26 | % C | ||||||||||||
Net investment income, net of reimbursements | 4.04 | %C | 5.11 | % C | 3.84 | % C | 4.35 | % C | ||||||||||||
Portfolio turnover rate | 57 | %B | 168 | % E | 57 | %B | 168 | % 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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Per share amounts have been calculated using the average shares method. |
E | Portfolio turnover is for the period from September 1, 2015 through August 31, 2016 and is annualized. |
F | Commencement of Operations for the Predecessor Fund. |
G | Commencement of Operations. |
H | Expense ratios may exceed stated expense caps in Note 2 due to pre-adoption expenses. |
I | The expense limitation for the Institutional Class shares was reduced from 1.60% to 0.90% upon reorganization into the Trust. Prior to the reorganization on May 31, 2014, the Fund was organized as a closed-end, non-diversified, management investment company. |
48
American Beacon Sound Point Floating Rate Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
A Class | C Class | |||||||||||||||
Six Months | December 11, | Six Months | December 11, | |||||||||||||
Ended | 2015G to | Ended | 2015G to | |||||||||||||
February 28, | August 31, | February 28, | August 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net asset value, beginning of period | $ | 10.20 | $ | 10.33 | $ | 10.21 | $ | 10.33 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.21 | 0.51 | 0.17 | 0.45 | ||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.17 | (0.10 | ) | 0.16 | (0.08 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income from investment operations | 0.38 | 0.41 | 0.33 | 0.37 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.21 | ) | (0.50 | ) | (0.17 | ) | (0.45 | ) | ||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | (0.02 | ) | (0.04 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.23 | ) | (0.54 | ) | (0.19 | ) | (0.49 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 10.35 | $ | 10.20 | $ | 10.35 | $ | 10.21 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return A | 3.75 | %B | 4.13 | %B | 3.46 | %B | 3.67 | %B | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 25,122,644 | $ | 6,849,306 | $ | 21,354,688 | $ | 3,040,244 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 1.21 | % C | 1.67 | % C | 1.93 | % C | 2.55 | % C | ||||||||
Expenses, net of reimbursements | 1.21 | % C | 1.24 | % C | 1.93 | % C | 1.99 | % C | ||||||||
Net investment income, before reimbursements | 3.83 | % C | 4.51 | % C | 2.97 | % C | 3.50 | % C | ||||||||
Net investment income, net of reimbursements | 3.83 | % C | 4.93 | % C | 2.97 | % C | 4.06 | % C | ||||||||
Portfolio turnover rate | 57 | %B | 168 | % E | 57 | %B | 168 | %E | ||||||||
SP ClassI | ||||||||||||||||
Six Months | Year Ended August 31, | |||||||||||||||
Ended | May 30, 2013F to | |||||||||||||||
February 28, | August 31, | |||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
(unaudited) | ||||||||||||||||
Net asset value, beginning of period | $ | 10.19 | $ | 10.38 | $ | 10.49 | $ | 10.62 | J | |||||||
|
|
|
|
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income | 0.16 | 0.30 | 0.43 | D | 0.13 | |||||||||||
Net gains from investments (both realized and unrealized) | 0.23 | 0.07 | 0.12 | (0.00 | )K | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total income from investment operations | 0.39 | 0.37 | 0.55 | 0.13 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.22 | ) | (0.52 | ) | (0.49 | ) | (0.26 | ) | ||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | (0.17 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions | (0.24 | ) | (0.56 | ) | (0.66 | ) | (0.26 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, end of period | $ | 10.34 | $ | 10.19 | $ | 10.38 | $ | 10.49 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total return A | 3.84 | %B | 3.70 | % | 5.53 | % | 1.19 | %B | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period | $ | 9,076,046 | $ | 11,651,032 | $ | 125,577 | $ | 1,138 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 1.11 | % C | 1.49 | % | 1.74 | % | 1.95 | % C | ||||||||
Expenses, net of reimbursements | 1.11 | % C | 1.19 | % H | 1.15 | % | 1.15 | % C | ||||||||
Net investment income, before reimbursements | 4.35 | % C | 4.01 | % | 3.59 | % | 3.70 | % C | ||||||||
Net investment income, net of reimbursements | 4.35 | % C | 4.30 | % | 4.18 | % | 4.50 | % C | ||||||||
Portfolio turnover rate | 57 | %B | 168 | % | 196 | % | 17 | % B |
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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Per share amounts have been calculated using the average shares method. |
E | Portfolio turnover is for the period from September 1, 2015 through August 31, 2016 and is annualized. |
F | Commencement of Operations for the Predecessor Fund. |
G | Commencement of Operations. |
H | Expense ratios may exceed stated expense caps in Note 2 due to pre-adoption expenses. |
I | Prior to the reorganization on December 11, 2015, the SP Class was known as the Investor Class. |
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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 SP 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 for the SiM High Yield Opportunities Fund and sixty days after the end of each quarter for the Sound Point Floating Rate Income Fund. | 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 |
TRANSFER AGENT |
INDEPENDENT REGISTERED |
DISTRIBUTOR | |||||||||
State Street Bank and Trust | Boston Financial Data Services | PUBLIC ACCOUNTING FIRM Ernst & Young LLP | Foreside Fund Services, LLC | |||||||||
Boston, Massachusetts | Kansas City, Missouri | Dallas, Texas | 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 SiM High Yield Opportunities Fund and American Beacon Sound Point Floating Rate Income Fund are service marks of American Beacon Advisors, Inc.
SAR 2/17
2017 SEMI-ANNUAL REPORT February 28, 2017 FLEXIBLE BOND 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.
FLEXIBLE BOND FUND
Investing in derivative instruments involves liquidity, credit, interest rate and market risks. Investments in high-yield securities are subject to greater levels of credit, interest rate, market and liquidity risks than investment-grade securities. Although the Fund has a flexible approach to investing, diversification does not ensure against loss. Investing in foreign and emerging market 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 | February 28, 2017 |
1 | ||||
2 | ||||
4 | ||||
Schedule of Investments: | ||||
6 | ||||
21 | ||||
25 | ||||
Financial Highlights: | ||||
57 | ||||
60 | ||||
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%. From Inauguration Day to February 28, it gained approximately 4%. |
Economists anticipated the Federal Reserve would increase the federal funds rate—perhaps as early as mid-March. The Federal Open Market Committee’s confidence in the improving U.S. economy was exhibited in December 2016 when short-term interest rates increased by 0.25% to a range of 0.50% to 0.75%. It was the second increase since 2008; the first increase occurred in December 2015.
For the six-month period that ended February 28, 2017, the Bloomberg Barclays U.S. Aggregate Index, a benchmark for investment-grade U.S. bonds, returned -2.19%. In contrast, during the same period, the Bank of America Merrill Lynch 3 Month LIBOR Constant Maturity Index, a widely used benchmark for short-term interest rates, returned 0.42%; and the Bank of America Merrill Lynch U.S. High Yield Master II Index, which represents domestic, below-investment-grade corporate debt, returned 5.54%.
For the 6 months ended February 28, 2017:
• | American Beacon Flexible Bond Fund (Investor Class) returned 2.05%. |
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
American Beacon Flexible Bond FundSM
February 28, 2017 (Unaudited)
The Investor Class of the Flexible Bond Fund (the “Fund”) returned 2.05% for the six months ended February 28, 2017. The Fund outperformed the Bloomberg Barclays U.S. Aggregate Index return of -2.19% and the BofA Merrill Lynch 3 Month LIBOR Constant Maturity Index return of 0.42% for the same period.
Total Returns for the Period ended February 28, 2017
Ticker | 6 Months* | 1 Year | 3 Years | 5 Years | Since Inception | |||||||||||||||||
Institutional Class (1,2,4) | AFXIX | 2.25 | % | 6.82 | % | 1.19 | % | 1.85 | % | 2.22 | % | |||||||||||
Y Class (1,2,4) | AFXYX | 2.15 | % | 6.67 | % | 1.08 | % | 1.73 | % | 2.12 | % | |||||||||||
Investor Class (1,2,4) | AFXPX | 2.05 | % | 6.41 | % | 0.84 | % | 1.47 | % | 1.91 | % | |||||||||||
A without Sales Charge (1,2,4) | AFXAX | 2.03 | % | 6.29 | % | 0.77 | % | 1.39 | % | 1.78 | % | |||||||||||
A with Sales Charge (1,2,4) | AFXAX | -2.81 | % | 1.21 | % | -0.86 | % | 0.41 | % | 0.90 | % | |||||||||||
C without Sales Charge (1,2,4) | AFXCX | 1.62 | % | 5.48 | % | 0.02 | % | 0.61 | % | 1.13 | % | |||||||||||
C with Sales Charge (1,2,4) | AFXCX | 0.62 | % | 4.48 | % | 0.02 | % | 0.61 | % | 1.13 | % | |||||||||||
Bloomberg Barclays U.S. Aggregate Index (3) | -2.19 | % | 1.42 | % | 2.64 | % | 2.24 | % | 2.98 | % | ||||||||||||
BofA Merrill Lynch 3 Month LIBOR Constant Maturity Index (3) | 0.42 | % | 0.72 | % | 0.41 | % | 0.39 | % | 0.39 | % |
* | 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 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 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. |
2. | 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. |
3. | The BofA Merrill Lynch 3 Month LIBOR Constant Maturity 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 Bloomberg Barclays U.S. Aggregate Index is a market weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. |
4. | 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 1.14%, 1.20%, 1.43%, 1.53%, and 2.27%, 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 performed well during the period producing positive returns while interest rates rose and the broader bond market (Bloomberg Barclays Aggregate) was negative. The Fund’s duration remained under two years, which was a significant factor in protecting it from rising interest rates. By comparison, the Bloomberg Barclays U.S. Aggregate Index duration ended the period at 6.0 years. Additionally, a large portion of the Fund’s core holdings were global corporate, sovereign and asset-backed securities, which provided incremental yield and performed strongly as credit spreads tightened during the period. Overall, the Fund’s weighted-average credit quality remained investment grade.
Within currencies, the Fund reported gains in its short positions in the euro and Japanese yen, both of which declined in value relative to the U.S. dollar due to their soft economies, central bank easing, and concern over trade protectionism in the U.S. These have been long-standing short positions in the Fund.
The Fund reported losses, however, in its long currency positions in peripheral Europe (non-Euro currencies), the Mexican peso, the British pound and the Malaysian ringgit, all of which declined during the period relative to the U.S. dollar. European exposures were harmed by the surprise Brexit vote and soft economic growth, the peso retreated after Trump’s surprise election victory, and the ringgit was harmed, as were most emerging markets, by trade protectionism rhetoric in the U.S. These long positions have also been maintained for several quarters as their fundamental attractiveness continues. Unfortunately, headline risk continues to cause uncertainty in these markets.
2
American Beacon Flexible Bond FundSM
Performance Overview
February 28, 2017 (Unaudited)
During the period, the Fund’s overall currency exposures benefitted total returns, primarily due to the short positions in the yen and Euro.
Looking forward, the Fund’s investment managers will continue to allocate investments across a wide range of global markets seeking to achieve the Fund’s goal of providing a positive total return, regardless of market conditions, over a full market cycle.
Top Ten Holdings (% Net Assets) | ||||||||
Fannie Mae TBA, 3.50%, Due 4/13/2047 | 5.3 | |||||||
U.S. Treasury Note/Bond, 1.625%, Due 7/31/2019 | 4.6 | |||||||
U.S. Treasury Note/Bond, 1.375%, Due 3/31/2020 | 4.2 | |||||||
Mexican Bonos Desarrollo, 7.75%, Due 11/13/2042 | 1.6 | |||||||
U.S. Treasury Note/Bond, 2.875%, Due 11/15/2046 | 1.6 | |||||||
Japan Treasury Discount Bills, -0.003%, Due 5/29/2017 | 1.3 | |||||||
Goldman Sachs Group, Inc., 1.357%, Due 11/15/2018 | 1.3 | |||||||
U.S. Treasury Note/Bond, 2.00%, Due 8/15/2025 | 1.3 | |||||||
Morgan Stanley, 1.514%, Due 4/25/2018 | 1.3 | |||||||
Brazil, Nota Do Tesouro Nacional, 10.00%, Due 1/1/2027 | 1.2 | |||||||
Total Fund Holdings | 327 | |||||||
Sector Allocation (% Investments) | ||||||||
Sovereign Obligations | 21.2 | |||||||
U.S. Treasury Obligations | 18.9 | |||||||
Finance | 17.4 | |||||||
Collateralized Mortgage Obligations | 13.6 | |||||||
Asset-Backed Obligations | 11.3 | |||||||
Agency Mortgage-Backed Obligations | 7.5 | |||||||
Service | 4.1 | |||||||
Manufacturing | 2.3 | |||||||
Telecommunications | 0.9 | |||||||
Consumer | 0.8 | |||||||
Energy | 0.8 | |||||||
Foreign Collateralized Mortgage Obligations | 0.8 | |||||||
Transportation | 0.3 | |||||||
Municipal Obligations | 0.2 | |||||||
Utilities | 0.1 |
3
American Beacon Flexible Bond FundSM
February 28, 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 are intended to help you understand the ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from September 1, 2016 through February 28, 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 Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the 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.
4
American Beacon Flexible Bond FundSM
Expense Example
February 28, 2017 (Unaudited)
Flexible Bond Fund
Beginning Account Value 9/1/2016 | Ending Account Value 2/28/2017 | Expenses Paid During Period 9/1/2016-2/28/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.54 | $ | 4.51 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.32 | $ | 4.51 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.48 | $ | 4.96 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.87 | $ | 4.96 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,020.53 | $ | 6.36 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.47 | $ | 6.36 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,020.27 | $ | 6.51 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.37 | $ | 6.51 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.25 | $ | 10.25 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,014.63 | $ | 10.24 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.90%, 0.99%, 1.27%, 1.30% and 2.05% 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 (181) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
5
American Beacon Flexible Bond FundSM
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||
DOMESTIC BANK LOAN OBLIGATIONS—1.77% | ||||||||
Consumer—0.23% | ||||||||
ARAMARK Corp., Term Loan E, 3.25%, Due 9/7/2019 A B | $ | 282,056 | $ | 284,806 | ||||
|
| |||||||
Manufacturing—0.18% | ||||||||
Allison Transmission Holdings, Inc., Term Loan B 3, 1.00%, Due 9/23/2022 A B | 225,132 | 227,664 | ||||||
|
| |||||||
Service—1.21% | ||||||||
Burlington Coat Factory Warehouse Corp., Term Loan B 4, 3.50%, Due 8/13/2021A B | 295,000 | 293,378 | ||||||
Charter Communications Operating LLC, 2016 Term Loan I, VR, 3.03%, Due 1/15/2024A B C | 99,250 | 99,852 | ||||||
Hilton Worldwide Finance LLC, Term Loan B1, 3.50%, Due 10/26/2020A B C | 47,697 | 48,007 | ||||||
Hilton Worldwide Finance LLC, Term Loan B2, 1.00%, Due 10/25/2023A B C | 648,496 | 651,200 | ||||||
JC Penney Corp., Inc., Term Loan B, VR, 5.25%, Due 6/23/2023A B | 268,600 | 265,186 | ||||||
Serta Simmons Bedding LLC, First Lien Term Loan, VR, 4.538%, Due 11/8/2023A B C | 150,000 | 150,629 | ||||||
|
| |||||||
1,508,252 | ||||||||
|
| |||||||
Telecommunications—0.08% | ||||||||
Sprint Communications, Inc., First Lien Term Loan B, VR, 3.313%, Due 2/2/2024 B | 100,000 | 100,143 | ||||||
|
| |||||||
Transportation—0.07% | ||||||||
Air Canada, 2016 First Lien Term Loan B, VR, 3.755%, Due 10/6/2023 B | 90,000 | 90,675 | ||||||
|
| |||||||
Total Domestic Bank Loan Obligations (Cost $2,206,264) | 2,211,540 | |||||||
|
| |||||||
CORPORATE AND SOVEREIGN OBLIGATIONS—28.79% | ||||||||
Consumer—0.53% | ||||||||
Anheuser-Busch InBev Finance, Inc., 2.65%, Due 2/1/2021 | 230,000 | 232,567 | ||||||
Reynolds American, Inc., 8.125%, Due 6/23/2019 | 250,000 | 283,315 | ||||||
Smithfield Foods, Inc., 2.70%, Due 1/31/2020D | 140,000 | 140,629 | ||||||
|
| |||||||
656,511 | ||||||||
|
| |||||||
Energy—0.85% | ||||||||
Kinder Morgan, Inc., 5.00%, Due 2/15/2021D | 100,000 | 107,557 | ||||||
Ras Laffan Liquefied Natural Gas Co., Ltd III, 6.75%, Due 9/30/2019E | 250,000 | 277,728 | ||||||
Sabine Pass Liquefaction LLC, 5.00%, Due 3/15/2027C D | 100,000 | 105,852 | ||||||
Shell International Finance BV, 2.25%, Due 11/10/2020 | 200,000 | 200,710 | ||||||
Sinopec Group Overseas Development 2014 Ltd., 4.375%, Due 4/10/2024E | 200,000 | 212,470 | ||||||
Tesoro Corp., 4.75%, Due 12/15/2023D | 140,000 | 144,900 | ||||||
|
| |||||||
1,049,217 | ||||||||
|
| |||||||
Finance—17.20% | ||||||||
2013-2 Aviation Loan Trust, 3.073%, Due 12/15/2022A D | 66,764 | 60,455 | ||||||
AerCap Ireland Capital Ltd / AerCap Global Aviation Trust, 2.75%, Due 5/15/2017 | 550,000 | 551,367 | ||||||
AGFC Capital Trust I Limited, 2.772%, Due 1/15/2067A D | 300,000 | 150,000 | ||||||
Air Lease Corp., 2.125%, Due 1/15/2020 | 250,000 | 247,389 | ||||||
American Express Credit Corp., | ||||||||
1.649%, Due 7/31/2018A | 820,000 | 823,160 | ||||||
1.70%, Due 10/30/2019 | 170,000 | 168,808 | ||||||
Australia & New Zealand Banking Group Ltd., 2.05%, Due 9/23/2019 | 250,000 | 250,181 | ||||||
Banco Santander Chile S.A., 1.915%, Due 4/11/2017A D | 880,000 | 880,000 | ||||||
Bank of America Corp., | ||||||||
5.65%, Due 5/1/2018 | 500,000 | 521,897 | ||||||
2.063%, Due 1/15/2019A | 700,000 | 708,012 | ||||||
1.868%, Due 4/1/2019A | 535,000 | 540,044 | ||||||
7.625%, Due 6/1/2019 | 100,000 | 112,087 | ||||||
4.125%, Due 1/22/2024 | 100,000 | 104,681 | ||||||
Bank of America NA, 5.30%, Due 3/15/2017 | 250,000 | 250,358 | ||||||
BB&T Corp., 2.625%, Due 6/29/2020 | 600,000 | 608,414 | ||||||
BNZ International Funding Ltd/London, 2.40%, Due 2/21/2020D | 250,000 | 250,558 | ||||||
Citigroup, Inc., | ||||||||
1.554%, Due 5/1/2017A | 500,000 | 500,328 | ||||||
1.727%, Due 4/27/2018A | 595,000 | 597,641 |
See accompanying notes
6
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||
Finance—17.20% (continued) | ||||||||
2.90%, Due 12/8/2021 | $ | 240,000 | $ | 240,686 | ||||
Credit Suisse Group Funding Guernsey Ltd., 3.75%, Due 3/26/2025 | 250,000 | 245,085 | ||||||
Deutsche Bank AG, 4.25%, Due 10/14/2021D | 200,000 | 202,262 | ||||||
DNB Bank ASA, 2.375%, Due 6/2/2021D | 300,000 | 297,053 | ||||||
Fifth Third Bancorp, 2.875%, Due 7/27/2020 | 600,000 | 610,110 | ||||||
Goldman Sachs Group, Inc., | ||||||||
2.139%, Due 11/15/2018A | 1,610,000 | 1,629,367 | ||||||
7.50%, Due 2/15/2019 | 232,000 | 256,436 | ||||||
2.60%, Due 4/23/2020 | 130,000 | 130,908 | ||||||
HSBC Holdings PLC, 2.65%, Due 1/5/2022F | 200,000 | 197,259 | ||||||
Hyundai Capital Services, Inc., 3.00%, Due 3/6/2022D | 230,000 | 229,650 | ||||||
International Lease Finance Corp., | ||||||||
3.875%, Due 4/15/2018 | 130,000 | 132,861 | ||||||
5.875%, Due 4/1/2019 | 80,000 | 85,880 | ||||||
JPMorgan Chase & Co., | ||||||||
1.938%, Due 1/25/2018A | 640,000 | 644,349 | ||||||
2.75%, Due 6/23/2020 | 250,000 | 254,408 | ||||||
4.40%, Due 7/22/2020 | 10,000 | 10,704 | ||||||
2.535%, Due 3/1/2021A | 300,000 | 308,842 | ||||||
JPMorgan Chase Bank NA, 6.00%, Due 10/1/2017 | 300,000 | 307,846 | ||||||
KeyCorp, 2.90%, Due 9/15/2020 | 300,000 | 305,547 | ||||||
Kommunalbanken AS, 1.300%, Due 6/16/2020A D | 634,000 | 638,197 | ||||||
Macquarie Bank Ltd., 1.662%, Due 10/27/2017A D | 610,000 | 611,931 | ||||||
Manulife Financial Corp., 4.061%, Due 2/24/2032 | 260,000 | 261,527 | ||||||
Mitsubishi UFJ Financial Group, Inc., | ||||||||
2.19%, Due 9/13/2021 | 200,000 | 195,011 | ||||||
2.998%, Due 2/22/2022 | 210,000 | 211,865 | ||||||
Mizuho Financial Group, 2.632%, Due 4/12/2021D | 210,000 | 208,663 | ||||||
Mizuho Financial Group, Inc., 2.953%, Due 2/28/2022 | 200,000 | 200,230 | ||||||
Morgan Stanley, | ||||||||
2.318%, Due 4/25/2018A | 1,600,000 | 1,618,304 | ||||||
7.30%, Due 5/13/2019 | 300,000 | 333,136 | ||||||
5.50%, Due 7/24/2020 | 350,000 | 383,962 | �� | |||||
New York Life Global Funding, 1.50%, Due 10/24/2019D | 350,000 | 346,220 | ||||||
Santander UK PLC, 2.50%, Due 3/14/2019F | 300,000 | 302,647 | ||||||
Shinhan Bank, 1.659%, Due 4/8/2017A D | 1,430,000 | 1,430,429 | ||||||
Skandinaviska Enskilda Banken AB, 2.625%, Due 11/17/2020D | 350,000 | 352,488 | ||||||
Toronto Dominion Bank, 2.009%, Due 4/7/2021A | 150,000 | 152,353 | ||||||
UBS AG, 5.125%, Due 5/15/2024E | 300,000 | 307,125 | ||||||
Wells Fargo & Co., 2.60%, Due 7/22/2020 | 100,000 | 101,239 | ||||||
Westpac Banking Corp., 2.60%, Due 11/23/2020 | 410,000 | 412,704 | ||||||
|
| |||||||
21,482,664 | ||||||||
|
| |||||||
Manufacturing—2.21% | ||||||||
Broadcom Corp / Broadcom Cayman Finance Ltd., 3.00%, Due 1/15/2022D | 100,000 | 99,992 | ||||||
Daimler Finance North America LLC, | ||||||||
1.875%, Due 1/11/2018C D | 400,000 | 401,007 | ||||||
2.30%, Due 1/6/2020C D | 200,000 | 200,593 | ||||||
Diamond 1 Finance Corp / Diamond 2 Finance Corp., | ||||||||
3.48%, Due 6/1/2019D | 50,000 | 51,131 | ||||||
4.42%, Due 6/15/2021D | 270,000 | 283,134 | ||||||
Electronic Arts, Inc., 3.70%, Due 3/1/2021 | 70,000 | 72,725 | ||||||
First Data Corp., 5.375%, Due 8/15/2023D | 210,000 | 218,400 | ||||||
FLIR Systems, Inc., 3.125%, Due 6/15/2021 | 170,000 | 170,980 | ||||||
Ford Motor Credit Co., LLC, 1.863%, Due 6/15/2018A C | 745,000 | 748,616 | ||||||
Hewlett Packard Enterprise Co., 3.85%, Due 10/15/2020 | 260,000 | 266,833 | ||||||
Roper Technologies, Inc., 2.80%, Due 12/15/2021 | 240,000 | 240,778 | ||||||
|
| |||||||
2,754,189 | ||||||||
|
|
See accompanying notes
7
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||||||
Service—3.09% | ||||||||||||
AbbVie, Inc., | ||||||||||||
2.50%, Due 5/14/2020 | $ | 100,000 | $ | 100,587 | ||||||||
3.60%, Due 5/14/2025 | 100,000 | 99,579 | ||||||||||
Actavis Funding SCS, 3.00%, Due 3/12/2020 | 400,000 | 407,445 | ||||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.464%, Due 7/23/2022C | 100,000 | 104,951 | ||||||||||
Dignity Health, 2.637%, Due 11/1/2019 | 300,000 | 302,351 | ||||||||||
DISH DBS Corp., 4.625%, Due 7/15/2017 | 680,000 | 686,800 | ||||||||||
ERAC USA Finance LLC, 4.50%, Due 8/16/2021C D | 350,000 | 373,552 | ||||||||||
Gilead Sciences, Inc., 2.55%, Due 9/1/2020 | 430,000 | 434,391 | ||||||||||
HCA, Inc., 6.50%, Due 2/15/2020 | 200,000 | 219,558 | ||||||||||
Mastercard, Inc., 2.00%, Due 11/21/2021 | 340,000 | 337,899 | ||||||||||
New Red Finance, Inc., 6.00%, Due 4/1/2022D | 105,000 | 109,495 | ||||||||||
Numericable Group S.A., 7.375%, Due 5/1/2026D | 200,000 | 207,250 | ||||||||||
Tencent Holdings Ltd., 2.875%, Due 2/11/2020D | 200,000 | 201,911 | ||||||||||
Teva Pharmaceutical Finance Netherlands III BV, 2.20%, Due 7/21/2021 | 100,000 | 96,380 | ||||||||||
Universal Health Services, Inc., 4.75%, Due 8/1/2022D | 70,000 | 72,100 | ||||||||||
Zimmer Biomet Holdings, Inc., 3.15%, Due 4/1/2022 | 100,000 | 100,325 | ||||||||||
|
| |||||||||||
3,854,574 | ||||||||||||
|
| |||||||||||
Sovereign—3.68% | ||||||||||||
Brazil, Petrobras Global Finance BV, 8.375%, Due 5/23/2021 | 250,000 | 278,825 | ||||||||||
Dominican Republic International Bond, 7.50%, Due 5/6/2021D | 260,000 | 287,625 | ||||||||||
Guatemala Government Bond, 5.75%, Due 6/6/2022D | 240,000 | 261,235 | ||||||||||
Honduras Government International Bond, 8.75%, Due 12/16/2020D | 240,000 | 272,400 | ||||||||||
Hungary Government International Bond, 6.25%, Due 1/29/2020 | 280,000 | 308,084 | ||||||||||
Indonesia Government International Bond, 5.875%, Due 3/13/2020D | 100,000 | 109,746 | ||||||||||
Norway, Eksportfinans ASA, 5.50%, Due 6/26/2017 | 600,000 | 606,360 | ||||||||||
Romanian Government International Bond, 6.75%, Due 2/7/2022E | 300,000 | 347,100 | ||||||||||
Serbia International Bond, 5.875%, Due 12/3/2018D | 240,000 | 252,361 | ||||||||||
Slovenia Government Bond, 5.85%, Due 5/10/2023E | 100,000 | 114,220 | ||||||||||
South Korea, Export-Import Bank of Korea, 5.00%, Due 4/11/2022 | 200,000 | 220,982 | ||||||||||
Supranational, Corporacion Andina de Fomento, | ||||||||||||
1.589%, Due 1/29/2018A | 880,000 | 880,428 | ||||||||||
2.00%, Due 5/10/2019 | 425,000 | 426,144 | ||||||||||
Vietnam Government International Bond, 6.75%, Due 1/29/2020D | 200,000 | 218,842 | ||||||||||
|
| |||||||||||
4,584,352 | ||||||||||||
|
| |||||||||||
Telecommunications—0.88% | ||||||||||||
AT&T, Inc., 2.45%, Due 6/30/2020 | 400,000 | 400,974 | ||||||||||
Frontier Communications Corp., 6.25%, Due 9/15/2021 | 300,000 | 286,500 | ||||||||||
Sprint Spectrum Co. LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC, 3.36%, Due 3/20/2023C D | 200,000 | 200,750 | ||||||||||
Verizon Communications, Inc., 2.709%, Due 9/14/2018A | 200,000 | 204,774 | ||||||||||
|
| |||||||||||
1,092,998 | ||||||||||||
|
| |||||||||||
Transportation—0.25% | ||||||||||||
American Airlines 2016-3 Class A Pass Through Trust, 3.25%, Due 4/15/2030 | 100,000 | 97,000 | ||||||||||
Continental Airlines 2012-3 Class C Pass Thru Certificates, 6.125%, Due 4/29/2018 | 210,000 | 218,925 | ||||||||||
|
| |||||||||||
315,925 | ||||||||||||
|
| |||||||||||
Utilities—0.09% | ||||||||||||
Dominion Resources, Inc., 2.00%, Due 8/15/2021 | 110,000 | 107,295 | ||||||||||
|
| |||||||||||
Total Corporate and Sovereign Obligations (Cost $35,736,382) | 35,897,725 | |||||||||||
|
| |||||||||||
FOREIGN CORPORATE AND SOVEREIGN OBLIGATIONS—20.03% | ||||||||||||
Energy—0.08% | ||||||||||||
Gazprom OAO Via Gaz Capital S.A., 3.755%, Due 3/15/2017 E | EUR | 100,000 | 106,009 | |||||||||
|
|
See accompanying notes
8
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||||||
Finance—1.23% | ||||||||||||
Banco Bilbao Vizcaya Argentaria S.A., 7.00%, Due 12/29/2049A E | EUR | 200,000 | $ | 207,644 | ||||||||
Banco Popular Español S.A., 10.743%, Due 10/29/2049A E | EUR | 200,000 | 213,747 | |||||||||
Bank of America Corp., 4.179%, Due 10/21/2025A E G | MXN | 3,000,000 | 168,728 | |||||||||
Lloyds Banking Group PLC, 7.625%, Due 12/29/2049E F | GBP | 500,000 | 674,712 | |||||||||
Novo Banco S.A., | ||||||||||||
5.00%, Due 4/23/2019E | EUR | 100,000 | 94,447 | |||||||||
5.00%, Due 5/23/2019E | EUR | 100,000 | 94,553 | |||||||||
Royal Bank of Scotland PLC, 6.934%, Due 4/9/2018A F | EUR | 50,000 | 56,750 | |||||||||
|
| |||||||||||
1,510,581 | ||||||||||||
|
| |||||||||||
Sovereign—18.73% | ||||||||||||
Argentine Republic Government International Bond, 3.875%, Due 1/15/2022E | EUR | 400,000 | 417,192 | |||||||||
Australia, Queensland Treasury Corp., 5.75%, Due 7/22/2024E | AUD | 1,090,000 | 996,064 | |||||||||
Austria, KAF Kaerntner Ausgleichszahlungs-Fonds, 0.01%, Due 1/14/2032D | EUR | 95,440 | 87,503 | |||||||||
Brazil, Nota Do Tesouro Nacional, | ||||||||||||
10.00%, Due 1/1/2025 | BRL | 2,250,000 | 716,388 | |||||||||
10.00%, Due 1/1/2027 | BRL | 4,735,000 | 1,498,253 | |||||||||
Greece, Hellenic Republic Government Bond, | ||||||||||||
3.375%, Due 7/17/2017D E | EUR | 100,000 | 102,859 | |||||||||
4.75%, Due 4/17/2019D E | EUR | 50,000 | 49,677 | |||||||||
Greece, Hellenic Republic Government International Bond, 3.80%, Due 8/8/2017 | JPY | 30,000,000 | 254,350 | |||||||||
Hungary Government Bond, | ||||||||||||
6.00%, Due 11/24/2023 | HUF | 260,000,000 | 1,080,665 | |||||||||
5.50%, Due 6/24/2025 | HUF | 100,000,000 | 400,481 | |||||||||
Indonesia Government Bond, | ||||||||||||
8.375%, Due 3/15/2024 | IDR | 9,800,000,000 | 771,596 | |||||||||
9.00%, Due 3/15/2029 | IDR | 1,900,000,000 | 153,727 | |||||||||
8.75%, Due 2/15/2044 | IDR | 11,700,000,000 | 910,573 | |||||||||
Japan Treasury Discount Bills, -0.003%, Due 5/29/2017 | JPY | 180,000,000 | 1,603,106 | |||||||||
Malaysia Government Bond, | ||||||||||||
3.659%, Due 10/15/2020 | MYR | 2,080,000 | 468,887 | |||||||||
4.048%, Due 9/30/2021 | MYR | 1,105,000 | 251,910 | |||||||||
3.62%, Due 11/30/2021 | MYR | 940,000 | 210,789 | |||||||||
3.48%, Due 3/15/2023 | MYR | 2,885,000 | 633,144 | |||||||||
Mexican Bonos, 7.75%, Due 11/23/2034 | MXN | 6,500,000 | 323,310 | |||||||||
Mexican Bonos Desarr, | ||||||||||||
8.50%, Due 5/31/2029H | MXN | 25,600,000 | 1,371,403 | |||||||||
8.50%, Due 11/18/2038H | MXN | 24,500,000 | 1,304,793 | |||||||||
7.75%, Due 11/13/2042H | MXN | 40,800,000 | 2,010,910 | |||||||||
New Zealand Government Bond, 5.50%, Due 4/15/2023E | NZD | 780,000 | 645,069 | |||||||||
Nigeria Government Bond, 5.125%, Due 7/12/2018E | 200,000 | 203,008 | ||||||||||
Poland Government Bond, 3.25%, Due 7/25/2025 | PLN | 3,355,000 | 804,741 | |||||||||
Portugal, Obrigacoes do Tesouro, 4.95%, Due 10/25/2023D E | EUR | 930,000 | 1,086,912 | |||||||||
South Africa Government Bond, | ||||||||||||
6.75%, Due 3/31/2021 | ZAR | 3,465,000 | 253,321 | |||||||||
6.50%, Due 2/28/2041 | ZAR | 16,030,000 | 872,127 | |||||||||
8.75%, Due 2/28/2048 | ZAR | 12,795,000 | 889,578 | |||||||||
United Kingdom Treasury Bill, | ||||||||||||
0.13%, Due 4/10/2017 | GBP | 1,200,000 | 1,488,654 | |||||||||
0.08%, Due 5/8/2017 | GBP | 1,200,000 | 1,488,385 | |||||||||
|
| |||||||||||
23,349,375 | ||||||||||||
|
| |||||||||||
Total Foreign Corporate and Sovereign Obligations (Cost $28,672,939) | 24,965,965 | |||||||||||
|
| |||||||||||
ASSET-BACKED OBLIGATIONS—11.94% | ||||||||||||
Apidos CLO XXII, 4.830%, Due 10/20/2027, 2015 22A CA D | $ | 400,000 | 401,954 | |||||||||
Carlyle Global Market Strategies Ltd., CLO, 2.507%, Due 4/27/2027, 2015 2A A1A D | 250,000 | 250,797 | ||||||||||
Carrington Mortgage Loan Trust, 1.031%, Due 2/25/2037, 2007 FRE1 A3A | 500,000 | 392,084 | ||||||||||
Colony American Homes 2014-2, 1.727%, Due 7/17/2031, A D | 212,366 | 212,385 |
See accompanying notes
9
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||
Asset-Backed Obligations—11.94% (continued) | ||||||||
Countrywide Asset-Backed Certificates Trust, | ||||||||
1.448%, Due 8/25/2035, 2005 3 MV5A | $ | 400,000 | $ | 388,611 | ||||
0.908%, Due 12/25/2036, 2006 12 1AA | 137,767 | 136,443 | ||||||
Drive Auto Receivables Trust 2016-B, 4.53%, Due 8/15/2023, 2016 BA DD | 550,000 | 564,412 | ||||||
First Franklin Mortgage Loan Trust, 1.131%, Due 11/25/2035, 2005 FF10 A5A | 1,000,000 | 816,964 | ||||||
First Investors Auto Owner, 4.70%, Due 4/18/2022, 2016 1A DD | 500,000 | 519,585 | ||||||
GoldenTree Loan Opportunities VII Ltd., CLO, 2.188%, Due 4/25/2025, 2013 7A AD | 500,000 | 499,645 | ||||||
GSAMP Trust, 0.891%, Due 12/25/2036, 2007 FM1 A2B | 1,442,381 | 796,017 | ||||||
Invitation Homes Trust, 2.118%, Due 6/17/2032, 2015 SFR2 AA D | 293,195 | 293,947 | ||||||
Madison Park Funding Ltd., CLO, | ||||||||
1.216%, Due 3/22/2021, 2007 4A A1AA D | 1,130,520 | 1,126,323 | ||||||
2.475%, Due 1/19/2025, 2014 13A AA D | 250,000 | 250,056 | ||||||
Madison Park Funding XIII Ltd., 1.00%, Due 1/19/2025, A D | 250,000 | 249,875 | ||||||
Morgan Stanley ABS Capital I Inc. Trust, | ||||||||
0.828%, Due 7/25/2036, 2006 WMC2 A2FPA | 74,473 | 33,246 | ||||||
0.928%, Due 11/25/2036, 2007 HE1 A2CA | 472,395 | 290,136 | ||||||
Morgan Stanley Home Equity Loan Trust, 0.871%, Due 4/25/2037, 2007 2 A1A | 1,053,655 | 656,250 | ||||||
Nomura Home Equity Loan Inc., Home Equity Loan Trust, 1.108%, | 1,077,596 | 378,968 | ||||||
Oak Hill Credit Partners, CLO, 2.150%, Due 4/20/2025, 2013 8A AD | 500,000 | 500,248 | ||||||
Oakwood Mortgage Investors, Inc., 6.61%, Due 6/15/2031, 2001 C A3 | 308,037 | 116,079 | ||||||
Octagon Investment Partners 24 Ltd., CLO, 2.502%, Due 5/21/2027, 2015 1A A1A D | 250,000 | 250,723 | ||||||
OHA Credit Partners XI Ltd., CLO, 5.330%, Due 10/20/2028, 2015 11A DA D | 600,000 | 608,362 | ||||||
Prestige Auto Receivables Trust, 5.15%, Due 11/15/2021, 2016 1A DD | 400,000 | 417,410 | ||||||
RAAC Series Trust, 1.178%, Due 9/25/2045, 2006 SP1 M1A | 800,000 | 689,430 | ||||||
Renaissance Home Equity Loan Trust, 5.612%, Due 4/25/2037, 2007 1 AF3 | 948,123 | 472,625 | ||||||
Residential Asset Securities Corp., | ||||||||
1.358%, Due 7/25/2033, 2003 KS5 AIIBA | 5,724 | 5,185 | ||||||
1.218%, Due 1/25/2036, 2005 KS12 M1A | 175,000 | 172,593 | ||||||
Santander Drive Auto Receivables Trust, 3.49%, Due 5/17/2021, 2015 3 D | 350,000 | 357,017 | ||||||
Thacher Park CLO Ltd., 1.00%, Due 10/20/2026, A D | 500,000 | 499,750 | ||||||
Tralee CDO Ltd., 2.380%, Due 7/20/2026, 2014 3A A2D | 600,000 | 600,163 | ||||||
Venture XVII CLO Ltd., 2.503%, Due 7/15/2026, 2014 17A AA D | 600,000 | 602,142 | ||||||
VOLT XXII LLC, 3.50%, Due 2/25/2055, 2015 NPL4 A1C D | 197,331 | 197,794 | ||||||
VOLT XXXIV LLC, 3.25%, Due 2/25/2055, 2015 NPL7 A1C D | 324,398 | 323,967 | ||||||
VOLT XXXVIII LLC, 3.875%, Due 9/25/2045, 2015 NP12 A1C D | 443,884 | 444,977 | ||||||
Wells Fargo Home Equity Asset-Backed Securities Trust, 1.008%, Due 4/25/2037, 2007 2 A3A . | 419,967 | 378,263 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $14,818,726) | 14,894,426 | |||||||
|
| |||||||
COLLATERALIZED MORTGAGE OBLIGATIONS—14.38% | ||||||||
Adjustable Rate Mortgage Trust, 3.346%, Due 9/25/2035, 2005 5 2A1 | 51,296 | 42,658 | ||||||
American Home Mortgage Investment Trust, | ||||||||
3.187%, Due 10/25/2034, 2004 3 5AA | 23,867 | 23,921 | ||||||
2.852%, Due 9/25/2045, 2005 2 4A1A | 4,085 | 4,043 | ||||||
Ameriquest Mortgage Securities Inc., 2.728%, Due 6/25/2034, 2004 R4 M2A | 839,573 | 640,532 | ||||||
Banc of America Alternative Loan Trust, 1.171%, Due 5/25/2035, 2005 4 CB6A | 36,104 | 28,698 | ||||||
Banc of America Funding Corporation, | ||||||||
0.987%, Due 4/20/2047, 2007 B A1 | 490,191 | 388,097 | ||||||
1.077%, Due 5/20/2047, 2007 C 7A5A | 234,141 | 205,101 | ||||||
Banc of America Mortgage Securities, Inc., 3.548%, Due 7/20/2032, 2002 G1A3A | 3,488 | 3,523 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust, | ||||||||
2.752%, Due 11/25/2030, 2000 2 A1 | 24,514 | 23,450 | ||||||
3.063%, Due 8/25/2033, 2003 5 2A1A | 49,500 | 49,394 | ||||||
3.326%, Due 8/25/2033, 2003 5 1A1A | 38,779 | 38,300 | ||||||
3.125%, Due 4/25/2034, 2004 1 22A1A | 8,941 | 8,835 | ||||||
3.557%, Due 11/25/2034, 2004 9 22A1A | 13,525 | 13,552 | ||||||
3.189%, Due 5/25/2047, 2007 3 1A1A | 26,622 | 24,223 | ||||||
Bear Stearns Alt-A Trust, | ||||||||
3.129%, Due 11/25/2036, 2006 6 32A1 | 103,600 | 84,031 |
See accompanying notes
10
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||
Collateralized Mortgage Obligations—14.38% (continued) | ||||||||
3.459%, Due 12/25/2046, 2006 7 23A1 | $ | 725,092 | $ | 527,352 | ||||
Chase Mortgage Finance Corp., | ||||||||
5.50%, Due 11/25/2035, 2005 S3 A10 | 200,000 | 189,912 | ||||||
3.249%, Due 2/25/2037, 2007 A1 1A5 | 25,899 | 25,493 | ||||||
3.210%, Due 3/25/2037, 2007 A1 12M3A | 186,027 | 151,626 | ||||||
Citigroup Mortgage Loan Trust, Inc., | ||||||||
3.057%, Due 8/25/2035, 2005 3 2A2A | 28,239 | 27,805 | ||||||
2.41%, Due 9/25/2035, 2005 6 A3A | 23,640 | 22,892 | ||||||
0.851%, Due 1/25/2037, 2007 AMC2 A3A | 140,996 | 90,168 | ||||||
Colony American Homes, 1.918%, Due 5/17/2031, 2014 1A AA D | 284,968 | 284,977 | ||||||
Cosmopolitan Hotal Trust, 2.17%, Due 11/15/2033, 2016 CSMO AA D | 250,000 | 252,422 | ||||||
Countrywide Alternative Loan Trust, | ||||||||
5.50%, Due 10/25/2033, 2003 20CB 1A4 | 144,818 | 145,355 | ||||||
6.00%, Due 10/25/2033, 2003 J2 A1 | 19,106 | 19,690 | ||||||
1.501%, Due 11/25/2035, 2005 56 1A1A | 820,823 | 700,738 | ||||||
6.50%, Due 9/25/2036, 2006 J5 1A1 | 661,898 | 550,226 | ||||||
0.989%, Due 7/20/2046, 2006 OA9 2A1AA | 9,474 | 5,193 | ||||||
0.968%, Due 9/25/2046, 2006 OA11 A1BA | 11,594 | 8,955 | ||||||
0.974%, Due 12/20/2046, 2006 OA17 1A1A | 963,855 | 745,549 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust, | ||||||||
3.300%, Due 6/25/2033, 2003 27 A1A | 25,340 | 25,206 | ||||||
1.538%, Due 9/25/2034, 2004 16 1A4AA | 31,261 | 28,756 | ||||||
1.358%, Due 4/25/2035, 2005 3 2A1A | 99,956 | 86,488 | ||||||
1.238%, Due 5/25/2035, 2005 9 1A3A | 105,677 | 87,493 | ||||||
2.996%, Due 11/20/2035, 2005 HYB7 6A1A | 770,453 | 650,191 | ||||||
5.75%, Due 5/25/2037, 2007 5 A51 | 49,132 | 43,509 | ||||||
Credit Suisse Mortgage-Backed Trust, 6.00%, Due 7/25/2036, 2006 6 1A4 | 406,067 | 300,650 | ||||||
Fannie Mae Connecticut Avenue Securities, | ||||||||
4.771%, Due 5/25/2025, 2015 C02 1M2A | 478,038 | 504,154 | ||||||
5.771%, Due 7/25/2025, 2015 C03 2M2A | 200,000 | 216,834 | ||||||
6.471%, Due 4/25/2028, 2015 C04 1M2A | 525,000 | 584,283 | ||||||
2.073%, Due 7/25/2029, A | 298,388 | 299,524 | ||||||
Fannie Mae Grantor Trust, 6.00%, Due 2/25/2044, 2004 T3 CL 1A1 | 10,510 | 12,041 | ||||||
First Horizon Asset Securities, Inc., 3.076%, Due 2/25/2034, 2004 AR1 2A1A | 35,990 | 35,866 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes, | ||||||||
1.979%, Due 7/25/2029, A | 368,358 | 369,236 | ||||||
1.97%, Due 8/25/2029, A | 250,000 | 250,548 | ||||||
GSMPS Mortgage Loan Trust, | ||||||||
1.121%, Due 3/25/2035, 2005 RP2 1AFA D | 650,497 | 575,488 | ||||||
1.121%, Due 9/25/2035, 2005 RP3 1AFA D | 676,450 | 580,122 | ||||||
1.171%, Due 4/25/2036, 2006 RP2 1AF1A D | 371,755 | 306,647 | ||||||
GSR Mortgage Loan Trust, | ||||||||
6.00%, Due 3/25/2032, 2003 2F 3A1 | 2,078 | 2,117 | ||||||
2.707%, Due 6/25/2034, 2004 7 3A1 | 20,545 | 19,912 | ||||||
3.282%, Due 11/25/2035, 2005 AR7 6A1A | 19,182 | 18,959 | ||||||
JP Morgan Alternative Loan Trust, 1.848%, Due 5/26/2037, 2008 R3 3A1D | 230,096 | 201,940 | ||||||
JP Morgan Mortgage Trust, 3.00%, Due 9/25/2044, 2014 IVR3 2A1A D | 249,271 | 252,520 | ||||||
Master Specialized Loan Trust, 1.031%, Due 2/25/2036, 2006 2 AA D | 729,856 | 689,013 | ||||||
Morgan Stanley ABS Capital I Inc. Trust, 0.838%, Due 12/25/2036, 2007 HE3 A2AA | 422,354 | 269,110 | ||||||
Morgan Stanley Mortgage Loan Trust, 2.962%, Due 6/25/2036, 2006 8AR 5A4A | 15,296 | 15,050 | ||||||
Nationstar Mortgage Loan Trust, 3.75%, Due 12/25/2052, 2013 A AD | 125,932 | 130,858 | ||||||
New Century Alternative Mortgage Loan Trust, 5.909%, Due 7/25/2036, 2006 ALT1 AF2 | 8,307 | 4,759 | ||||||
New Residential Mortgage Loan Trust, | ||||||||
3.75%, Due 5/28/2052, 2015 1A A3D | 171,308 | 176,341 | ||||||
3.75%, Due 5/25/2054, 2014 2A A3D | 261,176 | 267,336 | ||||||
5.666%, Due 11/25/2054, 2014 3A B3A D | 416,373 | 427,900 | ||||||
3.75%, Due 8/25/2055, 2015 2A A1D | 487,313 | 502,119 | ||||||
Nomura Asset Acceptance Corp., 7.50%, Due 3/25/2034, 2004 R1 A2D | 86,307 | 79,691 | ||||||
Prime Mortgage Trust, 1.271%, Due 2/25/2035, 2006 CL1 A1A | 59,411 | 55,258 |
See accompanying notes
11
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||
Collateralized Mortgage Obligations—14.38% (continued) | ||||||||
Residential Accredit Loans, Inc., Trust, | ||||||||
5.75%, Due 9/25/2035, 2005 QS13 2A4 | $ | 662,585 | $ | 589,986 | ||||
1.028%, Due 2/25/2036, 2006 QA2 1A1A | 480,177 | 359,339 | ||||||
0.878%, Due 5/25/2037, 2007 QA3 A1A | 279,080 | 232,914 | ||||||
Residential Asset Securitization Trust, 3.183%, Due 12/25/2034, 2004 IP2 4A | 54,960 | 53,571 | ||||||
Residential Funding Mortgage Securities Trust, 6.00%, Due 5/25/2037, 2007 S5 A4 | 822,267 | 764,651 | ||||||
Structured Asset Mortgage Investments II Trust, 1.001%, | 77,374 | 67,924 | ||||||
Structured Asset Mortgage Investments Trust, 1.461%, | 417,427 | 398,914 | ||||||
WaMu Mortgage Pass Through Certificates, | ||||||||
2.933%, Due 2/25/2033, 2003 AR1 2AA | 2,723 | 2,658 | ||||||
2.931%, Due 3/25/2035, 2005 AR3 A1 | 29,268 | 28,564 | ||||||
5.50%, Due 11/25/2035, 2005 9 2A2 | 174,176 | 156,327 | ||||||
2.848%, Due 9/25/2036, 2006 AR10 1A1 | 646,527 | 605,642 | ||||||
2.473%, Due 1/25/2037, 2006 AR18 1A1A | 999,094 | 855,448 | ||||||
0.931%, Due 2/25/2037, 2007 HY1 A2AA | 257,200 | 194,920 | ||||||
2.888%, Due 3/25/2037, 2007 HY3 4A1A | 125,730 | 120,122 | ||||||
2.217%, Due 12/19/2039, 2001 AR5 1A | 65,431 | 63,932 | ||||||
Wells Fargo Mortgage Backed Securities Trust, 3.096%, | 44,320 | 44,682 | ||||||
|
| |||||||
Total Collateralized Mortgage Obligations (Cost $17,741,188) | 17,936,224 | |||||||
|
| |||||||
FOREIGN COLLATERALIZED MORTGAGE OBLIGATIONS—0.80% | ||||||||
IM Pastor 4 Fondo de Titulizacion de Activos, 1.00%, Due 3/22/2044, 4 AE | EUR 792,603 | 693,029 | ||||||
Rural Hipotecario I Fondo De Titulizacion Hipotecaria, 0.057%, | EUR 285,787 | 300,553 | ||||||
|
| |||||||
Total Foreign Collateralized Mortgage Obligations (Cost $1,317,303) | 993,582 | |||||||
|
| |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS—7.90% | ||||||||
Fannie Mae Pool, 3.00%, Due 2/1/2046, | 97,950 | 97,401 | ||||||
Fannie Mae TBA, | ||||||||
3.00%, Due 2/13/2047 I | 1,300,000 | 1,292,709 | ||||||
3.00%, Due 3/13/2047 I | 400,000 | 397,312 | ||||||
3.50%, Due 3/13/2047 I | 800,000 | 820,062 | ||||||
3.00%, Due 4/13/2047 I | 600,000 | 594,909 | ||||||
3.50%, Due 4/13/2047 I | 6,500,000 | 6,650,335 | ||||||
|
| |||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $9,812,179) | 9,852,728 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS—20.00% | ||||||||
U.S. Treasury Floating Rate Note—1.89% | ||||||||
0.686%, Due 10/31/2018 A | 905,000 | 905,905 | ||||||
0.656%, Due 1/31/2019 A | 1,455,000 | 1,454,999 | ||||||
|
| |||||||
2,360,904 | ||||||||
|
| |||||||
U.S. Treasury Inflation Protected Securities—1.95% | ||||||||
0.25%, Due 1/15/2025 G | 652,365 | 650,873 | ||||||
2.375%, Due 1/15/2025 G | 678,829 | 789,041 | ||||||
0.625%, Due 1/15/2026 G | 152,411 | 156,259 | ||||||
2.375%, Due 1/15/2027 G | 119,718 | 142,717 | ||||||
3.875%, Due 4/15/2029 G | 496,390 | 693,664 | ||||||
|
| |||||||
2,432,554 | ||||||||
|
| |||||||
U.S. Treasury Notes/Bonds—16.16% | ||||||||
1.25%, Due 12/31/2018 | 1,400,000 | 1,401,586 | ||||||
1.625%, Due 7/31/2019 | 5,700,000 | 5,737,854 | ||||||
1.375%, Due 3/31/2020 | 5,300,000 | 5,277,639 | ||||||
1.125%, Due 9/30/2021 | 1,550,000 | 1,500,109 | ||||||
1.375%, Due 6/30/2023 | 50,000 | 47,799 | ||||||
1.25%, Due 7/31/2023 | 800,000 | 757,782 | ||||||
2.25%, Due 12/31/2023 | 600,000 | 603,164 | ||||||
2.25%, Due 1/31/2024 | 200,000 | 200,930 | ||||||
2.50%, Due 5/15/2024 | 800,000 | 815,500 |
See accompanying notes
12
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Principal Amount* | Fair Value | |||||||
U.S. Treasury Notes/Bonds—16.16% (continued) | ||||||||
2.125%, Due 5/15/2025 | $ | 50,000 | $ | 49,309 | ||||
2.00%, Due 8/15/2025 | 1,600,000 | 1,559,563 | ||||||
1.625%, Due 2/15/2026 | 200,000 | 188,156 | ||||||
2.875%, Due 11/15/2046 | 2,055,000 | 2,016,549 | ||||||
|
| |||||||
20,155,940 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $24,941,045) | 24,949,398 | |||||||
|
| |||||||
MUNICIPAL OBLIGATIONS—0.17% | ||||||||
City of Chicago, IL, 7.75%, Due 1/1/2042 | 100,000 | 102,781 | ||||||
Illinois State G.O. BAB, 7.35%, Due 7/1/2035 | 100,000 | 108,285 | ||||||
|
| |||||||
Total Municipal Obligations (Cost $207,325) | 211,066 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS—9.25% | ||||||||
Short-Term Investment—7.16% | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassJ | 8,933,955 | 8,933,955 | ||||||
|
| |||||||
Agency—1.29% | ||||||||
0.52%, Due 3/31/2017 | 100,000 | 99,967 | ||||||
0.52%, Due 4/21/2017 | 600,000 | 599,592 | ||||||
0.53%, Due 4/27/2017 | 900,000 | 899,316 | ||||||
|
| |||||||
1,598,875 | ||||||||
|
| |||||||
Certificates Of Deposit—0.80% | ||||||||
Sumitomo Mitsui Trust Bank Limited, 1.723%, Due 9/18/2017A | 400,000 | 401,131 | ||||||
Mitsubishi UFJ Trust & Banking Corp., 1.713%, Due 9/19/2017A | 100,000 | 100,263 | ||||||
Natixis S.A., 1.688%, Due 9/25/2017A | 200,000 | 200,715 | ||||||
Norinchukin Bank, 1.733%, Due 10/12/2017A | 200,000 | 200,648 | ||||||
Barclays Bank PLC, 1.804%, Due 11/6/2017A F | 100,000 | 100,237 | ||||||
|
| |||||||
1,002,994 | ||||||||
|
| |||||||
Total Short-Term Investments (Cost $11,532,715) | 11,535,824 | |||||||
|
| |||||||
TOTAL INVESTMENTS—115.01% (Cost $146,986,056) | 143,448,478 | |||||||
PURCHASED OPTIONS—0.18% (Premiums Paid $ 310,333) | 226,480 | |||||||
WRITTEN OPTIONS—(0.18%) (Premiums Received $ (303,603)) | (227,868 | ) | ||||||
LIABILITIES, NET OF OTHER ASSETS—(15.01%) | (18,723,340 | ) | ||||||
|
| |||||||
TOTAL NET ASSETS—100.00% | $ | 124,723,750 | ||||||
|
|
Percentages are stated as a percent of net assets.
*In U.S. Dollars unless otherwise noted.
A | 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. |
B | Term Loan. |
C | LLC - Limited Liability Company. |
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 $24,847,205 or 19.92% of net assets. The Fund has no right to demand registration of these securities. |
E | 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. |
F | PLC - Public Limited Company. |
G | Inflation-Indexed Note. |
H | Par value represents units rather than shares. |
I | TBA - To Be Announced. |
J | The Fund is affiliated by having the same investment advisor. |
See accompanying notes
13
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Futures Contracts Open on February 28, 2017:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
90-Day Eurodollar Futures | Short | 67 | March 2017 | $ | (16,571,527 | ) | $ | 9,130 | ||||||||||||
90-Day Eurodollar Futures | Short | 34 | March 2018 | (8,360,374 | ) | 2,324 | ||||||||||||||
90-Day Eurodollar Futures | Short | 163 | December 2019 | (40,032,082 | ) | 209,196 | ||||||||||||||
Austrailian 10-Year Bond Futures | Long | 1 | March 2017 | 97,520 | 806 | |||||||||||||||
Euro OAT Futures | Short | 51 | March 2017 | (8,116,210 | ) | 14,509 | ||||||||||||||
Euro-Bund Futures | Long | 5 | June 2017 | 850,755 | 11,652 | |||||||||||||||
Long GILT Futures | Short | 28 | June 2017 | (4,411,038 | ) | (9,419 | ) | |||||||||||||
U.S. Treasury 10-Year Note Futures | Long | 43 | June 2017 | 5,344,968 | 11,894 | |||||||||||||||
U.S. Treasury 5-Year Note Futures | Short | 42 | June 2017 | (4,917,979 | ) | (25,558 | ) | |||||||||||||
U.S. Ultra Bond Futures | Long | 13 | June 2017 | 2,108,568 | (5,413 | ) | ||||||||||||||
|
|
|
| |||||||||||||||||
$ | (74,007,399 | ) | $ | 219,121 | ||||||||||||||||
|
|
|
|
Centrally cleared swap agreements outstanding on February 28, 2017:
Interest Rate Swaps
Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate (%) | Expiration Date | Curr | Notional Amount (4) | Premiums Paid (Received) | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.7500 | 12/16/2018 | USD | 300 | $ | (621 | ) | $ | (1,158 | ) | $ | (537 | ) | ||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.7500 | 12/16/2018 | USD | 4,000 | (22,262 | ) | (15,574 | ) | 6,688 | ||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.2500 | 6/21/2019 | USD | 8,100 | 80,683 | 73,954 | (6,729 | ) | |||||||||||||||||||||||
Receive | 6-Month GBP-LIBOR | 1.6500 | 1/22/2020 | GBP | 400 | 10 | (14,707 | ) | (14,717 | ) | ||||||||||||||||||||||
Pay | 3-Month USD-LIBOR | 2.0000 | 12/16/2020 | USD | 20,800 | 278,066 | 95,405 | (182,661 | ) | |||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 2.0000 | 12/16/2020 | USD | 20,100 | 60,474 | (95,855 | ) | (156,329 | ) | ||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.2500 | 6/21/2021 | USD | 12,900 | 390,471 | 373,595 | (16,876 | ) | |||||||||||||||||||||||
Pay | 1-Month MXN-TIIE | 6.7500 | 8/31/2021 | MXN | 500 | (557 | ) | (734 | ) | (177 | ) | |||||||||||||||||||||
Receive | 6-Month GBP-LIBOR | 2.0000 | 3/18/2022 | GBP | 200 | (1,371 | ) | (15,198 | ) | (13,827 | ) | |||||||||||||||||||||
Pay | 3-Month USD-LIBOR | 2.2500 | 12/16/2022 | USD | 7,600 | (48,219 | ) | 69,677 | 117,896 | |||||||||||||||||||||||
Receive | 6-Month JPY-LIBOR | 0.3000 | 3/18/2026 | JPY | 130,000 | (14,233 | ) | (9,354 | ) | 4,879 | ||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 2.2500 | 6/15/2026 | USD | 200 | (9,562 | ) | 823 | 10,385 | |||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.7500 | 12/21/2026 | USD | 1,590 | (21,692 | ) | 85,494 | 107,186 | |||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.7500 | 12/21/2026 | USD | 8,100 | (99,376 | ) | 417,129 | 516,505 | |||||||||||||||||||||||
Pay | 3-Month USD-LIBOR | 2.4000 | 2/21/2027 | USD | 1,000 | — | 3,829 | 3,829 | ||||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.5000 | 6/21/2027 | USD | 1,900 | 161,857 | 153,164 | (8,693 | ) | |||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 2.5000 | 6/15/2046 | USD | 270 | (20,599 | ) | 7,415 | 28,014 | |||||||||||||||||||||||
Receive | 3-Month USD-LIBOR | 2.2500 | 12/21/2046 | USD | 430 | 28,609 | 35,639 | 7,030 | ||||||||||||||||||||||||
Pay | 3-Month USD-LIBOR | 1.7500 | 6/21/2047 | USD | 550 | (106,944 | ) | (108,335 | ) | (1,391 | ) | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | 654,734 | $ | 1,055,209 | $ | 400,475 | |||||||||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
14
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
OTC Swap Agreements Outstanding on February 28, 2017:
Credit Default Swaps on Corporate and Sovereign Securities - Sell Protection
Reference Entity | Counter- party | Fixed Rate (%) | Expiration Date | Implied Credit Spread at February 28, 2017 (3) (%) | Curr | Notional Amount (4) | Premiums Paid (Received) | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Republic Of Argentina | GST | 5.0000 | 6/20/2017 | 0.6971 | USD | 100 | $ | 1,028 | $ | 1,333 | $ | 305 | ||||||||||||||||||||||||
Royal Bank of Scotland PLC | CBK | 1.0000 | 12/20/2018 | 1.1540 | EUR | 50 | (1,016 | ) | (155 | ) | 861 | |||||||||||||||||||||||||
Republic Of Colombia | BRC | 1.0000 | 6/20/2021 | 1.2496 | USD | 200 | (5,801 | ) | (2,023 | ) | 3,778 | |||||||||||||||||||||||||
United Mexican States | BCC | 1.0000 | 12/20/2021 | 1.4167 | USD | 100 | (3,661 | ) | (1,858 | ) | 1,803 | |||||||||||||||||||||||||
Federative Republic of | ||||||||||||||||||||||||||||||||||||
Brazil | BCC | 1.0000 | 12/20/2021 | 2.2344 | USD | 100 | (8,923 | ) | (5,366 | ) | 3,557 | |||||||||||||||||||||||||
Federative Republic of | ||||||||||||||||||||||||||||||||||||
Brazil | DUB | 1.0000 | 12/20/2021 | 2.2344 | USD | 100 | (9,090 | ) | (5,366 | ) | 3,724 | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | (27,463 | ) | $ | (13,435 | ) | $ | 14,028 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
Credit Default Swaps on Credit Indices - Buy Protection (1)
Index/Tranches | Counter- party | Fixed Rate (%) | Expiration Date | Implied Credit Spread at February 28, 2017 (3) (%) | Curr | Notional Amount (4) | Premiums (Received) | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Markit CDX HY | CCP | 5.0000 | 12/20/2021 | 3.1589 | USD | 5,395.50 | $ | (287,116 | ) | $ | (416,711 | ) | $ | (129,595 | ) | |||||||||||||||||||||
iTraxx Senior Financials | CCP | 1.0000 | 12/20/2021 | 0.9175 | EUR | 300.00 | (1,186 | ) | (1,234 | ) | (48 | ) | ||||||||||||||||||||||||
iTraxx Europe | CCP | 1.0000 | 12/20/2021 | 0.7289 | EUR | 400.00 | (5,288 | ) | (5,447 | ) | (159 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | (293,590 | ) | $ | (423,392 | ) | $ | (129,802 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
Interest Rate Inflation-Linked Swaps
Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate (%) | Counter- party | Expiration Date | Curr | Notional Amount (4) | Premiums (Received) | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Receive | EUR-EXT-CPI | 0.7400 | CCP | 1/15/2020 | EUR | 500 | $ | (4,232 | ) | $ | 2,496 | $ | 6,728 | |||||||||||||||||||||||
Receive | EUR-EXT-CPI | 0.9900 | CBK | 3/31/2020 | EUR | 1,700 | (207 | ) | (5,069 | ) | (4,862 | ) | ||||||||||||||||||||||||
Pay | UK-RPI | 3.1400 | GSC | 1/14/2030 | GBP | 300 | — | (11,267 | ) | (11,267 | ) | |||||||||||||||||||||||||
Pay | UK-RPI | 3.4000 | CCP | 6/15/2030 | GBP | 10 | (20 | ) | 6 | 26 | ||||||||||||||||||||||||||
Pay | EUR-EXT-CPI | 3.3000 | CCP | 11/15/2030 | GBP | 140 | (5,369 | ) | (5,578 | ) | (209 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | (9,828 | ) | $ | (19,412 | ) | $ | (9,584 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
(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. |
(5) | The quoted market prices and resulting values for credit default swaps on asset-backed securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/ sold as of the period end. Increasing fair values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
See accompanying notes
15
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Purchased options outstanding on February 28, 2017:
Interest Rate Swaptions
Description | Counter- party | Floating Rate Index | Pay / Receive Floating Rate | Exercise Rate (%) | Expiration Date | Notional Amount (4) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Call - OTC 2-Year IRS | GSC | | 3-Month USD-LIBOR | | Pay | 1.00 | 3/28/2017 | 5,600 | $ | 18,998 | $ | 1 | $ | (18,997 | ) | |||||||||||||||||||||
Put - OTC 5-Year IRS | BRC | | 3-Month USD-LIBOR | | Pay | 1.60 | 2/15/2018 | 850 | 6,060 | 3,813 | (2,247 | ) | ||||||||||||||||||||||||
Put - OTC 5-Year IRS | GLM | | 3-Month USD-LIBOR | | Pay | 1.60 | 2/15/2018 | 850 | 5,943 | 3,813 | (2,130 | ) | ||||||||||||||||||||||||
Put - OTC 30-Year IRS | GSC | | 3-Month USD-LIBOR | | Pay | 2.97 | 9/24/2018 | 1,200 | 62,100 | 63,920 | 1,820 | |||||||||||||||||||||||||
Put - OTC 30-Year IRS | CBK | | 3-Month USD-LIBOR | | Pay | 2.97 | 9/24/2018 | 600 | 30,525 | 31,960 | 1,435 | |||||||||||||||||||||||||
Call - OTC 2-Year IRS | MSC | | 3-Month USD-LIBOR | | Pay | 1.65 | 11/15/2018 | 4,700 | 26,673 | 16,863 | (9,810 | ) | ||||||||||||||||||||||||
Put - OTC 30-Year IRS | MYC | | 3-Month USD-LIBOR | | Pay | 3.05 | 12/12/2018 | 600 | 28,848 | 31,625 | 2,777 | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | 179,147 | $ | 151,995 | $ | (27,152 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
Interest Rate Floors
Description | Counter- party | Floating Rate Index | Curr | Exercise Rate (%) | Expiration Date | Notional Amount (4) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Put - INT FLR | BRC | 3M USD-LIBOR | USD | 1.63 | 8/15/2019 | 5,000 | $ | 44,900 | $ | 19,708 | $ | (25,192 | ) | |||||||||||||||||||||||
Put - INT FLR | DUB | 3M USD-LIBOR | USD | 1.63 | 8/15/2019 | 2,500 | 22,500 | 9,854 | (12,646 | ) | ||||||||||||||||||||||||||
Put - INT FLR | GSC | 3M USD-LIBOR | USD | 1.63 | 8/15/2019 | 5,000 | 32,000 | 19,694 | (12,306 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | 99,400 | $ | 49,256 | $ | (50,144 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
Index Options
Description | Exercise Price | Expiration Date | Curr | Number of Contracts | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Put - S&P 500 Index | 2,000.00 | 3/17/2017 | USD | 62 | $ | 5,950 | $ | 2,418 | $ | (3,532 | ) | |||||||||||||||||
Put - S&P 500 Index | 1,970.00 | 3/31/2017 | USD | 58 | 5,974 | 5,974 | — | |||||||||||||||||||||
Put - S&P 500 Index | 2,250.00 | 3/31/2017 | USD | 24 | 14,684 | 15,480 | 796 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 26,608 | $ | 23,872 | $ | (2,736 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
Exchange Traded Fund Options
Description | Exercise Price | Expiration Date | Curr | Number of Contracts | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Put - iShares 20+ Year Treasury Bond ETF | 112.00 | 3/3/2017 | USD | 138 | $ | 2,052 | $ | 69 | $ | (1,983 | ) | |||||||||||||||||
Put - iShares 20+ Year Treasury Bond ETF | 114.00 | 3/17/2017 | USD | 122 | 2,074 | 610 | (1,464 | ) | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 4,126 | $ | 679 | $ | (3,447 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
16
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Options on Exchange-Traded Futures Contracts
Description | Exercise Price | Expiration Date | Curr | Number of Contracts | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Put - 10-Year U.S. Treasury Future Option | 94.00 | 3/24/2017 | USD | 69 | $ | 565 | $ | 483 | $ | (82 | ) | |||||||||||||||||
Put - 5-Year U.S. Treasury Future Option | 93.00 | 3/24/2017 | USD | 25 | 214 | 195 | (19 | ) | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 779 | $ | 678 | $ | (101 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
OTC European Foreign Currency Options
Description | Counter- party | Exercise Price | Expiration Date | Notional Amount (4) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Put - OTC 30-Year FN TBA 3.5% | FBF | 80.00 | 3/6/2017 | 7,000 | $ | 273 | $ | — | $ | (273 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 273 | $ | — | $ | (273 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
Written options outstanding on February 28, 2017:
Interest Rate Swaptions
Description | Counter- party | Floating Rate Index | Pay/ Receive Floating Rate | Exercise Rate (%) | Expiration Date | Notional Amount (4) | Premiums (Received) | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Call - OTC 10-Year IRS | GSC | 3-Month USD-LIBOR | Receive | 1.56 | 3/28/2017 | 200 | $ | (3,333 | ) | $ | (1 | ) | $ | 3,332 | ||||||||||||||||||||||
Call - OTC 10-Year IRS | GSC | 3-Month USD-LIBOR | Receive | 1.57 | 3/28/2017 | 1,000 | (16,000 | ) | (5 | ) | 15,995 | |||||||||||||||||||||||||
Put - OTC 5-Year IRS | FBF | 3-Month USD-LIBOR | Receive | 3.02 | 2/15/2018 | 2,200 | (12,733 | ) | (9,262 | ) | 3,471 | |||||||||||||||||||||||||
Put - OTC 5-Year IRS | CBK | 3-Month USD-LIBOR | Receive | 2.60 | 9/24/2018 | 2,800 | (29,120 | ) | (40,324 | ) | (11,204 | ) | ||||||||||||||||||||||||
Put - OTC 5-Year IRS | GSC | 3-Month USD-LIBOR | Receive | 2.60 | 9/24/2018 | 5,800 | (61,840 | ) | (83,528 | ) | (21,688 | ) | ||||||||||||||||||||||||
Call - OTC 10-Year IRS | MSC | 3-Month USD-LIBOR | Receive | 2.00 | 11/15/2018 | 1,000 | (26,389 | ) | (17,317 | ) | 9,072 | |||||||||||||||||||||||||
Put - OTC 5-Year IRS | MYC | 3-Month USD-LIBOR | Receive | 2.70 | 12/12/2018 | 3,000 | (31,757 | ) | (43,919 | ) | (12,162 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | (181,172 | ) | $ | (194,356 | ) | $ | (13,184 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
Interest Rate Floors
Description | Counter- party | Floating Rate Index | Exercise Rate (%) | Expiration Date | Notional Amount (4) | Premiums (Received) | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Put - INT FLR | DUB | 3M USD-LIBOR | 1.00 | 8/15/2019 | 5,000 | $ | (22,500 | ) | $ | (2,657 | ) | $ | 19,843 | |||||||||||||||||||
Put - INT FLR | BRC | 3M USD-LIBOR | 1.00 | 8/15/2019 | 10,000 | (45,770 | ) | (5,314 | ) | 40,456 | ||||||||||||||||||||||
Put - INT FLR | GSC | 3M USD-LIBOR | 1.00 | 8/15/2019 | 10,000 | (32,000 | ) | (5,025 | ) | 26,975 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | (100,270 | ) | $ | (12,996 | ) | $ | 87,274 | |||||||||||||||||||||||||
|
|
|
|
|
|
Options on Exchange-Traded Futures Contracts
Description | Counter- party | Exercise Price | Expiration Date | Curr | Number of Contracts | Premiums (Received) | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Call - 10-Year U.S. Treasury Future Option | MYC | 125.00 | 3/24/2017 | USD | 13 | $ | (8,073 | ) | $ | (6,297 | ) | $ | 1,776 | |||||||||||||||||||
Call - 10-Year U.S. Treasury Future Option | MYC | 125.00 | 4/21/2017 | USD | 13 | (6,390 | ) | (9,547 | ) | (3,157 | ) | |||||||||||||||||||||
Put - 10-Year U.S. Treasury Future Option | MYC | 123.00 | 4/21/2017 | USD | 13 | (7,698 | ) | (4,672 | ) | 3,026 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | (22,161 | ) | $ | (20,516 | ) | $ | 1,645 | |||||||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
17
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Borrowing and Other Financing Transactions on February 28, 2017:
Reverse Repurchase Agreements
Counterparty | Borrowing Rate | Borrowing Date | Maturity Date | Amount Borrowed | Payable for Reverse Repurchase Agreements | |||||||||||||||
The Royal Bank of Scotland (1) | 0.93 | % | 1/26/2017 | 3/8/2017 | $ | 188,500 | (5) | $ | 188,500 | |||||||||||
The Royal Bank of Scotland (2) | 0.93 | % | 2/7/2017 | 3/8/2017 | 615,000 | (5) | 615,000 | |||||||||||||
The Bank of Nova Scotia (3) | 0.85 | % | 1/3/2017 | 4/4/2017 | 5,286,750 | (6) | 5,286,750 | |||||||||||||
The Bank of Montreal (4) | 0.78 | % | 1/9/2017 | 4/10/2017 | 4,156,375 | (7) | 4,156,375 | |||||||||||||
The Bank of Montreal (4) | 0.79 | % | 2/22/2017 | 4/21/2017 | 503,750 | (7) | 503,750 | |||||||||||||
|
|
|
| |||||||||||||||||
$ | 10,750,375 | $ | 10,750,375 | |||||||||||||||||
|
|
|
|
Short Sales
Type of Investment | Description | Coupon (%) | Maturity Date | Principal Amount | Proceeds | Fair Value | ||||||||||||||||||
U.S. Agency Mortgage-Backed Obligation | Fannie Mae TBA | 3.00 | 3/13/2047 | $ | (500,000 | ) | $ | (492,812 | ) | $ | (496,641 | ) | ||||||||||||
U.S. Agency Mortgage-Backed Obligation | Fannie Mae TBA | 3.00 | 2/13/2047 | (1,300,000 | ) | (1,287,503 | ) | (1,292,709 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | (1,800,000 | ) | $ | (1,780,315 | ) | $ | (1,789,350 | )(8) | ||||||||||||||||
|
|
|
|
|
|
1) | Collateralized by a U.S. Treasury N/B valued at $188,500, 1.250%, 7/31/2023. |
2) | Collateralized by a U.S. Treasury N/B valued at $615,000, 2.500%, 5/15/2024. |
3) | Collateralized by a U.S. Treasury N/B valued at $5,286,750, 1.375%, 3/31/2020. |
4) | Collateralized by a U.S. Treasury N/B valued at $4,660,125, 1.625%, 7/31/2019. |
5) | The average amount of borrowing during the period ended February 28, 2017 was $401,750 at a weighted average interest rate of 0.93%. |
6) | The average amount of borrowing during the period ended February 28, 2017 was $5,286,750 at a weighted average interest rate of 0.85%. |
7) | The average amount of borrowing during the period ended February 28, 2017 was $2,330,063 at a weighted average interest rate of 0.78%. |
8) | Short sales represent 1.43% of total net assets. |
See accompanying notes
18
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Forward Currency Contracts Open on February 28, 2017:
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||
Buy | JPY | 298,339 | 5/23/2017 | BNP | $ | — | $ | (39 | ) | $ | (39 | ) | ||||||||||||
Sell | AUD | 296,181 | 5/23/2017 | BNP | — | (83 | ) | (83 | ) | |||||||||||||||
Buy | EUR | 1,032,914 | 3/2/2017 | BOA | 389 | — | 389 | |||||||||||||||||
Sell | EUR | 1,138,854 | 3/2/2017 | BOA | 10,326 | — | 10,326 | |||||||||||||||||
Sell | JPY | 273,265 | 3/2/2017 | BOA | — | (2,093 | ) | (2,093 | ) | |||||||||||||||
Buy | EUR | 98,568 | 3/13/2017 | BOA | — | (423 | ) | (423 | ) | |||||||||||||||
Buy | EUR | 26,497 | 3/13/2017 | BOA | — | (125 | ) | (125 | ) | |||||||||||||||
Sell | EUR | 223,633 | 3/13/2017 | BOA | — | (2,125 | ) | (2,125 | ) | |||||||||||||||
Buy | SGD | 190,530 | 3/17/2017 | BOA | 532 | — | 532 | |||||||||||||||||
Buy | TWD | 29,674 | 3/21/2017 | BOA | 674 | — | 674 | |||||||||||||||||
Sell | TWD | 232,655 | 3/21/2017 | BOA | — | (5,322 | ) | (5,322 | ) | |||||||||||||||
Sell | RUB | 214,149 | 3/22/2017 | BOA | 1,851 | — | 1,851 | |||||||||||||||||
Sell | EUR | 1,034,511 | 4/4/2017 | BOA | — | (293 | ) | (293 | ) | |||||||||||||||
Sell | SGD | 190,615 | 6/23/2017 | BOA | — | (539 | ) | (539 | ) | |||||||||||||||
Buy | CNY | 144,991 | 12/5/2017 | BOA | 2,671 | — | 2,671 | |||||||||||||||||
Sell | CNY | 144,991 | 12/5/2017 | BOA | — | (5,563 | ) | (5,563 | ) | |||||||||||||||
Buy | CAD | 192,801 | 4/12/2017 | BRC | 471 | — | 471 | |||||||||||||||||
Buy | CAD | 60,250 | 4/12/2017 | BRC | — | (772 | ) | (772 | ) | |||||||||||||||
Sell | CAD | 451,124 | 4/12/2017 | BRC | 2,146 | — | 2,146 | |||||||||||||||||
Sell | CAD | 92,635 | 4/12/2017 | BRC | 1,764 | — | 1,764 | |||||||||||||||||
Sell | JPY | 1,610,092 | 5/30/2017 | BRC | — | (5,776 | ) | (5,776 | ) | |||||||||||||||
Sell | GBP | 662,614 | 3/2/2017 | CBK | 7,747 | — | 7,747 | |||||||||||||||||
Buy | EUR | 4,238 | 3/8/2017 | CBK | — | (5 | ) | (5 | ) | |||||||||||||||
Sell | EUR | 420,670 | 3/8/2017 | CBK | 7,618 | — | 7,618 | |||||||||||||||||
Sell | NOK | 274,429 | 4/10/2017 | CBK | — | (8,337 | ) | (8,337 | ) | |||||||||||||||
Buy | JPY | 2,853,292 | 4/11/2017 | CBK | 22,110 | — | 22,110 | |||||||||||||||||
Sell | JPY | 6,509,073 | 4/11/2017 | CBK | — | (208,191 | ) | (208,191 | ) | |||||||||||||||
Buy | JPY | 199,860 | 4/27/2017 | CBK | 772 | — | 772 | |||||||||||||||||
Sell | JPY | 199,860 | 4/27/2017 | CBK | — | (2,155 | ) | (2,155 | ) | |||||||||||||||
Sell | EUR | 9,192,821 | 5/10/2017 | CBK | 78,206 | — | 78,206 | |||||||||||||||||
Buy | BRL | 334,955 | 3/2/2017 | DUB | 9,387 | — | 9,387 | |||||||||||||||||
Sell | BRL | 334,955 | 3/2/2017 | DUB | 1,264 | — | 1,264 | |||||||||||||||||
Buy | RUB | 480,956 | 4/21/2017 | DUB | 5,643 | — | 5,643 | |||||||||||||||||
Sell | CHF | 99,567 | 3/2/2017 | FBF | 229 | — | 229 | |||||||||||||||||
Buy | SGD | 28,464 | 3/17/2017 | FBF | 464 | — | 464 | |||||||||||||||||
Buy | TWD | 202,981 | 3/21/2017 | FBF | — | (21 | ) | (21 | ) | |||||||||||||||
Buy | MXN | 228,017 | 4/17/2017 | FBF | 3,590 | — | 3,590 | |||||||||||||||||
Sell | TWD | 203,734 | 6/23/2017 | FBF | 231 | — | 231 | |||||||||||||||||
Buy | EUR | 105,940 | 3/2/2017 | GLM | — | (1,184 | ) | (1,184 | ) | |||||||||||||||
Sell | GBP | 483,982 | 3/9/2017 | GLM | — | (6,512 | ) | (6,512 | ) | |||||||||||||||
Sell | SGD | 218,994 | 3/17/2017 | GLM | — | (7,199 | ) | (7,199 | ) | |||||||||||||||
Sell | GBP | 663,184 | 4/4/2017 | GLM | 1,107 | — | 1,107 | |||||||||||||||||
Buy | INR | 24,658 | 4/20/2017 | GLM | 646 | — | 646 | |||||||||||||||||
Buy | INR | 2,113,349 | 3/2/2017 | HUS | 79,010 | — | 79,010 | |||||||||||||||||
Sell | INR | 1,858,548 | 3/2/2017 | HUS | — | (35 | ) | (35 | ) | |||||||||||||||
Sell | INR | 254,801 | 3/2/2017 | HUS | — | (7,851 | ) | (7,851 | ) | |||||||||||||||
Buy | SEK | 1,573,387 | 3/6/2017 | HUS | 28,314 | — | 28,314 | |||||||||||||||||
Buy | GBP | 1,861,443 | 3/8/2017 | HUS | — | (14,052 | ) | (14,052 | ) | |||||||||||||||
Buy | GBP | 1,489,154 | 3/8/2017 | HUS | — | (802 | ) | (802 | ) | |||||||||||||||
Sell | GBP | 4,838,510 | 3/8/2017 | HUS | 33,260 | — | 33,260 | |||||||||||||||||
Buy | GBP | 3,933,908 | 3/9/2017 | HUS | — | (94,513 | ) | (94,513 | ) | |||||||||||||||
Buy | NOK | 2,267,021 | 4/10/2017 | HUS | 55,546 | — | 55,546 | |||||||||||||||||
Buy | NOK | 233,038 | 4/18/2017 | HUS | 6,152 | — | 6,152 | |||||||||||||||||
Sell | NOK | 233,038 | 4/18/2017 | HUS | — | (2,568 | ) | (2,568 | ) | |||||||||||||||
Buy | SEK | 1,033,035 | 4/24/2017 | HUS | — | (15,366 | ) | (15,366 | ) | |||||||||||||||
Sell | GBP | 1,491,394 | 5/8/2017 | HUS | 5,822 | 5,822 |
See accompanying notes
19
American Beacon Flexible Bond FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Sell | SGD | 3,926,337 | 5/16/2017 | HUS | $ | — | $ | (54,052 | ) | $ | (54,052 | ) | ||||||||||||||||
Buy | AUD | 1,209,360 | 5/17/2017 | HUS | 3,883 | — | 3,883 | |||||||||||||||||||||
Buy | INR | 1,835,372 | 6/2/2017 | HUS | — | (6,167 | ) | (6,167 | ) | |||||||||||||||||||
Buy | CLP | 2,384,246 | 6/16/2017 | HUS | — | (24,648 | ) | (24,648 | ) | |||||||||||||||||||
Buy | JPY | 713,323 | 4/11/2017 | JPM | 25,184 | — | 25,184 | |||||||||||||||||||||
Sell | NZD | 604,141 | 4/21/2017 | JPM | — | (7,409 | ) | (7,409 | ) | |||||||||||||||||||
Buy | SGD | 1,284,983 | 5/16/2017 | JPM | 4,596 | — | 4,596 | |||||||||||||||||||||
Sell | TWD | 1,277,068 | 6/2/2017 | JPM | 2,005 | — | 2,005 | |||||||||||||||||||||
Buy | EUR | 28,617 | 3/13/2017 | RBC | — | (136 | ) | (136 | ) | |||||||||||||||||||
Buy | GBP | 223,403 | 3/13/2017 | RBC | — | (3,423 | ) | (3,423 | ) | |||||||||||||||||||
Sell | EUR | 225,753 | 3/13/2017 | RBC | 1,603 | — | 1,603 | |||||||||||||||||||||
Sell | GBP | 453,011 | 3/13/2017 | RBC | — | (8,112 | ) | (8,112 | ) | |||||||||||||||||||
Buy | BRL | 334,955 | 3/2/2017 | SCB | — | (1,264 | ) | (1,264 | ) | |||||||||||||||||||
Sell | BRL | 334,955 | 3/2/2017 | SCB | 539 | — | 539 | |||||||||||||||||||||
Sell | RUB | 63,542 | 3/22/2017 | SCB | — | (1,542 | ) | (1,542 | ) | |||||||||||||||||||
Buy | BRL | 332,337 | 4/4/2017 | SCB | — | (297 | ) | (297 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 405,752 | $ | (498,994 | ) | $ | (93,242 | ) | |||||||||||||||||||||
|
|
|
|
|
|
Glossary:
Counterparty Abbreviations: | ||||||||||
BCC | Barclays Capital | GSC | Goldman Sachs Capital Markets | MYC | Morgan Stanley Capital Services | |||||
BRC | Barclays Bank PLC | GST | Goldman Sachs International | RBC | Royal Bank Of Canada | |||||
CBK | Citibank, N.A. | HUS | HSBC Bank USA | SCB | Standard Chartered Bank | |||||
DUB | Deutsche Bank AG | JPM | JPMorgan Chase Bank, N.A. | |||||||
FBF | Credit Suisse International | MSC | Morgan Stanley & Co. Inc. | |||||||
Currency Abbreviations: | ||||||||||
AUD | Australian Dollar | INR | Indian Rupee | TWD | Taiwanese Dollar | |||||
BRL | Brazilian Real | JPY | Japanese Yen | USD | United States Dollar | |||||
CAD | Canadian Dollar | MXN | Mexican Peso | ZAR | South African Rand | |||||
CHF | Swiss Franc | MYR | Malaysian Ringgit | |||||||
CLP | Chilean Peso | NOK | Norwegian Krone | |||||||
CNY | Yuan Renminbi | NZD | New Zealand Dollar | |||||||
EUR | Euro | PLN | Polish Zolty | |||||||
GBP | Pound Sterling | RUB | Russian Ruble | |||||||
HUF | Hungarian Forint | SEK | Swedish Krona | |||||||
IDR | Indonesian Rupiah | SGD | Singapore Dollar | |||||||
Index Abbreviations: | ||||||||||
CDX | Credit Default Swap Index | HY | High Yield | RPI | Retail Price Index | |||||
EXT-CPI | Consumer Price Index, Excluding Tobacco | iTraxx | Credit Default Swap Index | S&P | Standard & Poor’s 500 Index | |||||
Exchange Abbreviations: | ||||||||||
CME | Chicago Mercantile Exchange | OTC | Over-the-Counter | |||||||
Other Abbreviations: | ||||||||||
CCP | Central Counterparty Clearing House | EPUT | European-style Put | LIBOR | London Interbank Offer Rate | |||||
CDS | Credit Default Swap | FN | Federal National Mortgage Association | OCC | Options Clearing Corporation | |||||
ECAL | European-style Call | IRS | Interest Rate Swap | TBA | To Be Announced |
See accompanying notes
20
American Beacon Flexible Bond FundSM
Statement of Assets and Liabilities
February 28, 2017 (Unaudited)
Flexible Bond Fund | ||||
Assets: | ||||
Investments in unaffiliated securities, at fair value A E | $ | 134,514,523 | ||
Investments in affiliated securities, at fair value B | 8,933,955 | |||
Purchased options, at fair value (Premiums paid $310,333) | 226,480 | |||
Foreign currency held at bank, at fair value C | 123,599 | |||
Cash at bank | 3,148 | |||
Cash at broker | 1,424,511 | |||
Swap premiums paid | 1,001,198 | |||
Swap Income receivable | 196,557 | |||
Dividends and interest receivable | 619,911 | |||
Receivable for investments sold | 19,246,112 | |||
Receivable for fund shares sold | 11,000 | |||
Receivable for tax reclaims | 4,242 | |||
Receivable for expense reimbursement (Note 2) | 19,918 | |||
Receivable for variation margin on open futures contracts | 1,215,165 | |||
Unrealized appreciation from swap agreements | 823,194 | |||
Unrealized appreciation from forward currency contracts | 405,752 | |||
Prepaid expenses | 34,506 | |||
|
| |||
Total assets | 168,803,771 | |||
|
| |||
Liabilities: | ||||
Payable for investments purchased | 27,942,184 | |||
Payable for fund shares redeemed | 37,385 | |||
Payable for variation margin from open futures contracts | 995,115 | |||
Payable for reverse repurchase agreements, at fair value F | 10,750,375 | |||
Foreign currency deposits with brokers, at fair value D | 91,393 | |||
Securities sold short, at value E | 1,789,358 | |||
Swap premium received | 677,345 | |||
Swap income payable | 253,701 | |||
Written options, at fair value (Premiums received $303,603) | 227,868 | |||
Interest payable | 12,476 | |||
Management and investment advisory fees payable | 95,981 | |||
Administrative service and service fees payable | 9,566 | |||
Transfer agent fees payable | 3,545 | |||
Custody and fund accounting fees payable | 22,201 | |||
Professional fees payable | 89,231 | |||
Trustee fees payable | 1,872 | |||
Payable for prospectus and shareholder reports | 11,029 | |||
Unrealized depreciation from swap agreements | 548,077 | |||
Unrealized depreciation from forward currency contracts | 498,994 | |||
Other liabilities | 22,325 | |||
|
| |||
Total liabilities | 44,080,021 | |||
|
| |||
Net Assets | $ | 124,723,750 | ||
|
| |||
Analysis of Net Assets: | ||||
Paid-in-capital | $ | 144,045,971 | ||
Undistributed (overdistribution of) net investment income | 685,487 | |||
Accumulated net realized (loss) | (16,809,630 | ) | ||
Unrealized appreciation of investments | 455,735 | |||
Unrealized (depreciation) of currency transactions | (4,130,899 | ) | ||
Unrealized appreciation of futures contracts | 219,122 | |||
Unrealized appreciation of swap agreements | 275,117 | |||
Unrealized (depreciation) of options contracts | (8,118 | ) | ||
Unrealized (depreciation) of short sales | (9,035 | ) | ||
|
| |||
Net assets | $ | 124,723,750 | ||
|
|
See accompanying notes
21
American Beacon Flexible Bond FundSM
Statement of Assets and Liabilities
February 28, 2017 (Unaudited)
Flexible Bond Fund | ||||
Shares outstanding at no par value (unlimited shares authorized): | ||||
Institutional Class | 8,773,871 | |||
|
| |||
Y Class | 2,826,450 | |||
|
| |||
Investor Class | 319,836 | |||
|
| |||
A Class | 798,644 | |||
|
| |||
C Class | 271,755 | |||
|
| |||
Net assets: | ||||
Institutional Class | $ | 84,291,148 | ||
|
| |||
Y Class | $ | 27,140,137 | ||
|
| |||
Investor Class | $ | 3,069,467 | ||
|
| |||
A Class | $ | 7,629,187 | ||
|
| |||
C Class | $ | 2,593,811 | ||
|
| |||
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 9.61 | ||
|
| |||
Y Class | $ | 9.60 | ||
|
| |||
Investor Class | $ | 9.60 | ||
|
| |||
A Class | $ | 9.55 | ||
|
| |||
A Class (offering price) | $ | 10.03 | ||
|
| |||
C Class | $ | 9.54 | ||
|
| |||
A Cost of investments in unaffiliated securities | $ | 138,052,101 | ||
B Cost of investments in affiliated securities | $ | 8,933,955 | ||
C Cost of foreign currency held at bank | $ | 125,112 | ||
D Cost of foreign currency deposits with brokers | $ | (91,393 | ) | |
E Proceeds of securities sold short | $ | 1,780,315 | ||
F Cost of reverse repurchase agreements | $ | 10,750,375 |
See accompanying notes
22
American Beacon Flexible Bond FundSM
Statement of Operations
For the six months ended February 28, 2017 (Unaudited)
Flexible Bond Fund | ||||
Investment income: | ||||
Dividend income from affiliated securities | $ | 18,225 | ||
Interest income | 2,409,661 | |||
Miscellaneous Income | 60,110 | |||
|
| |||
Total investment income | 2,487,996 | |||
|
| |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 580,812 | |||
Transfer agent fees: | ||||
Institutional Class | 14,544 | |||
Y Class | 639 | |||
Investor Class | 876 | |||
A Class | 1,330 | |||
C Class | 258 | |||
Custody and fund accounting fees | 44,890 | |||
Professional fees | 55,415 | |||
Registration fees and expenses | 32,611 | |||
Service fees (Note 2): | ||||
Y Class | 14,745 | |||
Investor Class | 3,911 | |||
A Class | 6,112 | |||
C Class | 2,246 | |||
Distribution fees (Note 2): | ||||
A Class | 10,187 | |||
C Class | 14,976 | |||
Prospectus and shareholder report expenses | 9,678 | |||
Trustee fees | 5,608 | |||
Other expenses | 8,045 | |||
|
| |||
Total expenses | 806,883 | |||
|
| |||
Net fees waived and expenses reimbursed (Note 2) | (143,479 | ) | ||
|
| |||
Net expenses | 663,404 | |||
|
| |||
Net investment income | 1,824,592 | |||
|
| |||
Realized and unrealized gain (loss) from investments: | ||||
Net realized gain (loss) from: | ||||
Investments | (456,979 | ) | ||
Foreign currency transactions | 819,019 | |||
Futures contracts | (142,959 | ) | ||
Swap agreements | (54,203 | ) | ||
Options contracts | (28,511 | ) | ||
Change in net unrealized appreciation (depreciation) of: | ||||
Investments | (1,426,359 | ) | ||
Foreign currency transactions | 368,102 | |||
Futures contracts | 506,426 | |||
Swap agreements | 1,481,881 | |||
Options contracts | (13,310 | ) | ||
Short sales | (9,035 | ) | ||
|
| |||
Net gain from investments | 1,044,072 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 2,868,664 | ||
|
| |||
A Foreign taxes | 12,590 |
See accompanying notes
23
American Beacon Flexible Bond FundSM
Statements of Changes in Net Assets
Flexible Bond Fund | ||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||
(unaudited) | ||||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 1,824,592 | $ | 5,107,686 | ||||
Net realized gain (loss) from investments, foreign currency transactions, futures contracts, swap agreements, and options contracts | 136,367 | (10,993,745 | ) | |||||
Change in net unrealized appreciation (depreciation) from investments, foreign currency transactions, futures contracts, swap agreements, option contracts, and short sales | 907,705 | 7,591,324 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 2,868,664 | 1,075,265 | ||||||
|
|
|
| |||||
Net investment income: | ||||||||
Institutional Class | (997,419 | ) | (4,907,696 | ) | ||||
Y Class | (321,666 | ) | (1,523,117 | ) | ||||
Investor Class | (30,526 | ) | (230,372 | ) | ||||
A Class | (77,900 | ) | (431,968 | ) | ||||
C Class | (16,465 | ) | (135,648 | ) | ||||
Net realized gain from investments: | ||||||||
Institutional Class | — | — | ||||||
Y Class | — | — | ||||||
Investor Class | — | — | ||||||
A Class | — | — | ||||||
C Class | — | — | ||||||
Return of capital | ||||||||
Institutional Class | — | (835,988 | ) | |||||
Y Class | — | (267,040 | ) | |||||
Investor Class | — | (22,402 | ) | |||||
A Class | — | (66,866 | ) | |||||
C Class | — | (20,519 | ) | |||||
|
|
|
| |||||
Net distributions to shareholders | (1,443,976 | ) | (8,441,616 | ) | ||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from sales of shares | 14,458,743 | 31,500,511 | ||||||
Reinvestment of dividends and distributions | 1,427,988 | 8,283,767 | ||||||
Cost of shares redeemed | (34,035,446 | ) | (129,888,786 | ) | ||||
Redemption fees | — | — | ||||||
|
|
|
| |||||
Net (decrease) in net assets from capital share transactions | (18,148,715 | ) | 90,104,508 | |||||
|
|
|
| |||||
Net (decrease) in net assets | (16,724,027 | ) | (96,840,859 | ) | ||||
|
|
|
| |||||
Net Assets: | ||||||||
Beginning of period | 141,447,777 | 238,288,636 | ||||||
|
|
|
| |||||
End of Period * | $ | 124,723,750 | $ | 141,447,777 | ||||
|
|
|
| |||||
*Includes undistributed (overdistribution of) net investment income | $ | 685,487 | $ | (973,616 | ) | |||
|
|
|
|
See accompanying notes
24
American Beacon Flexible Bond FundSM
February 28, 2017 (Unaudited)
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust. The Fund, a series within the Trust, is registered under the Investment Company Act of 1940, as amended (the “Act”), as a non-diversified, open-end management investment company. As of February 28, 2017, the Trust consists of twenty-seven active series, one of which is presented in this filing (the “Fund”): American Beacon Flexible Bond 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.
The Flexible Bond Fund is a commodity pool, as defined in the regulations of the Commodity Futures Trading Commission (the “CFTC”) and operated by the Manager, a commodity pool operator registered with the CFTC.
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.
25
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
The following is a summary of significant accounting policies, consistently followed by the Fund in the preparation of the financial statements. The Fund is an investment company, 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”).
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.
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 the 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 market 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 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.
Commission Recapture
The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations, if applicable. For the six months ended February 28, 2017, the Fund did not have commission recapture income.
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 Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 February 28, 2017, based on management’s evaluation of the shareholder account base, four accounts in the Fund have been identified as representing an unaffiliated controlling ownership of approximately 34% of the Fund’s outstanding shares.
2. Transactions with Affiliates
Management Agreement
The Fund and the Manager are parties to 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 $15 billion, 0.325% of the next $15 billion, and 0.30% over $30 billion. The Fund also pays 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 six months ended February 28, 2017 were as follows:
Fund | Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | ||||||||||||
Flexible Bond | 0.90 | % | $ | 580,812 | $ | 343,053 | $ | 237,759 |
Distribution Plans
The Fund, except for the A and C Classes, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees will be charged to the Fund for distribution purposes. However, the Plan authorizes the management fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to separately compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance,
27
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 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.
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 intermediary’s average net assets in the Institutional Class on an annual basis. For the six months ended February 28, 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 | |||
Flexible Bond | $ | 12,559 |
As of February 28, 2017, the Fund owed 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 | |||
Flexible Bond | $ | 1,527 |
Investment in Affiliated Funds
The Fund may invest in the American Beacon U.S. Government Money Market Select Fund (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 fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the six months ended February 28, 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 | |||
Flexible Bond | $ | 4,560 |
Interfund Lending Program
Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in
28
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating Fund. During the six months ended February 28, 2017, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
The Manager contractually agreed to reimburse the classes of the Fund to the extent that total annual fund operating expenses exceed the Fund’s expense cap. For the six months ended February 28, 2017, the Manager waived or reimbursed expenses as follows:
Fund | Class | Expense Cap 9/1/2016 to 2/28/2017 | Reimbursed Expenses | Expiration | ||||||||||
Flexible Bond | Institutional | 0.90 | % | $ | 99,696 | 2020 | ||||||||
Flexible Bond | Y | 0.99 | % | 29,455 | 2020 | |||||||||
Flexible Bond | Investor | 1.27 | % | 1,882 | 2020 | |||||||||
Flexible Bond | A | 1.29 | % | 9,272 | 2020 | |||||||||
Flexible Bond | C | 2.04 | % | 3,174 | 2020 |
Of these amounts, $19,918 was disclosed as a receivable from the Manager on the Statement of Assets and Liabilities at February 28, 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 reimbursed expenses listed above expire in 2020.
The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||||
Flexible Bond | $ | — | $ | 854,833 | 2017 | |||||||
Flexible Bond | — | 274,583 | 2018 | |||||||||
Flexible Bond | — | 395,527 | 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 six months ended February 28, 2017, Foreside collected $4 in sales commissions from the sale of A Class shares for the Fund.
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 six months ended February 28, 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 six months ended February 28, 2017, CDSC fees of $600 were collected for the Fund for Class C Shares.
29
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
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 Trust’s Board.
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.
For valuation purposes, the last quoted 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 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
30
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 American Depositary Receipts (“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.
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 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.
Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows and market-based yield spreads for each tranche, and incorporate deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Common stocks, ETFs and financial derivative instruments, such as futures contracts, are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To
31
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts, options contracts, or swaps agreements, 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 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.
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of February 28, 2017, the investments were classified as described below:
Flexible Bond Fund (1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Domestic Bank Loan Obligations | $ | — | $ | 2,211,540 | $ | — | $ | 2,211,540 | ||||||||
Corporate and Sovereign Obligations | — | 35,897,725 | — | 35,897,725 | ||||||||||||
Foreign Corporate and Sovereign Obligations | — | 24,965,965 | — | 24,965,965 | ||||||||||||
Asset-Backed Obligations | — | 14,894,426 | — | 14,894,426 | ||||||||||||
Collateralized Mortgage Obligations | — | 17,936,224 | — | 17,936,224 | ||||||||||||
Foreign Collateralized Mortgage Obligations | — | 993,582 | — | 993,582 | ||||||||||||
U.S. Agency Mortgage-Backed Obligations | — | 9,852,728 | — | 9,852,728 | ||||||||||||
U.S. Treasury Obligations | — | 24,949,398 | — | 24,949,398 | ||||||||||||
Municipal Obligations | — | 211,066 | — | 211,066 | ||||||||||||
Short-Term Investments: | ||||||||||||||||
Investment Companies | 8,933,955 | — | — | 8,933,955 | ||||||||||||
U.S. Agency Obligations | — | 1,598,875 | — | 1,598,875 | ||||||||||||
Certificates of Deposit | — | 1,002,994 | — | 1,002,994 | ||||||||||||
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|
|
|
|
| |||||||||
Total Investments in Securities | $ | 8,933,955 | $ | 134,514,523 | $ | — | $ | 143,448,478 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments - Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Futures Contracts | $ | 260,803 | $ | — | $ | — | $ | 260,803 | ||||||||
Interest Rate Swap Agreements | — | 1,316,123 | — | 1,316,123 | ||||||||||||
Interest Rate Inflation-Linked Swap Agreements | — | 2,502 | — | 2,502 | ||||||||||||
Credit Default Swap Agreements | — | 1,333 | — | 1,333 | ||||||||||||
Purchased Options Outstanding | — | 226,480 | — | 226,480 | ||||||||||||
Forward Currency Contracts | — | 405,752 | — | 405,752 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments-Assets | $ | 260,803 | $ | 1,952,190 | $ | — | $ | 2,212,993 | ||||||||
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|
|
|
|
|
|
|
32
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Other Financial Instruments - Liabilities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Futures Contracts | $ | — | $ | (1,789,350 | ) | $ | — | $ | (1,789,350 | ) | ||||||
Futures Contracts | (41,682 | ) | — | — | (41,682 | ) | ||||||||||
Interest Rate Swap Agreements | — | (260,914 | ) | — | (260,914 | ) | ||||||||||
Interest Rate Inflation-Linked Swap Agreements | — | (21,913 | ) | — | (21,913 | ) | ||||||||||
Credit Default Swap Agreements | — | (438,160 | ) | — | (438,160 | ) | ||||||||||
Written Options Outstanding | — | (227,868 | ) | — | (227,868 | ) | ||||||||||
Reverse Repurchase Agreements | — | (10,750,375 | ) | — | (10,750,375 | ) | ||||||||||
Forward Currency Contracts | — | (498,994 | ) | — | (498,994 | ) | ||||||||||
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|
|
|
|
|
|
| |||||||||
Total Other Financial Instruments-Liabilities | $ | (41,682 | ) | $ | (13,987,574 | ) | $ | — | $ | (14,029,256 | ) | |||||
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* | Refer to the Schedule of Investments for Industry Information. |
U.S. GAAP also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the six months ended February 28, 2017, there were no transfers between levels.
4. Securities and Other Investments
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.
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 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,
33
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
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.
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
34
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
Repurchase Agreements
A repurchase agreement is a fixed income security in the form of an agreement between a Fund as purchaser and an approved counterparty as seller. The agreement is backed by collateral in the form of securities and/or cash transferred by the seller to the buyer. Under the agreement, a Fund acquires securities from the seller and the seller simultaneously commits to repurchase the securities at an agreed upon price and date, normally within a week. The price for the seller to repurchase the securities is greater than a Fund’s purchase price, reflecting an agreed upon “interest rate” that is effective for the period of time the purchaser’s money is invested in the security. During the term of the repurchase agreement, a Fund monitors on a daily basis the market value of the collateral subject to the agreement and, if the market value of the securities falls below the seller’s repurchase amount provided under the repurchase agreement, the seller is required to transfer additional securities or cash collateral equal to the amount by which the market value of the securities falls below the repurchase amount. Repurchase agreements may exhibit the economic characteristics of loans by a Fund.
The obligation of the seller under the repurchase agreement is not guaranteed, and there is a risk that the seller may fail to repurchase the underlying securities, whether because of the seller’s bankruptcy or otherwise. In such event, a Fund would attempt to exercise its rights with respect to the underlying collateral, including possible sale of the securities. A Fund may incur various expenses in connection with the exercise of its rights and may be subject to various delays and risks of loss, including (a) possible declines in the value of the underlying collateral, (b) possible reduction in levels of income and (c) lack of access to the collateral if held through a third-party custodian and possible inability to enforce the Fund’s rights. The Board has established procedures pursuant to which the Manager monitors the creditworthiness of the counterparties with which the Fund enters into repurchase agreement transactions.
The Funds may enter into repurchase agreements with member banks of the Federal Reserve System or registered broker-dealers who, in the opinion of the sub-advisor, present a minimal risk of default during the term of the agreement. The underlying securities which serve as collateral for repurchase agreements may include fixed income and equity securities such as U.S. government and agency securities, municipal obligations, corporate obligations, asset-backed securities, mortgage-backed securities, common and preferred stock, American Depositary Receipts, exchange-traded funds and convertible securities. There is no percentage restriction on each the Fund’s ability to enter into repurchase agreements with terms of seven days or less.
Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having at least equal value to the repurchase price.
Payment-In-Kind Securities
The Fund may invest in payment-in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as
35
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
a dirty price) and require a pro-rata adjustment from the “Unrealized appreciation (depreciation) of investments” to “Dividend and interest receivable” in the Statement of Assets and Liabilities.
Inflation-Indexed Bonds
The Fund 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 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 Statement of Operations, even though investors do not receive their principal until maturity.
Illiquid and Restricted Securities
The Fund 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 six months ended February 28, 2017, are disclosed in the Notes to the Schedule of Investments.
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.
Real Estate Investment Trusts
The Fund may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. The 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.
36
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Commercial Paper
The Fund may invest in commercial paper and other short-term notes. Commercial paper refers to promissory notes representing an unsecured debt of a corporation or finance company with a fixed maturity of no more than 270 days. A variable amount master demand note (which is a type of commercial paper) represents a direct borrowing arrangement involving periodically fluctuating rates of interest under a letter agreement between a commercial paper issuer and an institutional lender pursuant to which the lender may determine to invest varying amounts.
Other Investment Company Securities and Other Exchange Traded Products
The Fund may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, unit investment trusts, and other investment companies of the Trust. The Fund may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Fund becomes a shareholder of that investment company. As a result, the Fund’s shareholders indirectly will bear the Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Fund’s shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
Mortgage-Related and Other Asset-Backed Securities
The Fund may invest in mortgage or other asset-backed securities (“ABS”). These securities may include mortgage instruments issued by U.S. government agencies (“agency mortgages”) or those issued by private entities (“non-agency mortgages”). Specific types of instruments may include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities and other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real property. The value of the Fund’s mortgage-backed securities (“MBS”) may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The mortgages underlying the securities may default or decline in quality or value. Through its investments in MBS, a Fund has exposure to subprime loans, Alt-A loans and non-conforming loans as well as to the mortgage and credit markets generally. Underlying collateral related to subprime, Alt-A and non-conforming mortgage loans has become increasingly susceptible to defaults and declines in quality or value, especially in a declining residential real estate market. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole.
Mortgage-Backed Securities
MBS often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of the Fund’s portfolio at the time resulting in reinvestment risk.
37
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS, making them more volatile and more sensitive to changes in interest rates. This is known as extension risk.
MBS may have less potential for capital appreciation than comparable fixed-income securities due to the likelihood of increased prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a price above par. In such an environment, this risk limits the potential price appreciation of these securities.
Agency Mortgage-Backed Securities
Certain MBS may be issued or guaranteed by the U.S. government or a government sponsored entity, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Although these instruments may be guaranteed by the U.S. government or a government sponsored entity, many such MBS are not backed by the full faith and credit of the United States and are still exposed to the risk of non-payment.
Privately Issued Mortgage-Backed Securities
MBS held by the Fund may be issued by private issuers including commercial banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles (“SPVs”) and other entities that acquire and package mortgage loans for resale as MBS. These privately issued non-agency MBS may offer higher yields than those issued by government agencies, but also may be subject to greater price changes than governmental issues. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. Alt-A loans refer to loans extended to borrowers who have incomplete documentation of income, assets, or other variables that are important to the credit underwriting processes. Non-conforming mortgages are loans that do not meet the standards that allow purchase by government-sponsored enterprises. MBS with exposure to subprime loans, Alt-A loans or non-conforming loans have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of non-payment is greater for MBS that are backed by mortgage pools that contain subprime, Alt-A and non-conforming loans, but a level of risk exists for all loans.
Unlike agency MBS issued or guaranteed by the U.S. government or a government-sponsored entity (e.g., Fannie Mae and Freddie Mac), MBS issued by private issuers do not have a government or government-sponsored entity guarantee, but may have credit enhancements provided by external entities such as banks or financial institutions or achieved through the structuring of the transaction itself. Examples of such credit support arising out of the structure of the transaction include the issue of senior and subordinated securities (e.g., the issuance of securities by an SPV in multiple classes or “tranches,” with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and “overcollateralization” (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment on the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored MBS and have wider variances in a number
38
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans.
Privately issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, MBS held in the Fund’s portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.
Asset-Backed Securities
ABS may include MBS, loans, receivables or other assets. The value of the Fund’s ABS may be affected by, among other things, actual or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the receivables, the market’s assessment of the quality of underlying assets or actual or perceived changes in the credit worthiness of the individual borrowers, the originator, the servicing agent or the financial institution providing the credit support.
Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities.
Rising or high interest rates tend to extend the duration of ABS, making them more volatile and more sensitive to changes in interest rates. The underlying assets are sometimes subject to prepayments which can shorten the security’s weighted average life and may lower its return. Defaults on loans underlying ABS have become an increasing risk for ABS that are secured by home equity loans related to sub-prime, Alt-A or non-conforming mortgage loans, especially in a declining residential real estate market.
ABS (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. ABS are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. The availability of ABS may be affected by legislative or regulatory developments. It is possible that such developments may require the Fund to dispose of any then existing holdings of such securities.
39
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Short Sales
The Fund 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 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 the six months ended February 28, 2017, short positions held by the Fund are disclosed in the Notes to the Schedule of Investments are disclosed in the Notes to the Schedule of Investments and the Statement of Assets and Liabilities.
Master Agreements
The Fund is 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 Fund 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 Repurchase Agreements (“Master Repo Agreements”) govern transactions between a Fund and select counterparties. The Master Repo Agreements maintain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for Repurchase and Reverse Repurchase Agreements.
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 the 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
The Fund may utilize derivative instruments to enhance return, hedge risk, gain efficient exposure to an asset class or to manage liquidity. When considering the Fund’s use of derivatives, it is important to note that the Funds do not use derivatives for the purpose of creating financial leverage.
Options Contracts
The Fund may write (1) call and put options on futures, swaps (“swaptions”), securities, commodities or currencies it owns or in which it 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
40
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 outstanding on the Statement 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 Statement 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.
For the six months ended February 28, 2017, the Fund purchased/sold options primarily for return enhancement and hedging.
The Fund’s option and swaption 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 Purchased Option and Swaption Notional Amounts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
Flexible Bond | 46,598,825 | |||
Average Written Option and Swaption Notional Amounts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
Flexible Bond | 51,419,250 |
Straddle Options
The Fund may enter into differing forms of straddle options. A straddle is an investment strategy that uses combinations of options that allow a Fund to profit based on the future price movements of the underlying security, regardless of the direction of those movements. A written straddle involves simultaneously writing a call option and a put option on the same security with the same strike price and expiration date. The written straddle increases in value when the underlying security price has little volatility before the expiration date. A purchased straddle involves simultaneously purchasing a call option and a put option on the same security with the same
41
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
strike price and expiration date. The purchased straddle increases in value when the underlying security price has high volatility, regardless of direction, before the expiration date.
Swap Agreements
The 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 agreements are 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 Statement 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 Statement 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 Statement 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 Statement of Operations. Net periodic payments received or paid by the Fund are included as part of realized gains or losses on the Statement 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 Statement 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 Fund’s 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 Fund will generally receive from the buyer of protection a fixed rate of periodic premiums 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 Fund would be subject to investment exposure up to the notional amount of the swap.
42
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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, 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 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, 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 Fund 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 Fund may use credit default swaps on asset-backed securities to provide a measure of protection against defaults of the referenced obligation that the Fund 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 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
43
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 agreement outstanding as of the six months ended February 28, 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 six months ended February 28, 2017, the Fund entered into credit default swaps primarily for return enhancement, hedging and exposure to credit instruments.
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.
Average Credit Default Swap Notional Amounts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
Flexible Bond | 5,921,375 |
Interest Rate Swap Agreements
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest with respect to the notional amount of principal.
For the six months ended February 28, 2017, the Fund entered into interest rate swaps primarily for return enhancement and hedging.
The Fund’s interest rate 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 interest rate swap contracts. For the purpose of this disclosure, the volume is measured by the notional amounts outstanding at each quarter end.
44
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Average Interest Rate Swap Notional Amounts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
Flexible Bond | 250,717,500 |
Over-the-Counter Agreements
OTC financial derivative instruments such as forward currency contracts, options contracts, interest rate, and credit default swap agreements derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. These instruments are valued using evaluated prices furnished by a pricing service selected by the Board. In certain cases, when a valuation is not readily available from a pricing service, the Fund’s Manager may provide a valuation. Derivative instruments that use valuation techniques and inputs similar to those described above are normally categorized as Level 2 in the fair value hierarchy.
Total Return Swap Agreements
The 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.
For the six months ended February 28, 2017, the Fund did not hold any total return swap agreements outstanding.
Inflation Swap Agreements
An inflation swap involves the use of inflation derivatives (or inflation-indexed derivatives) to transfer inflation risk from one party to another. The derivatives used may be over-the-counter or exchange-traded derivatives. Inflation swaps frequently include real rate swaps, such as asset swaps of inflation-indexed bonds. Inflation swaps are simply a linear form of such derivatives. Real rate swaps consist of the nominal interest swap rate minus the corresponding inflation swap.
In an inflation swap, one party pays a fixed rate on a notional principal amount, while the other party pays a floating rate linked to an inflation index, such as the Consumer Price Index (CPI). The party paying the floating rate pays the inflation adjusted rate multiplied by the notional principal amount.
There are three main types of inflation swap. In a standard interbank inflation-linked swap, or zero-coupon inflation-linked swap, cash flow is exchanged on the maturity date. This swap pays out the exact value of the cumulative inflation for a fixed capital sum over a determined period.
In a year-on-year inflation-linked swap, inflation is used on an annual basis rather than a cumulative one. Typically, an inflation swap is priced on a zero-coupon basis, with payment exchanged upon maturity. One party pays the compound fixed rate, while the other pays the actual inflation rate for the term of the swap. In Europe, inflation swaps are typically paid on a year-on-year basis where the year-on-year rate of change of the price index is paid. In the United States, payment is more typically on a month-on-month basis, although the inflation rate used is still the year-on-year rate.
45
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
In an inflation-linked income swap two cash flows are exchanged, each of which follows the inflation index. One party pays a fixed inflation increase annually over the period of the contract. The other party pays the actual inflation over the period of the contract. The swap itself consists of a series of zero-coupon swaps. Other traded inflation derivatives include caps, floors, and straddles, which are usually priced against year-on-year swaps.
The Fund’s inflation 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 inflation swap contracts. For the purpose of this disclosure, the volume is measured by the notional amounts outstanding at each quarter end.
Average Inflation Swap Notional Amounts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
Flexible Bond | 4,000,000 |
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 six months ended February 28, 2017, the Fund entered into forward currency exchange contracts primarily for return enhancement and hedging.
The Fund’s 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 forward currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD at each quarter end.
Average Forward Currency Notional Amounts Outstanding Period ended February 28, 2017 | ||||||||
Fund | Purchased Contracts | Sold Contracts | ||||||
Flexible Bond Fund | 31,325,962 | 47,390,041 |
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
46
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
For the six months ended February 28, 2017, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
The Fund’s futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding each quarter end.
Average Futures Contracts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
Flexible Bond | 422 |
The following is a summary of the fair valuations of the Fund’s derivative instruments categorized by risk exposure(1):
Fair Values of financial derivative instruments on the Statement of Assets and Liabilities as of February 28, 2017:
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||
Assets: | Credit contracts | Foreign exchange contracts | Interest Rate contracts | Equity Contracts | Total | |||||||||||||||
Unrealized appreciation of forward currency contracts | $ | — | $ | 405,752 | $ | — | $ | — | $ | 405,752 | ||||||||||
Receivable for variation margin from open futures contracts(2) | — | — | 260,803 | — | 260,803 | |||||||||||||||
Unrealized appreciation from swap agreements | 14,028 | — | 809,166 | — | 823,194 | |||||||||||||||
Purchased options and swaptions outstanding | — | — | 201,251 | 25,229 | 226,480 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 14,028 | $ | 405,752 | $ | 1,271,220 | $ | 25,229 | $ | 1,716,229 | |||||||||||
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|
| |||||||||||
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||
Credit | Foreign exchange | Interest Rate | Equity | Total | ||||||||||||||||
Liabilities: | contracts | contracts | contracts | Contracts | ||||||||||||||||
Unrealized depreciation of foreign currency contracts | $ | — | $ | (498,994 | ) | $ | — | $ | — | $ | (498,994 | ) | ||||||||
Payable for variation margin from open futures contracts(2) | — | — | (41,682 | ) | — | (41,682 | ) | |||||||||||||
Unrealized depreciation from swap agreements | (129,802 | ) | — | (418,275 | ) | — | (548,077 | ) | ||||||||||||
Written options and swaptions outstanding | — | — | (207,352 | ) | (20,516 | ) | (227,868 | ) | ||||||||||||
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|
| |||||||||||
$ | (129,802 | ) | $ | (498,994 | ) | $ | (667,309 | ) | $ | (20,516 | ) | $ | (1,316,621 | ) | ||||||
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|
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|
|
The effect of financial derivative instruments on the Statement of Operations for the period ended February 28, 2017:
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||
Realized gain (loss) from derivatives recognized as a result from operations: | Credit contracts | Foreign exchange contracts | Interest Rate contracts | Equity Contracts | Total | |||||||||||||||
Net realized gain (loss) from forward currency transactions | $ | — | $ | 1,386,300 | $ | — | $ | — | $ | 1,386,300 | ||||||||||
Net realized gain (loss) from futures contracts | — | — | (142,959 | ) | — | (142,959 | ) | |||||||||||||
Net realized gain (loss) from swap agreements | 44,934 | — | (99,137 | ) | — | (54,203 | ) | |||||||||||||
Net realized gain (loss) from options and swaptions contracts | — | 14,129 | (53,692 | ) | (96,330 | ) | (28,509 | ) | ||||||||||||
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|
|
|
|
|
| |||||||||||
$ | 44,934 | $ | 1,400,429 | $ | (188,804 | ) | $ | (96,330 | ) | $ | 1,160,629 | |||||||||
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|
47
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||
Net change in unrealized appreciation (depreciation) of derivatives recognized as a | Credit | Foreign exchange | Interest Rate | Equity | Total | |||||||||||||||
contracts | contracts | contracts | Contracts | |||||||||||||||||
Change in net unrealized appreciation or (depreciation) from forward currency transactions | $ | — | $ | 590,965 | $ | — | $ | — | $ | 590,965 | ||||||||||
Change in net unrealized appreciation or (depreciation) from futures contracts | — | — | 506,425 | — | 506,425 | |||||||||||||||
Change in net unrealized appreciation or (depreciation) from swap agreements | (84,003 | ) | — | 1,565,885 | — | 1,481,882 | ||||||||||||||
Change in net unrealized appreciation or (depreciation) from option and swaptions contracts | — | (4,051 | ) | (17,626 | ) | 8,367 | (13,310 | ) | ||||||||||||
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| |||||||||||
$ | (84,003 | ) | $ | 586,914 | $ | 2,054,684 | $ | 8,367 | $ | 2,565,962 | ||||||||||
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(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 Schedule of Investment footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
6. Principal Risks
Investing in the Fund may involve certain risks including, but not limited to, those described below.
Counterparty Risk
The Fund is subject to the risk that a party or participant to a transaction, such as a broker or derivative counterparty, will be unwilling or unable to satisfy its obligation to make timely principal, interest or settlement payments or to otherwise honor its obligations to the Funds.
Currency Risk
The Fund 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 Fund’s 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 Fund to additional risks that it would not be subject to if it invested directly in the securities or other instruments underlying those derivatives, including the high degree of leverage often embedded in such instruments, and potential material and prolonged deviations between the theoretical value and realizable value of a derivative. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment. Derivatives may be illiquid and may be more volatile than other types of investments. The Fund 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 Fund 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.
48
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
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.
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 Fund 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 Fund and may involve a small investment of cash (the amount of initial and variation margin) relative to the magnitude of the risk assumed (the potential increase or decrease in the price of the futures contract).
High Portfolio Turnover Risk
Portfolio turnover is a measure of the Fund’s trading activity over a one-year period. A portfolio turnover rate of 100% would indicate that the Fund sold and replaced the entire value of its securities holdings during the period. High portfolio turnover could increase the Fund’s transaction costs, have a negative impact on performance, and generate higher capital gain distributions to shareholders than if the Fund has 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 Fund will have the potential for greater losses than if the Fund 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.
49
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Liquidity Risk
Liquidity risk is the risk that the Fund 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 Fund 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 Fund 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 Fund 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 Fund. In some cases, due to unanticipated levels of illiquidity the Fund 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.
Multiple Sub-Advisor Risk
The Manager may allocate the Fund’s assets among multiple sub-advisors, each of which is responsible for investing its allocated portion of the Fund’s assets. To a significant extent, the Fund’s performance will depend on the success of the Manager in allocating the Fund’s assets to sub-advisors and its selection and oversight of the sub-advisors. Because each sub-adviser manages its allocated portion of the Fund independently from another sub-adviser, the same security may be held in different portions of the Fund, or may be acquired for one portion of the Fund at a time when a sub-adviser to another portion deems it appropriate to dispose of the security from that other portion, resulting in higher expenses without accomplishing any net result in the Fund’s holdings. Similarly, under some market conditions, one sub-adviser may believe that temporary, defensive investments in short-term instruments or cash are appropriate when another sub-adviser believes continued exposure to the equity or debt markets is appropriate for its allocated portion of the Fund. Because each sub-adviser directs the trading for its
50
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
own portion of the Fund, and does not aggregate its transactions with those of the other sub-advisors, the Fund may incur higher brokerage costs than would be the case if a single sub-adviser were managing the entire Fund. In addition, while the Manager seeks to allocate the Fund’s assets among the Fund’s sub-advisors in a manner that it believes is consistent with achieving the Fund’s investment objective(s), the Manager may be subject to potential conflicts of interest in allocating the Fund’s assets among sub-advisors, because the Manager pays different fees to the sub-adviser and due to other factors that could impact the Manager’s revenues and profits.
Non-Diversification Risk
The Fund is non-diversified, which means the Fund 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 Fund 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 Fund may invest in shares of other registered investment companies, including exchange-traded funds (“ETFs”). To the extent that the Fund 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 Fund’s 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 Fund 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 Fund 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 Fund is party to enforceable master netting agreements between brokers and counterparties, which provide for the right to offset under certain circumstances. The Fund employs multiple money managers and counterparties and has elected not to offset qualifying financial and derivative instruments on the Statement 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 February 28, 2017.
51
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Flexible Bond Fund
Offsetting of Financial and Derivative Assets as of February 28, 2017:
Description | Gross Amount of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Assets Presented in the Statement of Assets and Liabilities | |||||||||
Futures contracts(1) (2) | $ | 260,803 | $ | — | $ | 260,803 | ||||||
Swap Agreements | 143,494 | — | 143,494 | |||||||||
Purchased Options and Swaptions Contracts | 226,480 | — | 226,480 | |||||||||
Forward Currency Contracts | 405,752 | — | 405,752 | |||||||||
|
|
|
|
|
| |||||||
$ | 1,036,529 | $ | — | $ | 1,036,529 | |||||||
|
|
|
|
|
|
Offsetting of Financial and Derivative Liabilities as of February 28, 2017:
Description | Gross Amount of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Assets Presented in the Statement of Assets and Liabilities | |||||||||
Futures contracts(1) (2) | $ | (41,682 | ) | $ | — | $ | (41,682 | ) | ||||
Swap Agreements | (145,594 | ) | — | (145,594 | ) | |||||||
Written Options and Swaptions Contracts | (227,868 | ) | — | (227,868 | ) | |||||||
Forward Currency Contracts | (498,994 | ) | — | (498,994 | ) | |||||||
Reverse Repurchase Agreements | (10,750,375 | ) | — | (10,750,375 | ) | |||||||
|
|
|
|
|
| |||||||
$ | (11,664,513 | ) | $ | — | $ | (11,664,513 | ) | |||||
|
|
|
|
|
|
(1) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investment footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
(2) | The securities presented here within are not subject to master netting agreements. As such, this is disclosed for informational purposes only. |
52
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of February 28, 2017:
Gross Amounts Not Offset in the Statement of Assets and Liabilities | ||||||||||||||||
Counterparty | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||
Barclays Capital | $ | 5,360 | $ | — | $ | — | $ | 5,360 | ||||||||
BNP Paribas, N.A. | (122 | ) | — | — | (122 | ) | ||||||||||
Bank of America, N.A. | (40 | ) | — | — | (40 | ) | ||||||||||
Barclays Bank PLC | 19,818 | — | — | 19,818 | ||||||||||||
Bank of Nova Scotia | (5,286,750 | ) | 5,286,750 | — | — | |||||||||||
Bank of Montreal | (4,660,125 | ) | 4,660,125 | — | — | |||||||||||
CitiBank, N.A. | (114,600 | ) | — | — | (114,600 | ) | ||||||||||
Deutsche Bank AG | 27,215 | — | — | 27,215 | ||||||||||||
Credit Suisse International | (4,769 | ) | — | — | (4,769 | ) | ||||||||||
Credit Suisse Securities USA LLC | — | — | 608,000 | (608,000 | ) | |||||||||||
Goldman Sachs Bank USA | (9,329 | ) | — | — | (9,329 | ) | ||||||||||
Goldman Sachs Capital Markets LP(2) | (43,060 | ) | — | — | (43,060 | ) | ||||||||||
Goldman Sachs International | 305 | — | — | 305 | ||||||||||||
HSBC Bank USA | (8,067 | ) | — | — | (8,067 | ) | ||||||||||
JPMorgan Chase Bank, N.A. | 24,376 | — | — | 24,376 | ||||||||||||
Morgan Stanley & Co. Inc. (2) | 246,195 | — | 81,000 | 165,195 | ||||||||||||
Morgan Stanley Capital | (32,810 | ) | — | 833,000 | (865,810 | ) | ||||||||||
Options Clearing Corp. | 24,551 | — | — | 24,551 | ||||||||||||
Royal Bank of Canada | (11,671 | ) | — | — | (11,671 | ) | ||||||||||
Royal Bank of Scotland | (801,897 | ) | 803,500 | — | 1,603 | |||||||||||
State Street Bank and Trust Co. | (2,564 | ) | — | — | (2,564 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | (10,627,984 | ) | $ | 10,750,375 | $ | 1,522,000 | $ | (1,399,609 | ) | |||||||
|
|
|
|
|
|
|
|
(1) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investment footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
(2) | 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 Fund does not have any unrecorded tax liabilities in the accompanying financial statements. The tax years for the periods ended August 31, 2013, 2014, 2015, and 2016 remain 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 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.
53
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
The tax character of distributions paid were as follows:
Distributions paid from: | Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | ||||||
Ordinary Income* | ||||||||
Institutional Class | $ | 997,419 | $ | 4,097,696 | ||||
Y Class | 321,666 | 1,523,117 | ||||||
Investor Class | 30,526 | 230,372 | ||||||
A Class | 77,900 | 431,968 | ||||||
C Class | 16,465 | 135,648 | ||||||
Tax return of capital | ||||||||
Institutional Class A | — | 835,988 | ||||||
Y Class | — | 267,040 | ||||||
Investor Class | — | 22,402 | ||||||
A Class | — | 66,866 | ||||||
C Class | — | 20,519 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 1,443,976 | $ | 8,441,616 | ||||
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of February 28, 2017, the components of distributable earnings (deficit) on a tax basis were as follows:
Cost basis of investments for federal income tax purposes | $ | 147,664,831 | ||
Unrealized appreciation | 1,951,027 | |||
Unrealized depreciation | (6,167,380 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) | (4,216,353 | ) | ||
Undistributed ordinary income | 525,074 | |||
Undistributed long-term capital gains | — | |||
Accumulated capital and other losses | (15,811,298 | ) | ||
Other temporary differences | 180,356 | |||
|
| |||
Distributable earnings (deficits) | $ | (19,322,221 | ) | |
|
|
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 to the tax deferral of losses from wash sales and the realization for tax purposes of unrealized gain (losses) on certain derivative instruments.
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassed on the Statement of Assets and Liabilities.
Accordingly, the following reclassified amounts represent current year permanent differences derived from foreign currency, paydowns, swap income, and distributions as of February 28, 2017:
Paid-in-capital | $ | — | ||
Undistributed (over distribution of) net investment income (loss) | 1,278,487 | |||
Accumulated net realized gain (loss) | (1,278,487 | ) | ||
Unrealized appreciation (depreciation) of investments in futures contracts | — |
54
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by the Fund in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.
As of the six months ended February 28, 2017, the Fund has $7,551,723 short-term and $8,259,575 long-term post RIC MOD capital loss carryforwards.
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended February 28, 2017 were as follows:
Flexible Bond Fund | ||||
Purchases (excluding U.S. government securities) | $ | 216,376,536 | ||
Sales and Maturities (excluding U.S. government securities) | 233,203,571 | |||
Purchases of U.S. government securities | 111,010,591 | |||
Sales and Maturities of U.S. government securities) | 115,508,518 |
A summary of the Fund’s direct transactions in the USG Select Fund for the six months ended February 28, 2017 were as follows:
Fund | Type of Transaction | August 31, 2016 Shares/Fair Value | Purchases | Sales | February 28, 2017 Shares/Fair Value | Dividend Income | ||||||||||||||||||
Flexible Bond | Direct | $ | 8,925,543 | $ | 84,373,019 | $ | 84,364,607 | $ | 8,933,955 | $ | 18,225 |
9. Options Contracts Written
The premium amount and number of option contracts written during the six months ended February 28, 2017 were as follows:
Number of Contracts | Notional Amount | Amount of Premiums | ||||||||||
Outstanding at August 31, 2016 | (48,174,672 | ) | $ | (119,284,250 | ) | $ | (436,991 | ) | ||||
Options written | (7,800,076 | ) | (7,876,000 | ) | (98,921 | ) | ||||||
Options expired | 5,100,035 | 5,135,000 | 62,159 | |||||||||
Options exercised | 2,000,000 | 2,000,000 | 10,025 | |||||||||
Options closed | 18,200,013 | 18,213,000 | 22,643 | |||||||||
|
|
|
|
|
| |||||||
Outstanding at February 28, 2017 | (30,674,700 | ) | $ | (101,812,250 | ) | $ | (441,085 | ) | ||||
|
|
|
|
|
|
55
American Beacon Flexible Bond FundSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
10. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund:
Institutional Class | ||||||||||||||||
Six Months Ended | Year Ended | |||||||||||||||
February 28, 2017 | August 31, 2016 | |||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,155,039 | $ | 10,982,300 | 1,253,593 | $ | 11,901,600 | ||||||||||
Reinvestment of dividends | 104,934 | 997,229 | 610,155 | 5,737,848 | ||||||||||||
Shares redeemed | (2,377,901 | ) | (22,615,603 | ) | (8,764,349 | ) | (83,282,513 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (1,117,928 | ) | $ | (10,636,074 | ) | (6,900,601 | ) | $ | (65,643,065 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Six Months Ended | Year Ended | |||||||||||||||
February 28, 2017 | August 31, 2016 | |||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 143,129 | $ | 1,362,378 | 1,529,479 | $ | 14,454,546 | ||||||||||
Reinvestment of dividends | 33,851 | 321,666 | 190,192 | 1,788,305 | ||||||||||||
Shares redeemed | (740,371 | ) | (7,032,614 | ) | (2,860,953 | ) | (26,987,262 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (563,391 | ) | $ | (5,348,570 | ) | (1,141,282 | ) | $ | (10,744,411 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | ||||||||||||||||
Six Months Ended | Year Ended | |||||||||||||||
February 28, 2017 | August 31, 2016 | |||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 128,505 | $ | 1,225,547 | 185,116 | $ | 1,773,235 | ||||||||||
Reinvestment of dividends | 3,176 | 30,172 | 26,671 | 250,750 | ||||||||||||
Shares redeemed | (111,581 | ) | (1,060,729 | ) | (686,482 | ) | (6,474,510 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | 20,100 | $ | 194,990 | (474,695 | ) | $ | (4,450,525 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Six Months Ended | Year Ended | |||||||||||||||
February 28, 2017 | August 31, 2016 | |||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 78,252 | $ | 742,844 | 268,007 | $ | 2,522,372 | ||||||||||
Reinvestment of dividends | 6,657 | 62,954 | 38,237 | 357,761 | ||||||||||||
Shares redeemed | (213,078 | ) | (2,016,299 | ) | (941,907 | ) | (8,884,768 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (128,169 | ) | $ | (1,210,501 | ) | (635,663 | ) | $ | (6,004,635 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Six Months Ended | Year Ended | |||||||||||||||
February 28, 2017 | August 31, 2016 | |||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 15,378 | $ | 145,674 | 90,443 | $ | 848,758 | ||||||||||
Reinvestment of dividends | 1,688 | 15,967 | 15,968 | 149,103 | ||||||||||||
Shares redeemed | (138,678 | ) | (1,310,201 | ) | (449,242 | ) | (4,259,733 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (121,612 | ) | $ | (1,148,560 | ) | (342,831 | ) | $ | (3,261,872 | ) | ||||||
|
|
|
|
|
|
|
|
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 Fund’s financial statements through this date.
56
American Beacon Flexible Bond FundSM
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||
Six Months Ended | Year Ended August 31, | |||||||||||||||||||||||
February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.21 | $ | 10.48 | $ | 10.05 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.10 | 0.22 | 0.29 | 0.21 | 0.34 | 0.02 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.11 | (0.04 | ) | (0.57 | ) | 0.16 | (0.24 | ) | 0.59 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.21 | 0.18 | (0.28 | ) | 0.37 | 0.10 | 0.61 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.37 | ) | (0.28 | ) | (0.18 | ) | (0.23 | ) | (0.18 | ) | ||||||||||||
Distributions from net realized gains | — | — | — | (0.07 | ) | (0.14 | ) | — | ||||||||||||||||
Tax Return of Capital | — | (0.08 | )A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.10 | ) | (0.45 | ) | (0.28 | ) | (0.25 | ) | (0.37 | ) | (0.18 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.61 | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.21 | $ | 10.48 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 2.25 | %C | 1.94 | % | (2.79 | )% | 3.70 | % | 0.83 | % | 6.34 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 84,291,148 | $ | 93,936,262 | $ | 164,119,296 | $ | 177,201,454 | $ | 127,322,158 | $ | 13,095,452 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.12 | %D | 1.13 | % | 1.27 | % | 1.24 | % | 1.22 | % | 1.42 | % | ||||||||||||
Expenses, net of reimbursements | 0.90 | %D | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | ||||||||||||
Net investment income, before reimbursements | 2.51 | %D | 2.70 | % | 2.37 | % | 1.61 | % | 0.84 | % | 0.44 | % | ||||||||||||
Net investment income, net of reimbursements | 2.73 | %D | 2.93 | % | 2.74 | % | 1.94 | % | 1.15 | % | 0.96 | % | ||||||||||||
Portfolio turnover rate | 150 | %C | 162 | % | 492 | % | 387 | % | 112 | % | 88 | % | ||||||||||||
Y Class | ||||||||||||||||||||||||
Six Months Ended | Year Ended August 31, | |||||||||||||||||||||||
February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.22 | $ | 10.51 | $ | 10.05 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.07 | 0.21 | 0.29 | 0.18 | 0.22 | 0.10 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.13 | (0.04 | ) | (0.58 | ) | 0.17 | (0.15 | ) | 0.53 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.20 | 0.17 | (0.29 | ) | 0.35 | 0.07 | 0.63 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.37 | ) | (0.27 | ) | (0.17 | ) | (0.22 | ) | (0.17 | ) | ||||||||||||
Distributions from net realized gains | — | — | — | (0.07 | ) | (0.14 | ) | — | ||||||||||||||||
Tax Return of Capital | ��� | (0.07 | )A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.10 | ) | (0.44 | ) | (0.27 | ) | (0.24 | ) | (0.36 | ) | (0.17 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.60 | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.22 | $ | 10.51 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 2.15 | %C | 1.83 | % | (2.87 | )% | 3.51 | % | 0.58 | % | 6.20 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 27,140,137 | $ | 32,193,869 | $ | 44,284,677 | $ | 38,033,706 | $ | 39,897,599 | $ | 13,131,982 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.19 | %D | 1.19 | % | 1.34 | % | 1.29 | % | 1.26 | % | 1.49 | % | ||||||||||||
Expenses, net of reimbursements | 0.99 | %D | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||||
Net investment income, before reimbursements | 2.41 | %D | 2.67 | % | 2.33 | % | 1.51 | % | 0.91 | % | 0.54 | % | ||||||||||||
Net investment income, net of reimbursements | 2.61 | %D | 2.86 | % | 2.68 | % | 1.81 | % | 1.19 | % | 1.04 | % | ||||||||||||
Portfolio turnover rate | 150 | %C | 162 | % | 492 | % | 387 | % | 112 | % | 88 | % |
A | The tax return of capital is calculated based on shares outstanding at time of distribution. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
57
American Beacon Flexible Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||
Six Months Ended | Year Ended August 31, | |||||||||||||||||||||||
February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.50 | $ | 9.76 | $ | 10.31 | $ | 10.21 | $ | 10.51 | $ | 10.07 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.27 | (1.27 | ) | (0.33 | ) | 0.02 | 0.18 | 0.09 | ||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.08 | ) | 1.41 | 0.01 | 0.30 | (0.13 | ) | 0.52 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.19 | 0.14 | (0.32 | ) | 0.32 | 0.05 | 0.61 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.33 | ) | (0.23 | ) | (0.15 | ) | (0.21 | ) | (0.17 | ) | ||||||||||||
Distributions from net realized gains | — | — | — | (0.07 | ) | (0.14 | ) | — | ||||||||||||||||
Tax Return of Capital | — | (0.07 | )A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.09 | ) | (0.40 | ) | (0.23 | ) | (0.22 | ) | (0.35 | ) | (0.17 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.60 | $ | 9.50 | $ | 9.76 | $ | 10.31 | $ | 10.21 | $ | 10.51 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 2.05 | %C | 1.57 | % | (3.11 | )% | 3.13 | % | 0.38 | % | 5.99 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 3,069,467 | $ | 2,846,444 | $ | 7,560,586 | $ | 24,410,567 | $ | 56,015,406 | $ | 21,245,367 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.40 | %D | 1.42 | % | 1.51 | % | 1.43 | % | 1.54 | % | 1.76 | % | ||||||||||||
Expenses, net of reimbursements | 1.27 | %D | 1.27 | % | 1.27 | % | 1.27 | % | 1.27 | % | 1.27 | % | ||||||||||||
Net investment income, before reimbursements | 2.23 | %D | 2.39 | % | 2.15 | % | 1.34 | % | 0.65 | % | 0.30 | % | ||||||||||||
Net investment income, net of reimbursements | 2.35 | %D | 2.53 | % | 2.38 | % | 1.50 | % | 0.92 | % | 0.79 | % | ||||||||||||
Portfolio turnover rate | 150 | %C | 162 | % | 492 | % | 387 | % | 112 | % | 88 | % | ||||||||||||
A Class | ||||||||||||||||||||||||
Six Months Ended | Year Ended August 31, | |||||||||||||||||||||||
February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.45 | $ | 9.72 | $ | 10.27 | $ | 10.16 | $ | 10.49 | $ | 10.06 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.01 | 0.02 | 0.12 | 0.10 | 0.21 | 0.07 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.18 | 0.11 | (0.44 | ) | 0.21 | (0.18 | ) | 0.51 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.19 | 0.13 | (0.32 | ) | 0.31 | 0.03 | 0.58 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.33 | ) | (0.23 | ) | (0.13 | ) | (0.22 | ) | (0.15 | ) | ||||||||||||
Distributions from net realized gains | — | — | — | (0.07 | ) | (0.14 | ) | — | ||||||||||||||||
Tax Return of Capital | — | (0.07 | )A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.09 | ) | (0.40 | ) | (0.23 | ) | (0.20 | ) | (0.36 | ) | (0.15 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.55 | $ | 9.45 | $ | 9.72 | $ | 10.27 | $ | 10.16 | $ | 10.49 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 2.03 | %C | 1.49 | % | (3.14 | )% | 3.12 | % | 0.16 | % | 5.70 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 7,629,187 | $ | 8,757,769 | $ | 15,190,886 | $ | 27,146,489 | $ | 41,376,389 | $ | 10,386,943 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.52 | %D | 1.52 | % | 1.66 | % | 1.68 | % | 1.67 | % | 1.93 | % | ||||||||||||
Expenses, net of reimbursements | 1.30 | %D | 1.29 | % | 1.29 | % | 1.38 | % | 1.39 | % | 1.39 | % | ||||||||||||
Net investment income, before reimbursements | 2.09 | %D | 2.31 | % | 1.95 | % | 1.10 | % | 0.50 | % | 0.05 | % | ||||||||||||
Net investment income, net of reimbursements | 2.32 | %D | 2.53 | % | 2.32 | % | 1.40 | % | 0.79 | % | 0.59 | % | ||||||||||||
Portfolio turnover rate | 150 | %C | 162 | % | 492 | % | 387 | % | 112 | % | 88 | % |
A | The tax return of capital is calculated based on shares outstanding at time of distribution. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
58
American Beacon Flexible Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||
Six Months Ended | Year Ended August 31, | |||||||||||||||||||||||
February 28, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.44 | $ | 9.69 | $ | 10.22 | $ | 10.11 | $ | 10.49 | $ | 10.09 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | (0.21 | ) | (0.08 | ) | 0.07 | 0.02 | 0.14 | 0.04 | ||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.36 | 0.14 | (0.46 | ) | 0.22 | (0.19 | ) | 0.48 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.15 | 0.06 | (0.39 | ) | 0.24 | (0.05 | ) | 0.52 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.05 | ) | (0.26 | ) | (0.14 | ) | (0.06 | ) | (0.19 | ) | (0.12 | ) | ||||||||||||
Distributions from net realized gains | — | — | — | (0.07 | ) | (0.14 | ) | — | ||||||||||||||||
Tax Return of Capital | — | (0.05 | )A | — | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.05 | ) | (0.31 | ) | (0.14 | ) | (0.13 | ) | (0.33 | ) | (0.12 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 9.54 | $ | 9.44 | $ | 9.69 | $ | 10.22 | $ | 10.11 | $ | 10.49 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return B | 1.62 | %C | 0.68 | % | (3.81 | )% | 2.37 | % | (0.54 | )% | 5.15 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 2,593,811 | $ | 3,713,433 | $ | 7,133,191 | $ | 11,126,819 | $ | 15,291,798 | $ | 5,640,482 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 2.26 | %D | 2.26 | % | 2.40 | % | 2.43 | % | 2.43 | % | 2.74 | % | ||||||||||||
Expenses, net of reimbursements | 2.05 | %D | 2.04 | % | 2.04 | % | 2.13 | % | 2.14 | % | 2.14 | % | ||||||||||||
Net investment income (loss), before reimbursements | 1.34 | %D | 1.55 | % | 1.21 | % | 0.35 | % | (0.24 | )% | (0.73 | )% | ||||||||||||
Net investment income (loss), net of reimbursements | 1.55 | %D | 1.77 | % | 1.57 | % | 0.66 | % | 0.04 | % | (0.13 | )% | ||||||||||||
Portfolio turnover rate | 150 | %C | 162 | % | 492 | % | 387 | % | 112 | % | 88 | % |
A | The tax return of capital is calculated based on shares outstanding at time of distribution. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
59
American Beacon FundSM
February 28, 2017 (Unaudited)
To the best of my knowledge and belief, the information contained in the attached financial statements for the period from September 1, 2016 to February 28, 2017, is accurate and complete.
Melinda G. Heika, Treasurer
American Beacon Advisors, Inc.
Commodity Pool Operator for the American Beacon AHL Managed Futures Strategy Fund
60
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 and C 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 sixty days after the end of each quarter. | A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www. sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
| ||||||||||||
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds and American Beacon Flexible Bond Fund are service marks of American Beacon Advisors, Inc. |
SAR 2/17 |
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.
THE LONDON COMPANY INCOME EQUITY FUND
Investing in small- and medium-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in dividend-paying stocks may result in less earnings growth or capital appreciation than investing in non-dividend paying stocks. 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. The use of futures contracts for cash management may subject the Fund to losing more money than invested. There can be no assurances that the investment objectives of this Fund will be met.
ZEBRA SMALL CAP EQUITY FUND
Investing in small-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. At times, certain securities may have limited marketability and may be difficult to sell. 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. 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 | February 28, 2017 |
1 | ||||
2 | ||||
6 | ||||
Schedules of Investments: | ||||
8 | ||||
10 | ||||
19 | ||||
22 | ||||
Financial Highlights: | ||||
39 | ||||
42 | ||||
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%. From Inauguration Day to February 28, it gained approximately 4%. | ||
Economists anticipated the Federal Reserve would increase the federal funds rate – perhaps as early as mid-March. The Federal Open Market Committee’s confidence in the improving U.S. economy was exhibited in December 2016 when short-term interest rates increased by 0.25% to a range of 0.50% to 0.75%. It was the second increase since 2008; the first increase occurred in December 2015. |
For the six-month period that ended February 28, 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 14.51%; and the S&P 500 Index, a domestic equity bellwether, grew 10.01%. In contrast, during the same period, the Bloomberg Barclays Capital U.S. Aggregate Index, a benchmark for domestic corporate and government bonds, returned -2.19%; and the Bank of America Merrill Lynch U.S. High Yield Master II Index, which represents domestic, below-investment-grade corporate debt, returned 5.54%.
For the 6 months ended February 28, 2017:
• | American Beacon The London Company Income Equity Fund (Investor Class) returned 7.12%. |
• | American Beacon Zebra Small Cap Equity Fund (Investor Class) returned 13.69%. |
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. We are pleased to have a broad range of products that cover the global equity and fixed income markets. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, |
![]() |
Gene L. Needles, Jr. |
President |
American Beacon Funds |
1
American Beacon The London Company Income Equity FundSM
February 28, 2017 (Unaudited)
The Investor Class of the American Beacon The London Company Income Equity Fund (the “Fund”) returned 7.12% for the six months ended February 28, 2017. The Fund underperformed the Russell 1000 Value Index (the “Index”) return of 11.07% for the same period.
Total Returns for the Period ended February 28, 2017
Ticker | 6 Months* | 1 Year | 3 Years | Since Inception 5/29/2012 | ||||||||||||||||
Institutional Class (1,2,4) | ABCIX | 7.21 | % | 20.00 | % | 10.52 | % | 13.53 | % | |||||||||||
Y Class (1,2,4) | ABCYX | 7.19 | % | 19.86 | % | 10.45 | % | 13.44 | % | |||||||||||
Investor Class (1,2,4) | ABCVX | 7.12 | % | 19.62 | % | 10.20 | % | 13.16 | % | |||||||||||
A without Sales Charge (1,2,4) | ABCAX | 6.99 | % | 19.51 | % | 10.09 | % | 13.03 | % | |||||||||||
A with Sales Charge (1,2,4) | ABCAX | 0.85 | % | 12.67 | % | 7.94 | % | 11.63 | % | |||||||||||
C without Sales Charge (1,2,4) | ABECX | 6.63 | % | 18.72 | % | 9.29 | % | 12.21 | % | |||||||||||
C with Sales Charge (1,2,4) | ABECX | 5.63 | % | 17.72 | % | 9.29 | % | 12.21 | % | |||||||||||
Russell 1000 Value Index (3) | 11.07 | % | 29.13 | % | 9.90 | % | 15.43 | % |
* | Not annualized. |
1. | Please note that the recent performance of the stock market has helped produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is 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 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. | A portion of the fees charged to the Y, A, and C Classes of the Fund was waived from 2012 through 2014 and partially recovered in 2015. Performance prior to waiving fees was lower than the actual returns shown from 2012 through 2014. A portion of the fees charged to the Investor Class of the Fund was waived in 2012 and 2013 and partially recovered in 2014 and 2015. Performance prior to waiving fees was lower than actual returns shown in 2012 and 2013. A portion of the fees charged to the Institutional Class of the Fund was waived from 2012 through 2014 and partially recovered in 2015 and 2016. Performance prior to waiving fees was lower than actual returns shown from 2012 through 2014. |
3. | The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 1000® Value Index and Russell 1000 Index are registered trademarks of the Frank Russell Company. One cannot directly invest in an index. |
4. | The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.76%, 0.83%, 1.07%, 1.14%, and 1.88%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund’s underperformance relative to the Index was primarily attributable to security selection among the various economic sectors, and to a lesser extent, sector allocation.
From a security selection standpoint, the Fund’s holdings in the Financials, Information Technology and Materials sectors detracted from performance. In the Financials sector, the Fund’s absence from Bank of America and JP Morgan Chase, which were up 53.5% and 36.0%, respectively, in the Index, negatively impacted performance. Cincinnati Financial (down 4.2%) also detracted from performance in the Financials sector. In the Information Technology sector, CA (down 3.3%) was the largest detractor. The Fund’s larger allocation in New Market Corp (up 1.2%) and The Mosaic Company (up 6.7%), both of which underperformed the sector, hurt performance in the Materials sector. The aforementioned poor selection was somewhat offset by good security selection in the Industrials sector. Companies in the Industrials sector contributing to performance included Norfolk Southern (up 30.3%) and General Dynamics (up 25.8%).
From a sector allocation perspective, the Fund’s significant underweight in Financials, the best performing sector in the Index, detracted from performance. An overweight position in the Consumer Staples sector also detracted from the Fund’s return. Underweight positions in Real Estate and Energy, two of the poorer performing sectors, added relative value.
2
American Beacon The London Company Income Equity FundSM
Performance Overview
February 28, 2017 (Unaudited)
The sub-advisor’s investment process continues to focus on downside protection, current income and capital appreciation.
Top Ten Holdings (% Net Assets) | ||||||||
General Dynamics Corp. | 5.3 | |||||||
Wells Fargo & Co. | 5.3 | |||||||
Altria Group, Inc. | 5.0 | |||||||
Norfolk Southern Corp. | 4.6 | |||||||
Carnival Corp. | 4.3 | |||||||
General Electric Co. | 4.1 | |||||||
Philip Morris International, Inc. | 3.9 | |||||||
Merck & Co., Inc. | 3.7 | |||||||
BlackRock, Inc. | 3.5 | |||||||
Cincinnati Financial Corp. | 3.5 | |||||||
Total Fund Holdings | 31 | |||||||
Sector Allocation (% Equities) | ||||||||
Consumer Staples | 21.2 | |||||||
Information Technology | 15.3 | |||||||
Financials | 14.9 | |||||||
Industrials | 14.4 | |||||||
Health Care | 10.0 | |||||||
Consumer Discretionary | 8.8 | |||||||
Energy | 4.7 | |||||||
Materials | 4.3 | |||||||
Utilities | 3.5 | |||||||
Telecommunication Services | 2.9 |
3
American Beacon Zebra Small Cap Equity FundSM
Performance Overview
February 28, 2017 (Unaudited)
The Investor Class of the American Beacon Zebra Small Cap Equity Fund (the “Fund”) returned 13.69% for the six-month period ended February 28, 2017. The Fund outperformed the Russell 2000® Index (the “Index”) return of 12.61% for the same period.
Total Returns for the Period ended February 28, 2017
Ticker | 6 months* | 1 Year | 3 Years | 5 Years | Since Inception (6/1/2010) | |||||||||||||||||||
Institutional Class (1,3,5) | AZSIX | 13.95 | % | 31.96 | % | 9.27 | % | 13.67 | % | 14.41 | % | |||||||||||||
Y Class (1,3,5). | AZSYX | 13.82 | % | 31.83 | % | 9.16 | % | 13.57 | % | 14.29 | % | |||||||||||||
Investor Class (1,3,5) | AZSPX | 13.69 | % | 31.47 | % | 8.86 | % | 13.25 | % | 13.97 | % | |||||||||||||
A without Sales Charge (1,3,5) | AZSAX | 13.68 | % | 31.44 | % | 8.85 | % | 13.18 | % | 13.89 | % | |||||||||||||
A with Sales Charge (1,3,5) | AZSAX | 7.12 | % | 23.90 | % | 6.73 | % | 11.85 | % | 12.90 | % | |||||||||||||
C without Sales Charge (1,2,3,5) | AZSCX | 13.30 | % | 30.46 | % | 8.02 | % | 12.32 | % | 13.06 | % | |||||||||||||
C with Sales Charge (1,2,3,5) | AZSCX | 12.30 | % | 29.46 | % | 8.02 | % | 12.32 | % | 13.06 | % | |||||||||||||
Russell 2000 Index (4) | 12.61 | % | 36.11 | % | 6.93 | % | 12.89 | % | 13.66 | % |
* | Not annualized. |
1. | Please note that the recent growth in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is 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 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 Class shares have a maximum sales charge of 5.75%. |
2. | Fund performance represents the total returns achieved by the Investor Class from 6/1/10 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 6/1/10. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase. |
3. | 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. |
4. | The Russell 2000 Index is an unmanaged index comprised of approximately 2,000 smaller-capitalization stocks from various industrial sectors. Russell 2000 Index is a registered trademark of the Frank Russell Company. One cannot directly invest in an index. |
5. | 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 1.54%, 1.59%, 1.75%, 1.91%, and 2.66%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund’s investment strategy is primarily focused on identifying fundamentally attractive companies with relatively low trading volumes. The sub-advisor believes that when these quality companies are recognized by investors, trading volumes are likely to increase and stock prices are likely to rise. Reporting attribution based on trading volume can be difficult; however, several traditional attribution factors are helpful in understanding the Fund’s returns.
During the quarter, the value segment of the small-cap market significantly outperformed growth. The Russell 2000 Index returned 12.61%, with the Russell 2000 Value Index returning 15.80%, and the Russell 2000 Growth Index returning 9.39%. The outperformance in value was primarily due to a recovery in Financials and in commodity-sensitive sectors (Energy and Materials) based on improved economic growth, rising interest rates, stable oil prices, and the surprise Trump election. The Fund invested significantly in value stocks.
The Fund’s allocation across sectors was generally in line with the Russell 2000 Index at +/-2% weights. The Fund did have a slight overweight (approximately 4%) in the Financial sector, which was one of the best performing sectors, but the strategy is not based on active sector allocation. The majority of performance is attributed to security selection – identifying fundamentally attractive companies with relatively low trading volumes.
4
American Beacon Zebra Small Cap Equity FundSM
Performance Overview
February 28, 2017 (Unaudited)
Market capitalization did not play a significant role during the period. The Fund’s weighted-average market capitalization of $1.6 billion was slightly smaller than that of the Russell 2000 Index, at $2.3 billion, but the market cap effect on returns was not as significant as the value/growth effect.
The sub-advisor continues to focus on uncovering opportunities by investing in a portfolio of securities that are generally less popular with investors but nevertheless have strong fundamental characteristics. At the same time, the portfolio will be underweight stocks that are heavily followed but have weak fundamentals.
Top Ten Holdings (% Net Assets) | ||||||||
Enstar Group Ltd. | 1.8 | |||||||
Sanmina Corp. | 1.7 | |||||||
Columbia Sportswear Co. | 1.4 | |||||||
Deluxe Corp. | 1.3 | |||||||
National General Holdings Corp. | 1.3 | |||||||
West Corp. | 1.3 | |||||||
j2 Global, Inc. | 1.2 | |||||||
Selective Insurance Group, Inc. | 1.2 | |||||||
Syntel, Inc. | 1.2 | |||||||
Allegiant Travel Co. | 1.1 | |||||||
Total Fund Holdings | 284 | |||||||
Sector Allocation (% Equities) | ||||||||
Financials | 22.4 | |||||||
Information Technology | 16.5 | |||||||
Industrials | 15.5 | |||||||
Consumer Discretionary | 14.0 | |||||||
Health Care | 12.6 | |||||||
Real Estate | 7.8 | |||||||
Materials | 3.8 | |||||||
Consumer Staples | 3.1 | |||||||
Utilities | 2.9 | |||||||
Energy | 1.0 | |||||||
Telecommunication Services | 0.4 |
5
American Beacon FundsSM
February 28, 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 September 1, 2016 through February 28, 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 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 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.
6
American Beacon FundsSM
Expense Examples
February 28, 2017 (Unaudited)
The London Company Income Equity Fund
Beginning Account Value 9/1/2016 | Ending Account Value 2/28/2017 | Expenses Paid During Period 9/1/2016-2/28/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,072.10 | $ | 3.75 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,021.19 | $ | 3.66 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,071.94 | $ | 4.16 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.80 | $ | 4.06 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,071.24 | $ | 5.39 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.61 | $ | 5.26 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,069.91 | $ | 5.70 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.28 | $ | 5.56 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,066.32 | $ | 9.53 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,015.57 | $ | 9.30 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.73%, 0.81%, 1.05%, 1.11%, and 1.86% 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 (181) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
Zebra Small Cap Equity Fund
Beginning Account Value 9/1/2016 | Ending Account Value 2/28/2017 | Expenses Paid During Period 9/1/2016-2/28/2017* | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,139.53 | $ | 4.77 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,020.33 | $ | 4.51 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,138.25 | $ | 5.30 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,019.86 | $ | 5.01 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,136.86 | $ | 6.78 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.46 | $ | 6.41 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,136.77 | $ | 6.89 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,018.37 | $ | 6.51 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,133.01 | $ | 10.84 | ||||||
Hypothetical** | $ | 1,000.00 | $ | 1,014.64 | $ | 10.24 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.90%, 1.00%, 1.28%, 1.30%, and 2.05% 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 (181) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
7
American Beacon The London Company Income Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
COMMON STOCK - 97.50% | ||||||||
CONSUMER DISCRETIONARY - 8.59% | ||||||||
Hotels, Restaurants & Leisure - 4.25% | ||||||||
Carnival Corp. | 906,290 | $ | 50,706,926 | |||||
|
| |||||||
Leisure Equipment & Products - 2.35% | ||||||||
Hasbro, Inc. | 289,627 | 28,056,167 | ||||||
|
| |||||||
Specialty Retail - 1.99% | ||||||||
Lowe’s Cos., Inc. | 318,988 | 23,723,138 | ||||||
|
| |||||||
Total Consumer Discretionary | 102,486,231 | |||||||
|
| |||||||
CONSUMER STAPLES - 20.74% | ||||||||
Beverages - 6.20% | ||||||||
Coca-Cola Co. | 916,327 | 38,449,081 | ||||||
Diageo PLC, Sponsored ADRA B | 310,580 | 35,502,400 | ||||||
|
| |||||||
73,951,481 | ||||||||
|
| |||||||
Food Products - 3.44% | ||||||||
General Mills, Inc. | 679,780 | 41,038,319 | ||||||
|
| |||||||
Tobacco - 11.10% | ||||||||
Altria Group, Inc. | 796,080 | 59,642,314 | ||||||
Philip Morris International, Inc. | 425,700 | 46,550,295 | ||||||
Reynolds American, Inc. | 424,704 | 26,149,025 | ||||||
|
| |||||||
132,341,634 | ||||||||
|
| |||||||
Total Consumer Staples | 247,331,434 | |||||||
|
| |||||||
ENERGY - 4.61% | ||||||||
Oil & Gas - 4.61% | ||||||||
Chevron Corp. | 267,974 | 30,147,075 | ||||||
Kinder Morgan, Inc. | 1,164,135 | 24,807,717 | ||||||
|
| |||||||
Total Energy | 54,954,792 | |||||||
|
| |||||||
FINANCIALS - 14.51% | ||||||||
Diversified Financials - 8.79% | ||||||||
BlackRock, Inc. | 108,142 | 41,900,699 | ||||||
Wells Fargo & Co. | 1,088,163 | 62,982,874 | ||||||
|
| |||||||
104,883,573 | ||||||||
|
| |||||||
Insurance - 5.72% | ||||||||
Berkshire Hathaway, Inc., Class BC | 157,070 | 26,924,939 | ||||||
Cincinnati Financial Corp. | 565,661 | 41,270,627 | ||||||
|
| |||||||
68,195,566 | ||||||||
|
| |||||||
Total Financials | 173,079,139 | |||||||
|
| |||||||
HEALTH CARE - 9.80% | ||||||||
Pharmaceuticals - 9.80% | ||||||||
Eli Lilly & Co. | 448,428 | 37,134,323 | ||||||
Merck & Co., Inc. | 667,923 | 43,996,088 | ||||||
Pfizer, Inc. | 1,046,903 | 35,720,330 | ||||||
|
| |||||||
Total Health Care | 116,850,741 | |||||||
|
| |||||||
INDUSTRIALS - 14.00% | ||||||||
Aerospace & Defense - 5.28% | ||||||||
General Dynamics Corp. | 331,525 | 62,926,760 | ||||||
|
| |||||||
Industrial Conglomerates - 4.13% | ||||||||
General Electric Co. | 1,653,940 | 49,303,951 | ||||||
|
|
See accompanying notes
8
American Beacon The London Company Income Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
INDUSTRIALS - 14.00% (continued) | ||||||||
Road & Rail - 4.59% | ||||||||
Norfolk Southern Corp. | 452,720 | $ | 54,792,702 | |||||
|
| |||||||
Total Industrials | 167,023,413 | |||||||
|
| |||||||
INFORMATION TECHNOLOGY - 14.87% | ||||||||
Communications Equipment - 3.24% | ||||||||
Cisco Systems, Inc. | 1,131,320 | 38,668,518 | ||||||
|
| |||||||
IT Consulting & Services - 2.57% | ||||||||
Paychex, Inc | 498,991 | 30,648,027 | ||||||
|
| |||||||
Semiconductor Equipment & Products - 2.88% | ||||||||
Intel Corp. | 947,761 | 34,308,948 | ||||||
|
| |||||||
Software - 6.18% | ||||||||
CA, Inc. | 1,127,170 | 36,373,776 | ||||||
Microsoft Corp. | 583,848 | 37,354,595 | ||||||
|
| |||||||
73,728,371 | ||||||||
|
| |||||||
Total Information Technology | 177,353,864 | |||||||
|
| |||||||
MATERIALS - 4.22% | ||||||||
Chemicals - 4.22% | ||||||||
NewMarket Corp. | 65,291 | 28,446,636 | ||||||
The Mosaic Co. | 701,080 | 21,866,685 | ||||||
|
| |||||||
Total Materials | 50,313,321 | |||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 2.79% | ||||||||
Diversified Telecommunication Services - 2.79% | ||||||||
Verizon Communications, Inc. | 671,379 | 33,320,540 | ||||||
|
| |||||||
UTILITIES - 3.37% | ||||||||
Electric - 3.37% | ||||||||
Dominion Resources, Inc. | 216,378 | 16,799,588 | ||||||
Duke Energy Corp. | 283,401 | 23,394,752 | ||||||
|
| |||||||
Total Utilities | 40,194,340 | |||||||
|
| |||||||
Total Common Stock (Cost $990,108,206) | 1,162,907,815 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS - 2.17% (Cost $25,915,827) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassD | 25,915,827 | 25,915,827 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.67% (Cost $1,016,024,033) | 1,188,823,642 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 0.33% | 3,974,882 | |||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 1,192,798,524 | ||||||
|
| |||||||
Percentages are stated as a percent of net assets. |
|
A | PLC - Public Limited Company. |
B | ADR - American Depositary Receipt. |
C | Non-income producing security. |
D | The Fund is affiliated by having the same investment advisor. |
Futures Contracts Open on February 28, 2017:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
S&P 500 E-Mini Index Futures | Long | 205 | March 2017 | $ | 24,218,700 | $ | 536,643 | |||||||||||||
|
|
|
| |||||||||||||||||
$ | 24,218,700 | $ | 536,643 | |||||||||||||||||
|
|
|
|
See accompanying notes
9
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
COMMON STOCK - 94.80% | ||||||||
COMMUNICATIONS - 0.05% | ||||||||
Internet Software & Services - 0.05% | ||||||||
DHI Group, Inc.A | 3,606 | $ | 17,850 | |||||
|
| |||||||
CONSUMER DISCRETIONARY - 13.31% | ||||||||
Auto Components - 1.27% | ||||||||
Gentherm, Inc.A | 3,936 | 142,680 | ||||||
Modine Manufacturing Co.A | 8,635 | 98,007 | ||||||
Standard Motor Products, Inc. | 3,310 | 158,781 | ||||||
Stoneridge, Inc.A | 4,612 | 77,897 | ||||||
|
| |||||||
477,365 | ||||||||
|
| |||||||
Diversified Consumer Services - 0.09% | ||||||||
Cambium Learining Group, Inc.A | 6,859 | 33,403 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure - 1.07% | ||||||||
Century Casinos, Inc.A | 3,219 | 22,018 | ||||||
Eldorado Resorts, Inc.A | 11,020 | 179,626 | ||||||
Golden Entertainment, Inc. | 5,727 | 67,865 | ||||||
Monarch Casino & Resort, Inc.A | 2,829 | 72,083 | ||||||
Ruth’s Hospitality Group, Inc. | 3,510 | 59,144 | ||||||
|
| |||||||
400,736 | ||||||||
|
| |||||||
Household Durables - 2.51% | ||||||||
Bassett Furniture Industries, Inc. | 1,629 | 44,553 | ||||||
CSS Industries, Inc. | 1,766 | 43,408 | ||||||
Flexsteel Industries, Inc. | 1,332 | 66,973 | ||||||
Haverty Furniture Companies, Inc. | 2,309 | 53,569 | ||||||
HNI Corp. | 6,411 | 293,752 | ||||||
Hooker Furniture Corp. | 1,478 | 48,774 | ||||||
Kimball International, Inc., Class B | 5,042 | 82,689 | ||||||
Knoll, Inc. | 7,828 | 174,956 | ||||||
Lifetime Brands, Inc. | 2,616 | 37,932 | ||||||
National Presto Industries, Inc. | 942 | 93,823 | ||||||
|
| |||||||
940,429 | ||||||||
|
| |||||||
Internet & Catalog Retail - 1.70% | ||||||||
HSN, Inc. | 9,417 | 355,021 | ||||||
Insight Enterprises, Inc.A | 5,808 | 246,027 | ||||||
Systemax, Inc. | 4,600 | 36,340 | ||||||
|
| |||||||
637,388 | ||||||||
|
| |||||||
Leisure Equipment & Products - 1.72% | ||||||||
Allegiant Travel Co. | 2,462 | 428,634 | ||||||
Escalade, Inc. | 2,423 | 31,499 | ||||||
Malibu Boats, Inc., Class AA | 3,030 | 62,297 | ||||||
Marine Products Corp. | 6,033 | 64,070 | ||||||
Sportsman’s Warehouse Holdings, Inc.A | 12,135 | 58,855 | ||||||
|
| |||||||
645,355 | ||||||||
|
| |||||||
Media - 0.12% | ||||||||
Saga Communications, Inc., Class A | 873 | 43,563 | ||||||
|
| |||||||
Multiline Retail - 0.46% | ||||||||
Fox Factory Holding Corp.A | 4,789 | 128,345 | ||||||
Stein Mart, Inc. | 11,752 | 42,307 | ||||||
|
| |||||||
170,652 | ||||||||
|
| |||||||
Specialty Retail - 2.19% | ||||||||
Ascena Retail Group, Inc.A | 18,502 | 85,109 | ||||||
Caleres, Inc. | 5,777 | 172,559 | ||||||
Cato Corp., Class A | 4,292 | 107,343 |
See accompanying notes
10
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
CONSUMER DISCRETIONARY - 13.31% (continued) | ||||||||
Specialty Retail - 2.19% (continued) | ||||||||
Citi Trends, Inc. | 1,463 | $ | 24,388 | |||||
Essendant, Inc. | 5,862 | 93,382 | ||||||
Kirkland’s, Inc. | 2,637 | 29,798 | ||||||
PC Connection, Inc. | 5,442 | 145,628 | ||||||
Shoe Carnival, Inc. | 3,118 | 79,010 | ||||||
West Marine, Inc.A | 2,367 | 21,753 | ||||||
Winmark Corp. | 541 | 61,376 | ||||||
|
| |||||||
820,346 | ||||||||
|
| |||||||
Textiles & Apparel - 2.18% | ||||||||
Columbia Sportswear Co. | 9,579 | 526,270 | ||||||
G-III Apparel Group Ltd.A | 4,818 | 123,967 | ||||||
Perry Ellis International, Inc. | 2,822 | 65,724 | ||||||
Superior Uniform Group, Inc. | 2,696 | 49,391 | ||||||
Weyco Group, Inc. | 1,837 | 50,297 | ||||||
|
| |||||||
815,649 | ||||||||
|
| |||||||
Total Consumer Discretionary | 4,984,886 | |||||||
|
| |||||||
CONSUMER STAPLES - 2.93% | ||||||||
Food & Drug Retailing - 1.58% | ||||||||
Seneca Foods Corp., Class AA. | 2,690 | 101,010 | ||||||
SpartanNash Co. | 5,823 | 203,223 | ||||||
Village Super Market, Inc., Class A | 2,194 | 64,964 | ||||||
Weis Markets, Inc. | 3,717 | 223,020 | ||||||
|
| |||||||
592,217 | ||||||||
|
| |||||||
Food Products - 0.28% | ||||||||
Farmer Brothers Co.A | 3,253 | 106,292 | ||||||
|
| |||||||
Household Products - 0.11% | ||||||||
Oil-Dri Corp of America | 1,160 | 40,924 | ||||||
|
| |||||||
Personal Products - 0.96% | ||||||||
Revlon, Inc., Class AA | 10,668 | 358,445 | ||||||
|
| |||||||
Total Consumer Staples | 1,097,878 | |||||||
|
| |||||||
ENERGY - 0.91% | ||||||||
Energy Equipment & Services - 0.19% | ||||||||
Matrix Service Co.A | 4,411 | 71,458 | ||||||
|
| |||||||
Oil & Gas - 0.72% | ||||||||
Dorian LPG Ltd.A | 23,202 | 218,563 | ||||||
Evolution Petroleum Corp. | 5,590 | 48,913 | ||||||
|
| |||||||
267,475 | ||||||||
|
| |||||||
Total Energy | 338,934 | |||||||
|
| |||||||
FINANCIALS - 21.10% | ||||||||
Banks - 8.27% | ||||||||
1st Source Corp. | 3,786 | 176,844 | ||||||
American National Bankshares, Inc. | 1,152 | 42,106 | ||||||
BancFirst Corp. | 2,228 | 212,440 | ||||||
Century Bancorp, Inc., Class A | 879 | 55,641 | ||||||
Citizens & Northern Corp. | 2,003 | 47,010 | ||||||
CNB Financial Corp. | 2,729 | 65,578 | ||||||
Community Trust Bancorp, Inc. | 2,713 | 124,527 | ||||||
County Bancorp, Inc. | 1,254 | 33,808 | ||||||
Enterprise Bancorp, Inc. | 1,793 | 59,420 | ||||||
Farmers Capital Bank Corp. | 1,086 | 42,191 | ||||||
Farmers National Banc Corp. | 4,104 | 56,635 |
See accompanying notes
11
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
FINANCIALS - 21.10% (continued) | ||||||||
Banks - 8.27% (continued) | ||||||||
Fidelity Southern Corp. | 4,081 | $ | 96,189 | |||||
Financial Institutions, Inc. | 2,239 | 76,574 | ||||||
First Bancorp | 3,158 | 94,898 | ||||||
First Bancorp, Inc. | 1,642 | 44,515 | ||||||
First Busey Corp. | 5,952 | 184,036 | ||||||
First Business Financial Services, Inc. | 1,712 | 43,177 | ||||||
First Defiance Financial Corp. | 1,369 | 67,286 | ||||||
First Mid-Illinois Bancshares, Inc. | 1,973 | 65,267 | ||||||
Great Southern Bancorp, Inc. | 2,407 | 120,470 | ||||||
Guaranty Bancorp | 3,549 | 87,838 | ||||||
Hingham Institution for Savings | 332 | 62,263 | ||||||
Horizon Bancorp | 3,363 | 87,236 | ||||||
MainSource Financial Group, Inc. | 3,674 | 125,834 | ||||||
MutualFirst Financial, Inc. | 1,082 | 34,245 | ||||||
Nicolet Bankshares, Inc.A | 1,422 | 69,308 | ||||||
Northrim BanCorp, Inc. | 1,344 | 39,178 | ||||||
Old Second Bancorp, Inc. | 4,405 | 48,235 | ||||||
Paragon Commercial Corp.A | 947 | 47,331 | ||||||
Premier Financial Bancorp, Inc. | 2,115 | 38,874 | ||||||
Republic Bancorp, Inc., Class A | 3,673 | 127,012 | ||||||
Sierra Bancorp | 2,011 | 57,595 | ||||||
Trico Bancshares | 3,438 | 124,903 | ||||||
Triumph Bancorp, Inc.A | 2,673 | 71,904 | ||||||
Univest Corp of Pennsylvania | 4,306 | 119,922 | ||||||
West Bancorporation, Inc. | 2,703 | 59,871 | ||||||
Xenith Bankshares, Inc.A | 7,013 | 186,756 | ||||||
|
| |||||||
3,096,917 | ||||||||
|
| |||||||
Capital Markets - 1.17% | ||||||||
B. Riley Financial, Inc. | 2,167 | 33,372 | ||||||
OM Asset Management PLCB | 27,182 | 405,283 | ||||||
|
| |||||||
438,655 | ||||||||
|
| |||||||
Diversified Financials - 4.34% | ||||||||
Cohen & Steers, Inc. | 5,955 | 223,967 | ||||||
Diamond Hill Investment Group, Inc. | 615 | 123,320 | ||||||
Enova International, Inc.A | 5,362 | 76,945 | ||||||
Flagstar Bancorp, Inc.A | 12,406 | 352,330 | ||||||
GAMCO Investors, Inc., Class A | 6,696 | 199,474 | ||||||
Heartland Financial USA, Inc. | 4,487 | 222,331 | ||||||
HomeStreet, Inc. | 5,881 | 160,551 | ||||||
MidWestOne Financial Group, Inc. | 2,024 | 73,815 | ||||||
PennyMac Financial Services, Inc., Class AA | 7,250 | 129,413 | ||||||
Westwood Holdings Group, Inc. | 1,137 | 64,650 | ||||||
|
| |||||||
1,626,796 | ||||||||
|
| |||||||
Insurance - 7.32% | ||||||||
AMERISAFE, Inc. | 3,109 | 199,909 | ||||||
Atlas Financial Holdings, Inc.A | 2,306 | 31,131 | ||||||
Baldwin & Lyons, Inc., Class B | 2,984 | 71,019 | ||||||
Crawford & Co., Class B | 7,221 | 78,131 | ||||||
Donegal Group, Inc., Class A | 4,261 | 70,775 | ||||||
EMC Insurance Group, Inc. | 4,067 | 113,063 | ||||||
Enstar Group Ltd.A | 3,505 | 679,094 | ||||||
Hallmark Financial Services, Inc.A | 4,098 | 45,160 | ||||||
Independence Holding Co. | 2,846 | 51,655 | ||||||
National General Holdings Corp. | 19,862 | 483,441 | ||||||
National Western Life Group, Inc., Class A | 849 | 269,855 | ||||||
Selective Insurance Group, Inc. | 10,004 | 443,176 |
See accompanying notes
12
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
FINANCIALS - 21.10% (continued) | ||||||||
Insurance - 7.32% (continued) | ||||||||
United Fire Group, Inc. | 4,844 | $ | 204,514 | |||||
|
| |||||||
2,740,923 | ||||||||
|
| |||||||
Total Financials | 7,903,291 | |||||||
|
| |||||||
HEALTH CARE - 11.90% | ||||||||
Biotechnology - 2.79% | ||||||||
Acorda Therapeutics, Inc.A | 5,156 | 136,376 | ||||||
Applied Genetic Technologies Corp.A | 2,876 | 22,289 | ||||||
Cytokinetics, Inc.A | 2,446 | 25,928 | ||||||
Fibrogen, Inc.A | 1,972 | 49,300 | ||||||
Five Prime Therapeutics, Inc.A | 1,313 | 60,227 | ||||||
Genomic Health, Inc.A | 1,981 | 59,806 | ||||||
Ironwood Pharmaceuticals, Inc.A | 2,808 | 47,427 | ||||||
Luminex Corp. | 4,655 | 86,492 | ||||||
Macrogenics, Inc.A | 673 | 14,227 | ||||||
Myriad Genetics, Inc.A | 9,040 | 175,647 | ||||||
PDL BioPharma, Inc. | 109,595 | 234,533 | ||||||
Progenics Pharmaceuticals, Inc.A | 2,164 | 24,323 | ||||||
Repligen Corp.A | 576 | 18,150 | ||||||
Retrophin, Inc.A | 1,133 | 24,099 | ||||||
RTI Surgical, Inc.A | 6,729 | 25,234 | ||||||
Vanda Pharmaceuticals, Inc.A | 1,624 | 23,142 | ||||||
Xencor, Inc.A | 726 | 18,041 | ||||||
|
| |||||||
1,045,241 | ||||||||
|
| |||||||
Health Care Equipment & Supplies - 3.73% | ||||||||
Atrion Corp. | 221 | 107,859 | ||||||
Cutera, Inc.A | 1,000 | 20,400 | ||||||
Exactech, Inc.A | 2,032 | 49,378 | ||||||
Globus Medical, Inc., Class AA | 6,824 | 189,775 | ||||||
Hillenbrand, Inc. | 9,118 | 331,439 | ||||||
LeMaitre Vascular, Inc. | 1,573 | 34,826 | ||||||
Masimo Corp. | 4,156 | 375,536 | ||||||
Meridian Bioscience, Inc. | 6,543 | 84,078 | ||||||
Nutraceutical International Corp. | 1,577 | 53,145 | ||||||
Orthofix International N.V.A | 1,734 | 61,921 | ||||||
Staar Surgical Co.A | 1,961 | 19,512 | ||||||
Surmodics, Inc.A | 1,392 | 34,452 | ||||||
Utah Medical Products, Inc. | 529 | 32,745 | ||||||
|
| |||||||
1,395,066 | ||||||||
|
| |||||||
Health Care Providers & Services - 4.34% | ||||||||
Addus HomeCare Corp.A | 1,126 | 36,257 | ||||||
Air Methods Corp. | 5,112 | 193,489 | ||||||
Almost Family, Inc. | 1,370 | 68,021 | ||||||
Amedisys, Inc.A | 2,622 | 126,433 | ||||||
AMN Healthcare Services, Inc.A | 1,379 | 56,746 | ||||||
Corvel Corp.A | 2,363 | 95,465 | ||||||
Cross Country Healthcare, Inc.A | 2,911 | 45,033 | ||||||
Ensign Group, Inc. | 8,777 | 165,359 | ||||||
LHC Group, Inc.A | 1,944 | 93,351 | ||||||
National Healthcare Corp. | 2,126 | 158,642 | ||||||
National Research Corp., Class A | 3,360 | 62,664 | ||||||
Omnicell, Inc.A | 3,962 | 150,655 | ||||||
PAREXEL International Corp.A | 5,391 | 348,744 | ||||||
RadNet, Inc.A | 4,432 | 26,370 | ||||||
|
| |||||||
1,627,229 | ||||||||
|
|
See accompanying notes
13
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
HEALTH CARE - 11.90% (continued) | ||||||||
Pharmaceuticals - 1.04% | ||||||||
Emergent BioSolutions, Inc.A | 3,418 | $ | 107,257 | |||||
Enanta Pharmaceuticals, Inc.A | 877 | 25,275 | ||||||
Phibro Animal Health Corp., Class A | 4,488 | 124,991 | ||||||
Spectrum Pharmaceuticals, Inc. | 7,198 | 46,067 | ||||||
Sucampo Pharmaceuticals, Inc., Class AA C | 7,327 | 86,092 | ||||||
|
| |||||||
389,682 | ||||||||
|
| |||||||
Total Health Care | 4,457,218 | |||||||
|
| |||||||
INDUSTRIALS - 14.67% | ||||||||
Aerospace & Defense - 0.48% | ||||||||
Kaman Corp. | 3,497 | 181,040 | ||||||
|
| |||||||
Building Products - 1.57% | ||||||||
AAON, Inc. | 6,160 | 207,284 | ||||||
Caesarstone Ltd. | 3,743 | 125,016 | ||||||
Omega Flex, Inc. | 1,192 | 54,117 | ||||||
Ply Gem Holding, Inc.A | 11,598 | 201,805 | ||||||
|
| |||||||
588,222 | ||||||||
|
| |||||||
Commercial Services & Supplies - 9.39% | ||||||||
Aceto Corp. | 5,206 | 79,860 | ||||||
American Public Education, Inc.A | 2,896 | 69,938 | ||||||
ARC Document Solutions, Inc.A | 8,354 | 33,583 | ||||||
Career Education Corp.A | 16,947 | 141,169 | ||||||
Convergys Corp. | 14,793 | 323,671 | ||||||
CSG Systems International, Inc. | 4,947 | 194,961 | ||||||
Deluxe Corp. | 6,860 | 504,827 | ||||||
Ennis, Inc. | 4,164 | 68,081 | ||||||
Franklin Covey Co.A | 1,528 | 27,428 | ||||||
Herman Miller, Inc. | 9,962 | 296,868 | ||||||
Interface, Inc. | 8,018 | 151,540 | ||||||
Kelly Services, Inc., Class A | 6,743 | 144,165 | ||||||
Kforce, Inc. | 3,567 | 91,850 | ||||||
Marlin Business Services Corp. | 1,707 | 40,627 | ||||||
Monotype Imaging Holdings, Inc. | 3,453 | 69,578 | ||||||
PHI, Inc.A D | 2,433 | 36,280 | ||||||
Steelcase, Inc., Class A | 16,173 | 258,768 | ||||||
TeleTech Holdings, Inc. | 6,634 | 201,010 | ||||||
TRC Co., Inc.A | 6,239 | 63,950 | ||||||
TrueBlue, Inc.A | 5,247 | 136,160 | ||||||
VSE Corp. | 2,110 | 85,835 | ||||||
West Corp. | 19,780 | 472,941 | ||||||
Willis Lease Finance Corp.A | 982 | 24,962 | ||||||
|
| |||||||
3,518,052 | ||||||||
|
| |||||||
Construction & Engineering - 0.11% | ||||||||
NV5 Global, Inc.A | 1,098 | 40,406 | ||||||
|
| |||||||
Electrical Equipment - 0.39% | ||||||||
Chase Corp. | 1,241 | 113,489 | ||||||
Preformed Line Products Co. | 724 | 33,319 | ||||||
|
| |||||||
146,808 | ||||||||
|
| |||||||
Industrial Conglomerates - 0.81% | ||||||||
ICF International, Inc.A | 2,804 | 120,432 | ||||||
Park-Ohio Industries, Inc. | 2,543 | 113,545 | ||||||
RPX Corp.A | 6,303 | 67,757 | ||||||
|
| |||||||
301,734 | ||||||||
|
|
See accompanying notes
14
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
INDUSTRIALS - 14.67% (continued) | ||||||||
Machinery - 1.08% | ||||||||
Altra Industrial Motion Corp. | 2,852 | $ | 110,801 | |||||
Columbus McKinnon Corp. | 2,748 | 70,926 | ||||||
Hurco Co., Inc. | 1,584 | 43,560 | ||||||
Kadant, Inc. | 1,477 | 91,426 | ||||||
Miller Industries, Inc. | 1,987 | 49,675 | ||||||
Supreme Industries, Inc., Class A | 1,977 | 38,650 | ||||||
|
| |||||||
405,038 | ||||||||
|
| |||||||
Oil & Gas - 0.09% | ||||||||
Ardmore Shipping Corp.A C | 4,868 | 33,346 | ||||||
|
| |||||||
Road & Rail - 0.10% | ||||||||
PAM Transportation Services, Inc. | 2,015 | 36,733 | ||||||
|
| |||||||
Trading Companies & Distributors - 0.45% | ||||||||
Neff Corp., Class AA | 1,819 | 28,376 | ||||||
Veritiv Corp.A | 2,509 | 139,626 | ||||||
|
| |||||||
168,002 | ||||||||
|
| |||||||
Transportation & Logistics - 0.20% | ||||||||
Universal Truckload Services, Inc. | 5,441 | 74,270 | ||||||
|
| |||||||
Total Industrials | 5,493,651 | |||||||
|
| |||||||
INFORMATION TECHNOLOGY - 15.62% | ||||||||
Communications Equipment - 0.74% | ||||||||
Bel Fuse, Inc., Class B | 1,531 | 39,959 | ||||||
Black Box Corp. | 3,094 | 27,846 | ||||||
Plantronics, Inc. | 3,274 | 175,356 | ||||||
Silicon, Ltd. | 922 | 35,036 | ||||||
|
| |||||||
278,197 | ||||||||
|
| |||||||
Computers & Peripherals - 0.11% | ||||||||
Avid Technology, Inc.A | 7,178 | 40,340 | ||||||
|
| |||||||
Electronic Equipment & Instruments - 5.05% | ||||||||
AVX Corp. | 25,041 | 388,636 | ||||||
CTS Corp. | 4,335 | 94,937 | ||||||
ePlus, Inc. | 803 | 101,941 | ||||||
Kimball Electronics, Inc.A | 4,622 | 74,414 | ||||||
Nanometrics, Inc.A | 2,516 | 68,460 | ||||||
Novanta, Inc.A | 4,486 | 109,010 | ||||||
Plexus Corp.A | 4,702 | 263,641 | ||||||
Sanmina Corp.A | 16,305 | 635,895 | ||||||
Scansource, Inc.A | 3,778 | 152,065 | ||||||
|
| |||||||
1,888,999 | ||||||||
|
| |||||||
Internet Software & Services - 4.17% | ||||||||
Carbonite, Inc.A | 1,882 | 36,605 | ||||||
Endurance International Group Holdings, Inc.A | 19,564 | 166,294 | ||||||
Grand Canyon Education, Inc.A | 6,650 | 408,177 | ||||||
j2 Global, Inc. | 5,490 | 446,995 | ||||||
NIC, Inc. | 8,220 | 173,442 | ||||||
Perficient, Inc.A | 5,200 | 94,484 | ||||||
Web.com Group, Inc.A | 10,986 | 211,481 | ||||||
Zix Corp. | 5,168 | 25,892 | ||||||
|
| |||||||
1,563,370 | ||||||||
|
| |||||||
IT Consulting & Services - 2.92% | ||||||||
EVERTEC, Inc. | 12,464 | 210,018 | ||||||
Forrester Research, Inc. | 2,011 | 73,402 |
See accompanying notes
15
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
INFORMATION TECHNOLOGY - 15.62% (continued) | ||||||||
IT Consulting & Services - 2.92% (continued) | ||||||||
Hackett Group, Inc. | 3,770 | $ | 76,003 | |||||
Sykes Enterprises, Inc.A | 6,524 | 177,583 | ||||||
Syntel, Inc. | 24,470 | 432,874 | ||||||
TechTarget, Inc.A | 3,661 | 33,498 | ||||||
Virtusa Corp.A | 2,853 | 88,472 | ||||||
|
| |||||||
1,091,850 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 1.17% | ||||||||
Entegris, Inc.A | 17,443 | 369,792 | ||||||
IXYS Corp. | 5,610 | 69,283 | ||||||
|
| |||||||
439,075 | ||||||||
|
| |||||||
Software - 1.46% | ||||||||
Pegasystems, Inc. | 7,062 | 303,666 | ||||||
QAD, Inc., Class A | 1,670 | 45,842 | ||||||
Quality Systems, Inc.A | 7,069 | 107,873 | ||||||
Sapiens International Corp., N.V | 6,219 | 90,051 | ||||||
|
| |||||||
547,432 | ||||||||
|
| |||||||
Total Information Technology | 5,849,263 | |||||||
|
| |||||||
MATERIALS - 3.58% | ||||||||
Chemicals - 2.34% | ||||||||
FutureFuel Corp. | 10,896 | 144,154 | ||||||
Hawkins, Inc. | 1,616 | 79,911 | ||||||
Innospec, Inc. | 3,435 | 224,305 | ||||||
KMG Chemicals, Inc. | 1,835 | 67,455 | ||||||
OMNOVA Solutions, Inc.A | 5,553 | 51,365 | ||||||
Stepan Co. | 3,442 | 260,250 | ||||||
Trecora ResourcesA | 4,233 | 51,008 | ||||||
|
| |||||||
878,448 | ||||||||
|
| |||||||
Construction Materials - 0.17% | ||||||||
United States Lime & Minerals, Inc. | 811 | 61,765 | ||||||
|
| |||||||
Containers & Packaging - 0.07% | ||||||||
UFP Technologies, Inc.A | 1,106 | 26,544 | ||||||
|
| |||||||
Metals & Mining - 0.15% | ||||||||
Handy & Harman Ltd.A | 2,303 | 54,927 | ||||||
|
| |||||||
Paper & Forest Products - 0.85% | ||||||||
Glatfelter Co. | 6,954 | 153,683 | ||||||
Potlatch Corp.E | 3,742 | 165,584 | ||||||
|
| |||||||
319,267 | ||||||||
|
| |||||||
Total Materials | 1,340,951 | |||||||
|
| |||||||
REAL ESTATE - 7.61% | ||||||||
Equity Real Estate Investment Trusts - 6.27% | ||||||||
Alexander’s, Inc.E | 712 | 311,251 | ||||||
Armada Hoffler Properties, Inc.E | 6,528 | 91,066 | ||||||
Geo Group, Inc.E | 5,839 | 277,995 | ||||||
Getty Realty Corp.E | 4,962 | 130,947 | ||||||
Infrareit, Inc.E | 6,264 | 104,296 | ||||||
Medical Properties Trust, Inc.E | 29,337 | 393,702 | ||||||
National Health Investors, Inc.E | 4,541 | 343,844 | ||||||
One Liberty Properties, Inc.E | 2,387 | 58,648 | ||||||
Saul Centers, Inc.E | 2,273 | 145,563 | ||||||
Select Income REITE | 10,905 | 283,530 |
See accompanying notes
16
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Shares | Fair Value | |||||||
REAL ESTATE - 7.61% (continued) | ||||||||
Equity Real Estate Investment Trusts - 6.27% (continued) | ||||||||
Summit Hotel Properties, Inc.E | 13,427 | $ | 206,642 | |||||
|
| |||||||
2,347,484 | ||||||||
|
| |||||||
Mortgage Real Estate Investment Trusts - 0.19% | ||||||||
Great Ajax Corp.E | 5,478 | 71,981 | ||||||
|
| |||||||
Real Estate Management & Development - 1.15% | ||||||||
AV Homes, Inc.A | 4,475 | 73,838 | ||||||
Consolidated Tomaka Land Co. | 599 | 33,017 | ||||||
HFF, Inc., Class A | 5,360 | 158,923 | ||||||
Marcus & Millichap, Inc.A | 5,950 | 162,733 | ||||||
|
| |||||||
428,511 | ||||||||
|
| |||||||
Total Real Estate | 2,847,976 | |||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 0.33% | ||||||||
Diversified Telecommunication Services - 0.13% | ||||||||
IDT Corp., Class B | 2,514 | 48,520 | ||||||
|
| |||||||
Wireless Telecommunication Services - 0.20% | ||||||||
Spok Holdings, Inc. | 4,051 | 73,728 | ||||||
|
| |||||||
Total Telecommunication Services | 122,248 | |||||||
|
| |||||||
UTILITIES - 2.79% | ||||||||
Electric - 2.24% | ||||||||
MGE Energy, Inc. | 4,492 | 287,264 | ||||||
Ormat Technologies, Inc. | 6,217 | 342,743 | ||||||
Otter Tail Corp. | 5,587 | 210,071 | ||||||
|
| |||||||
840,078 | ||||||||
|
| |||||||
Water - 0.55% | ||||||||
Artesian Resources Corp., Class A | 1,300 | 42,835 | ||||||
Middlesex Water Co. | 2,625 | 98,831 | ||||||
York Water Co. | 1,767 | 63,612 | ||||||
|
| |||||||
205,278 | ||||||||
|
| |||||||
Total Utilities | 1,045,356 | |||||||
|
| |||||||
Total Common Stock (Cost $32,069,524) | 35,499,501 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS - 3.15% (Cost $1,179,902) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassF | 1,179,902 | 1,179,902 | ||||||
|
| |||||||
SECURITIES LENDING COLLATERAL - 0.22% (Cost $83,350) | ||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassF | 83,350 | 83,350 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 98.17% (Cost $33,332,776) | 36,762,753 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 1.83% | 684,708 | |||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 37,447,461 | ||||||
|
| |||||||
Percentages are stated as a percent of net assets. |
A | Non-income producing security. |
B | PLC - Public Limited Company. |
C | All or a portion of this security is on loan at February 28, 2017. |
D | Non-voting participating shares. |
E | REIT - Real Estate Investment Trust. |
F | The Fund is affiliated by having the same investment advisor. |
See accompanying notes
17
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
February 28, 2017 (Unaudited)
Futures Contracts Open on February 28, 2017:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Russell 2000 Mini Index Futures | Long | 16 | March 2017 | $ | 1,108,000 | $ | 7,553 | |||||||||||||
|
|
|
| |||||||||||||||||
$ | 1,108,000 | $ | 7,553 | |||||||||||||||||
|
|
|
|
See accompanying notes
18
Statements of Assets and Liabilities
February 28, 2017 (Unaudited)
The London Company Income Equity Fund | Zebra Small Cap Equity Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at fair value A C | $ | 1,162,907,815 | $ | 35,499,501 | ||||
Investments in affiliated securities, at fair value B | 25,915,827 | 1,263,252 | ||||||
Deposit with brokers for futures contracts | 426,739 | 28,229 | ||||||
Dividends and interest receivable | 3,823,126 | 35,236 | ||||||
Receivable for investments sold | — | 136,809 | ||||||
Receivable for fund shares sold | 2,725,060 | 996,144 | ||||||
Receivable for expense reimbursement (Note 2) | — | 9,915 | ||||||
Receivable for variation margin on open futures contracts | 536,719 | 7,573 | ||||||
Prepaid expenses | 96,467 | 29,834 | ||||||
|
|
|
| |||||
Total assets | 1,196,431,753 | 38,006,493 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Payable for investments purchased | — | 202,717 | ||||||
Payable for fund shares redeemed | 2,683,705 | 214,699 | ||||||
Payable upon return of securities loaned | — | 83,350 | ||||||
Management and investment advisory fees payable | 649,850 | 27,745 | ||||||
Administrative service and service fees payable | 241,496 | 6,803 | ||||||
Transfer agent fees payable | 2,644 | 438 | ||||||
Custody and fund accounting fees payable | 7,195 | 1,367 | ||||||
Professional fees payable | 18,904 | 21,872 | ||||||
Payable for prospectus and shareholder reports | 28,148 | — | ||||||
Other liabilities | 1,287 | 41 | ||||||
|
|
|
| |||||
Total liabilities | 3,633,229 | 559,032 | ||||||
|
|
|
| |||||
Net Assets | $ | 1,192,798,524 | $ | 37,447,461 | ||||
|
|
|
| |||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | $ | 1,037,604,549 | $ | 32,342,533 | ||||
Undistributed (overdistribution of) net investment income | 2,162,643 | 7,385 | ||||||
Accumulated net realized gain (loss) | (20,304,920 | ) | 1,660,013 | |||||
Unrealized appreciation of investments | 172,799,609 | 3,429,977 | ||||||
Unrealized appreciation of futures contracts | 536,643 | 7,553 | ||||||
|
|
|
| |||||
Net assets | $ | 1,192,798,524 | $ | 37,447,461 | ||||
|
|
|
| |||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||
Institutional Class | 13,266,006 | 111,953 | ||||||
|
|
|
| |||||
Y Class | 41,597,097 | 1,040,551 | ||||||
|
|
|
| |||||
Investor Class | 2,253,974 | 629,515 | ||||||
|
|
|
| |||||
A Class | 6,086,890 | 430,753 | ||||||
|
|
|
| |||||
C Class | 11,416,763 | 149,366 | ||||||
|
|
|
| |||||
Net assets: | ||||||||
Institutional Class | $ | 213,332,518 | $ | 1,775,336 | ||||
|
|
|
| |||||
Y Class | $ | 665,670,250 | $ | 16,640,312 | ||||
|
|
|
| |||||
Investor Class | $ | 36,120,450 | $ | 9,946,171 | ||||
|
|
|
| |||||
A Class | $ | 96,983,385 | $ | 6,810,464 | ||||
|
|
|
| |||||
C Class | $ | 180,691,921 | $ | 2,275,178 | ||||
|
|
|
| |||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 16.08 | $ | 15.86 | ||||
|
|
|
| |||||
Y Class | $ | 16.00 | $ | 15.99 | ||||
|
|
|
| |||||
Investor Class | $ | 16.03 | $ | 15.80 | ||||
|
|
|
| |||||
A Class | $ | 15.93 | $ | 15.81 | ||||
|
|
|
| |||||
A Class (offering price) | $ | 16.90 | $ | 16.77 | ||||
|
|
|
| |||||
C Class | $ | 15.83 | $ | 15.23 | ||||
|
|
|
| |||||
A Cost of investments in unaffiliated securities | $ | 990,108,206 | $ | 32,069,524 | ||||
B Cost of investments in affiliated securities | $ | 25,915,827 | $ | 1,263,252 | ||||
C Fair value of securities on loan | $ | — | $ | 81,430 |
See accompanying notes
19
American Beacon FundsSM
Statements of Operations
For the six months Ended February 28, 2017 (Unaudited)
The London Company Income Equity Fund | Zebra Small Cap Equity Fund | |||||||
Investment income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 15,531,426 | $ | 453,451 | ||||
Dividend income from affiliated securities | 88,236 | 1,810 | ||||||
Income derived from securities lending | — | 8,743 | ||||||
|
|
|
| |||||
Total investment income | 15,619,662 | 464,004 | ||||||
|
|
|
| |||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 3,658,032 | 143,247 | ||||||
Transfer agent fees: | ||||||||
Institutional Class | 24,879 | 391 | ||||||
Y Class | 8,370 | 169 | ||||||
Investor Class | 1,621 | 904 | ||||||
A Class | 3,881 | 467 | ||||||
C Class | 3,807 | 143 | ||||||
Custody and fund accounting fees | 43,438 | 6,208 | ||||||
Professional fees | 30,995 | 20,458 | ||||||
Registration fees and expenses | 48,763 | 36,996 | ||||||
Service fees (Note 2): | ||||||||
Y Class | 302,196 | 6,922 | ||||||
Investor Class | 53,126 | 10,749 | ||||||
A Class | 69,563 | 4,031 | ||||||
C Class | 135,143 | 1,470 | ||||||
Distribution fees (Note 2): | ||||||||
A Class | 115,939 | 6,719 | ||||||
C Class | 900,956 | 9,803 | ||||||
Prospectus and shareholder report expenses. | 33,969 | 2,398 | ||||||
Trustee fees | 27,511 | 731 | ||||||
Other expenses | 26,666 | 1,331 | ||||||
|
|
|
| |||||
Total expenses | 5,488,855 | 253,137 | ||||||
|
|
|
| |||||
Net fees waived and expenses reimbursed (Note 2) | — | (66,187 | ) | |||||
|
|
|
| |||||
Net expenses | 5,488,855 | 186,950 | ||||||
|
|
|
| |||||
Net investment income | 10,130,807 | 277,054 | ||||||
|
|
|
| |||||
Realized and unrealized gain (loss) from investments: | ||||||||
Net realized gain (loss) from: | ||||||||
Investments | (23,711,244 | ) | 1,891,928 | |||||
Commission recapture (Note 3) | 10,290 | — | ||||||
Futures contracts | 3,057,124 | 34,164 | ||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||
Investments | 89,652,936 | 1,721,572 | ||||||
Futures contracts | 434,284 | 425 | ||||||
|
|
|
| |||||
Net gain from investments | 69,443,390 | 3,648,089 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | $ | 79,574,197 | $ | 3,925,143 | ||||
|
|
|
| |||||
A Foreign taxes | $ | — | $ | 50 |
See accompanying notes
20
American Beacon FundsSM
Statements of Changes in Net Assets
The London Company Income Equity Fund | Zebra Small Cap Equity Fund | |||||||||||||||
Six Months Ended February 28, | Year Ended August 31, | Six Months Ended February 28, | Year Ended August 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 10,130,807 | $ | 18,248,062 | $ | 277,054 | $ | 153,893 | ||||||||
Net realized gain (loss) from investments, commission recapture, and futures contracts | (20,643,830 | ) | 8,459,871 | 1,926,092 | (254,586 | ) | ||||||||||
Change in net unrealized appreciation (depreciation) from investments and futures contracts | 90,087,220 | 80,948,359 | 1,721,997 | 2,570,834 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets resulting from operations | 79,574,197 | 107,656,292 | 3,925,143 | 2,470,141 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (2,007,385 | ) | (3,544,997 | ) | (19,221 | ) | (8,763 | ) | ||||||||
Y Class | (5,910,133 | ) | (9,926,813 | ) | (167,869 | ) | (38,839 | ) | ||||||||
Investor Class | (270,733 | ) | (452,631 | ) | (101,264 | ) | (13,402 | ) | ||||||||
A Class | (780,644 | ) | (1,491,174 | ) | (61,098 | ) | (10,123 | ) | ||||||||
C Class | (847,691 | ) | (1,766,190 | ) | (13,853 | ) | — | |||||||||
Net realized gain from investments: | ||||||||||||||||
Institutional Class | (1,273,581 | ) | — | — | (201,256 | ) | ||||||||||
Y Class | (3,962,754 | ) | — | — | (891,959 | ) | ||||||||||
Investor Class | (214,901 | ) | — | — | (447,110 | ) | ||||||||||
A Class | (591,876 | ) | — | — | (468,807 | ) | ||||||||||
C Class | (1,169,919 | ) | — | — | (161,536 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (17,029,617 | ) | (17,181,805 | ) | (363,305 | ) | (2,241,795 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 213,897,266 | 548,570,693 | 11,022,928 | 13,574,650 | ||||||||||||
Reinvestment of dividends and distributions | 8,266,996 | 7,818,081 | 359,354 | 2,212,923 | ||||||||||||
Cost of shares redeemed | (178,793,282 | ) | (277,196,132 | ) | (5,461,485 | ) | (8,379,853 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets from capital share transactions | 43,370,980 | 279,192,642 | 5,920,797 | 7,407,720 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets | 105,915,560 | 369,667,129 | 9,482,635 | 7,636,066 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 1,086,882,964 | 717,215,835 | 27,964,826 | 20,328,760 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 1,192,798,524 | $ | 1,086,882,964 | $ | 37,447,461 | $ | 27,964,826 | ||||||||
|
|
|
|
|
|
|
| |||||||||
*Includes undistributed (overdistribution of) net investment income | $ | 2,162,643 | $ | 2,328,414 | $ | 7,385 | $ | 51,103 | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes
21
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”) is organized as a Massachusetts business trust. The Funds, each a series within the Trust, are registered under the Investment Company Act of 1940, as amended, (the “Act”) as diversified, open-end management investment companies. As of February 28, 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”): the American Beacon The London Company Income Equity Fund and the American Beacon Zebra Small Cap Equity 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 Funds’ Financial Statements.
Class Disclosure
The Funds have 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,
22
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
Dividends to Shareholders
Dividends from net investment income of the Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. 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 Funds also designate earnings and profits distributed to shareholders on the redemption of shares.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Funds. This amount is reported with the net realized gain in the Funds’ Statements of Operations, if applicable.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
23
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 February 28, 2017, based on management’s evaluation of the shareholder account base, one account has been identified as representing one non-affiliated controlling ownership of approximately 7% of the Zebra Small Cap Equity Fund’s outstanding shares.
2. Transactions with Affiliates
Management Agreement
The Funds and the Manager are parties to 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 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 six months ended February 28, 2017 were as follows:
Fund | Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | ||||||||||||
The London Company Income Equity | 0.67 | % | $ | 3,658,032 | $ | 1,725,037 | $ | 1,932,995 | ||||||||
Zebra Small Cap Equity | 0.89 | % | 143,247 | 86,946 | 56,301 |
As compensation for services provided by the Manager in connection with securities lending activities conducted by the Zebra Small Cap Equity Fund, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee of 10% of the net monthly interest income (the gross income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 10% of such loan fees. This fee is included in “Income derived from securities lending” and “Management and investment advisory fees” on the Statements of Operations. During the six months ended February 28, 2017, securities lending fees paid to the Manager were $771 for the Zebra Small Cap Equity Fund.
Distribution Plans
The Funds, except for the A and C Classes, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fees received by the Manager and the investment advisor hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A Classes and 1.00% of the average daily net assets of the C Classes of each Fund. 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.
24
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 up to 0.10% of the average daily net assets of Y Class, up to 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the 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 February 28, 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 | |||
The London Company Income Equity | $ | 22,003 | ||
Zebra Small Cap Equity | 266 |
As of February 28, 2017, the Funds owed 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 | Reimbursement of Sub-Transfer Agent Fees | |||
The London Company Income Equity | $ | 3,788 | ||
Zebra Small Cap Equity | 355 |
Investment in Affiliated Funds
The Funds may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). Cash collateral received by the Funds in connection with securities lending may also be invested in 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 fees totaling 0.10% of its average daily net assets of the USG Select Fund. During the period ended February 28, 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 | Securities Lending Collateral in USG Select Fund | Total | |||||||||
The London Company Income Equity | $ | 24,206 | $ | — | $ | 24,206 | ||||||
Zebra Small Cap Equity | 462 | 147 | 609 |
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
25
American Beacon FundsSM
February 28, 2017 (Unaudited)
from other participating funds. During the six months ended February 28, 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 exceed the Funds’ expense cap. For the six months ended February 28, 2017, the Manager waived or reimbursed expenses as follows:
Fund | Class | Expense Cap 9/1/2016 - 2/28/2017 | Reimbursed Expenses | Expiration | ||||||||||
Zebra Small Cap Equity | Institutional | 0.89 | % | $ | 4,514 | 2020 | ||||||||
Zebra Small Cap Equity | Y | 0.99 | % | 30,544 | 2020 | |||||||||
Zebra Small Cap Equity | Investor | 1.27 | % | 14,266 | 2020 | |||||||||
Zebra Small Cap Equity | A | 1.29 | % | 12,387 | 2020 | |||||||||
Zebra Small Cap Equity | C | 2.04 | % | 14,476 | 2020 |
Of these amounts, $9,915 was disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at February 28, 2017 for the Zebra Small Cap Equity 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’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 listed above will expire in 2020. The Funds did not record a liability for potential reimbursements, due to the current assessment that a reimbursement is unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration | |||||||||
The London Company Income Equity | $ | — | $ | 13,005 | 2017 | |||||||
Zebra Small Cap Equity Fund | — | 94,922 | 2017 | |||||||||
Zebra Small Cap Equity Fund | — | 105,676 | 2018 | |||||||||
Zebra Small Cap Equity Fund | — | 130,345 | 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 six months ended February 28, 2017, Foreside collected $41,797 and $1,001 in sales commissions from the sale of Class A Shares for The London Company Income Equity and Zebra Small Cap Equity Funds, respectively.
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 six months ended February 28, 2017, fees of $299 were collected for The London Company Income Equity Fund 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 six months ended February 28, 2017, CDSC fees of $37,617 and $169 were collected for the Class A Shares of The London Company Income Equity and Zebra Small Cap Equity Funds, respectively.
26
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 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 are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing 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.
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 margin disclosed on the Statements of Assets and Liabilities.
Other investments, including restricted securities, and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value as determined in good faith by the Valuation Committee, established by the Funds’ Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
27
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Level 1 - | Quoted prices in active markets for identical securities. | |
Level 2 - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | |
Level 3 - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment. |
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 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.
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.
The Funds’ investments are summarized by level based on the inputs used to determine their values. As of February 28, 2017, the investments were classified as described below:
The London Company Income Equity Fund(1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 1,162,907,815 | $ | — | $ | — | $ | 1,162,907,815 | ||||||||
Short-Term Investments - Money Market Funds | 25,915,827 | — | — | 25,915,827 | ||||||||||||
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Total Investments in Securities | $ | 1,188,823,642 | $ | — | $ | — | $ | 1,188,823,642 | ||||||||
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Financial Derivative Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 536,643 | $ | — | $ | — | $ | 536,643 | ||||||||
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Total Other Financial Instruments | $ | 536,643 | $ | — | $ | — | $ | 536,643 | ||||||||
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Zebra Small Cap Equity Fund(1) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 35,499,501 | $ | — | $ | — | $ | 35,499,501 | ||||||||
Short-Term Investments - Money Market Funds | 1,179,902 | — | — | 1,179,902 | ||||||||||||
Securities Lending Collateral invested in Money Markets Funds. | 83,350 | — | — | 83,350 | ||||||||||||
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Total Investments in Securities | $ | 36,762,753 | $ | — | $ | — | $ | 36,762,753 | ||||||||
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Financial Derivative Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 7,553 | $ | — | $ | — | $ | 7,553 | ||||||||
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Total Other Financial Instruments | $ | 7,553 | $ | — | $ | — | $ | 7,553 | ||||||||
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(1) | Refer to the Schedule of Investments for industry information. |
U.S. GAAP also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the six months ended February 28, 2017, there were no transfers between levels.
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 a Fund’s possible inability to convert immediately into U.S.
28
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
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.
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, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund
29
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
5. Financial Derivative Instruments
The Funds may utilize derivative instruments to manage liquidity. 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 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.
For the six months ended February 28, 2017, the Funds entered into future contracts primarily for exposing cash to markets.
The Funds’ futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding each quarter end.
Average Futures Contracts Outstanding | ||||
Fund | Period ended February 28, 2017 | |||
The London Company Income Equity | 328 | |||
Zebra Small Cap Equity | 9 |
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure(1):
Fair Values of financial derivative instruments not accounted for as hedging instruments as of February 28, 2017:
Statements of Assets and Liabilities: | Derivatives | The London Company Income Equity | Zebra Small Cap Equity | |||||||||
Receivable for variation margin from open futures contracts (2) | Equity Contracts | $ | 536,643 | $ | 7,553 |
The effect of financial derivative instruments not accounted for as hedging instruments during the period ended February 28, 2017:
Statements of Operations: | ||||||||||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 3,057,124 | $ | 34,164 | |||||||
Change in net unrealized appreciation (depreciation) of futures contracts | Equity Contracts | 434,284 | 425 |
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Funds’ Schedules of Investment footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
30
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
6. Principal Risks
Investing in the Funds 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.
Dividend Risk
An issuer of stock held by the Fund may choose not to declare a dividend or the dividend rate might not remain at current levels. Dividend paying stocks might not experience the same level of earnings growth or capital appreciation as non-dividend paying stocks.
Foreign Investing Risk
Non-U.S. investments carry potential risks not associated with U.S. investments. Such risks include, but are not limited to: (1) currency exchange rate fluctuations, (2) political and financial instability, (3) less liquidity, (4) lack of uniform accounting, auditing and financial reporting standards, (5) 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.
Futures Contracts Risk
Futures contracts are derivative instruments where one party pays a fixed price for an agreed amount of securities or other underlying assets at an agreed date. The use of such derivative instruments may expose the Fund to additional risks 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 Fund and may involve a small investment of cash (the amount of initial and variation margin) relative to the magnitude of the risk assumed (the potential increase or decrease in the price of the futures contract).
Liquidity Risk
The Zebra Small Cap Equity Fund is susceptible to the risk that certain small cap equity investments held by the Fund may have limited marketability or be subject to restrictions on sale, and may be difficult or impossible to purchase or 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. The Fund may be required to dispose of investments at unfavorable times or prices to satisfy obligations, which may result in losses or may be costly to the Fund. For example, the Fund may be forced to sell certain investments at unfavorable prices to meet redemption requests or other cash needs. Judgment plays a greater role in pricing illiquid investments than in investments with more active markets
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 an unusually high degree of volatility in the financial markets, both domestic and foreign. 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.
31
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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 of a rate increase on various 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 Funds may invest in shares of other registered investment companies, including money market funds. To the extent that a Fund invests in shares of other registered investment companies, you will indirectly bear fees and expenses charged by those investment companies in addition to the Fund’s 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.
Securities Lending Risk
To the extent a Fund lends its securities, it may be subject to the following risks. Borrowers of the Fund’s securities typically provide collateral in the form of cash that is reinvested in securities. The securities in which the collateral is invested may not perform sufficiently to cover the return collateral payments owed to borrowers. In addition, delays may occur in the recovery of securities from borrowers, which could interfere with a Fund’s ability to vote proxies or to settle transactions and there is the risk of possible loss of rights in the collateral should the borrower fail financially.
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 February 28, 2017.
32
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
The London Company Income Equity Fund
Offsetting of Financial and Derivative Assets as of February 28, 2017:
Gross Amounts | Net Amount of | |||||||||||
Offset in the | Assets Presented | |||||||||||
Statements | in the Statements | |||||||||||
Gross Amounts of | of Assets and | of Assets and | ||||||||||
Description | Recognized Assets | Liabilities | Liabilities | |||||||||
Futures contracts (1) | $ | 536,643 | $ | — | $ | 536,643 |
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of February 28, 2017:
Gross Amounts Offset in the Statements | ||||||||||||||||
Net Amount of Assets | of Assets and Liabilities | |||||||||||||||
Presented in the Statements | Financial | Cash Collateral | ||||||||||||||
Counterparty | of Assets and Liabilities | Instruments | Pledged | Net Amount | ||||||||||||
Goldman Sachs & Co. (1) | $ | 536,643 | $ | — | $ | — | $ | 536,643 |
Zebra Small Cap Equity Fund
Offsetting of Financial Asset and Derivative Assets as of February 28, 2017:
Gross Amounts | Net Amount of | |||||||||||
Offset in the | Assets Presented | |||||||||||
Statements | in the Statements | |||||||||||
Gross Amounts of | of Assets and | of Assets and | ||||||||||
Description | Recognized Assets | Liabilities | Liabilities | |||||||||
Securities on loan(2) | $ | 81,430 | $ | — | $ | 81,430 | ||||||
Futures Contracts (1) | 7,553 | — | 7,553 | |||||||||
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$ | 88,983 | $ | — | $ | 88,983 | |||||||
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Financial Asset, Derivative Assets, and Collateral Pledged by Counterparty as of February 28, 2017:
Gross Amounts Offset in the | ||||||||||||||||
NetAmount of Assets Presented in the Statements | Statements of Assets and Liabilities | |||||||||||||||
Financial | Cash Collateral | |||||||||||||||
Counterparty | of Assets and Liabilities | Instruments | Pledged(2) | Net Amount | ||||||||||||
Barclays Capital Inc. | $ | 49,000 | $ | — | $ | (49,000 | ) | $ | — | |||||||
Goldman Sachs & Co (1) | 7,553 | — | — | 7,553 | ||||||||||||
JP Morgan Clearing Corp. | 32,430 | — | (32,430 | ) | — | |||||||||||
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$ | 88,983 | $ | — | $ | (81,430 | ) | $ | 7,553 | ||||||||
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(1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for information purposes only. |
(2) | Excess collateral received from the individual counterparty is not shown for financial statement purposes. Collateral with a value of $83,350 has been received in connection with securities lending transactions. |
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 recorded tax liabilities in the accompanying financial statements. The tax years for the periods ended August 31, 2013, 2014, 2015, and 2016 remain subject to examination by the Internal Revenue Service. If applicable, the Funds recognized interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
33
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
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.
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:
The London Company | Zebra Small Cap | |||||||||||||||
Income Equity Fund | Equity Fund | |||||||||||||||
Six months ended | Year ended | Six months ended | Year ended | |||||||||||||
February 28, 2017 | August 31, 2016 | February 28, 2017 | August 31, 2016 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary Income* | ||||||||||||||||
Institutional Class | $ | 2,008,359 | $ | 3,544,997 | $ | 19,221 | $ | 71,514 | ||||||||
Y Class | 5,913,190 | 9,926,813 | 167,869 | 316,947 | ||||||||||||
Investor Class | 270,894 | 452,631 | 101,264 | 152,808 | ||||||||||||
A Class | 781,105 | 1,491,174 | 61,098 | 156,294 | ||||||||||||
C Class | 848,494 | 1,766,190 | 13,853 | 50,367 | ||||||||||||
Long-term capital gains | ||||||||||||||||
Institutional Class | 1,272,607 | — | — | 138,505 | ||||||||||||
Y Class | 3,959,697 | — | — | 613,851 | ||||||||||||
Investor Class | 214,740 | — | — | 307,704 | ||||||||||||
A Class | 591,415 | — | — | 322,636 | ||||||||||||
C Class | 1,169,116 | — | — | 111,169 | ||||||||||||
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Total distributions paid | $ | 17,029,617 | $ | 17,181,805 | $ | 363,305 | $ | 2,241,795 | ||||||||
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* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of February 28, 2017, the components of distributable earnings (deficit) on a tax basis were as follows:
The London Company | Zebra Small Cap | |||||||
Income Equity Fund | Equity Fund | |||||||
Cost basis of investments for federal income tax purposes | $ | 1,016,057,300 | $ | 33,602,425 | ||||
Unrealized appreciation | 193,765,836 | 4,878,625 | ||||||
Unrealized depreciation | (20,999,494 | ) | (1,718,297 | ) | ||||
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Net unrealized appreciation (depreciation) | 172,766,342 | 3,160,328 | ||||||
Undistributed ordinary income | 2,162,643 | 989,282 | ||||||
Undistributed long-term capital gains | — | 955,318 | ||||||
Accumulated capital and other losses | (19,735,010 | ) | — | |||||
Other temporary differences | — | — | ||||||
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Distributable earnings (deficits) | $ | 155,193,975 | $ | 5,104,928 | ||||
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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 (depreciation) are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains (losses) on certain derivative instruments and the reclassification of income from real estate investment securities.
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
34
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Accordingly, the following reclassified amounts represent current year permanent differences derived from reclassifications of income from real estate investment securities and dividend reclasses as of February 28, 2017:
The London Company | Zebra Small Cap | |||||||
Income Equity Fund | Equity Fund | |||||||
Paid-in-capital | $ | (1 | ) | $ | 220 | |||
Undistributed (overdistribution of) net investment income | (479,992 | ) | 42,533 | |||||
Accumulated net realized gain (loss) | 479,993 | (42,753 | ) | |||||
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 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 February 28, 2017, The London Company Income Equity Fund has $1,358,719 of short-term and $18,376,291 of long-term post RIC MOD capital loss carryforward .
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended February 28, 2017 were as follows:
The London Company | ||||||||
Income | Zebra Small Cap | |||||||
Equity Fund | Equity Fund | |||||||
Purchases (excluding U.S. government securities) | $ | 101,955,125 | $ | 16,076,380 | ||||
Sales and Maturities (excluding U.S. government securities) | 40,646,756 | 11,228,694 |
A summary of the Funds’ transactions in the USG Select Fund for the six months ended February 28, 2017 were as follows:
August 31, 2016 | February 28, 2017 | |||||||||||||||||||||
Type of | Shares/Fair | Shares/Fair | Dividend | |||||||||||||||||||
Fund | Transaction | Value | Purchases | Sales | Value | Income | ||||||||||||||||
The London Company Income Equity | Direct | $ | 45,223,294 | $ | 150,965,259 | $ | 170,272,726 | $ | 25,915,827 | $ | 88,236 | |||||||||||
Zebra Small Cap Equity | Direct Securities | 830,296 | 9,857,530 | 9,507,924 | 1,179,902 | 1,810 | ||||||||||||||||
Zebra Small Cap Equity | Lending | 356,775 | 2,296,684 | 2,570,109 | 83,350 | N/A |
9. Securities Lending
The Zebra Small Cap Equity Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower subject to standard settlement periods. This may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds, and other short-term investments, provided the investments meet certain quality and diversification requirements. Securities purchased with cash collateral
35
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
proceeds are listed in the Fund’s Schedule of Investments and the collateral is shown on the Statements of Assets and Liabilities as a payable.
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retained 80%, 10%, and 10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive certain income associated with that security and any gain or loss in the market price that may occur during the term of the loan. In the case of domestic equities, the value of any dividend is received in the form of a substitute payment approximately equal to the dividend. In the case of foreign securities, a negotiated amount is received that is less than the actual dividend, but higher than the dividend amount minus the foreign tax that the Fund would be subject to on the dividend.
Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.
At February 28, 2017, the value of outstanding securities on loan and the value of collateral was as follows :
Fair Value of | Cash Collateral | |||||||
Securities on Loan | Non-Cash Collateral | Posted by Borrower | ||||||
$81,430 | $ | — | $ | 83,350 |
Cash collateral is listed in the Funds’ Schedules of Investments and is shown on Statements of Assets and Liabilities. Income earned on these investments is included in “Income derived from securities lending” in the Statements of Operations.
Non-cash collateral received by the Funds may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Funds’ Schedules of Investments or Statements of Assets and Liabilities.
10. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds:
Institutional Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,940,929 | $ | 29,459,637 | 4,317,062 | $ | 61,703,562 | ||||||||||
Reinvestment of dividends | 182,827 | 2,784,667 | 209,460 | 2,997,506 | ||||||||||||
Shares redeemed | (1,627,265 | ) | (24,767,333 | ) | (1,646,575 | ) | (23,431,242 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 496,491 | $ | 7,476,971 | 2,879,947 | $ | 41,269,826 | ||||||||||
|
|
|
|
|
|
|
|
36
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
Y Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 9,512,671 | $ | 144,209,699 | 24,943,586 | $ | 354,214,007 | ||||||||||
Reinvestment of dividends | 240,460 | 3,645,452 | 216,302 | 3,091,654 | ||||||||||||
Shares redeemed | (6,575,864 | ) | (100,086,968 | ) | (13,173,464 | ) | (187,434,356 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 3,177,267 | $ | 47,768,183 | 11,986,424 | $ | 169,871,305 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 791,896 | $ | 11,945,892 | 1,081,723 | $ | 15,497,749 | ||||||||||
Reinvestment of dividends | 30,839 | 468,815 | 30,330 | 432,609 | ||||||||||||
Shares redeemed | (491,083 | ) | (7,402,162 | ) | (679,241 | ) | (9,525,154 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 331,652 | $ | 5,012,545 | 432,812 | $ | 6,405,204 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 732,920 | $ | 11,035,620 | 2,777,336 | $ | 39,632,748 | ||||||||||
Reinvestment of dividends | 55,083 | 832,260 | 61,866 | 877,243 | ||||||||||||
Shares redeemed | (969,737 | ) | (14,565,470 | ) | (1,841,117 | ) | (26,253,994 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | (181,73 | ) | $ | (2,697,590 | ) | 998,085 | $ | 14,255,997 | ||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1,156,078 | $ | 17,246,418 | 5,471,163 | $ | 77,522,627 | ||||||||||
Reinvestment of dividends | 35,558 | 535,802 | 29,724 | 419,069 | ||||||||||||
Shares redeemed | (2,122,787 | ) | (31,971,349 | ) | (2,151,617 | ) | (30,551,386 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | (931,151 | ) | $ | (14,189,129 | ) | 3,349,270 | $ | 47,390,310 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Institutional Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 9,577 | $ | 142,786 | 54,556 | $ | 748,177 | ||||||||||
Reinvestment of dividends | 1,201 | 19,221 | 16,524 | 210,019 | ||||||||||||
Shares redeemed | (62,641 | ) | (886,044 | ) | (31,439 | ) | (414,137 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | (51,863 | ) | $ | (724,037 | ) | 39,641 | $ | 544,059 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 373,289 | $ | 5,637,558 | 309,719 | $ | 4,112,092 | ||||||||||
Reinvestment of dividends | 10,383 | 167,686 | 72,550 | 930,798 | ||||||||||||
Shares redeemed | (117,163 | ) | (1,784,587 | ) | (291,579 | ) | (3,867,819 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 266,509 | $ | 4,020,657 | 90,690 | $ | 1,175,071 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 157,924 | $ | 2,442,443 | 468,594 | $ | 6,246,532 | ||||||||||
Reinvestment of dividends | 6,322 | 100,896 | 36,142 | 459,726 | ||||||||||||
Shares redeemed | (77,230 | ) | (1,155,835 | ) | (143,215 | ) | (1,898,357 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 87,016 | $ | 1,387,504 | 361,521 | $ | 4,807,901 | ||||||||||
|
|
|
|
|
|
|
|
37
American Beacon FundsSM
Notes to Financial Statements
February 28, 2017 (Unaudited)
A Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 142,898 | $ | 2,227,185 | 128,084 | $ | 1,705,574 | ||||||||||
Reinvestment of dividends | 3,361 | 57,984 | 35,611 | 453,323 | ||||||||||||
Shares redeemed | (86,542 | ) | (1,268,444 | ) | (130,342 | ) | (1,726,256 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 59,987 | $ | 1,016,725 | 33,353 | $ | 432,641 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | ||||||||||||||||
Six Months Ended February 28, 2017 | Year Ended August 31, 2016 | |||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 37,782 | $ | 572,956 | 59,351 | $ | 762,275 | ||||||||||
Reinvestment of dividends | 880 | 13,567 | 12,910 | 159,057 | ||||||||||||
Shares redeemed | (25,126 | ) | (366,575 | ) | (37,688 | ) | (473,284 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | 13,536 | $ | 219,948 | 34,574 | $ | 448,048 | ||||||||||
|
|
|
|
|
|
|
|
11. Subsequent Event
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.
38
American Beacon The London Company Income Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | May 29 to | |||||||||||||||||||||||
February 28, | Year Ended August 31, | August 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.25 | $ | 13.85 | $ | 14.12 | $ | 11.80 | $ | 10.49 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.16 | 0.32 | 0.31 | 0.30 | 0.31 | 0.06 | ||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.93 | 1.40 | (0.14 | ) | 2.39 | 1.30 | 0.47 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.09 | 1.72 | 0.17 | 2.69 | 1.61 | 0.53 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.32 | ) | (0.32 | ) | (0.28 | ) | (0.29 | ) | (0.04 | ) | ||||||||||||
Distributions from net realized gains | (0.10 | ) | — | (0.12 | ) | (0.09 | ) | (0.01 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.26 | ) | (0.32 | ) | (0.44 | ) | (0.37 | ) | (0.30 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 16.08 | $ | 15.25 | $ | 13.85 | $ | 14.12 | $ | 11.80 | $ | 10.49 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 7.21 | %B | 12.57 | % | 1.08 | % | 23.13 | % | 15.55 | % | 5.31 | %B | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 213,332,518 | $ | 194,708,612 | $ | 137,006,660 | $ | 58,277,396 | $ | 44,731,302 | $ | 10,330,902 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 0.73 | %C | 0.75 | % | 0.75 | % | 0.82 | % | 1.13 | % | 7.28 | %C | ||||||||||||
Expenses, net of reimbursements | 0.73 | %C | 0.77 | % | 0.79 | % | 0.79 | % | 0.79 | % | 0.79 | %C | ||||||||||||
Net investment income (loss), before expense reimbursements | 2.11 | %C | 2.32 | % | 2.35 | % | 2.31 | % | 2.32 | % | (3.99 | )%C | ||||||||||||
Net investment income, net of reimbursements | 2.11 | %C | 2.30 | % | 2.30 | % | 2.33 | % | 2.66 | % | 2.50 | %C | ||||||||||||
Portfolio turnover rate | 4 | %B | 20 | % | 15 | % | 10 | % | 15 | % | 6 | %D | ||||||||||||
Y Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | May 29 to | |||||||||||||||||||||||
February 28, | Year Ended August 31, | August 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.17 | $ | 13.79 | $ | 14.06 | $ | 11.75 | $ | 10.49 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.15 | 0.32 | 0.31 | 0.28 | 0.33 | 0.05 | ||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.93 | 1.37 | (0.15 | ) | 2.39 | 1.26 | 0.48 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.08 | 1.69 | 0.16 | 2.67 | 1.59 | 0.53 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.31 | ) | (0.31 | ) | (0.27 | ) | (0.32 | ) | (0.04 | ) | ||||||||||||
Distributions from net realized gains | (0.10 | ) | — | (0.12 | ) | (0.09 | ) | (0.01 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.25 | ) | (0.31 | ) | (0.43 | ) | (0.36 | ) | (0.33 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 16.00 | $ | 15.17 | $ | 13.79 | $ | 14.06 | $ | 11.75 | $ | 10.49 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 7.19 | %B | 12.42 | % | 1.03 | % | 23.05 | % | 15.45 | % | 5.31 | %B | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 665,670,250 | $ | 582,952,334 | $ | 364,477,089 | $ | 122,714,756 | $ | 28,814,001 | $ | 551,601 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 0.81 | %C | 0.82 | % | 0.83 | % | 0.89 | % | 1.09 | % | 10.59 | %C | ||||||||||||
Expenses, net of reimbursements | 0.81 | %C | 0.82 | % | 0.84 | % | 0.89 | % | 0.89 | % | 0.89 | %C | ||||||||||||
Net investment income (loss), before expense reimbursements | 2.03 | %C | 2.24 | % | 2.27 | % | 2.24 | % | 2.22 | % | (7.30 | )%C | ||||||||||||
Net investment income, net of reimbursements | 2.03 | %C | 2.24 | % | 2.26 | % | 2.25 | % | 2.42 | % | 2.40 | %C | ||||||||||||
Portfolio turnover rate | 4 | %B | 20 | % | 15 | % | 10 | % | 15 | % | 6 | %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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover is for the period May 29, 2012 through August 31, 2012 and is not annualized. |
39
American Beacon The London Company Income Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | May 29 to | |||||||||||||||||||||||
February 28, | Year Ended August 31, | August 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.19 | $ | 13.81 | $ | 14.08 | $ | 11.76 | $ | 10.48 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.13 | 0.28 | 0.28 | 0.26 | 0.27 | 0.05 | ||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.94 | 1.37 | (0.17 | ) | 2.39 | 1.29 | 0.47 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.07 | 1.65 | 0.11 | 2.65 | 1.56 | 0.52 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.27 | ) | (0.26 | ) | (0.24 | ) | (0.27 | ) | (0.04 | ) | ||||||||||||
Distributions from net realized gains | (0.10 | ) | — | (0.12 | ) | (0.09 | ) | (0.01 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.23 | ) | (0.27 | ) | (0.38 | ) | (0.33 | ) | (0.28 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 16.03 | $ | 15.19 | $ | 13.81 | $ | 14.08 | $ | 11.76 | $ | 10.48 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 7.12 | %B | 12.13 | % | 0.71 | % | 22.83 | % | 15.14 | % | 5.21 | %B | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 36,120,450 | $ | 29,208,149 | $ | 20,564,814 | $ | 16,549,654 | $ | 8,839,661 | $ | 2,073,316 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.05 | %C | 1.06 | % | 1.04 | % | 1.06 | % | 1.54 | % | 10.14 | %C | ||||||||||||
Expenses, net of reimbursements | 1.05 | %C | 1.06 | % | 1.16 | % | 1.10 | % | 1.17 | % | 1.17 | %C | ||||||||||||
Net investment income (loss), before expense reimbursements | 1.79 | %C | 2.01 | % | 2.04 | % | 2.06 | % | 1.86 | % | (6.99 | )%C | ||||||||||||
Net investment income, net of reimbursements | 1.79 | %C | 2.01 | % | 1.93 | % | 2.02 | % | 2.23 | % | 1.99 | %C | ||||||||||||
Portfolio turnover rate | 4 | %B | 20 | % | 15 | % | 10 | % | 15 | % | 6 | %D | ||||||||||||
A Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | May 29 to | |||||||||||||||||||||||
February 28, | Year Ended August 31, | August 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.11 | $ | 13.73 | $ | 14.00 | $ | 11.70 | $ | 10.47 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.13 | 0.27 | 0.27 | 0.24 | 0.31 | 0.05 | ||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.92 | 1.38 | (0.16 | ) | 2.37 | 1.23 | 0.46 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.05 | 1.65 | 0.11 | 2.61 | 1.54 | 0.51 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.27 | ) | (0.26 | ) | (0.22 | ) | (0.30 | ) | (0.04 | ) | ||||||||||||
Distributions from net realized gains | (0.10 | ) | — | (0.12 | ) | (0.09 | ) | (0.01 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.23 | ) | (0.27 | ) | (0.38 | ) | (0.31 | ) | (0.31 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 15.93 | $ | 15.11 | $ | 13.73 | $ | 14.00 | $ | 11.70 | $ | 10.47 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 6.99 | %B | 12.14 | % | 0.71 | % | 22.58 | % | 14.99 | % | 5.11 | %B | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 96,983,385 | $ | 94,705,221 | $ | 72,363,106 | $ | 31,579,315 | $ | 12,108,558 | $ | 646,710 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.11 | %C | 1.13 | % | 1.13 | % | 1.28 | % | 1.59 | % | 11.94 | %C | ||||||||||||
Expenses, net of reimbursements | 1.11 | %C | 1.13 | % | 1.17 | % | 1.27 | % | 1.29 | % | 1.29 | %C | ||||||||||||
Net investment income (loss), before expense reimbursements | 1.72 | %C | 1.94 | % | 1.96 | % | 1.85 | % | 1.93 | % | (8.87 | )%C | ||||||||||||
Net investment income, net of reimbursements | 1.72 | %C | 1.94 | % | 1.92 | % | 1.86 | % | 2.23 | % | 1.78 | %C | ||||||||||||
Portfolio turnover rate | 4 | %B | 20 | % | 15 | % | 10 | % | 15 | % | 6 | %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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover is for the period May 29, 2012 through August 31, 2012 and is not annualized. |
40
American Beacon The London Company Income Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | May 29 to | |||||||||||||||||||||||
February 28, | Year Ended August 31, | August 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.01 | $ | 13.65 | $ | 13.93 | $ | 11.66 | $ | 10.46 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.07 | 0.17 | 0.18 | 0.15 | 0.24 | 0.04 | ||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.92 | 1.36 | (0.17 | ) | 2.35 | 1.21 | 0.46 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 0.99 | 1.53 | 0.01 | 2.50 | 1.45 | 0.50 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.07 | ) | (0.17 | ) | (0.17 | ) | (0.14 | ) | (0.24 | ) | (0.04 | ) | ||||||||||||
Distributions from net realized gains | (0.10 | ) | — | (0.12 | ) | (0.09 | ) | (0.01 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.17 | ) | (0.17 | ) | (0.29 | ) | (0.23 | ) | (0.25 | ) | (0.04 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 15.83 | $ | 15.01 | $ | 13.65 | $ | 13.93 | $ | 11.66 | $ | 10.46 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 6.63 | %B | 11.28 | % | (0.04 | )% | 21.69 | % | 14.05 | % | 5.01 | %B | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 180,691,921 | $ | 185,308,648 | $ | 122,804,166 | $ | 46,638,516 | $ | 8,015,463 | $ | 274,067 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.86 | %C | 1.87 | % | 1.88 | % | 2.02 | % | 2.26 | % | 13.83 | %C | ||||||||||||
Expenses, net of reimbursements | 1.86 | %C | 1.87 | % | 1.89 | % | 2.01 | % | 2.04 | % | 2.04 | %C | ||||||||||||
Net investment income (loss), before expense reimbursements | 0.96 | %C | 1.20 | % | 1.22 | % | 1.11 | % | 1.09 | % | (10.65 | )%C | ||||||||||||
Net investment income, net of reimbursements | 0.96 | %C | 1.20 | % | 1.21 | % | 1.12 | % | 1.31 | % | 1.14 | %C | ||||||||||||
Portfolio turnover rate | 4 | %B | 20 | % | 15 | % | 10 | % | 15 | % | 6 | %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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover is for the period May 29, 2012 through August 31, 2012 and is not annualized. |
41
American Beacon Zebra Small Cap Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended February 28, | Year Ended August 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.07 | $ | 14.21 | $ | 14.36 | $ | 13.66 | $ | 12.40 | $ | 11.30 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.16 | 0.18 | 0.13 | 0.14 | 0.46 | 0.27 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 1.80 | 1.15 | (0.03 | ) | 2.12 | 2.79 | 1.15 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income from investment operations | 1.96 | 1.33 | 0.10 | 2.26 | 3.25 | 1.42 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.06 | ) | (0.04 | ) | — | (1.17 | ) | (0.10 | ) | |||||||||||||
Distributions from net realized gains | — | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.17 | ) | (1.47 | ) | (0.25 | ) | (1.56 | ) | (1.99 | ) | (0.32 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 15.86 | $ | 14.07 | $ | 14.21 | $ | 14.36 | $ | 13.66 | $ | 12.40 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 13.95 | %B | 10.46 | % | 0.68 | % | 16.67 | % | 29.81 | % | 12.78 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 1,775,336 | $ | 2,305,284 | $ | 1,764,526 | $ | 1,606,024 | $ | 1,522,235 | $ | 923,572 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.39 | % C | 1.53 | % | 1.56 | % | 1.64 | % | 2.77 | % | 3.18 | % | ||||||||||||
Expenses, net of reimbursements | 0.90 | % C | 0.89 | % | 1.00 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||||
Net investment income (loss), before reimbursements | 1.98 | % C | 0.34 | % | 0.17 | % | 0.33 | % | (0.28 | )% | (0.71 | )% | ||||||||||||
Net investment income, net of reimbursements | 2.48 | % C | 0.97 | % | 0.73 | % | 0.99 | % | 1.50 | % | 1.48 | % | ||||||||||||
Portfolio turnover rate | 36 | %B | 50 | % | 97 | % | 76 | % | 89 | % | 103 | % | ||||||||||||
Y Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended February 28, | Year Ended August 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.20 | $ | 14.33 | $ | 14.50 | $ | 13.79 | $ | 12.46 | $ | 11.36 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.13 | 0.12 | 0.10 | 0.56 | 0.37 | 0.06 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 1.83 | 1.22 | (0.02 | ) | 1.71 | 2.89 | 1.37 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.96 | 1.34 | 0.08 | 2.27 | 3.26 | 1.43 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.06 | ) | (0.04 | ) | — | (1.11 | ) | (0.11 | ) | |||||||||||||
Distributions from net realized gains | — | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.17 | ) | (1.47 | ) | (0.25 | ) | (1.56 | ) | (1.93 | ) | (0.33 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 15.99 | $ | 14.20 | $ | 14.33 | $ | 14.50 | $ | 13.79 | $ | 12.46 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 13.82 | %B | 10.44 | % | 0.54 | % | 16.59 | % | 29.65 | % | 12.78 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 16,640,312 | $ | 10,988,456 | $ | 9,795,860 | $ | 8,168,361 | $ | 1,693,046 | $ | 1,173,851 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.44 | % C | 1.58 | % | 1.62 | % | 1.65 | % | 2.79 | % | 3.39 | % | ||||||||||||
Expenses, net of reimbursements | 1.00 | % C | 0.99 | % | 1.10 | % | 1.09 | % | 1.09 | % | 1.09 | % | ||||||||||||
Net investment income (loss), before reimbursements | 1.41 | % C | 0.28 | % | 0.12 | % | 0.19 | % | (0.23 | )% | (0.81 | )% | ||||||||||||
Net investment income, net of reimbursements | 1.86 | % C | 0.87 | % | 0.64 | % | 0.75 | % | 1.47 | % | 1.49 | % | ||||||||||||
Portfolio turnover rate | 36 | %B | 50 | % | 97 | % | 76 | % | 89 | % | 103 | % |
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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
42
American Beacon Zebra Small Cap Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
February 28, | Year Ended August 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.05 | $ | 14.22 | $ | 14.39 | $ | 13.73 | $ | 12.44 | $ | 11.31 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.14 | 0.28 | 0.01 | 0.10 | 0.53 | 0.17 | ||||||||||||||||||
Net gains (losses)frominvestments(both realizedandunrealized) | 1.78 | 1.00 | 0.04 | 2.12 | 2.68 | 1.22 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.92 | 1.28 | 0.05 | 2.22 | 3.21 | 1.39 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.04 | ) | (0.01 | ) | — | (1.10 | ) | (0.04 | ) | |||||||||||||
Distributions from net realized gains | — | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.17 | ) | (1.45 | ) | (0.22 | ) | (1.56 | ) | (1.92 | ) | (0.26 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 15.80 | $ | 14.05 | $ | 14.22 | $ | 14.39 | $ | 13.73 | $ | 12.44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 13.69 | %B | 10.07 | % | 0.29 | % | 16.27 | % | 29.30 | % | 12.45 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 9,946,171 | $ | 7,620,538 | $ | 2,573,002 | $ | 3,003,670 | $ | 3,301,901 | $ | 1,670,426 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.61 | % C | 1.74 | % | 1.82 | % | 1.86 | % | 3.07 | % | 3.60 | % | ||||||||||||
Expenses, net of reimbursements | 1.28 | % C | 1.27 | % | 1.37 | % | 1.37 | % | 1.37 | % | 1.37 | % | ||||||||||||
Net investment income (loss), before reimbursements | 1.31 | % C | 0.09 | % | (0.12 | )% | 0.15 | % | (0.60 | )% | (1.14 | )% | ||||||||||||
Net investment income, net of reimbursements | 1.64 | % C | 0.56 | % | 0.33 | % | 0.64 | % | 1.11 | % | 1.08 | % | ||||||||||||
Portfolio turnover rate | 36 | %B | 50 | % | 97 | % | 76 | % | 89 | % | 103 | % | ||||||||||||
A Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
February 28, | Year Ended August 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.06 | $ | 14.22 | $ | 14.40 | $ | 13.75 | $ | 12.46 | $ | 11.32 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.17 | 0.10 | 0.05 | 0.48 | 0.18 | 0.13 | ||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 1.75 | 1.18 | 0.00 | 1.73 | 3.02 | 1.24 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.92 | 1.28 | 0.05 | 2.21 | 3.20 | 1.37 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.03 | ) | (0.02 | ) | — | (1.09 | ) | (0.01 | ) | |||||||||||||
Distributions from net realized gains | — | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.17 | ) | (1.44 | ) | (0.23 | ) | (1.56 | ) | (1.91 | ) | (0.23 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net asset value, end of period | $ | 15.81 | $ | 14.06 | $ | 14.22 | $ | 14.40 | $ | 13.75 | $ | 12.46 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total return A | 13.68 | %B | 10.04 | % | 0.29 | % | 16.17 | % | 29.07 | % | 12.28 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 6,810,464 | $ | 5,212,114 | $ | 4,797,155 | $ | 4,894,024 | $ | 2,080,892 | $ | 2,231,680 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 1.76 | % C | 1.90 | % | 1.94 | % | 2.05 | % | 3.22 | % | 3.71 | % | ||||||||||||
Expenses, net of reimbursements | 1.30 | % C | 1.29 | % | 1.40 | % | 1.47 | % | 1.49 | % | 1.49 | % | ||||||||||||
Net investment income (loss), before reimbursements | 1.26 | % C | (0.04 | )% | (0.21 | )% | (0.14 | )% | (0.62 | )% | (1.26 | )% | ||||||||||||
Net investment income, net of reimbursements | 1.72 | % C | 0.57 | % | 0.33 | % | 0.45 | % | 1.11 | % | 0.97 | % | ||||||||||||
Portfolio turnover rate | 36 | %B | 50 | % | 97 | % | 76 | % | 89 | % | 103 | % |
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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
43
American Beacon Zebra Small Cap Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
February 28, | Year Ended August 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.53 | $ | 13.81 | $ | 14.08 | $ | 13.57 | $ | 12.28 | $ | 11.24 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.10 | 0.10 | (0.07 | ) | 0.33 | 0.24 | 0.03 | |||||||||||||||||
Net gains from investments (both realized and unrealized) | 1.70 | 1.03 | 0.01 | 1.74 | 2.84 | 1.23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total income (loss) from investment operations | 1.80 | 1.13 | (0.06 | ) | 2.07 | 3.08 | 1.26 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | — | — | — | (0.97 | ) | — | ||||||||||||||||
Distributions from net realized gains | — | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions | (0.10 | ) | (1.41 | ) | (0.21 | ) | (1.56 | ) | (1.79 | ) | (0.22 | ) | ||||||||||||
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Net asset value, end of period | $ | 15.23 | $ | 13.53 | $ | 13.81 | $ | 14.08 | $ | 13.57 | $ | 12.28 | ||||||||||||
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Total return A | 13.30 | %B | 9.17 | % | (0.48 | )% | 15.29 | % | 28.20 | % | 11.35 | % | ||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period | $ | 2,275,178 | $ | 1,838,434 | $ | 1,398,217 | $ | 1,468,876 | $ | 695,075 | $ | 506,602 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 2.50 | % C | 2.65 | % | 2.69 | % | 2.81 | % | 3.95 | % | 4.48 | % | ||||||||||||
Expenses, net of reimbursements | 2.05 | % C | 2.04 | % | 2.15 | % | 2.22 | % | 2.24 | % | 2.24 | % | ||||||||||||
Net investment income (loss), before reimbursements | 0.46 | % C | (0.78 | )% | (0.96 | )% | (0.89 | )% | (1.38 | )% | (2.02 | )% | ||||||||||||
Net investment income (loss), net of reimbursements | 0.92 | % C | (0.18 | )% | (0.41 | )% | (0.30 | )% | 0.33 | % | 0.23 | % | ||||||||||||
Portfolio turnover rate | 36 | %B | 50 | % | 97 | % | 76 | % | 89 | % | 103 | % |
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 for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
44
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, and C 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 each Fund’s portfolio holdings is also available at www.americanbeaconfunds. com approximately twenty days after the end of each month for the London Company Income Equity Fund and sixty days after the end of each quarter for the Zebra Small Cap Equity Fund. | 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 |
TRANSFER AGENT |
INDEPENDENT REGISTERED |
DISTRIBUTOR | |||||||||
State Street Bank and Trust | Boston Financial Data Services | PUBLIC ACCOUNTING FIRM Ernst & Young LLP | Foreside Fund Services, LLC | |||||||||
Boston, Massachusetts
| Kansas City, Missouri | Dallas, Texas | 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 The London Company Income Equity Fund, and American Beacon Zebra Small Cap Equity Fund are service marks of American Beacon Advisors, Inc.
SAR 2/17
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.
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: May 9, 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: May 9, 2017
By /s/ Melinda G. Heika |
Melinda G. Heika |
Treasurer |
American Beacon Funds |
Date: May 9, 2017