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: August 31, 2017
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
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.
Important Information: 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 the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Advisors | August 31, 2017 |
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Schedule of Investments: | ||||
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Financial Highlights: | ||||
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Disclosures Regarding the Approval of the Management and Investment Advisory Agreements | 67 | |||
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Back Cover |
![]() | Dear Shareholders,
At American Beacon, we are proud to offer a broad range of equity, fixed-income and alternative mutual fund products for institutions and individuals. Our mutual funds – which span the domestic, international, global, frontier and emerging markets – are sub-advised by experienced portfolio managers who employ distinctive investment processes to manage assets through a variety of economic and market conditions. Together, we work diligently to help our clients and shareholders meet their long-term financial goals.
Institutional wisdom, enduring value. Since our inception as a pension fiduciary in 1986, American Beacon has focused on identifying and overseeing institutional investment managers and portfolio risk management. In 1987, we leveraged our size and experience to launch a series of sub-advised, multi- |
manager mutual funds providing individual investors access to many of the same institutional managers as our pension clients. Following the financial crisis in 2008, we saw that investors were looking for unique solutions from managers who were not necessarily mainstream. In 2010, we began offering mutual funds from single managers with distinctive investment styles or asset classes. As we continue to expand our family of funds, our solutions-based approach provides innovative investments.
Guiding principles. Our “manager of managers” philosophy is built on a long-standing history of innovative thinking, discipline and consistency in applying our solutions-based approach. As a manager of managers, our goal is to engage the most effective money managers for each asset class, investment style or market strategy – whether through a single sub-advisor or a combination of sub-advisors. Because we take our fiduciary responsibilities very seriously, our thorough manager evaluation and selection process is rigorous and ongoing. Our guiding principles – predictability, style consistency, competitive pricing and long-term relationships – provide a strong foundation for our due-diligence process. Our broad range of mutual funds helps investors navigate the economic storms and market downturns in the U.S. and abroad. Our years of experience evaluating sub-advisors have led us to identify and partner with asset managers who have adhered to their disciplined processes for many years and through multiple market cycles.
Focus on asset protection and risk mitigation. We strive to provide innovative, long-term products without gimmicks. From offering some of the first multi-manager funds, one of the first retirement-income funds and the first open-end mutual fund in the U.S. to focus primarily on frontier-market debt, our robust history includes applying a disciplined, solutions-based approach to our product development process to help protect assets and mitigate risk.
Thank you for your continued interest in American Beacon. For additional information about our funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards,
Gene L. Needles, Jr.
President
American Beacon Funds
1
Global Bond Market Overview
August 31, 2017 (Unaudited)
Interest Rates
Interest rates rose across the larger global bond markets during the 12-month period ended August 31, 2017, as economies stabilized, the Federal Reserve (the “Fed”) continued to raise rates and commodity prices improved. In addition, elections in several countries, most notably the U.S. and France, ended with market-friendly outcomes. Even the historic Brexit vote in the U.K. was taken in stride. Switzerland was the only country at period end with its 10-year sovereign debt trading at negative yields, although Japan was close.
With the noted exception of Brazil, the following government bond yields illustrate the general rise in interest rates during the period.
Interest Rates
(10-year sovereign bond yields)
Country | August 31, 2016 | August 31, 2017 | ||||||
Switzerland | (0.50 | )% | (0.17 | )% | ||||
Japan | (0.07 | )% | 0.00 | % | ||||
Germany | (0.07 | )% | 0.36 | % | ||||
United Kingdom | 0.64 | % | 1.03 | % | ||||
United States | 1.58 | % | 2.12 | % | ||||
Mexico | 5.83 | % | 6.84 | % | ||||
Brazil | 12.08 | % | 9.98 | % |
Global Currencies
The positive outlook for global economies was also reflected in the currency markets where many currencies appreciated relative to the U.S. dollar. The exceptions were Japan, due to its soft economy and large quantitative-easing program, and the U.K., following the Brexit vote.
In emerging-market countries, such as Brazil and Mexico, commodity price stabilization and improved fiscal situations allowed their currencies to strengthen. A moderated tone toward global trade following Donald Trump’s election as the 45th U.S. president and the reduced expectations for federal rate hikes also allowed foreign currencies to outperform the dollar. Similarly, positive responses to elections in Europe, as well as muted reactions to Italian bank bail-outs and Greek budget imbalances, demonstrated investor confidence. In general, the markets brushed off many of the negative headlines during the period.
The following positive returns reflect the appreciation of foreign currency relative to the U.S. dollar.
Global Currencies
(Change in value vs. the U.S. dollar for the
12-month period ended August 31, 2017)
Geographic Area/Country/Currency | Change in Value | |||||||
Japanese Yen | (6.0 | )% | ||||||
British Pound | (1.6 | )% | ||||||
Chinese Renminbi | 1.4 | % | ||||||
Brazilian Real | 2.5 | % | ||||||
Swiss Franc | 2.6 | % | ||||||
Mexican Peso | 5.0 | % | ||||||
European Union Euro | 6.7 | % |
2
Global Bond Market Overview
August 31, 2017 (Unaudited)
Bloomberg Barclays Bond Index Returns
Given the positive investor sentiment, total returns across bond markets were attractive, and only the U.S. Treasury sectors reported negative returns as interest rates rose. Risk sector returns reflected a narrowing in credit spreads as investors flocked to yield, and interest rate increases were mild enough to keep investors in the credit markets.
Bloomberg Barclays Bond Index Returns
(Total return for the 12-month period ended
August 31, 2017)
Global/Emerging Markets | Total Return | |||
Global Treasury | (1.7 | )% | ||
Global Aggregate | 0.2 | % | ||
Global Inflation-Linked | 0.7 | % | ||
Global Securitized | 1.6 | % | ||
Global Corporate | 4.4 | % | ||
Emerging Market, Hard Currency Aggregate | 5.4 | % | ||
Emerging Market, Local Currency Government | 5.4 | % | ||
Global High Yield | 9.4 | % |
Domestic Market | Total Return | |||
U.S. Treasury | (1.0 | )% | ||
U.S. Aggregate | 0.5 | % | ||
U.S. Treasury Inflation-Protected | 0.5 | % | ||
U.S. Securitized | 0.8 | % | ||
U.S. Corporate | 2.1 | % | ||
U.S. High-Yield | 8.6 | % |
3
American Beacon Flexible Bond FundSM
Performance Overview
August 31, 2017 (Unaudited)
The Investor Class of the American Beacon Flexible Bond Fund (the “Fund”) returned 5.36% for the twelve months ended August 31, 2017. The Fund outperformed the Bloomberg Barclays U.S. Aggregate Index return of 0.49% and the BofA Merrill Lynch 3-Month LIBOR Constant Maturity Index return of 0.99% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the period from 7/5/2011 through 8/31/2017
Total Returns for the Period ended August 31, 2017 | |||||||||||||||||||||||||||||||||
Ticker | 1 Year | 3 Years | 5 Years | Since Inception | Value of $10,000 7/5/2011- 8/31/2017 | ||||||||||||||||||||||||||||
Institutional Class (1,2,4) | AFXIX | 5.77 | % | 1.61 | % | 1.81 | % | 2.60 | % | $ | 11,714 | ||||||||||||||||||||||
Y Class (1,2,4) | AFXYX | 5.67 | % | 1.51 | % | 1.72 | % | 2.51 | % | $ | 11,646 | ||||||||||||||||||||||
Investor Class (1,2,4) | AFXPX | 5.36 | % | 1.21 | % | 1.44 | % | 2.28 | % | $ | 11,490 | ||||||||||||||||||||||
A Class with sales Charge (1,2,4) | AFXAX | 0.34 | % | -0.45 | % | 0.39 | % | 1.35 | % | $ | 10,863 | ||||||||||||||||||||||
A Class without sales charge (1,2,4) | AFXAX | 5.33 | % | 1.17 | % | 1.37 | % | 2.16 | % | $ | 11,405 | ||||||||||||||||||||||
C Class with sales charge (1,2,4) | AFXCX | 3.53 | % | 0.41 | % | 0.60 | % | 1.50 | % | $ | 10,960 | ||||||||||||||||||||||
C Class without sales charge (1,2,4) | AFXCX | 4.53 | % | 0.41 | % | 0.60 | % | 1.50 | % | $ | 10,960 | ||||||||||||||||||||||
BofA Merrill Lynch 3-Month LIBOR Constant Maturity Index (3) | 0.99 | % | 0.56 | % | 0.45 | % | 0.45 | % | $ | 10,278 | |||||||||||||||||||||||
Bloomberg Barclays U.S. Aggregate Index (3) | 0.49 | % | 2.64 | % | 2.19 | % | 3.18 | % | $ | 12,132 |
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. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A 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 and/or reimbursed since Fund inception. Performance prior to waiving and/or reimbursing fees was lower than the actual returns shown since inception. |
4
American Beacon Flexible Bond FundSM
Performance Overview
August 31, 2017 (Unaudited)
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. |
For additional comparisons, the BofA Merrill Lynch High Yield Master II Index returned 8.79%. The Bloomberg Barclays U.S. Corporate (investment grade) Index returned 2.13%, and the Bloomberg Barclays U.S. Treasury Index returned -0.95% during the period.
The Fund performed well as interest rates rose and the broader U.S. bond market (Bloomberg Barclays Aggregate) was essentially flat. The Fund’s U.S. duration exposure remained very low during the period, under 2.0 years, which was a significant factor in protecting it from rising rates. By comparison, the Bloomberg Barclays Aggregate duration ended the period at nearly 6.0 years. The Fund also held small amounts of duration exposure to Mexico and Brazil, which produced mixed results but offered much higher yields than those in many U.S. markets. The Fund held minor negative duration exposures to the core European countries as their negative yields appeared unsustainable given the slowly improving economic outlook. Likewise, a short position in UK government bonds, following the market’s overreaction to the ‘Brexit’ vote, added value as yields returned to more reasonable levels.
A majority of the Fund’s core holdings continue to be invested in global corporates, sovereigns, asset-backed and mortgage-backed securities that offer higher yields than U.S. treasuries. The Fund maintained a weighted-average credit rating of investment grade to help control volatility if the markets were to decline. Despite the variety of political and economic disruptions in Europe, South America and Asia, investors appeared confident in the global outlook and were eager to invest in higher yields across a variety of asset classes. Nearly all credit sectors outperformed during the period.
Currency exposures also contributed to the Fund’s returns. Gains from a short position in the Japanese yen added value as the currency weakened following heated trade-protection rhetoric during the U.S. election. Moderate economic growth and continued quantitative easing also helped to keep the yen soft. Long positions in Latin America, most prominently the Mexican peso, added value as their economies stabilized and fears of border walls and trade protection abated. Likewise, longs in the Brazilian Real and Chilean Peso generated gains as political headlines waned and commodity prices stabilized. In Europe, long positions in peripheral-country currencies performed well as the outlook for the Eurozone improved, but these gains were largely offset by a short position in the Euro currency, which rallied as well. Lastly, the long position in UK government bonds benefitted the Fund as the British Pound recovered from an overdone ‘Brexit’ decline. In general, the U.S. dollar weakened throughout 2017, on a trade-weight basis, and the Fund’s flexibility to invest in non-dollar currencies proved beneficial.
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) | ||||||||
U.S. Treasury Notes/Bonds 1.625%, Due 7/31/2019 | 4.4 | |||||||
U.S. Treasury Notes/Bonds 1.163%, Due 1/31/2019 | 2.6 | |||||||
U.S. Treasury Notes/Bonds 1.093%, Due 4/30/2019 | 2.4 | |||||||
U.S. Treasury Notes/Bonds 2.000%, Due 5/31/2024 | 2.0 | |||||||
Fannie Mae 3.500%, Due 10/1/2047, TBA | 2.0 | |||||||
Mexican Bonos 7.750%, Due 11/13/2042 | 1.9 | |||||||
U.S. Treasury Notes/Bonds 2.000%, Due 4/30/2024 | 1.4 | |||||||
Republic of Poland Government Bond 3.250%, Due 7/25/2025 | 1.4 | |||||||
Japan Treasury Discount Bill Due 9/19/2017 | 1.4 | |||||||
Goldman Sachs Group, Inc. 2.415%, Due 11/15/2018 | 1.3 | |||||||
Total Fund Holdings | 341 |
5
American Beacon Flexible Bond FundSM
August 31, 2017 (Unaudited)
Sector Allocation (% Investments) | ||||||||
Foreign Sovereign Obligations | 23.4 | |||||||
U.S. Treasury Obligations | 21.3 | |||||||
Asset-Backed Obligations | 14.3 | |||||||
Financial | 13.9 | |||||||
Collateralized Mortgage Obligations | 13.3 | |||||||
U.S. Agency Mortgage-Backed Obligations | 2.5 | |||||||
Consumer, Cyclical | 2.5 | |||||||
Consumer, Non-Cyclical | 2.0 | |||||||
Communications | 2.0 | |||||||
Energy | 1.3 | |||||||
Technology | 1.1 | |||||||
Consumer | 1.1 | |||||||
Commercial Mortgage-Backed Obligations | 0.3 | |||||||
Municipal Obligations | 0.3 | |||||||
Manufacturing | 0.2 | |||||||
Utilities | 0.2 | |||||||
Industrial | 0.2 | |||||||
Basic Materials | 0.1 |
Top Ten Country Allocation (% Investments) | ||||||||
United States | 64.1 | |||||||
Cayman Islands | 5.3 | |||||||
Mexico | 4.7 | |||||||
Japan | 2.8 | |||||||
Poland | 2.1 | |||||||
Brazil | 2.0 | |||||||
Indonesia | 1.8 | |||||||
Malaysia | 1.7 | |||||||
Australia | 1.7 | |||||||
United Kingdom | 1.5 |
6
American Beacon Flexible Bond FundSM
August 31, 2017 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees, if applicable, and (2) ongoing costs, including management fees, distribution (12b-1) fees, sub-transfer agent fees, and other Fund expenses. The Examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from March 1, 2017 through August 31, 2017.
Actual Expenses
The “Actual” lines of the tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the 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 Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as sales charges (loads) or redemption fees, as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “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.
7
American Beacon Flexible Bond FundSM
Expense Example
August 31, 2017 (Unaudited)
American Beacon Flexible Bond Fund | |||||||||||||||
Beginning Account Value 3/1/2017 | Ending Account Value 8/31/2017 | Expenses Paid During Period 3/1/2017-8/31/2017* | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $1,000.00 | $1,034.40 | $4.62 | ||||||||||||
Hypothetical** | $1,000.00 | $1,020.70 | $4.58 | ||||||||||||
Y Class | |||||||||||||||
Actual | $1,000.00 | $1,034.40 | $5.08 | ||||||||||||
Hypothetical** | $1,000.00 | $1,020.20 | $5.04 | ||||||||||||
Investor Class | |||||||||||||||
Actual | $1,000.00 | $1,032.40 | $6.51 | ||||||||||||
Hypothetical** | $1,000.00 | $1,018.80 | $6.46 | ||||||||||||
A Class | |||||||||||||||
Actual | $1,000.00 | $1,032.40 | $6.61 | ||||||||||||
Hypothetical** | $1,000.00 | $1,018.70 | $6.56 | ||||||||||||
C Class | |||||||||||||||
Actual | $1,000.00 | $1,028.60 | $10.43 | ||||||||||||
Hypothetical** | $1,000.00 | $1,014.90 | $10.36 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 0.90%, 0.99%, 1.27%, 1.29%, and 2.04% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
8
American Beacon Flexible Bond FundSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Flexible Bond Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Beacon Flexible Bond Fund (one of the funds constituting the American Beacon Funds) (the Fund), as of August 31, 2017, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2017, by correspondence with the custodian, brokers and agent banks or by other appropriate auditing procedures where replies from brokers or agent banks were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Flexible Bond Fund at August 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
October 27, 2017
9
American Beacon Flexible Bond FundSM
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONSA - 1.47% | |||||||||||||||
Consumer - 1.04% | |||||||||||||||
Burlington Coat Factory Warehouse Corp., 3.980%, Due 8/13/2021, Term Loan B4, | $ | 295,000 | $ | 295,738 | |||||||||||
Charter Communications Operating LLC, 3.489%, Due 1/15/2024, 2016 Term Loan I Add, | 98,750 | 99,188 | |||||||||||||
Hilton Worldwide Finance LLC, 3.234%, Due 10/25/2023, Term Loan B2, | 694,453 | 696,522 | |||||||||||||
J.C. Penney Corporation, Inc., 5.568%, Due 6/23/2023, 2016 Term Loan B, | 265,200 | 261,002 | |||||||||||||
|
| ||||||||||||||
1,352,450 | |||||||||||||||
|
| ||||||||||||||
Energy - 0.07% | |||||||||||||||
Petroleo Global Trading, Due 2/19/2020, Term LoanB | 100,000 | 97,500 | |||||||||||||
|
| ||||||||||||||
Manufacturing - 0.24% | |||||||||||||||
Air Canada, 3.460%, Due 10/6/2023, 2017 Term Loan B, (3 mo. LIBOR + 2.250%) | 90,000 | 90,282 | |||||||||||||
Allison Transmission, Inc., 3.240%, Due 9/23/2022, New Term Loan B3, | 224,003 | 224,726 | |||||||||||||
|
| ||||||||||||||
315,008 | |||||||||||||||
|
| ||||||||||||||
Telecommunications - 0.04% | |||||||||||||||
CenturyLink, Inc., 2.750%, Due 1/31/2025, 2017 Term Loan BC | 50,000 | 48,896 | |||||||||||||
|
| ||||||||||||||
Utilities - 0.08% | |||||||||||||||
Energy Future Intermediate Holding Co., LLC, 3.079%, Due 6/23/2018, 2017 Delayed DIP Term LoanD | 100,000 | 100,400 | |||||||||||||
|
| ||||||||||||||
Total Bank Loan Obligations (Cost $1,913,739) | 1,914,254 | ||||||||||||||
|
| ||||||||||||||
CORPORATE OBLIGATIONS - 17.08% | |||||||||||||||
Basic Materials - 0.12% | |||||||||||||||
Sherwin-Williams Co., 2.250%, Due 5/15/2020 | 150,000 | 150,733 | |||||||||||||
|
| ||||||||||||||
Communications - 1.85% | |||||||||||||||
Amazon.com, Inc., | |||||||||||||||
1.900%, Due 8/21/2020E | 250,000 | 251,027 | |||||||||||||
4.050%, Due 8/22/2047E | 100,000 | 102,867 | |||||||||||||
AT&T, Inc., | |||||||||||||||
2.450%, Due 6/30/2020 | 400,000 | 403,418 | |||||||||||||
2.850%, Due 2/14/2023 | 260,000 | 259,294 | |||||||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.908%, Due 7/23/2025 | 100,000 | 107,127 | |||||||||||||
NBCUniversal Enterprise, Inc., 1.699%, Due 4/1/2021, (3 mo. USD LIBOR + 0.400%)E F | 775,000 | 774,221 | |||||||||||||
Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC, 3.360%, Due 3/20/2023E | 200,000 | 202,940 | |||||||||||||
Verizon Communications, Inc., | |||||||||||||||
3.125%, Due 3/16/2022 | 200,000 | 205,074 | |||||||||||||
4.125%, Due 3/16/2027 | 100,000 | 103,495 | |||||||||||||
|
| ||||||||||||||
2,409,463 | |||||||||||||||
|
| ||||||||||||||
Consumer, Cyclical - 2.29% | |||||||||||||||
American Airlines 2016-3 Class A Pass Through Trust, 3.250%, Due 4/15/2030 | 100,000 | 99,650 | |||||||||||||
Continental Airlines 2012-3 Class C Pass Through Trust, 6.125%, Due 4/29/2018 | 210,000 | 214,399 | |||||||||||||
Daimler Finance North America LLC, | |||||||||||||||
1.875%, Due 1/11/2018E | 200,000 | 200,209 | |||||||||||||
2.300%, Due 1/6/2020E | 200,000 | 201,070 | |||||||||||||
eBay, Inc., 2.181%, Due 1/30/2023, (3 mo. USD LIBOR + 0.870%)F | 200,000 | 201,049 | |||||||||||||
Ford Motor Credit Co., LLC, | |||||||||||||||
2.146%, Due 6/15/2018, (3 mo. USD LIBOR + 0.900%)F | 745,000 | 748,201 | |||||||||||||
2.979%, Due 8/3/2022 | 250,000 | 249,851 | |||||||||||||
General Motors Financial Co., Inc., | |||||||||||||||
2.234%, Due 4/13/2020, (3 mo. USD LIBOR + 0.930%)F | 795,000 | 798,654 | |||||||||||||
2.606%, Due 6/30/2022, (3 mo. USD LIBOR + 1.310%)F | 160,000 | 160,792 |
See accompanying notes
10
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
CORPORATE OBLIGATIONS - 17.08% (continued) | |||||||||||||||
Consumer, Cyclical - 2.29% (continued) | |||||||||||||||
Hyundai Capital America, 2.550%, Due 4/3/2020E | $ | 17,000 | $ | 17,065 | |||||||||||
PetSmart, Inc., 5.875%, Due 6/1/2025E | 100,000 | 89,250 | |||||||||||||
|
| ||||||||||||||
2,980,190 | |||||||||||||||
|
| ||||||||||||||
Consumer, Non-Cyclical - 1.56% | |||||||||||||||
BAT Capital Corp., | |||||||||||||||
2.297%, Due 8/14/2020E | 250,000 | 251,139 | |||||||||||||
2.195%, Due 8/15/2022, (3 mo. USD LIBOR + 0.880%)E F | 250,000 | 250,910 | |||||||||||||
Cardinal Health, Inc., 2.616%, Due 6/15/2022 | 210,000 | 211,083 | |||||||||||||
Dignity Health, 2.637%, Due 11/1/2019 | 300,000 | 303,634 | |||||||||||||
ERAC USA Finance LLC, 4.500%, Due 8/16/2021E | 350,000 | 375,633 | |||||||||||||
HCA, Inc., 6.500%, Due 2/15/2020 | 100,000 | 108,898 | |||||||||||||
McCormick & Co., Inc., 2.700%, Due 8/15/2022 | 50,000 | 50,466 | |||||||||||||
Smithfield Foods, Inc., 3.350%, Due 2/1/2022E | 195,000 | 198,167 | |||||||||||||
Universal Health Services, Inc., | |||||||||||||||
3.750%, Due 8/1/2019E | 100,000 | 102,410 | |||||||||||||
4.750%, Due 8/1/2022E | 70,000 | 72,100 | |||||||||||||
Zimmer Biomet Holdings, Inc., 3.150%, Due 4/1/2022 | 100,000 | 102,232 | |||||||||||||
|
| ||||||||||||||
2,026,672 | |||||||||||||||
|
| ||||||||||||||
Energy - 0.41% | |||||||||||||||
Extraction Oil & Gas, Inc., 7.375%, Due 5/15/2024E | 100,000 | 100,500 | |||||||||||||
Kinder Morgan, Inc., 5.000%, Due 2/15/2021E | 100,000 | 107,286 | |||||||||||||
Murphy Oil Corp., 5.750%, Due 8/15/2025 | 100,000 | 101,300 | |||||||||||||
Sabine Pass Liquefaction LLC, | |||||||||||||||
5.750%, Due 5/15/2024 | 100,000 | 111,211 | |||||||||||||
5.000%, Due 3/15/2027 | 100,000 | 106,100 | |||||||||||||
|
| ||||||||||||||
526,397 | |||||||||||||||
|
| ||||||||||||||
Financial - 9.58% | |||||||||||||||
2013-2 Aviation Loan Trust, 3.356%, Due 12/15/2022, (3 mo. USD LIBOR + 2.110%)E F | 62,098 | 58,043 | |||||||||||||
AGFC Capital Trust I, 3.054%, Due 1/15/2067, (3 mo. USD LIBOR + 1.750%)E F | 300,000 | 174,000 | |||||||||||||
American Express Credit Corp., 1.921%, Due 7/31/2018, (3 mo. USD LIBOR + 0.610%)F | 820,000 | 823,207 | |||||||||||||
Ares Capital Corp., 3.500%, Due 2/10/2023 | 150,000 | 149,465 | |||||||||||||
Athene Global Funding, 2.750%, Due 4/20/2020E | 200,000 | 202,126 | |||||||||||||
Bank of America Corp., | |||||||||||||||
5.650%, Due 5/1/2018 | 500,000 | 512,549 | |||||||||||||
2.344%, Due 1/15/2019, (3 mo. USD LIBOR + 1.040%)F | 700,000 | 707,288 | |||||||||||||
2.169%, Due 4/1/2019, (3 mo. USD LIBOR + 0.870%)F | 535,000 | 539,988 | |||||||||||||
7.625%, Due 6/1/2019 | 100,000 | 109,504 | |||||||||||||
2.369%, Due 7/21/2021, (3 mo. USD LIBOR + 0.660%)F | 200,000 | 200,538 | |||||||||||||
4.125%, Due 1/22/2024 | 100,000 | 107,079 | |||||||||||||
4.383%, Due 10/21/2025G H | MXN | 3,000,000 | 204,707 | ||||||||||||
Blackstone CQP Holdco LP, 6.500%, Due 3/20/2021E | 50,000 | 51,539 | |||||||||||||
Brookfield Finance LLC, 4.000%, Due 4/1/2024 | 50,000 | 52,435 | |||||||||||||
CIT Group, Inc., 5.800%, Due 6/15/2022, (3 mo. USD LIBOR + 3.972%)F | 100,000 | 103,750 | |||||||||||||
Citigroup, Inc., | |||||||||||||||
2.007%, Due 4/27/2018, (3 mo. USD LIBOR + 0.690%)F | 595,000 | 596,866 | |||||||||||||
2.900%, Due 12/8/2021 | 240,000 | 244,008 | |||||||||||||
2.750%, Due 4/25/2022 | 50,000 | 50,450 | |||||||||||||
2.414%, Due 5/17/2024, (3 mo. USD LIBOR + 1.100%)F | 150,000 | 150,047 | |||||||||||||
Exela Intermediate LLC / Exela Finance, Inc., 10.000%, Due 7/15/2023E | 50,000 | 49,000 | |||||||||||||
Goldman Sachs Group, Inc. | |||||||||||||||
2.415%, Due 11/15/2018, (3 mo. USD LIBOR + 1.100%)F | 1,610,000 | 1,624,750 | |||||||||||||
7.500%, Due 2/15/2019 | 232,000 | 250,398 | |||||||||||||
2.600%, Due 4/23/2020 | 130,000 | 131,588 | |||||||||||||
2.368%, Due 6/5/2023, (3 mo. USD LIBOR + 1.050%)F | 200,000 | 200,685 | |||||||||||||
2.313%, Due 7/24/2023, (3 mo. USD LIBOR + 1.000%)F | 100,000 | 99,839 | |||||||||||||
International Lease Finance Corp., | |||||||||||||||
3.875%, Due 4/15/2018 | 130,000 | 131,468 | |||||||||||||
5.875%, Due 4/1/2019 | 80,000 | 84,655 |
See accompanying notes
11
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
CORPORATE OBLIGATIONS - 17.08% (continued) | |||||||||||||||
Financial - 9.58% (continued) | |||||||||||||||
JPMorgan Chase & Co., | |||||||||||||||
2.214%, Due 1/25/2018, (3 mo. USD LIBOR + 0.900%)F | $ | 640,000 | $ | 641,955 | |||||||||||
2.750%, Due 6/23/2020 | 250,000 | 255,205 | |||||||||||||
4.400%, Due 7/22/2020 | 10,000 | 10,671 | |||||||||||||
2.796%, Due 3/1/2021, (3 mo. USD LIBOR + 1.480%)F | 300,000 | 309,403 | |||||||||||||
2.776%, Due 4/25/2023, (3 mo. USD LIBOR + 0.935%)F | 40,000 | 40,331 | |||||||||||||
3.220%, Due 3/1/2025, (3 mo. USD LIBOR + 1.155%)F | 100,000 | 101,791 | |||||||||||||
JPMorgan Chase Bank NA, 6.000%, Due 10/1/2017 | 300,000 | 300,926 | |||||||||||||
KeyCorp, 2.900%, Due 9/15/2020 | 300,000 | 307,122 | |||||||||||||
Morgan Stanley, | |||||||||||||||
2.594%, Due 4/25/2018, (3 mo. USD LIBOR + 1.280%)F | 1,600,000 | 1,610,585 | |||||||||||||
7.300%, Due 5/13/2019 | 300,000 | 326,580 | |||||||||||||
5.500%, Due 7/24/2020 | 350,000 | 382,551 | |||||||||||||
Provident Funding Associates LP / PFG Finance Corp., 6.375%, Due 6/15/2025E | 50,000 | 51,750 | |||||||||||||
Regions Financial Corp., 2.750%, Due 8/14/2022 | 100,000 | 100,663 | |||||||||||||
Wells Fargo & Co., | |||||||||||||||
2.600%, Due 7/22/2020 | 100,000 | 101,650 | |||||||||||||
2.625%, Due 7/22/2022 | 300,000 | 302,127 | |||||||||||||
|
| ||||||||||||||
12,453,282 | |||||||||||||||
|
| ||||||||||||||
Industrial - 0.19% | |||||||||||||||
Roper Technologies, Inc., 2.800%, Due 12/15/2021 | 240,000 | 243,170 | |||||||||||||
|
| ||||||||||||||
Technology - 0.92% | |||||||||||||||
Broadcom Corp. / Broadcom Cayman Finance Ltd., 3.000%, Due 1/15/2022E | 100,000 | 101,359 | |||||||||||||
Dell International LLC / EMC Corp., | |||||||||||||||
3.480%, Due 6/1/2019E | 50,000 | 51,100 | |||||||||||||
4.420%, Due 6/15/2021E | 270,000 | 284,507 | |||||||||||||
DXC Technology Co., 2.875%, Due 3/27/2020 | 140,000 | 142,390 | |||||||||||||
Electronic Arts, Inc., 3.700%, Due 3/1/2021 | 70,000 | 73,183 | |||||||||||||
First Data Corp., 5.375%, Due 8/15/2023E | 210,000 | 221,025 | |||||||||||||
Hewlett Packard Enterprise Co., 3.600%, Due 10/15/2020 | 260,000 | 269,771 | |||||||||||||
j2 Cloud Services LLC / j2 Global Co-Obligor, Inc., 6.000%, Due 7/15/2025E | 50,000 | 51,562 | |||||||||||||
|
| ||||||||||||||
1,194,897 | |||||||||||||||
|
| ||||||||||||||
Utilities - 0.16% | |||||||||||||||
Dominion Energy, Inc., 2.000%, Due 8/15/2021 | 110,000 | 108,509 | |||||||||||||
FirstEnergy Corp., 2.850%, Due 7/15/2022, Series A | 100,000 | 100,335 | |||||||||||||
|
| ||||||||||||||
208,844 | |||||||||||||||
|
| ||||||||||||||
Total Corporate Obligations (Cost $22,129,192) | 22,193,648 | ||||||||||||||
|
| ||||||||||||||
FOREIGN CORPORATE OBLIGATIONS - 5.83% | |||||||||||||||
Communications - 0.16% | |||||||||||||||
Tencent Holdings Ltd., 2.875%, Due 2/11/2020E | 200,000 | 203,425 | |||||||||||||
|
| ||||||||||||||
Consumer, Cyclical - 0.15% | |||||||||||||||
1011778 BC ULC / New Red Finance, Inc., 6.000%, Due 4/1/2022E | 47,000 | 48,551 | |||||||||||||
Alimentation Couche-Tard, Inc., 2.700%, Due 7/26/2022E | 150,000 | 150,436 | |||||||||||||
|
| ||||||||||||||
198,987 | |||||||||||||||
|
| ||||||||||||||
Consumer, Non-Cyclical - 0.46% | |||||||||||||||
Allergan Funding SCS, 3.000%, Due 3/12/2020 | 400,000 | 408,188 | |||||||||||||
Teva Pharmaceutical Finance Netherlands III BV, 2.200%, Due 7/21/2021 | 200,000 | 190,431 | |||||||||||||
|
| ||||||||||||||
598,619 | |||||||||||||||
|
| ||||||||||||||
Energy - 0.76% | |||||||||||||||
CNOOC Finance 2012 Ltd., 3.875%, Due 5/2/2022E | 200,000 | 210,502 | |||||||||||||
Petrobras Global Finance BV, 8.375%, Due 5/23/2021 | 250,000 | 283,875 | |||||||||||||
Ras Laffan Liquefied Natural Gas Co., Ltd. III, 6.750%, Due 9/30/2019H | 250,000 | 270,375 | |||||||||||||
Sinopec Group Overseas Development 2014 Ltd., 4.375%, Due 4/10/2024H | 200,000 | 216,548 | |||||||||||||
|
| ||||||||||||||
981,300 | |||||||||||||||
|
|
See accompanying notes
12
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
Financial - 4.17% | |||||||||||||||
Barclays PLC, 8.250%, Due 12/15/2018, (5-Yr. Semi-Annual USD Swap + 6.705%)G F | $ | 100,000 | $ | 106,032 | |||||||||||
BNP Paribas S.A., 2.950%, Due 5/23/2022E | 200,000 | 202,309 | |||||||||||||
BNZ International Funding Ltd., 2.400%, Due 2/21/2020E | 250,000 | 252,005 | |||||||||||||
BPCE S.A., 2.197%, Due 5/31/2022, (3 mo. USD LIBOR + 0.880%)F | 250,000 | 251,480 | |||||||||||||
Credit Suisse Group Funding Guernsey Ltd., 3.750%, Due 3/26/2025 | 250,000 | 256,235 | |||||||||||||
Deutsche Bank AG, 4.250%, Due 10/14/2021 | 200,000 | 211,026 | |||||||||||||
DNB Bank ASA, 2.375%, Due 6/2/2021E | 300,000 | 301,470 | |||||||||||||
Lloyds Banking Group PLC, 7.625%, Due 12/29/2049G H | GBP | 500,000 | 730,052 | ||||||||||||
Macquarie Bank Ltd., 1.947%, Due 10/27/2017, (3 mo. USD LIBOR + 0.630%)E F | 610,000 | 610,517 | |||||||||||||
Mitsubishi UFJ Financial Group, Inc., | |||||||||||||||
2.190%, Due 9/13/2021 | 200,000 | 198,920 | |||||||||||||
2.998%, Due 2/22/2022 | 210,000 | 214,816 | |||||||||||||
Mizuho Financial Group, Inc., | |||||||||||||||
2.632%, Due 4/12/2021E | 210,000 | 211,511 | |||||||||||||
2.953%, Due 2/28/2022 | 200,000 | 203,367 | |||||||||||||
National Australia Bank Ltd., 1.825%, Due 5/22/2020, (3 mo. USD LIBOR + 0.510%)E F | 485,000 | 486,606 | |||||||||||||
Novo Banco S.A., 5.000%, Due 5/23/2019H | EUR | 50,000 | 48,510 | ||||||||||||
Royal Bank of Scotland PLC, 6.934%, Due 4/9/2018H | EUR | 50,000 | 61,927 | ||||||||||||
Santander UK PLC, 2.500%, Due 3/14/2019 | 300,000 | 303,103 | |||||||||||||
Sumitomo Mitsui Financial Group, Inc., 2.784%, Due 7/12/2022 | 100,000 | 101,104 | |||||||||||||
The Toronto-Dominion Bank, 2.303%, Due 4/7/2021, (3 mo. USD LIBOR + 1.000%)F | 150,000 | 153,131 | |||||||||||||
UBS AG, 5.125%, Due 5/15/2024H | 300,000 | 320,891 | |||||||||||||
UBS Group Funding Switzerland AG, 2.265%, Due 8/15/2023, (3 mo. USD LIBOR + 0.950%)E F | 200,000 | 199,895 | |||||||||||||
|
| ||||||||||||||
5,424,907 | |||||||||||||||
|
| ||||||||||||||
Technology - 0.13% | |||||||||||||||
Seagate HDD Cayman, 3.750%, Due 11/15/2018 | 170,000 | 172,848 | |||||||||||||
|
| ||||||||||||||
Total Foreign Corporate Obligations (Cost $7,558,169) | 7,580,086 | ||||||||||||||
|
| ||||||||||||||
FOREIGN SOVEREIGN OBLIGATIONS - 23.02% | |||||||||||||||
Argentina POM Politica Monetaria, 26.250%, Due 6/21/2020, Series POMG | ARS | 2,700,000 | 167,043 | ||||||||||||
Argentine Republic Government International Bond, 3.875%, Due 1/15/2022H | EUR | 300,000 | 361,285 | ||||||||||||
Brazil Notas do Tesouro Nacional, | |||||||||||||||
10.000%, Due 1/1/2025 | BRL | 2,250,000 | 735,637 | ||||||||||||
10.000%, Due 1/1/2027 | BRL | 4,735,000 | 1,537,166 | ||||||||||||
Corporacion Andina de Fomento, | |||||||||||||||
1.861%, Due 1/29/2018, (3 mo. USD LIBOR + 0.550%)F | 880,000 | 880,183 | |||||||||||||
2.000%, Due 5/10/2019 | 425,000 | 425,927 | |||||||||||||
Dominican Republic International Bond, 7.500%, Due 5/6/2021E | 260,000 | 289,575 | |||||||||||||
Georgia Government International Bond, 6.875%, Due 4/12/2021H | 200,000 | 223,100 | |||||||||||||
Guatemala Government Bond, 5.750%, Due 6/6/2022E | 240,000 | 262,200 | |||||||||||||
Hellenic Republic Government Bond, 4.750%, Due 4/17/2019E H | EUR | 50,000 | 61,118 | ||||||||||||
Honduras Government International Bond, 8.750%, Due 12/16/2020E | 240,000 | 275,208 | |||||||||||||
Hungary Government International Bond, 6.250%, Due 1/29/2020 | 380,000 | 415,150 | |||||||||||||
Indonesia Government International Bond, | |||||||||||||||
5.875%, Due 3/13/2020E | 100,000 | 109,193 | |||||||||||||
4.875%, Due 5/5/2021E | 260,000 | 280,158 | |||||||||||||
Indonesia Treasury Bond, | |||||||||||||||
8.375%, Due 3/15/2024 | IDR | 9,800,000,000 | 798,202 | ||||||||||||
9.000%, Due 3/15/2029 | IDR | 1,900,000,000 | 164,915 | ||||||||||||
8.750%, Due 2/15/2044 | IDR | 11,700,000,000 | 971,319 | ||||||||||||
Japan Treasury Discount Bill, | |||||||||||||||
(0.105%), Due 9/19/2017 | JPY | 195,000,000 | 1,773,853 | ||||||||||||
(0.116%), Due 10/23/2017, Series 697 | JPY | 100,000,000 | 909,771 | ||||||||||||
Kenya Government International Bond, 5.875%, Due 6/24/2019E | 200,000 | 206,766 | |||||||||||||
Kommunalbanken A/S, 1.580%, Due 6/16/2020, (3 mo. USD LIBOR + 0.330%)E F | 634,000 | 638,746 | |||||||||||||
Kuwait International Government Bond, 3.500%, Due 3/20/2027E | 200,000 | 207,376 |
See accompanying notes
13
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
FOREIGN SOVEREIGN OBLIGATIONS - 23.02% (continued) | |||||||||||||||
Malaysia Government Bond, | |||||||||||||||
3.659%, Due 10/15/2020 | MYR | 2,080,000 | $ | 490,086 | |||||||||||
4.048%, Due 9/30/2021 | MYR | 1,105,000 | 263,389 | ||||||||||||
3.620%, Due 11/30/2021 | MYR | 940,000 | 219,919 | ||||||||||||
3.480%, Due 3/15/2023 | MYR | 2,885,000 | 664,358 | ||||||||||||
3.955%, Due 9/15/2025 | MYR | 785,000 | 183,786 | ||||||||||||
3.900%, Due 11/30/2026 | MYR | 290,000 | 67,944 | ||||||||||||
3.899%, Due 11/16/2027 | MYR | 1,330,000 | 310,878 | ||||||||||||
Mexican Bonos Desarr, | |||||||||||||||
8.500%, Due 5/31/2029I | MXN | 25,600,000 | 1,614,686 | ||||||||||||
7.750%, Due 11/23/2034I | MXN | 6,500,000 | 387,893 | ||||||||||||
8.500%, Due 11/18/2038I | MXN | 24,500,000 | 1,569,957 | ||||||||||||
7.750%, Due 11/13/2042I | MXN | 40,800,000 | 2,430,965 | ||||||||||||
Nigeria Government International Bond, 5.125%, Due 7/12/2018H | $ | 200,000 | 203,078 | ||||||||||||
Peru Government Bond, 6.150%, Due 8/12/2032E H | PEN | 3,525,000 | 1,135,664 | ||||||||||||
Portugal Obrigacoes do Tesouro OT, 2.875%, Due 10/15/2025E H | EUR | 1,070,000 | 1,320,958 | ||||||||||||
Queensland Treasury Corp., 5.750%, Due 7/22/2024H | AUD | 1,090,000 | 1,025,494 | ||||||||||||
Republic of Belarus International Bond, 8.950%, Due 1/26/2018H | 200,000 | 204,754 | |||||||||||||
Republic of Poland Government Bond, | |||||||||||||||
3.250%, Due 7/25/2025 | PLN | 6,275,000 | 1,780,353 | ||||||||||||
2.500%, Due 7/25/2026 | PLN | 3,220,000 | 854,172 | ||||||||||||
Republic of South Africa Government Bond, | |||||||||||||||
6.750%, Due 3/31/2021 | ZAR | 3,465,000 | 260,659 | ||||||||||||
6.500%, Due 2/28/2041 | ZAR | 16,030,000 | 868,032 | ||||||||||||
8.750%, Due 2/28/2048 | ZAR | 6,915,000 | 477,722 | ||||||||||||
Republic of South Africa Government International Bond, 5.500%, Due 3/9/2020 | 200,000 | 213,687 | |||||||||||||
Romanian Government International Bond, 6.750%, Due 2/7/2022H | 400,000 | 466,728 | |||||||||||||
Serbia International Bond, 5.875%, Due 12/3/2018E | 240,000 | 250,464 | |||||||||||||
Slovenia Government International Bond, 5.850%, Due 5/10/2023H | 100,000 | 117,257 | |||||||||||||
Turkey Government Bond, 10.600%, Due 2/11/2026 | TRY | 1,405,000 | 414,551 | ||||||||||||
Turkey Government International Bond, 5.625%, Due 3/30/2021 | 200,000 | 213,827 | |||||||||||||
Vietnam Government International Bond, 6.750%, Due 1/29/2020E | 200,000 | 218,552 | |||||||||||||
|
| ||||||||||||||
Total Foreign Sovereign Obligations (Cost $30,832,971) | 29,923,704 | ||||||||||||||
|
| ||||||||||||||
ASSET-BACKED OBLIGATIONS - 14.07% | |||||||||||||||
Ameriquest Mortgage Securities, Inc., 3.184%, Due 6/25/2034, 2004 R4 M2, (1 mo. USD LIBOR + 1.950%)F | 839,573 | 694,901 | |||||||||||||
Apidos CLO XXII, 5.107%, Due 10/20/2027, 2015-22A C, (3 mo. USD LIBOR + 3.800%)E F | 400,000 | 402,047 | |||||||||||||
Carlyle Global Market Strategies CLO Ltd., | |||||||||||||||
2.307%, Due 4/20/2027, 2015-1A AR, (3 mo. USD LIBOR + 1.000%)E F | 300,000 | 299,997 | |||||||||||||
2.787%, Due 4/27/2027, 2015-2A A1, (3 mo. USD LIBOR + 1.470%)E F | 250,000 | 250,961 | |||||||||||||
Carlyle Global Market Strategies Euro CLO Ltd., 1.000%, Due 9/21/2029, 2015-2A AA1R, | 250,000 | 297,635 | |||||||||||||
Carrington Mortgage Loan Trust, 1.494%, Due 2/25/2037, 2007 FRE1 A3, | 500,000 | 442,530 | |||||||||||||
Cedar Funding II CLO Ltd., 2.519%, Due 6/9/2030, 2013-1A A1R, (3 mo. USD LIBOR + 1.230%)E F | 470,000 | 470,008 | |||||||||||||
Citigroup Mortgage Loan Trust, Inc., 1.314%, Due 1/25/2037, 2007 AMC2 A3A, | 134,926 | 88,629 | |||||||||||||
Colony American Homes, | |||||||||||||||
2.378%, Due 5/17/2031, 2014 1A A, (1 mo. LIBOR + 1.150%)E F | 273,628 | 274,807 | |||||||||||||
2.186%, Due 7/17/2031, 2014 2A A, (1 mo. LIBOR + 0.950%)E F | 166,934 | 167,147 | |||||||||||||
Countrywide Asset-Backed Certificates, 1.364%, Due 12/25/2036, 2006 12 1A, | 127,661 | 129,180 | |||||||||||||
Countrywide Asset-Backed Certificates Trust, 1.904%, Due 8/25/2035, 2005 3 MV5, | 400,000 | 400,909 | |||||||||||||
Domino’s Pizza Master Issuer LLC, | |||||||||||||||
2.486%, Due 7/25/2047, 2017 1A A2I, (3 mo. USD LIBOR + 1.250%)E F | 400,000 | 400,644 | |||||||||||||
3.082%, Due 7/25/2047, 2017 1A A2IIE | 400,000 | 400,176 |
See accompanying notes
14
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
ASSET-BACKED OBLIGATIONS - 14.07% (continued) | |||||||||||||||
Dryden 31 Senior Loan Fund, 2.384%, Due 4/18/2026, 2014-31A AR, | $ | 260,000 | $ | 260,133 | |||||||||||
First Franklin Mortgage Loan Trust, 1.594%, Due 11/25/2035, 2005 FF10 A5, | 1,000,000 | 939,852 | |||||||||||||
First Investors Auto Owner, 4.700%, Due 4/18/2022, 2016 1A DE | 500,000 | 519,085 | |||||||||||||
GoldenTree Loan Opportunities VII Ltd., 2.464%, Due 4/25/2025, 2013-7A A, CLO, | 494,065 | 494,060 | |||||||||||||
GSAMP Trust, 1.354%, Due 12/25/2036, 2007 FM1 A2B, (1 mo. USD LIBOR + 0.120%)F | 1,407,021 | 762,445 | |||||||||||||
Invitation Homes Trust, 2.577%, Due 6/17/2032, 2015 SFR2 A, (1 mo. LIBOR + 1.350%)E F | 291,616 | 292,679 | |||||||||||||
Madison Park Funding IV Ltd., 1.507%, Due 3/22/2021, 2007-4A A1A, CLO, | 607,818 | 607,311 | |||||||||||||
Madison Park Funding XIII Ltd., 2.416%, Due 1/19/2025, 2014-13A AR, CLO, | 250,000 | 250,806 | |||||||||||||
Madison Park Funding XIV Ltd., 4.557%, Due 7/20/2026, 2014-14A DR, | 250,000 | 249,992 | |||||||||||||
Mastr Specialized Loan Trust, 1.494%, Due 2/25/2036, 2006 2 A, (1 mo. USD LIBOR + 0.260%)E F | 680,445 | 644,468 | |||||||||||||
Morgan Stanley ABS Capital I, Inc. Trust, | |||||||||||||||
1.284%, Due 7/25/2036, 2006 WMC2 A2FP, (1 mo. USD LIBOR + 0.050%)F | 73,216 | 47,919 | |||||||||||||
1.384%, Due 11/25/2036, 2007 HE1 A2C, (1 mo. USD LIBOR + 0.150%)F | 451,583 | 289,026 | |||||||||||||
1.294%, Due 12/25/2036, 2007 HE3 A2A, (1 mo. USD LIBOR + 0.060%)F | 406,267 | 264,389 | |||||||||||||
Morgan Stanley Home Equity Loan Trust, 1.334%, Due 4/25/2037, 2007 2 A1, | 1,015,477 | 622,219 | |||||||||||||
Nomura Home Equity Loan, Inc. Home Equity Loan Trust, 1.564%, Due 10/25/2036, 2006 AF1 A4, | 1,051,364 | 393,572 | |||||||||||||
Oakwood Mortgage Investors, Inc., 6.610%, Due 6/15/2031, 2001 C A3G | 305,992 | 107,982 | |||||||||||||
Octagon Investment Partners 24 Ltd., | |||||||||||||||
1.000%, Due 5/21/2027, 2015-1A A1R, CLOE | 250,000 | 250,000 | |||||||||||||
1.000%, Due 5/21/2027, 2015-1A A2AR, CLOE | 250,000 | 250,000 | |||||||||||||
2.766%, Due 5/21/2027, 2015-1A A1, CLO, (3 mo. USD LIBOR + 1.450%)E F | 250,000 | 250,751 | |||||||||||||
OHA Credit Partners VIII Ltd., 2.427%, Due 4/20/2025, 2013-8A A, CLO, | 463,987 | 464,124 | |||||||||||||
OHA Credit Partners XI Ltd., 5.607%, Due 10/20/2028, 2015-11A D, CLO, | 600,000 | 606,431 | |||||||||||||
Prestige Auto Receivables Trust, 5.150%, Due 11/15/2021, 2016 1A DE | 400,000 | 416,674 | |||||||||||||
RAAC Series Trust, 1.634%, Due 9/25/2045, 2006 SP1 M1, (1 mo. USD LIBOR + 0.400%)F | 800,000 | 762,805 | |||||||||||||
Renaissance Home Equity Loan Trust, 5.612%, Due 4/25/2037, 2007 1 AF3J | 941,119 | 498,770 | |||||||||||||
Residential Asset Securitization Trust, | |||||||||||||||
1.814%, Due 7/25/2033, 2003 KS5 AIIB, (1 mo. USD LIBOR + 0.580%)F | 5,395 | 5,100 | |||||||||||||
1.674%, Due 1/25/2036, 2005 KS12 M1, (1 mo. USD LIBOR + 0.440%)F | 166,208 | 165,746 | |||||||||||||
Springleaf Funding Trust, 2.680%, Due 7/15/2030, 2017 AA AE | 200,000 | 201,817 | |||||||||||||
Taco Bell Funding LLC, 3.832%, Due 5/25/2046, 2016 1A A2IE | 356,400 | 365,862 | |||||||||||||
Thacher Park CLO Ltd., 2.467%, Due 10/20/2026, 2014-1A AR, (3 mo. USD LIBOR + 1.160%)E F | 500,000 | 500,009 | |||||||||||||
Tralee CLO III Ltd., 2.657%, Due 7/20/2026, 2014-3A A2, (3 mo. USD LIBOR + 1.350%)E F | 600,000 | 600,262 | |||||||||||||
Vibrant CLO VII Ltd., 1.000%, Due 10/20/2030, 2017-7A A1, (3 mo. USD LIBOR + 1.270%)E F | 400,000 | 400,000 | |||||||||||||
VOLT XXII LLC, 3.500%, Due 2/25/2055, 2015 NPL4 A1E J | 165,205 | 165,779 | |||||||||||||
VOLT XXXVIII LLC, 3.875%, Due 9/25/2045, 2015 NP12 A1E J | 294,188 | 295,416 | |||||||||||||
Wells Fargo Home Equity Asset-Backed Securities Trust, 1.464%, Due 4/25/2037, 2007 2 A3, (1 mo. USD LIBOR + 0.230%)F | 391,332 | 369,928 | |||||||||||||
Westlake Automobile Receivables Trust, 4.100%, Due 6/15/2021, 2016 2A DE | 250,000 | 254,312 | |||||||||||||
|
| ||||||||||||||
Total Asset-Backed Obligations (Cost $17,895,908) | 18,289,295 | ||||||||||||||
|
| ||||||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS - 13.16% | |||||||||||||||
Adjustable Rate Mortgage Trust, 3.598%, Due 9/25/2035, 2005-5 2A1G | 45,216 | 41,979 | |||||||||||||
American Home Mortgage Investment Trust, | |||||||||||||||
3.240%, Due 10/25/2034, 2004-3 5A, (12 mo. USD LIBOR + 1.500%)F | 18,587 | 18,789 | |||||||||||||
2.953%, Due 9/25/2045, 2005-2 4A1, (6 mo. USD LIBOR + 1.500%)F | 3,266 | 3,276 | |||||||||||||
Banc of America Alternative Loan Trust, 1.634%, Due 5/25/2035, 2005-4 CB6, (1 mo. USD LIBOR + 0.400%)F | 32,746 | 27,129 |
See accompanying notes
15
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS - 13.16% (continued) | |||||||||||||||
Banc of America Funding Trust, 1.531%, Due 5/20/2047, 2007-C 7A5, (1 mo. USD LIBOR + 0.300%)F | $ | 205,670 | $ | 180,288 | |||||||||||
Bank of America Mortgage Trust, 4.067%, Due 7/20/2032, 2002-G 1A3G | 3,400 | 3,440 | |||||||||||||
Bear Stearns Adjustable Rate Mortgage Trust, | |||||||||||||||
2.778%, Due 11/25/2030, 2000-2 A1G | 19,886 | 19,191 | |||||||||||||
3.363%, Due 8/25/2033, 2003-5 2A1G | 44,627 | 44,552 | |||||||||||||
3.758%, Due 8/25/2033, 2003-5 1A1G | 38,193 | 37,892 | |||||||||||||
3.625%, Due 4/25/2034, 2004-1 22A1G | 518 | 515 | |||||||||||||
3.738%, Due 11/25/2034, 2004-9 22A1G | 11,057 | 11,135 | |||||||||||||
3.655%, Due 5/25/2047, 2007-3 1A1G | 21,768 | 20,656 | |||||||||||||
Bear Stearns ALT-A Trust, | |||||||||||||||
3.305%, Due 11/25/2036, 2006-6 32A1G | 99,326 | 84,726 | |||||||||||||
6.904%, Due 12/25/2046, 2006-7 23A1G | 653,872 | 512,342 | |||||||||||||
Chase Mortgage Finance Trust, | |||||||||||||||
5.500%, Due 11/25/2035, 2005-S3 A10 | 195,842 | 187,191 | |||||||||||||
3.512%, Due 2/25/2037, 2007-A1 1A5G | 22,191 | 22,348 | |||||||||||||
3.266%, Due 3/25/2037, 2007-A1 12M3G | 157,893 | 133,270 | |||||||||||||
Citigroup Mortgage Loan Trust, Inc., | |||||||||||||||
3.439%, Due 8/25/2035, 2005-3 2A2AG | 22,646 | 22,648 | |||||||||||||
2.830%, Due 9/25/2035, 2005-6 A3, (1 yr. CMT + 1.800%)F | 20,508 | 19,942 | |||||||||||||
Cosmopolitan Hotel Trust, 2.627%, Due 11/15/2033, 2016-CSMO A, (1 mo. LIBOR + 1.400%)E F | 250,000 | 251,393 | |||||||||||||
Countrywide Alternative Loan Trust, | |||||||||||||||
6.000%, Due 10/25/2033, 2003-J2 A1 | 16,185 | 16,776 | |||||||||||||
1.964%, Due 11/25/2035, 2005-56 1A1, (1 mo. USD LIBOR + 0.730%)F | 760,688 | 748,302 | |||||||||||||
6.500%, Due 9/25/2036, 2006-J5 1A1 | 617,101 | 517,618 | |||||||||||||
1.441%, Due 7/20/2046, 2006-OA9 2A1A, (1 mo. USD LIBOR + 0.210%)F | 8,532 | 5,652 | |||||||||||||
1.424%, Due 9/25/2046, 2006-OA11 A1B, (1 mo. USD LIBOR + 0.190%)F | 10,730 | 9,532 | |||||||||||||
Countrywide Home Loan Mortgage Pass Through Trust, 5.750%, Due 5/25/2037, 2007-5 A51 | 43,061 | 38,849 | |||||||||||||
Countrywide Home Loan Mortgage Pass Through Trust, | |||||||||||||||
3.823%, Due 6/25/2033, 2003-27 A1G | 21,546 | 21,623 | |||||||||||||
1.994%, Due 9/25/2034, 2004-16 1A4A, (1 mo. USD LIBOR + 0.760%)F | 28,494 | 27,528 | |||||||||||||
1.814%, Due 4/25/2035, 2005-3 2A1, (1 mo. USD LIBOR + 0.580%)F | 91,406 | 83,813 | |||||||||||||
1.694%, Due 5/25/2035, 2005-9 1A3, (1 mo. USD LIBOR + 0.460%)F | 96,776 | 86,069 | |||||||||||||
3.011%, Due 11/20/2035, 2005-HYB7 6A1G | 700,768 | 635,380 | |||||||||||||
3.398%, Due 2/25/2047, 2007-HYB2 3A1G | 161,683 | 145,237 | |||||||||||||
CSMC Mortgage-Backed Trust, 6.000%, Due 7/25/2036, 2006-6 1A4 | 376,693 | 329,609 | |||||||||||||
Fannie Mae Connecticut Avenue Securities | |||||||||||||||
5.234%, Due 5/25/2025, 2015-C02 1M2, (1 mo. USD LIBOR + 4.000%)F | 428,667 | 459,853 | |||||||||||||
6.234%, Due 7/25/2025, 2015-C03 2M2, (1 mo. USD LIBOR + 5.000%)F | 198,063 | 217,158 | |||||||||||||
6.934%, Due 4/25/2028, 2015-C04 1M2, (1 mo. USD LIBOR + 5.700%)F | 525,000 | 590,563 | |||||||||||||
2.534%, Due 7/25/2029, 2017-C01 1M1, (1 mo. USD LIBOR + 1.300%)F | 289,010 | 291,443 | |||||||||||||
2.384%, Due 9/25/2029, 2017-C02 2M1, (1 mo. USD LIBOR + 1.150%)F | 368,216 | 371,362 | |||||||||||||
First Horizon Alternative Mortgage Securities Trust, 3.176%, Due 9/25/2036, 2006-AA5 A1G | 176,445 | 162,518 | |||||||||||||
Freddie Mac Structured Agency Credit Risk Debt Notes, | |||||||||||||||
2.434%, Due 7/25/2029, 2017-DNA1 M1, (1 mo. USD LIBOR + 1.200%)F | 358,026 | 362,159 | |||||||||||||
2.434%, Due 8/25/2029, 2017-HQA1 M1, (1 mo. USD LIBOR + 1.200%)F | 240,528 | 242,537 | |||||||||||||
GSMPS Mortgage Loan Trust, | |||||||||||||||
1.584%, Due 3/25/2035, 2005-RP2 1AF, (1 mo. USD LIBOR + 0.350%)E F | 610,451 | 557,458 | |||||||||||||
1.584%, Due 9/25/2035, 2005-RP3 1AF, (1 mo. USD LIBOR + 0.350%)E F | 644,805 | 561,723 | |||||||||||||
1.634%, Due 4/25/2036, 2006-RP2 1AF1, (1 mo. USD LIBOR + 0.400%)E F | 348,407 | 303,644 | |||||||||||||
GSR Mortgage Loan Trust, | |||||||||||||||
6.000%, Due 3/25/2032, 2003-2F 3A1 | 1,673 | 1,703 | |||||||||||||
3.215%, Due 6/25/2034, 2004-7 3A1G | 18,571 | 18,367 | |||||||||||||
3.222%, Due 11/25/2035, 2005-AR7 6A1G | 16,436 | 16,178 | |||||||||||||
IM Pastor 4 FTA, 0.000%, Due 3/22/2044, 4 A, (3 mo. EUR EURIBOR + 0.140%)F H | EUR | 750,485 | 781,808 | ||||||||||||
JP Morgan Alternative Loan Trust, 5.655%, Due 5/26/2037, 2008-R3 3A1E G N | 211,864 | 179,680 | |||||||||||||
JP Morgan Mortgage Trust, 3.000%, Due 9/25/2044, 2014-IVR3 2A1E G | 201,673 | 204,408 | |||||||||||||
Morgan Stanley Mortgage Loan Trust, 3.145%, Due 6/25/2036, 2006-8AR 5A4G | 14,177 | 14,141 |
See accompanying notes
16
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS - 13.16% (continued) | |||||||||||||||
NACC Reperforming Loan REMIC Trust, 7.500%, Due 3/25/2034, 2004-R1 A2E | $ | 79,778 | $ | 78,757 | |||||||||||
Nationstar Mortgage Loan Trust, 3.750%, Due 12/25/2052, 2013-A AE G | 107,595 | 112,604 | |||||||||||||
New Century Alternative Mortgage Loan Trust, 5.909%, Due 7/25/2036, 2006-ALT1 AF2G | 7,826 | 4,704 | |||||||||||||
New Residential Mortgage Loan Trust, | |||||||||||||||
3.750%, Due 5/28/2052, 2015-1A A3E G | 148,037 | 154,236 | |||||||||||||
3.750%, Due 5/25/2054, 2014-2A A3E G | 221,477 | 227,555 | |||||||||||||
5.663%, Due 11/25/2054, 2014-3A B3E G | 398,431 | 433,098 | |||||||||||||
3.750%, Due 8/25/2055, 2015-2A A1E G | 434,638 | 453,088 | |||||||||||||
2.734%, Due 7/25/2056, 2017-5A A1, (1 mo. USD LIBOR + 1.500%)E F | 341,685 | 350,506 | |||||||||||||
4.000%, Due 3/25/2057, 2017-2A A3E G | 339,632 | 357,126 | |||||||||||||
4.000%, Due 4/25/2057, 2017-3A A1E G | 281,231 | 294,653 | |||||||||||||
Newgate Funding, | |||||||||||||||
0.000%, Due 12/1/2050, 2007-1X BB, (3 mo. EUR EURIBOR + 0.220%)F H | EUR | 86,855 | 90,112 | ||||||||||||
0.000%, Due 12/15/2050, 2007-2X BB, (3 mo. EUR EURIBOR + 0.250%)F H | EUR | 169,169 | 174,343 | ||||||||||||
Prime Mortgage Trust, 1.734%, Due 2/25/2035, 2006-CL1 A1, (1 mo. USD LIBOR + 0.500%)F | 53,336 | 50,184 | |||||||||||||
Residential Accredit Loans, Inc., Trust, | |||||||||||||||
5.750%, Due 9/25/2035, 2005-QS13 2A4 | 591,915 | 577,881 | |||||||||||||
1.484%, Due 2/25/2036, 2006-QA2 1A1, (1 mo. USD LIBOR + 0.250%)F | 428,736 | 343,895 | |||||||||||||
1.334%, Due 5/25/2037, 2007-QA3 A1, (1 mo. USD LIBOR + 0.100%)F | 255,242 | 233,383 | |||||||||||||
Residential Asset Securitization Trust, 3.341%, Due 12/25/2034, 2004-IP2 4AG | 48,556 | 47,973 | |||||||||||||
Residential Funding Mortgage Securities Trust, 6.000%, Due 5/25/2037, 2007-S5 A4 | 751,029 | 713,818 | |||||||||||||
Ripon Mortgages PLC, 1.082%, Due 8/20/2056, 2017-A1 1A, (3 mo. GBP LIBOR + 0.800%)E F | GBP | 309,811 | 401,571 | ||||||||||||
Structured Asset Mortgage Investments II Trust, 1.694%, Due 5/25/2045, 2005-AR2 2A1, (1 mo. USD LIBOR + 0.460%)F | 73,082 | 68,075 | |||||||||||||
Structured Asset Mortgage Investments Trust, 1.911%, Due 11/19/2033, 2003-AR3 A1, (1 mo. USD LIBOR + 0.680%)F | 363,875 | 350,625 | |||||||||||||
WaMu Mortgage Pass Through Certificates, | |||||||||||||||
3.056%, Due 3/25/2035, 2005-AR3 A1G | 25,211 | 24,780 | |||||||||||||
3.120%, Due 9/25/2036, 2006-AR10 1A1G | 577,187 | 545,380 | |||||||||||||
2.592%, Due 1/25/2037, 2006-AR18 1A1G | 902,883 | 830,354 | |||||||||||||
3.227%, Due 3/25/2037, 2007-HY3 4A1G | 108,800 | 107,356 | |||||||||||||
2.371%, Due 12/19/2039, 2001-AR5 1AG | 61,518 | 61,135 | |||||||||||||
Washington Mutual Mortgage Pass-Through Certificates WMALT Series Trust, | |||||||||||||||
5.500%, Due 11/25/2035, 2005-9 2A2 | 151,585 | 139,403 | |||||||||||||
1.394%, Due 2/25/2037, 2007-HY1 A2A, (1 mo. USD LIBOR + 0.160%)F | 235,611 | 192,362 | |||||||||||||
Washington Mutual MSC Mortgage Pass-Through Certificates Series Trust, 3.319%, Due 2/25/2033, 2003-AR1 2AG | 1,754 | 1,735 | |||||||||||||
Wells Fargo Mortgage Backed Securities Trust, 3.411%, Due 3/25/2035, 2005-AR3 2A1G | 38,608 | 39,068 | |||||||||||||
|
| ||||||||||||||
Total Collateralized Mortgage Obligations (Cost $16,482,953) | 17,105,153 | ||||||||||||||
|
| ||||||||||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 0.31% | |||||||||||||||
BBCMS Mortgage Trust, 3.727%, Due 8/15/2036, 2017-DELC E, (1 mo. LIBOR + 2.500%)E F | 200,000 | 199,971 | |||||||||||||
FREMF Mortgage Trust, 3.782%, Due 5/25/2024, 2017-KF32 B, (1 mo. LIBOR + 2.550%)E F | 199,994 | 200,303 | |||||||||||||
|
| ||||||||||||||
Total Commercial Mortgage-Backed Obligations (Cost $399,994) | 400,274 | ||||||||||||||
|
| ||||||||||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 2.46% | |||||||||||||||
Fannie Mae Grantor Trust, 6.000%, Due 2/25/2044, 2004-T3 1A1 | 8,705 | 10,032 | |||||||||||||
Fannie Mae Pool, 3.000%, Due 2/1/2046 | 96,902 | 98,074 | |||||||||||||
Fannie Mae Pool, | |||||||||||||||
3.000%, Due 10/1/2047, TBA | 500,000 | 504,981 | |||||||||||||
3.500%, Due 10/1/2047, TBA | 2,500,000 | 2,586,279 | |||||||||||||
|
| ||||||||||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $3,179,325) | 3,199,366 | ||||||||||||||
|
|
See accompanying notes
17
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
U.S. TREASURY OBLIGATIONS - 20.97% | |||||||||||||||
U.S. Treasury Floating Rate Notes, | |||||||||||||||
1.163%, Due 1/31/2019, (3 mo. Treasury money market yield + 0.140%)F | $ | 3,415,000 | $ | 3,420,830 | |||||||||||
1.093%, Due 4/30/2019, (3 mo. Treasury money market yield + 0.070%)F | 3,120,000 | 3,121,166 | |||||||||||||
1.083%, Due 7/31/2019, (3 mo. Treasury money market yield + 0.060%)F | 925,000 | 924,888 | |||||||||||||
U.S. Treasury Inflation Protected Securities, | |||||||||||||||
0.250%, Due 1/15/2025K | 661,869 | 659,948 | |||||||||||||
2.375%, Due 1/15/2025K | 168,932 | 194,613 | |||||||||||||
0.625%, Due 1/15/2026K | 154,632 | 158,159 | |||||||||||||
3.875%, Due 4/15/2029K | 56,620 | 78,003 | |||||||||||||
U.S. Treasury Notes/Bonds, | |||||||||||||||
1.250%, Due 5/31/2019 | 1,485,000 | 1,483,318 | |||||||||||||
1.625%, Due 7/31/2019O | 5,700,000 | 5,731,172 | |||||||||||||
1.375%, Due 3/31/2020 | 1,300,000 | 1,299,797 | |||||||||||||
1.375%, Due 6/30/2023 | 50,000 | 48,746 | |||||||||||||
1.250%, Due 7/31/2023 | 800,000 | 773,500 | |||||||||||||
2.250%, Due 12/31/2023 | 600,000 | 613,242 | |||||||||||||
2.250%, Due 1/31/2024 | 200,000 | 204,328 | |||||||||||||
2.000%, Due 4/30/2024 | 1,800,000 | 1,809,070 | |||||||||||||
2.500%, Due 5/15/2024 | 800,000 | 829,094 | |||||||||||||
2.000%, Due 5/31/2024 | 2,600,000 | 2,612,289 | |||||||||||||
2.125%, Due 5/15/2025 | 50,000 | 50,406 | |||||||||||||
2.000%, Due 8/15/2025 | 1,600,000 | 1,596,375 | |||||||||||||
1.625%, Due 2/15/2026 | 200,000 | 193,156 | |||||||||||||
2.375%, Due 5/15/2027O | 980,000 | 1,001,246 | |||||||||||||
2.250%, Due 8/15/2027 | 450,000 | 455,098 | |||||||||||||
|
| ||||||||||||||
Total U.S. Treasury Obligations (Cost $27,174,257) | 27,258,444 | ||||||||||||||
|
| ||||||||||||||
MUNICIPAL OBLIGATIONS - 0.25% | |||||||||||||||
City of Chicago IL, 7.750%, Due 1/1/2042, Series B | 100,000 | 109,302 | |||||||||||||
State of Illinois, 7.350%, Due 7/1/2035 | 100,000 | 115,298 | |||||||||||||
Texas Public Finance Authority, 8.250%, Due 7/1/2024 | 100,000 | 105,704 | |||||||||||||
|
| ||||||||||||||
Total Municipal Obligations (Cost $313,229) | 330,304 | ||||||||||||||
|
| ||||||||||||||
Shares | |||||||||||||||
SHORT-TERM INVESTMENTS - 6.07% | |||||||||||||||
Investment Companies - 5.15% | |||||||||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class, 0.97%L M | 6,688,878 | 6,688,878 | |||||||||||||
|
| ||||||||||||||
Certificate of Deposits - 0.92% | |||||||||||||||
Barclays Bank PLC, 1.940%, Due 9/4/2018 | 300,000 | 300,000 | |||||||||||||
Mitsubishi UFJ Trust & Banking Corp., 1.987%, Due 9/19/2017 | 100,000 | 100,043 | |||||||||||||
Natixis S.A., 1.979%, Due 9/25/2017 | 200,000 | 200,106 | |||||||||||||
Norinchukin Bank, 2.019%, Due 10/12/2017 | 200,000 | 200,187 | |||||||||||||
Sumitomo Mitsui Trust Bank Ltd., 1.997%, Due 9/18/2017 | 400,000 | 400,153 | |||||||||||||
|
| ||||||||||||||
1,200,489 | |||||||||||||||
|
| ||||||||||||||
Total Short-Term Investments (Cost $7,888,878) | 7,889,367 | ||||||||||||||
|
| ||||||||||||||
TOTAL INVESTMENTS - 104.69% (Cost $135,768,615) | 136,083,895 | ||||||||||||||
PURCHASED OPTIONS AND SWAPTIONS CONTRACTS - 0.13% (Premiums Paid $321,820) | 164,379 | ||||||||||||||
WRITTEN OPTIONS AND SWAPTIONS CONTRACTS - (0.06%) (Premiums Received $(280,198)) | (75,674 | ) | |||||||||||||
LIABILITIES, NET OF OTHER ASSETS - (4.76%) | (6,190,972 | ) | |||||||||||||
|
| ||||||||||||||
TOTAL NET ASSETS - 100.00% | $ | 129,981,628 | |||||||||||||
|
| ||||||||||||||
Percentages are stated as a percent of net assets. *In U.S. Dollars unless otherwise noted. |
See accompanying notes
18
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
A Bank loan obligations, unless otherwise stated, carry a floating rate of interest. The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
B Coupon rates are not available for bank loans that are unsettled and/or unfunded as of August 31, 2017.
C Fixed Rate.
D Unfunded Loan Commitment. At period end, the amount of unfunded loan commitments was $27,273 or 0.02% of net assets, of which all relates to a portion of the Energy Future Intermediate Holding Co., LLC bank loan.
E Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $29,351,177 or 22.58% of net assets. The Fund has no right to demand registration of these securities.
F Variable, floating, or adjustable rate securities with an interest rate that changes periodically. Rates are periodically reset with rates that are based on a predetermined benchmark such as a widely followed interest rate such as T-bills, LIBOR or PRIME plus a fixed spread. The interest rate disclosed reflects the rate in effect on August 31, 2017.
G Coupon rate may changes based on changes of the underlying collateral or prepayments of principal. The coupon rate shown represents the rate in effect on August 31, 2017.
H 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.
I Par value represents units rather than shares.
J Step Up/Down - A zero coupon bond that converts to a fixed rate or variable interest rate at a designated future date. The rate disclosed represents the coupon rate at August 31, 2017. The maturity date disclosed represents the final maturity date.
K Inflation-Indexed Note.
L The Fund is affiliated by having the same investment advisor.
M 7-day yield.
N Value was determined using significant unobservable inputs.
O This security or a piece thereof is held as segregated collateral at period end but may not be inclusive of post-settlement trade activity.
CLO - Collateralized Loan Obligation.
LLC - Limited Liability Company.
LP - Limited Partnership.
PLC - Public Limited Company.
TBA - To Be Announced.
Futures Contracts Open on August 31, 2017: |
Long Futures | ||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
Australian 10-Year Bond Futures | 1 | September 2017 | $ | 104,134 | $ | 102,039 | $ | (2,095 | ) | |||||||
Euro-Bund Futures | 5 | December 2017 | 960,009 | 964,703 | 4,694 | |||||||||||
U.S. Treasury 10-Year Note Futures | 28 | December 2017 | 3,542,249 | 3,555,563 | 13,314 | |||||||||||
U.S. Treasury 5-Year Note Futures | 27 | December 2017 | 3,194,682 | 3,199,500 | 4,818 | |||||||||||
|
|
|
|
|
| |||||||||||
$ | 7,801,074 | $ | 7,821,805 | $ | 20,731 | |||||||||||
|
|
|
|
|
|
Short Futures | ||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
90-Day Eurodollar Futures | 78 | June 2019 | $ | (19,125,433 | ) | $ | (19,170,450 | ) | $ | (45,017 | ) | |||||
Euro OAT Futures | 16 | September 2017 | (2,848,003 | ) | (2,869,143 | ) | (21,140 | ) | ||||||||
Euro OAT Futures | 5 | December 2017 | (926,649 | ) | (929,139 | ) | (2,490 | ) | ||||||||
Euro-Buxl 30-Year Bond Futures | 6 | September 2017 | (1,190,199 | ) | (1,201,392 | ) | (11,193 | ) | ||||||||
Long GILT Futures | 70 | December 2017 | (11,527,711 | ) | (11,483,603 | ) | 44,108 | |||||||||
U.S. Long Bond Futures | 1 | December 2017 | (155,257 | ) | (156,094 | ) | (837 | ) | ||||||||
U.S. Treasury 10-Year Note Futures | 26 | December 2017 | (3,295,271 | ) | (3,301,594 | ) | (6,323 | ) | ||||||||
U.S. Treasury 5-Year Note Futures | 12 | December 2017 | (1,419,523 | ) | (1,422,000 | ) | (2,477 | ) | ||||||||
|
|
|
|
|
| |||||||||||
$ | (40,488,046 | ) | $ | (40,533,415 | ) | $ | (45,369 | ) | ||||||||
|
|
|
|
|
|
See accompanying notes
19
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Centrally Cleared Swap Agreements Outstanding on August 31, 2017: |
Interest Rate Swaps |
Pay/Receive Floating Rate | Floating Rate Index | Fixed Rate (%) | Expiration Date | Curr | Notional Amount(4) (000s) | Premiums Paid (Received) | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.75 | 12/16/2018 | USD | 300 | $ | (446 | ) | $ | (1,108 | ) | $ | (662 | ) | ||||||||||||
Receive | 3-Month USD-LIBOR | 1.75 | 12/16/2018 | USD | 4,000 | (8,209 | ) | (14,648 | ) | (6,439 | ) | |||||||||||||||
Receive | 3-Month USD-LIBOR | 1.25 | 6/21/2019 | USD | 8,100 | 63,052 | 38,278 | (24,774 | ) | |||||||||||||||||
Receive | 6-Month GBP-LIBOR | 1.65 | 1/22/2020 | GBP | 400 | (11,392 | ) | (13,189 | ) | (1,797 | ) | |||||||||||||||
Receive | 3-Month USD-LIBOR | 1.25 | 6/21/2020 | USD | 25,400 | 495,389 | 247,102 | (248,287 | ) | |||||||||||||||||
Pay | 3-Month USD-LIBOR | 2.00 | 12/16/2020 | USD | 7,400 | 102,860 | 84,879 | (17,981 | ) | |||||||||||||||||
Receive | 6-Month GBP-LIBOR | 2.00 | 3/18/2022 | GBP | 200 | (12,827 | ) | (14,549 | ) | (1,722 | ) | |||||||||||||||
Pay | 3-Month USD-LIBOR | 2.25 | 12/16/2022 | USD | 7,600 | 15,556 | 176,452 | 160,896 | ||||||||||||||||||
Receive | 6-Month EUR-EURIBOR | 0.50 | 3/21/2023 | EUR | 1,900 | 25,201 | 24,155 | (1,046 | ) | |||||||||||||||||
Receive | 6-Month JPY-LIBOR | 0.30 | 3/18/2026 | JPY | 130,000 | (7,572 | ) | (12,468 | ) | (4,896 | ) | |||||||||||||||
Receive | 3-Month USD-LIBOR | 2.25 | 6/15/2026 | USD | 200 | (9,043 | ) | (3,982 | ) | 5,061 | ||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.75 | 12/21/2026 | USD | 590 | (5,686 | ) | 15,499 | 21,185 | |||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.75 | 12/21/2026 | USD | 8,100 | (94,272 | ) | 198,711 | 292,983 | |||||||||||||||||
Receive | 3-Month USD-LIBOR | 1.50 | 6/21/2027 | USD | 1,900 | 153,945 | 96,186 | (57,759 | ) | |||||||||||||||||
Receive | 3-Month USD-LIBOR | 2.50 | 6/15/2046 | USD | 100 | (7,498 | ) | (2,075 | ) | 5,423 | ||||||||||||||||
Receive | 6-Month EUR-EURIBOR | 1.50 | 3/21/2048 | EUR | 400 | 7,943 | 1,040 | (6,903 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 707,001 | $ | 820,283 | $ | 113,282 | |||||||||||||||||||||
|
|
|
|
|
|
Credit Default Swaps on Credit Indices - Buy Protection (1) | ||||||||||||||||||||||||||
Index/Tranches | Fixed Rate (%) | Expiration Date | Implied Credit Spread at 8/31/2017(3) (%) | Curr | Notional Amount(4) (000s) | Premiums Paid (Received) | Fair Value(5) | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Markit CDX HY | 5.0000 | 12/20/2021 | 2.9762 | USD | 3,515 | $ | (190,617 | ) | $ | (273,572 | ) | $ | (82,955 | ) | ||||||||||||
iTraxx Europe | 1.0000 | 6/20/2022 | 0.5487 | EUR | 400 | (4,919 | ) | (10,248 | ) | (5,329 | ) | |||||||||||||||
iTraxx Europe Senior Financials | 1.0000 | 6/20/2022 | 0.5331 | EUR | 300 | (1,647 | ) | (7,956 | ) | (6,309 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | (197,183 | ) | $ | (291,776 | ) | $ | (94,593 | ) | ||||||||||||||||||
|
|
|
|
|
|
OTC Swap Agreements Outstanding on August 31, 2017: |
Credit Default Swaps on Corporate and Sovereign Securities - Sell Protection(2) |
Reference Entity | Counter- Party | Fixed Rate (%) | Expiration Date | Implied Credit Spread at 8/31/2017(3) | Curr | Notional Amount(4) | Premiums Paid (Received) | Fair Value(5) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Republic Of Colombia | BRC | 1.0000 | 6/20/2021 | 0.9194 | USD | 200 | $ | (5,123 | ) | $ | 588 | $ | 5,711 | |||||||||||||||||
United Mexican States | BRC | 1.0000 | 12/20/2021 | 0.8914 | USD | 100 | (3,277 | ) | 446 | 3,723 | ||||||||||||||||||||
Republic Of Argentina | GST | 5.0000 | 6/20/2022 | 2.8819 | USD | 50 | 4,070 | 4,521 | 451 | |||||||||||||||||||||
Republic Of Argentina | BRC | 5.0000 | 6/20/2022 | 2.8819 | USD | 50 | 4,036 | 4,522 | 486 | |||||||||||||||||||||
Federatived Republic Of Brazil | GST | 1.0000 | 6/20/2022 | 1.9672 | USD | 200 | (12,506 | ) | (8,497 | ) | 4,009 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | (12,800 | ) | $ | 1,580 | $ | 14,380 | ||||||||||||||||||||||||
|
|
|
|
|
|
(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. |
See accompanying notes
20
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
(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. |
Purchased Options Contracts Outstanding on August 31, 2017: |
Interest Rate Swaptions |
Description | Counter- party | Floating Rate Index | Pay/ Receive Floating Rate | Exercise Rate (%) | Expiration Date | Number of Contracts | Notional Amount (000s) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Put – OTC 5-Year IRS | BRC | 6-Month GBP-LIBOR | Pay | 1.60 | 2/15/2018 | 850,000 | 850 | $ | 6,059 | $ | 491 | $ | (5,568 | ) | ||||||||||||||||||||
Put – OTC 5-Year IRS | GSC | 6-Month GBP-LIBOR | Pay | 1.60 | 2/15/2018 | 850,000 | 850 | 5,943 | 491 | (5,452 | ) | |||||||||||||||||||||||
Put – OTC 5-Year IRS | GSC | 6-Month GBP-LIBOR | Pay | 1.47 | 3/1/2018 | 800,000 | 800 | 5,321 | 949 | (4,372 | ) | |||||||||||||||||||||||
Put – OTC 30-Year IRS | GST | 3-Month USD-LIBOR | Pay | 2.97 | 9/24/2018 | 1,200,000 | 1,200 | 62,100 | 22,134 | (39,966 | ) | |||||||||||||||||||||||
Put – OTC 30-Year IRS | CBK | 3-Month USD-LIBOR | Pay | 2.97 | 9/24/2018 | 600,000 | 600 | 30,525 | 11,067 | (19,458 | ) | |||||||||||||||||||||||
Call – OTC 2-Year IRS | MSC | 3-Month USD-LIBOR | Pay | 1.65 | 11/15/2018 | 4,700,000 | 4,700 | 26,673 | 18,869 | (7,804 | ) | |||||||||||||||||||||||
Put – OTC 30-Year IRS | MSC | 3-Month USD-LIBOR | Pay | 3.05 | 12/12/2018 | 600,000 | 600 | 28,848 | 11,978 | (16,870 | ) | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||
$ | 165,469 | $ | 65,979 | $ | (99,490 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
Interest Rate Floors | ||||||||||||||||||||||||||||||||||
Description | Counter- party | Floating Rate Index | Pay/ Floating Rate | Exercise Rate (%) | Expiration Date | Number of Contracts | Notional Amount (000s) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Put – INT FLR | GSC | 3-Month USD-LIBOR | Pay | 1.63 | 8/15/2019 | 5,000,000 | 5,000 | $ | 32,000 | $ | 22,551 | $ | (9,449 | ) | ||||||||||||||||||||
Put – INT FLR | BRC | 3-Month USD-LIBOR | Pay | 1.63 | 8/15/2019 | 5,000,000 | 5,000 | 44,900 | 22,496 | (22,404 | ) | |||||||||||||||||||||||
Put – INT FLR | DUB | 3-Month USD-LIBOR | Pay | 1.63 | 8/15/2019 | 2,500,000 | 2,500 | 22,500 | 11,248 | (11,252 | ) | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||
$ | 99,400 | $ | 56,295 | $ | (43,105 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
Index Options | ||||||||||||||||||||||||||||||||||||
Description | Counterparty | Exercise Price | Expiration Date | Currency | Number of Contracts | Notional Amount (000s) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||||
Put – S&P 500 Index | CCP | 2,050.00 | 9/15/2017 | USD | 42 | 4 | $ | 6,125 | $ | 630 | $ | (5,495 | ) | |||||||||||||||||||||||
Put – S&P 500 Index | CCP | 2,175.00 | 9/29/2017 | USD | 73 | 7 | 6,277 | 6,277 | - | |||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
$ | 12,402 | $ | 6,907 | $ | (5,495 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
Exchange-Traded Fund Options | ||||||||||||||||||||||||||||||
Description | Counterparty | Exercise Price | Expiration Date | Currency | Number of Contracts | Notional Amount (000s) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Put – iShares 20+ Year Treasury Bond ETF | CCP | 117.00 | 9/1/2017 | USD | 135 | 14 | $ | 2,023 | $ | 135 | $ | (1,888 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 2,023 | $ | 135 | $ | (1,888 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
21
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Options on Exchange-Traded Futures Contracts | ||||||||||||||||||||||||||||||
Description | Counterparty | Exercise Price | Expiration Date | Currency | Number of Contracts | Notional Amount (000s) | Premiums Paid | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Put – 90-Day Eurodollar Futures | CCP | 98.25 | 12/17/2018 | USD | 110 | 275 | $ | 42,526 | $ | 35,063 | $ | (7,463 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 42,526 | $ | 35,063 | $ | (7,463 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
Written Options Contracts Outstanding on August 31, 2017: |
Interest Rate Swaptions |
Description | Counter- party | Floating Rate Index | Pay/ Receive Floating Rate | Exercise Rate (%) | Expiration Date | Number of Contracts | Notional Amount (000s) | Premiums Received | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Put – OTC 5-Year IRS | FBF | 3-Month USD-LIBOR | Receive | 3.02 | 2/15/2018 | 2,200,000 | 2,200 | $ | (12,732 | ) | $ | (118 | ) | $ | 12,614 | |||||||||||||||||
Put – OTC 5-Year IRS | MSC | 3-Month USD-LIBOR | Receive | 3.00 | 3/1/2018 | 1,100,000 | 1,100 | (6,336 | ) | (94 | ) | 6,242 | ||||||||||||||||||||
Put - OTC 5-Year IRS | GST | 3-Month USD-LIBOR | Receive | 2.60 | 9/24/2018 | 5,800,000 | 5,800 | (61,840 | ) | (18,222 | ) | 43,618 | ||||||||||||||||||||
Put – OTC 5-Year IRS | CBK | 3-Month USD-LIBOR | Receive | 2.60 | 9/24/2018 | 2,800,000 | 2,800 | (29,120 | ) | (8,797 | ) | 20,323 | ||||||||||||||||||||
Call – OTC 10-Year IRS | MSC | 3-Month USD-LIBOR | Receive | 2.00 | 11/15/2018 | 1,000,000 | 1,000 | (26,389 | ) | (19,112 | ) | 7,277 | ||||||||||||||||||||
Put – OTC 5-Year IRS | MSC | 3-Month USD-LIBOR | Receive | 2.70 | 12/12/2018 | 3,000,000 | 3,000 | (31,758 | ) | (10,994 | ) | 20,764 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | (168,175 | ) | $ | (57,337 | ) | $ | 110,838 | |||||||||||||||||||||||||
|
|
|
|
|
|
Interest Rate Floors | ||||||||||||||||||||||||||||||||
Description | Counter- party | Floating Rate Index | Pay/ Receive Rate | Exercise Rate (%) | Expiration Date | Number of Contracts | Notional Amount (000s) | Premiums Received | Fair Value | Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
Put – INT FLR | GSC | 3-Month USD-LIBOR | Receive | 1.00 | 8/15/2019 | 10,000,000 | 10,000 | $ | (32,000 | ) | $ | (3,129 | ) | $ | 28,871 | |||||||||||||||||
Put – INT FLR | BRC | 3-Month USD-LIBOR | Receive | 1.00 | 8/15/2019 | 10,000,000 | 10,000 | (45,770 | ) | (3,003 | ) | 42,767 | ||||||||||||||||||||
Put – INT FLR | DUB | 3-Month USD-LIBOR | Receive | 1.00 | 8/15/2019 | 5,000,000 | 5,000 | (22,500 | ) | (1,502 | ) | 20,998 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | (100,270 | ) | $ | (7,634 | ) | $ | 92,636 | |||||||||||||||||||||||||
|
|
|
|
|
|
Options on Exchange-Traded Futures Contracts | ||||||||||||||||||||||||||||
Description | Counterparty | Exercise Price | Expiration Date | Currency | Number of Contracts | Notional Amount (000s) | Premiums Received | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||||
Call – U.S. Treasury 10-Year Note Future Option | CCP | 129.00 | 10/27/2017 | USD | 6 | 6 | $ | (1,587 | ) | $ | (1,219 | ) | $ | 368 | ||||||||||||||
Put – 90-Day Eurodollar Futures | CCP | 97.75 | 12/17/2018 | USD | 110 | 275 | (8,252 | ) | (6,875 | ) | 1,377 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | (9,839 | ) | $ | (8,094 | ) | $ | 1,745 | |||||||||||||||||||||
|
|
|
|
|
|
OTC European Foreign Currency Options | ||||||||||||||||||||||||||
Description | Counterparty | Exercise Price | Expiration Date | Currency | Number of Contracts | Notional Amount (000s) | Premiums Received | Fair Value | Unrealized Appreciation (Depreciation) | |||||||||||||||||
OTC ECAL EUR versus USD | GSC | 1.19 | 9/21/2017 | EUR | 200,000 | 200 | $ | (1,152 | ) | $ | (1,915 | ) | $ | (763 | ) | |||||||||||
OTC ECAL EUR versus USD | GSC | 1.22 | 11/1/2017 | EUR | 100,000 | 100 | (762 | ) | (694 | ) | 68 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | (1,914 | ) | $ | (2,609 | ) | $ | (695 | ) | ||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
22
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Borrowing and Other Financing Transactions on August 31, 2017: |
Reverse Repurchase Agreements |
Counterparty | Borrowing Rate | Borrowing Date | Maturity Date | Amount Borrowed | Payable for Reverse Repurchase Agreements | |||||||||
Deutsche Bank AG(1) | 1.23% | 8/30/2017 | 9/6/2017 | $ | 615,750 | (3) | $ | 615,750 | ||||||
Deutsche Bank AG(1) | 1.21% | 8/31/2017 | 9/8/2017 | 390,450 | (3) | 390,450 | ||||||||
JPMorgan Chase Bank, N.A.(1) | 1.18% | 8/28/2017 | 9/1/2017 | 389,025 | (4) | 389,025 | ||||||||
Toronto Dominion Bank(2) | 1.23% | 8/31/2017 | 9/6/2017 | 1,813,500 | (5) | 1,813,500 | ||||||||
|
|
|
| |||||||||||
$ | 3,208,725 | $ | 3,208,725 | |||||||||||
|
|
|
|
(1) | Collateralized by a U.S. Treasury N/B valued at $1,395,225, 2.375%, 5/15/2027. |
(2) | Collateralized by a U.S. Treasury N/B valued at $1,813,500, 1.625%, 7/31/2019. |
(3) | The average amount of borrowing during the period ended August 31, 2017 was $1,006,200 at a weighted average interest rate of 1.22%. |
(4) | The average amount of borrowing during the period ended August 31, 2017 was $389,025 at a weighted average interest rate of 1.18%. |
(5) | The average amount of borrowing during the period ended August 31, 2017 was $1,813,500 at a weighted average interest rate of 1.23%. |
Forward Currency Contracts Open on August 31, 2017: | ||||||||||||||||||||||||||
Currency Purchased | Currency Sold | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
USD | 419,039 | EUR | 412,532 | 9/5/2017 | BOA | $ | - | $ | (6,507 | ) | $ | (6,507 | ) | |||||||||||||
USD | 104,909 | CAD | 102,949 | 9/5/2017 | BOA | - | (1,960 | ) | (1,960 | ) | ||||||||||||||||
ARS | 104,892 | USD | 102,000 | 9/20/2017 | BOA | 2,892 | - | 2,892 | ||||||||||||||||||
USD | 104,892 | ARS | 101,463 | 9/20/2017 | BOA | - | (3,429 | ) | (3,429 | ) | ||||||||||||||||
TRY | 83,259 | USD | 79,515 | 10/13/2017 | BOA | 3,744 | - | 3,744 | ||||||||||||||||||
COP | 126,729 | USD | 124,261 | 11/1/2017 | BOA | 2,468 | - | 2,468 | ||||||||||||||||||
TRY | 209,992 | USD | 203,527 | 11/15/2017 | BOA | 6,465 | - | 6,465 | ||||||||||||||||||
CNY | 152,753 | USD | 142,320 | 12/5/2017 | BOA | 10,433 | - | 10,433 | ||||||||||||||||||
USD | 152,754 | CNY | 139,428 | 12/5/2017 | BOA | - | (13,326 | ) | (13,326 | ) | ||||||||||||||||
BRL | 331,034 | USD | 324,807 | 9/5/2017 | BRC | 6,227 | - | 6,227 | ||||||||||||||||||
USD | 331,034 | BRL | 331,113 | 9/5/2017 | BRC | 79 | - | 79 | ||||||||||||||||||
USD | 2,684,296 | JPY | 2,683,379 | 9/13/2017 | BRC | - | (917 | ) | (917 | ) | ||||||||||||||||
GBP | 606,751 | USD | 612,159 | 9/19/2017 | BRC | - | (5,408 | ) | (5,408 | ) | ||||||||||||||||
USD | 606,751 | GBP | 612,216 | 9/19/2017 | BRC | 5,465 | - | 5,465 | ||||||||||||||||||
EUR | 321,519 | USD | 317,101 | 11/20/2017 | BRC | 4,418 | - | 4,418 | ||||||||||||||||||
USD | 317,514 | CHF | 316,922 | 11/20/2017 | BRC | - | (592 | ) | (592 | ) | ||||||||||||||||
USD | 104,909 | CAD | 103,182 | 9/5/2017 | CBK | - | (1,727 | ) | (1,727 | ) | ||||||||||||||||
USD | 364,424 | EUR | 363,824 | 9/13/2017 | CBK | - | (600 | ) | (600 | ) | ||||||||||||||||
GBP | 3,660,670 | USD | 3,660,577 | 9/15/2017 | CBK | 93 | - | 93 | ||||||||||||||||||
ARS | 8,941 | USD | 9,000 | 9/18/2017 | CBK | - | (59 | ) | (59 | ) | ||||||||||||||||
USD | 302,854 | TWD | 301,193 | 9/18/2017 | CBK | - | (1,661 | ) | (1,661 | ) | ||||||||||||||||
USD | 209,026 | KRW | 207,000 | 9/18/2017 | CBK | - | (2,026 | ) | (2,026 | ) | ||||||||||||||||
USD | 52,049 | ARS | 52,000 | 9/18/2017 | CBK | - | (49 | ) | (49 | ) | ||||||||||||||||
USD | 279,906 | RUB | 281,763 | 9/21/2017 | CBK | 1,857 | - | 1,857 | ||||||||||||||||||
NZD | 299,166 | USD | 309,885 | 10/18/2017 | CBK | - | (10,719 | ) | (10,719 | ) | ||||||||||||||||
USD | 299,166 | NZD | 304,810 | 10/18/2017 | CBK | 5,644 | - | 5,644 | ||||||||||||||||||
USD | 2,489,917 | JPY | 2,477,669 | 11/2/2017 | CBK | - | (12,248 | ) | (12,248 | ) | ||||||||||||||||
USD | 1,514,016 | JPY | 1,501,957 | 11/2/2017 | CBK | - | (12,059 | ) | (12,059 | ) | ||||||||||||||||
USD | 7,466,321 | EUR | 7,401,156 | 11/10/2017 | CBK | - | (65,165 | ) | (65,165 | ) | ||||||||||||||||
ARS | 73,068 | USD | 73,000 | 9/18/2017 | DUB | 68 | - | 68 | ||||||||||||||||||
BRL | 331,034 | USD | 331,113 | 9/5/2017 | FBF | - | (79 | ) | (79 | ) | ||||||||||||||||
EUR | 419,039 | USD | 423,456 | 9/5/2017 | FBF | - | (4,417 | ) | (4,417 | ) | ||||||||||||||||
USD | 331,034 | BRL | 328,514 | 9/5/2017 | FBF | - | (2,520 | ) | (2,520 | ) | ||||||||||||||||
TWD | 302,855 | USD | 301,840 | 9/18/2017 | FBF | 1,015 | - | 1,015 | ||||||||||||||||||
USD | 101,818 | KRW | 102,105 | 9/18/2017 | FBF | 287 | - | 287 | ||||||||||||||||||
BRL | 329,597 | USD | 326,998 | 10/3/2017 | FBF | 2,599 | - | 2,599 | ||||||||||||||||||
USD | 419,675 | EUR | 424,123 | 10/3/2017 | FBF | 4,448 | - | 4,448 | ||||||||||||||||||
INR | 25,635 | USD | 25,269 | 12/4/2017 | FBF | 366 | - | 366 | ||||||||||||||||||
USD | 303,880 | TWD | 302,841 | 12/4/2017 | FBF | - | (1,039 | ) | (1,039 | ) | ||||||||||||||||
JPY | 277,437 | USD | 275,518 | 9/5/2017 | GSC | 1,919 | - | 1,919 |
See accompanying notes
23
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Forward Currency Contracts Open on August 31, 2017 (continued) |
Currency Purchased | Currency Sold | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||
GBP | 955,602 | USD | 955,240 | 9/5/2017 | GSC | $ | 362 | $ | - | $ | 362 | |||||||||||||||
USD | 690,516 | GBP | 702,453 | 9/5/2017 | GSC | 11,937 | - | 11,937 | ||||||||||||||||||
USD | 274,708 | JPY | 273,725 | 9/5/2017 | GSC | - | (983 | ) | (983 | ) | ||||||||||||||||
USD | 108,113 | AUD | 107,778 | 9/5/2017 | GSC | - | (335 | ) | (335 | ) | ||||||||||||||||
USD | 104,741 | GBP | 105,312 | 9/5/2017 | GSC | 571 | - | 571 | ||||||||||||||||||
USD | 104,138 | AUD | 103,172 | 9/5/2017 | GSC | - | (966 | ) | (966 | ) | ||||||||||||||||
KRW | 310,844 | USD | 312,639 | 9/18/2017 | GSC | - | (1,795 | ) | (1,795 | ) | ||||||||||||||||
USD | 956,543 | GBP | 956,212 | 10/3/2017 | GSC | - | (331 | ) | (331 | ) | ||||||||||||||||
RUB | 485,761 | USD | 484,720 | 10/20/2017 | GSC | 1,041 | - | 1,041 | ||||||||||||||||||
CAD | 2,187,634 | USD | 2,188,394 | 11/6/2017 | GSC | - | (760 | ) | (760 | ) | ||||||||||||||||
USD | 496,825 | CAD | 492,088 | 11/6/2017 | GSC | - | (4,737 | ) | (4,737 | ) | ||||||||||||||||
USD | 368,612 | CAD | 363,984 | 11/6/2017 | GSC | - | (4,628 | ) | (4,628 | ) | ||||||||||||||||
USD | 311,081 | KRW | 312,876 | 12/4/2017 | GSC | 1,795 | - | 1,795 | ||||||||||||||||||
USD | 212,908 | MXN | 214,521 | 12/15/2017 | GSC | 1,613 | - | 1,613 | ||||||||||||||||||
INR | 2,017,206 | USD | 1,978,679 | 9/8/2017 | HUS | 38,527 | - | 38,527 | ||||||||||||||||||
SEK | 1,787,790 | USD | 1,645,242 | 9/12/2017 | HUS | 142,548 | - | 142,548 | ||||||||||||||||||
USD | 416,484 | GBP | 423,612 | 9/13/2017 | HUS | 7,128 | - | 7,128 | ||||||||||||||||||
USD | 1,649,652 | KRW | 1,659,529 | 9/14/2017 | HUS | 9,877 | - | 9,877 | ||||||||||||||||||
USD | 1,086,559 | GBP | 1,096,257 | 9/15/2017 | HUS | 9,698 | - | 9,698 | ||||||||||||||||||
USD | 814,919 | GBP | 817,891 | 9/15/2017 | HUS | 2,972 | - | 2,972 | ||||||||||||||||||
NOK | 333,895 | USD | 305,283 | 9/28/2017 | HUS | 28,612 | - | 28,612 | ||||||||||||||||||
USD | 325,396 | EUR | 305,886 | 9/28/2017 | HUS | - | (19,510 | ) | (19,510 | ) | ||||||||||||||||
TRY | 436,707 | USD | 423,173 | 9/29/2017 | HUS | 13,534 | - | 13,534 | ||||||||||||||||||
TRY | 442,454 | USD | 429,149 | 9/29/2017 | HUS | 13,305 | - | 13,305 | ||||||||||||||||||
TRY | 448,200 | USD | 433,502 | 9/29/2017 | HUS | 14,698 | - | 14,698 | ||||||||||||||||||
USD | 444,796 | ZAR | 428,171 | 10/11/2017 | HUS | - | (16,625 | ) | (16,625 | ) | ||||||||||||||||
USD | 439,446 | ZAR | 422,606 | 10/11/2017 | HUS | - | (16,840 | ) | (16,840 | ) | ||||||||||||||||
NOK | 2,128,569 | USD | 1,971,173 | 10/12/2017 | HUS | 157,396 | - | 157,396 | ||||||||||||||||||
RUB | 83,532 | USD | 79,651 | 10/13/2017 | HUS | 3,881 | - | 3,881 | ||||||||||||||||||
SEK | 1,173,588 | USD | 1,129,937 | 10/23/2017 | HUS | 43,651 | - | 43,651 | ||||||||||||||||||
CAD | 301,270 | USD | 297,994 | 10/25/2017 | HUS | 3,276 | - | 3,276 | ||||||||||||||||||
CAD | 312,488 | USD | 306,679 | 10/25/2017 | HUS | 5,809 | - | 5,809 | ||||||||||||||||||
USD | 306,878 | CAD | 306,552 | 10/25/2017 | HUS | - | (326 | ) | (326 | ) | ||||||||||||||||
USD | 306,878 | CAD | 307,140 | 10/25/2017 | HUS | 262 | - | 262 | ||||||||||||||||||
NOK | 916,541 | USD | 896,131 | 11/15/2017 | HUS | 20,410 | - | 20,410 | ||||||||||||||||||
USD | 2,556,469 | EUR | 2,556,911 | 11/10/2017 | JPM | 442 | - | 442 | ||||||||||||||||||
USD | 776,497 | EUR | 771,696 | 11/10/2017 | JPM | - | (4,801 | ) | (4,801 | ) | ||||||||||||||||
USD | 3,931,340 | TWD | 3,910,670 | 12/1/2017 | JPM | - | (20,670 | ) | (20,670 | ) | ||||||||||||||||
AUD | 730,688 | USD | 722,686 | 11/17/2017 | NAB | 8,002 | - | 8,002 | ||||||||||||||||||
GBP | 414,018 | USD | 408,595 | 9/21/2017 | RBC | 5,423 | - | 5,423 | ||||||||||||||||||
EUR | 433,691 | USD | 417,000 | 9/21/2017 | RBC | 16,691 | - | 16,691 | ||||||||||||||||||
USD | 433,691 | EUR | 408,628 | 9/21/2017 | RBC | - | (25,063 | ) | (25,063 | ) | ||||||||||||||||
USD | 414,018 | GBP | 415,468 | 9/21/2017 | RBC | 1,450 | - | 1,450 | ||||||||||||||||||
GBP | 404,101 | USD | 409,846 | 10/23/2017 | RBC | - | (5,745 | ) | (5,745 | ) | ||||||||||||||||
EUR | 415,337 | USD | 420,965 | 10/23/2017 | RBC | - | (5,628 | ) | (5,628 | ) | ||||||||||||||||
USD | 415,337 | EUR | 410,383 | 10/23/2017 | RBC | - | (4,954 | ) | (4,954 | ) | ||||||||||||||||
USD | 404,101 | GBP | 405,100 | 10/23/2017 | RBC | 999 | - | 999 | ||||||||||||||||||
ARS | 16,987 | USD | 17,000 | 9/18/2017 | RBS | - | (13 | ) | (13 | ) | ||||||||||||||||
USD | 160,345 | GBP | 161,998 | 9/5/2017 | SCB | 1,653 | - | 1,653 | ||||||||||||||||||
SGD | 313,402 | USD | 310,842 | 9/18/2017 | SCB | 2,560 | - | 2,560 | ||||||||||||||||||
USD | 313,403 | SGD | 307,948 | 9/18/2017 | SCB | - | (5,455 | ) | (5,455 | ) | ||||||||||||||||
USD | 313,683 | SGD | 311,070 | 12/4/2017 | SCB | - | (2,613 | ) | (2,613 | ) | ||||||||||||||||
JPY | 625,494 | USD | 613,278 | 9/25/2017 | SSB | 12,216 | - | 12,216 | ||||||||||||||||||
USD | 625,494 | JPY | 608,172 | 9/25/2017 | SSB | - | (17,322 | ) | (17,322 | ) | ||||||||||||||||
USD | 407,547 | AUD | 406,980 | 10/27/2017 | SSB | - | (567 | ) | (567 | ) | ||||||||||||||||
EUR | 426,588 | USD | 432,689 | 11/15/2017 | SSB | - | (6,101 | ) | (6,101 | ) | ||||||||||||||||
USD | 426,588 | EUR | 421,510 | 11/15/2017 | SSB | - | (5,078 | ) | (5,078 | ) | ||||||||||||||||
BRL | 82,367 | USD | 81,661 | 11/16/2017 | SSB | 706 | - | 706 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 643,532 | $ | (318,353 | ) | $ | 325,179 | ||||||||||||||||||||
|
|
|
|
|
|
See accompanying notes
24
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
Glossary: | ||
Counterparty Abbreviations: | ||
BOA | Bank of America, N.A. | |
BRC | Barclays Bank PLC | |
CBK | Citibank, N.A. | |
DUB | Deutsche Bank AG | |
FBF | Credit Suisse International | |
GSC | Goldman Sachs Capital Markets | |
GST | Goldman Sachs International | |
HUS | HSBC Bank (USA) | |
JPM | JPMorgan Chase Bank, N.A. | |
NAB | National Australia Bank Limited | |
RBC | Royal Bank of Canada | |
RBS | Royal Bank of Scotland PLC | |
SCB | Standard Chartered Bank | |
SSB | State Street Bank & Trust Co. |
Currency Abbreviations: | ||
ARS | Argentine Peso | |
AUD | Australian Dollar | |
BRL | Brazilian Real | |
CAD | Canadian Dollar | |
CHF | Swiss Franc | |
CNY | Chinese Yuan | |
COP | Colombian Peso | |
EUR | Euro | |
GBP | Pound Sterling | |
INR | Indian Rupee | |
JPY | Japanese Yen | |
KRW | South Korean Won | |
MXN | Mexican Peso | |
NOK | Norwegian Krone | |
PEN | Peruvian Nuevo Sol | |
PLN | Polish Zloty | |
RUB | Russian Ruble | |
SEK | Swedish Krona | |
SGD | Singapore Dollar | |
TRY | Turkish Lira | |
TWD | Taiwan Dollar | |
USD | United States Dollar | |
ZAR | South African Rand |
Index Abbreviations: | ||
CDX | Credit Default Swap Index | |
HY | High-Yield | |
iTraxx | Credit Default Swap Index | |
S&P 500 | Standard & Poor’s U.S. Equity Large-cap Index |
Other Abbreviations: | ||
Bund | German Federal Government Bond | |
Buxl | Long term debt that is issued by the Federal Republic of Germany | |
CCP | Central Counterparty Clearing House | |
ECAL | European-Style Call | |
ETF | Exchange-Traded Fund | |
EURIBOR | Euro Interbank Offered Rate | |
GILT | Bank of England Bonds | |
LIBOR | London Interbank Offered Rate | |
OTC | Over-the-Counter |
See accompanying notes
25
American Beacon Flexible Bond FundSM
Schedule of Investments
August 31, 2017
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of August 31, 2017, the investments were classified as described below:
Flexible Bond Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Assets |
| |||||||||||||||||||||||||||
Bank Loan Obligations | $ | - | $ | 1,914,254 | $ | - | $ | 1,914,254 | ||||||||||||||||||||
Corporate Obligations | - | 22,193,648 | - | 22,193,648 | ||||||||||||||||||||||||
Foreign Corporate Obligations | - | 7,580,086 | - | 7,580,086 | ||||||||||||||||||||||||
Foreign Sovereign Obligations | - | 29,923,704 | - | 29,923,704 | ||||||||||||||||||||||||
Asset-Backed Obligations | - | 18,289,295 | - | 18,289,295 | ||||||||||||||||||||||||
Collateralized Mortgage Obligations | - | 16,925,473 | 179,680 | 17,105,153 | ||||||||||||||||||||||||
Commercial Mortgage-Backed Obligations | - | 400,274 | - | 400,274 | ||||||||||||||||||||||||
U.S. Agency Mortgage-Backed Obligations | - | 3,199,366 | - | 3,199,366 | ||||||||||||||||||||||||
U.S. Treasury Obligations | - | 27,258,444 | - | 27,258,444 | ||||||||||||||||||||||||
Municipal Obligations | - | 330,304 | - | 330,304 | ||||||||||||||||||||||||
Short-Term Investments: | ||||||||||||||||||||||||||||
Investment Companies | 6,688,878 | - | - | 6,688,878 | ||||||||||||||||||||||||
Certificate of Deposits | - | 1,200,489 | - | 1,200,489 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Investments in Securities - Assets | $ | 6,688,878 | $ | 129,215,337 | $ | 179,680 | $ | 136,083,895 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||||||||||||||
Futures Contracts | $ | 66,934 | $ | - | $ | - | $ | 66,934 | ||||||||||||||||||||
Swap Contract Agreements | - | 499,928 | - | 499,928 | ||||||||||||||||||||||||
Purchased Options and Swaptions Contracts | 42,105 | 122,274 | - | 164,379 | ||||||||||||||||||||||||
Forward Currency Contracts | - | 643,532 | - | 643,532 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Financial Derivative Instruments - Assets | $ | 109,039 | $ | 1,265,734 | $ | - | $ | 1,374,773 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||||||||||||||
Futures Contracts | $ | (91,572 | ) | $ | - | $ | - | $ | (91,572 | ) | ||||||||||||||||||
Swap Contract Agreements | - | (466,859 | ) | - | (466,859 | ) | ||||||||||||||||||||||
Written Options and Swaptions Contracts | (8,094 | ) | (67,580 | ) | - | (75,674 | ) | |||||||||||||||||||||
Reverse Repurchase Agreements | - | (3,208,725 | ) | - | (3,208,725 | ) | ||||||||||||||||||||||
Forward Currency Contracts | - | (318,353 | ) | - | (318,353 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Financial Derivative Instruments - Liabilities | $ | (99,666 | ) | $ | (4,061,517 | ) | $ | - | $ | (4,161,183 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
U.S. GAAP requires all transfers between any level to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. As of August 31, 2017, there were no transfers between Level 1 and Level 2, and one security was transferred from Level 2 to Level 3 with a fair value of $179,680 due to a valuation based on a single broker quote.
The following table is a reconciliation of Level 3 assets within the Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:
Security Type | Balance as of 8/31/2016 | Net Purchases | Net Sales | Accrued (Premiums) | Realized Gain (Loss) | Change in (Depreciation) | Transfer into | Transfer out of | Balance as of | Change in at Period | ||||||||||||||||||||||||
Collateralized Mortgage Obligations | $- | $- | $- | $ | - | $ | - | $ | - | $ | 179,680 | $ | - | $ | 179,680 | $ | - | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Total | $- | $- | $- | $ | - | $ | - | $ | - | $ | 179,680 | $ | - | $ | 179,680 | $ | - | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation (depreciation) on the Statement of Operations.
The collateralized mortgage obligation was classified as a Level 3 security because the security was priced using a single broker quote.
See accompanying notes
26
American Beacon Flexible Bond FundSM
Statement of Assets and Liabilities
August 31, 2017
Assets: |
| |||
Investments in unaffiliated securities, at fair value† | $ | 129,395,017 | ||
Investments in affiliated securities, at fair value‡ | 6,688,878 | |||
Foreign currency, at fair value^ | 124,019 | |||
Purchased options and swaptions contracts outstanding (premiums paid $321,820) | 164,379 | |||
Foreign currency with brokers, at fair value* | 54,126 | |||
Swap premium paid | 872,052 | |||
Swap income receivable | 194,642 | |||
Cash with brokers | 222,755 | |||
Deposits with brokers for futures contracts | 680,340 | |||
Dividends and interest receivable | 643,588 | |||
Receivable for investments sold | 6,423,387 | |||
Receivable for fund shares sold | 60,319 | |||
Receivable for tax reclaims | 7,515 | |||
Receivable for expense reimbursement (Note 2) | 23,056 | |||
Receivable for variation margin on open futures contracts (Note 5) | 1,338,381 | |||
Unrealized appreciation from swap agreements | 499,928 | |||
Unrealized appreciation from forward currency contracts | 643,532 | |||
Prepaid expenses | 44,060 | |||
|
| |||
Total assets | 148,079,974 | |||
|
| |||
Liabilities: |
| |||
Payable for investments purchased | 10,368,009 | |||
Payable for fund shares redeemed | 1,291,471 | |||
Foreign currency deposits with brokers for futures contracts, at fair value¤ | 103,624 | |||
Payable for reverse repurchase agreements# | 3,208,725 | |||
Swap premium received | 375,034 | |||
Payable for variation margin from open futures contracts (Note 5) | 1,362,656 | |||
Written option and swaption contracts, at fair value (premiums received $280,198) | 75,674 | |||
Swap income payable | 215,859 | |||
Unfunded loan commitments | 27,273 | |||
Management and sub-advisory fees payable (Note 2) | 112,154 | |||
Service fees payable (Note 2) | 7,186 | |||
Transfer agent fees payable (Note 2) | 4,788 | |||
Custody and fund accounting fees payable | 34,979 | |||
Professional fees payable | 113,743 | |||
Trustee fees payable | 104 | |||
Payable for prospectus and shareholder reports | 8,821 | |||
Unrealized depreciation from swap agreements | 466,859 | |||
Unrealized depreciation from forward currency contracts | 318,353 | |||
Other liabilities | 3,034 | |||
|
| |||
Total liabilities | 18,098,346 | |||
|
| |||
Net Assets | $ | 129,981,628 | ||
|
| |||
Analysis of Net Assets: |
| |||
Paid-in-capital | $ | 145,611,303 | ||
(Overdistribution) of net investment income | 84,658 | |||
Accumulated net realized (loss) | (16,409,289 | ) | ||
Unrealized appreciation of investments in unaffiliated securitiesA | 315,280 | |||
Unrealized (depreciation) of purchased options and swaptions contracts | (157,441 | ) | ||
Unrealized appreciation of forward currency contracts | 325,179 | |||
Unrealized (depreciation) of foreign currency transactions | (1,017 | ) | ||
Unrealized (depreciation) of futures contracts | (24,638 | ) | ||
Unrealized appreciation of swap agreements | 33,069 | |||
Unrealized appreciation of written options and swaptions contracts | 204,524 | |||
|
| |||
Net assets | $ | 129,981,628 | ||
|
|
See accompanying notes
27
American Beacon Flexible Bond FundSM
Statement of Assets and Liabilities
August 31, 2017
Shares outstanding at no par value (unlimited shares authorized): |
| |||
Institutional Class | 8,984,286 | |||
|
| |||
Y Class | 3,032,072 | |||
|
| |||
Investor Class | 432,612 | |||
|
| |||
A Class | 561,471 | |||
|
| |||
C Class | 227,481 | |||
|
| |||
Net assets: |
| |||
Institutional Class | $ | 88,277,101 | ||
|
| |||
Y Class | $ | 29,763,479 | ||
|
| |||
Investor Class | $ | 4,242,206 | ||
|
| |||
A Class | $ | 5,480,382 | ||
|
| |||
C Class | $ | 2,218,460 | ||
|
| |||
Net asset value, offering and redemption price per share: |
| |||
Institutional Class | $ | 9.83 | ||
|
| |||
Y Class | $ | 9.82 | ||
|
| |||
Investor Class | $ | 9.81 | ||
|
| |||
A Class | $ | 9.76 | ||
|
| |||
A Class (offering price) | $ | 10.25 | ||
|
| |||
C Class | $ | 9.75 | ||
|
| |||
† Cost of investments in unaffiliated securities | $ | 129,079,737 | ||
‡ Cost of investments in affiliated securities | $ | 6,688,878 | ||
^ Cost of foreign currency | $ | 124,242 | ||
¤ Cost of foreign currency deposits with broker for futures contracts | $ | 103,905 | ||
* Cost of foreign currency with broker | $ | 54,123 | ||
# Cost of reverse repurchase agreements | $ | 3,208,725 | ||
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at year end. |
|
See accompanying notes
28
American Beacon Flexible Bond FundSM
Statement of Operations
For the year ended August 31, 2017
Investment income: |
| |||
Dividend income from affiliated securities | $ | 45,170 | ||
Interest income (net of foreign taxes)† | 4,693,173 | |||
|
| |||
Total investment income | 4,738,343 | |||
|
| |||
Expenses: |
| |||
Management and sub-advisory fees (Note 2) | 1,126,122 | |||
Transfer agent fees: | ||||
Institutional Class (Note 2) | 25,693 | |||
Y Class (Note 2) | 12,853 | |||
Investor Class | 1,610 | |||
A Class | 1,625 | |||
C Class | 326 | |||
Custody and fund accounting fees | 82,977 | |||
Professional fees | 99,608 | |||
Registration fees and expenses | 68,115 | |||
Service fees (Note 2): | ||||
Y Class | 17,053 | |||
Investor Class | 8,509 | |||
A Class | 10,661 | |||
C Class | 4,057 | |||
Distribution fees (Note 2): | ||||
A Class | 17,768 | |||
C Class | 27,048 | |||
Prospectus and shareholder report expenses | 23,105 | |||
Trustee fees | 7,610 | |||
Other expenses | 18,870 | |||
|
| |||
Total expenses | 1,553,610 | |||
|
| |||
Net fees waived and expenses (reimbursed) (Note 2) | (271,143 | ) | ||
|
| |||
Net expenses | 1,282,467 | |||
|
| |||
Net investment income | 3,455,876 | |||
|
| |||
Realized and unrealized gain (loss) from investments: |
| |||
Net realized gain (loss) from: | ||||
Investments in unaffiliated securitiesA | (157,023 | ) | ||
Purchased options and swaptions contracts | (302,914 | ) | ||
Foreign currency transactions | (1,200,670 | ) | ||
Forward currency contracts | 647,343 | |||
Futures contracts | (70,621 | ) | ||
Swap agreements | (226,546 | ) | ||
Written options and swaptions contracts | 140,439 | |||
Change in net unrealized appreciation (depreciation) of: | ||||
Investments in unaffiliated securitiesB | (1,566,814 | ) | ||
Purchased options and swaptions contracts | (142,418 | ) | ||
Foreign currency transactions | 3,813,777 | |||
Forward currency contracts | 1,009,386 | |||
Futures contracts | 262,666 | |||
Swap agreements | 1,239,833 | |||
Written options and swaptions contracts | 184,309 | |||
|
| |||
Net gain from investments | 3,630,747 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 7,086,623 | ||
|
| |||
† Foreign taxes | $ | 31,764 | ||
A The Fund did not recognize net realized gains (losses) from the sale of investments in affiliated securities. |
| |||
B The Fund’s investments in affiliated securities did not have a change in unrealized appreciation (depreciation) at year end. |
|
See accompanying notes
29
American Beacon Flexible Bond FundSM
Statement of Changes in Net Assets
Year Ended August 31, 2017 | Year Ended August 31, 2016 | |||||||||||
Increase (decrease) in net assets: |
| |||||||||||
Operations: |
| |||||||||||
Net investment income | $ | 3,455,876 | $ | 5,107,686 | ||||||||
Net realized (loss) from investments in unaffiliated securities, foreign currency transactions, forward currency contracts, futures contracts, swap agreements, purchased options and swaptions contracts, and written options and swaptions contracts | (1,169,992 | ) | (10,993,745 | ) | ||||||||
Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities, foreign currency transactions, forward currency contracts, futures contracts, swap agreements, purchased options and swaptions contracts, and written options and swaptions contracts | 4,800,739 | 7,591,324 | ||||||||||
|
|
|
| |||||||||
Net increase in net assets resulting from operations | 7,086,623 | 1,705,265 | ||||||||||
|
|
|
| |||||||||
Distributions to shareholders: |
| |||||||||||
Net investment income: | ||||||||||||
Institutional Class | (1,731,406 | ) | (4,907,696 | ) | ||||||||
Y Class | (554,390 | ) | (1,523,117 | ) | ||||||||
Investor Class | (61,714 | ) | (230,372 | ) | ||||||||
A Class | (122,695 | ) | (431,968 | ) | ||||||||
C Class | (28,533 | ) | (135,648 | ) | ||||||||
Return of capital: | ||||||||||||
Institutional Class | (229,228 | ) | (835,988 | ) | ||||||||
Y Class | (78,298 | ) | (267,040 | ) | ||||||||
Investor Class | (6,313 | ) | (22,402 | ) | ||||||||
A Class | (16,691 | ) | (66,866 | ) | ||||||||
C Class | (3,340 | ) | (20,519 | ) | ||||||||
|
|
|
| |||||||||
Net distributions to shareholders | (2,832,608 | ) | (8,441,616 | ) | ||||||||
|
|
|
| |||||||||
Capital share transactions: |
| |||||||||||
Proceeds from sales of shares | 25,658,079 | 31,500,511 | ||||||||||
Reinvestment of dividends and distributions | 2,804,731 | 8,283,767 | ||||||||||
Cost of shares redeemed | (44,182,974 | ) | (129,888,786 | ) | ||||||||
|
|
|
| |||||||||
Net (decrease) in net assets from capital share transactions | (15,720,164 | ) | (90,104,508 | ) | ||||||||
|
|
|
| |||||||||
Net (decrease) in net assets | (11,466,149 | ) | (96,840,859 | ) | ||||||||
|
|
|
| |||||||||
Net assets: |
| |||||||||||
Beginning of period | 141,447,777 | 238,288,636 | ||||||||||
|
|
|
| |||||||||
End of period* | $ | 129,981,628 | $ | 141,447,777 | ||||||||
|
|
|
| |||||||||
*Includes undistributed/(overdistribution) of net investment income | $ | 84,658 | $ | (973,616 | ) | |||||||
|
|
|
|
See accompanying notes
30
American Beacon Flexible Bond FundSM
August 31, 2017
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 (the “Act”), as amended, as diversified, open-end management investment company. As of August 31, 2017, the Trust consists of thirty-two active series, one of which is presented in this filing: American Beacon Flexible Bond Fund (the “Fund”). The remaining thirty-one 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.
Recently Adopted 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, and has been adopted accordingly.
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. | $ | 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 service, distribution and sub-transfer agent fees that vary amongst the classes as described more fully in Note 2.
The following is a summary of significant accounting policies, consistently followed by the Fund in preparation of the financial statements. The Fund is considered an investment company and accordingly, follows
31
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946, Financial Services – Investment Companies, a part of 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 on the Fund’s Statement of Operations.
Distributions to Shareholders
Distributions, if any, of net investment income are generally paid at least annually and recorded on the ex-dividend date. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP. To the extent necessary to fully distribute capital gains, the Fund may designate earnings and profits distributed to shareholders on the redemption of shares.
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 year ended August 31, 2017, the Fund did not have commission recapture income.
Allocation of Income, Trust Expenses, Gains, and Losses
Investment income, realized and unrealized gains and losses from investments of the Fund is allocated daily to each class of shares based upon the relative proportion of net assets of each class to the total net assets of the Fund. Expenses directly charged or attributable to any Fund will be paid from the assets of the Fund. Generally, expenses of the Trust will be allocated among and charged to the assets of the Fund on a basis that the Trustees deem fair and equitable, which may be based on the relative net assets of the Fund or nature of the services performed and relative applicability to the Fund.
32
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
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 August 31, 2017, based on management’s evaluation of the shareholder account base, 4 accounts in the Fund have been identified as representing an unaffiliated controlling ownership of approximately 33% of the Fund’s outstanding Institutional Class shares.
2. Transactions with Affiliates
Management and Investment Sub-Advisory Agreements
The Fund and the Manager are parties to a Management Agreement that obligates the Manager to provide the Fund with investment advisory and administrative services. As compensation for performing the duties under the Management Agreement, the Manager will receive an annualized management fee based on a percentage of the Fund’s average daily net assets that is calculated and accrued daily according to the following schedule:
First $15 billion | 0.35 | % | ||
Next $15 billion | 0.325 | % | ||
Over $30 billion | 0.30 | % |
The Trust, on behalf of the Fund, and the Manager have entered into an Investment Advisory Agreement with the following Sub-Advisors pursuant to which the Fund has agreed to pay an annualized sub-advisory fee that is calculated and accrued daily based on the Fund’s average daily net assets according to the following schedules:
Brandywine Global Investment Management, LLC
All Assets | 0.55 | % |
Pacific Investment Management Company LLC
All Assets | 0.60 | % |
Payden & Rygel
First $100 million | 0.40 | % | ||
Over $100 million | 0.35 | % |
33
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
The Management and Sub-Advisory Fees paid by the Fund for the year ended August 31, 2017 were as follows:
Effective Fee Rate | Amount of Fees Paid | |||||||||||
Management Fees | 0.35 | % | $ | 460,986 | ||||||||
Sub-Advisor Fees | 0.52 | % | 665,136 | |||||||||
|
|
|
| |||||||||
Total | 0.87 | % | $ | 1,126,122 | ||||||||
|
|
|
|
Distribution Plans
The Fund, except for the A and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management fee received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. of the Fund. 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 0.15% 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 Fund. Effective April 1, 2017, the Fund terminated the Service Plan for the Y Class.
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. Effective April 1, 2017, the Fund agreed to compensate the intermediaries for providing service to the Y Class. Intermediaries transact with the Fund primarily through the use of omnibus accounts on behalf of its 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 approval, has agreed to reimburse the Manager for certain non-distribution shareholder services provided by financial intermediaries for the Institutional and Y Classes. 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. During the year ended August 31, 2017, the sub-transfer agent fees, as reflected in “Transfer agent fees” on the Statement of Operations, were as follows:
Fund | Sub-Transfer Agent Fees | |||
Flexible Bond | $ | 33,956 |
34
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
As of August 31, 2017, the Fund owed the Manager the following reimbursement of sub-transfer agent fees, as reflected in “Transfer agent fees payable” on the Statement of Assets and Liabilities:
Fund | Reimbursement Sub-Transfer Agent Fees | |||
Flexible Bond | $ | 3,779 |
Investments 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 investment advisor to the USG Select Fund and receives management fees and administrative fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the year ended August 31, 2017, the Manager earned fees on the Fund’s direct investments in the USG Select Fund as shown below:
Fund | Direct Investments in USG Select Fund | |||
Flexible Bond | $ | 8,262 |
Interfund Credit Facility
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 a credit facility whereby each Fund, under certain conditions, is permitted to lend money directly to and borrow directly from other participating Funds for temporary purposes. The interfund credit facility is advantageous to the Fund because it provides added liquidity, and eliminates the need to maintain higher cash balances to meet redemptions. This situation could arise when shareholder redemptions exceed anticipated volumes and certain funds have insufficient cash on hand to satisfy such redemptions or when sales of securities do not settle as expected, resulting in a cash shortfall for a fund. When a Fund liquidates portfolio securities to meet redemption requests, they often do not receive payment in settlement for up to three days (or longer for certain foreign transactions). Redemption requests normally are satisfied on the next business day. The credit facility provides a source of immediate, short-term liquidity pending settlement of the sale of portfolio securities. The credit facility is administered by a credit facility team consisting of professionals from the Manager’s asset management, compliance, and accounting areas who report the activities of the credit facility to the Board. During the year ended August 31, 2017, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
The Manager contractually agreed to reduce fees and/or reimburse expenses for the classes of the Fund to the extent that total operating expenses exceed the expense cap. During the year ended August 31, 2017, the Manager waived and/or reimbursed expenses as follows:
Expense Cap | Expiration of | |||||||||||||||||
Fund | Class | 9/1/2016 - 8/31/2017 | Reimbursed Expenses | (Recouped) Expenses | ||||||||||||||
Flexible Bond | Institutional | 0.90 | % | $ | 189,637 | $ | - | 2020 | ||||||||||
Flexible Bond | Y | 0.99 | % | 57,055 | - | 2020 | ||||||||||||
Flexible Bond | Investor | 1.27 | % | 3,775 | - | 2020 | ||||||||||||
Flexible Bond | A | 1.29 | % | 15,165 | - | 2020 | ||||||||||||
Flexible Bond | C | 2.04 | % | 5,511 | - | 2020 |
Of these amounts, $23,056 was disclosed as a receivable from the Manager on the Statement of Assets and Liabilities at August 31, 2017. The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of such fee reductions and expense reimbursements. Under the policy, the Manager can be
35
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
reimbursed by the Fund for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs within three years after the Manager’s own waiver or reimbursement and (b) does not cause the Fund’s annual operating expenses to exceed the lesser of the contractual percentage limit in effect at the time of the waiver/reimbursement or time of recoupment. The reimbursed expenses listed above will expire in 2020.
The carryover of excess expenses potentially reimbursable to the Manager, but not recorded as a liability are as follows:
Fund | Recouped Expenses | Excess Expense Carryover | Expired 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 year ended August 31, 2017, Foreside collected $80 for the Fund from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Fund’s Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended August 31, 2017, there were no CDSC fees collected for Class A Shares of the Fund.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Fund’s Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended August 31, 2017, CDSC fees of $600 were collected for Class C Shares of the Fund.
Trustee Fees and Expenses
As compensation for their service to the Trust, the American Beacon Select Funds and the American Beacon Institutional Funds Trust, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board of Trustees meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The Chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally at 4:00 p.m. Eastern Time, each day that the Exchange is open for business. Equity securities, including 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.
36
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
Debt securities normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. Prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board.
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to deposit with their 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.
Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value, as determined in good faith by the Manager’s Valuation Committee, pursuant to procedures established by the Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 | - | Quoted prices in active markets for identical securities. | ||
Level 2 | - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | ||
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 incorporates deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
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Common stocks, ETFs, preferred securities, and financial derivative instruments, such as futures contracts or options that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are generally categorized as Level 2 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.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers. Depending on the product and the terms of the transaction, the fair value of the financial derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends, and exchange rates. Financial derivatives that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Level 3 trading assets and trading liabilities, at fair value
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows.
Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and may be categorized as Level 3 of the fair value hierarchy.
Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of the Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.
The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued, pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.
When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of
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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.
4. Securities and Other Investments
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.
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.
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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, 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.
The Fund earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in “Interest income” on 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 on the Statement of Assets and Liabilities and Statement of Operations.
Certificates of Deposit (“CDs”)
CDs are issued against funds deposited in an eligible bank (including its domestic and foreign branches, subsidiaries and agencies). They are for a definite period of time, earn a specified rate of return and are normally negotiable. U.S. dollar denominated CDs issued by banks abroad are known as Eurodollar CDs. CDs issued by foreign branches of U.S. banks are known as Yankee CDs.
Foreign Debt Securities
The 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 the Fund’s
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Notes to Financial Statements
August 31, 2017
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.
High-Yield Securities
Non-investment-grade securities are rated below the four highest credit grades by at least one of the public rating agencies (or are unrated if not publicly rated). Participation in high-yielding securities transactions generally involves greater returns in the form of higher average yields. However, participation in such transactions involves greater risks, including sensitivity to economic changes, solvency, and relative liquidity in the secondary trading market. Lower ratings may reflect a greater possibility that the financial condition of the issuer, or adverse changes in general economic conditions, or both, may impair the ability of the issuer to make payments of interest and principal. The prices and yields of lower-rated securities generally fluctuate more than higher-quality securities, and such prices may decline significantly in periods of general economic difficulty or rising interest rates.
Illiquid and Restricted Securities
The 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. Restricted securities outstanding during the year ended August 31, 2017 are disclosed in the Fund’s Notes to the Schedule of Investments.
Regulation S under the Securities Act permits the sale abroad of securities that are not registered for sale in the United States and includes a provision for U.S. investors, such as the Fund, to purchase such unregistered securities if certain conditions are met.
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.
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.
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.
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American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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.
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.
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 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.
Privately Issued Mortgage-Backed Securities
MBS held by a 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 (“SPV”)) 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
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American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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 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.
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 to be held by an eligible third-party custodian. 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 Fund may enter into repurchase agreements with member banks of the Federal Reserve System or registered broker-dealers who, in the opinion of the Manager, present a minimal risk of default during the term of the agreement. The underlying securities which serve as collateral for repurchase agreements typically include U.S. Government and agency securities. There is no percentage restriction on the Fund’s ability to enter into repurchase agreements with terms of seven days or less.
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August 31, 2017
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.
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 dividends and interest payable on such securities, if any, are reflected as a liability on the Statement 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 August 31, 2017, the Fund did not hold any short positions.
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.
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 Fund does 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 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)
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American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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.
During the year ended August 31, 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 Contracts Notional Amounts* Outstanding | ||||
Fund | Year Ended August 31, 2017 | |||
Flexible Bond | 28,988,625 |
Average Written Option and Swaption Contracts Notional Amounts* Outstanding | ||||
Fund | Year Ended August 31, 2017 | |||
Flexible Bond | 42,109,500 |
* Notional amounts are denominated in local currency
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 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 either privately negotiated in the over-the-counter market (“OTC Swaps”) or cleared in a central clearing house (“Centrally Cleared Swaps”). The Fund may enter into credit default, cross-currency, interest rate and other forms of swap agreements to manage its exposure to credit, currency, interest rate, and inflation risk. In connection with these agreements, securities or cash may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.
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American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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.
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.
46
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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 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.
47
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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 August 31, 2017, for which the Fund is the seller of protection is disclosed in the Notes to the Schedule of Investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.
During the year ended August 31, 2017, the Fund entered into credit default swaps primarily for return enhancement and hedging.
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 measure by the notional amounts outstanding at each quarter end.
Average Credit Default Swap Notional Amounts* Outstanding | ||||
Fund | Year Ended August 31, 2017 | |||
Flexible Bond | 6,443,875 |
* Notional amounts are denominated in local currency
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.
During the year ended August 31, 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.
Average Interest Rate Swap Notional Amounts* Outstanding | ||||
Fund | Year Ended August 31, 2017 | |||
Flexible Bond | 215,352,500 |
* Notional amounts are denominated in local currency
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.
48
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
During the year ended August 31, 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.
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.
During the year ended August 31, 2017, the Fund entered into inflation swap agreements for return enhancement and hedging.
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 | Year Ended August 31, 2017 | |||
Flexible Bond | $ | 1,887,500 |
* Notional amounts are denominated in local currency
Forward Currency Contracts
The Fund may enter into forward currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Fund’s securities denominated in foreign currencies. Forward currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Fund may also use currency contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. The Fund bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Fund also bears the credit risk if the counterparty fails to perform under the contract.
49
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
During the year ended August 31, 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 table illustrates 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 Foreign Currency Notional Amount Outstanding | ||||||||
Fund | Purchased Contracts | Sold Contracts | ||||||
Flexible Bond | 28,374,245 | 40,784,580 |
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
During the year ended August 31, 2017, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at each quarter end.
Average Futures Contracts Outstanding | ||||
Fund | Year Ended August 31, 2017 | |||
Flexible Bond | 393 |
50
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
The following is a summary of the fair valuations of the Fund’s derivative instruments categorized by risk
exposure(1):
Fair values of financial instruments on the Statement of Assets and Liabilities as of August 31, 2017: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets: | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased options contracts outstanding | $ | - | $ | 35,063 | $ | - | $ | 56,295 | $ | 7,042 | $ | 98,400 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased swaptions contracts outstanding | - | - | - | 65,979 | - | 65,979 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized appreciation of forward currency contracts | - | 643,532 | - | - | - | 643,532 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivable for variation margin from open futures contracts(2) | - | - | - | 66,934 | - | 66,934 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized appreciation from swap agreements | 14,380 | - | - | 485,548 | - | 499,928 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities: | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Written options contracts outstanding | $ | - | $ | (9,484 | ) | $ | - | $ | (8,853 | ) | $ | - | $ | (18,337 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Written swaptions contracts outstanding | - | - | - | (57,337 | ) | - | (57,337 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized depreciation of forward currency contracts | - | (318,353 | ) | - | - | - | (318,353 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payable for variation margin from open futures contracts(2) | - | - | - | (91,572 | ) | - | (91,572 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized depreciation from swap agreements | (94,593 | ) | - | - | (372,266 | ) | - | (466,859 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The effect of financial derivative instruments on the Statement of Operations as of August 31, 2017: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gain (loss) of derivatives | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from forward currency contracts | $ | - | $ | 647,343 | $ | - | $ | - | $ | - | $ | 647,343 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from futures contracts | - | - | - | (70,621 | ) | - | (70,621 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from swap agreements | (244,046 | ) | - | - | 17,500 | - | (226,546 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from purchased options and swaptions contracts outstanding | - | (26,943 | ) | - | (27,493 | ) | (248,478 | ) | (302,914 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from written options and swaptions contracts outstanding | - | 36,424 | - | 104,015 | - | 140,439 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized appreciation | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) from forward currency contracts | $ | – | $ | 1,009,386 | $ | – | $ | – | $ | – | $ | 1,009,386 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) from futures contracts | – | – | – | 262,666 | – | 262,666 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) from swap agreements | (48,315 | ) | – | – | 1,288,148 | – | 1,239,833 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) from purchased options and swaptions contracts outstanding | – | 12,237 | – | (162,018 | ) | 7,363 | (142,418 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) from written options and swaptions contracts outstanding | – | (22,187 | ) | – | 206,496 | 184,309 |
(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 Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.
51
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
Master Agreements
International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties govern transactions in over-the-counter (“OTC”) 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 a particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.
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 a Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral.
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 Fund.
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
52
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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.
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
Forward currency 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 forward currency 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 forward currency contract.
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 potentially 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.
Interest Rate Risk
Investments in investment-grade and non-investment grade fixed-income securities are subject to interest rate risk. The value of the Fund’s fixed-income investments typically will fall when interest rates rise. The Fund may be particularly sensitive to changes in interest rates if it invests in debt securities with intermediate and long terms to maturity. Debt securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter durations. Yields of debt securities will fluctuate over time. Since the financial crisis that started in 2008, the Federal Reserve has attempted to stabilize the economy and support the economic recovery by keeping the federal funds rate (the interest rate at which depository institutions lend reserve balances to other depository institutions overnight) at or near zero percent. The Federal Reserve raised the federal funds rate in December 2016, March 2017 and June 2017 and maintains a
53
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
forecast for one more hike in 2017. Interest rates may rise significantly and/or rapidly, potentially resulting in substantial losses to the Fund. During periods of very low or negative interest rates, the Fund may be unable to maintain positive returns. Certain European countries and Japan have recently experienced negative interest rates on deposits and debt securities have traded at negative yields. Negative interest rates may become more prevalent among non-U.S. issuers, and potentially within the United States. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, may result in heightened market volatility and may detract from Fund performance to the extent the Fund is exposed to such interest rates.
Leverage Risk
The Fund’s use of futures, forward currency 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 an increase or decrease in the Fund’s exposure to an asset or class of assets and may cause the Fund’s NAV to be volatile.
Liquidity Risk
Liquidity risk is the risk that the 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
54
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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 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.
Other Investment Companies Risk
The Fund may invest in shares of other registered investment companies, including ETFs and money market funds. To the extent that the Fund invest in shares of other registered investment companies, the Fund will indirectly bear the 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 Fund’s 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 a 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
55
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
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 the report date, August 31, 2017.
Flexible Bond Fund
Offsetting of Financial and Derivative Assets and Liabilities as of August 31, 2017: | ||||||||||
Assets | Liabilities | |||||||||
Futures Contracts | $ | 66,934 | $ | 91,572 | ||||||
Swap Agreement - Centrally cleared | 485,548 | 466,859 | ||||||||
Swap Agreement - OTC | 14,380 | - | ||||||||
Purchased Swaptions Contracts | 65,979 | - | ||||||||
Purchased Options Contracts | 98,400 | - | ||||||||
Written Swaptions Contracts | - | 57,337 | ||||||||
Written Options Contracts | - | 18,337 | ||||||||
Forward Currency Contracts | 643,532 | 318,353 | ||||||||
|
|
|
| |||||||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 1,374,773 | $ | 952,458 | ||||||
|
|
|
| |||||||
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | (594,587 | ) | (566,525 | ) | ||||||
|
|
|
| |||||||
Total derivative assets and liabilities subject to an MNA | $ | 780,186 | $ | 385,933 | ||||||
|
|
|
|
Financial Assets, Derivatives, and Collateral Received/(Pledged) by Counterparty as of August 31, 2017: | ||||||||||||||||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Assets and Liabilities | ||||||||||||||||||||||||||||||||||||
Counterparty | Gross Amounts of Assets Presented in the Statement of Assets and Liabilities | Derivatives Available for Offset | Non-Cash Collateral Pledged | Cash Collateral Pledged | Net Amount | |||||||||||||||||||||||||||||||
Bank of America, N.A. | $ | 26,002 | $ | (25,222 | ) | $ | - | $ | - | $ | 780 | |||||||||||||||||||||||||
Barclays Bank PLC | 49,096 | (9,920 | ) | - | - | 39,176 | ||||||||||||||||||||||||||||||
Citibank, N.A. | 18,661 | (18,661 | ) | - | - | - | ||||||||||||||||||||||||||||||
Credit Suisse International | 8,715 | (8,173 | ) | - | - | 542 | ||||||||||||||||||||||||||||||
Deutsche Bank AG | 11,316 | (1,502 | ) | - | - | 9,814 | ||||||||||||||||||||||||||||||
Goldman Sachs Capital Markets | 43,229 | (20,273 | ) | - | - | 22,956 | ||||||||||||||||||||||||||||||
Goldman Sachs International | 26,594 | (18,222 | ) | - | - | 8,372 | ||||||||||||||||||||||||||||||
HSBC Bank (USA) | 515,584 | (53,301 | ) | - | - | 462,283 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank, N.A. | 442 | (442 | ) | - | - | - | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. Inc. | 30,847 | (30,200 | ) | - | - | 647 | ||||||||||||||||||||||||||||||
National Australia Bank Limited | 8,002 | - | - | - | 8,002 | |||||||||||||||||||||||||||||||
Royal Bank of Canada | 24,563 | (24,563 | ) | - | - | - | ||||||||||||||||||||||||||||||
Standard Chartered Bank | 4,213 | (4,213 | ) | - | - | - | ||||||||||||||||||||||||||||||
State Street Bank & Trust Co. | 12,922 | (12,922 | ) | - | - | - | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total | $ | 780,186 | $ | (227,614 | ) | $ | - | $ | - | $ | 552,572 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
56
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
Gross Amounts Not Offset in the Statement of Assets and Liabilities | ||||||||||||||||||||||||||||||||||||
Counterparty | Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities | Derivatives Available for Offset | Non-Cash Collateral Received | Cash Collateral Received | Net Amount | |||||||||||||||||||||||||||||||
Bank of America, N.A. | $ | 25,222 | $ | (25,222 | ) | $ | - | $ | - | $ | - | |||||||||||||||||||||||||
Barclays Bank PLC | 9,920 | (9,920 | ) | - | - | - | ||||||||||||||||||||||||||||||
Citibank, N.A. | 115,110 | (18,661 | ) | - | - | 96,449 | ||||||||||||||||||||||||||||||
Credit Suisse International | 8,173 | (8,173 | ) | - | - | - | ||||||||||||||||||||||||||||||
Deutsche Bank AG | 1,502 | (1,502 | ) | - | - | - | ||||||||||||||||||||||||||||||
Goldman Sachs Capital Markets | 20,273 | (20,273 | ) | - | - | - | ||||||||||||||||||||||||||||||
Goldman Sachs International | 18,222 | (18,222 | ) | - | - | - | ||||||||||||||||||||||||||||||
HSBC Bank (USA) | 53,301 | (53,301 | ) | - | - | - | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank, N.A. | 25,471 | (442 | ) | - | - | 25,029 | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. Inc. | 30,200 | (30,200 | ) | - | - | - | ||||||||||||||||||||||||||||||
Royal Bank of Canada | 41,390 | (24,563 | ) | - | - | 16,827 | ||||||||||||||||||||||||||||||
Royal Bank of Scotland PLC | 13 | - | - | - | 13 | |||||||||||||||||||||||||||||||
Standard Chartered Bank | 8,068 | (4,213 | ) | - | - | 3,855 | ||||||||||||||||||||||||||||||
State Street Bank & Trust Co. | 29,068 | (12,922 | ) | - | - | 16,146 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total | $ | 385,933 | $ | (227,614 | ) | $ | - | $ | - | $ | 158,319 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
7. Federal Income and Excise Taxes
It is the policy of the Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.
The Fund does not have any unrecorded tax liabilities in the accompanying financial statements. The tax years for the four year period ended August 31, 2017 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 (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:
Year Ended August 31, 2017 | Year Ended August 31, 2016 | |||||||||||
Distributions paid from: | ||||||||||||
Ordinary income* | ||||||||||||
Institutional Class | $ | 1,368,295 | $ | 4,907,696 | ||||||||
Y Class | 433,595 | 1,523,117 | ||||||||||
Investors Class | 50,598 | 230,372 | ||||||||||
A Class | 93,921 | 431,968 | ||||||||||
C Class | 22,980 | 135,648 | ||||||||||
Tax return of capital | ||||||||||||
Institutional Class | 592,339 | 835,988 | ||||||||||
Y Class | 199,093 | 267,040 | ||||||||||
Investors Class | 17,429 | 22,402 | ||||||||||
A Class | 45,465 | 66,866 | ||||||||||
C Class | 8,893 | 20,519 | ||||||||||
|
|
|
| |||||||||
Total distributions paid | $ | 2,832,608 | $ | 8,441,616 | ||||||||
|
|
|
|
*For tax purposes, short-term capital gains are considered ordinary income distributions.
57
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
As of August 31, 2017 the components of distributable earnings (deficits) on a tax basis were as follows:
Fund | Tax Cost | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Flexible Bond | $ | 136,865,798 | $ | 4,877,246 | $ | (5,071,921 | ) | $ | (194,675 | ) |
Fund | Net Unrealized Appreciation (Depreciation) | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other (Losses) | Other Temporary Differences | Distributable Earnings | ||||||||||||||||||||||||||||||||||||||
Flexible Bond | $ | (194,675 | ) | $ | 529,349 | $ | - | $ | (15,964,349 | ) | $ | - | $ | (15,629,675 | ) |
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation (depreciation) are attributable primarily to the tax deferral of losses from wash sales and straddles, amortization adjustments from swaps, and the realization for tax purposes of unrealized gains (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 income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from foreign currency, paydowns, swap income and dividend re-classes as of August 31, 2017:
Fund | Paid-In-Capital | Undistributed (Overdistribution of) Net Investment Income | Accumulated Net Realized Gain (Loss) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
Flexible Bond | $ | (529,349 | ) | $ | 101,136 | $ | 428,213 | $ | - |
Under the Regulated Investment Company Modernization Act of 2010 (“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 August 31, 2017, the Fund had $6,899,148 of short-term and $9,065,201 long-term post RIC MOD capital loss carryforwards.
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales and maturities of investments, other than short-term obligations, for the year ended August 31, 2017 were as follows:
Fund | Purchases (non-U.S. Government Securities) | Purchases of U.S. Government Securities | Sales (non-U.S. Government Securities) | Sales of U.S. Government Securities | ||||||||||||||||||||||||
Flexible Bond | $ | 40,786,594 | $ | 300,032,973 | $ | 54,390,596 | $ | 314,070,080 |
A summary of the Fund’s transactions in the USG Select Fund for the year ended August 31, 2017 were as follows:
Fund | Type of Transaction | August 31, 2016 Shares/Fair Value | Purchases | Sales | August 31, 2017 Shares/Fair Value | Dividend Income | ||||||||||||||||||||||||||||||||||||
Flexible Bond | Direct | $ | 8,925,543 | $ | 122,083,196 | $ | 124,319,861 | $ | 6,688,878 | $ | 45,170 |
58
American Beacon Flexible Bond FundSM
Notes to Financial Statements
August 31, 2017
9. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund:
Institutional Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,663,568 | $ | 15,914,446 | 1,253,593 | $ | 11,901,600 | ||||||||||||||||||||||
Reinvestment of dividends | 204,294 | 1,960,244 | 610,155 | 5,737,848 | ||||||||||||||||||||||||
Shares redeemed | (2,775,374 | ) | (26,484,011 | ) | (8,764,349 | ) | (83,282,513 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net (decrease) in shares outstanding | (907,512 | ) | $ | (8,609,321 | ) | (6,900,601 | ) | $ | (65,643,065 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 476,861 | $ | 4,608,525 | 1,529,479 | $ | 14,454,546 | ||||||||||||||||||||||
Reinvestment of dividends | 65,961 | 632,595 | 190,192 | 1,788,305 | ||||||||||||||||||||||||
Shares redeemed | (900,592 | ) | (8,584,774 | ) | (2,860,953 | ) | (26,987,262 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net(decrease) in shares outstanding | (357,770 | ) | $ | (3,343,654 | ) | (1,141,282 | ) | $ | (10,744,411 | ) | ||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 285,136 | $ | 2,744,151 | 185,116 | $ | 1,773,235 | ||||||||||||||||||||||
Reinvestment of dividends | 7,001 | 67,241 | 26,671 | 250,750 | ||||||||||||||||||||||||
Shares redeemed | (159,261 | ) | (1,522,338 | ) | (686,482 | ) | (6,474,510 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 132,876 | $ | 1,289,054 | (474,695 | ) | $ | (4,450,525 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
A Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 215,757 | $ | 2,069,773 | 268,007 | $ | 2,522,372 | ||||||||||||||||||||||
Reinvestment of dividends | 11,930 | 113,722 | 38,237 | 357,761 | ||||||||||||||||||||||||
Shares redeemed | (592,971 | ) | (5,665,080 | ) | (941,907 | ) | (8,884,768 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net (decrease) in shares outstanding | (365,284 | ) | $ | (3,481,585 | ) | (635,663 | ) | $ | (6,004,635 | ) | ||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||||
C Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Flexible Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 33,578 | $ | 321,184 | 90,443 | $ | 848,758 | ||||||||||||||||||||||
Reinvestment of dividends | 3,241 | 30,929 | 15,968 | 149,103 | ||||||||||||||||||||||||
Shares redeemed | (202,704 | ) | (1,926,771 | ) | (449,242 | ) | (4,259,733 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net (decrease) in shares outstanding | (165,885 | ) | $ | (1,574,658 | ) | (342,831 | ) | $ | (3,261,872 | ) | ||||||||||||||||||
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|
|
|
|
|
|
|
10. Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
59
American Beacon Flexible Bond FundSM
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||||||||||||||
Year Ended 2017 | Year EndedA 2016 | Year Ended 2015 | Year Ended 2014 | Year Ended 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.21 | $ | 10.48 | ||||||||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.24 | 0.22 | 0.29 | 0.21 | 0.34 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.30 | (0.04 | ) | (0.57 | ) | 0.16 | (0.24 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.54 | 0.18 | (0.28 | ) | 0.37 | 0.10 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.37 | ) | (0.28 | ) | (0.18 | ) | (0.23 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | – | – | – | (0.07 | ) | (0.14 | ) | |||||||||||||||||||||||||||||
Tax return of capital | (0.01 | )B | (0.08 | )B | – | – | – | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.21 | ) | (0.45 | ) | (0.28 | ) | (0.25 | ) | (0.37 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.83 | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.21 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnc | 5.77 | % | 1.94 | % | (2.79 | )% | 3.70 | % | 0.83 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 88,277,101 | $ | 93,936,262 | $ | 164,119,296 | $ | 177,201,454 | $ | 127,322,158 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.11 | % | 1.13 | % | 1.27 | % | 1.24 | % | 1.22 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements | 2.49 | % | 2.70 | % | 2.37 | % | 1.61 | % | 0.84 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 2.70 | % | 2.93 | % | 2.74 | % | 1.94 | % | 1.15 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 258 | % | 162 | % | 492 | % | 387 | % | 112 | % |
A | On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund. |
B | Return of capital is calculated based on shares outstanding at the time of distribution. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
60
American Beacon Flexible Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year EndedA August 31, 2016 | Year Ended August 31, 2015 | Year Ended August 31, 2014 | Year Ended August 31, 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.22 | $ | 10.51 | ||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.22 | 0.21 | 0.29 | 0.18 | 0.22 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.31 | (0.04 | ) | (0.58 | ) | 0.17 | (0.15 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.53 | 0.17 | (0.29 | ) | 0.35 | 0.07 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.37 | ) | (0.27 | ) | (0.17 | ) | (0.22 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | – | – | – | (0.07 | ) | (0.14 | ) | |||||||||||||||||||||||||||||
Tax return of capital | (0.01 | )B | (0.07 | )B | – | – | – | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.21 | ) | (0.44 | ) | (0.27 | ) | (0.24 | ) | (0.36 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsC | – | – | – | – | – | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.82 | $ | 9.50 | $ | 9.77 | $ | 10.33 | $ | 10.22 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnD | 5.67 | % | 1.83 | % | (2.87 | )% | 3.51 | % | 0.58 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 29,763,479 | $ | 32,193,869 | $ | 44,284,677 | $ | 38,033,706 | $ | 39,897,599 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.19 | % | 1.19 | % | 1.34 | % | 1.29 | % | 1.26 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.99 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements | 2.40 | % | 2.67 | % | 2.33 | % | 1.51 | % | 0.91 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 2.60 | % | 2.86 | % | 2.68 | % | 1.81 | % | 1.19 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 258 | % | 162 | % | 492 | % | 387 | % | 112 | % |
A | On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund. |
B | Return of capital is calculated based on shares outstanding at the time of distribution. |
C | Amount represents less than $0.01 per share. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
61
American Beacon Flexible Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year EndedA August 31, 2016 | Year Ended August 31, 2015 | Year Ended August 31, 2014 | Year Ended August 31, 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.50 | $ | 9.76 | $ | 10.31 | $ | 10.21 | $ | 10.51 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.98 | (1.27 | ) | (0.33 | ) | 0.02 | 0.18 | |||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | (0.48 | ) | 1.41 | 0.01 | 0.30 | (0.13 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.50 | 0.14 | (0.32 | ) | 0.32 | 0.05 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.18 | ) | (0.33 | ) | (0.23 | ) | (0.15 | ) | (0.21 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | - | (0.07 | ) | (0.14 | ) | |||||||||||||||||||||||||||||
Tax return of capital | (0.01 | )B | (0.07 | )B | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.19 | ) | (0.40 | ) | (0.23 | ) | (0.22 | ) | (0.35 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsC | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.81 | $ | 9.50 | $ | 9.76 | $ | 10.31 | $ | 10.21 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnD | 5.36 | % | 1.57 | % | (3.11 | )% | 3.13 | % | 0.38 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 4,242,206 | $ | 2,846,444 | $ | 7,560,586 | $ | 24,410,567 | $ | 56,015,406 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.38 | % | 1.42 | % | 1.51 | % | 1.43 | % | 1.54 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 1.27 | % | 1.27 | % | 1.27 | % | 1.27 | % | 1.27 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements | 2.22 | % | 2.39 | % | 2.15 | % | 1.34 | % | 0.65 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 2.33 | % | 2.53 | % | 2.38 | % | 1.50 | % | 0.92 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 258 | % | 162 | % | 492 | % | 387 | % | 112 | % |
A | On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund. |
B | Return of capital is calculated based on shares outstanding at the time of distribution. |
C | Amount represents less than $0.01 per share. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
62
American Beacon Flexible Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
A Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year EndedA August 31, 2016 | Year Ended August 31, 2015 | Year Ended August 31, 2014 | Year Ended August 31, 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.45 | $ | 9.72 | $ | 10.27 | $ | 10.16 | $ | 10.49 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.17 | ) | 0.02 | 0.12 | 0.10 | 0.21 | ||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.67 | 0.11 | (0.44 | ) | 0.21 | (0.18 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.50 | 0.13 | (0.32 | ) | 0.31 | 0.03 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.18 | ) | (0.33 | ) | (0.23 | ) | (0.13 | ) | (0.22 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | - | (0.07 | ) | (0.14 | ) | |||||||||||||||||||||||||||||
Tax return of capital | (0.01 | )B | (0.07 | )B | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.19 | ) | (0.40 | ) | (0.23 | ) | (0.20 | ) | (0.36 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsC | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.76 | $ | 9.45 | $ | 9.72 | $ | 10.27 | $ | 10.16 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnD | 5.33 | % | 1.49 | % | (3.14 | )% | 3.12 | % | 0.16 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 5,480,382 | $ | 8,757,769 | $ | 15,190,886 | $ | 27,146,489 | $ | 41,376,389 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.50 | % | 1.52 | % | 1.66 | % | 1.68 | % | 1.67 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 1.29 | % | 1.29 | % | 1.29 | % | 1.38 | % | 1.39 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements | 2.08 | % | 2.31 | % | 1.95 | % | 1.10 | % | 0.50 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 2.29 | % | 2.53 | % | 2.32 | % | 1.40 | % | 0.79 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 258 | % | 162 | % | 492 | % | 387 | % | 112 | % |
A | On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund. |
B | Return of capital is calculated based on shares outstanding at the time of distribution. |
C | Amount represents less than $0.01 per share. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
63
American Beacon Flexible Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year EndedA August 31, 2016 | Year Ended August 31, 2015 | Year Ended August 31, 2014 | Year Ended August 31, 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.44 | $ | 9.69 | $ | 10.22 | $ | 10.11 | $ | 10.49 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.31 | ) | (0.08 | ) | 0.07 | 0.02 | 0.14 | |||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.73 | 0.14 | (0.46 | ) | 0.22 | (0.19 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.42 | 0.06 | (0.39 | ) | 0.24 | (0.05 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.26 | ) | (0.14 | ) | (0.06 | ) | (0.19 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | - | (0.07 | ) | (0.14 | ) | |||||||||||||||||||||||||||||
Tax return of capital | (0.00 | )B | (0.05 | )C | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.11 | ) | (0.31 | ) | (0.14 | ) | (0.13 | ) | (0.33 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsB | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.75 | $ | 9.44 | $ | 9.69 | $ | 10.22 | $ | 10.11 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnD | 4.53 | % | 0.68 | % | (3.81 | )% | 2.37 | % | (0.54 | )% | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 2,218,460 | $ | 3,713,433 | $ | 7,133,191 | $ | 11,126,819 | $ | 15,291,798 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 2.24 | % | 2.26 | % | 2.40 | % | 2.43 | % | 2.43 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 2.04 | % | 2.04 | % | 2.04 | % | 2.13 | % | 2.14 | % | ||||||||||||||||||||||||||
Net investment income (loss), before expense reimbursements | 1.34 | % | 1.55 | % | 1.21 | % | 0.35 | % | (0.24 | )% | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 1.54 | % | 1.77 | % | 1.57 | % | 0.66 | % | 0.04 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 258 | % | 162 | % | 492 | % | 387 | % | 112 | % |
A | On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund. |
B | Amount represents less than $0.01 per share. |
C | Return of capital is calculated based on shares outstanding at the time of distribution. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
64
American Beacon Flexible Bond FundSM
Affirmation of the Commodity Pool Operator
August 31, 2017 (Unaudited)
To the best of my knowledge, the information contained in the attached financial statements for the period from September 1, 2016 to August 31, 2017, is accurate and complete.
Melinda G. Heika, Treasurer
American Beacon Advisors, Inc.
Commodity Pool Operator for the American Beacon Flexible Bond Fund
65
American Beacon FundsSM
August 31, 2017 (Unaudited)
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended August 31, 2017. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2017.
The Fund did not designate any distributions as short-term or long-term capital gains distributions for the year ended August 31, 2017.
Shareholders will receive notification in January 2018 of the applicable tax information necessary to prepare their 2017 income tax returns.
66
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Renewal and Approval of Management Agreement and Investment Advisory Agreement
At in-person meetings held on May 16, 2017 and June 7, 2017 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 7 meeting, approved the renewal of:
(1) the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (the “Trust”), on behalf of American Beacon Flexible Bond Fund (“Fund”);
(2) the Investment Advisory Agreements among the Manager, the Trust, on behalf of the Fund, and each of Payden & Rygel (“P&R”), Brandywine Global Investment Management, LLC (“Brandywine”) and Pacific Investment Management Company LLC (“PIMCO”), (each, a “subadvisor” and collectively, the “subadvisors”).
The Investment Advisory Agreements are referred to herein as the “Investment Advisory Agreements”. The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for its consideration of the renewal of the Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisor, Broadridge, Inc. (“Broadridge”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and the subadvisor.
In advance of the Meetings, the Board’s Investment Committee and/or the Manager coordinated the production of information from Broadridge and Morningstar regarding the performance, fees and expenses of the Fund as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Agreements, the Trustees received and evaluated such information as they deemed necessary. The information requested on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or the subadvisors.
• | comparisons of the performance of an appropriate share class of the Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Broadridge and Morningstar, and to the performance of certain similar accounts, if applicable, managed by the firm; |
• | comparisons of the Fund’s management and subadvisory fee rates and expense ratio with the management fee rates paid by comparable mutual funds and their expense ratios, including peer group averages and fee and expense analyses provided by Broadridge and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided by a firm; |
• | a description of any applicable fee waivers and/or expense reimbursements in place for the Fund during the past year, and any proposed changes to those arrangements; |
• | the Manager’s profitability with respect to the services that it provided to the Fund; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to the Fund and whether the current fee rates charged or to be charged to the Fund reflect these economies of scale for the benefit of the Fund’s investors; |
• | an evaluation of other benefits to the firm or Fund as a result of their relationship, if any; |
• | information regarding the administrative, accounting-related and cash management services that the Manager provides to the Fund and the fees that the Manager receives for such services; and |
67
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
• | information regarding a firm’s financial condition, the personnel of the Manager who are assigned primary responsibility for managing the Fund, staffing levels, portfolio managers’ compensation, insurance coverage, material pending litigation, code of ethics, compliance matters, actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Fund, and the Manager’s disaster recovery plans. |
The Board noted that the Manager provides management and administrative services to the Fund pursuant to the Management Agreement. The Board considered that many mutual funds have separate contracts governing both types of services, and observed that the actual management fee rates provided by Broadridge for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
A firm may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of the firm based on information that was provided. In such cases, the Board determined that the omission of any such information was not material to its considerations. The class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
Provided below is an overview of certain factors the Board considered in connection with its renewal and approval of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the Independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Fund and its shareholders.
Considerations With Respect to the Renewal of the Management Agreement and The Investment Advisory Agreements
In determining whether to renew the Agreements, the Trustees considered the best interests of the Fund. While the Management Agreement and the Investment Advisory Agreements for the Fund were considered at the Meetings, the Board considered the Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of the Fund; (3) the costs incurred by the Manager in rendering services to the Fund and its resulting profits or losses; (4) comparisons of services and fee rates with contracts entered into by the Manager or the subadvisors or their affiliates with other clients (such as pension funds and other institutional clients); (5) the extent to which economies of scale, if any, have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect economies of scale, if any, for the benefit of Fund investors; and (7) any other benefits derived or anticipated to be derived by the Manager or the subadvisors from their relationship with the Fund.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: the Fund’s long-term performance and the length of service of key investment personnel at the Manager; the cost structure of the Fund; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Fund; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; and the Manager’s efforts to retain key employees and maintain staffing levels.
68
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
With respect to the renewal of the Investment Advisory Agreements, the Trustees considered the level of staffing and the size of the subadvisors. The Board also considered the adequacy of the resources committed to the Fund by the subadvisors, and whether those resources were commensurate with the needs of the Fund and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of the subadvisors. The Board also considered the subadvisors’ representations regarding their compliance program and code of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and the subadvisors were appropriate for the Fund.
Investment Performance. The Board evaluated the comparative information provided by Broadridge and the Manager regarding the performance of the Fund relative to its Broadridge performance universe, Morningstar Category, and benchmark index, as well as the Fund’s Morningstar rating. The Board considered the information provided by Broadridge regarding its independent peer selection methodology to select all Broadridge performance universes. The Board also considered that the performance universe selected by Broadridge may not provide appropriate comparisons for the Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also evaluated the comparative information provided by each subadvisor regarding the performance of its portion of the Fund relative to the performance of other comparable investment accounts managed by the subadvisor and the Fund’s benchmark index. In addition, the Board considered the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to the Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to the Fund.”
Costs of the Services Provided to the Fund and the Profits Realized by the Manager from its Relationship with the Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager, before and after the payment of distribution-related expenses by the Manager. The profits or losses were noted at both an aggregate level for all funds within the group of mutual funds sponsored by the Manager (the “Fund Complex”) and at an individual Fund level, with the Manager sustaining losses with respect to the Fund before and after the payment of distribution-related expenses. The Board also considered comparative information provided by the Manager regarding the Manager’s overall profitability with respect to the Fund Complex relative to the overall profitability of other firms in the mutual fund industry, as disclosed in publicly available sources. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rate paid by the Fund, the Manager represented that, among other matters, the difference is attributable to the fact that the Manager does not perform administrative services for non-investment company clients and reflects the greater level of responsibility and regulatory requirements associated with managing the Fund.
The Board also noted that the Manager proposed to continue the fee waivers and expense reimbursements for the Fund that were in place during the last fiscal year. The Board further considered that, with respect to the Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager. The Board also noted that certain share classes of the Fund maintain higher expense ratios in order to compensate third-party financial intermediaries.
In analyzing the fee rates charged by each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, with respect to Brandywine and P&R, the Manager has negotiated the lowest fee rate the subadvisor charges for any comparable client accounts and, with respect to PIMCO, the Fund’s subadvisory fee rate schedule was generally favorable compared to other comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that a subadvisor may not account for its profits on an account-by-account basis and, to the extent it does, it likely employs different methodologies in connection with these calculations.
69
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to the Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to the Fund.”
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Fund grows and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that, with respect to P&R, the Manager has negotiated breakpoints in the subadvisory fee rates for the Fund and, with respect to Brandywine and PIMCO, each subadvisor has represented that it does not believe that it is likely to experience any further economies of scale in connection with its management of Fund assets. In addition, the Board noted the Manager’s representation that the Management Agreement contains fee schedule breakpoints at higher asset levels with respect to the Fund. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for the Fund provide for a reasonable sharing of benefits from any economies of scale with the Fund.
Benefits Derived from the Relationship with the Fund. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Fund, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors. In addition, the Board noted that Brandywine benefits from soft dollar arrangements for proprietary research. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Fund appears to be fair and reasonable.
Additional Considerations and Conclusions with Respect to the Fund
The performance comparisons below were made versus the Fund’s Broadridge performance universe and Morningstar Category. With respect to the Broadridge performance universe, the 1st Quintile represents the top twenty percent of the universe based on performance and the 5th Quintile representing the bottom twenty percent of the universe based on performance. References below to the Fund’s Broadridge performance universe are to the universe of mutual funds with a comparable investment classification/objective included in the analysis provided by Broadridge. Information regarding the performance of individual subadvisors is calculated by the Manager using information provided by the Fund’s custodian. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events.
The expense comparisons below were made versus the Fund’s Broadridge expense universe and Broadridge expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. References below to the Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Broadridge. The Broadridge expense group consists of the Fund and a representative sample of funds with similar operating structures and asset sizes, as selected by Broadridge. The Broadridge expense universe includes all funds in the investment classification/objective with a similar operating structure as the share class of the Fund included in the Broadridge comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered the Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the subadvisors’ use of soft dollars was requested from the Manager and was considered by the Trustees.
70
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Additional Considerations and Conclusions with Respect to the Flexible Bond Fund
In considering the renewal of the Management Agreement for the Fund, the Trustees considered the following additional factors:
Broadridge Total Expenses Excluding 12b-1 Fees and Morningstar Fee Level Ranking
Compared to Broadridge Expense Group | 3rd Quintile | |
Compared to Broadridge Expense Universe | 3rd Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Average Expense Ratio |
Broadridge and Morningstar Performance Analysis (five-year period ended February 28, 2017)
Compared to Broadridge Performance Universe | 4th Quintile | |
Compared to Morningstar Category | 4th Quintile |
In considering the renewal of the Investment Advisory Agreements with Brandywine, PIMCO and P&R, the Trustees considered that the diversification of investment strategies facilitated by the Fund’s multi-manager structure permits the Fund to mitigate the risks associated with a single subadvisor. The Trustees also considered the following additional factors:
Subadvisor Performance (compared to Broadridge Performance Universe for period indicated, ending February 28, 2017)
Brandywine | 5 Years | 2nd Quintile | ||
PIMCO | 5 Years | 3rd Quintile | ||
Payden & Rygel | 1 Years | 4th Quintile |
The Trustees also considered: (1) information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor’s allocation of the Fund; (2) the replacement of an underperforming subadvisor in the fourth quarter of 2015; (3) that the one-year period was not long enough to fully evaluate the performance of Payden & Rygel; (4) the Manager’s representation that there are challenges associated with identifying a peer group for evaluating the Fund’s expenses and performance as none of the funds in the Fund’s Broadridge expense group, expense universe, performance universe or Morningstar category pursue a comparable investment strategy; (5) the overall improvement in the subadvisors’ relative performance in a rising interest-rate environment; and (6) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Management and Investment Advisory Agreements are fair and reasonable; and (2) determined that the American Beacon Flexible Bond Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund.
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Trustees and Officers of the American Beacon FundsSM (Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. The address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees thirty-four funds in the fund complex that includes the Trust, the American Beacon Select Funds and the American Beacon Institutional Funds Trust. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (80) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gilbert G. Alvarado (47) | Trustee since 2015 | Director, Kura MD, Inc. (local telehealth organization) (2015-present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present); Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-2015); Director, Sacramento Regional Technology Alliance (2011-2016); Director, Women’s Empowerment (2009-2014); Director, Valley Healthcare Staffing (2017-present); Trustee, American Beacon Select Funds (2015-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Joseph B. Armes (55) | Trustee since 2015 | Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2015-Present); Chairman of the Board of Capital Southwest Corporation, predecessor to CSW Industrials, Inc. (2014-present) (investment company); CEO, Capital Southwest Corporation (2013-2015); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Gerard J. Arpey (59) | Trustee since 2012 | Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Director, S.C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Brenda A. Cline (56) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc. (public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). |
72
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
NON-INTERESTED TRUSTEES (CONT.) | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Eugene J. Duffy (63) | Trustee since 2008 | Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Thomas M. Dunning (74) | Trustee since 2008 | Chairman Emeritus, Lockton Dunning Benefits (consulting firm in employee benefits) (2008-Present); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Richard A. Massman (74) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus, Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities) (2009-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Barbara J. McKenna, CFA (54) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
R. Gerald Turner (71) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
OFFICERS | Term | |||
One Year | ||||
Gene L. Needles, Jr. (62) | President since 2009 | President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Resolute Investment Managers, Inc. (2015-Present); President, CEO and Director, Resolute Acquisition, Inc. (2015-Present); President, CEO and Director, Resolute Topco, Inc. (2015-Present), President & CEO, Resolute Investment Holdings, LLC (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc. (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, LLC (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Director, Chairman, President and CEO, Alpha Quant Advisors, LLC (2016-Present); Director, ARK Investment Management LLC (2016-Present); Director, Shapiro Capital Management LLC (2017-Present); Member, Investment Advisory Committee, Employees Retirement System of Texas (2017-Present); Trustee, American Beacon NextShares Trust (2015-Present); President, American Beacon Select Funds (2009-Present); President, American Beacon Mileage Funds (2009-2012); President, American Beacon Master Trust (2009–2012); President, American Beacon Institutional Funds Trust (2017-Present). |
73
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Rosemary K. Behan (58) | VP, Secretary and Chief Legal Officer since 2006 | Vice President and Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Resolute Investment Holdings, LLC (2015-Present) Secretary, Resolute Investment Managers, Inc. (2015-Present); Secretary, Resolute Topco, Inc. (2015-Present); Secretary, Resolute Acquisition, Inc. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, LLC (2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Secretary, Alpha Quant Advisors, LLC (2016-Present); Chief Legal Officer, Vice President and Secretary, American Beacon Select Funds (2006-Present); Chief Legal Officer, Vice President and Secretary, American Beacon Mileage Funds (2006-2012); Chief Legal Officer, Vice President and Secretary, American Beacon Master Trust (2006-2012); Chief Legal Officer, Vice President and Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Brian E. Brett (57) | VP since 2004 | Senior Vice President (2012-Present) and Vice President (2004-2012), American Beacon Advisors, Inc.; Vice President, American Beacon Select Funds (2004-Present); Vice President, American Beacon Mileage Funds (2004-2012); Vice President, American Beacon Master Trust (2004-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Paul B. Cavazos(48) | VP since 2016 | Senior Vice President, American Beacon Advisors, Inc. (2016-Present); Chief Investment Officer and Assistant Treasurer, DTE Energy (2007-2016); Vice President, American Beacon Select Funds (2016-Present); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Erica Duncan (47) | VP Since 2011 | Vice President, American Beacon Advisors, Inc. (2011-Present); Vice President, American Beacon Select Funds (2011-Present); Vice President, American Beacon Mileage Funds (2011-2012); Vice President, American Beacon Master Trust (2011-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Melinda G. Heika (56) | Treasurer since 2010 | Treasurer, American Beacon Advisors, Inc. (2010-Present); Resolute Investment Managers, Inc. (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present); Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute Investment Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, LLC (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Treasurer, American Beacon Select Funds (2010-Present); Treasurer, American Beacon Mileage Funds (2010-2012); Treasurer, American Beacon Master Trust (2010-2012); Treasurer, American Beacon Institutional Funds Trust (2017-Present). | ||
Terri L. McKinney (53) | VP since 2010 | Vice President (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.; Vice President, Resolute Investment Managers, Inc. (2017-Present); Vice President, Alpha Quant Advisors, LLC (2016-Present); Vice President, American Beacon Select Funds (2010-Present); Vice President, American Beacon Mileage Funds (2010-2012); Vice President, American Beacon Master Trust (2010-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). |
74
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Jeffrey K. Ringdahl (42) | VP since 2010 | Senior Vice President (2013-Present), Vice President (2010-2013), and Director (2015-Present), American Beacon Advisors, Inc.; Vice President, American Beacon Select Funds (2010-Present); Vice President, American Beacon Mileage Funds (2010-2012); Vice President, American Beacon Master Trust (2010-2012); Senior Vice President (2012-Present) and Manager (2015-Present), American Private Equity Management, LLC; Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Trustee, American Beacon NextShares Trust (2015-Present); Director and Senior Vice Present, Resolute Investment Holdings, LLC (2015-Present); Director and Senior Vice President, Resolute Topco, Inc. (2015-Present); Director and Senior Vice President, Resolute Acquisition, Inc. (2015-Present); Director and Senior Vice President, Resolute Investment Managers, Inc. (2015-Present); Director, Executive Vice President and Chief Operating Officer, Alpha Quant Advisors, LLC (2016-Present); Vice President, American Beacon Institutional Funds Trust (2017-President); Director, Shapiro Capital Management, LLC (2017-Present). | ||
Samuel J. Silver (54) | VP Since 2011 | Vice President, American Beacon Advisors, Inc. (2011-Present); Vice President, American Beacon Select Funds (2011-Present); Vice President, American Beacon Mileage Funds (2011-2012); Vice President, American Beacon Master Trust (2011-2012); American Beacon Institutional Funds Trust (2011-Present). | ||
Christina E. Sears (45) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, LLC (2012-Present); Chief Compliance Officer and Vice President, Alpha Quant Advisors, LLC (2016-Present); Chief Compliance Officer (2004-Present) and Assistant Secretary (1999-Present), American Beacon Select Funds; Chief Compliance Officer (2004-2012) and Assistant Secretary (1999-2012), American Beacon Mileage Funds; Chief Compliance Officer (2004-2012) and Assistant Secretary (1999-2012), American Beacon Master Trust; Chief Compliance Officer and Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Sonia L. Bates (60) | Asst. Treasurer since 2011 | Assistant Treasurer, American Beacon Advisors, Inc. (2011-Present); Assistant Treasurer, Resolute Investment Managers, Inc. (2015-Present); Assistant Treasurer, Resolute Acquisition, Inc. (2015-Present); Assistant. Treasurer, Resolute Topco, Inc. (2015-Present); Assistant Treasurer, Resolute Investment Holdings, LLC.; Assistant Treasurer, Lighthouse Holdings, Inc. (2011-2015); Assistant Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Assistant Treasurer, American Private Equity Management, LLC (2012-Present); Assistant Treasurer, American Beacon Select Funds (2011-Present); Assistant Treasurer American Beacon Mileage Funds (2011-2012); Assistant Treasurer, American Beacon Master Trust (2011-2012); Assistant Treasurer, American Beacon Institutional Funds Trust (2017-Present). | ||
Shelley D. Abrahams (42) | Assistant Secretary since 2008 | Assistant Secretary, American Beacon Advisors, Inc. (2008-Present); Assistant Secretary, American Beacon Select Funds (2008-Present); Assistant Secretary, American Beacon Mileage Funds (2008-2012); Assistant Secretary, American Beacon Master Trust (2008-2012); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). |
75
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Rebecca L. Harris (50) | Assistant Secretary since 2010 | Vice President, American Beacon Advisors, Inc. (2016-Present); Vice President, Resolute Investment Managers, Inc. (2017-Present); Vice President, Alpha Quant Advisors, LLC (2016-Present); Assistant Secretary, American Beacon Select Funds (2010-Present); Assistant Secretary, American Beacon Mileage Funds (2010-2012); Assistant Secretary, American Beacon Master Trust (2010-2012); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Diana N. Lai (41) | Assistant Secretary since 2012 | Assistant Secretary, American Beacon Advisors, Inc. (2012-Present); Assistant Secretary, American Beacon Select Funds (2012-Present); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Teresa A. Oxford (59) | Assistant Secretary since 2015 | Assistant Secretary, American Beacon Advisors, Inc. (2015-Present); Assistant Secretary, Alpha Quant Advisors, LLC (2016-Present); Assistant Secretary, American Beacon Select Funds (2015-Present); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). |
* As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75.
** Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors.
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American Beacon FundsSM
August 31, 2017 (Unaudited)
The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
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eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
![]() | ![]() | |
By E-mail: | On the Internet: | |
american_beacon.funds@ambeacon.com | Visit our website at www.americanbeaconfunds.com | |
By Telephone: Call (800) 658-5811 | By Mail: American Beacon Funds 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 (202) 551-8090. A complete schedule of the Fund’s portfolio holdings is also made available on 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, which 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 August 31 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.
AR 8/17
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.
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.
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 the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | August 31, 2017 |
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Disclosures Regarding the Approval of the Management and Investment Advisory Agreements | 49 | |||
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Back Cover |
Dear Shareholders,
At American Beacon, we are proud to offer a broad range of equity, fixed-income and alternative mutual fund products for institutions and individuals. Our mutual funds – which span the domestic, international, global, frontier and emerging markets – are sub-advised by experienced portfolio managers who employ distinctive investment processes to manage assets through a variety of economic and market conditions. Together, we work diligently to help our clients and shareholders meet their long-term financial goals.
Institutional wisdom, enduring value. Since our inception as a pension fiduciary in 1986, American Beacon has focused on identifying and overseeing institutional investment managers and portfolio risk management. In 1987, we leveraged our size and experience to launch a series of sub-advised, multi- |
manager mutual funds providing individual investors access to many of the same institutional managers as our pension clients. Following the financial crisis in 2008, we saw that investors were looking for unique solutions from managers who were not necessarily mainstream. In 2010, we began offering mutual funds from single managers with distinctive investment styles or asset classes. As we continue to expand our family of funds, our solutions-based approach provides innovative investments.
Guiding principles. Our “manager of managers” philosophy is built on a long-standing history of innovative thinking, discipline and consistency in applying our solutions-based approach. As a manager of managers, our goal is to engage the most effective money managers for each asset class, investment style or market strategy – whether through a single sub-advisor or a combination of sub-advisors. Because we take our fiduciary responsibilities very seriously, our thorough manager evaluation and selection process is rigorous and ongoing. Our guiding principles – predictability, style consistency, competitive pricing and long-term relationships – provide a strong foundation for our due-diligence process. Our broad range of mutual funds helps investors navigate the economic storms and market downturns in the U.S. and abroad. Our years of experience evaluating sub-advisors have led us to identify and partner with asset managers who have adhered to their disciplined processes for many years and through multiple market cycles.
Focus on asset protection and risk mitigation. We strive to provide innovative, long-term products without gimmicks. From offering some of the first multi-manager funds, one of the first retirement-income funds and the first open-end mutual fund in the U.S. to focus primarily on frontier-market debt, our robust history includes applying a disciplined, solutions-based approach to our product development process to help protect assets and mitigate risk.
Thank you for your continued interest in American Beacon. For additional information about our 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
Domestic Equity Market Overview
August 31, 2017 (Unaudited)
U.S. equities posted strong returns over the 12-month period ended August 31, 2017, reflecting steady economic growth and low inflation. Economic reports were generally positive over the year, driven by strength from U.S. consumers. The labor market was strong with unemployment below 5% and annual wage inflation of roughly 2.5%. Housing and manufacturing data were also generally positive. On the negative side, auto sales declined in the first eight months of 2017 following all-time highs in 2016.
Turning to monetary policy, the Federal Open Market Committee continued to tighten with additional increases in the federal funds rate. The latest increase in June set the range for the federal funds rate at 1.0% to 1.25%. While short-term rates moved higher, long-term rates didn’t move much and the 10-year yield on U.S. Treasuries remained just over 2%. On top of the additional rate increases, the Federal Reserve (the “Fed”) plans to pursue balance sheet normalization later in 2017. This involves reducing the Fed’s investments in U.S. Treasuries and mortgage-backed securities. Over time, the Fed hopes to gradually remove monetary accommodation.
Stocks rose across the market-cap spectrum during the 12-month period as evidenced by a 16.1% increase in the broader Russell 3000 Index. Large cap issues led the way with both the Russell 1000 and S&P 500 indexes posting gains of 16.2%. Mid-cap shares were weakest, but the Russell Midcap Index still posted a gain of 12.4%. In terms of other performance factors, the Growth sector outperformed the Value sector and the Cyclical sectors outperformed the more Defensive sectors.
There was limited volatility over the 12-month period and very few periods with significant declines. Stocks were strong in late 2016 following the surprising results from the U.S. presidential election, and they continued to move steadily higher between January and August 2017.
2
American Beacon The London Company Income Equity FundSM
Performance Overview
August 31, 2017 (Unaudited)
The Investor Class of the American Beacon The London Company Income Equity Fund (the “Fund”) returned 8.33% for the twelve-month period ended August 31, 2017, compared to the Russell 1000 Value Index (the “Index”) return of 11.58% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 5/29/2012 through 8/31/2017
Total Returns for the Period ended August 31, 2017 | |||||||||||||||||||||||||||||||||
Ticker | 1 Year | 3 Years | 5 Years | Since Inception | Value of $10,000 5/29/2012– 8/31/2017 | ||||||||||||||||||||||||||||
Institutional Class (1,2,4) | ABCIX | 8.64 | % | 7.32 | % | 11.96 | % | 12.44 | % | $ | 18,523 | ||||||||||||||||||||||
Y Class (1,2,4) | ABCYX | 8.60 | % | 7.25 | % | 11.87 | % | 12.36 | % | $ | 18,453 | ||||||||||||||||||||||
Investor Class (1,2,4) | ABCVX | 8.33 | % | 6.95 | % | 11.59 | % | 12.07 | % | $ | 18,202 | ||||||||||||||||||||||
A Class with sales Charge (1,2,4) | ABCAX | 2.03 | % | 4.84 | % | 10.16 | % | 10.71 | % | $ | 17,070 | ||||||||||||||||||||||
A Class without sales charge (1,2,4) | ABCAX | 8.24 | % | 6.92 | % | 11.48 | % | 11.96 | % | $ | 18,111 | ||||||||||||||||||||||
C Class with sales charge (1,2,4) | ABECX | 6.42 | % | 6.12 | % | 10.65 | % | 11.13 | % | $ | 17,414 | ||||||||||||||||||||||
C Class without sales charge (1,2,4) | ABECX | 7.42 | % | 6.12 | % | 10.65 | % | 11.13 | % | $ | 17,414 | ||||||||||||||||||||||
Russell 1000 Value Index (3) | 11.58 | % | 6.74 | % | 13.25 | % | 13.95 | % | $ | 19,879 |
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. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A 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 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. 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 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 actual returns shown from 2012 through 2014. |
3
American Beacon The London Company Income Equity FundSM
Performance Overview
August 31, 2017 (Unaudited)
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 trailed the Index entirely due to stock selection as sector allocation added value relative to the Index.
From a security selection standpoint, the Fund’s holdings in the Financials and Information Technology sectors were the largest detractors from performance. In the Financials sector, the Fund’s absence from JP Morgan Chase, Bank of America and Citigroup, which were up 37.9%, 50.2% and 44.4%, respectively, in the Index, negatively impacted performance. Companies detracting from performance in the Information Technology sector included Paychex (down 3.0%). The aforementioned poor performance was somewhat offset by good selection in the Consumer Discretionary sector. Carnival (up 49.3%) and Hasbro (up 22.7%) contributed most to performance in the Consumer Discretionary sector. The Fund’s absence from L Brands, which was down 50.2% in the Index, also contributed to performance.
From a sector allocation perspective, the Fund’s underweight positions in Energy and Real Estate, two of the poorer performing sectors, added value relative to the Index. Being underweight Financials, the best performing sector, detracted from the Fund’s return.
The sub-advisor’s investment process focuses on downside protection, current income and total return appreciation.
Top Ten Holdings (% Net Assets) | ||||||||
General Dynamics Corp. | 5.6 | |||||||
Carnival Corp. | 5.2 | |||||||
Wells Fargo & Co. | 4.6 | |||||||
Norfolk Southern Corp. | 4.5 | |||||||
Altria Group, Inc. | 4.2 | |||||||
Philip Morris International, Inc. | 4.1 | |||||||
BlackRock, Inc. | 3.8 | |||||||
Microsoft Corp. | 3.6 | |||||||
Cincinnati Financial Corp. | 3.6 | |||||||
Merck & Co., Inc. | 3.5 | |||||||
Total Fund Holdings | 31 | |||||||
Sector Allocation (% Equities) | ||||||||
Consumer Staples | 17.5 | |||||||
Information Technology | 15.6 | |||||||
Financials | 15.0 | |||||||
Industrials | 13.7 | |||||||
Consumer Discretionary | 11.6 | |||||||
Health Care | 10.0 | |||||||
Energy | 4.5 | |||||||
Utilities | 3.6 | |||||||
Real Estate | 3.3 | |||||||
Telecommunication Services | 2.8 | |||||||
Materials | 2.4 |
4
American Beacon Zebra Small Cap Equity FundSM
Performance Overview
August 31, 2017 (Unaudited)
The Investor Class of the American Beacon Zebra Small Cap Equity Fund (the “Fund”) returned 14.77% for the twelve months ended August 31, 2017, which was slightly under the Russell 2000 Index (the “Index”) return of 14.91%.
Comparison of Change in Value of a $10,000 Investment For the Period from 6/1/2010 through 8/31/2017
Total Returns for the Period ended August 31, 2017 | |||||||||||||||||||||||||||||||||
Ticker | 1 Year | 3 Years | 5 Years | Since Inception | Value of $10,000 6/1/2010- 8/31/2017 | ||||||||||||||||||||||||||||
Institutional Class (1,3,5) | AZSIX | 15.25 | % | 8.62 | % | 14.19 | % | 13.52 | % | $ | 25,073 | ||||||||||||||||||||||
Y Class (1,3,5) | AZSYX | 15.11 | % | 8.52 | % | 14.08 | % | 13.41 | % | $ | 24,904 | ||||||||||||||||||||||
Investor Class (1,3,5) | AZSPX | 14.77 | % | 8.20 | % | 13.75 | % | 13.08 | % | $ | 24,383 | ||||||||||||||||||||||
A Class with sales Charge (1,3,5) | AZSAX | 8.14 | % | 6.08 | % | 12.35 | % | 12.10 | % | $ | 22,881 | ||||||||||||||||||||||
A Class without sales charge (1,3,5) | AZSAX | 14.76 | % | 8.19 | % | 13.69 | % | 13.02 | % | $ | 24,277 | ||||||||||||||||||||||
C Class with sales charge (1,2,3,5) | AZSCX | 12.97 | % | 7.38 | % | 12.83 | % | 12.19 | % | $ | 23,022 | ||||||||||||||||||||||
C Class without sales charge (1,2,3,5) | AZSCX | 13.97 | % | 7.38 | % | 12.83 | % | 12.19 | % | $ | 23,022 | ||||||||||||||||||||||
Russell 2000 Index (4) | 14.91 | % | 7.67 | % | 13.15 | % | 12.97 | % | $ | 24,217 |
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. Please note that the recent performance of the securities market has helped produce short-term returns that are not typical and may not continue in the future. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A 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 Fund inception. Performance prior to waiving fees was lower than the actual returns shown since inception. |
5
American Beacon Zebra Small Cap Equity FundSM
Performance Overview
August 31, 2017 (Unaudited)
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 seeks to identify fundamentally attractive companies with relatively low trading volumes. The strategy benefits when these companies are recognized more broadly by investors, trading volumes increase and stock prices begin to rise. As a result of this approach, price momentum can appear in factor analysis on the Fund’s returns, but this is driven primarily by the rising popularity of a stock, not simple price momentum.
The strategy’s focus on fundamentally attractive companies tends to result in holdings with more value-like characteristics than growth, and various measures of price-to-earnings, return-on-equity and return on assets reflect this approach. The Fund’s sector allocations are generally in line with those of the Index (+/-3%) and are not a primary source of return attribution. The majority of performance typically comes from security selection. While sector weightings may be similar, returns within each sector can vary significantly from the Index.
Among the Fund’s larger exposures during the period, returns in the Information Technology sector were similar to those of the Index, but all other sector returns were materially different. The Fund’s returns in Consumer Discretionary, Energy and Real Estate were double those returns of the Index; however, Consumer Staples, Materials and Industrials lagged substantially. The focus on fundamentally attractive companies with relatively low trading volume tends to result in these return discrepancies.
In total, the Fund’s performance was in line with that of the Index and demonstrated lower volatility and beta. Additionally, the Fund’s longer-term performance remains attractive as the strategy has performed well through the equity market cycles.
The sub-advisor continues to focus on uncovering opportunities by investing in companies that are generally less popular with investors but have strong fundamental characteristics. Likewise, the Fund will be underweight stocks that are heavily followed but have weak fundamentals. This contrarian style generally results in a portfolio with attractive risk-adjusted returns over market cycles.
Top Ten Holdings (% Net Assets) | ||||||||
Enstar Group Ltd. | 2.1 | |||||||
Columbia Sportswear Co. | 1.5 | |||||||
Deluxe Corp. | 1.3 | |||||||
AVX Corp. | 1.2 | |||||||
Entegris, Inc. | 1.1 | |||||||
International Bancshares Corp. | 1.1 | |||||||
Pegasystems, Inc. | 1.1 | |||||||
Syntel, Inc. | 1.0 | |||||||
Helen of Troy Ltd. | 1.0 | |||||||
Washington Real Estate Investment Trust | 0.9 | |||||||
Total Fund Holdings | 288 | |||||||
Sector Allocation (% Equities) | ||||||||
Financials | 21.2 | |||||||
Industrials | 18.0 | |||||||
Information Technology | 16.5 | |||||||
Health Care | 15.1 | |||||||
Consumer Discretionary | 9.7 | |||||||
Real Estate | 7.5 | |||||||
Materials | 4.1 | |||||||
Utilities | 2.9 | |||||||
Consumer Staples | 2.9 | |||||||
Energy | 1.3 | |||||||
Telecommunication Services | 0.8 |
6
Expense Examples
August 31, 2017 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees, if applicable, and (2) ongoing costs, including management fees, distribution (12b-1) fees, sub-transfer agent 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 March 1, 2017 through August 31, 2017.
Actual Expenses
The “Actual” lines of the tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional 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 Funds’ actual expense ratio and an assumed 5% per year rate of return before expenses (not the Funds’ 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 Investor and Institutional Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Funds, such as sales charges (loads) or redemption fees, as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
7
American Beacon FundsSM
Expense Examples
August 31, 2017 (Unaudited)
American Beacon The London Company Income Equity Fund | |||||||||||||||
Beginning Account Value 3/1/2017 | Ending Account Value 8/31/2017 | Expenses Paid During Period 3/1/2017-8/31/2017* | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $1,000.00 | $1,013.40 | $3.81 | ||||||||||||
Hypothetical** | $1,000.00 | $1,021.40 | $3.82 | ||||||||||||
Y Class | |||||||||||||||
Actual | $1,000.00 | $1,013.20 | $4.16 | ||||||||||||
Hypothetical** | $1,000.00 | $1,021.10 | $4.18 | ||||||||||||
Investor Class | |||||||||||||||
Actual | $1,000.00 | $1,011.30 | $5.37 | ||||||||||||
Hypothetical** | $1,000.00 | $1,019.90 | $5.40 | ||||||||||||
A Class | |||||||||||||||
Actual | $1,000.00 | $1,011.70 | $5.73 | ||||||||||||
Hypothetical** | $1,000.00 | $1,019.50 | $5.75 | ||||||||||||
C Class | |||||||||||||||
Actual | $1,000.00 | $1,007.40 | $9.46 | ||||||||||||
Hypothetical** | $1,000.00 | $1,015.80 | $9.50 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 0.75%, 0.82%, 1.06%, 1.13%, and 1.87% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
American Beacon Zebra Small Cap Equity Fund | |||||||||||||||
Beginning Account Value 3/1/2017 | Ending Account Value 8/31/2017 | Expenses Paid During Period 3/1/2017-8/31/2017* | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $1,000.00 | $1,011.30 | $4.51 | ||||||||||||
Hypothetical** | $1,000.00 | $1,020.70 | $4.53 | ||||||||||||
Y Class | |||||||||||||||
Actual | $1,000.00 | $1,011.30 | $5.02 | ||||||||||||
Hypothetical** | $1,000.00 | $1,020.20 | $5.04 | ||||||||||||
Investor Class | |||||||||||||||
Actual | $1,000.00 | $1,009.50 | $6.43 | ||||||||||||
Hypothetical** | $1,000.00 | $1,018.80 | $6.46 | ||||||||||||
A Class | |||||||||||||||
Actual | $1,000.00 | $1,009.50 | $6.53 | ||||||||||||
Hypothetical** | $1,000.00 | $1,018.70 | $6.56 | ||||||||||||
C Class | |||||||||||||||
Actual | $1,000.00 | $1,005.90 | $10.31 | ||||||||||||
Hypothetical** | $1,000.00 | $1,014.90 | $10.36 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 0.89%, 0.99%, 1.27%, 1.29%, and 2.04% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
8
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of American Beacon The London Company Income Equity Fund and American Beacon Zebra Small Cap Equity Fund
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of American Beacon The London Company Income Equity Fund and American Beacon Zebra Small Cap Equity Fund (two of the funds constituting the American Beacon Funds) (the Funds), as of August 31, 2017, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2017, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon The London Company Income Equity Fund and American Beacon Zebra Small Cap Equity Fund at August 31, 2017, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
October 27, 2017
9
American Beacon The London Company Income Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 95.70% | |||||||||||||||
Consumer Discretionary - 11.14% | |||||||||||||||
Hotels, Restaurants & Leisure - 5.24% | |||||||||||||||
Carnival Corp. | 877,320 | $ | 60,956,194 | ||||||||||||
|
| ||||||||||||||
Leisure Products - 0.98% | |||||||||||||||
Hasbro, Inc. | 115,377 | 11,335,790 | |||||||||||||
|
| ||||||||||||||
Multiline Retail - 2.96% | |||||||||||||||
Target Corp. | 631,460 | 34,433,514 | |||||||||||||
|
| ||||||||||||||
Specialty Retail - 1.96% | |||||||||||||||
Lowe’s Cos, Inc. | 308,778 | 22,815,606 | |||||||||||||
|
| ||||||||||||||
Total Consumer Discretionary | 129,541,104 | ||||||||||||||
|
| ||||||||||||||
Consumer Staples - 16.77% | |||||||||||||||
Beverages - 5.42% | |||||||||||||||
Coca-Cola Co. | 495,967 | 22,591,297 | |||||||||||||
Diageo PLC, Sponsored ADR | 300,650 | 40,410,366 | |||||||||||||
|
| ||||||||||||||
63,001,663 | |||||||||||||||
|
| ||||||||||||||
Food Products - 3.01% | |||||||||||||||
General Mills, Inc. | 658,100 | 35,050,406 | |||||||||||||
|
| ||||||||||||||
Tobacco - 8.34% | |||||||||||||||
Altria Group, Inc. | 770,580 | 48,854,772 | |||||||||||||
Philip Morris International, Inc. | 412,060 | 48,182,176 | |||||||||||||
|
| ||||||||||||||
97,036,948 | |||||||||||||||
|
| ||||||||||||||
Total Consumer Staples | 195,089,017 | ||||||||||||||
|
| ||||||||||||||
Energy - 4.27% | |||||||||||||||
Oil, Gas & Consumable Fuels - 4.27% | |||||||||||||||
Chevron Corp. | 259,414 | 27,918,135 | |||||||||||||
Kinder Morgan, Inc. | 1,126,895 | 21,782,880 | |||||||||||||
|
| ||||||||||||||
49,701,015 | |||||||||||||||
|
| ||||||||||||||
Total Energy | 49,701,015 | ||||||||||||||
|
| ||||||||||||||
Financials - 14.38% | |||||||||||||||
Banks - 4.62% | |||||||||||||||
Wells Fargo & Co. | 1,053,393 | 53,796,781 | |||||||||||||
|
| ||||||||||||||
Capital Markets - 3.77% | |||||||||||||||
BlackRock, Inc. | 104,692 | 43,866,995 | |||||||||||||
|
| ||||||||||||||
Diversified Financial Services - 2.37% | |||||||||||||||
Berkshire Hathaway, Inc., Class BA | 151,990 | 27,534,508 | |||||||||||||
|
| ||||||||||||||
Insurance - 3.62% | |||||||||||||||
Cincinnati Financial Corp. | 547,591 | 42,076,892 | |||||||||||||
|
| ||||||||||||||
Total Financials | 167,275,176 | ||||||||||||||
|
| ||||||||||||||
Health Care - 9.54% | |||||||||||||||
Pharmaceuticals - 9.54% | |||||||||||||||
Eli Lilly & Co. | 434,088 | 35,287,013 | |||||||||||||
Merck & Co., Inc. | 646,553 | 41,288,875 |
See accompanying notes
10
American Beacon The London Company Income Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 95.70% (continued) | |||||||||||||||
Health Care - 9.54% (continued) | |||||||||||||||
Pharmaceuticals - 9.54% (continued) | |||||||||||||||
Pfizer, Inc. | 1,013,493 | $ | 34,377,683 | ||||||||||||
|
| ||||||||||||||
Total Health Care | 110,953,571 | ||||||||||||||
|
| ||||||||||||||
Industrials - 13.11% | |||||||||||||||
Aerospace & Defense - 5.56% | |||||||||||||||
General Dynamics Corp. | 321,005 | 64,634,356 | |||||||||||||
|
| ||||||||||||||
Industrial Conglomerates - 3.01% | |||||||||||||||
General Electric Co. | 1,426,880 | 35,029,904 | |||||||||||||
|
| ||||||||||||||
Road & Rail - 4.54% | |||||||||||||||
Norfolk Southern Corp. | 438,240 | 52,816,685 | |||||||||||||
|
| ||||||||||||||
Total Industrials | 152,480,945 | ||||||||||||||
|
| ||||||||||||||
Information Technology - 14.91% | |||||||||||||||
Communications Equipment - 3.03% | |||||||||||||||
Cisco Systems, Inc. | 1,095,170 | 35,275,426 | |||||||||||||
|
| ||||||||||||||
IT Services - 2.37% | |||||||||||||||
Paychex, Inc. | 483,101 | 27,551,250 | |||||||||||||
|
| ||||||||||||||
Semiconductors & Semiconductor Equipment - 2.77% | |||||||||||||||
Intel Corp. | 917,521 | 32,177,461 | |||||||||||||
|
| ||||||||||||||
Software - 6.74% | |||||||||||||||
CA, Inc. | 1,091,160 | 36,204,689 | |||||||||||||
Microsoft Corp. | 565,218 | 42,261,350 | |||||||||||||
|
| ||||||||||||||
78,466,039 | |||||||||||||||
|
| ||||||||||||||
Total Information Technology | 173,470,176 | ||||||||||||||
|
| ||||||||||||||
Materials - 2.27% | |||||||||||||||
Chemicals - 2.27% | |||||||||||||||
NewMarket Corp. | 63,221 | 26,458,621 | |||||||||||||
|
| ||||||||||||||
Real Estate - 3.15% | |||||||||||||||
Equity Real Estate Investment Trusts (REITs) - 3.15% | |||||||||||||||
Crown Castle International Corp. | 338,000 | 36,652,720 | |||||||||||||
|
| ||||||||||||||
Telecommunication Services - 2.68% | |||||||||||||||
Diversified Telecommunication Services - 2.68% | |||||||||||||||
Verizon Communications, Inc. | 649,979 | 31,179,493 | |||||||||||||
|
| ||||||||||||||
Utilities - 3.48% | |||||||||||||||
Electric Utilities - 2.06% | |||||||||||||||
Duke Energy Corp. | 274,411 | 23,956,080 | |||||||||||||
|
| ||||||||||||||
Multi-Utilities - 1.42% | |||||||||||||||
Dominion Energy, Inc. | 209,478 | 16,500,582 | |||||||||||||
|
| ||||||||||||||
Total Utilities | 40,456,662 | ||||||||||||||
|
| ||||||||||||||
Total Common Stocks (Cost $946,853,659) | 1,113,258,500 | ||||||||||||||
|
|
See accompanying notes
11
American Beacon The London Company Income Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
SHORT-TERM INVESTMENTS - 3.84% (Cost $44,690,684) | |||||||||||||||
Investment Companies - 3.84% | |||||||||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class, 0.97%B C | 44,690,684 | $ | 44,690,684 | ||||||||||||
|
| ||||||||||||||
TOTAL INVESTMENTS - 99.54% (Cost $991,544,343) | 1,157,949,184 | ||||||||||||||
OTHER ASSETS, NET OF LIABILITIES - 0.46% | 5,321,265 | ||||||||||||||
|
| ||||||||||||||
TOTAL NET ASSETS - 100.00% | $ | 1,163,270,449 | |||||||||||||
|
| ||||||||||||||
Percentages are stated as a percent of net assets. |
A Non-income producing security.
B The Fund is affiliated by having the same investment advisor.
C 7-day yield.
ADR - American Depositary Receipt.
PLC - Public Limited Company.
Futures Contracts Open on August 31, 2017: | ||||||||||||||||||||
Long Futures | ||||||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
S&P 500 E-Mini Index Futures | 338 | September 2017 | $ | 41,659,762 | $ | 41,744,690 | $ | 84,928 | ||||||||||||
|
|
|
|
|
| |||||||||||||||
$ | 41,659,762 | $ | 41,744,690 | $ | 84,928 | |||||||||||||||
|
|
|
|
|
|
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of August 31, 2017, the investments were classified as described below:
The London Company Income Equity Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Common Stocks | $ | 1,113,258,500 | $ | - | $ | - | $ | 1,113,258,500 | ||||||||||||||||||||
Short-Term Investments | 44,690,684 | - | - | 44,690,684 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Investments in Securities - Assets | $ | 1,157,949,184 | $ | - | $ | - | $ | 1,157,949,184 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||||||||||||||
Futures Contracts | $ | 84,928 | $ | - | $ | - | $ | 84,928 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Financial Derivative Instruments - Assets | $ | 84,928 | $ | - | $ | - | $ | 84,928 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
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 the Fund’s assets and liabilities. During the year ended August 31, 2017, there were no transfers between levels.
See accompanying notes
12
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% | |||||||||||||||
Consumer Discretionary - 9.54% | |||||||||||||||
Auto Components - 1.25% | |||||||||||||||
Gentherm, Inc.A | 7,226 | $ | 225,090 | ||||||||||||
Standard Motor Products, Inc. | 4,537 | 200,082 | |||||||||||||
Stoneridge, Inc.A | 6,290 | 104,162 | |||||||||||||
|
| ||||||||||||||
529,334 | |||||||||||||||
|
| ||||||||||||||
Distributors - 0.14% | |||||||||||||||
Weyco Group, Inc. | 2,151 | 59,260 | |||||||||||||
|
| ||||||||||||||
Diversified Consumer Services - 0.82% | |||||||||||||||
American Public Education, Inc.A | 3,495 | 64,483 | |||||||||||||
Cambium Learning Group, Inc.A | 10,012 | 58,671 | |||||||||||||
Career Education Corp.A | 18,638 | 179,111 | |||||||||||||
Liberty Tax, Inc. | 3,405 | 45,797 | |||||||||||||
|
| ||||||||||||||
348,062 | |||||||||||||||
|
| ||||||||||||||
Hotels, Restaurants & Leisure - 0.67% | |||||||||||||||
Denny’s Corp.A | 10,917 | 130,567 | |||||||||||||
Monarch Casino & Resort, Inc.A | 2,934 | 104,362 | |||||||||||||
RCI Hospitality Holdings, Inc. | 2,162 | 50,375 | |||||||||||||
|
| ||||||||||||||
285,304 | |||||||||||||||
|
| ||||||||||||||
Household Durables - 2.25% | |||||||||||||||
AV Homes, Inc.A | 6,444 | 99,560 | |||||||||||||
Bassett Furniture Industries, Inc. | 1,629 | 58,400 | |||||||||||||
CSS Industries, Inc. | 2,035 | 54,497 | |||||||||||||
Flexsteel Industries, Inc. | 1,526 | 69,433 | |||||||||||||
Helen of Troy Ltd.A | 4,519 | 408,066 | |||||||||||||
Hooker Furniture Corp. | 2,199 | 88,510 | |||||||||||||
NACCO Industries, Inc., Class A | 1,589 | 115,202 | |||||||||||||
New Home Co., Inc.A | 6,040 | 62,333 | |||||||||||||
|
| ||||||||||||||
956,001 | |||||||||||||||
|
| ||||||||||||||
Leisure Products - 0.79% | |||||||||||||||
Escalade, Inc. | 3,890 | 46,874 | |||||||||||||
Johnson Outdoors, Inc., Class A | 1,849 | 117,966 | |||||||||||||
Marine Products Corp. | 6,496 | 101,208 | |||||||||||||
MCBC Holdings, Inc.A | 4,190 | 71,817 | |||||||||||||
|
| ||||||||||||||
337,865 | |||||||||||||||
|
| ||||||||||||||
Media - 0.31% | |||||||||||||||
Beasley Broadcast Group, Inc., Class A | 6,645 | 66,118 | |||||||||||||
Saga Communications, Inc., Class A | 1,563 | 63,848 | |||||||||||||
|
| ||||||||||||||
129,966 | |||||||||||||||
|
| ||||||||||||||
Specialty Retail - 1.30% | |||||||||||||||
Caleres, Inc. | 7,518 | 202,836 | |||||||||||||
Cato Corp., Class A | 4,174 | 54,930 | |||||||||||||
Citi Trends, Inc. | 2,463 | 44,654 | |||||||||||||
Haverty Furniture Companies, Inc. | 3,561 | 83,505 | |||||||||||||
Shoe Carnival, Inc. | 3,318 | 66,692 | |||||||||||||
Winmark Corp. | 763 | 100,601 | |||||||||||||
|
| ||||||||||||||
553,218 | |||||||||||||||
|
| ||||||||||||||
Textiles, Apparel & Luxury Goods - 2.01% | |||||||||||||||
Columbia Sportswear Co. | 11,072 | 634,315 | |||||||||||||
Culp, Inc. | 2,253 | 65,337 | |||||||||||||
Perry Ellis International, Inc.A | 4,174 | 91,118 |
See accompanying notes
13
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Consumer Discretionary - 9.54% (continued) | |||||||||||||||
Textiles, Apparel & Luxury Goods - 2.01% (continued) | |||||||||||||||
Superior Uniform Group, Inc. | 2,986 | $ | 65,752 | ||||||||||||
|
| ||||||||||||||
856,522 | |||||||||||||||
|
| ||||||||||||||
Total Consumer Discretionary | 4,055,532 | ||||||||||||||
|
| ||||||||||||||
Consumer Staples - 2.80% | |||||||||||||||
Food & Staples Retailing - 1.42% | |||||||||||||||
Ingles Markets, Inc., Class A | 4,569 | 100,290 | |||||||||||||
SpartanNash Co. | 8,646 | 213,038 | |||||||||||||
Village Super Market, Inc., Class A | 3,039 | 70,292 | |||||||||||||
Weis Markets, Inc. | 4,987 | 220,475 | |||||||||||||
|
| ||||||||||||||
604,095 | |||||||||||||||
|
| ||||||||||||||
Food Products - 0.69% | |||||||||||||||
Farmer Brothers Co.A | 6,058 | 197,188 | |||||||||||||
Seneca Foods Corp., Class AA | 3,314 | 98,757 | |||||||||||||
|
| ||||||||||||||
295,945 | |||||||||||||||
|
| ||||||||||||||
Household Products - 0.11% | |||||||||||||||
Oil-Dri Corp of America | 1,170 | 47,619 | |||||||||||||
|
| ||||||||||||||
Personal Products - 0.58% | |||||||||||||||
Revlon, Inc., Class AA B | 14,509 | 245,202 | |||||||||||||
|
| ||||||||||||||
Total Consumer Staples | 1,192,861 | ||||||||||||||
|
| ||||||||||||||
Energy - 1.31% | |||||||||||||||
Energy Equipment & Services - 0.15% | |||||||||||||||
Matrix Service Co.A | 5,632 | 66,739 | |||||||||||||
|
| ||||||||||||||
Oil, Gas & Consumable Fuels - 1.16% | |||||||||||||||
Adams Resources & Energy, Inc. | 995 | 34,497 | |||||||||||||
Evolution Petroleum Corp. | 7,903 | 54,926 | |||||||||||||
Gener8 Maritime, Inc.A B | 48,262 | 217,179 | |||||||||||||
Hallador Energy Co. | 8,232 | 47,745 | |||||||||||||
Renewable Energy Group, Inc.A | 11,439 | 138,412 | |||||||||||||
|
| ||||||||||||||
492,759 | |||||||||||||||
|
| ||||||||||||||
Total Energy | 559,498 | ||||||||||||||
|
| ||||||||||||||
Financials - 20.90% | |||||||||||||||
Banks - 10.66% | |||||||||||||||
ACNB Corp. | 1,395 | 36,479 | |||||||||||||
Ames National Corp. | 1,816 | 49,214 | |||||||||||||
Arrow Financial Corp. | 2,974 | 96,060 | |||||||||||||
Bank of Marin Bancorp | 1,228 | 80,373 | |||||||||||||
Bar Harbor Bankshares | 3,348 | 87,918 | |||||||||||||
C&F Financial Corp. | 869 | 40,713 | |||||||||||||
Carolina Financial Corp. | 2,822 | 96,033 | |||||||||||||
Central Valley Community Bancorp | 2,295 | 45,143 | |||||||||||||
Century Bancorp, Inc., Class A | 1,100 | 73,480 | |||||||||||||
Citizens & Northern Corp. | 2,519 | 56,526 | |||||||||||||
Civista Bancshares, Inc.B | 2,153 | 43,512 | |||||||||||||
CNB Financial Corp. | 3,010 | 72,722 | |||||||||||||
Codorus Valley Bancorp, Inc. | 1,586 | 39,729 | |||||||||||||
Community Trust Bancorp, Inc. | 3,029 | 128,884 | |||||||||||||
County Bancorp, Inc. | 1,737 | 52,075 |
See accompanying notes
14
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Financials - 20.90% (continued) | |||||||||||||||
Banks - 10.66% (continued) | |||||||||||||||
Enterprise Bancorp, Inc. | 2,206 | $ | 70,570 | ||||||||||||
Farmers National Banc Corp. | 5,729 | 78,487 | |||||||||||||
Fidelity Southern Corp. | 5,180 | 113,235 | |||||||||||||
Financial Institutions, Inc. | 3,013 | 81,954 | |||||||||||||
First Bancorp, Inc. | 2,233 | 58,125 | |||||||||||||
First Busey Corp. | 7,985 | 230,367 | |||||||||||||
First Business Financial Services, Inc. | 2,008 | 42,790 | |||||||||||||
First Community Bancshares, Inc. | 3,021 | 77,761 | |||||||||||||
First Financial Corp. | 2,336 | 101,382 | |||||||||||||
First Mid-Illinois Bancshares, Inc. | 2,723 | 94,434 | |||||||||||||
Great Southern Bancorp, Inc. | 3,009 | 149,848 | |||||||||||||
Heartland Financial USA, Inc. | 5,376 | 244,608 | |||||||||||||
Horizon Bancorp | 4,405 | 115,279 | |||||||||||||
International Bancshares Corp. | 13,112 | 471,376 | |||||||||||||
LCNB Corp. | 2,084 | 38,450 | |||||||||||||
MBT Financial Corp. | 4,722 | 47,928 | |||||||||||||
Mercantile Bank Corp. | 3,337 | 101,411 | |||||||||||||
MidWestOne Financial Group, Inc. | 2,472 | 81,279 | |||||||||||||
Nicolet Bankshares, Inc.A | 1,666 | 91,047 | |||||||||||||
Northrim BanCorp, Inc. | 1,509 | 45,044 | |||||||||||||
Penns Woods Bancorp, Inc. | 1,007 | 43,210 | |||||||||||||
Premier Financial Bancorp, Inc. | 2,115 | 39,974 | |||||||||||||
Republic Bancorp, Inc., Class A | 4,125 | 146,768 | |||||||||||||
Sierra Bancorp | 2,588 | 65,502 | |||||||||||||
Simmons First National Corp., Class A | 5,770 | 301,194 | |||||||||||||
Southern First Bancshares, Inc.A | 1,237 | 43,728 | |||||||||||||
TriCo Bancshares | 4,266 | 151,784 | |||||||||||||
WesBanco, Inc. | 8,660 | 328,907 | |||||||||||||
West Bancorporation, Inc. | 3,464 | 76,035 | |||||||||||||
|
| ||||||||||||||
4,531,338 | |||||||||||||||
|
| ||||||||||||||
Capital Markets - 1.91% | |||||||||||||||
B. Riley Financial, Inc. | 4,065 | 66,666 | |||||||||||||
Cohen & Steers, Inc. | 6,901 | 261,134 | |||||||||||||
Diamond Hill Investment Group, Inc. | 736 | 144,499 | |||||||||||||
GAMCO Investors, Inc., Class A | 8,568 | 252,499 | |||||||||||||
Westwood Holdings Group, Inc. | 1,435 | 87,721 | |||||||||||||
|
| ||||||||||||||
812,519 | |||||||||||||||
|
| ||||||||||||||
Consumer Finance - 0.17% | |||||||||||||||
Enova International, Inc.A | 6,214 | 73,947 | |||||||||||||
|
| ||||||||||||||
Diversified Financial Services - 0.27% | |||||||||||||||
Marlin Business Services Corp. | 2,428 | 63,371 | |||||||||||||
Tiptree, Inc. | 8,167 | 52,269 | |||||||||||||
|
| ||||||||||||||
115,640 | |||||||||||||||
|
| ||||||||||||||
Insurance - 5.06% | |||||||||||||||
Baldwin & Lyons, Inc., Class B | 3,537 | 77,460 | |||||||||||||
Blue Capital Reinsurance Holdings Ltd. | 2,278 | 42,826 | |||||||||||||
Crawford & Co., Class B | 10,573 | 104,884 | |||||||||||||
Donegal Group, Inc., Class A | 5,580 | 85,542 | |||||||||||||
Enstar Group Ltd.A | 4,309 | 894,333 | |||||||||||||
FBL Financial Group, Inc., Class A | 5,322 | 361,896 | |||||||||||||
Investors Title Co. | 374 | 65,775 | |||||||||||||
National Western Life Group, Inc., Class A | 946 | 316,352 | |||||||||||||
Safety Insurance Group, Inc. | 2,864 | 204,490 | |||||||||||||
|
| ||||||||||||||
2,153,558 | |||||||||||||||
|
|
See accompanying notes
15
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Financials - 20.90% (continued) | |||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) - 0.22% | |||||||||||||||
Great Ajax Corp. | 6,531 | $ | 92,609 | ||||||||||||
|
| ||||||||||||||
Thrifts & Mortgage Finance - 2.61% | |||||||||||||||
Bear State Financial, Inc. | 7,556 | 77,676 | |||||||||||||
First Defiance Financial Corp. | 1,922 | 94,101 | |||||||||||||
Flagstar Bancorp, Inc.A | 11,839 | 388,556 | |||||||||||||
Hingham Institution for Savings | 476 | 87,589 | |||||||||||||
Home Bancorp, Inc. | 1,331 | 53,746 | |||||||||||||
PennyMac Financial Services, Inc., Class AA | 8,294 | 140,998 | |||||||||||||
Southern Missouri Bancorp, Inc. | 1,628 | 52,845 | |||||||||||||
Timberland Bancorp, Inc. | 1,615 | 44,751 | |||||||||||||
United Community Financial Corp. | 8,664 | 78,756 | |||||||||||||
Waterstone Financial, Inc. | 5,010 | 88,426 | |||||||||||||
|
| ||||||||||||||
1,107,444 | |||||||||||||||
|
| ||||||||||||||
Total Financials | 8,887,055 | ||||||||||||||
|
| ||||||||||||||
Health Care - 14.79% | |||||||||||||||
Biotechnology - 4.66% | |||||||||||||||
Acorda Therapeutics, Inc.A | 6,124 | 127,379 | |||||||||||||
Aimmune Therapeutics, Inc.A | 1,945 | 41,818 | |||||||||||||
AMAG Pharmaceuticals, Inc.A | 13,332 | 222,644 | |||||||||||||
BioSpecifics Technologies Corp.A | 824 | 38,852 | |||||||||||||
Emergent BioSolutions, Inc.A | 6,741 | 251,642 | |||||||||||||
Enanta Pharmaceuticals, Inc.A | 1,283 | 54,989 | |||||||||||||
FibroGen, Inc.A | 1,225 | 59,045 | |||||||||||||
Genomic Health, Inc.A | 1,981 | 62,798 | |||||||||||||
Ironwood Pharmaceuticals, Inc.A | 2,808 | 44,788 | |||||||||||||
Ligand Pharmaceuticals, Inc.A | 1,027 | 132,349 | |||||||||||||
Loxo Oncology, Inc.A | 625 | 52,125 | |||||||||||||
Myriad Genetics, Inc.A | 10,035 | 305,967 | |||||||||||||
Natera, Inc.A | 4,541 | 56,081 | |||||||||||||
PDL BioPharma, Inc.A | 109,818 | 342,632 | |||||||||||||
Repligen Corp.A | 1,452 | 63,409 | |||||||||||||
Spectrum Pharmaceuticals, Inc.A | 7,198 | 70,252 | |||||||||||||
Xencor, Inc.A | 2,529 | 54,677 | |||||||||||||
|
| ||||||||||||||
1,981,447 | |||||||||||||||
|
| ||||||||||||||
Health Care Equipment & Supplies - 3.86% | |||||||||||||||
Analogic Corp. | 1,384 | 99,025 | |||||||||||||
Atrion Corp. | 248 | 154,293 | |||||||||||||
Cantel Medical Corp. | 4,244 | 344,825 | |||||||||||||
CONMED Corp. | 3,433 | 170,277 | |||||||||||||
Exactech, Inc.A | 2,315 | 70,723 | |||||||||||||
Lantheus Holdings, Inc.A | 5,765 | 100,887 | |||||||||||||
LeMaitre Vascular, Inc. | 1,895 | 68,978 | |||||||||||||
Meridian Bioscience, Inc. | 6,543 | 90,948 | |||||||||||||
Neogen Corp.A | 4,072 | 280,561 | |||||||||||||
Orthofix International N.V.A | 1,734 | 85,330 | |||||||||||||
RTI Surgical, Inc.A | 7,231 | 32,540 | |||||||||||||
STAAR Surgical Co.A | 4,097 | 48,959 | |||||||||||||
Surmodics, Inc.A | 1,763 | 45,838 | |||||||||||||
Utah Medical Products, Inc. | 665 | 47,980 | |||||||||||||
|
| ||||||||||||||
1,641,164 | |||||||||||||||
|
| ||||||||||||||
Health Care Providers & Services - 4.40% | |||||||||||||||
Aceto Corp. | 6,662 | 70,684 | |||||||||||||
Addus HomeCare Corp.A | 1,762 | 59,996 |
See accompanying notes
16
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Health Care - 14.79% (continued) | |||||||||||||||
Health Care Providers & Services - 4.40% (continued) | |||||||||||||||
Almost Family, Inc.A | 2,118 | $ | 103,147 | ||||||||||||
Amedisys, Inc.A | 4,226 | 220,766 | |||||||||||||
AMN Healthcare Services, Inc.A | 2,374 | 88,669 | |||||||||||||
Civitas Solutions, Inc.A | 5,445 | 104,000 | |||||||||||||
CorVel Corp.A | 2,946 | 152,897 | |||||||||||||
Cross Country Healthcare, Inc.A | 5,248 | 64,970 | |||||||||||||
Ensign Group, Inc. | 8,777 | 180,280 | |||||||||||||
Landauer, Inc. | 1,051 | 65,215 | |||||||||||||
LHC Group, Inc.A | 2,456 | 160,254 | |||||||||||||
National HealthCare Corp. | 2,973 | 185,337 | |||||||||||||
National Research Corp., Class A | 3,721 | 120,188 | |||||||||||||
Owens & Minor, Inc. | 5,135 | 143,472 | |||||||||||||
R1 RCM, Inc.A | 23,294 | 76,870 | |||||||||||||
RadNet, Inc.A | 7,445 | 76,311 | |||||||||||||
|
| ||||||||||||||
1,873,056 | |||||||||||||||
|
| ||||||||||||||
Health Care Technology - 0.28% | |||||||||||||||
Quality Systems, Inc.A | 7,563 | 119,117 | |||||||||||||
|
| ||||||||||||||
Life Sciences Tools & Services - 0.27% | |||||||||||||||
Luminex Corp. | 6,000 | 115,980 | |||||||||||||
|
| ||||||||||||||
Pharmaceuticals - 1.32% | |||||||||||||||
Corcept Therapeutics, Inc.A | 8,953 | 149,246 | |||||||||||||
Innoviva, Inc.A | 17,842 | 250,502 | |||||||||||||
Phibro Animal Health Corp., Class A | 4,488 | 159,324 | |||||||||||||
|
| ||||||||||||||
559,072 | |||||||||||||||
|
| ||||||||||||||
Total Health Care | 6,289,836 | ||||||||||||||
|
| ||||||||||||||
Industrials - 17.70% | |||||||||||||||
Aerospace & Defense - 0.39% | |||||||||||||||
Wesco Aircraft Holdings, Inc.A | 19,806 | 166,371 | |||||||||||||
|
| ||||||||||||||
Airlines - 0.80% | |||||||||||||||
Allegiant Travel Co. | 2,889 | 340,902 | |||||||||||||
|
| ||||||||||||||
Building Products - 2.69% | |||||||||||||||
AAON, Inc. | 7,181 | 234,100 | |||||||||||||
Apogee Enterprises, Inc. | 4,490 | 196,213 | |||||||||||||
Caesarstone Ltd.A | 4,510 | 130,677 | |||||||||||||
Insteel Industries, Inc. | 3,524 | 88,347 | |||||||||||||
Ply Gem Holdings, Inc.A | 12,603 | 195,977 | |||||||||||||
Universal Forest Products, Inc. | 3,408 | 297,212 | |||||||||||||
|
| ||||||||||||||
1,142,526 | |||||||||||||||
|
| ||||||||||||||
Commercial Services & Supplies - 6.57% | |||||||||||||||
Brady Corp., Class A | 7,454 | 248,591 | |||||||||||||
Deluxe Corp. | 7,769 | 538,780 | |||||||||||||
Ennis, Inc. | 4,573 | 87,344 | |||||||||||||
Essendant, Inc. | 8,223 | 97,525 | |||||||||||||
Herman Miller, Inc. | 10,081 | 339,226 | |||||||||||||
HNI Corp. | 8,114 | 297,378 | |||||||||||||
Interface, Inc. | 9,542 | 181,298 | |||||||||||||
Kimball International, Inc., Class B | 6,629 | 112,428 | |||||||||||||
Knoll, Inc. | 8,168 | 147,432 |
See accompanying notes
17
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Industrials - 17.70% (continued) | |||||||||||||||
Commercial Services & Supplies - 6.57% (continued) | |||||||||||||||
Matthews International Corp., Class A | 5,192 | $ | 312,818 | ||||||||||||
NL Industries, Inc.A | 9,569 | 72,246 | |||||||||||||
Steelcase, Inc., Class A | 18,768 | 247,738 | |||||||||||||
VSE Corp. | 2,110 | 110,036 | |||||||||||||
|
| ||||||||||||||
2,792,840 | |||||||||||||||
|
| ||||||||||||||
Construction & Engineering - 0.53% | |||||||||||||||
IES Holdings, Inc.A | 13,768 | 227,172 | |||||||||||||
|
| ||||||||||||||
Electrical Equipment - 0.14% | |||||||||||||||
Preformed Line Products Co. | 1,168 | 61,028 | |||||||||||||
|
| ||||||||||||||
Machinery - 4.26% | |||||||||||||||
Columbus McKinnon Corp. | 4,196 | 138,594 | |||||||||||||
Global Brass & Copper Holdings, Inc. | 4,080 | 121,788 | |||||||||||||
Hillenbrand, Inc. | 10,539 | 376,769 | |||||||||||||
Hurco Companies, Inc. | 1,584 | 55,678 | |||||||||||||
Milacron Holdings Corp.A | 12,979 | 207,015 | |||||||||||||
Miller Industries, Inc. | 2,401 | 60,265 | |||||||||||||
Mueller Industries, Inc. | 9,784 | 291,857 | |||||||||||||
Omega Flex, Inc. | 1,500 | 86,985 | |||||||||||||
Park-Ohio Holdings Corp. | 3,087 | 123,017 | |||||||||||||
Standex International Corp. | 1,829 | 174,578 | |||||||||||||
TriMas Corp.A | 7,243 | 175,280 | |||||||||||||
|
| ||||||||||||||
1,811,826 | |||||||||||||||
|
| ||||||||||||||
Professional Services - 1.62% | |||||||||||||||
ICF International, Inc.A | 3,292 | 158,181 | |||||||||||||
Kelly Services, Inc., Class A | 8,342 | 180,437 | |||||||||||||
Kforce, Inc. | 5,236 | 94,248 | |||||||||||||
Mistras Group, Inc.A | 3,838 | 72,577 | |||||||||||||
Resources Connection, Inc. | 4,435 | 56,546 | |||||||||||||
TrueBlue, Inc.A | 6,253 | 127,874 | |||||||||||||
|
| ||||||||||||||
689,863 | |||||||||||||||
|
| ||||||||||||||
Road & Rail - 0.26% | |||||||||||||||
Universal Logistics Holdings, Inc. | 6,522 | 108,265 | |||||||||||||
|
| ||||||||||||||
Trading Companies & Distributors - 0.44% | |||||||||||||||
Huttig Building Products, Inc.A B | 7,831 | 44,637 | |||||||||||||
Veritiv Corp.A | 3,764 | 105,392 | |||||||||||||
Willis Lease Finance Corp.A | 1,553 | 36,961 | |||||||||||||
|
| ||||||||||||||
186,990 | |||||||||||||||
|
| ||||||||||||||
Total Industrials | 7,527,783 | ||||||||||||||
|
| ||||||||||||||
Information Technology - 16.20% | |||||||||||||||
Communications Equipment - 0.47% | |||||||||||||||
Plantronics, Inc. | 4,718 | 201,128 | |||||||||||||
|
| ||||||||||||||
Electronic Equipment, Instruments & Components - 5.14% | |||||||||||||||
Anixter International, Inc.A | 5,279 | 389,590 | |||||||||||||
AVX Corp. | 29,697 | 518,213 | |||||||||||||
Bel Fuse, Inc., Class B | 2,096 | 53,448 | |||||||||||||
CTS Corp. | 5,383 | 121,118 | |||||||||||||
Insight Enterprises, Inc.A | 7,516 | 301,241 | |||||||||||||
Kimball Electronics, Inc.A | 5,385 | 102,584 |
See accompanying notes
18
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Information Technology - 16.20% (continued) | |||||||||||||||
Electronic Equipment, Instruments & Components - 5.14% (continued) | |||||||||||||||
Novanta, Inc.A | 4,822 | $ | 188,540 | ||||||||||||
PC Connection, Inc. | 6,266 | 159,846 | |||||||||||||
PCM, Inc.A | 3,063 | 40,278 | |||||||||||||
ScanSource, Inc.A | 4,806 | 188,636 | |||||||||||||
Systemax, Inc. | 5,007 | 122,371 | |||||||||||||
|
| ||||||||||||||
2,185,865 | |||||||||||||||
|
| ||||||||||||||
Internet Software & Services - 1.23% | |||||||||||||||
NIC, Inc. | 11,486 | 187,796 | |||||||||||||
TechTarget, Inc.A | 4,713 | 46,847 | |||||||||||||
Web.com Group, Inc.A | 11,332 | 286,700 | |||||||||||||
|
| ||||||||||||||
521,343 | |||||||||||||||
|
| ||||||||||||||
IT Services - 5.31% | |||||||||||||||
Cardtronics PLC, Class AA | 8,263 | 214,673 | |||||||||||||
Convergys Corp. | 15,997 | 375,929 | |||||||||||||
CSG Systems International, Inc. | 5,545 | 214,647 | |||||||||||||
EVERTEC, Inc. | 15,320 | 281,888 | |||||||||||||
Forrester Research, Inc. | 2,330 | 94,948 | |||||||||||||
Hackett Group, Inc. | 4,711 | 64,352 | |||||||||||||
Perficient, Inc.A | 5,865 | 107,329 | |||||||||||||
Sykes Enterprises, Inc.A | 7,492 | 199,737 | |||||||||||||
Syntel, Inc.B | 22,880 | 413,213 | |||||||||||||
TeleTech Holdings, Inc. | 7,354 | 291,954 | |||||||||||||
|
| ||||||||||||||
2,258,670 | |||||||||||||||
|
| ||||||||||||||
Semiconductors & Semiconductor Equipment - 2.48% | |||||||||||||||
Amkor Technology, Inc.A | 40,213 | 353,070 | |||||||||||||
Cohu, Inc. | 4,653 | 87,290 | |||||||||||||
Entegris, Inc.A | 19,105 | 486,222 | |||||||||||||
IXYS Corp.A | 5,610 | 129,030 | |||||||||||||
|
| ||||||||||||||
1,055,612 | |||||||||||||||
|
| ||||||||||||||
Software - 1.16% | |||||||||||||||
Pegasystems, Inc. | 7,895 | 454,357 | |||||||||||||
Zix Corp.A | 7,099 | 37,696 | |||||||||||||
|
| ||||||||||||||
492,053 | |||||||||||||||
|
| ||||||||||||||
Technology Hardware, Storage & Peripherals - 0.41% | |||||||||||||||
Avid Technology, Inc.A | 13,086 | 57,709 | |||||||||||||
Eastman Kodak Co.A | 15,046 | 116,607 | |||||||||||||
|
| ||||||||||||||
174,316 | |||||||||||||||
|
| ||||||||||||||
Total Information Technology | 6,888,987 | ||||||||||||||
|
| ||||||||||||||
Materials - 4.02% | |||||||||||||||
Chemicals - 3.41% | |||||||||||||||
A Schulman, Inc. | 6,467 | 196,597 | |||||||||||||
Chase Corp. | 1,466 | 137,071 | |||||||||||||
FutureFuel Corp. | 12,514 | 168,689 | |||||||||||||
Hawkins, Inc. | 1,964 | 70,017 | |||||||||||||
Innospec, Inc. | 4,510 | 250,305 | |||||||||||||
KMG Chemicals, Inc. | 1,835 | 88,117 | |||||||||||||
Stepan Co. | 3,785 | 292,807 | |||||||||||||
Tredegar Corp. | 5,875 | 95,762 | |||||||||||||
Valhi, Inc. | 69,457 | 151,416 | |||||||||||||
|
| ||||||||||||||
1,450,781 | |||||||||||||||
|
|
See accompanying notes
19
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Materials - 4.02% (continued) | |||||||||||||||
Construction Materials - 0.18% | |||||||||||||||
United States Lime & Minerals, Inc. | 931 | $ | 74,433 | ||||||||||||
|
| ||||||||||||||
Containers & Packaging - 0.09% | |||||||||||||||
UFP Technologies, Inc.A | 1,490 | 39,634 | |||||||||||||
|
| ||||||||||||||
Paper & Forest Products - 0.34% | |||||||||||||||
PH Glatfelter Co. | 8,311 | 143,947 | |||||||||||||
|
| ||||||||||||||
Total Materials | 1,708,795 | ||||||||||||||
|
| ||||||||||||||
Real Estate - 7.39% | |||||||||||||||
Equity Real Estate Investment Trusts (REITs) - 5.49% | |||||||||||||||
Alexander’s, Inc. | 861 | 360,492 | |||||||||||||
Getty Realty Corp. | 6,016 | 165,801 | |||||||||||||
One Liberty Properties, Inc. | 3,895 | 93,519 | |||||||||||||
Potlatch Corp. | 5,141 | 245,740 | |||||||||||||
Sabra Health Care REIT, Inc. | 8,895 | 194,355 | |||||||||||||
Saul Centers, Inc. | 2,838 | 171,983 | |||||||||||||
Select Income REIT | 16,015 | 371,708 | |||||||||||||
Summit Hotel Properties, Inc. | 16,713 | 248,021 | |||||||||||||
Urstadt Biddle Properties, Inc., Class A | 4,100 | 84,788 | |||||||||||||
Washington Real Estate Investment Trust | 12,166 | 399,775 | |||||||||||||
|
| ||||||||||||||
2,336,182 | |||||||||||||||
|
| ||||||||||||||
Real Estate Management & Development - 1.90% | |||||||||||||||
Consolidated-Tomoka Land Co. | 1,168 | 64,707 | |||||||||||||
FRP Holdings, Inc.A | 1,370 | 60,143 | |||||||||||||
HFF, Inc., Class A | 6,298 | 240,143 | |||||||||||||
Kennedy-Wilson Holdings, Inc. | 10,016 | 193,309 | |||||||||||||
Marcus & Millichap, Inc.A | 6,833 | 179,913 | |||||||||||||
Maui Land & Pineapple Co., Inc.A | 5,279 | 68,099 | |||||||||||||
|
| ||||||||||||||
806,314 | |||||||||||||||
|
| ||||||||||||||
Total Real Estate | 3,142,496 | ||||||||||||||
|
| ||||||||||||||
Telecommunication Services - 0.75% | |||||||||||||||
Diversified Telecommunication Services - 0.14% | |||||||||||||||
IDT Corp., Class B | 4,011 | 59,002 | |||||||||||||
|
| ||||||||||||||
Wireless Telecommunication Services - 0.61% | |||||||||||||||
Shenandoah Telecommunications Co. | 5,666 | 204,259 | |||||||||||||
Spok Holdings, Inc. | 3,370 | 56,448 | |||||||||||||
|
| ||||||||||||||
260,707 | |||||||||||||||
|
| ||||||||||||||
Total Telecommunication Services | 319,709 | ||||||||||||||
|
| ||||||||||||||
Utilities - 2.81% | |||||||||||||||
Electric Utilities - 1.54% | |||||||||||||||
MGE Energy, Inc. | 5,552 | 353,107 | |||||||||||||
Otter Tail Corp. | 7,167 | 299,581 | |||||||||||||
|
| ||||||||||||||
652,688 | |||||||||||||||
|
| ||||||||||||||
Multi-Utilities - 0.27% | |||||||||||||||
Unitil Corp. | 2,300 | 114,678 | |||||||||||||
|
| ||||||||||||||
Water Utilities - 1.00% | |||||||||||||||
Artesian Resources Corp., Class A | 1,582 | 58,676 | |||||||||||||
Middlesex Water Co. | 2,895 | 109,952 |
See accompanying notes
20
American Beacon Zebra Small Cap Equity FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 98.21% (continued) | |||||||||||||||
Utilities - 2.81% (continued) | |||||||||||||||
Water Utilities - 1.00% (continued) | |||||||||||||||
SJW Group | 3,498 | $ | 194,139 | ||||||||||||
York Water Co. | 1,954 | 64,287 | |||||||||||||
|
| ||||||||||||||
427,054 | |||||||||||||||
|
| ||||||||||||||
Total Utilities | 1,194,420 | ||||||||||||||
|
| ||||||||||||||
Total Common Stocks (Cost $39,639,005) | 41,766,972 | ||||||||||||||
|
| ||||||||||||||
SHORT-TERM INVESTMENTS - 1.58% (Cost $672,167) | |||||||||||||||
Investment Companies - 1.58% | |||||||||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class, 0.97%C D | 672,167 | 672,167 | |||||||||||||
|
| ||||||||||||||
SECURITIES LENDING COLLATERAL - 1.01% (Cost $428,665) | |||||||||||||||
Investment Companies - 1.01% | |||||||||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class, 0.97%C D | 428,665 | 428,665 | |||||||||||||
|
| ||||||||||||||
TOTAL INVESTMENTS - 100.80% (Cost $40,739,837) | 42,867,804 | ||||||||||||||
OTHER LIABILITIES, NET OF ASSETS - (0.80%) | (338,195 | ) | |||||||||||||
|
| ||||||||||||||
TOTAL NET ASSETS - 100.00% | $ | 42,529,609 | |||||||||||||
|
| ||||||||||||||
Percentages are stated as a percent of net assets. |
A Non-income producing security.
B All or a portion of this security is on loan at August 31, 2017.
C The Fund is affiliated by having the same investment advisor.
D 7-day yield.
PLC - Public Limited Company.
REIT - Real Estate Investment Trust.
Futures Contracts Open on August 31, 2017: | ||||||||||||||||||||
Long Futures | ||||||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Russell 2000 Mini Index Futures | 9 | September 2017 | $ | 628,543 | $ | 631,980 | $ | 3,437 | ||||||||||||
|
|
|
|
|
| |||||||||||||||
$ | 628,543 | $ | 631,980 | $ | 3,437 | |||||||||||||||
|
|
|
|
|
|
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of August 31, 2017, the investments were classified as described below:
Zebra Small Cap Equity Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Common Stocks | $ | 41,766,972 | $ | - | $ | - | $ | 41,766,972 | ||||||||||||||||||||
Short-Term Investments | 672,167 | - | - | 672,167 | ||||||||||||||||||||||||
Securities Lending Collateral | 428,665 | - | - | 428,665 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Investments in Securities - Assets | $ | 42,867,804 | $ | - | $ | - | $ | 42,867,804 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||||||||||||||
Futures Contracts | $ | 3,437 | $ | - | $ | - | $ | 3,437 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Financial Derivative Instruments - Assets | $ | 3,437 | $ | - | $ | - | $ | 3,437 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
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 the Fund’s assets and liabilities. During the period ended August 31, 2017, there were no transfers between levels.
See accompanying notes
21
Statements of Assets and Liabilities
August 31, 2017
The London Company Income Equity Fund | Zebra Small Cap Equity Fund | |||||||||||
Assets: | ||||||||||||
Investments in unaffiliated securities, at fair value† | $ | 1,113,258,500 | $ | 41,766,972 | ||||||||
Investments in affiliated securities, at fair value‡ | 44,690,684 | 1,100,832 | ||||||||||
Cash | - | 2,669 | ||||||||||
Deposit with brokers for futures contracts | 1,419,600 | 30,150 | ||||||||||
Dividends and interest receivable | 4,274,740 | 40,650 | ||||||||||
Receivable for fund shares sold | 1,559,849 | 88,729 | ||||||||||
Receivable for expense reimbursement (Note 2) | - | 16,763 | ||||||||||
Receivable for variation margin on open futures contracts (Note 5) | 277,337 | 6,105 | ||||||||||
Prepaid expenses | 43,563 | 40,507 | ||||||||||
|
|
|
| |||||||||
Total assets | 1,165,524,273 | 43,093,377 | ||||||||||
|
|
|
| |||||||||
Liabilities: | ||||||||||||
Payable for fund shares redeemed | 1,166,616 | 41,126 | ||||||||||
Payable upon return of securities loaned§ | - | 428,665 | ||||||||||
Management and sub-advisory fees payable (Note 2) | 722,808 | 36,692 | ||||||||||
Service fees payable | 182,785 | 6,531 | ||||||||||
Transfer agent fees payable (Note 2) | 67,041 | 2,580 | ||||||||||
Custody and fund accounting fees payable | 32,196 | 4,917 | ||||||||||
Professional fees payable | 42,100 | 39,663 | ||||||||||
Trustee fees payable | 138 | 53 | ||||||||||
Payable for prospectus and shareholder reports | 30,535 | 1,967 | ||||||||||
Other liabilities | 9,605 | 1,574 | ||||||||||
|
|
|
| |||||||||
Total liabilities | 2,253,824 | 563,768 | ||||||||||
|
|
|
| |||||||||
Net assets | $ | 1,163,270,449 | $ | 42,529,609 | ||||||||
|
|
|
| |||||||||
Analysis of net assets: | ||||||||||||
Paid-in-capital | $ | 1,005,267,274 | $ | 37,064,122 | ||||||||
Undistributed net investment income | 2,512,600 | - | ||||||||||
Accumulated net realized gain (loss) | (10,999,194 | ) | 3,334,083 | |||||||||
Unrealized appreciation of investments in unaffiliated securitiesA | 166,404,841 | 2,127,967 | ||||||||||
Unrealized appreciation of futures contracts | 84,928 | 3,437 | ||||||||||
|
|
|
| |||||||||
Net assets | $ | 1,163,270,449 | $ | 42,529,609 | ||||||||
|
|
|
| |||||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||||||
Institutional Class | 13,809,940 | 257,041 | ||||||||||
|
|
|
| |||||||||
Y Class | 41,352,972 | 1,152,579 | ||||||||||
|
|
|
| |||||||||
Investor Class | 1,984,955 | 675,083 | ||||||||||
|
|
|
| |||||||||
A Class | 5,959,253 | 426,223 | ||||||||||
|
|
|
| |||||||||
C Class | 9,443,397 | 144,099 | ||||||||||
|
|
|
| |||||||||
Net assets: | ||||||||||||
Institutional Class | $ | 222,730,033 | $ | 4,122,461 | ||||||||
|
|
|
| |||||||||
Y Class | $ | 663,588,078 | $ | 18,631,514 | ||||||||
|
|
|
| |||||||||
Investor Class | $ | 31,897,528 | $ | 10,766,976 | ||||||||
|
|
|
| |||||||||
A Class | $ | 95,206,378 | $ | 6,801,568 | ||||||||
|
|
|
| |||||||||
C Class | $ | 149,848,432 | $ | 2,207,090 | ||||||||
|
|
|
| |||||||||
Net asset value, offering and redemption price per share: | ||||||||||||
Institutional Class | $ | 16.13 | $ | 16.04 | ||||||||
|
|
|
| |||||||||
Y Class | $ | 16.05 | $ | 16.17 | ||||||||
|
|
|
| |||||||||
Investor Class | $ | 16.07 | $ | 15.95 | ||||||||
|
|
|
| |||||||||
A Class | $ | 15.98 | $ | 15.96 | ||||||||
|
|
|
| |||||||||
A Class (offering price) | $ | 16.95 | $ | 16.93 | ||||||||
|
|
|
| |||||||||
C Class | $ | 15.87 | $ | 15.32 | ||||||||
|
|
|
| |||||||||
† Cost of investments in unaffiliated securities | $ | 946,853,659 | $ | 39,639,005 | ||||||||
‡ Cost of investments in affiliated securities | $ | 44,690,684 | $ | 1,100,832 | ||||||||
§ Fair value of securities on loan | $ | - | $ | 422,196 | ||||||||
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at year end. |
|
See accompanying notes
22
American Beacon FundsSM
Statements of Operations
For the year ended August 31, 2017
The London Company Income Equity Fund | Zebra Small Cap Equity Fund | |||||||||||
Investment income: | ||||||||||||
Dividend income from unaffiliated securities† | $ | 32,505,790 | $ | 712,360 | ||||||||
Dividend income from affiliated securities | 205,036 | 6,054 | ||||||||||
Interest income | 668 | - | ||||||||||
Income derived from securities lending (Note 9) | 428 | 9,896 | ||||||||||
|
|
|
| |||||||||
Total investment income | 32,711,922 | 728,310 | ||||||||||
|
|
|
| |||||||||
Expenses: | ||||||||||||
Management and sub-advisory fees (Note 2) | 7,596,816 | 330,192 | ||||||||||
Transfer agent fees: | ||||||||||||
Institutional Class (Note 2) | 54,457 | 1,025 | ||||||||||
Y Class (Note 2) | 307,970 | 8,404 | ||||||||||
Investor Class | 3,388 | 2,091 | ||||||||||
A Class | 9,627 | 1,255 | ||||||||||
C Class | 9,440 | 318 | ||||||||||
Custody and fund accounting fees | 91,736 | 14,107 | ||||||||||
Professional fees | 95,977 | 42,841 | ||||||||||
Registration fees and expenses | 100,273 | 70,742 | ||||||||||
Service fees (Note 2): | ||||||||||||
Y Class | 359,090 | 8,364 | ||||||||||
Investor Class | 110,154 | 24,428 | ||||||||||
A Class | 144,103 | 9,614 | ||||||||||
C Class | 259,304 | 3,182 | ||||||||||
Distribution fees (Note 2): | ||||||||||||
A Class | 240,172 | 16,023 | ||||||||||
C Class | 1,728,697 | 21,216 | ||||||||||
Prospectus and shareholder report expenses | 96,284 | 12,748 | ||||||||||
Trustee fees | 85,061 | 2,491 | ||||||||||
Other expenses | 70,941 | 4,791 | ||||||||||
|
|
|
| |||||||||
Total expenses | 11,363,490 | 573,832 | ||||||||||
|
|
|
| |||||||||
Net fees waived and expenses (reimbursed) / recouped (Note 2) | - | (144,028 | ) | |||||||||
|
|
|
| |||||||||
Net expenses | 11,363,490 | 429,804 | ||||||||||
|
|
|
| |||||||||
Net investment income | 21,348,432 | 298,506 | ||||||||||
|
|
|
| |||||||||
Realized and unrealized gain (loss) from investments: | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investments in unaffiliated securitiesA | (15,856,097 | ) | 3,523,403 | |||||||||
Commission recapture (Note 1) | 23,740 | - | ||||||||||
Futures contracts | 4,494,252 | 47,702 | ||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||
Investments in unaffiliated securitiesB | 83,258,168 | 419,562 | ||||||||||
Futures contracts | (17,431 | ) | (3,691 | ) | ||||||||
|
|
|
| |||||||||
Net gain from investments | 71,902,632 | 3,986,976 | ||||||||||
|
|
|
| |||||||||
Net increase in net assets resulting from operations | $ | 93,251,064 | $ | 4,285,482 | ||||||||
|
|
|
| |||||||||
† Foreign taxes | $ | - | $ | 110 | ||||||||
A The Fund did not recognize net realized gains (losses) from the sale of investments in affiliated securities. |
| |||||||||||
B The Fund’s investments in affiliated securities did not have a change in unrealized appreciation (depreciation) at year end. |
|
See accompanying notes
23
American Beacon FundsSM
Statements of Changes in Net Assets
The London Company Income Equity Fund | Zebra Small Cap Equity Fund | |||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year Ended August 31, 2016 | Year Ended August 31, 2017 | Year Ended August 31, 2016 | |||||||||||||||||||||||||
Increase (decrease) in net assets: | ||||||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||||||
Net investment income | $ | 21,348,432 | $ | 18,248,062 | $ | 298,506 | $ | 153,893 | ||||||||||||||||||||
Net realized gain (loss) from investments in unaffiliated securities, commission recapture, and futures contracts | (11,338,105 | ) | 8,459,871 | 3,571,105 | (254,586 | ) | ||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities, and futures contracts | 83,240,737 | 80,948,359 | 415,871 | 2,570,834 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in net assets resulting from operations | 93,251,064 | 107,656,292 | 4,285,482 | 2,470,141 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Distributions to shareholders: | ||||||||||||||||||||||||||||
Net investment income: | ||||||||||||||||||||||||||||
Institutional Class | (4,173,571 | ) | (3,544,997 | ) | (19,221 | ) | (8,763 | ) | ||||||||||||||||||||
Y Class | (12,650,308 | ) | (9,926,813 | ) | (167,869 | ) | (38,839 | ) | ||||||||||||||||||||
Investor Class | (568,820 | ) | (452,631 | ) | (101,264 | ) | (13,402 | ) | ||||||||||||||||||||
A Class | (1,620,074 | ) | (1,491,174 | ) | (61,098 | ) | (10,123 | ) | ||||||||||||||||||||
C Class | (1,671,479 | ) | (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 | (27,897,283 | ) | (17,181,805 | ) | (363,305 | ) | (2,241,795 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Capital share transactions: | ||||||||||||||||||||||||||||
Proceeds from sales of shares | 399,841,050 | 548,570,693 | 22,550,139 | 13,574,650 | ||||||||||||||||||||||||
Reinvestment of dividends and distributions | 13,775,750 | 7,818,081 | 359,354 | 2,212,923 | ||||||||||||||||||||||||
Cost of shares redeemed | (402,583,096 | ) | (277,196,132 | ) | (12,266,887 | ) | (8,379,853 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in net assets from capital share transactions | 11,033,704 | 279,192,642 | 10,642,606 | 7,407,720 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in net assets | 76,387,485 | 369,667,129 | 14,564,783 | 7,636,066 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net assets: | ||||||||||||||||||||||||||||
Beginning of period | 1,086,882,964 | 717,215,835 | 27,964,826 | 20,328,760 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
End of period * | $ | 1,163,270,449 | $ | 1,086,882,964 | $ | 42,529,609 | $ | 27,964,826 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
*Includes undistributed net investment income | $ | 2,512,600 | $ | 2,328,414 | $ | - | $ | 51,103 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes
24
American Beacon FundsSM
August 31, 2017
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 (the “Act”), as amended, as diversified, open-end management investment companies. As of August 31, 2017, the Trust consists of thirty-two active series, two of which are presented in this filing: the American Beacon The London Company Income Equity Fund and the American Beacon Zebra Small Cap Equity Fund (collectively, the “Funds” and each individually a “Fund”). The remaining thirty 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.
Recently Adopted Accounting Pronouncements
In October 2016, the Securities and Exchange Commission (“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, and has been adopted accordingly.
Class Disclosure
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
Class | Eligible Investors | Minimum Initial Investments | ||||
Institutional | Large institutional investors - sold directly or through intermediary channels. | $ | 250,000 | |||
Y Class | Large institutional retirement plan investors - sold directly or through intermediary channels. | $ | 100,000 | |||
Investor | All investors using intermediary organizations, such as broker-dealers or retirement plan sponsors. | $ | 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 service, distribution and sub-transfer agent fees that 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, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board
25
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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.
Distributions to Shareholders
Distributions, if any, of net investment income are generally paid at least annually and recorded on the ex-dividend date. 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 may 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 the Funds’ investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Funds. 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, Trust Expenses, Gains, and Losses
Investment income, realized and unrealized gains and losses from investments of the Funds are allocated daily to each class of shares based upon the relative proportion of net assets of each class to the total net assets of the Funds. Expenses directly charged or attributable to any Fund will be paid from the assets of the Fund. Generally, expenses of the Trust will be allocated among and charged to the assets of the Funds on a basis that the Trustees deem fair and equitable, which may be based on the relative net assets of the Funds or nature of the services performed and relative applicability to the Funds.
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
26
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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 and Investment Sub-Advisory Agreements
The Funds and the Manager are parties to a Management Agreement that obligates the Manager to provide the Funds with investment advisory and administrative services. As compensation for performing the duties under the Management Agreement, the Manager will receive an annualized management fee based on a percentage of the Funds’ average daily net assets that is calculated and accrued daily according to the following schedule:
First $5 billion | 0.35 | % | ||
Next $5 billion | 0.325 | % | ||
Next $10 billion | 0.30 | % | ||
Over $20 billion | 0.275 | % |
The Trust, on behalf of the Funds, and the Manager have entered into an Investment Advisory Agreement with the following Sub-Advisors pursuant to which the Funds have agreed to pay an annualized sub-advisory fee that is calculated and accrued daily based on the Funds’ average daily net assets according to the following schedules:
The London Company of Virginia, LLC
First $25 million | 0.40 | % | ||
Next $225 million | 0.35 | % | ||
Over $250 million | 0.30 | % |
Zebra Capital Management, LLC
First $350 million | 0.55 | % | ||
Next $400 million | 0.50 | % | ||
Over $750 million | 0.45 | % |
The Management and Sub-Advisory Fees paid by the Funds for the year ended August 31, 2017 were as follows:
The London Company Income Equity Fund
Effective Fee Rate | Amount of Fees Paid | |||||||||||
Management Fees | 0.35 | % | $ | 4,016,577 | ||||||||
Sub-Advisor Fees | 0.31 | % | 3,580,239 | |||||||||
|
|
|
| |||||||||
Total | 0.66 | % | $ | 7,596,816 | ||||||||
|
|
|
|
Zebra Small Cap Equity Fund
Effective Fee Rate | Amount of Fees Paid | |||||||||||
Management Fees | 0.35 | % | $ | 129,080 | ||||||||
Sub-Advisor Fees | 0.55 | % | 201,112 | |||||||||
|
|
|
| |||||||||
Total | 0.90 | % | $ | 330,192 | ||||||||
|
|
|
|
As compensation for services provided by the Manager in connection with securities lending activities conducted by the Funds, the lending Fund pay to the Manager, with respect to cash collateral posted by
27
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
borrowers, a fee up to 10% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 10% of such loan fees. These fees are included in “Income derived from securities lending” and “Management and investment advisory fees” on the Statements of Operations. During the year ended August 31, 2017, the Manager received securities lending fees of $63 and $910 for the securities lending activities of The London Company Income Equity Fund and Zebra Small Cap Equity Fund, respectively.
Distribution Plans
The Funds, except for the A and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fee received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes of the Funds. 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 0.15% 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. Effective April 1, 2017, the Funds terminated the Service Plan for the Y Class.
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. Effective April 1, 2017, the Funds agreed to compensate the intermediaries for providing services to the Y Class. 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 certain non-distribution shareholder services provided by financial intermediaries for the Institutional and Y Classes. 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 and Y Classes on an annual basis. During the year ended August 31, 2017, the sub-transfer agent fees, as reflected in “Transfer agent fees” on the Statements of Operations, were as follows:
Fund | Sub-Transfer Agent Fees | |||
The London Company Income Equity | $ | 328,132 | ||
Zebra Small Cap Equity | 8,443 |
28
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
As of August 31, 2017, the Funds owed the Manager the following reimbursement of sub-transfer agent fees, as reflected in “Transfer agent fees payable” on the Statements of Assets and Liabilities:
Fund | Reimbursement Sub-Transfer Agent Fees | |||
The London Company Income Equity | $ | 60,400 | ||
Zebra Small Cap Equity | 2,003 |
Investments 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 and administrative fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the year ended August 31, 2017, the Manager earned fees on the Funds’ direct and securities lending collateral 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 | $ | 39,013 | $ | 274 | $ | 39,287 | ||||||
Zebra Small Cap Equity | 1,031 | 481 | 1,512 |
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 a credit facility whereby each Fund, under certain conditions, is permitted to lend money directly to and borrow directly from other participating Funds for temporary purposes. The interfund credit facility is advantageous to the Fund because it provides added liquidity, and eliminates the need to maintain higher cash balances to meet redemptions. This situation could arise when shareholder redemptions exceed anticipated volumes and certain funds have insufficient cash on hand to satisfy such redemptions or when sales of securities do not settle as expected, resulting in a cash shortfall for a fund. When a Fund liquidates portfolio securities to meet redemption requests, they often do not receive payment in settlement for up to three days (or longer for certain foreign transactions). Redemption requests normally are satisfied on the next business day. The credit facility provides a source of immediate, short-term liquidity pending settlement of the sale of portfolio securities. The credit facility is administered by a credit facility team consisting of professionals from the Manager’s asset management, compliance, and accounting areas who report the activities of the credit facility to the Board. During the year ended August 31, 2017, the Funds did not utilize the credit facility.
Expense Reimbursement Plan
The Manager contractually agreed to reimburse the Funds to the extent that total annual fund operating expenses exceeded the Funds’ expense cap. During the year ended August 31, 2017, the Manager waived and/or reimbursed expenses as follows:
Expense Cap | Expiration of Reimbursed Expenses | |||||||||||||||||
Fund | Class | 9/1/2016 - 8/31/2017 | Reimbursed Expenses | (Recouped) Expenses | ||||||||||||||
Zebra Small Cap Equity | Institutional | 0.89 | % | $ | 9,994 | $ | - | 2020 | ||||||||||
Zebra Small Cap Equity | Y | 0.99 | % | 67,326 | - | 2020 | ||||||||||||
Zebra Small Cap Equity | Investor | 1.27 | % | 29,831 | - | 2020 | ||||||||||||
Zebra Small Cap Equity | A | 1.29 | % | 27,779 | - | 2020 | ||||||||||||
Zebra Small Cap Equity | C | 2.04 | % | 9,098 | - | 2020 |
29
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Of these amounts, $16,763 was disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at August 31, 2017 for the Zebra Small Cap Equity Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of such fee reductions and expense reimbursements. Under the policy, the Manager can be reimbursed by the Funds for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs within three years after the Manager’s own waiver or reimbursement and (b) does not cause the Funds’ annual operating expenses to exceed the lesser of the contractual percentage limit in effect at the time of the waiver/reimbursement or time of recoupment. The reimbursed expenses listed above will expire in 2020. The carryover of excess expenses potentially reimbursable to the Manager, but not recorded as a liability are as follows:
Fund | Recouped Expenses | Excess Expense Carryover | Expired Expense Carryover | Expiration of Reimbursed Expenses | ||||||||||||
The London Company Income Equity | $ | - | $ | 13,005 | $ | - | 2017 | |||||||||
Zebra Small Cap Equity | - | 94,922 | - | 2017 | ||||||||||||
Zebra Small Cap Equity | - | 105,676 | - | 2018 | ||||||||||||
Zebra Small Cap Equity | - | 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. During the year ended August 31, 2017, Foreside collected $73,974 and $2,546 for The London Company Income Equity Fund and Zebra Small Cap Equity Fund, respectively, from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Funds’ Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended August 31, 2017, fees of $299 were collected for the Class A Shares of The London Company Income Equity 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 Funds’ Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended August 31, 2017, CDSC fees of $65,365 and $499 were collected for Class C Shares of The London Company Income Equity Fund and Zebra Small Cap Equity Funds, respectively.
Trustee Fees and Expenses
As compensation for their service to the Trust, the American Beacon Select Funds Trust and the American Beacon Institutional Funds Trust, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board of Trustees meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The Chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally at 4:00 p.m. Eastern Time, each day that the Exchange is open for business. Equity securities, including exchange-
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the 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 their 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.
Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value, as determined in good faith by the Manager’s Valuation Committee, pursuant to procedures established by the Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 | - | Quoted prices in active markets for identical securities. | ||
Level 2 | - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | ||
Level 3 | - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Common stocks, preferred securities, and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
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
31
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Funds’ possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the Funds may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Funds to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
Common Stock
Common stock generally takes the form of shares in a corporation which represent an ownership interest. It ranks below preferred stock and debt securities in claims for dividends and for assets of the company in a liquidation or bankruptcy. The value of a company’s common stock may fall as a result of factors directly relating to that company, such as decisions made by its management or decreased demand for the company’s products or services. A stock’s value may also decline because of factors affecting not just the company, but also companies in the same industry or sector. The price of a company’s stock may also be affected by changes in financial markets that are relatively unrelated to the company, such as changes in interest rates, currency exchange rates or industry regulation. Companies that elect to pay dividends on their common stock generally only do so after they invest in their own business and make required payments to bondholders and on other debt and preferred stock. Therefore, the value of a company’s common stock will usually be more volatile than its bonds, other debt and preferred stock. Common stock may be exchange-traded or over-the-counter (“OTC”). OTC stock may be less liquid than exchange-traded stock.
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, the Funds become a shareholder of that investment company. As a result, the Funds’ shareholders indirectly will bear the Funds’ proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Funds’ shareholders directly bear in connection with the Funds’ own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Funds in their 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 gain market exposure on cash balances or reduce market exposure in anticipation of liquidity needs. When considering the Funds’ use of derivatives, it is important to note that the Funds do not use derivatives for the purpose of creating financial leverage.
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Funds usually reflect this amount on the Schedules of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
During the year ended August 31, 2017, the Funds entered into future contracts primarily for exposing cash to markets.
The Funds’ average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at each quarter end.
Average Futures Contracts Outstanding | ||||
Fund | Year ended August 31, 2017 | |||
The London Company Income Equity | 297 | |||
Zebra Small Cap Equity | 11 |
The following is a summary of the fair valuations of the Funds’ derivative instruments categorized by risk exposure(1):
The London Company Income Equity Fund
Fair values of financial instruments on the Statements of Assets and Liabilities as of August 31, 2017: | ||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||||||||||||||||||||||
Assets: | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | ||||||||||||||||||||||||||||||||||||||
Receivable for variation margin from open futures contracts(2) | $ | - | $ | - | $ | - | $ | - | $ | 84,928 | $ | 84,928 |
The effect of financial derivative instruments on the Statements of Operations as of August 31, 2017: | ||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||||||||||||||||||||||
Realized gain (loss) of | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from futures contracts | $ | - | $ | - | $ | - | $ | - | $ | 4,494,252 | $ | 4,494,252 | ||||||||||||||||||||||||||||||||
Net change in unrealized | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | ||||||||||||||||||||||||||||||||||||||
Change in unrealized appreciation (depreciation) from futures contracts | $ | - | $ | - | $ | - | $ | - | $ | (17,431 | ) | $ | (17,431 | ) |
33
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Zebra Small Cap Equity Fund
Fair values of financial instruments on the Statements of Assets and Liabilities as of August 31, 2017: | ||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||||||||||||||||||||||
Assets: | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | ||||||||||||||||||||||||||||||||||||||
Receivable for variation margin from open futures contracts(2) | $ | - | $ | - | $ | - | $ | - | $ | 3,437 | $ | 3,437 |
The effect of financial derivative instruments on the Statements of Operations as of August 31, 2017: | ||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | ||||||||||||||||||||||||||||||||||||||||||||
Realized gain (loss) of | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | ||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from futures contracts | $ | - | $ | - | $ | - | $ | - | $ | 47,702 | $ | 47,702 |
Net change in unrealized | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | ||||||||||||||||||||||||||||||||||||||
Change in unrealized appreciation (depreciation) from futures contracts | $ | - | $ | - | $ | - | $ | - | $ | (3,691 | ) | $ | (3,691 | ) |
(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’ Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.
6. Principal Risks
Investing in the Funds may involve certain risks including, but not limited to, those described below.
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.
Dividend Risk
An issuer of stock held by the Funds 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 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.
34
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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 they would not be subject to if they invested directly in the securities underlying those derivatives. Futures contracts may experience potentially 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).
Liquidity Risk
The Funds are susceptible to the risk that certain investments held by the Funds may have limited marketability or be subject to restrictions on sale, and may be difficult to sell at favorable times or prices. The Funds could lose money if they are unable to dispose of an investment at a time that is most beneficial to the Funds. For example, the Funds may be forced to sell certain investments at unfavorable prices to meet redemption requests or other cash needs.
Market Risk
Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in 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. 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 the Funds invest in shares of other registered investment companies, the Funds will indirectly bear the 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 the Funds lends its securities, it may be subject to the following risks; i) borrowers of the Funds’ securities typically provide collateral in the form of cash that is reinvested in securities, ii) the securities in which the collateral is invested may not perform sufficiently to cover the return collateral payments owed to borrowers, iii) delays may occur in the recovery of securities from borrowers, which could interfere with the Funds’ ability to vote proxies or to settle transactions, and iv) there is the risk of possible loss of rights in the collateral should the borrower fail financially.
35
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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, August 31, 2017.
The London Company Income Equity Fund
Offsetting of Financial and Derivative Assets as of August 31, 2017: | ||||||||||||
Assets | Liabilities | |||||||||||
Futures Contracts | $ | 84,928 | $ | - | ||||||||
|
|
|
| |||||||||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 84,928 | $ | - | ||||||||
|
|
|
| |||||||||
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | $ | (84,928 | ) | $ | - | |||||||
|
|
|
|
Zebra Small Cap Equity Fund
Offsetting of Financial and Derivative Assets as of August 31, 2017: | ||||||||||||
Assets | Liabilities | |||||||||||
Futures Contracts | $ | 3,437 | $ | - | ||||||||
|
|
|
| |||||||||
Total derivative assets and liabilities in the Statement of Assets and Liabilities | $ | 3,437 | $ | - | ||||||||
|
|
|
| |||||||||
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | $ | (3,437 | ) | $ | - | |||||||
|
|
|
|
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 distributions 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. Each of the tax years in the four year period ended August 31, 2017 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 (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.
36
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
The tax character of distributions paid were as follows:
The London Company Income Equity Fund | Zebra Small Cap Equity Fund | |||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year Ended August 31, 2016 | Year Ended August 31, 2017 | Year Ended August 31, 2016 | |||||||||||||||||||||||||
Distributions paid from: | ||||||||||||||||||||||||||||
Ordinary income* | ||||||||||||||||||||||||||||
Institutional Class | $ | 4,174,535 | $ | 3,544,997 | $ | 19,221 | $ | 71,514 | ||||||||||||||||||||
Y Class | 12,653,305 | 9,926,813 | 167,869 | 316,947 | ||||||||||||||||||||||||
Investors Class | 568,983 | 452,631 | 101,264 | 152,808 | ||||||||||||||||||||||||
A Class | 1,620,522 | 1,491,174 | 61,098 | 156,294 | ||||||||||||||||||||||||
C Class | 1,672,364 | 1,766,190 | 13,853 | 50,367 | ||||||||||||||||||||||||
Long-term capital gains | ||||||||||||||||||||||||||||
Institutional Class | 1,272,617 | - | - | 138,505 | ||||||||||||||||||||||||
Y Class | 3,959,757 | - | - | 613,851 | ||||||||||||||||||||||||
Investors Class | 214,738 | - | - | 307,704 | ||||||||||||||||||||||||
A Class | 591,428 | - | - | 322,636 | ||||||||||||||||||||||||
C Class | 1,169,034 | - | - | 111,169 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total distributions paid | $ | 27,897,283 | $ | 17,181,805 | $ | 363,305 | $ | 2,241,795 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
* For tax purposes, short-term capital gains are considered ordinary income distributions.
As of August 31, 2017 the components of distributable earnings (deficits) on a tax basis were as follows:
Fund | Tax Cost | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
The London Company Income Equity | $ | 991,577,551 | $ | 192,871,965 | $ | (26,500,332 | ) | $ | 166,371,633 | |||||||||||||||||||
Zebra Small Cap Equity | 41,074,756 | 3,977,969 | (2,184,921 | ) | 1,793,048 |
Fund | Net Unrealized Appreciation (Depreciation) | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Capital and Other (Losses) | Other Temporary Differences | Distributable Earnings | ||||||||||||||||||||||||||||||||||||||
The London Company Income Equity | $ | 166,371,633 | $ | 2,512,600 | $ | - | $ | (10,881,058 | ) | $ | - | $ | 158,003,175 | |||||||||||||||||||||||||||||||
Zebra Small Cap Equity | 1,793,048 | 1,926,196 | 1,746,243 | – | - | 5,465,487 |
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 reclassifications of income from real estate investment securities.
Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from reclassification of income from real estate investment securities and dividend reclassifications as of August 31, 2017:
Fund | Paid-In-Capital | Undistributed (Overdistribution of) Net Investment Income | Accumulated Net Realized Gain (Loss) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
The London Company Income Equity | $ | - | $ | (479,994 | ) | $ | 479,994 | $ | - | |||||||||||||||||||
Zebra Small Cap Equity | - | 13,696 | (13,696 | ) | - |
37
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Under the Regulated Investment Company Modernization Act of 2010 (“RIC MOD”), net capital losses recognized by the Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.
As of August 31, 2017, The London Company Income Equity Fund has $1,879,996 short-term and $9,001,062 long-term post RIC MOD capital loss carryforwards. The Zebra Small Cap Equity Fund did not have any capital loss carryforwards.
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended August 31, 2017 were as follows:
Fund | Purchases (non-U.S. Government Securities) | Purchases of U.S. Government Securities | Sales (non-U.S. Government Securities) | Sales of U.S. Government Securities | ||||||||||||||||||||||||
The London Company Income Equity | $ | 172,020,382 | $ | – | $ | 149,719,599 | $ | – | ||||||||||||||||||||
Zebra Small Cap Equity | 38,208,005 | – | 27,370,490 | – |
A summary of the Funds’ transactions in the USG Select Fund for the year ended August 31, 2017 were as follows:
Fund | Type of Transaction | August 31, 2016 Shares/Fair Value | Purchases | Sales | August 31, 2017 Shares/Fair Value | Dividend Income | ||||||||||||||||||||||||||||||||||||
The London Company Income Equity | Direct | $ | 45,223,294 | $ | 285,371,373 | $ | 285,903,983 | $ | 44,690,684 | $ | 205,036 | |||||||||||||||||||||||||||||||
The London Company Income Equity | Securities Lending | - | 39,393,102 | 39,393,102 | - | N/A | ||||||||||||||||||||||||||||||||||||
Zebra Small Cap Equity | Direct | 830,296 | 23,794,351 | 23,952,480 | 672,167 | 6,054 | ||||||||||||||||||||||||||||||||||||
Zebra Small Cap Equity | Securities Lending | 356,775 | 6,928,427 | 6,856,537 | 428,665 | N/A |
9. Securities Lending
The Funds may lend their securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked-to-market daily. Daily mark-to-market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark-to-market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds and other short-term investments, provided the investments meet certain quality and diversification requirements. Securities purchased with cash collateral proceeds are listed in the Fund’s Schedule of Investments and the collateral is shown on the Statements of Assets and Liabilities as a payable.
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Funds, the Agent, and the Manager retained 80%, 10%, and 10%, respectively, of the income generated from securities lending.
38
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
While securities are on loan, the Funds continue 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 Funds would be subject to on the dividend.
Securities lending transactions pose certain risks to the Funds, 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 Funds could also experience delays and costs in gaining access to the collateral. The Funds bear the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.
As of August 31, 2017, the value of outstanding securities on loan and the value of collateral were as follows:
Fund | Market Value of Securities on Loan |
| Cash Collateral Received |
| Non-Cash Collateral Received |
| Total Collateral Received | |||||||||||||||||||||
The London Company Income Equity | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||
Zebra Small Cap Equity | 422,196 | 428,665 | - | 428,665 |
Cash collateral is listed on the Funds’ Schedules of Investments and is shown on the Statements of Assets and Liabilities. Income earned on these investments is included in “Income derived from securities lending” on 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 | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 4,274,282 | $ | 66,864,871 | 4,317,062 | $ | 61,703,562 | ||||||||||||||||||||||
Reinvestment of dividends | 294,910 | 4,594,135 | 209,460 | 2,997,506 | ||||||||||||||||||||||||
Shares redeemed | (3,528,768 | ) | (54,999,838 | ) | (1,646,575 | ) | (23,431,242 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 1,040,424 | $ | 16,459,168 | 2,879,947 | $ | 41,269,826 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 16,994,776 | $ | 263,758,741 | 24,943,586 | $ | 354,214,007 | ||||||||||||||||||||||
Reinvestment of dividends | 403,309 | 6,261,848 | 216,302 | 3,091,654 | ||||||||||||||||||||||||
Shares redeemed | (14,464,943 | ) | (226,114,832 | ) | (13,173,464 | ) | (187,434,356 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 2,933,142 | $ | 43,905,757 | 11,986,424 | $ | 169,871,305 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
39
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Investor Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,088,611 | $ | 16,697,410 | 1,081,723 | $ | 15,497,749 | ||||||||||||||||||||||
Reinvestment of dividends | 48,652 | 755,491 | 30,330 | 432,609 | ||||||||||||||||||||||||
Shares redeemed | (1,074,630 | ) | (16,707,261 | ) | (679,241 | ) | (9,525,154 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 62,633 | $ | 745,640 | 432,812 | $ | 6,405,204 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
A Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,642,756 | $ | 25,547,130 | 2,777,336 | $ | 39,632,748 | ||||||||||||||||||||||
Reinvestment of dividends | 88,521 | 1,367,347 | 61,866 | 877,243 | ||||||||||||||||||||||||
Shares redeemed | (2,040,648 | ) | (31,612,110 | ) | (1,841,117 | ) | (26,253,994 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | (309,371 | ) | $ | (4,697,633 | ) | 998,085 | $ | 14,255,997 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
C Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
The London Company Income Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,771,458 | $ | 26,972,898 | 5,471,163 | $ | 77,522,627 | ||||||||||||||||||||||
Reinvestment of dividends | 51,940 | 796,929 | 29,724 | 419,069 | ||||||||||||||||||||||||
Shares redeemed | (4,727,915 | ) | (73,149,055 | ) | (2,151,617 | ) | (30,551,386 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | (2,904,517 | ) | $ | (45,379,228 | ) | 3,349,270 | $ | 47,390,310 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 165,603 | $ | 2,691,437 | 54,556 | $ | 748,177 | ||||||||||||||||||||||
Reinvestment of dividends | 1,201 | 19,221 | 16,524 | 210,019 | ||||||||||||||||||||||||
Shares redeemed | (73,580 | ) | (1,063,732 | ) | (31,439 | ) | (414,137 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 93,224 | $ | 1,646,926 | 39,641 | $ | 544,059 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 658,050 | $ | 10,271,125 | 309,719 | $ | 4,112,092 | ||||||||||||||||||||||
Reinvestment of dividends | 10,383 | 167,686 | 72,550 | 930,798 | ||||||||||||||||||||||||
Shares redeemed | (289,896 | ) | (4,614,186 | ) | (291,579 | ) | (3,867,819 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 378,537 | $ | 5,824,625 | 90,690 | $ | 1,175,071 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 308,451 | $ | 4,853,543 | 468,594 | $ | 6,246,532 | ||||||||||||||||||||||
Reinvestment of dividends | 6,322 | 100,896 | 36,142 | 459,726 | ||||||||||||||||||||||||
Shares redeemed | (182,190 | ) | (2,832,374 | ) | (143,215 | ) | (1,898,357 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 132,583 | $ | 2,122,065 | 361,521 | $ | 4,807,901 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
A Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 247,176 | $ | 3,889,818 | 128,084 | $ | 1,705,574 | ||||||||||||||||||||||
Reinvestment of dividends | 3,631 | 57,984 | 35,611 | 453,323 | ||||||||||||||||||||||||
Shares redeemed | (195,350 | ) | (3,035,436 | ) | (130,342 | ) | (1,726,256 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 55,457 | $ | 912,366 | 33,353 | $ | 432,641 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
40
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
C Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Zebra Small Cap Equity Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 55,416 | $ | 844,216 | 59,351 | $ | 762,275 | ||||||||||||||||||||||
Reinvestment of dividends | 880 | 13,567 | 12,910 | 159,057 | ||||||||||||||||||||||||
Shares redeemed | (48,027 | ) | (721,159 | ) | (37,688 | ) | (473,284 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in shares outstanding | 8,269 | $ | 136,624 | 34,573 | $ | 448,048 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
11. Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Funds’ financial statements through this date.
41
American Beacon The London Company Income Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.25 | $ | 13.85 | $ | 14.12 | $ | 11.80 | $ | 10.49 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.33 | 0.32 | 0.31 | 0.30 | 0.31 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.97 | 1.40 | (0.14 | ) | 2.39 | 1.30 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 1.30 | 1.72 | 0.17 | 2.69 | 1.61 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.32 | ) | (0.32 | ) | (0.32 | ) | (0.28 | ) | (0.29 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | (0.10 | ) | - | (0.12 | ) | (0.09 | ) | (0.01 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.42 | ) | (0.32 | ) | (0.44 | ) | (0.37 | ) | (0.30 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 16.13 | $ | 15.25 | $ | 13.85 | $ | 14.12 | $ | 11.80 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 8.64 | % | 12.57 | % | 1.08 | % | 23.13 | % | 15.55 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 222,730,033 | $ | 194,708,612 | $ | 137,006,660 | $ | 58,277,396 | $ | 44,731,302 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 0.74 | % | 0.75 | % | 0.75 | % | 0.82 | % | 1.13 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 0.74 | % | 0.77 | % | 0.79 | % | 0.79 | % | 0.79 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 2.12 | % | 2.32 | % | 2.35 | % | 2.31 | % | 2.32 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 2.12 | % | 2.30 | % | 2.30 | % | 2.33 | % | 2.66 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 14 | % | 20 | % | 15 | % | 10 | % | 15 | % | ||||||||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.17 | $ | 13.79 | $ | 14.06 | $ | 11.75 | $ | 10.49 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.32 | 0.32 | 0.31 | 0.28 | 0.33 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.97 | 1.37 | (0.15 | ) | 2.39 | 1.26 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 1.29 | 1.69 | 0.16 | 2.67 | 1.59 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.31 | ) | (0.31 | ) | (0.31 | ) | (0.27 | ) | (0.32 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | (0.10 | ) | - | (0.12 | ) | (0.09 | ) | (0.01 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.41 | ) | (0.31 | ) | (0.43 | ) | (0.36 | ) | (0.33 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 16.05 | $ | 15.17 | $ | 13.79 | $ | 14.06 | $ | 11.75 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 8.60 | % | 12.42 | % | 1.03 | % | 23.05 | % | 15.45 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 663,588,078 | $ | 582,952,334 | $ | 364,477,089 | $ | 122,714,756 | $ | 28,814,001 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 0.81 | % | 0.82 | % | 0.83 | % | 0.89 | % | 1.09 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 0.81 | % | 0.82 | % | 0.84 | % | 0.89 | % | 0.89 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 2.04 | % | 2.24 | % | 2.27 | % | 2.24 | % | 2.22 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 2.04 | % | 2.24 | % | 2.26 | % | 2.25 | % | 2.42 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 14 | % | 20 | % | 15 | % | 10 | % | 15 | % |
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. |
See accompanying notes
42
American Beacon The London Company Income Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.19 | $ | 13.81 | $ | 14.08 | $ | 11.76 | $ | 10.48 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.28 | 0.28 | 0.28 | 0.26 | 0.27 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.97 | 1.37 | (0.17 | ) | 2.39 | 1.29 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 1.25 | 1.65 | 0.11 | 2.65 | 1.56 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.27 | ) | (0.27 | ) | (0.26 | ) | (0.24 | ) | (0.27 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | (0.10 | ) | - | (0.12 | ) | (0.09 | ) | (0.01 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.37 | ) | (0.27 | ) | (0.38 | ) | (0.33 | ) | (0.28 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 16.07 | $ | 15.19 | $ | 13.81 | $ | 14.08 | $ | 11.76 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 8.33 | % | 12.13 | % | 0.71 | % | 22.83 | % | 15.14 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 31,897,528 | $ | 29,208,149 | $ | 20,564,814 | $ | 16,549,654 | $ | 8,839,661 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 1.05 | % | 1.06 | % | 1.04 | % | 1.06 | % | 1.54 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 1.05 | % | 1.06 | % | 1.16 | % | 1.10 | % | 1.17 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 1.79 | % | 2.01 | % | 2.04 | % | 2.06 | % | 1.86 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 1.79 | % | 2.01 | % | 1.93 | % | 2.02 | % | 2.23 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 14 | % | 20 | % | 15 | % | 10 | % | 15 | % | ||||||||||||||||||||||||||
A Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.11 | $ | 13.73 | $ | 14.00 | $ | 11.70 | $ | 10.47 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.27 | 0.27 | 0.27 | 0.24 | 0.31 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.96 | 1.38 | (0.16 | ) | 2.37 | 1.23 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 1.23 | 1.65 | 0.11 | 2.61 | 1.54 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.26 | ) | (0.27 | ) | (0.26 | ) | (0.22 | ) | (0.30 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | (0.10 | ) | - | (0.12 | ) | (0.09 | ) | (0.01 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.36 | ) | (0.27 | ) | (0.38 | ) | (0.31 | ) | (0.31 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 15.98 | $ | 15.11 | $ | 13.73 | $ | 14.00 | $ | 11.70 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 8.24 | % | 12.14 | % | 0.71 | % | 22.58 | % | 14.99 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 95,206,378 | $ | 94,705,221 | $ | 72,363,106 | $ | 31,579,315 | $ | 12,108,558 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 1.12 | % | 1.13 | % | 1.13 | % | 1.28 | % | 1.59 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 1.12 | % | 1.13 | % | 1.17 | % | 1.27 | % | 1.29 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 1.73 | % | 1.94 | % | 1.96 | % | 1.85 | % | 1.93 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 1.73 | % | 1.94 | % | 1.92 | % | 1.86 | % | 2.23 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 14 | % | 20 | % | 15 | % | 10 | % | 15 | % |
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. |
See accompanying notes
43
American Beacon The London Company Income Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.01 | $ | 13.65 | $ | 13.93 | $ | 11.66 | $ | 10.46 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.15 | 0.17 | 0.18 | 0.15 | 0.24 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.96 | 1.36 | (0.17 | ) | 2.35 | 1.21 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 1.11 | 1.53 | 0.01 | 2.50 | 1.45 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.17 | ) | (0.17 | ) | (0.14 | ) | (0.24 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | (0.10 | ) | - | (0.12 | ) | (0.09 | ) | (0.01 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.25 | ) | (0.17 | ) | (0.29 | ) | (0.23 | ) | (0.25 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 15.87 | $ | 15.01 | $ | 13.65 | $ | 13.93 | $ | 11.66 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 7.42 | % | 11.28 | % | (0.04 | )% | 21.69 | % | 14.05 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 149,848,432 | $ | 185,308,648 | $ | 122,804,166 | $ | 46,638,516 | $ | 8,015,463 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 1.86 | % | 1.87 | % | 1.88 | % | 2.02 | % | 2.26 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 1.86 | % | 1.87 | % | 1.89 | % | 2.01 | % | 2.04 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 0.97 | % | 1.20 | % | 1.22 | % | 1.11 | % | 1.09 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 0.97 | % | 1.20 | % | 1.21 | % | 1.12 | % | 1.31 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 14 | % | 20 | % | 15 | % | 10 | % | 15 | % |
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 | Annualized. |
See accompanying notes
44
American Beacon Zebra Small Cap Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.07 | $ | 14.21 | $ | 14.36 | $ | 13.66 | $ | 12.40 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.24 | 0.18 | 0.13 | 0.14 | 0.46 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.90 | 1.15 | (0.03 | ) | 2.12 | 2.79 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 2.14 | 1.33 | 0.10 | 2.26 | 3.25 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.06 | ) | (0.04 | ) | - | (1.17 | ) | |||||||||||||||||||||||||||
Distributions from net realized gains | - | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.17 | ) | (1.47 | ) | (0.25 | ) | (1.56 | ) | (1.99 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 16.04 | $ | 14.07 | $ | 14.21 | $ | 14.36 | $ | 13.66 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 15.25 | % | 10.46 | % | 0.68 | % | 16.67 | % | 29.81 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 4,122,461 | $ | 2,305,284 | $ | 1,764,526 | $ | 1,606,024 | $ | 1,522,235 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.36 | % | 1.53 | % | 1.56 | % | 1.64 | % | 2.77 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 0.89 | % | 0.89 | % | 1.00 | % | 0.99 | % | 0.99 | % | ||||||||||||||||||||||||||
Net investment income (loss), before expense reimbursements | 0.80 | % | 0.34 | % | 0.17 | % | 0.33 | % | (0.28 | )% | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 1.26 | % | 0.97 | % | 0.73 | % | 0.99 | % | 1.50 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 77 | % | 50 | % | 97 | % | 76 | % | 89 | % | ||||||||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.20 | $ | 14.33 | $ | 14.50 | $ | 13.79 | $ | 12.46 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.15 | 0.12 | 0.10 | 0.56 | 0.37 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 1.99 | 1.22 | (0.02 | ) | 1.71 | 2.89 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 2.14 | 1.34 | 0.08 | 2.27 | 3.26 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.06 | ) | (0.04 | ) | - | (1.11 | ) | |||||||||||||||||||||||||||
Distributions from net realized gains | - | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.17 | ) | (1.47 | ) | (0.25 | ) | (1.56 | ) | (1.93 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 16.17 | $ | 14.20 | $ | 14.33 | $ | 14.50 | $ | 13.79 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 15.11 | % | 10.44 | % | 0.54 | % | 16.59 | % | 29.65 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 18,631,514 | $ | 10,988,456 | $ | 9,795,860 | $ | 8,168,361 | $ | 1,693,046 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.41 | % | 1.58 | % | 1.61 | % | 1.65 | % | 2.79 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 0.99 | % | 0.99 | % | 1.10 | % | 1.09 | % | 1.09 | % | ||||||||||||||||||||||||||
Net investment income (loss), before expense reimbursements | 0.54 | % | 0.28 | % | 0.12 | % | 0.19 | % | (0.23 | )% | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 0.96 | % | 0.87 | % | 0.64 | % | 0.75 | % | 1.47 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 77 | % | 50 | % | 97 | % | 76 | % | 89 | % |
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. |
See accompanying notes
45
American Beacon Zebra Small Cap Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.05 | $ | 14.22 | $ | 14.39 | $ | 13.73 | $ | 12.44 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.14 | 0.28 | 0.01 | 0.10 | 0.53 | |||||||||||||||||||||||||||||||
Net gains on investments (both realized and unrealized) | 1.93 | 1.00 | 0.04 | 2.12 | 2.68 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 2.07 | 1.28 | 0.05 | 2.26 | 3.21 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.04 | ) | (0.01 | ) | - | (1.10 | ) | |||||||||||||||||||||||||||
Distributions from net realized gains | - | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.17 | ) | (1.45 | ) | (0.22 | ) | (1.56 | ) | (1.92 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 15.95 | $ | 14.05 | $ | 14.22 | $ | 14.39 | $ | 13.73 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 14.77 | % | 10.07 | % | 0.29 | % | 16.27 | % | 29.30 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 10,766,976 | $ | 7,620,538 | $ | 2,573,002 | $ | 3,003,670 | $ | 3,301,901 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.58 | % | 1.74 | % | 1.82 | % | 1.86 | % | 3.07 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 1.27 | % | 1.27 | % | 1.37 | % | 1.37 | % | 1.37 | % | ||||||||||||||||||||||||||
Net investment income (loss), before expense reimbursements | 0.41 | % | 0.09 | % | (0.12 | )% | 0.15 | % | (0.60 | )% | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 0.72 | % | 0.56 | % | 0.33 | % | 0.64 | % | 1.11 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 77 | % | 50 | % | 97 | % | 76 | % | 89 | % | ||||||||||||||||||||||||||
A Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.06 | $ | 14.22 | $ | 14.40 | $ | 13.75 | $ | 12.46 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.16 | 0.10 | 0.05 | 0.48 | 0.18 | |||||||||||||||||||||||||||||||
Net gains on investments (both realized and unrealized) | 1.91 | 1.18 | 0.00 | 1.73 | 3.02 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 2.07 | 1.28 | 0.05 | 2.21 | 3.20 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.03 | ) | (0.02 | ) | - | (1.09 | ) | |||||||||||||||||||||||||||
Distributions from net realized gains | - | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.17 | ) | (1.44 | ) | (0.23 | ) | (1.56 | ) | (1.91 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 15.96 | $ | 14.06 | $ | 14.22 | $ | 14.40 | $ | 13.75 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnA | 14.76 | % | 10.04 | % | 0.29 | % | 16.17 | % | 29.07 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 6,801,568 | $ | 5,212,114 | $ | 4,797,155 | $ | 4,894,024 | $ | 2,080,892 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 1.73 | % | 1.90 | % | 1.94 | % | 2.05 | % | 3.22 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 1.29 | % | 1.29 | % | 1.40 | % | 1.47 | % | 1.49 | % | ||||||||||||||||||||||||||
Net investment income (loss), before expense reimbursements | 0.28 | % | (0.04 | )% | (0.21 | )% | (0.14 | )% | (0.62 | )% | ||||||||||||||||||||||||||
Net investment income, net of reimbursements | 0.71 | % | 0.57 | % | 0.33 | % | 0.45 | % | 1.11 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 77 | % | 50 | % | 97 | % | 76 | % | 89 | % |
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. |
See accompanying notes
46
American Beacon Zebra Small Cap Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
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Net asset value, beginning of period | $ | 13.53 | $ | 13.81 | $ | 14.08 | $ | 13.57 | $ | 12.28 | ||||||||||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.03 | 0.10 | (0.07 | ) | 0.33 | 0.24 | ||||||||||||||||||||||||||||||
Net gains on investments (both realized and unrealized) | 1.86 | 1.03 | 0.01 | 1.74 | 2.84 | |||||||||||||||||||||||||||||||
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Total income (loss) from investment operations | 1.89 | 1.13 | (0.06 | ) | 2.07 | 3.08 | ||||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | - | - | - | (0.97 | ) | |||||||||||||||||||||||||||||
Distributions from net realized gains | - | (1.41 | ) | (0.21 | ) | (1.56 | ) | (0.82 | ) | |||||||||||||||||||||||||||
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Total distributions | (0.10 | ) | (1.41 | ) | (0.21 | ) | (1.56 | ) | (1.79 | ) | ||||||||||||||||||||||||||
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Net asset value, end of period | $ | 15.32 | $ | 13.53 | $ | 13.81 | $ | 14.08 | $ | 13.57 | ||||||||||||||||||||||||||
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Total returnA | 13.97 | % | 9.17 | % | (0.48 | )% | 15.29 | % | 28.20 | % | ||||||||||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 2,207,090 | $ | 1,838,434 | $ | 1,398,217 | $ | 1,468,876 | $ | 695,075 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 2.47 | % | 2.65 | % | 2.69 | % | 2.81 | % | 3.95 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements | 2.04 | % | 2.04 | % | 2.15 | % | 2.22 | % | 2.24 | % | ||||||||||||||||||||||||||
Net investment (loss), before expense reimbursements | (0.42 | )% | (0.78 | )% | (0.96 | )% | (0.89 | )% | (1.38 | )% | ||||||||||||||||||||||||||
Net investment income (loss), net of reimbursements | 0.01 | % | (0.18 | )% | (0.41 | )% | (0.30 | )% | 0.33 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 77 | % | 50 | % | 97 | % | 76 | % | 89 | % |
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. |
See accompanying notes
47
Federal Tax Information
August 31, 2017 (Unaudited)
Certain tax information regarding the Funds is required to be provided to shareholders based upon the Funds’ income and distributions for the taxable year ended August 31, 2017. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2017.
The Funds designated the following items with regard to distributions paid during the fiscal year ended August 31, 2017. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Funds to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Corporate Dividends-Received Deduction: | ||||
The London Company Income Equity | 93.87 | % | ||
Zebra Small Cap Equity | 80.23 | % | ||
Qualified Dividend Income: | ||||
The London Company Income Equity | 100.00 | % | ||
Zebra Small Cap Equity | 100.00 | % | ||
Long-Term Capital Gain Distributions: | ||||
The London Company Income Equity | $ | 7,207,574 | ||
Zebra Small Cap Equity | - | |||
Short-Term Capital Gain Distributions: | ||||
The London Company Income Equity | $ | - | ||
Zebra Small Cap Equity | $ | 45,597 |
Shareholders will receive notification in January 2018 of the applicable tax information necessary to prepare their 2017 income tax returns.
48
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Renewal and Approval of Management Agreements and Investment Advisory Agreements
At in-person meetings held on May 16, 2017 and June 7, 2017 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 7 meeting, approved the renewal of:
(1) the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (the “Trust”), on behalf of American Beacon The London Company Income Equity Fund (“TLC Fund”) and the American Beacon Zebra Small Cap Equity Fund (“Zebra Fund”) (collectively, the “Funds”);
(2) the Investment Advisory Agreement among the Manager, the Trust, on behalf of the TLC Fund, and The London Company of Virginia, LLC (“TLC”); and
(3) the Investment Advisory Agreement among the Manager, the Trust, on behalf of the Zebra Fund, and Zebra Capital Management, LLC (“Zebra”).
Each of the Investment Advisory Agreements is referred to herein as the “Investment Advisory Agreement,” and TLC and Zebra are hereinafter each referred to as a “subadvisor.” The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for its consideration of the renewal of the Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisors, Broadridge, Inc. (“Broadridge”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In advance of the Meetings, the Board’s Investment Committee and/or the Manager coordinated the production of information from Broadridge and Morningstar regarding the performance, fees and expenses of the Funds as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Agreements, the Trustees received and evaluated such information as they deemed necessary. The information requested on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
• | comparisons of the performance of an appropriate share class of each Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Broadridge and Morningstar, and to the performance of certain similar accounts, if applicable, managed by the firm; |
• | comparisons of each Fund’s management and subadvisory fee rates and expense ratio with the management fee rates paid by comparable mutual funds and their expense ratios, including peer group averages and fee and expense analyses provided by Broadridge and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided by a firm; |
• | a description of any applicable fee waivers and/or expense reimbursements in place for each Fund during the past year, and any proposed changes to those arrangements; |
• | the Manager’s profitability with respect to the services that it provided to each Fund; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors; |
49
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
• | an evaluation of other benefits to a firm or Funds as a result of their relationship, if any; |
• | information regarding the administrative, accounting-related, cash management and securities lending services that the Manager provides to the Funds and the fees that the Manager receives for such services; and |
• | information regarding a firm’s financial condition, the personnel of the Manager who are assigned primary responsibility for managing the Funds, staffing levels, portfolio managers’ compensation, insurance coverage, material pending litigation, code of ethics, compliance matters, actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Funds, and the Manager’s disaster recovery plans. |
The Board noted that the Manager provides management and administrative services to the Funds pursuant to the Management Agreement. The Board considered that many mutual funds have separate contracts governing both types of services, and observed that the actual management fee rates provided by Broadridge for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
A firm may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of the firms based on information that was provided. In such cases, the Board determined that the omission of any such information was not material to its considerations. The class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
Provided below is an overview of certain factors the Board considered in connection with its renewal and approval of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the Independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to the Renewal of the Management Agreement and Each Investment Advisory Agreement
In determining whether to renew the Agreements, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for both of the Funds were considered at the Meetings, the Board considered each Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional clients); (5) the extent to which economies of scale, if any, have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect economies of scale, if any, for the benefit of Fund investors; and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund.
50
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: the Zebra Fund’s long-term performance and the TLC Fund’s performance for various periods since its inception in 2012; the length of service of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; and the Manager’s efforts to retain key employees and maintain staffing levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing and the size of the subadvisor. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered each subadvisor’s representations regarding its compliance program and code of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund.
Investment Performance. The Board evaluated the comparative information provided by Broadridge and the Manager regarding the performance of each Fund relative to its Broadridge performance universe, Morningstar Category, and benchmark index, as well as the Fund’s Morningstar rating. The Board considered the information provided by Broadridge regarding its independent peer selection methodology to select all Broadridge performance universes. The Board also considered that the performance universes selected by Broadridge may not provide appropriate comparisons for a Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also evaluated the comparative information provided by each subadvisor regarding the performance of each Fund relative to the Fund’s benchmark index and, with respect to the TLC Fund, the performance of other comparable investment accounts managed by TLC. In addition, the Board considered the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager, before and after the payment of distribution-related expenses by the Manager. The profits or losses were noted at both an aggregate level for all funds within the group of mutual funds sponsored by the Manager (the “Fund Complex”) and at an individual Fund level, with the TLC Fund being profitable for the Manager before and after the payment of distribution-related expenses and the Manager sustaining losses with respect to the Zebra Fund before and after the payment of distribution-related expenses. The Board also considered comparative information provided by the Manager regarding the Manager’s overall profitability with respect to the Fund Complex relative to the overall profitability of other firms in the mutual fund industry, as disclosed in publicly available sources. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds the Manager represented that, among other matters, the difference is attributable to the fact that the Manager does not perform administrative services for non-investment company clients and reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the fee waivers and expense reimbursements for the Zebra Fund that were in place during the last fiscal year. The Board further considered that, with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager. In addition, the Board considered that the Manager receives fees for overseeing the securities lending program on behalf of each Fund. The Board also noted that certain share classes of the Funds maintain higher expense ratios in order to compensate third-party financial intermediaries.
51
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
In analyzing the fee rates charged by each subadvisor in connection with its investment advisory services to a Fund, the Board considered each subadvisor’s representation that, for fee comparison purposes, the subadvisor does not manage any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as each Fund grows and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in the subadvisory fee schedule for each Fund. In addition, the Board noted the Manager’s representation that the Management Agreement contains fee schedule breakpoints at higher asset levels with respect to each Fund. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with each Fund.
Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisors’ investment process and expanding the level of assets under management by the Manager and the subadvisors. In addition, the Board noted that each subadvisor benefits from soft dollar arrangements for proprietary and/or third-party research. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
The performance comparisons below were made versus each Fund’s Broadridge performance universe and Morningstar Category. With respect to the Broadridge performance universe, the 1st Quintile represents the top twenty percent of the universe based on performance and the 5th Quintile representing the bottom twenty percent of the universe based on performance. References below to each Fund’s Broadridge performance universe are to the universe of mutual funds with a comparable investment classification/objective included in the analysis provided by Broadridge. In reviewing the performance of the Zebra Fund, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events.
The expense comparisons below were made versus each Fund’s Broadridge expense universe and Broadridge expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Broadridge. A Broadridge expense group consists of the Fund and a representative sample of funds with similar operating structures and asset sizes, as selected by Broadridge. A Broadridge expense universe includes all funds in the investment classification/objective with a similar operating structure as the share class of the Fund included in the Broadridge comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. For each Fund, the Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the subadvisors’ use of soft dollars was requested from the Manager and was considered by the Trustees.
52
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Additional Considerations and Conclusions with Respect to the American Beacon The London Company Income Equity Fund
In considering the renewal of the Management Agreement with the Manager and the Investment Advisory Agreement with TLC for the TLC Fund, the Trustees considered the following additional factors:
Broadridge Total Expense Analysis Excluding 12b-1 Fees and Morningstar Fee Level Ranking
Compared to Broadridge Expense Group | 2nd Quintile | |
Compared to Broadridge Expense Universe | 3rd Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Average Expense Ratio |
Broadridge and Morningstar Performance Analysis (three-year period ended February 28, 2017)
Compared to Broadridge Performance Universe | 1st Quintile | |
Compared to Morningstar Category | 1st Quintile |
The Trustees also considered: (1) information provided by The London Company that, for fee rate comparison purposes, it does not manage other accounts in the same strategy as the Fund; and (2) the Manager’s recommendation to continue to retain the subadvisor based upon, among other factors, the relatively brief period that this Fund has been in operation.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and subadvisor under the Management and Investment Advisory Agreements are fair and reasonable; and (2) determined that the American Beacon The London Company Income Equity Fund and its shareholders would benefit from the Manager’s and subadvisor’s continued management of the Fund.
Additional Considerations and Conclusions with Respect to the American Beacon Zebra Small Cap Equity Fund
In considering the renewal of the Management Agreement with the Manager and the Investment Advisory Agreement with Zebra for the Zebra Fund, the Trustees considered the following additional factors:
Broadridge Total Expenses Excluding 12b-1 Fees and Morningstar Fee Level Ranking
Compared to Broadridge Expense Group | 1st Quintile | |
Compared to Broadridge Expense Universe | 2nd Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Below Average Expense Ratio |
Broadridge and Morningstar Performance Analysis (five-year period ended February 28, 2017)
Compared to Broadridge Performance Universe | 2nd Quintile | |
Compared to Morningstar Category | 1st Quintile |
The Trustees also considered: (1) Zebra’s representation that it does not manage other accounts in the same strategy as the Fund; and (2) the Manager’s recommendation to continue to retain the subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisor under the Management and Investment Advisory Agreements are fair and reasonable; and (2) determined that the American Beacon Zebra Small Cap Equity Fund and its shareholders would benefit from the Manager’s and subadvisor’s continued management of the Fund.
53
Trustees and Officers of the American Beacon FundsSM (Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. The address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees thirty-four funds in the fund complex that includes the Trust, the American Beacon Select Funds and the American Beacon Institutional Funds Trust. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (80) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gilbert G. Alvarado (47) | Trustee since 2015 | Director, Kura MD, Inc. (local telehealth organization) (2015-present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present); Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-2015); Director, Sacramento Regional Technology Alliance (2011-2016); Director, Women’s Empowerment (2009-2014); Director, Valley Healthcare Staffing (2017–present); Trustee, American Beacon Select Funds (2015-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Joseph B. Armes (55) | Trustee since 2015 | Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2015-Present); Chairman of the Board of Capital Southwest Corporation, predecessor to CSW Industrials, Inc. (2014-present) (investment company); CEO, Capital Southwest Corporation (2013-2015); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Gerard J. Arpey (59) | Trustee since 2012 | Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Director, S.C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Brenda A. Cline (56) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc. (public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). |
54
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
NON-INTERESTED TRUSTEES (CONT.) | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Eugene J. Duffy (63) | Trustee since 2008 | Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Thomas M. Dunning (74) | Trustee since 2008 | Chairman Emeritus, Lockton Dunning Benefits (consulting firm in employee benefits) (2008–Present); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Richard A. Massman (74) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus, Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities) (2009-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Barbara J. McKenna, CFA (54) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
R. Gerald Turner (71) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
OFFICERS | Term | |||
One Year | ||||
Gene L. Needles, Jr. (62) | President since 2009 | President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Resolute Investment Managers, Inc. (2015-Present); President, CEO and Director, Resolute Acquisition, Inc. (2015-Present); President, CEO and Director, Resolute Topco, Inc. (2015-Present), President & CEO, Resolute Investment Holdings, LLC (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc. (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, LLC (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Director, Chairman, President and CEO, Alpha Quant Advisors, LLC (2016-Present); Director, ARK Investment Management LLC (2016-Present); Director, Shapiro Capital Management LLC (2017-Present); Member, Investment Advisory Committee, Employees Retirement System of Texas (2017-Present); Trustee, American Beacon NextShares Trust (2015-Present); President, American Beacon Select Funds (2009-Present); President, American Beacon Mileage Funds (2009-2012); President, American Beacon Master Trust (2009–2012); President, American Beacon Institutional Funds Trust (2017-Present). |
55
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Rosemary K. Behan (58) | VP, Secretary and Chief Legal Officer since 2006 | Vice President and Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Resolute Investment Holdings, LLC (2015-Present) Secretary, Resolute Investment Managers, Inc. (2015-Present); Secretary, Resolute Topco, Inc. (2015-Present); Secretary, Resolute Acquisition, Inc. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, LLC (2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Secretary, Alpha Quant Advisors, LLC (2016-Present); Chief Legal Officer, Vice President and Secretary, American Beacon Select Funds (2006-Present); Chief Legal Officer, Vice President and Secretary, American Beacon Mileage Funds (2006-2012); Chief Legal Officer, Vice President and Secretary, American Beacon Master Trust (2006-2012); Chief Legal Officer, Vice President and Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Brian E. Brett (57) | VP since 2004 | Senior Vice President (2012-Present) and Vice President (2004-2012), American Beacon Advisors, Inc.; Vice President, American Beacon Select Funds (2004-Present); Vice President, American Beacon Mileage Funds (2004-2012); Vice President, American Beacon Master Trust (2004-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Paul B. Cavazos (48) | VP since 2016 | Senior Vice President, American Beacon Advisors, Inc. (2016-Present); Chief Investment Officer and Assistant Treasurer, DTE Energy (2007-2016); Vice President, American Beacon Select Funds (2016-Present); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Erica Duncan (47) | VP Since 2011 | Vice President, American Beacon Advisors, Inc. (2011-Present); Vice President, American Beacon Select Funds (2011-Present); Vice President, American Beacon Mileage Funds (2011-2012); Vice President, American Beacon Master Trust (2011-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Melinda G. Heika (56) | Treasurer since 2010 | Treasurer, American Beacon Advisors, Inc. (2010-Present); Resolute Investment Managers, Inc. (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present); Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute Investment Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, LLC (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Treasurer, American Beacon Select Funds (2010-Present); Treasurer, American Beacon Mileage Funds (2010-2012); Treasurer, American Beacon Master Trust (2010-2012); Treasurer, American Beacon Institutional Funds Trust (2017-Present). | ||
Terri L. McKinney (53) | VP since 2010 | Vice President (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.; Vice President, Resolute Investment Managers, Inc. (2017-Present); Vice President, Alpha Quant Advisors, LLC (2016-Present); Vice President, American Beacon Select Funds (2010-Present); Vice President, American Beacon Mileage Funds (2010-2012); Vice President, American Beacon Master Trust (2010-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). |
56
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Jeffrey K. Ringdahl (42) | VP since 2010 | Senior Vice President (2013-Present), Vice President (2010-2013), and Director (2015-Present), American Beacon Advisors, Inc.; Vice President, American Beacon Select Funds (2010-Present); Vice President, American Beacon Mileage Funds (2010-2012); Vice President, American Beacon Master Trust (2010-2012); Senior Vice President (2012-Present) and Manager (2015-Present), American Private Equity Management, LLC; Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Trustee, American Beacon NextShares Trust (2015-Present); Director and Senior Vice Present, Resolute Investment Holdings, LLC (2015-Present); Director and Senior Vice President, Resolute Topco, Inc. (2015-Present); Director and Senior Vice President, Resolute Acquisition, Inc. (2015-Present); Director and Senior Vice President, Resolute Investment Managers, Inc. (2015-Present); Director, Executive Vice President and Chief Operating Officer, Alpha Quant Advisors, LLC (2016-Present); Vice President, American Beacon Institutional Funds Trust (2017-President); Director, Shapiro Capital Management, LLC (2017-Present). | ||
Samuel J. Silver (54) | VP Since 2011 | Vice President, American Beacon Advisors, Inc. (2011-Present); Vice President, American Beacon Select Funds (2011-Present); Vice President, American Beacon Mileage Funds (2011-2012); Vice President, American Beacon Master Trust (2011-2012); American Beacon Institutional Funds Trust (2011-Present). | ||
Christina E. Sears (45) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, LLC (2012-Present); Chief Compliance Officer and Vice President, Alpha Quant Advisors, LLC (2016-Present); Chief Compliance Officer (2004-Present) and Assistant Secretary (1999-Present), American Beacon Select Funds; Chief Compliance Officer (2004-2012) and Assistant Secretary (1999-2012), American Beacon Mileage Funds; Chief Compliance Officer (2004-2012) and Assistant Secretary (1999-2012), American Beacon Master Trust; Chief Compliance Officer and Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Sonia L. Bates (60) | Asst. Treasurer since 2011 | Assistant Treasurer, American Beacon Advisors, Inc. (2011-Present); Assistant Treasurer, Resolute Investment Managers, Inc. (2015-Present); Assistant Treasurer, Resolute Acquisition, Inc. (2015-Present); Assistant. Treasurer, Resolute Topco, Inc. (2015-Present); Assistant Treasurer, Resolute Investment Holdings, LLC.; Assistant Treasurer, Lighthouse Holdings, Inc. (2011-2015); Assistant Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Assistant Treasurer, American Private Equity Management, LLC (2012-Present); Assistant Treasurer, American Beacon Select Funds (2011-Present); Assistant Treasurer American Beacon Mileage Funds (2011-2012); Assistant Treasurer, American Beacon Master Trust (2011-2012); Assistant Treasurer, American Beacon Institutional Funds Trust (2017-Present). | ||
Shelley D. Abrahams (42) | Assistant Secretary since 2008 | Assistant Secretary, American Beacon Advisors, Inc. (2008-Present); Assistant Secretary, American Beacon Select Funds (2008-Present); Assistant Secretary, American Beacon Mileage Funds (2008-2012); Assistant Secretary, American Beacon Master Trust (2008-2012); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). |
57
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Rebecca L. Harris (50) | Assistant Secretary since 2010 | Vice President, American Beacon Advisors, Inc. (2016-Present); Vice President, Resolute Investment Managers, Inc. (2017-Present); Vice President, Alpha Quant Advisors, LLC (2016-Present); Assistant Secretary, American Beacon Select Funds (2010-Present); Assistant Secretary, American Beacon Mileage Funds (2010-2012); Assistant Secretary, American Beacon Master Trust (2010-2012); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
One Year | ||||
Diana N. Lai (41) | Assistant Secretary since 2012 | Assistant Secretary, American Beacon Advisors, Inc. (2012-Present); Assistant Secretary, American Beacon Select Funds (2012-Present); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Teresa A. Oxford (59) | Assistant Secretary since 2015 | Assistant Secretary, American Beacon Advisors, Inc. (2015-Present); Assistant Secretary, Alpha Quant Advisors, LLC (2016-Present); Assistant Secretary, American Beacon Select Funds (2015-Present); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). |
* As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75.
** Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors.
58
Privacy Policy
August 31, 2017 (Unaudited)
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
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60
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: Call (800) 658-5811 | By Mail: American Beacon Funds 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 1-800-SEC-0330. A complete schedule of each Fund’s portfolio holdings is also made available on the Funds’ website at www.americanbeaconfunds.com approximately 60 days after the end of each quarter for the Zebra Small Cap Equity Fund and 20 days after the end of each month for The London Company Income 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, which is available free of charge on the Fund’s website at www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds, American Beacon The London Company Income Equity Fund and American Beacon Zebra Small Cap Equity Fund are service marks of American Beacon Advisors, Inc.
AR 8/17
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.
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
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 the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Advisors | August 31, 2017 |
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Schedules of Investments: | ||||
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Financial Highlights: | ||||
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Disclosures Regarding the Approval of the Management and Investment Advisory Agreements | 63 | |||
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Back Cover |
![]() | Dear Shareholders,
At American Beacon, we are proud to offer a broad range of equity, fixed-income and alternative mutual fund products for institutions and individuals. Our mutual funds – which span the domestic, international, global, frontier and emerging markets – are sub-advised by experienced portfolio managers who employ distinctive investment processes to manage assets through a variety of economic and market conditions. Together, we work diligently to help our clients and shareholders meet their long-term financial goals.
Institutional wisdom, enduring value. Since our inception as a pension fiduciary in 1986, American Beacon has focused on identifying and overseeing institutional investment managers and portfolio risk management. In 1987, we leveraged our size and experience to launch a series of sub-advised, multi- |
manager mutual funds providing individual investors access to many of the same institutional managers as our pension clients. Following the financial crisis in 2008, we saw that investors were looking for unique solutions from managers who were not necessarily mainstream. In 2010, we began offering mutual funds from single managers with distinctive investment styles or asset classes. As we continue to expand our family of funds, our solutions-based approach provides innovative investments.
Guiding principles. Our “manager of managers” philosophy is built on a long-standing history of innovative thinking, discipline and consistency in applying our solutions-based approach. As a manager of managers, our goal is to engage the most effective money managers for each asset class, investment style or market strategy – whether through a single sub-advisor or a combination of sub-advisors. Because we take our fiduciary responsibilities very seriously, our thorough manager evaluation and selection process is rigorous and ongoing. Our guiding principles – predictability, style consistency, competitive pricing and long-term relationships – provide a strong foundation for our due-diligence process. Our broad range of mutual funds helps investors navigate the economic storms and market downturns in the U.S. and abroad. Our years of experience evaluating sub-advisors have led us to identify and partner with asset managers who have adhered to their disciplined processes for many years and through multiple market cycles.
Focus on asset protection and risk mitigation. We strive to provide innovative, long-term products without gimmicks. From offering some of the first multi-manager funds, one of the first retirement-income funds and the first open-end mutual fund in the U.S. to focus primarily on frontier-market debt, our robust history includes applying a disciplined, solutions-based approach to our product development process to help protect assets and mitigate risk.
Thank you for your continued interest in American Beacon. For additional information about our funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards,
Gene L. Needles, Jr.
President
American Beacon Funds
1
High-Yield Bond Market Overview
August 31, 2017 (Unaudited)
High-Yield Bond Market
The high-yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Index (the “Index”), returned 8.79% for the 12-month period ended August 31, 2017.
All sectors produced positive returns despite considerable dispersion across the Index. Among the larger sectors, the best performers were Financial Services, at 11.90% and Basic Industries (including Metals and Mining), at 11.30%, reflecting rising interest rates and stabilizing commodity prices. The best-performing sector overall was Transportation, at 16.79%; however, with an Index weight less than 1.00%, its significance was relatively minor. Retail was the worst-performing sector, at 1.48%, as retailers struggled with overcapacity, poor demographics and online competition. The next-lowest performer was Consumer Goods, at 6.00%.
From a credit-quality perspective, lower-rated bonds outperformed during the period as the economy improved and investors sought yield. CCC-credit-rated issues returned 15.03%, followed by B-credit-rated issues at 8.49% and BB-credit-rated issues (the highest quality within high-yield) at 7.03%.
The default rate for high-yield issuers ended the period at 1.10%, as compared to 3.57% in early 2017, reflecting a significant decline in defaults within the Energy and Metals and Mining sectors. As commodity prices stabilized during the period, issuers were finally able to recover.
Also during the period, the Federal Reserve (the “Fed”) raised interest rates three times (in December, March and June) in response to the improving economy. Fortunately, credit spreads in the high-yield market narrowed sufficiently to offset the rise in rates and allowed for positive total returns. High-yield spreads narrowed by approximately 130 basis points (or 1.30%) and ended at 390 basis points (or 3.90%) over U.S. Treasuries.
Bank Loan Market
The Bank Loan segment of the high-yield bond market returned 5.85% during the period, according to the Credit Suisse Leveraged Loan Index.
Returns among Bank Loan sectors were generally consistent with those of traditional high-yield with the exception that Energy was the best performer, at 17.83%. The higher-quality, senior-secured, bank-loan structures allowed Energy to recover rapidly, and the floating-rate coupons attracted investors in the rising-rate environment. Basic Industries (including Metals and Mining) was the next best performer, at 16.58%, and Retail ended with a loss of 3.72%.
The lower duration of Bank Loan securities resulted in less spread contraction as compared to traditional high-yield, and their par-call features limited price appreciation. However, with a yield-to-maturity of approximately 6.19% at period end, they continued to offer compelling risk-adjusted value. Given the strong credit markets and expectation for Fed rate hikes, the Bank Loan segment was an appealing asset class during the period.
2
American Beacon SiM High Yield Opportunities FundSM
Performance Overview
August 31, 2017 (Unaudited)
The Investor Class of the American Beacon SiM High Yield Opportunities Fund (the “Fund”) returned 7.31% for the year ended August 31, 2017. The Fund underperformed the Bank of America (“BofA”) Merrill Lynch U.S. High Yield Master II Index (the “Index”) which gained 8.79% during the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 2/14/2011 through 8/31/2017
Total Returns for the Period ended August 31, 2017 | |||||||||||||||||||||||||||||||||
Ticker | 1 Year | 3 Years | 5 Years | Since Inception | Value of $10,000 2/14/2011- 8/31/2017 | ||||||||||||||||||||||||||||
Institutional Class (1,2,4) | SHOIX | 7.51 | % | 4.60 | % | 7.04 | % | 7.13 | % | $ | 15,688 | ||||||||||||||||||||||
Y Class (1,2,4) | SHOYX | 7.46 | % | 4.53 | % | 6.96 | % | 7.01 | % | $ | 15,579 | ||||||||||||||||||||||
Investor Class (1,2,4) | SHYPX | 7.31 | % | 4.26 | % | 6.70 | % | 6.72 | % | $ | 15,302 | ||||||||||||||||||||||
A Class with sales Charge (1,2,4) | SHOAX | 2.07 | % | 2.48 | % | 5.56 | % | 5.84 | % | $ | 14,496 | ||||||||||||||||||||||
A Class without sales charge (1,2,4) | SHOAX | 7.12 | % | 4.17 | % | 6.58 | % | 6.63 | % | $ | 15,215 | ||||||||||||||||||||||
C Class with sales charge (1,2,4) | SHOCX | 5.33 | % | 3.41 | % | 5.79 | % | 5.87 | % | $ | 14,526 | ||||||||||||||||||||||
C Class without sales charge (1,2,4) | SHOCX | 6.33 | % | 3.41 | % | 5.79 | % | 5.87 | % | $ | 14,526 | ||||||||||||||||||||||
BofA Merrill Lynch U.S. High Yield Master II Index (3) | 8.79 | % | 4.81 | % | 6.49 | % | 6.74 | % | $ | 15,334 |
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. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A 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 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 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 fees charged to the Y Class of the Fund was waived |
3
American Beacon SiM High Yield Opportunities FundSM
Performance Overview
August 31, 2017 (Unaudited)
from 2011 through 2013, partially recovered in 2015, and waived in 2016. Performance prior to waiving fees was lower than actual returns shown from 2011 through 2013 and in 2016. A portion of 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 actual returns shown from 2011 through 2014. |
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 allocation perspective, the Fund’s overweight to the Consumer sector and underweight to the Finance sector detracted from Fund performance. On the other hand, the Fund’s overweight to the Foreign Sovereign sector was additive to the Fund’s relative returns.
Issue selection within the Fund’s Energy, Service, and Manufacturing sector holdings was detrimental to Fund performance as they lagged the Index returns. Conversely, holdings within the Fund’s Consumer and Finance sectors contributed positively to overall Fund performance.
From a credit quality standpoint, issue selection within the CCC and Below-C-rated credit categories hurt relative performance. Security selection within the B-rated credit category added to the Fund’s relative performance as holdings outperformed the Index.
From a credit quality allocation perspective, the Fund’s underweight to the BB-credit rating category and overweight to the CCC-credit rating category contributed positively to the Fund’s performance. This was offset slightly by an underweight to the CC-credit rating category which was detrimental to the Fund’s returns.
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. 7.000%, Due 3/31/2024 | 2.5 | |||||||
Simmons Foods, Inc. 7.875%, Due 10/1/2021 | 2.0 | |||||||
Kissner Holdings LP / Kissner Milling Co., Ltd. / BSC Holding, Inc. / Kissner USA 8.375%, Due 12/1/2022 | 1.9 | |||||||
Qorvo, Inc. 7.000%, Due 12/1/2025 | 1.8 | |||||||
DaVita, Inc. 5.000%, Due 5/1/2025 | 1.8 | |||||||
Southern Graphics, Inc. 8.375%, Due 10/15/2020 | 1.7 | |||||||
Gartner, Inc. 5.125%, Due 4/1/2025 | 1.7 | |||||||
Prime Security Services Borrower LLC / Prime Finance, Inc. 9.250%, Due 5/15/2023 | 1.7 | |||||||
Hellenic Republic Government Bond 3.000%, Due 2/24/2023, Series PSI | 1.6 | |||||||
JBS USA LUX S.A. / JBS USA Finance, Inc. 5.875%, Due 7/15/2024 | 1.6 | |||||||
Total Fund Holdings | 93 | |||||||
Sector Allocation (% Investments) | ||||||||
Consumer, Non-Cyclical | 36.1 | |||||||
Industrials | 15.2 | |||||||
Consumer, Cyclical | 13.4 | |||||||
Energy | 13.2 | |||||||
Technology | 7.6 | |||||||
Communications | 5.3 | |||||||
Basic Materials | 3.5 | |||||||
Foreign Sovereign Obligations | 2.4 | |||||||
Utilities | 1.4 | |||||||
Bank Loan Obligations | 1.0 | |||||||
Financials | 0.7 | |||||||
Materials | 0.1 | |||||||
Foreign Convertible Obligations | 0.1 | |||||||
4
American Beacon SiM High Yield Opportunities FundSM
Performance Overview
August 31, 2017 (Unaudited)
Country Allocation (% Fixed Income) | ||||||||
United States | 72.3 | |||||||
Canada | 12.8 | |||||||
Brazil | 4.9 | |||||||
United Kingdom | 2.6 | |||||||
Luxembourg | 2.5 | |||||||
Greece | 1.7 | |||||||
Mexico | 1.4 | |||||||
Monaco | 1.1 | |||||||
Supranational | 0.6 | |||||||
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. |
5
American Beacon Sound Point Floating Rate Income FundSM
Performance Overview
August 31, 2017 (Unaudited)
The Investor Class of the American Beacon Sound Point Floating Rate Income Fund (the “Fund”) returned 6.12% for the twelve months ended August 31, 2017. The Fund outperformed the Credit Suisse Leveraged Loan Index (the “Index”) return of 5.85%.
Comparison of Change in Value of a $10,000 Investment For the Period from 12/3/2012 through 8/31/2017
Total Returns for the Period ended August 31, 2017 | ||||||||||||||||||||||||||||
Ticker | 1 Year | 3 Years | Since Inception (12/3/2012) | Value of $10,000 12/3/2012- 8/31/2017 | ||||||||||||||||||||||||
Institutional Class (1,2,6) | SPFLX | 6.37 | % | 5.41 | % | 6.25 | % | $ | 13,329 | |||||||||||||||||||
Y Class (1,2,3,6) | SPFYX | 6.27 | % | 5.29 | % | 6.17 | % | $ | 13,284 | |||||||||||||||||||
Investor Class (1,2,3,6) | SPFPX | 6.12 | % | 5.17 | % | 6.10 | % | $ | 13,239 | |||||||||||||||||||
A Class with sales Charge (1,2,3,6) | SOUAX | 3.29 | % | 4.21 | % | 5.47 | % | $ | 12,555 | |||||||||||||||||||
A Class without sales charge (1,2,3,6) | SOUAX | 5.92 | % | 5.09 | % | 6.05 | % | $ | 13,210 | |||||||||||||||||||
C Class with sales charge (1,2,3,6) | SOUCX | 4.23 | % | 4.68 | % | 5.78 | % | $ | 13,053 | |||||||||||||||||||
C Class without sales charge (1,2,3,6) | SOUCX | 5.23 | % | 4.68 | % | 5.78 | % | $ | 13,053 | |||||||||||||||||||
SP Class (1,2,4,6) | SPFRX | 6.14 | % | 5.12 | % | 6.06 | % | $ | 13,216 | |||||||||||||||||||
Credit Suisse Leveraged Loan Index (5) | 5.85 | % | 3.64 | % | 4.37 | % | $ | 12,251 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A Class shares have a maximum sales charge of 2.50%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase. |
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. |
6
American Beacon Sound Point Floating Rate Income FundSM
Performance Overview
August 31, 2017 (Unaudited)
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 the Y, Investor, A, and C Classes 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 performed well during the period despite having underweight positions in the best-performing sectors of the Index – Energy and Mining. These sectors performed well as commodity prices stabilized, world economic growth improved and investors sought yield. The Fund, however, generally seeks to avoid highly-leveraged, cyclical sectors as they can increase return volatility and raise the potential for defaults. The Fund did, however, benefit from its underweight position in Retail, another volatile and levered sector, as it was the worst-performing sector in the Index. Retailers suffered under the pressure of online competition, overcapacity and moderate consumer spending which made for difficulty during the period. The Fund also seeks to avoid crowded or over-invested sectors where valuations can become stretched.
Within credit quality, the Fund benefitted from its overweight position in single-B rated issuers as they outperformed double-B rated issuers. Bottom-up security selection is a primary element in the portfolio construction process as the Fund seeks to invest in stable issuers with consistent cash flows, strong asset coverage and steady loan-to-value profiles. In addition, active involvement in the new-issue market adds value as does a keen awareness of the Collateralized Loan Obligation (“CLO”) market, which represents a significant source of bank loan demand.
During the period, the Fund’s assets increased from $110 million to over $930 million as investors responded to the strong credit markets and rising interest rates (the Fed Funds rate ended the period in a target range of 1.00% to 1.25%). The Fed also began to discuss plans to reduce its balance sheet, which could lead to further upward pressure on rates. With three-month LIBOR over 1.30% at period end, the coupons on most bank loans will continue to adjust upwards as interest rates increase.
The Fund was well positioned for the market environment. At period end, the weighted-average price of its bank loan holdings was $99.6, to mitigate call risk, and its weighted-average yield-to-maturity was 6.47%, as compared to 6.19% for the Index. Approximately 90% of the Fund’s assets were invested in bank loan securities, and the remainder was in short-term investments for liquidity.
Top Ten Holdings (% Net Assets) | ||||||||
Staples, Inc. Due 8/6/2024, 2017 Term Loan B (unfunded) | 1.5 | |||||||
Confie Seguros Holding II Co. 6.739%, Due 4/19/2022, 2016 Term Loan B | 1.1 | |||||||
Bright Bidco B.V. 5.796%, Due 6/30/2024, Term Loan B | 1.0 | |||||||
Heartland Dental, LLC 6.060%, Due 7/13/2023, 2017 1st Lien Term Loan | 0.9 | |||||||
PAE Holding Corporation 6.739%, Due 10/20/2022, 1st Lien Term Loan | 0.9 | |||||||
Greenway Health, LLC 6.050%, Due 2/14/2024, 2017 1st Lien Term Loan | 0.9 | |||||||
Interior Logic Group, Inc. 7.210%, Due 3/1/2024, 2017 Term Loan B | 0.8 | |||||||
American Bath Group, LLC 6.546%, Due 9/30/2023, 2017 Term Loan B | 0.8 | |||||||
TKC Holdings, Inc. 5.489%, Due 2/1/2023, 2017 1st Lien Term Loan | 0.8 | |||||||
Brand Energy & Infrastructure Services, Inc. 5.564%, Due 6/21/2024, 2017 Term Loan | 0.8 | |||||||
Total Fund Holdings | 308 | |||||||
7
American Beacon Sound Point Floating Rate Income FundSM
Performance Overview
August 31, 2017 (Unaudited)
Sector Weightings (% Investments) | ||||||||
Manufacturing | 29.2 | |||||||
Service | 22.5 | |||||||
Consumer | 17.2 | |||||||
Financials | 8.5 | |||||||
Telecommunications | 5.5 | |||||||
Basic Materials | 4.0 | |||||||
Technology | 3.4 | |||||||
Utilities | 2.6 | |||||||
Energy | 1.7 | |||||||
Transportation | 1.5 | |||||||
Healthcare | 1.2 | |||||||
Defense | 1.0 | |||||||
Media | 1.0 | |||||||
Consumer, Cyclical | 0.6 | |||||||
Consumer, Non-Cyclical | 0.1 |
8
American Beacon FundsSM
August 31, 2017 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees, if applicable, and (2) ongoing costs, including management fees, distribution (12b-1) fees, sub-transfer agent 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 March 1, 2017 through August 31, 2017.
Actual Expenses
The “Actual” lines of the tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional 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 Funds’ actual expense ratio and an assumed 5% per year rate of return before expenses (not the Funds’ 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 Investor and Institutional Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Funds, such as sales charges (loads) or redemption fees, as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
9
American Beacon FundsSM
Expense Examples
August 31, 2017 (Unaudited)
American Beacon SiM High Yield Opportunities Fund | |||||||||||||||
Beginning Account Value 3/1/2017 | Ending Account Value 8/31/2017 | Expenses Paid During Period 3/1/2017-8/31/2017* | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $1,000.00 | $1,018.30 | $4.32 | ||||||||||||
Hypothetical** | $1,000.00 | $1,020.90 | $4.33 | ||||||||||||
Y Class | |||||||||||||||
Actual | $1,000.00 | $1,017.00 | $4.58 | ||||||||||||
Hypothetical** | $1,000.00 | $1,020.70 | $4.58 | ||||||||||||
Investor Class | |||||||||||||||
Actual | $1,000.00 | $1,016.70 | $5.85 | ||||||||||||
Hypothetical** | $1,000.00 | $1,019.40 | $5.85 | ||||||||||||
A Class | |||||||||||||||
Actual | $1,000.00 | $1,015.40 | $6.20 | ||||||||||||
Hypothetical** | $1,000.00 | $1,019.10 | $6.21 | ||||||||||||
C Class | |||||||||||||||
Actual | $1,000.00 | $1,011.70 | $9.89 | ||||||||||||
Hypothetical** | $1,000.00 | $1,015.40 | $9.91 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 0.84%, 0.90%, 1.15%, 1.22%, and 1.95% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
American Beacon Sound Point Floating Rate Income Fund | |||||||||||||||
Beginning Account Value 3/1/2017 | Ending Account Value 8/31/2017 | Expenses Paid During Period 3/1/2017-8/31/2017* | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $1,000.00 | $1,023.10 | $4.28 | ||||||||||||
Hypothetical** | $1,000.00 | $1,021.00 | $4.28 | ||||||||||||
Y Class | |||||||||||||||
Actual | $1,000.00 | $1,022.60 | $4.74 | ||||||||||||
Hypothetical** | $1,000.00 | $1,020.50 | $4.74 | ||||||||||||
Investor Class | |||||||||||||||
Actual | $1,000.00 | $1,021.80 | $5.61 | ||||||||||||
Hypothetical** | $1,000.00 | $1,019.70 | $5.60 | ||||||||||||
A Class | |||||||||||||||
Actual | $1,000.00 | $1,021.00 | $6.37 | ||||||||||||
Hypothetical** | $1,000.00 | $1,018.90 | $6.36 | ||||||||||||
C Class | |||||||||||||||
Actual | $1,000.00 | $1,016.20 | $10.16 | ||||||||||||
Hypothetical** | $1,000.00 | $1,015.10 | $10.16 | ||||||||||||
SP Class | |||||||||||||||
Actual | $1,000.00 | $1,021.00 | $6.01 | ||||||||||||
Hypothetical** | $1,000.00 | $1,019.30 | $6.01 |
* | Expenses are equal to the Fund’s annualized net expense ratios for the six-month period of 0.84%, 0.93%, 1.10%, 1.25%, 2.00% and 1.18% 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 (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
10
American Beacon FundsSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of American Beacon SiM High Yield Opportunities Fund and Sound Point Floating Rate Income Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Beacon SiM High Yield Opportunities Fund (one of the funds constituting the American Beacon Funds) (a Fund), as of August 31, 2017, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Beacon Sound Point Floating Rate Income Fund (one of the funds constituting the American Beacon Funds) (a Fund), as of August 31, 2017, and the related statement of operations for the year then ended and the statement of changes in net assets and the financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the periods ended August 31, 2015, 2014 and 2013 of American Beacon Sound Point Floating Rate Income Fund were audited by other auditors whose report dated October 30, 2015, expressed an unqualified opinion on those financial statements and financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2017, by correspondence with the custodian, brokers and agent banks or by other appropriate auditing procedures where replies from brokers or agent banks were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon SiM High Yield Opportunities Fund at August 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended in conformity with U.S. generally accepted accounting principles. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Sound Point Floating Rate Income Fund at August 31, 2017, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the two years in the period then ended in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
October 27, 2017
11
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 1.86% | |||||||||||||||
Consumer Staples - 0.01% | |||||||||||||||
Food & Staples Retailing - 0.01% | |||||||||||||||
Nueva Pescanova, S.L.A | 301,134 | $ | 179,243 | ||||||||||||
|
| ||||||||||||||
Energy - 1.04% | |||||||||||||||
Oil, Gas & Consumable Fuels - 1.04% | |||||||||||||||
Cona Resources Ltd. | 2,389,894 | 3,846,796 | |||||||||||||
Granite Oil Corp. | 1,222,532 | 3,661,477 | |||||||||||||
KNOT Offshore Partners LPB | 207,261 | 4,880,997 | |||||||||||||
Sanchez Energy Corp. | 14,137 | 61,920 | |||||||||||||
|
| ||||||||||||||
12,451,190 | |||||||||||||||
|
| ||||||||||||||
Total Energy | 12,451,190 | ||||||||||||||
|
| ||||||||||||||
Financials - 0.70% | |||||||||||||||
Capital Markets - 0.33% | |||||||||||||||
Oslo Bors VPS Holding ASA | 269,988 | 3,897,764 | |||||||||||||
|
| ||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) - 0.37% | |||||||||||||||
Annaly Capital Management, Inc. | 359,000 | 4,487,500 | |||||||||||||
|
| ||||||||||||||
Total Financials | 8,385,264 | ||||||||||||||
|
| ||||||||||||||
Materials - 0.11% | |||||||||||||||
Chemicals - 0.11% | |||||||||||||||
CVR Partners LP | 511,274 | 1,334,425 | |||||||||||||
|
| ||||||||||||||
Total Common Stocks (Cost $27,402,696) | 22,350,122 | ||||||||||||||
|
| ||||||||||||||
CONVERTIBLE PREFERRED STOCKS - 0.15% (Cost $3,758,766) | |||||||||||||||
Energy - 0.15% | |||||||||||||||
Oil, Gas & Consumable Fuels - 0.15% | |||||||||||||||
Sanchez Energy Corp., Series B | 108,200 | 1,851,951 | |||||||||||||
|
| ||||||||||||||
PREFERRED STOCKS - 0.26% (Cost $3,117,500) | |||||||||||||||
Energy - 0.26% | |||||||||||||||
Oil, Gas & Consumable Fuels - 0.26% | |||||||||||||||
Scorpio Tankers, Inc. | 124,700 | 3,156,157 | |||||||||||||
|
| ||||||||||||||
Principal Amount* | |||||||||||||||
BANK LOAN OBLIGATIONSC - 0.98% (Cost $11,380,731) | |||||||||||||||
Consumer Discretionary - 0.98% | |||||||||||||||
Gol LuxCo S.A., 6.500%, Due 8/31/2020, 1st Lien Term Loan, (Fixed + 6.500%) | $ | 11,450,000 | 11,721,937 | ||||||||||||
|
| ||||||||||||||
CORPORATE OBLIGATIONS - 65.61% | |||||||||||||||
Basic Materials - 1.53% | |||||||||||||||
CVR Partners LP / CVR Nitrogen Finance Corp., 9.250%, Due 6/15/2023D | 17,915,000 | 18,385,269 | |||||||||||||
|
| ||||||||||||||
Communications - 2.89% | |||||||||||||||
Salem Media Group, Inc., 6.750%, Due 6/1/2024D | 15,185,000 | 15,716,475 | |||||||||||||
Univision Communications, Inc., 5.125%, Due 2/15/2025D | 18,950,000 | 19,044,750 | |||||||||||||
|
| ||||||||||||||
34,761,225 | |||||||||||||||
|
| ||||||||||||||
Consumer, Cyclical - 6.98% | |||||||||||||||
Carlson Travel, Inc., 9.500%, Due 12/15/2024D | 11,095,000 | 10,845,362 | |||||||||||||
Golden Nugget, Inc., 8.500%, Due 12/1/2021D | 16,980,000 | 17,744,100 | |||||||||||||
Men’s Wearhouse, Inc., 7.000%, Due 7/1/2022 | 17,255,000 | 15,313,812 |
See accompanying notes
12
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
CORPORATE OBLIGATIONS - 65.61% (continued) | |||||||||||||||
Consumer, Cyclical - 6.98% (continued) | |||||||||||||||
MGM Resorts International, 7.750%, Due 3/15/2022 | $ | 14,355,000 | $ | 16,795,350 | |||||||||||
Station Casinos LLC, 7.500%, Due 3/1/2021 | 7,319,000 | 7,593,463 | |||||||||||||
Titan International, Inc., 6.875%, Due 10/1/2020 | 15,195,000 | 15,690,053 | |||||||||||||
|
| ||||||||||||||
83,982,140 | |||||||||||||||
|
| ||||||||||||||
Consumer, Non-Cyclical - 28.70% | |||||||||||||||
Acadia Healthcare Co., Inc., 5.125%, Due 7/1/2022 | 17,155,000 | 17,755,425 | |||||||||||||
B&G Foods, Inc., 5.250%, Due 4/1/2025 | 12,290,000 | 12,627,975 | |||||||||||||
DaVita, Inc., 5.000%, Due 5/1/2025 | 21,085,000 | 21,375,973 | |||||||||||||
Envision Healthcare Corp., 5.125%, Due 7/1/2022D | 12,750,000 | 13,244,063 | |||||||||||||
Gartner, Inc., 5.125%, Due 4/1/2025D | 19,210,000 | 20,242,537 | |||||||||||||
Halyard Health, Inc., 6.250%, Due 10/15/2022 | 17,710,000 | 18,440,537 | |||||||||||||
HCA, Inc., | |||||||||||||||
4.750%, Due 5/1/2023 | 8,394,000 | 8,853,991 | |||||||||||||
4.500%, Due 2/15/2027 | 10,441,000 | 10,584,564 | |||||||||||||
Hearthside Group Holdings LLC/Hearthside Finance Co., 6.500%, Due 5/1/2022D | 15,547,000 | 15,819,072 | |||||||||||||
Kindred Healthcare, Inc., 6.375%, Due 4/15/2022 | 19,659,000 | 17,889,690 | |||||||||||||
Kronos Acquisition Holdings, Inc., 9.000%, Due 8/15/2023D | 13,570,000 | 13,437,693 | |||||||||||||
LifePoint Health, Inc., 5.375%, Due 5/1/2024 | 17,000,000 | 17,595,000 | |||||||||||||
Live Nation Entertainment, Inc., 4.875%, Due 11/1/2024D | 6,765,000 | 6,900,300 | |||||||||||||
MEDNAX, Inc., 5.250%, Due 12/1/2023D | 17,465,000 | 18,076,275 | |||||||||||||
Post Holdings, Inc., 5.000%, Due 8/15/2026D | 17,221,000 | 17,221,000 | |||||||||||||
Prime Security Services Borrower LLC / Prime Finance, Inc., 9.250%, Due 5/15/2023D | 18,120,000 | 20,022,600 | |||||||||||||
Select Medical Corp., 6.375%, Due 6/1/2021 | 18,135,000 | 18,696,460 | |||||||||||||
Simmons Foods, Inc., 7.875%, Due 10/1/2021D | 23,220,000 | 24,642,225 | |||||||||||||
Southern Graphics, Inc., 8.375%, Due 10/15/2020D | 20,190,000 | 20,543,325 | |||||||||||||
Tenet Healthcare Corp., 4.500%, Due 4/1/2021 | 17,892,000 | 18,249,840 | |||||||||||||
TreeHouse Foods, Inc., 6.000%, Due 2/15/2024D | 12,444,000 | 13,159,530 | |||||||||||||
|
| ||||||||||||||
345,378,075 | |||||||||||||||
|
| ||||||||||||||
Energy - 9.02% | |||||||||||||||
California Resources Corp., | |||||||||||||||
5.500%, Due 9/15/2021 | 12,968,000 | 5,770,760 | |||||||||||||
8.000%, Due 12/15/2022D | 12,345,000 | 6,805,181 | |||||||||||||
CVR Refining LLC / Coffeyville Finance, Inc., 6.500%, Due 11/1/2022 | 17,075,000 | 17,288,437 | |||||||||||||
Denbury Resources, Inc., 5.500%, Due 5/1/2022 | 12,426,000 | 5,684,895 | |||||||||||||
Energen Corp., | |||||||||||||||
4.625%, Due 9/1/2021 | 18,210,000 | 18,301,050 | |||||||||||||
7.125%, Due 2/15/2028 | 5,450,000 | 5,668,000 | |||||||||||||
Murphy Oil Corp., | |||||||||||||||
6.875%, Due 8/15/2024 | 1,799,000 | 1,900,194 | |||||||||||||
7.050%, Due 5/1/2029 | 6,150,000 | 6,512,850 | |||||||||||||
6.125%, Due 12/1/2042 | 11,166,000 | 10,496,040 | |||||||||||||
Sanchez Energy Corp., 6.125%, Due 1/15/2023 | 14,935,000 | 11,387,938 | |||||||||||||
Whiting Petroleum Corp., 5.750%, Due 3/15/2021 | 19,865,000 | 18,673,100 | |||||||||||||
|
| ||||||||||||||
108,488,445 | |||||||||||||||
|
| ||||||||||||||
Industrial - 10.53% | |||||||||||||||
AECOM, 5.875%, Due 10/15/2024 | 9,309,000 | 10,181,719 | |||||||||||||
Airxcel, Inc., 8.500%, Due 2/15/2022D | 9,280,000 | 9,813,600 | |||||||||||||
CBC Ammo LLC / CBC FinCo, Inc., 7.250%, Due 11/15/2021D | 18,518,000 | 18,703,180 | |||||||||||||
Crown Americas LLC / Crown Americas Capital Corp. IV, 4.500%, Due 1/15/2023 | 15,925,000 | 16,681,438 | |||||||||||||
Engility Corp., 8.875%, Due 9/1/2024 | 16,705,000 | 18,229,331 | |||||||||||||
Kratos Defense & Security Solutions, Inc., 7.000%, Due 5/15/2019 | 9,800,000 | 9,947,000 | |||||||||||||
LSB Industries, Inc., 8.500%, Due 8/1/2019E F | 18,027,000 | 17,621,392 | |||||||||||||
MasTec, Inc., 4.875%, Due 3/15/2023 | 17,090,000 | 17,389,075 | |||||||||||||
Sealed Air Corp., 5.125%, Due 12/1/2024D | 7,612,000 | 8,087,750 | |||||||||||||
|
| ||||||||||||||
126,654,485 | |||||||||||||||
|
|
See accompanying notes
13
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
CORPORATE OBLIGATIONS - 65.61% (continued) | |||||||||||||||
Technology - 5.96% | |||||||||||||||
DynCorp International, Inc., 11.875%, Due 11/30/2020, PIK (1.50%) | $ | 15,560,178 | $ | 16,415,988 | |||||||||||
Leidos, Inc., | |||||||||||||||
7.125%, Due 7/1/2032 | 10,336,000 | 11,472,960 | |||||||||||||
5.500%, Due 7/1/2033 | 6,996,000 | 6,830,889 | |||||||||||||
Microsemi Corp., 9.125%, Due 4/15/2023D | 13,401,000 | 15,346,959 | |||||||||||||
Qorvo, Inc., 7.000%, Due 12/1/2025 | 19,136,000 | 21,671,520 | |||||||||||||
|
| ||||||||||||||
71,738,316 | |||||||||||||||
|
| ||||||||||||||
Total Corporate Obligations (Cost $784,171,412) | 789,387,955 | ||||||||||||||
|
| ||||||||||||||
CONVERTIBLE OBLIGATIONS - 2.95% | |||||||||||||||
Communications - 0.87% | |||||||||||||||
Gogo, Inc., 3.750%, Due 3/1/2020 | 11,035,000 | 10,517,734 | |||||||||||||
|
| ||||||||||||||
Consumer, Cyclical - 1.03% | |||||||||||||||
Titan Machinery, Inc., 3.750%, Due 5/1/2019 | 12,755,000 | 12,372,350 | |||||||||||||
|
| ||||||||||||||
Industrial - 1.05% | |||||||||||||||
Scorpio Tankers, Inc., 2.375%, Due 7/1/2019D | 14,006,000 | 12,640,415 | |||||||||||||
|
| ||||||||||||||
Total Convertible Obligations (Cost $35,113,168) | 35,530,499 | ||||||||||||||
|
| ||||||||||||||
FOREIGN CORPORATE OBLIGATIONS - 23.93% | |||||||||||||||
Basic Materials - 1.91% | |||||||||||||||
Kissner Holdings LP / Kissner Milling Co., Ltd. / BSC Holding, Inc. / Kissner USA, 8.375%, Due 12/1/2022D | 22,605,000 | 23,000,587 | |||||||||||||
|
| ||||||||||||||
Communications - 1.48% | |||||||||||||||
Virgin Media Finance PLC, 6.000%, Due 10/15/2024D | 17,100,000 | 17,869,500 | |||||||||||||
|
| ||||||||||||||
Consumer, Cyclical - 5.13% | |||||||||||||||
Codere Finance 2 Luxembourg S.A., 7.625%, Due 11/1/2021D | 15,750,000 | 15,659,438 | |||||||||||||
Gol Linhas Aereas S.A., 10.750%, Due 2/12/2023A D | 5,000,000 | 4,750,000 | |||||||||||||
Gol LuxCo S.A., 9.500%, Due 7/20/2021, PIK (1.000%)D | 2,089,171 | 2,026,496 | |||||||||||||
Ladbrokes Group Finance PLC, 5.125%, Due 9/8/2023G | GBP | 9,700,000 | 12,856,653 | ||||||||||||
Servicios Corporativos Javer S.A.B. de C.V., 9.875%, Due 4/6/2021D | 7,673,000 | 7,887,844 | |||||||||||||
Viking Cruises Ltd., 8.500%, Due 10/15/2022D | 17,680,000 | 18,497,700 | |||||||||||||
|
| ||||||||||||||
61,678,131 | |||||||||||||||
|
| ||||||||||||||
Consumer, Non-Cyclical - 6.68% | |||||||||||||||
Clearwater Seafoods, Inc., 6.875%, Due 5/1/2025D | 17,920,000 | 19,040,000 | |||||||||||||
IHS Markit Ltd., 5.000%, Due 11/1/2022D | 15,819,000 | 17,250,620 | |||||||||||||
JBS USA LUX S.A. / JBS USA Finance, Inc., 5.875%, Due 7/15/2024D | 18,875,000 | 19,110,937 | |||||||||||||
Minerva Luxembourg S.A., 6.500%, Due 9/20/2026D | 13,525,000 | 13,566,251 | |||||||||||||
Ritchie Bros Auctioneers, Inc., 5.375%, Due 1/15/2025D | 10,972,000 | 11,410,880 | |||||||||||||
|
| ||||||||||||||
80,378,688 | |||||||||||||||
|
| ||||||||||||||
Energy - 2.50% | |||||||||||||||
MEG Energy Corp., 7.000%, Due 3/31/2024D | 37,803,000 | 30,053,385 | |||||||||||||
|
| ||||||||||||||
Industrial - 3.36% | |||||||||||||||
ATS Automation Tooling Systems, Inc., 6.500%, Due 6/15/2023D | 17,494,000 | 18,324,965 | |||||||||||||
Navios Maritime Acquisition Corp. / Navios Acquisition Finance US, Inc., 8.125%, Due 11/15/2021D | 8,595,000 | 7,112,363 | |||||||||||||
Tervita Escrow Corp., 7.625%, Due 12/1/2021D | 14,930,000 | 15,004,650 | |||||||||||||
|
| ||||||||||||||
40,441,978 | |||||||||||||||
|
|
See accompanying notes
14
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
August 31, 2017
Principal Amount* | Fair Value | ||||||||||||||
FOREIGN CORPORATE OBLIGATIONS - 23.93% (continued) | |||||||||||||||
Technology - 1.45% | |||||||||||||||
Sensata Technologies B.V., 4.875%, Due 10/15/2023D | $ | 16,705,000 | $ | 17,414,963 | |||||||||||
|
| ||||||||||||||
Utilities - 1.42% | |||||||||||||||
Stoneway Capital Corp., 10.000%, Due 3/1/2027D | 16,225,000 | 17,056,531 | |||||||||||||
|
| ||||||||||||||
Total Foreign Corporate Obligations (Cost $285,163,572) | 287,893,763 | ||||||||||||||
|
| ||||||||||||||
FOREIGN CONVERTIBLE OBLIGATIONS - 0.06% | |||||||||||||||
Consumer, Non-Cyclical - 0.06% | |||||||||||||||
Nueva Pescanova, S.L., | |||||||||||||||
3.000%, Due 5/23/2024, Tranche AA H | EUR | 430,439 | 362,186 | ||||||||||||
1.000%, Due 5/23/2029, PIK 1.000% Tranche BA F H | EUR | 617,926 | 278,294 | ||||||||||||
1.000%, Due 5/23/2034, PIK 1.000% Tranche CA F H | EUR | 296,704 | 26,605 | ||||||||||||
|
| ||||||||||||||
Total Foreign Convertible Obligations (Cost $600,446) | 667,085 | ||||||||||||||
|
| ||||||||||||||
FOREIGN SOVEREIGN OBLIGATIONS - 2.32% | |||||||||||||||
Hellenic Republic Government Bond, 3.000%, Due 2/24/2023, Series PSIE F G | EUR | 17,685,000 | 19,763,491 | ||||||||||||
Mexican Bonos, 6.500%, Due 6/10/2021, Series M | MXN | 147,500,000 | 8,190,883 | ||||||||||||
|
| ||||||||||||||
Total Foreign Sovereign Obligations (Cost $25,145,611) | 27,954,374 | ||||||||||||||
|
| ||||||||||||||
TOTAL INVESTMENTS - 98.12% (Cost $1,175,853,902) | 1,180,513,843 | ||||||||||||||
OTHER ASSETS, NET OF LIABILITIES - 1.88% | 22,662,021 | ||||||||||||||
|
| ||||||||||||||
TOTAL NET ASSETS - 100.00% | $ | 1,203,175,864 | |||||||||||||
|
| ||||||||||||||
Percentages are stated as a percent of net assets. *In U.S. Dollars unless otherwise noted. |
A Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $5,596,328 or 0.47% of net assets. Value was determined using significant unobservable inputs.
B MLP - Master Limited Partnership.
C Bank loan obligations, unless otherwise stated, carry a floating rate of interest. The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
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 $611,478,771 or 50.82% of net assets. The Fund has no right to demand registration of these securities.
E Step Up/Down - A zero coupon bond that converts to a fixed rate or variable interest rate at a designated future date. The rate disclosed represents the coupon rate at August 31, 2017. The maturity date disclosed represents the final maturity date.
F Variable rate.
G Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.
H Default Security. At period end, the amount of securities in default was $667,085 or 0.06% of net assets.
LLC - Limited Liability Company.
LP - Limited Partnership.
PIK - Payment in Kind.
PLC - Public Limited Company.
Futures Contracts Open on August 31, 2017: | ||||||||||||||||
Short Futures | ||||||||||||||||
Description | Number of Contracts | Expiration Date | Notional Amount | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
British Pound Currency Futures | 163 | September 2017 | $ | (13,042,941 | ) | $ | (13,182,625 | ) | $ | (139,684 | ) | |||||
Euro Currency Futures | 140 | September 2017 | (19,921,006 | ) | (20,846,000 | ) | (924,994 | ) | ||||||||
|
|
|
|
|
| |||||||||||
$ | (32,963,947 | ) | $ | (34,028,625 | ) | $ | (1,064,678 | ) | ||||||||
|
|
|
|
|
|
See accompanying notes
15
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
August 31, 2017
Glossary:
Currency Abbreviations: | ||
EUR | Euro | |
GBP | Pound Sterling | |
MXN | Mexican Peso |
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of August 31, 2017, the investments were classified as described below:
SiM High Yield Opportunities Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Common Stocks | $ | 22,170,879 | $ | - | $ | 179,243 | $ | 22,350,122 | ||||||||||||||||||||
Convertible Preferred Stocks | - | 1,851,951 | - | 1,851,951 | ||||||||||||||||||||||||
Preferred Stocks | 3,156,157 | - | - | 3,156,157 | ||||||||||||||||||||||||
Bank Loan Obligations | - | 11,721,937 | - | 11,721,937 | ||||||||||||||||||||||||
Corporate Obligations | - | 789,387,955 | - | 789,387,955 | ||||||||||||||||||||||||
Convertible Obligations | - | 35,530,499 | - | 35,530,499 | ||||||||||||||||||||||||
Foreign Corporate Obligations | - | 283,143,763 | 4,750,000 | 287,893,763 | ||||||||||||||||||||||||
Foreign Convertible Obligations | - | - | 667,085 | 667,085 | ||||||||||||||||||||||||
Foreign Sovereign Obligations | - | 27,954,374 | - | 27,954,374 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Investments in Securities - Assets | $ | 25,327,036 | $ | 1,149,590,479 | $ | 5,596,328 | $ | 1,180,513,843 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||||||||||||||
Futures Contracts | $ | (1,064,678 | ) | $ | - | $ | - | $ | (1,064,678 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Financial Derivative Instruments - Liabilities | $ | (1,064,678 | ) | $ | - | $ | - | $ | (1,064,678 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
U.S. GAAP requires all transfers between any level to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. As of August 31, 2017, there was a transfer of $1,851,951 of convertible preferred stocks from Level 1 to Level 2, and a transfer of a corporate obligation with a value of $2,026,496 from Level 3 to Level 2 for the SiM High Yield Opportunities Fund. The corporate obligation transferred from Level 3 to Level 2 was previously fair valued by the Valuation Committee, but the pricing provider began pricing based on evaluated bids during the period.
The following table is a reconciliation of Level 3 assets within the Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:
Security Type | Balance as of | Net Purchases | Net Sales | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Transfer into Level 3 | Transfer out of Level 3 | Balance as of 8/31/2017 | Change in Unrealized Appreciation (Depreciation) at Period end** | ||||||||||||||||||||||||
Common Stocks | $ - | $ 161,325 | $ - | $ | - | $ | - | $ | 17,918 | $ | - | $ | - | $ | 179,243 | $ | 17,918 | |||||||||||||||||
Foreign Corporate Obligations | 4,608,500 | 243,123 | - | (616,505 | ) | - | 2,541,378 | - | 2,026,496 | 4,750,000 | 2,541,378 | |||||||||||||||||||||||
Foreign Convertible Obligations | 1,097,045 | 600,401 | 4,359,847 | (1,334 | ) | (5,715,211 | ) | 9,046,031 | - | - | 667,085 | 66,638 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
$5,705,545 | $1,004,849 | $4,359,847 | $ | (617,839 | ) | $ | (5,715,211 | ) | $ | 11,605,327 | $ | - | $ | 2,026,496 | $ | 5,596,328 | $ | 2,625,934 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** 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.
See accompanying notes
16
American Beacon SiM High Yield Opportunities FundSM
Schedule of Investments
August 31, 2017
The following is a summary of significant unobservable inputs used in the fair valuation of the assets categorized within Level 3 of the fair value hierarchy:
Security Type | Fair Value At 8/31/17 | Valuation Technique | Unobservable Inputs | Range of Inputs | ||||||
Common Stocks | $ | 179,243 | Valuation based on private quotes submitted to an intermediary agent in foreign market. | Private quotes2 | n/a | |||||
Foreign Corporate Obligations | $ | 4,750,000 | Comparison of yields to similar debt instruments | Comparative Yields Liquidity Discount3 | 9.45% 3.00% | |||||
Foreign Convertible Obligations | $ | 362,185 | Enterprise Value, Discounted Cash Flow | EBITDA multiple1 Discount rate | 8.0x 10.0% | |||||
Foreign Convertible Obligations | $ | 278,294 | Enterprise Value, Discounted Cash Flow | EBITDA multiple1 Discount rate | 8.0x 12.0% | |||||
Foreign Convertible Obligations | $ | 26,605 | Enterprise Value, Discounted Cash Flow | EBITDA multiple1 Discount rate | 8.0x 15.0% |
1 These obligations were received from a bankruptcy restructuring. The key assumptions used in the valuation include EBITDA multiples based on comparable companies. The valuation estimate will change if any of the assumptions change.
2 The equity shares were received from a bankruptcy restructuring. The valuation is based on private quotes submitted to an intermediary agent in a foreign market. The valuation estimate will change based on market participants’ perceptions of the value of the company.
3 This obligation is an unsecured corporate bond. Valuation may change if the yields of the comparative bond change or if the market imputes a higher liquidity discount to this bond than presently incorporated into the fair value.
See accompanying notes
17
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Shares | Fair Value | ||||||||||||||
COMMON STOCKS - 0.04% | |||||||||||||||
Consumer Discretionary - 0.00% | |||||||||||||||
Diversified Consumer Services - 0.00% | |||||||||||||||
TwentyEighty, Inc., Class A | 412 | $ | - | ||||||||||||
|
| ||||||||||||||
Financials - 0.00% | |||||||||||||||
Diversified Financial Services - 0.00% | |||||||||||||||
RCS 2L EscrowA | 667 | - | |||||||||||||
|
| ||||||||||||||
Industrials - 0.03% | |||||||||||||||
Machinery - 0.03% | |||||||||||||||
Aretec Group, Inc.K | 15,975 | 311,513 | |||||||||||||
|
| ||||||||||||||
Information Technology - 0.01% | |||||||||||||||
Internet Software & Services - 0.01% | |||||||||||||||
Answer Holdings, Inc. | 4,206 | 64,141 | |||||||||||||
Answers Corp. | 23 | 351 | |||||||||||||
|
| ||||||||||||||
Total Information Technology | 64,492 | ||||||||||||||
|
| ||||||||||||||
Total Common Stocks (Cost $96,744) | 376,005 | ||||||||||||||
|
| ||||||||||||||
WARRANTS - 0.00% (Cost $0) | |||||||||||||||
Materials - 0.00% | |||||||||||||||
Euramax Holdings, Inc.A B K | 21 | - | |||||||||||||
|
| ||||||||||||||
Principal Amount | |||||||||||||||
BANK LOAN OBLIGATIONSC - 89.05% | |||||||||||||||
Basic Materials - 3.65% | |||||||||||||||
4L Technologies Inc., 5.731%, Due 5/8/2020, 1st Lien Term Loan, (1 mo. LIBOR + 4.500%) | $ | 474,560 | 416,820 | ||||||||||||
Big River Steel, LLC, 6.236%, Due 8/11/2023, Term Loan B, (3 mo. LIBOR + 5.000%) | 420,000 | 424,200 | |||||||||||||
Charter NEX US Holdings, Inc., 4.489%, Due 5/16/2024, 2017 Term Loan B, (1 mo. LIBOR + 3.250%) | 7,058,000 | 7,064,635 | |||||||||||||
Diamond (BC) B.V., Due 7/12/2024, USD Term LoanJ | 1,065,000 | 1,057,683 | |||||||||||||
Hi-Crush Partners LP, 5.046%, Due 4/28/2021, Term Loan B, (3 mo. LIBOR + 3.750%) | 3,533,814 | 3,457,237 | |||||||||||||
Huntsman International, LLC, 4.239%, Due 4/1/2023, Term Loan B2, (1 mo. LIBOR + 3.000%) | 286,115 | 287,276 | |||||||||||||
Ineos US Finance, LLC, 4.007%, Due 4/1/2024, 2024 USD Term Loan, (2 mo. LIBOR + 2.750%) | 2,000,000 | 2,004,000 | |||||||||||||
KMG Chemicals, Inc., 5.489%, Due 6/15/2024, Term Loan B, (1 mo. LIBOR + 4.250%) | 1,693,233 | 1,711,181 | |||||||||||||
New Arclin U.S. Holding Corp., | |||||||||||||||
10.170%, Due 2/14/2025, 2nd Lien Term Loan, (6 mo. LIBOR + 8.750%) | 4,000,000 | 4,045,000 | |||||||||||||
5.670%, Due 2/14/2024, 1st Lien Term Loan, (6 mo. LIBOR + 4.250%) | 2,000,000 | 2,015,000 | |||||||||||||
Proampac PG Borrower, LLC, 9.816%, Due 11/18/2024, 2016 2nd Lien Term Loan, (3 mo. LIBOR + 8.500%) | 1,750,000 | 1,777,352 | |||||||||||||
SK Spice S.a.r.L., Due 7/1/2024, USD 2017 Term Loan B2J | 2,004,000 | 2,005,263 | |||||||||||||
Tensar Corporation, 6.046%, Due 7/9/2021, Term Loan, (3 mo. LIBOR + 4.750%) | 718,975 | 671,343 | |||||||||||||
TMS International Corp., 4.309%, Due 8/21/2024, 2017 Term Loan B, (3 mo. LIBOR + 3.000%) | 2,910,000 | 2,906,362 | |||||||||||||
Vantage Specialty Chemicals, Inc., 5.739%, Due 2/5/2021, Term Loan B, (1 mo. LIBOR + 4.500%) | 195,026 | 196,245 | |||||||||||||
Zep, Inc., Due 8/12/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.000%)J | 4,000,000 | 4,003,320 | |||||||||||||
|
| ||||||||||||||
34,042,917 | |||||||||||||||
|
| ||||||||||||||
Consumer - 15.47% | |||||||||||||||
ABG Intermediate Holdings 2, LLC, 5.296%, Due 5/27/2021, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.000%) | 2,974,894 | 2,986,050 | |||||||||||||
AP NMT Acquisition BV, 7.049%, Due 8/13/2021, USD 1st Lien Term Loan, (3 mo. LIBOR + 5.750%) | 788,491 | 740,196 | |||||||||||||
ASP MSG Acquisition Co., Inc., 5.296%, Due 8/16/2023, 2017 Term Loan B, (3 mo. LIBOR + 4.000%) | 120,093 | 120,993 | |||||||||||||
At Home Holding III, Inc., 4.811%, Due 6/3/2022, Term Loan, (3 mo. LIBOR + 3.500%) | 3,324,181 | 3,295,094 |
See accompanying notes
18
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONS - 89.05% (continued) | |||||||||||||||
Consumer - 15.47% (continued) | |||||||||||||||
Augusta Sportswear Group, Inc., 5.739%, Due 10/26/2023, Term Loan B, (1 Week LIBOR + 4.500%) | $ | 648,076 | $ | 638,355 | |||||||||||
Caesars Entertainment Operating Company, Due 3/31/2024, Exit Term LoanJ | 3,429,000 | 3,431,160 | |||||||||||||
Caesars Entertainment Resort Properties, LLC, 4.739%, Due 10/11/2020, Term Loan B, (1 mo. LIBOR + 3.500%) | 735,426 | 738,493 | |||||||||||||
Candy Intermediate Holdings, Inc., 5.796%, Due 6/15/2023, 2016 Term Loan, (3 mo. LIBOR + 4.500%) | 2,262,008 | 2,189,918 | |||||||||||||
Casablanca US Holdings, Inc., 6.061%, Due 3/15/2024, 1st Lien Term Loan, (2 mo. LIBOR + 4.750%) | 6,982,500 | 6,999,956 | |||||||||||||
ClubCorp Club Operations, Inc., Due 8/15/2024, 2017 Incremental Term LoanJ | 3,663,000 | 3,638,568 | |||||||||||||
Comfort Holding, LLC, | |||||||||||||||
11.231%, Due 1/17/2025, 2nd Lien Term Loan, (1 mo. LIBOR + 10.000%) | 3,000,000 | 2,520,000 | |||||||||||||
5.981%, Due 2/5/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.750%) | 6,842,850 | 6,312,529 | |||||||||||||
Cyan Blue Holdco 3, Ltd., Due 7/26/2024, 2017 USD Term Loan BJ | 479,000 | 481,697 | |||||||||||||
Del Monte Foods, Inc., 6.500%, Due 2/18/2021, 1st Lien Term Loan, (3 mo. LIBOR + 3.250%) | 305,625 | 248,210 | |||||||||||||
Deluxe Entertainment Services Group, Inc., 6.811%, Due 2/28/2020, Term Loan 2014, (3 mo. LIBOR + 5.500%) | 2,616,988 | 2,616,988 | |||||||||||||
DHX Media, Ltd., 4.989%, Due 12/29/2023, Term Loan B, (1 mo. LIBOR + 3.750%) | 1,018,000 | 1,020,545 | |||||||||||||
Encompass Digital Media, Inc., 5.800%, Due 6/6/2021, 1st Lien Term Loan, (3 mo. LIBOR + 4.500%) | 3,153,160 | 2,987,619 | |||||||||||||
G-III Apparel Group, Ltd., 6.563%, Due 12/1/2022, Term Loan B, (3 mo. LIBOR + 5.250%) | 1,304,571 | 1,287,456 | |||||||||||||
Genoa, a QoL Healthcare Company, LLC, 4.514%, Due 10/28/2023, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.250%) | 335,465 | 336,304 | |||||||||||||
Give & Go Prepared Foods Corp., 5.564%, Due 7/29/2023, 2017 1st Lien Add-On Term Loan, (3 mo. LIBOR + 4.250%) | 6,216,000 | 6,235,456 | |||||||||||||
Global Eagle Entertainment, Inc., 8.456%, Due 1/6/2023, 1st Lien Term Loan, (1 Week LIBOR + 7.000%) | 2,700,019 | 2,596,068 | |||||||||||||
Greektown Holdings, LLC, 4.239%, Due 3/21/2024, 2017 Term Loan B, (1 mo. LIBOR + 3.000%) | 3,841,000 | 3,832,588 | |||||||||||||
Harbor Freight Tools USA, Inc., 4.489%, Due 8/18/2023, 2016 Term Loan B, (1 mo. LIBOR + 3.250%) | 1,969,925 | 1,976,583 | |||||||||||||
HLF Financing S.a r.l., 6.739%, Due 2/15/2023, Term Loan B, (1 mo. LIBOR + 5.500%) | 6,868,750 | 6,898,835 | |||||||||||||
Horizon Global Corporation, 5.739%, Due 6/30/2021, 2017 Term Loan B, (1 mo. LIBOR + 4.500%) | 63,159 | 63,712 | |||||||||||||
Intrawest Resorts Holdings, Inc., | |||||||||||||||
4.489%, Due 7/31/2024, Term Loan B1, (1 mo. LIBOR + 3.250%) | 2,268,191 | 2,268,191 | |||||||||||||
4.489%, Due 7/31/2024, Term Loan B2, (1 mo. LIBOR + 3.250%) | 1,197,809 | 1,197,809 | |||||||||||||
KIK Custom Products, Inc., 5.793%, Due 8/26/2022, 2015 Term Loan B, (3 mo. LIBOR + 4.500%) | 771,831 | 777,944 | |||||||||||||
Laureate Education, Inc., 5.739%, Due 4/26/2024, 2017 Term Loan B, (1 mo. LIBOR + 4.500%) | 6,478,763 | 6,503,058 | |||||||||||||
Leslie’s Poolmart, Inc., 5.061%, Due 8/16/2023, 2016 Term Loan, (3 mo. LIBOR + 3.750%) | 6,964,912 | 6,961,987 | |||||||||||||
Lions Gate Entertainment Corp., 4.239%, Due 12/8/2023, 2016 1st Lien Term Loan, (1 mo. LIBOR + 3.000%) | 2,814,125 | 2,835,231 | |||||||||||||
Mohegan Tribal Gaming Authority, 5.239%, Due 10/13/2023, 2016 Term Loan B, (1 mo. LIBOR + 4.000%) | 2,871,449 | 2,896,574 | |||||||||||||
Nature’s Bounty Co. (The), | |||||||||||||||
Due 8/11/2024, New 2017 Term LoanJ | 5,654,000 | 5,615,157 | |||||||||||||
Due 9/15/2025, 2017 2nd Lien Term LoanJ | 4,000,000 | 3,966,680 | |||||||||||||
NBG Acquisition, Inc., 6.914%, Due 4/26/2024, Term Loan, (6 mo. LIBOR + 5.500%) | 1,388,000 | 1,374,120 | |||||||||||||
NPC International, Inc., 4.736%, Due 4/19/2024, 1st Lien Term Loan, (1 mo. LIBOR + 3.500%) | 3,973,000 | 3,992,865 | |||||||||||||
P.F. Chang’s China Bistro, Inc., Due 8/18/2022, 2017 Term Loan BJ | 2,858,000 | 2,772,260 | |||||||||||||
ProQuest, LLC, 4.989%, Due 10/24/2021, New Term Loan B, (1 mo. LIBOR + 3.750%) | 5,210,756 | 5,258,538 | |||||||||||||
Q Holding Company, 6.296%, Due 12/16/2021, Term Loan B, (3 mo. LIBOR + 5.000%) | 6,249,252 | 6,257,063 | |||||||||||||
Quincy Newspapers, Inc., 6.500%, Due 10/13/2022, Term Loan B, (1 mo. LIBOR + 3.250%) | 212,603 | 213,269 | |||||||||||||
Raley’s, 6.489%, Due 5/18/2022, Term Loan, (1 mo. LIBOR + 5.250%) | 831,128 | 837,361 | |||||||||||||
Shutterfly, Inc., Due 8/9/2024, Delayed Draw Term Loan BD J | 681,000 | 675,470 | |||||||||||||
Staples, Inc., Due 8/6/2024, 2017 Term Loan BJ | 14,056,000 | 13,982,487 | |||||||||||||
Sundial Brands, LLC, 5.981%, Due 8/9/2024, 2017 Term Loan B, (1 mo. LIBOR + 4.750%) | 1,682,000 | 1,656,770 | |||||||||||||
TouchTunes Interactive Networks, Inc., | |||||||||||||||
6.046%, Due 5/28/2021, Incremental Term Loan, (3 mo. LIBOR + 4.750%)K | 1,496,183 | 1,503,664 | |||||||||||||
6.046%, Due 5/29/2021, 1st Lien Term Loan, (3 mo. LIBOR + 4.750%) | 895,224 | 899,700 |
See accompanying notes
19
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONS - 89.05% (continued) | |||||||||||||||
Consumer - 15.47% (continued) | |||||||||||||||
VC GB Holdings, Inc., 9.239%, Due 2/28/2025, 2nd Lien Term Loan, (1 mo. LIBOR + 8.000%) | $ | 3,000,000 | $ | 2,970,000 | |||||||||||
Winnebago Industries, Inc., 5.729%, Due 11/8/2023, Term Loan, (3 mo. LIBOR + 4.500%) | 4,653,813 | 4,723,621 | |||||||||||||
|
| ||||||||||||||
144,333,192 | |||||||||||||||
|
| ||||||||||||||
Defense - 0.92% | |||||||||||||||
Garda World Security Corporation, 7.250%, Due 5/24/2024, 2017 Term Loan, (PRIME + 3.000%) | 5,262,956 | 5,291,481 | |||||||||||||
MacDonald, Dettwiler & Associates, Ltd., Due 7/6/2024, Term Loan BJ | 3,324,000 | 3,308,211 | |||||||||||||
|
| ||||||||||||||
8,599,692 | |||||||||||||||
|
| ||||||||||||||
Energy - 1.49% | |||||||||||||||
Expro FinServices S.a r.l., 5.960%, Due 9/2/2021, Term Loan, (3 mo. LIBOR + 4.750%) | 1,468,674 | 944,357 | |||||||||||||
Green Plains Renewable Energy, Inc., Due 8/18/2023, 2017 Term Loan BJ | 1,083,000 | 1,083,455 | |||||||||||||
Navios Maritime Midstream Partners LP, 5.780%, Due 6/18/2020, Term Loan B, (3 mo. LIBOR + 4.500%) | 74,480 | 74,108 | |||||||||||||
Southcross Energy Partners LP, 5.546%, Due 8/4/2021, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%) | 8,012,432 | 7,015,926 | |||||||||||||
TEX Operations Co., LLC, | |||||||||||||||
3.982%, Due 8/4/2023, Exit Term Loan C, (1 mo. LIBOR + 2.750%) | 889,757 | 889,633 | |||||||||||||
3.987%, Due 8/4/2023, Exit Term Loan B, (1 mo. LIBOR + 2.750%) | 3,881,737 | 3,881,193 | |||||||||||||
|
| ||||||||||||||
13,888,672 | |||||||||||||||
|
| ||||||||||||||
Financial - 7.69% | |||||||||||||||
Acrisure, LLC, 6.296%, Due 11/22/2023, 2016 Term Loan B, (3 mo. LIBOR + 5.000%) | 4,332,143 | 4,380,879 | |||||||||||||
AlixPartners, LLP, 4.296%, Due 4/4/2024, 2017 Term Loan B, (3 mo. LIBOR + 3.000%) | 3,936,135 | 3,954,163 | |||||||||||||
AmeriLife Group, LLC, | |||||||||||||||
9.978%, Due 1/10/2023, 2nd Lien Term Loan, (1 mo. LIBOR + 8.750%) | 186,000 | 180,420 | |||||||||||||
5.989%, Due 6/18/2022, 1st Lien Term Loan, (1 mo. LIBOR + 4.750%) | 1,492,288 | 1,466,173 | |||||||||||||
Aretec Group, Inc., 8.000%, Due 11/23/2020, Exit Term Loan, (Fixed + 8.000%) | 852,390 | 860,914 | |||||||||||||
Ascensus, Inc., 5.296%, Due 12/3/2022, 2017 Term Loan, (3 mo. LIBOR + 4.000%) | 1,376,625 | 1,383,508 | |||||||||||||
Asurion, LLC, Due 11/3/2023, 2017 Term Loan B5, (3 mo. LIBOR + 3.000%)J | 1,146,000 | 1,150,298 | |||||||||||||
Big Jack Holdings LP, 5.490%, Due 4/5/2024, 2017 Term Loan B, (1 mo. LIBOR + 4.250%) | 3,436,307 | 3,444,898 | |||||||||||||
Citco Funding, LLC, 4.239%, Due 3/31/2022, 2017 Term Loan, (1 mo. LIBOR + 3.000%) | 6,982,500 | 7,043,597 | |||||||||||||
Confie Seguros Holding II Co., | |||||||||||||||
11.046%, Due 5/8/2019, 2nd Lien Term Loan, (3 mo. LIBOR + 9.750%) | 3,456,000 | 3,389,748 | |||||||||||||
6.739%, Due 4/19/2022, 2016 Term Loan B, (1 mo. LIBOR + 5.500%) | 10,013,201 | 9,883,030 | |||||||||||||
Duke Finance, LLC, 5.514%, Due 2/21/2024, 2017 Incremental Term Loan, (3 mo. LIBOR + 4.250%) | 5,136,982 | 5,149,825 | |||||||||||||
First Eagle Holdings, Inc., 4.796%, Due 12/1/2022, 2017 Term Loan B, (3 mo. LIBOR + 3.500%) | 1,519,161 | 1,533,881 | |||||||||||||
Focus Financial Partners, LLC, 4.549%, Due 7/3/2024, 1st Lien Term Loan, (3 mo. LIBOR + 3.250%) | 2,024,000 | 2,046,770 | |||||||||||||
Freedom Mortgage Corporation, 6.956%, Due 2/23/2022, 1st Lien Term Loan, (6 mo. LIBOR + 5.500%) | 5,962,500 | 6,040,788 | |||||||||||||
GreenSky Holdings, LLC, 5.250%, Due 8/26/2024, Term Loan, (1 mo. LIBOR + 4.000%) | 745,000 | 741,275 | |||||||||||||
Higginbotham & Associates, LLC, 6.239%, Due 11/25/2021, 1st Lien Term Loan, (1 mo. LIBOR + 5.000%) | 2,062,797 | 2,070,532 | |||||||||||||
Hyperion Insurance Group, Ltd., 5.250%, Due 4/29/2022, 2017 Term Loan B, (1 mo. LIBOR + 4.000%) | 6,903,988 | 6,986,836 | |||||||||||||
Jane Street Group, LLC, 5.734%, Due 8/11/2022, 2017 Term Loan B, (3 mo. LIBOR + 4.500%) | 3,500,000 | 3,530,625 | |||||||||||||
Keystone Acquisition Corp., 6.546%, Due 5/27/2024, 1st Lien Term Loan, (3 mo. LIBOR + 5.250%) | 305,000 | 303,856 | |||||||||||||
Liquidnet Holdings, Inc., 5.479%, Due 7/15/2024, 2017 Term Loan, (3 mo. LIBOR + 4.250%) | 645,000 | 645,000 | |||||||||||||
NXT Capital, Inc., 5.740%, Due 11/22/2022, 2016 Term Loan, (1 mo. LIBOR + 4.500%) | 2,653,665 | 2,693,470 | |||||||||||||
St. Georges University, 5.490%, Due 7/6/2022, 2016 Term Loan B, (1 mo. LIBOR + 4.250%) | 2,825,237 | 2,837,611 | |||||||||||||
|
| ||||||||||||||
71,718,097 | |||||||||||||||
|
|
See accompanying notes
20
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONS - 89.05% (continued) | |||||||||||||||
Health Care - 1.04% | |||||||||||||||
Carestream Dental Equiment, Inc, Due 8/7/2024, 2017 1st Lien Term Loan BJ | $ | 2,066,000 | $ | 2,053,088 | |||||||||||
Curo Health Services Holdings, Inc., 5.309%, Due 2/7/2022, 2015 1st Lien Term Loan, (3 mo. LIBOR + 4.000%) | 2,989,834 | 2,991,089 | |||||||||||||
DuPage Medical Group, Ltd., | |||||||||||||||
4.315%, Due 8/15/2024, 1st Lien Term Loan, (3 mo. LIBOR + 3.000%) | 3,154,000 | 3,146,115 | |||||||||||||
8.315%, Due 8/15/2025, 2nd Lien Term Loan, (3 mo. LIBOR + 7.000%) | 1,500,000 | 1,492,500 | |||||||||||||
|
| ||||||||||||||
9,682,792 | |||||||||||||||
|
| ||||||||||||||
Manufacturing - 25.54% | |||||||||||||||
84 Lumber Company, 6.984%, Due 10/4/2023, Term Loan B, (1 mo. LIBOR + 5.750%) | 4,082,663 | 4,123,489 | |||||||||||||
Access CIG, LLC, 6.236%, Due 10/18/2021, 1st Lien Term Loan, (1 mo. LIBOR + 5.000%) | 369,111 | 369,941 | |||||||||||||
Accuride Corporation, 8.296%, Due 10/21/2023, Term Loan B, (3 mo. LIBOR + 7.000%) | 276,293 | 280,438 | |||||||||||||
Advanced Integration Technology LP, 5.989%, Due 3/21/2023, 2017 Term Loan B, (1 mo. LIBOR + 4.750%) | 5,311,134 | 5,204,911 | |||||||||||||
Aerial Merger Sub, Inc., 9.312%, Due 2/24/2025, 2nd Lien Term Loan, (3 mo. LIBOR + 8.000%) | 2,751,000 | 2,778,510 | |||||||||||||
American Bath Group, LLC, | |||||||||||||||
6.546%, Due 9/30/2023, 2017 Term Loan B, (3 mo. LIBOR + 5.250%) | 5,456,360 | 5,429,078 | |||||||||||||
11.046%, Due 9/27/2024, 2016 2nd Lien Term Loan, (3 mo. LIBOR + 9.750%) | 537,000 | 534,315 | |||||||||||||
American Traffic Solutions, Inc., 5.731%, Due 5/24/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.500%) | 2,547,000 | 2,553,368 | |||||||||||||
AP Exhaust Acquisition, LLC, 6.309%, Due 5/10/2024, 1st Lien Term Loan, (3 mo. LIBOR + 5.000%) | 597,503 | 585,552 | |||||||||||||
Aptean, Inc., 10.800%, Due 12/14/2023, 2016 2nd Lien Term Loan, (3 mo. LIBOR + 9.500%) | 1,000,000 | 998,130 | |||||||||||||
Ardent Legacy Acquisitions, Inc., 6.796%, Due 8/4/2021, 2015 Term Loan B, (3 mo. LIBOR + 5.500%) | 488,750 | 489,361 | |||||||||||||
Associated Asphalt Partners, LLC, 6.489%, Due 4/5/2024, 2017 Term Loan B, (1 mo. LIBOR + 5.250%) | 3,042,000 | 3,011,580 | |||||||||||||
Avantor Performance Materials Holdings, LLC, 5.240%, Due 3/10/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.000%) | 4,355,085 | 4,353,735 | |||||||||||||
Blackboard, Inc., 6.304%, Due 6/30/2021, Term Loan B4, (3 mo. LIBOR + 5.000%) | 7,110,797 | 6,995,247 | |||||||||||||
Blucora, Inc., 5.037%, Due 5/22/2024, Term Loan B, (3 mo. LIBOR + 3.750%) | 2,140,800 | 2,162,208 | |||||||||||||
Bright Bidco B.V., 5.796%, Due 6/30/2024, Term Loan B, (3 mo. LIBOR + 4.500%) | 9,230,000 | 9,287,687 | |||||||||||||
Chef’s Warehouse Leasing Co., LLC (The), 5.990%, Due 6/22/2022, 1st Lien Term Loan, (1 mo. LIBOR + 4.750%) | 733,930 | 742,187 | |||||||||||||
Commercial Vehicle Group, Inc., 7.239%, Due 3/15/2024, Term Loan B, (1 mo. LIBOR + 6.000%) | 2,923,000 | 2,930,308 | |||||||||||||
Constellis Holdings, LLC, | |||||||||||||||
6.296%, Due 4/21/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 5.000%) | 5,563,000 | 5,514,324 | |||||||||||||
10.296%, Due 4/21/2025, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 9.000%) | 5,861,000 | 5,799,928 | |||||||||||||
CPI International, Inc., 4.734%, Due 7/26/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 3.500%) | 2,102,000 | 2,095,000 | |||||||||||||
DAE Aviation Holdings, Inc., Due 7/7/2022, 2017 1st Lien Term LoanJ | 958,000 | 960,395 | |||||||||||||
Daseke, Inc., | |||||||||||||||
6.739%, Due 2/2/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 5.500%) | 2,475,225 | 2,490,695 | |||||||||||||
8.750%, Due 2/2/2024, Delayed Draw Term LoanD | 518,571 | 521,813 | |||||||||||||
Dragon Merger Sub, LLC, 5.313%, Due 7/24/2024, USD 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.000%) | 1,832,000 | 1,842,681 | |||||||||||||
EagleView Technology Corporation, 5.560%, Due 7/22/2022, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%) | 282,841 | 282,841 | |||||||||||||
Eastman Kodak Company, 7.507%, Due 9/3/2019, Exit Term Loan, (2 mo. LIBOR + 6.250%) | 1,370,344 | 1,351,502 | |||||||||||||
Electrical Components International, Inc., 6.046%, Due 5/28/2021, 2014 Term Loan B, (3 mo. LIBOR + 4.750%) | 7,033,164 | 7,068,329 | |||||||||||||
Electro Rent Corporation, 6.239%, Due 1/19/2024, 1st Lien Term Loan, (1 mo. LIBOR + 5.000%) | 1,309,055 | 1,320,509 | |||||||||||||
Engineered Machinery Holdings, Inc., | |||||||||||||||
4.556%, Due 7/19/2024, USD 1st Lien Term Loan, (3 mo. LIBOR + 3.250%) | 1,822,124 | 1,819,846 | |||||||||||||
8.556%, Due 7/18/2025, USD 2nd Lien Term Loan, (3 mo. LIBOR + 7.250%) | 1,310,000 | 1,314,913 | |||||||||||||
4.485%, Due 7/19/2024, 1st Lien Delayed Draw Term LoanD | 236,876 | 236,580 | |||||||||||||
Euramax International, Inc., 16.000%, Due 2/6/2021, Unsecured Term Loan, (PIK (14.000%) + 2.000%) | 302,095 | 247,718 |
See accompanying notes
21
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONS - 89.05% (continued) | |||||||||||||||
Manufacturing - 25.54% (continued) | |||||||||||||||
GCA Services Group, Inc., 8.000%, Due 3/1/2023, 2016 Term Loan, (PRIME + 3.750%) | $ | 734,600 | $ | 736,436 | |||||||||||
Global Brass & Copper, Inc., 4.500%, Due 7/18/2023, 2016 Term Loan B, (1 mo. LIBOR + 3.250%) | 1,985,000 | 1,997,406 | |||||||||||||
GlobalLogic Holdings, Inc., 5.796%, Due 6/13/2022, 2016 Term Loan B, (3 mo. LIBOR + 4.500%) | 5,985,000 | 5,999,963 | |||||||||||||
Greenway Health, LLC, 6.050%, Due 2/14/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.750%) | 8,000,000 | 8,010,000 | |||||||||||||
Hayward Industries, Inc., 4.739%, Due 7/18/2024, Term Loan B, (1 mo. LIBOR + 3.250%) | 1,568,000 | 1,574,868 | |||||||||||||
Infiltrator Systems, Inc., 4.796%, Due 5/27/2022, 2016 Term Loan B, (3 mo. LIBOR + 3.500%) | 3,795,028 | 3,817,153 | |||||||||||||
Information Resources, Inc., 5.486%, Due 1/18/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.250%) | 3,524,168 | 3,546,194 | |||||||||||||
Innovative Xcessories & Services, LLC, 6.040%, Due 11/29/2022, Term Loan B, (3 mo. LIBOR + 4.750%) | 3,867,308 | 3,910,815 | |||||||||||||
Interior Logic Group, Inc., 7.210%, Due 3/1/2024, 2017 Term Loan B, (3 mo. LIBOR + 6.000%) | 7,900,000 | 7,880,250 | |||||||||||||
Internap Corporation, 8.240%, Due 4/6/2022, 2017 Term Loan, (1 mo. LIBOR + 7.000%) | 915,000 | 919,575 | |||||||||||||
IPS Corporation, 6.486%, Due 12/20/2023, 2016 1st Lien Term Loan, (1 mo. LIBOR + 5.250%) | 6,969,987 | 6,987,412 | |||||||||||||
LANDesk Group, Inc., | |||||||||||||||
5.490%, Due 1/20/2024, 2017 Term Loan B, (1 mo. LIBOR + 4.250%) | 1,496,464 | 1,475,888 | |||||||||||||
10.240%, Due 1/20/2025, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 9.000%) | 2,828,000 | 2,794,064 | |||||||||||||
Livingston International, Inc., | |||||||||||||||
5.546%, Due 4/18/2019, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%) | 4,506,285 | 4,260,332 | |||||||||||||
9.546%, Due 4/18/2020, 2nd Lien Term Loan, (3 mo. LIBOR + 8.250%) | 750,000 | 702,188 | |||||||||||||
LSC Communications, Inc., 7.239%, Due 9/30/2022, Term Loan B, (1 mo. LIBOR + 6.000%) | 1,520,489 | 1,526,190 | |||||||||||||
LTI Holdings, Inc., 5.989%, Due 5/8/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.750%) | 4,813,000 | 4,782,919 | |||||||||||||
Marine Acquisition Corp., 4.989%, Due 1/30/2021, New Term Loan B, (1 mo. LIBOR + 3.750%)K | 3,263,656 | 3,271,815 | |||||||||||||
Mirion Technologies, Inc., 6.046%, Due 3/31/2022, Term Loan B, (3 mo. LIBOR + 4.750%) | 818,730 | 816,683 | |||||||||||||
Navios Maritime Partners LP, 6.250%, Due 9/14/2020, 2017 Term Loan B, (3 mo. LIBOR + 5.000%) | 2,221,875 | 2,210,766 | |||||||||||||
Netsmart Technologies, Inc., | |||||||||||||||
10.817%, Due 10/5/2023, 2nd Lien Term Loan, (3 mo. LIBOR + 9.500%) | 354,000 | 354,000 | |||||||||||||
5.796%, Due 4/19/2023, 2016 Term Loan C1, (3 mo. LIBOR + 4.500%) | 1,615,955 | 1,632,115 | |||||||||||||
NN, Inc. | |||||||||||||||
5.489%, Due 10/19/2022, 2016 Term Loan B, (1 mo. LIBOR + 4.250%) | 6,348,233 | 6,379,975 | |||||||||||||
4.989%, Due 3/22/2021, 2017 Term Loan, (1 mo. LIBOR + 3.750%) | 1,397,880 | 1,404,869 | |||||||||||||
Novetta Solutions, LLC, 6.300%, Due 10/16/2022, 2015 Term Loan, (3 mo. LIBOR + 5.000%) | 431,916 | 415,719 | |||||||||||||
PAE Holding Corporation, 6.739%, Due 10/20/2022, 1st Lien Term Loan, (1 mo. LIBOR + 5.500%) | 6,022,884 | 6,034,207 | |||||||||||||
PGT, Inc., 6.046%, Due 2/16/2022, 2016 Term Loan, (2 mo. LIBOR + 4.750%)K | 2,577,062 | 2,596,390 | |||||||||||||
Pike Corporation, 9.240%, Due 9/2/2024, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.000%) | 1,000,000 | 1,010,000 | |||||||||||||
PLZ Aeroscience Corporation, 4.799%, Due 7/31/2022, USD Term Loan, (3 mo. LIBOR + 3.500%) | 4,318,992 | 4,324,390 | |||||||||||||
Polycom, Inc., 6.484%, Due 9/27/2023, 1st Lien Term Loan, (1 mo. LIBOR + 5.250%) | 3,536,858 | 3,580,184 | |||||||||||||
Power Products, LLC, 5.307%, Due 12/20/2022, 2017 Term Loan B, (3 mo. LIBOR + 4.000%) | 2,485,271 | 2,497,697 | |||||||||||||
Project Ruby Ultimate Parent Corp., 4.989%, Due 2/9/2024, Term Loan B, (1 mo. LIBOR + 3.750%) | 4,984,093 | 5,000,690 | |||||||||||||
Q Technologies Inc., 9.739%, Due 4/5/2023, Term Loan B, (1 mo. LIBOR + 8.500%)K | 4,121,000 | 4,069,488 | |||||||||||||
Ramundsen Holdings, LLC, 5.546%, Due 2/1/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%) | 1,559,093 | 1,562,990 | |||||||||||||
Securus Technologies Holdings, Inc., 9.000%, Due 4/30/2021, 2nd Lien Term Loan, (1 Week LIBOR + 7.750%) | 494,000 | 495,235 | |||||||||||||
SIRVA Worldwide, Inc., 7.811%, Due 11/14/2022, 2016 Term Loan, (3 mo. LIBOR + 6.500%) | 1,990,000 | 1,999,950 | |||||||||||||
SiteOne Landscape Supply, Inc., 4.740%, Due 4/29/2022, 2017 Term Loan B, (1 mo. LIBOR + 3.500%) | 363,418 | 365,235 | |||||||||||||
SolarWinds Holdings, Inc., 4.739%, Due 2/5/2023, 2017 Term Loan, (1 mo. LIBOR + 3.500%) | 5,916,835 | 5,938,194 | |||||||||||||
Stratus Technologies, Inc., 6.240%, Due 4/28/2021, 1st Lien Term Loan, (1 mo. LIBOR + 5.000%) | 2,969,150 | 2,976,573 | |||||||||||||
Synchronoss Technologies, Inc., 5.757%, Due 1/19/2024, Term Loan, (3 mo. LIBOR + 4.500%) | 4,807,395 | 4,735,284 | |||||||||||||
TigerLuxOne S.a.r.l., 6.046%, Due 2/16/2024, 1st Lien Term Loan B, (3 mo. LIBOR + 4.750%) | 3,375,000 | 3,388,702 | |||||||||||||
TricorBraun Holdings, Inc., | |||||||||||||||
5.046%, Due 11/30/2023, 2016 1st Lien Term Loan, (3 mo. LIBOR + 3.750%) | 2,713,636 | 2,728,561 | |||||||||||||
3.750%, Due 11/30/2023, 1st Lien Delayed Draw Term LoanD | 272,727 | 274,227 | |||||||||||||
TurboCombustor Technology, Inc, 5.796%, Due 12/2/2020, New Term Loan B, (3 mo. LIBOR + 4.500%) | 681,235 | 647,173 | |||||||||||||
U.S. Farathane, LLC, 5.296%, Due 12/23/2021, Reprice Term Loan, (3 mo. LIBOR + 4.000%) | 2,535,727 | 2,548,406 | |||||||||||||
Verisk Analytics, Inc., 6.300%, Due 5/10/2023, 1st Lien Term Loan, (3 mo. LIBOR + 5.000%) | 779,130 | 784,973 |
See accompanying notes
22
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONS - 89.05% (continued) | |||||||||||||||
Manufacturing - 25.54% (continued) | |||||||||||||||
VIP Cinema Holdings, Inc., 7.300%, Due 2/1/2023, USD Term Loan B, (3 mo. LIBOR + 6.000%) | $ | 4,206,750 | $ | 4,233,042 | |||||||||||
WD Wolverine Holdings, LLC, 6.796%, Due 8/16/2022, 1st Lien Term Loan, (3 mo. LIBOR + 5.500%) | 3,975,000 | 3,816,000 | |||||||||||||
Werner Co., 5.258%, Due 6/23/2024, 2017 Term Loan, (2 mo. LIBOR + 4.000%) | 6,444,000 | 6,444,000 | |||||||||||||
WP CPP Holdings, LLC, 4.811%, Due 12/28/2019, Term Loan B3, (1 mo. LIBOR + 3.500%) | 3,253,773 | 3,166,995 | |||||||||||||
|
| ||||||||||||||
238,323,300 | |||||||||||||||
|
| ||||||||||||||
Media - 0.91% | |||||||||||||||
Harland Clarke Holdings Corp., 6.796%, Due 2/9/2022, Term Loan B6, (3 mo. LIBOR + 5.500%) | 4,518,829 | 4,532,024 | |||||||||||||
Imagine! Print Solutions, Inc., | |||||||||||||||
6.050%, Due 6/21/2022, 2017 Term Loan, (3 mo. LIBOR + 4.750%) | 2,539,635 | 2,539,635 | |||||||||||||
10.051%, Due 6/21/2023, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.750%) | 1,426,000 | 1,411,740 | |||||||||||||
|
| ||||||||||||||
8,483,399 | |||||||||||||||
|
| ||||||||||||||
Service - 20.70% | |||||||||||||||
21st Century Oncology Holdings, Inc., 7.425%, Due 4/30/2022, Term Loan, (3 mo. LIBOR + 6.125%)E | 2,592,659 | 2,434,948 | |||||||||||||
ABB Concise Optical Group, LLC, 6.243%, Due 6/15/2023, 2016 Term Loan B, (3 mo. LIBOR + 5.000%) | 244,924 | 245,230 | |||||||||||||
AI Aqua Merger Sub, Inc., Due 12/13/2023, 2017 Incremental Term LoanJ | 2,053,000 | 2,056,860 | |||||||||||||
Alvogen Pharma US, Inc., 6.240%, Due 4/2/2022, Term Loan, (1 mo. LIBOR + 5.000%) | 713,952 | 706,812 | |||||||||||||
Amaya Holdings B.V., 4.796%, Due 8/1/2021, Repriced Term Loan B, (3 mo. LIBOR + 3.500%) | 2,224,212 | 2,229,261 | |||||||||||||
Ancestry.com Operations Inc., 4.480%, Due 10/19/2023, 2017 1st Lien Term Loan, (1 mo. LIBOR + 3.250%) | 3,014,550 | 3,027,754 | |||||||||||||
Aricent Technologies, | |||||||||||||||
9.729%, Due 4/14/2022, 2nd Lien Term Loan, (1 mo. LIBOR + 8.500%) | 5,118,000 | 5,143,590 | |||||||||||||
5.729%, Due 4/14/2021, 1st Lien Term Loan, (1 mo. LIBOR + 4.500%) | 7,225,818 | 7,223,578 | |||||||||||||
ASP MCS Acquisition Corp., 6.056%, Due 5/18/2024, Term Loan B, (3 mo. LIBOR + 4.750%) | 2,845,000 | 2,884,119 | |||||||||||||
Auction.com, LLC, 6.240%, Due 5/12/2019, Term Loan B, (1 mo. LIBOR + 5.000%) | 260,993 | 260,340 | |||||||||||||
BCPE Eagle Buyer, LLC, | |||||||||||||||
5.489%, Due 3/18/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.250%) | 3,765,983 | 3,765,983 | |||||||||||||
9.239%, Due 3/17/2025, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.000%) | 2,061,000 | 2,063,576 | |||||||||||||
Beasley Mezzanine Holdings, LLC, 7.239%, Due 9/27/2023, Term Loan B, (1 mo. LIBOR + 6.000%) | 191,675 | 193,353 | |||||||||||||
Brand Energy & Infrastructure Services, Inc., 5.564%, Due 6/21/2024, 2017 Term Loan, (2 mo. LIBOR + 4.250%) | 7,333,000 | 7,350,306 | |||||||||||||
Casablanca US Holdings, Inc., 10.311%, Due 3/15/2025, 2nd Lien Term Loan, (3 mo. LIBOR + 9.000%) | 3,000,000 | 3,030,000 | |||||||||||||
CDS U.S. Intermediate Holdings, Inc., | |||||||||||||||
Due 7/8/2022, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.750%)J | 4,770,000 | 4,752,112 | |||||||||||||
9.546%, Due 7/10/2023, 2nd Lien Term Loan, (3 mo. LIBOR + 8.250%) | 639,796 | 638,996 | |||||||||||||
CH Hold Corp., 4.239%, Due 2/1/2024, 1st Lien Term Loan, (1 mo. LIBOR + 3.000%) | 7,137,392 | 7,161,160 | |||||||||||||
Change Healthcare Holdings, Inc., 3.989%, Due 3/1/2024, 2017 Term Loan B, (1 mo. LIBOR + 2.750%) | 4,987,500 | 4,985,006 | |||||||||||||
CIBT Holdings, Inc., 5.239%, Due 5/24/2024, 2017 Term Loan, (1 mo. LIBOR + 4.000%) | 6,037,000 | 6,052,092 | |||||||||||||
ContextMedia Health, LLC, 7.750%, Due 12/9/2021, Term Loan B, (1 mo. LIBOR + 6.500%) | 2,339,025 | 2,341,949 | |||||||||||||
ConvergeOne Holdings Corporation, 6.050%, Due 6/20/2024, 2017 Term Loan B, (3 mo. LIBOR + 4.750%) | 509,000 | 508,578 | |||||||||||||
Coral-US Co-Borrower, LLC, 4.739%, Due 1/31/2025, Term Loan B3, (1 mo. LIBOR + 3.500%) | 5,454,000 | 5,421,058 | |||||||||||||
DTI Holdco, Inc., 6.561%, Due 9/30/2023, 2016 Term Loan B, (3 mo. LIBOR + 5.250%) | 4,696,861 | 4,485,502 | |||||||||||||
Equian, LLC, | |||||||||||||||
5.051%, Due 5/20/2024, Delayed Draw Term LoanD | 470,588 | 474,706 | |||||||||||||
5.066%, Due 5/20/2024, Term Loan B, (3 mo. LIBOR + 3.750%) | 1,529,412 | 1,542,794 | |||||||||||||
EVO Payments International, LLC, 6.240%, Due 12/22/2023, 1st Lien Term Loan, (1 mo. LIBOR + 5.000%) | 4,987,500 | 5,043,609 | |||||||||||||
Extreme Reach, Inc., | |||||||||||||||
7.550%, Due 2/7/2020, 1st Lien Term Loan, (3 mo. LIBOR + 6.250%) | 430,798 | 429,721 | |||||||||||||
11.267%, Due 1/24/2021, 2nd Lien Term Loan, (3 mo. LIBOR + 10.000%) | 217,000 | 208,320 | |||||||||||||
FHC Health Systems, Inc., 5.239%, Due 12/23/2021, 2014 Term Loan, (1 mo. LIBOR + 4.000%) | 162,311 | 157,442 | |||||||||||||
Floor and Decor Outlets of America, Inc., 4.740%, Due 9/30/2023, 2017 Term Loan, (1 mo. LIBOR + 3.500%) | 1,100,688 | 1,100,688 |
See accompanying notes
23
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONS - 89.05% (continued) | |||||||||||||||
Service - 20.70% (continued) | |||||||||||||||
Harbortouch Payments, LLC, 5.989%, Due 10/11/2023, 2016 1st Lien Term Loan, (1 mo. LIBOR + 4.750%) | $ | 1,263,650 | $ | 1,267,605 | |||||||||||
HD Supply Waterworks, Ltd., 4.455%, Due 8/1/2024, 2017 Term Loan B, (6 mo. LIBOR + 3.000%) | 3,000,000 | 3,003,750 | |||||||||||||
Heartland Dental, LLC, | |||||||||||||||
6.060%, Due 7/13/2023, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.750%) | 8,554,000 | 8,554,000 | |||||||||||||
9.820%, Due 7/26/2024, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.500%) | 2,988,000 | 3,025,350 | |||||||||||||
Highland Acquisitions Holdings, LLC, 6.739%, Due 11/30/2022, Term Loan B, (1 mo. LIBOR + 5.500%) | 2,312,120 | 2,321,761 | |||||||||||||
IG Investment Holdings, LLC, 5.296%, Due 10/31/2021, 2017 Term Loan, (3 mo. LIBOR + 4.000%) | 2,190,923 | 2,203,696 | |||||||||||||
Jackson Hewitt Inc., 8.311%, Due 7/24/2020, Term Loan B, (PRIME + 6.000%) | 253,148 | 241,123 | |||||||||||||
Kingpin Intermediate Holdings, LLC, | |||||||||||||||
5.480%, Due 6/28/2024, 2017 1st Lien Term Loan B, (1 mo. LIBOR + 4.250%) | 3,670,000 | 3,695,984 | |||||||||||||
Due 6/28/2025, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.750%)J | 1,733,000 | 1,761,889 | |||||||||||||
KUEHG Corp., 9.514%, Due 8/18/2025, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.250%) | 2,776,000 | 2,762,120 | |||||||||||||
LSF9 Atlantis Holdings, LLC, 7.232%, Due 5/1/2023, 2017 Term Loan, (1 mo. LIBOR + 6.000%) | 2,109,000 | 2,113,387 | |||||||||||||
McGraw-Hill Global Education Holdings, LLC, 5.239%, Due 5/4/2022, 2016 Term Loan B, (1 mo. LIBOR + 4.000%) | 1,715,576 | 1,682,877 | |||||||||||||
Mister Car Wash Holdings, Inc., 5.026%, Due 8/20/2021, Term Loan B, (2 mo. LIBOR + 3.750%) | �� | 346,451 | 347,029 | ||||||||||||
NEP/NCP Holdco, Inc., | |||||||||||||||
4.489%, Due 7/21/2022, Incremental Term Loan, (1 mo. LIBOR + 3.250%) | 2,730,000 | 2,716,350 | |||||||||||||
8.231%, Due 1/23/2023, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 7.000%) | 606,362 | 607,878 | |||||||||||||
New Millennium HoldCo, Inc., 7.739%, Due 12/21/2020, Exit Term Loan, (1 mo. LIBOR + 6.500%) | 996,006 | 547,803 | |||||||||||||
NMSC Holdings, Inc., 6.296%, Due 4/19/2023, 1st Lien Term Loan, (3 mo. LIBOR + 5.000%) | 2,233,578 | 2,261,497 | |||||||||||||
nThrive, Inc., 5.739%, Due 10/20/2022, 2016 1st Lien Term Loan, (1 mo. LIBOR + 4.500%) | 2,062,195 | 2,069,928 | |||||||||||||
Playpower, Inc., 6.046%, Due 6/23/2021, 2015 1st Lien Term Loan, (3 mo. LIBOR + 4.750%) | 686,651 | 690,084 | |||||||||||||
Quorum Health Corporation, 8.065%, Due 4/29/2022, Term Loan B, (1 mo. LIBOR + 5.750%) | 1,935,220 | 1,947,741 | |||||||||||||
Research Now Group, Inc., | |||||||||||||||
5.796%, Due 3/18/2021, Term Loan, (3 mo. LIBOR + 4.500%) | 1,471,790 | 1,464,431 | |||||||||||||
10.046%, Due 3/18/2022, 2nd Lien Term Loan, (3 mo. LIBOR + 8.750%) | 48,000 | 47,040 | |||||||||||||
SAI Global, Ltd., 5.796%, Due 11/18/2023, USD 1st Lien Term Loan, (3 mo. LIBOR + 4.500%) | 995,000 | 1,004,950 | |||||||||||||
STG-Fairway Acquisitions, Inc., 6.546%, Due 6/30/2022, 2015 1st Lien Term Loan, (3 mo. LIBOR + 5.250%) | 1,545,000 | 1,494,788 | |||||||||||||
Stratose Intermediate Holdings II, LLC, 4.546%, Due 6/22/2023, 1st Lien Term Loan, (3 mo. LIBOR + 3.250%) | 2,885,506 | 2,907,147 | |||||||||||||
SurveyMonkey, Inc., 5.800%, Due 4/13/2024, 2017 Term Loan, (3 mo. LIBOR + 4.500%) | 4,827,031 | 4,887,369 | |||||||||||||
Tessera Holding Corporation, 4.489%, Due 12/1/2023, Term Loan B, (1 mo. LIBOR + 3.250%) | 1,536,063 | 1,552,391 | |||||||||||||
TKC Holdings, Inc., | |||||||||||||||
5.489%, Due 2/1/2023, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.250%) | 7,381,008 | 7,401,748 | |||||||||||||
9.239%, Due 2/1/2024, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.000%) | 803,000 | 803,000 | |||||||||||||
Travel Leaders Group, LLC, 5.814%, Due 1/25/2024, New 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.500%) | 2,275,298 | 2,291,407 | |||||||||||||
TRC Companies, Inc., 5.231%, Due 6/21/2024, Term Loan, (1 mo. LIBOR + 4.000%) | 4,834,000 | 4,846,085 | |||||||||||||
Tweddle Group, Inc., 7.311%, Due 10/24/2022, 2016 Term Loan, (3 mo. LIBOR + 6.000%) | 1,194,375 | 1,188,403 | |||||||||||||
TwentyEighty, Inc., | |||||||||||||||
8.750%, Due 3/31/2020, PIK (8.750%) Term Loan C, (3 mo. LIBOR + 0.250%) | 39,953 | 29,965 | |||||||||||||
7.000%, Due 3/31/2020, PIK (7.000%) Term Loan B, (3 mo. LIBOR + 1.000%) | 41,823 | 31,368 | |||||||||||||
UFC Holdings, LLC, | |||||||||||||||
4.490%, Due 8/18/2023, 1st Lien Term Loan, (1 mo. LIBOR + 3.250%) | 3,353,732 | 3,362,117 | |||||||||||||
8.736%, Due 8/18/2024, 2nd Lien Term Loan, (1 mo. LIBOR + 7.500%) | 1,000,000 | 1,018,750 | |||||||||||||
United Site Services, Inc., | |||||||||||||||
5.068%, Due 8/25/2024, 1st Lien Term Loan B (3 mo. LIBOR + 3.75%) | 3,140,000 | 3,163,550 | |||||||||||||
9.068%, Due 8/25/2025, 2nd Lien Term Loan B (3 mo. LIBOR + 7.75%) | 3,722,000 | 3,740,610 | |||||||||||||
Utility One Source LP, 6.799%, Due 4/7/2023, Term Loan B, (3 mo. LIBOR + 5.500%) | 3,620,000 | 3,685,631 | |||||||||||||
Vestcom Parent Holdings, Inc., 7.250%, Due 12/19/2023, 2016 1st Lien Term Loan, (1 mo. LIBOR + 4.000%) | 4,975,000 | 4,987,438 | |||||||||||||
William Morris Endeavor Entertainment, LLC, 4.490%, Due 5/6/2021, 1st Lien Term Loan, (1 mo. LIBOR + 3.250%) | 2,487,500 | 2,497,450 | |||||||||||||
World Triathlon Corporation, 5.546%, Due 6/26/2021, Term Loan, (3 mo. LIBOR + 4.250%) | 2,976,982 | 2,976,982 | |||||||||||||
WP CityMD Bidco, LLC, 5.296%, Due 5/25/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.000%) | 3,731,000 | 3,740,328 | |||||||||||||
Xplornet Communications, Inc., 7.296%, Due 9/9/2021, Term Loan B, (3 mo. LIBOR + 6.000%) | 2,241,820 | 2,264,238 | |||||||||||||
|
| ||||||||||||||
193,128,481 | |||||||||||||||
|
|
See accompanying notes
24
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
BANK LOAN OBLIGATIONS - 89.05% (continued) | |||||||||||||||
Technology - 2.74% | |||||||||||||||
Answers Finance, LLC, | |||||||||||||||
6.239%, Due 4/15/2021, 1st Lien Exit Term Loan, (1 mo. LIBOR + 5.000%) | $ | 15,124 | $ | 14,368 | |||||||||||
9.000%, Due 9/15/2021, PIK (4.500%) 2nd Lien Exit Term Loan, (PRIME + 7.900%) | 21,853 | 20,979 | |||||||||||||
AP Gaming I, LLC, 6.739%, Due 2/15/2024, 2017 Term Loan B, (1 mo. LIBOR + 5.500%) | 1,095,000 | 1,108,687 | |||||||||||||
Aptean, Inc., 5.550%, Due 12/20/2022, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.250%) | 697,253 | 702,050 | |||||||||||||
Compuware Corporation, 5.550%, Due 12/15/2021, Term Loan B3, (3 mo. LIBOR + 4.250%) | 5,786,268 | 5,844,130 | |||||||||||||
EIG Investors Corp., 5.317%, Due 2/9/2023, 2017 Term Loan, (3 mo. LIBOR + 4.000%) | 4,970,266 | 5,018,925 | |||||||||||||
GTCR Valor Companies, Inc., 5.503%, Due 6/16/2023, USD 2017 Term Loan B1, (3 mo. LIBOR + 4.250%) | 2,071,000 | 2,085,787 | |||||||||||||
Hyland Software, Inc., 4.489%, Due 7/1/2022, 2017 1st Lien Term Loan, (1 mo. LIBOR + 3.250%) | 815,000 | 821,112 | |||||||||||||
NAB Holdings, LLC, 4.799%, Due 7/1/2024, 2017 Term Loan, (3 mo. LIBOR + 3.500%) | 1,528,000 | 1,533,730 | |||||||||||||
SMS Systems Maintenance Services, Inc., 6.239%, Due 10/30/2023, 2016 1st Lien Term Loan, (PRIME + 4.000%) | 5,845,625 | 5,765,248 | |||||||||||||
Syncsort, Inc., Due 8/9/2024, 2017 Term Loan BJ | 2,717,000 | 2,690,509 | |||||||||||||
|
| ||||||||||||||
25,605,525 | |||||||||||||||
|
| ||||||||||||||
Telecommunications - 5.19% | |||||||||||||||
Aerial Merger Sub, Inc., 0.00%, Due 2/28/2024, Term Loan B2, (3 mo. LIBOR + 3.750%) | 5,000,000 | 5,037,500 | |||||||||||||
CenturyLink, Inc., | |||||||||||||||
2.750%, Due 1/31/2025, 2017 Term Loan BF | 3,946,000 | 3,858,872 | |||||||||||||
Due 2/17/2018, Bridge Term LoanD F J | 4,000,000 | 4,000,000 | |||||||||||||
Colorado Buyer Inc, 4.310%, Due 5/1/2024, Term Loan B, (3 mo. LIBOR + 3.000%) | 3,721,000 | 3,737,298 | |||||||||||||
Global Tel*Link Corporation, | |||||||||||||||
5.296%, Due 5/23/2020, 1st Lien Term Loan, (3 mo. LIBOR + 4.000%) | 6,596,145 | 6,639,020 | |||||||||||||
9.046%, Due 11/23/2020, 2nd Lien Term Loan, (3 mo. LIBOR + 7.750%) | 1,288,000 | 1,281,560 | |||||||||||||
Merrill Communications, LLC, 6.561%, Due 6/1/2022, 2015 Term Loan, (3 mo. LIBOR + 5.250%) | 43,088 | 43,304 | |||||||||||||
Onvoy, LLC, 5.796%, Due 2/10/2024, 2017 1st Lien Term Loan B, (3 mo. LIBOR + 4.500%) | 6,978,510 | 6,961,064 | |||||||||||||
Securus Technologies Holdings, Inc., | |||||||||||||||
Due 6/15/2025, 2017 2nd Lien Term LoanJ | 3,926,000 | 3,931,889 | |||||||||||||
Due 6/20/2024, 2017 1st Lien Term LoanJ | 3,564,000 | 3,591,478 | |||||||||||||
Telesat Canada, 4.300%, Due 11/17/2023, Term Loan B4, (3 mo. LIBOR + 3.000%) | 4,636,101 | 4,667,580 | |||||||||||||
U.S. Telepacific Corporation, 6.317%, Due 5/2/2023, 2017 Term Loan B, (3 mo. LIBOR + 5.000%) | 4,793,000 | 4,669,197 | |||||||||||||
|
| ||||||||||||||
48,418,762 | |||||||||||||||
|
| ||||||||||||||
Transportation - 1.37% | |||||||||||||||
ASG Technologies Group, Inc., 6.061%, Due 7/31/2024, Term Loan, (3 mo. LIBOR + 4.750%) | 1,806,000 | 1,810,515 | |||||||||||||
Gruden Acquisition, Inc., 6.796%, Due 8/18/2022, 2017 Term Loan, (1 mo. LIBOR + 5.500%) | 4,917,491 | 4,841,663 | |||||||||||||
REP WWEX Acquisition Parent, LLC, 5.952%, Due 1/31/2024, 1st Lien Term Loan, (6 mo. LIBOR + 4.500%) | 6,139,613 | 6,149,866 | |||||||||||||
|
| ||||||||||||||
12,802,044 | |||||||||||||||
|
| ||||||||||||||
Utilities - 2.34% | |||||||||||||||
Astoria Energy, LLC, 5.240%, Due 12/24/2021, Term Loan B, (1 mo. LIBOR + 4.000%) | 1,051,629 | 1,053,606 | |||||||||||||
Entergy Rhode Island State Energy LP, 5.990%, Due 12/17/2022, Term Loan B, (1 mo. LIBOR + 4.750%) | 149,720 | 149,066 | |||||||||||||
Helix Gen Funding, LLC, 4.960%, Due 6/2/2024, Term Loan B, (3 mo. LIBOR + 3.750%) | 6,324,689 | 6,380,726 | |||||||||||||
Invenergy Thermal Operating I, LLC, 6.796%, Due 10/19/2022, 2015 Term Loan B, (3 mo. LIBOR + 5.500%) | 480,737 | 456,701 | |||||||||||||
Lightstone Generation, LLC, | |||||||||||||||
5.739%, Due 1/30/2024, Initial Term Loan B, (1 mo. LIBOR + 4.500%) | 6,690,235 | 6,643,872 | |||||||||||||
5.739%, Due 1/30/2024, Initial Term Loan C, (1 mo. LIBOR + 4.500%) | 416,870 | 413,981 | |||||||||||||
Meter Readings Holding, LLC, 7.067%, Due 8/29/2023, 2016 Term Loan B, (3 mo. LIBOR + 5.750%) | 495,312 | 503,980 | |||||||||||||
PrimeLine Utility Services, LLC, 6.811%, Due 11/12/2022, Term Loan, (2 mo. LIBOR + 5.500%) | 164,319 | 163,703 | |||||||||||||
Southeast PowerGen, LLC, 4.800%, Due 12/2/2021, Term Loan B, (3 mo. LIBOR + 3.500%) | 2,000,000 | 1,908,340 | |||||||||||||
Star West Generation, LLC, 6.050%, Due 5/10/2020, 2015 Term Loan B, (3 mo. LIBOR + 4.750%) | 1,860,606 | 1,637,333 | |||||||||||||
WG Partners Acquisition, LLC, 5.296%, Due 11/15/2023, Term Loan B, (3 mo. LIBOR + 4.000%) | 2,508,820 | 2,515,092 | |||||||||||||
|
| ||||||||||||||
21,826,400 | |||||||||||||||
|
| ||||||||||||||
Total Bank Loan Obligations (Cost $831,128,661) | 830,853,273 | ||||||||||||||
|
|
See accompanying notes
25
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
Principal Amount | Fair Value | ||||||||||||||
CORPORATE OBLIGATIONS - 0.90% | |||||||||||||||
Consumer, Cyclical - 0.53% | |||||||||||||||
Arch Merger Sub, Inc., 8.500%, Due 9/15/2025G | $ | 2,397,000 | $ | 2,322,094 | |||||||||||
Constellation Merger Sub, Inc., 8.500%, Due 9/15/2025G | 2,702,000 | 2,641,205 | |||||||||||||
|
| ||||||||||||||
4,963,299 | |||||||||||||||
|
| ||||||||||||||
Consumer, Non-Cyclical - 0.09% | |||||||||||||||
LSC Communications, Inc., 8.750%, Due 10/15/2023G | 845,000 | 866,125 | |||||||||||||
|
| ||||||||||||||
Technology - 0.28% | |||||||||||||||
Everi Payments, Inc., 10.000%, Due 1/15/2022 | 2,337,000 | 2,547,330 | |||||||||||||
|
| ||||||||||||||
Total Corporate Obligations (Cost $8,419,180) | 8,376,754 | ||||||||||||||
|
| ||||||||||||||
Shares | |||||||||||||||
SHORT-TERM INVESTMENTS - 18.30% (Cost $170,748,662) | |||||||||||||||
Investment Companies - 18.30% | |||||||||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class, 0.97%H I | 170,748,662 | 170,748,662 | |||||||||||||
|
| ||||||||||||||
TOTAL INVESTMENTS - 108.29% (Cost $1,010,393,247) | 1,010,354,694 | ||||||||||||||
LIABILITIES, NET OF OTHER ASSETS - (8.29%) | (77,344,097 | ) | |||||||||||||
|
| ||||||||||||||
TOTAL NET ASSETS - 100.00% | $ | 933,010,597 | |||||||||||||
|
| ||||||||||||||
Percentages are stated as a percent of net assets. |
A Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $0 or 0.000% of net assets. Valuation was determined using significant unobservable inputs.
B Non-income producing security.
C Bank loan obligations, unless otherwise stated, carry a floating rate of interest. The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
D Unfunded Loan Commitment. At period end, the amount of unfunded loan commitments was $5,584,387 or 0.60% of net assets. Of this amount, $203,143, $69,585, $122,638, $235,294, $681,000, and $272,727 relate to Daseke, Inc., Delayed Draw Term Loan, Engineered Machinery Holdings, Inc., 1st Lien Delayed Draw Term Loan, Engineered Machinery Holdings, Inc., 2nd Lien Delayed Draw Term Loan, Equian, LLC, Delayed Draw Term Loan, Shutterfly, Inc., Delayed Draw Term Loan, and TricorBraun Holdings, Inc., 1st Lien Delayed Draw Term Loan, respectively. At period end, the Fund held an unfunded bridge loan commitment of $4,000,000 related to CenturyLink, Inc.
E Default Security. At period end, the amount of securities in default was $2,434,948 or 0.26% of net assets.
F Fixed Rate.
G Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $5,829,424 or 0.62% of net assets. The Fund has no right to demand registration of these securities.
H The Fund is affiliated by having the same investment advisor.
I 7-day yield.
J Coupon rates are not available for bank loans that are unsettled and/or unfunded as of August 31, 2017.
K Value was determined using significant unobservable inputs.
LIBOR - London Interbank Offered Rate.
LLC - Limited Liability Company.
LP - Limited Partnership.
PIK - Payment in Kind.
PRIME - A rate, charged by banks, based on the U.S. Federal Funds rate.
The Fund’s investments are summarized by level based on the inputs used to determine their values. As of August 31, 2017, the investments were classified as described below:
Sound Point Floating Rate Income Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Common Stocks | $ | 64,492 | $ | - | $ | 311,513 | $ | 376,005 | ||||||||||||||||||||
Warrants | - | - | - | (1) | - | |||||||||||||||||||||||
Bank Loan Obligations(2) | - | 819,164,198 | 11,689,075 | 830,853,273 | ||||||||||||||||||||||||
Corporate Obligations | - | 8,376,754 | - | 8,376,754 | ||||||||||||||||||||||||
Short-Term Investments | 170,748,662 | - | - | 170,748,662 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total Investments in Securities - Assets | $ | 170,813,154 | $ | 827,540,952 | $ | 12,000,588 | $ | 1,010,354,694 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes
26
American Beacon Sound Point Floating Rate Income FundSM
Schedule of Investments
August 31, 2017
(1) | Investments held in the Fund’s portfolio with $0 fair value. |
(2) | Unfunded loan commitments represent $1,584,387 at period end. |
U.S. GAAP requires all transfers between any level to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. As of August 31, 2017, there were no transfers between Level 1 and Level 2 and no transfers from Level 2 to Level 3 in the Fund.
The following table is a reconciliation of Level 3 assets within the Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:
Security Type | Balance as of 8/31/2016 | Net Purchases | Net Sales | Accrued Discounts (Premiums) | Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Transfer into Level 3 | Transfer out of Level 3 | Balance as of 8/31/2017 | Change in Unrealized Appreciation (Depreciation) at Period end** | ||||||||||||||||||||||||||||||
Bank Loan Obligations | $- | $- | $- | $ | - | $ | - | $ | - | $ | 11,689,075 | $ | - | $ | 11,689,075 | $ | - | |||||||||||||||||||||||
Common Stocks | - | - | (1) | - | - | - | - | 311,513 | - | 311,513 | - | |||||||||||||||||||||||||||||
Warrants | - | (1) | - | - | - | - | - | - | - | - | (1) | - | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 0 | $ | 0 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 12,000,588 | $ | - | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** 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.
(1) Investments held in the Fund’s portfolio with $0 fair value.
One common stock and a warrant, classified as Level 3, have been fair valued at $0 by the Valuation Committee. The common stock and bank loan obligations with values of $311,513 and $11,689,075, respectively, have been classified as Level 3 due to a valuation based on single broker quotes.
See accompanying notes
27
American Beacon FundsSM
Statements of Assets and Liabilities
August 31, 2017
SiM High Yield Opportunities Fund | Sound Point Floating Rate Income Fund | |||||||||||
Assets: | ||||||||||||
Investments in unaffiliated securities, at fair value† | $ | 1,180,513,843 | $ | 839,606,032 | ||||||||
Investments in affiliated securities, at fair value‡ | - | 170,748,662 | ||||||||||
Dividends and interest receivable | 22,997,458 | 4,650,005 | ||||||||||
Receivable for investments sold | 6,235,365 | 57,254,329 | ||||||||||
Receivable for fund shares sold | 2,121,640 | 7,963,955 | ||||||||||
Receivable for tax reclaims | 23 | - | ||||||||||
Receivable for expense reimbursement (Note 2) | 24,508 | - | ||||||||||
Receivable for variation margin on open futures contracts (Note 5) | 726,308 | - | ||||||||||
Prepaid expenses | 55,072 | 87,058 | ||||||||||
|
|
|
| |||||||||
Total assets | 1,212,674,217 | 1,080,310,041 | ||||||||||
|
|
|
| |||||||||
Liabilities: | ||||||||||||
Payable for investments purchased | 1,668,700 | 136,764,668 | ||||||||||
Payable for fund shares redeemed | 6,059,499 | 2,494,819 | ||||||||||
Payable under excess expense reimbursement plan (Note 2) | - | 27,427 | ||||||||||
Cash due to custodian | - | 1,338,664 | ||||||||||
Dividends payable | 399,348 | 169,846 | ||||||||||
Payable for loan with the interfund credit facility | 258,439 | - | ||||||||||
Unfunded loan commitments | - | 5,584,387 | ||||||||||
Management and sub-advisory fees payable (Note 2) | 737,700 | 523,546 | ||||||||||
Service fees payable | 124,535 | 67,849 | ||||||||||
Transfer agent fees payable (Note 2) | 79,075 | 49,369 | ||||||||||
Custody and fund accounting fees payable | 35,251 | 76,214 | ||||||||||
Professional fees payable | 64,100 | 64,664 | ||||||||||
Trustee fees payable | 160 | 610 | ||||||||||
Payable for prospectus and shareholder reports | 53,402 | 7,461 | ||||||||||
Other liabilities | 18,144 | 129,920 | ||||||||||
|
|
|
| |||||||||
Total liabilities | 9,498,353 | 147,299,444 | ||||||||||
|
|
|
| |||||||||
Net assets | $ | 1,203,175,864 | $ | 933,010,597 | ||||||||
|
|
|
| |||||||||
Analysis of net assets: | ||||||||||||
Paid-in-capital | $ | 1,218,683,302 | $ | 929,946,988 | ||||||||
(Overdistribution) of net investment income | (8,062,765 | ) | (35,395 | ) | ||||||||
Accumulated net realized gain (loss) | (11,059,974 | ) | 3,137,557 | |||||||||
Unrealized appreciation (depreciation) of investments in affiliated securitiesA | 4,659,941 | (38,553 | ) | |||||||||
Unrealized appreciation of foreign currency transactions | 20,038 | - | ||||||||||
Unrealized (depreciation) of futures contracts | (1,064,678 | ) | - | |||||||||
|
|
|
| |||||||||
Net assets | $ | 1,203,175,864 | $ | 933,010,597 | ||||||||
|
|
|
|
See accompanying notes
28
American Beacon FundsSM
Statements of Assets and Liabilities
August 31, 2017
SiM High Yield Opportunities Fund | Sound Point Floating Rate Income Fund | |||||||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||||||
Institutional Class | 36,992,101 | 22,358,521 | ||||||||||
|
|
|
| |||||||||
Y Class | 60,135,028 | 48,956,998 | ||||||||||
|
|
|
| |||||||||
Investor Class | 12,080,316 | 12,568,502 | ||||||||||
|
|
|
| |||||||||
A Class | 8,836,589 | 3,134,841 | ||||||||||
|
|
|
| |||||||||
C Class | 7,222,205 | 3,035,645 | ||||||||||
|
|
|
| |||||||||
SP Class | N/A | 75,804 | ||||||||||
|
|
|
| |||||||||
Net assets: | ||||||||||||
Institutional Class | $ | 355,492,590 | $ | 231,445,512 | ||||||||
|
|
|
| |||||||||
Y Class | $ | 577,349,417 | $ | 507,077,617 | ||||||||
|
|
|
| |||||||||
Investor Class | $ | 115,679,739 | $ | 129,817,379 | ||||||||
|
|
|
| |||||||||
A Class | $ | 84,955,157 | $ | 32,450,342 | ||||||||
|
|
|
| |||||||||
C Class | $ | 69,698,961 | $ | 31,434,098 | ||||||||
|
|
|
| |||||||||
SP Class | N/A | $ | 785,649 | |||||||||
|
|
|
| |||||||||
Net asset value, offering and redemption price per share: | ||||||||||||
Institutional Class | $ | 9.61 | $ | 10.35 | ||||||||
|
|
|
| |||||||||
Y Class | $ | 9.60 | $ | 10.36 | ||||||||
|
|
|
| |||||||||
Investor Class | $ | 9.58 | $ | 10.33 | ||||||||
|
|
|
| |||||||||
A Class | $ | 9.61 | $ | 10.35 | ||||||||
|
|
|
| |||||||||
A Class (offering price) | $ | 10.09 | $ | 10.62 | ||||||||
|
|
|
| |||||||||
C Class | $ | 9.65 | $ | 10.35 | ||||||||
|
|
|
| |||||||||
SP Class | N/A | $ | 10.36 | |||||||||
|
|
|
| |||||||||
† Cost of investments in unaffiliated securities | $ | 1,175,853,902 | $ | 839,644,585 | ||||||||
‡ Cost of investments in affiliated securities | $ | - | $ | 170,748,662 | ||||||||
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at year end. |
|
See accompanying notes
29
American Beacon FundsSM
Statements of Operations
For the year ended August 31, 2017
SiM High Yield Opportunities Fund | Sound Point Floating Rate Income Fund | |||||||||||
Investment income: | ||||||||||||
Dividend income from unaffiliated securities (net of foreign taxes)† | $ | 1,738,119 | $ | - | ||||||||
Dividend income from affiliated securities | 72,447 | 734,338 | ||||||||||
Interest income | 80,153,657 | 26,130,413 | ||||||||||
|
|
|
| |||||||||
Total investment income | 81,964,223 | 26,864,751 | ||||||||||
|
|
|
| |||||||||
Expenses: | ||||||||||||
Management and sub-advisory fees (Note 2) | 8,673,593 | 3,521,547 | ||||||||||
Transfer agent fees: | ||||||||||||
Institutional Class (Note 2) | 257,263 | 52,326 | ||||||||||
Y Class (Note 2) | 275,016 | 189,397 | ||||||||||
Investor Class | 8,181 | 3,967 | ||||||||||
A Class | 17,407 | 1,147 | ||||||||||
C Class | 5,786 | 1,874 | ||||||||||
SP Class | - | 1,152 | ||||||||||
Custody and fund accounting fees | 108,375 | 166,708 | ||||||||||
Professional fees | 118,753 | 77,783 | ||||||||||
Registration fees and expenses | 186,955 | 225,864 | ||||||||||
Service fees (Note 2): | ||||||||||||
Y Class | 285,059 | 67,094 | ||||||||||
Investor Class | 450,928 | 166,002 | ||||||||||
A Class | 129,791 | 31,843 | ||||||||||
C Class | 109,672 | 28,305 | ||||||||||
Distribution fees (Note 2): | ||||||||||||
A Class | 216,319 | 53,071 | ||||||||||
C Class | 731,150 | 188,703 | ||||||||||
SP Class | - | 15,138 | ||||||||||
Prospectus and shareholder report expenses | 178,625 | 56,166 | ||||||||||
Trustee fees | 78,939 | 30,099 | ||||||||||
Other expenses | 54,925 | 17,637 | ||||||||||
|
|
|
| |||||||||
Total expenses | 11,886,737 | 4,895,823 | ||||||||||
|
|
|
| |||||||||
Net fees waived and expenses (reimbursed) / recouped (Note 2) | (44,356 | ) | 24,550 | |||||||||
|
|
|
| |||||||||
Net expenses | 11,842,381 | 4,920,373 | ||||||||||
|
|
|
| |||||||||
Net investment income | 70,121,842 | 21,944,378 | ||||||||||
|
|
|
| |||||||||
Realized and unrealized gain (loss) from investments: | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investments in unaffiliated securitiesA | (2,449,888 | ) | 3,428,894 | |||||||||
Foreign currency transactions | (180,033 | ) | - | |||||||||
Futures contracts | 5,954,159 | - | ||||||||||
Change in net unrealized appreciation (depreciation) of: | ||||||||||||
Investments in unaffiliated securitiesB | 7,497,967 | (97,215 | ) | |||||||||
Foreign currency transactions | 8,412,053 | - | ||||||||||
Futures contracts | (4,794,306 | ) | - | |||||||||
|
|
|
| |||||||||
Net gain from investments | 14,439,952 | 3,331,679 | ||||||||||
|
|
|
| |||||||||
Net increase in net assets resulting from operations | $ | 84,561,794 | $ | 25,276,057 | ||||||||
|
|
|
| |||||||||
† Foreign taxes | $ | 141,760 | $ | - | ||||||||
A The Fund did not recognize net realized gains (losses) from the sale of investments in affiliated securities. |
| |||||||||||
B The Fund’s investments in affiliated securities did not have a change in unrealized appreciation (depreciation) at year end. |
|
See accompanying notes
30
American Beacon FundsSM
Statements of Changes in Net Assets
SiM High Yield Opportunities Fund | Sound Point Floating Rate Income Fund | |||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year Ended August 31, 2016 | Year Ended August 31, 2017 | Year Ended August 31, 2016 | |||||||||||||||||||||||||
Increase (decrease) in net assets: | ||||||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||||||
Net investment income | $ | 70,121,842 | $ | 52,094,516 | $ | 21,944,378 | $ | 3,713,537 | ||||||||||||||||||||
Net realized gain (loss) from investments in unaffiliated securities, foreign currency transactions, and futures contracts | 3,324,238 | (27,419,311 | ) | 3,428,894 | 180,741 | |||||||||||||||||||||||
Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities, foreign currency transactions, and futures contracts | 11,115,714 | 38,725,649 | (97,215 | ) | 48 | |||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in net assets | 84,561,794 | 63,400,854 | 25,276,057 | 3,894,326 | ||||||||||||||||||||||||
|
|
| �� |
|
|
|
| |||||||||||||||||||||
Distributions to shareholders: | ||||||||||||||||||||||||||||
Net investment income: | ||||||||||||||||||||||||||||
Institutional Class | (20,623,091 | ) | (15,212,818 | ) | (6,542,503 | ) | (2,520,762 | ) | ||||||||||||||||||||
Y Class | (29,088,824 | ) | (17,027,838 | ) | (10,872,357 | ) | (238,133 | ) | ||||||||||||||||||||
Investor Class | (6,890,982 | ) | (5,991,314 | ) | (2,806,600 | ) | (400,495 | ) | ||||||||||||||||||||
A Class | (4,476,817 | ) | (3,828,770 | ) | (857,851 | ) | (110,249 | ) | ||||||||||||||||||||
C Class | (3,314,854 | ) | (3,237,252 | ) | (622,300 | ) | (34,369 | ) | ||||||||||||||||||||
SP Class | - | - | (257,055 | ) | (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 | (1,720,604 | ) | (2,546,029 | ) | - | - | ||||||||||||||||||||||
Y Class | (2,843,585 | ) | (2,703,885 | ) | - | - | ||||||||||||||||||||||
Investor Class | (529,582 | ) | (772,676 | ) | - | - | ||||||||||||||||||||||
A Class | (390,036 | ) | (467,780 | ) | - | - | ||||||||||||||||||||||
C Class | (271,445 | ) | (378,573 | ) | - | - | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net distributions to shareholders | (70,149,820 | ) | (52,166,935 | ) | (22,430,605 | ) | (4,142,189 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Capital share transactions: | ||||||||||||||||||||||||||||
Proceeds from sales of shares | 665,020,665 | 640,680,660 | 970,627,322 | 137,502,090 | ||||||||||||||||||||||||
Reinvestment of dividends and distributions | 65,249,947 | 48,182,689 | 20,919,758 | 3,205,179 | ||||||||||||||||||||||||
Cost of shares redeemed | (690,058,534 | ) | (433,324,385 | ) | (172,663,750 | ) | (72,206,459 | ) | ||||||||||||||||||||
Redemption fees | 30,709 | 157,230 | - | - | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in net assets from capital share transactions | 40,242,787 | 255,696,194 | 818,883,330 | 68,500,810 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase in net assets | 54,654,761 | 266,930,113 | 821,728,782 | 68,252,947 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net assets: | ||||||||||||||||||||||||||||
Beginning of period | 1,148,521,103 | 881,590,990 | 111,281,815 | 43,028,868 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
End of period* | $ | 1,203,175,864 | $ | 1,148,521,103 | $ | 933,010,597 | $ | 111,281,815 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
*Includes (overdistribution) of net investment income | $ | (8,062,765 | ) | $ | (5,226,981 | ) | $ | (35,395 | ) | $ | (21,107 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
See accompanying notes
31
American Beacon FundsSM
August 31, 2017
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 (the “Act”), as amended, as diversified, open-end management investment companies. As of August 31, 2017, the Trust consists of thirty-two active series, two of which are presented in this filing: American Beacon SiM High Yield Opportunities Fund and American Beacon Sound Point Floating Rate Income Fund (collectively, the “Funds” and each individually a “Fund”). The remaining thirty 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.
Recently Adopted 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, and has been adopted accordingly.
Class Disclosure
Each Fund has 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:
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. | $ | 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 Class | 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 respective Fund. Class specific expenses, where applicable, currently include service, distribution and sub-transfer agent fees that vary amongst the classes as described more fully in Note 2.
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946, Financial Services – Investment Companies, a part of 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 on the Funds’ Statements of Operations.
Distributions to Shareholders
Distributions, if any, of net investment income are generally paid at least annually and recorded on the ex-dividend date. 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 may 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 Funds’ investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Funds. 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. The Funds did not have commission recapture income for the year ended August 31, 2017.
Allocation of Income, Trust Expenses, Gains, and Losses
Investment income, realized and unrealized gains and losses from investments of the Funds are allocated daily to each class of shares based upon the relative proportion of net assets of each class to the total net assets of the Funds. Expenses directly charged or attributable to any Fund will be paid from the assets of the Fund.
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Generally, expenses of the Trust will be allocated among and charged to the assets of the Funds on a basis that the Trustees deem fair and equitable, which may be based on the relative net assets of the Funds or nature of the services performed and relative applicability to the Funds.
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 High Yield Opportunities 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 this Fund pro-rata based on the 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 and Investment Sub-Advisory Agreements
The Funds and the Manager are parties to a Management Agreement that obligates the Manager to provide the Funds with investment advisory and administrative services. As compensation for performing the duties under the Management Agreement, the Manager will receive an annualized management fee based on a percentage of the Funds’ average daily net assets that is calculated and accrued daily according to the following schedule:
First $5 billion | 0.35 | % | ||
Next $5 billion | 0.325 | % | ||
Next $10 billion | 0.30 | % | ||
Over $20 billion | 0.275 | % |
The Trust, on behalf of the Funds, and the Manager have entered into an Investment Advisory Agreement with the following Sub-Advisors pursuant to which the Funds have agreed to pay an annualized sub-advisory fee that is calculated and accrued daily based on the Funds’ average daily net assets according to the following schedules:
Strategic Income Management, LLC
First $250 million | 0.45 | % | ||
Next $250 million | 0.40 | % | ||
Next $500 million | 0.35 | % | ||
Over $1 billion | 0.30 | % |
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Sound Point Capital Management, LP
All Assets | 0.35 | % |
The Management and Sub-Advisory Fees paid by the Funds for the year ended August 31, 2017 were as follows:
SiM High Yield Opportunities Fund
Effective Fee Rate | Amount of Fees Paid | |||||||||||
Management Fees | 0.35 | % | $ | 4,199,242 | ||||||||
Sub-Advisor Fees | 0.37 | % | 4,474,351 | |||||||||
|
|
|
| |||||||||
Total | 0.72 | % | $ | 8,673,593 | ||||||||
|
|
|
|
Sound Point Floating Rate Income Fund
Effective Fee Rate | Amount of Fees Paid | |||||||||||
Management Fees | 0.35 | % | $ | 1,760,773 | ||||||||
Sub-Advisor Fees | 0.35 | % | 1,760,774 | |||||||||
|
|
|
| |||||||||
Total | 0.70 | % | $ | 3,521,547 | ||||||||
|
|
|
|
Distribution Plans
The Funds, except for the A, C and SP Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fee received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A, C and SP 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 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. of the Funds. 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 0.15% 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. Effective April 1, 2017, the Funds terminated the Service Plan for the Y Class.
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. Effective April 1, 2017, the Funds agreed to compensate the intermediaries for providing services to the Y Class. Intermediaries transact with the Funds
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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 Board approval, have agreed to reimburse the Manager for certain non-distribution shareholder services provided by financial intermediaries for the Institutional and Y Classes. 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. During the year ended August 31, 2017, the sub-transfer agent fees, as reflected in “Transfer agent fees” on the Statements of Operations, were as follows:
Fund | Sub-Transfer Agent Fees | |||
SiM High Yield Opportunities | $ | 494,393 | ||
Sound Point Floating Rate Income | 223,239 |
As of August 31, 2017, the Funds owed the Manager the following reimbursement of sub-transfer agent fees, as reflected in “Transfer agent fees payable” on the Statements of Assets and Liabilities:
Fund | Reimbursement Sub-Transfer Agent Fees | |||
SiM High Yield Opportunities | $ | 71,096 | ||
Sound Point Floating Rate Income | 45,227 |
Investments 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 and administrative fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the year ended August 31, 2017, the Manager earned fees on the Funds’ direct investments in the USG Select Fund as shown below:
Fund | Direct Investments in USG Select Fund | |||
SiM High Yield Opportunities | $ | 13,524 | ||
Sound Point Floating Rate Income | 112,813 |
Interfund Credit Facility
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 a credit facility whereby each Fund, under certain conditions, is permitted to lend money directly to and borrow directly from other participating Funds for temporary purposes. The interfund credit facility is advantageous to the Funds because it provides added liquidity, and eliminates the need to maintain higher cash balances to meet redemptions. This situation could arise when shareholder redemptions exceed anticipated volumes and certain funds have insufficient cash on hand to satisfy such redemptions or when sales of securities do not settle as expected, resulting in a cash shortfall for a fund. When a Fund liquidates portfolio securities to meet redemption requests, they often do not receive payment in settlement for up to three days (or longer for certain foreign transactions). Redemption requests normally are satisfied on the next business day. The credit facility provides a source of immediate, short-term liquidity pending settlement of the sale of portfolio securities. The credit facility is administered by a credit facility team consisting of professionals from the Manager’s asset management, compliance, and accounting areas who report the activities of the credit facility to the Board. During the year ended August 31, 2017, the SiM High Yield Opportunities Fund borrowed on average $2,017,297 for 11 days at a rate of 1.34% with interest charges of $765. These amounts are recorded within “Other expenses” on the accompanying Statements of Operations. For the year ended August 31, 2017, the Fund had an outstanding loan with the Interfund Credit Facility of $258,439 recorded within “Payable for loan with the Interfund Credit Facility” in the Statements of Assets and Liabilities.
36
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Expense Reimbursement Plan
The Manager contractually agreed to reimburse the Funds to the extent that total annual fund operating expenses exceeded the Funds’ expense cap. During the year ended August 31, 2017, the Manager waived and/or reimbursed (recouped) expenses as follows:
Expense Cap | Expiration of Reimbursed Expenses | |||||||||||||||||
Fund | Class | 9/1/2016 - 8/31/2017 | Reimbursed Expenses | (Recouped) Expenses | ||||||||||||||
SiM High Yield Opportunities | Institutional | 0.84 | % | $ | 44,356 | $ | - | 2020 | ||||||||||
Sound Point Floating Rate Income | Institutional | 0.84 | % | 14,168 | - | 2020 | ||||||||||||
Sound Point Floating Rate Income | Y | 0.94 | % | - | (18,249 | ) | 2020 | |||||||||||
Sound Point Floating Rate Income | Investor | 1.22 | % | - | (10,668 | ) | 2020 | |||||||||||
Sound Point Floating Rate Income | A | 1.24 | % | - | (4,504 | ) | 2020 | |||||||||||
Sound Point Floating Rate Income | C | 1.99 | % | - | (3,070 | ) | 2020 | |||||||||||
Sound Point Floating Rate Income | SP | 1.15 | % | - | (2,227 | ) | 2020 |
Of these amounts, $24,508 was disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at August 31, 2017 for the SiM High Yield Opportunities Fund and $27,427 was disclosed as a payable to the Manager on the Statements of Assets and Liabilities at August 31, 2017 for the Sound Point Floating Rate Income Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of such fee reductions and expense reimbursements. Under the policy, the Manager can be reimbursed by the Funds for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs within three years after the Manager’s own waiver or reimbursement and (b) does not cause the Funds’ annual operating expenses to exceed the lesser of the contractual percentage limit in effect at the time of the waiver/reimbursement or time of recoupment. The reimbursed expenses listed above will expire in 2020. The carryover of excess expenses potentially reimbursable to the Manager, but not recorded as a liability are as follows:
Fund | Recouped Expenses | Excess Expense Carryover | Expired Expense Carryover | Expiration of Reimbursed Expenses | ||||||||||||
SiM High Yield Opportunities | $ | - | $ | 60,056 | $ | - | 2018 | |||||||||
SiM High Yield Opportunities | - | 175,131 | - | 2019 | ||||||||||||
SiM High Yield Opportunities | - | 44,356 | - | 2020 | ||||||||||||
Sound Point Floating Rate Income | 38,718 | (1) | 197,803 | - | 2019 | |||||||||||
Sound Point Floating Rate Income | - | 14,168 | - | 2020 |
(1) Of this amount, $0, $18,249, $10,668, $4,504, $3,070, and $2,227 relate to Institutional, Y, Investor, A, C, and SP classes respectively.
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the year ended August 31, 2017, Foreside collected $32,256 and $48,911 for SiM High Yield Opportunities Fund and Sound Point Floating Rate Income Fund, respectively, from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Funds’ Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended August 31, 2017, fees of $4,532 and $191 were collected for the Class A Shares of the SiM High Yield Opportunities Fund and Sound Point Floating Rate Income Fund, respectively.
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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 Funds’ Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended August 31, 2017, CDSC fees of $10,380 and $10,258 were collected for the Class C Shares of the SiM High Yield Opportunities Fund and Sound Point Floating Rate Income Fund, respectively.
Trustee Fees and Expenses
As compensation for their service to the Trust, the American Beacon Select Funds and the American Beacon Institutional Funds Trust, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board of Trustees meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The Chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally at 4:00 p.m. Eastern Time, each day that the Exchange is open for business. Equity securities, including 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 normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. Prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board.
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Funds are required to deposit with their 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.
Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value, as determined in good faith by the Manager’s Valuation Committee, pursuant to procedures established by the Board.
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 | – | Quoted prices in active markets for identical securities. | ||
Level 2 | – | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | ||
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, preferred securities, and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
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.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.
Level 3 trading assets and trading liabilities, at fair value
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows.
Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and may be categorized as Level 3 of the fair value hierarchy.
Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of the 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.
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American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued, pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.
When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of the 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.
4. Securities and Other Investments
Bank Loans and Senior Loans
Loans are typically administered by a bank, insurance company, finance company or other financial institution (the “agent”) for a lending syndicate of financial institutions. In a typical loan, the agent administers the terms of the loan agreement and is responsible for the collection of principal and interest and fee payments from the borrower and the apportionment of these payments to all lenders that are parties to the loan agreement. In addition, an institution (which may be the agent) may hold collateral on behalf of the lenders. Typically, under loan agreements, the agent is given broad authority in monitoring the borrower’s performance and is obligated to use the same care it would use in the management of its own property. In asserting rights against a borrower, the Funds 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 Funds might incur certain costs and delays in realizing payment on a loan or suffer a loss of principal and/or interest. The Funds 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 Funds may not benefit directly from any collateral supporting the loan in which it has purchased the participation. When the Funds purchases assignments from lenders, the Funds will acquire direct rights against the borrower on the loan.
The Funds earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in “Interest income” on the Statements of Operations, is recognized ratably over the
40
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included on the Statements of Assets and Liabilities and Statements of Operations.
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 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 non-convertible 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 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 specific term. A revolving credit facility differs from a delayed funding loan in that as the borrower repays the loan, an amount equal to the
41
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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.
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). There is no minimum rating criteria for the Funds’ 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.
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 may be intended to reduce risk by providing further diversification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political or social instability, nationalization, expropriation, or confiscatory taxation); the potentially adverse effects of unavailability of public information regarding issuers, different 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 the Funds’ rights as an investor.
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.
42
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
Illiquid and Restricted Securities
The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933 (the “Securities Act”). Illiquid securities have included securities that have not been registered under the Securities Act, securities that are otherwise not readily marketable, and repurchase agreements having a remaining maturity of longer than seven calendar days. Disposal of both illiquid and restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding during the year ended August 31, 2017 are disclosed in the Fund’s Notes to the Schedule of Investments.
Regulation S under the Securities Act permits the sale abroad of securities that are not registered for sale in the United States and includes a provision for U.S. investors, such as the Funds, to purchase such unregistered securities if certain conditions are met.
Inflation-Indexed Bonds
The Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted based on the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on 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.
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.
Payment-In-Kind Securities
The Funds 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.
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
43
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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, the Funds become a shareholder of that investment company. As a result, the Funds’ shareholders indirectly will bear the Funds’ proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses the Funds’ shareholders directly bear in connection with the Funds’ own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Funds in their 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 gain market exposure on cash balances or reduce market exposure in anticipation of liquidity needs. When considering the Funds’ use of derivatives, it is important to note that the Funds do not use derivatives for the purpose of creating financial leverage.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Funds usually reflects this amount on the Schedules of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
During the year ended August 31, 2017, the SiM High Yield Opportunities Fund entered into future contracts primarily for return enhancement and hedging.
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 each quarter end.
Average Futures Contracts Outstanding | ||||
Fund | Year Ended August 31, 2017 | |||
SiM High Yield Opportunities | 441 |
44
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
The following is a summary of the fair valuations of the Fund’s derivative instruments categorized by risk exposure(1):
SiM High Yield Opportunities Fund
Fair values of financial instruments on the Statements of Assets and Liabilities as of August 31, 2017: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities: | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
Receivable for variation margin from open futures contracts(2) | $ | - | $ | 1,064,678 | $ | - | $ | - | $ | - | $ | 1,064,678 |
The effect of financial derivative instruments on the Statements of Operations as of August 31, 2017: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives not accounted for as hedging instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Realized gain (loss) of derivatives | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
Net realized gain (loss) from futures contracts | $ | - | $ | 5,954,159 | $ | - | $ | - | $ | - | $ | 5,954,159 | |||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized appreciation | Credit contracts | Foreign exchange contracts | Commodity contracts | Interest rate contracts | Equity contracts | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized appreciation (depreciation) from futures contracts | $ | - | $ | (4,794,306 | ) | $ | - | $ | - | $ | - | $ | (4,794,306 | ) |
(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 Fund’s Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.
6. Principal Risks
Investing in the Funds may involve certain risks including, but not limited to, those described below.
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.
Equity Investment Risk
Equity securities are subject to market risk. The Funds’ investments in equity securities may include common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, REITs, depositary receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges. Such investments may expose the Funds to
45
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
additional risk. The value of a company’s common stock may fall as a result of factors affecting the company, companies in the same industry or sector, or the financial markets overall. Common stock generally is subordinate to preferred stock upon the liquidation or bankruptcy of the issuing company. Preferred stocks and convertible securities are sensitive to movements in interest rates. Preferred stocks may be less liquid than common stocks and, unlike common stocks, participation in the growth of an issuer may be limited. Distributions on preferred stocks generally are payable at the discretion of an issuer and after required payments to bond holders. Convertible securities are subject to the risk that the credit standing of the issuer may have an effect on the convertible securities’ investment value. Investments in REITs are subject to the risks associated with investing in the real estate industry such as adverse developments affecting the real estate industry and real property values. Depositary receipts and U.S. dollar-denominated foreign stocks traded on U.S. exchanges are subject to certain of the risks associated with investing directly in foreign securities, including, but not limited to, currency fluctuations and political and financial instability in the home country of a particular depositary receipt or foreign stock.
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 they would not be subject to if they invested directly in the securities underlying those derivatives. Futures contracts may experience potentially 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 interest rates on 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 or derivatives it holds, particularly mortgage backed and other asset backed securities, 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 to movements in interest rates. The Federal Reserve raised the federal funds rate in December 2016, March 2017, and
46
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
June 2017 and maintains a forecast of one more hike in 2017. Interest rates may rise, perhaps significantly and/or rapidly, potentially resulting in substantial losses to the Funds. The prices of fixed-income securities or derivatives are also affected by their duration. Fixed-income securities or derivatives with longer duration generally have greater sensitivity to changes in interest rates. An increase in interest rates can impact markets broadly as well. Some investors buy securities with borrowed money; an increase in interest rates can cause a decline in those markets.
Liquidity Risk
The Funds are susceptible to the risk that certain fixed-income investments, 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 they are 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.
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 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. Interest 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
47
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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 invest in shares of other registered investment companies, the Funds will indirectly bear the 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.
Prepayment and Extension 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 or otherwise prepaid before maturity. If this occurs, no additional interest will be paid on the investment and the Funds 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. Extension risk is the risk that a decrease in prepayments may, as a result of higher interest rates or other factors, result in the extension of a security’s effective maturity, heighten interest rate risk and increase the potential for a decline in price.
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, August 31, 2017.
SiM High Yield Opportunities Fund
Offsetting of Financial and Derivative Assets as of August 31, 2017: | ||||||||||||
Assets | Liabilities | |||||||||||
Futures Contracts | $ | - | $ | 1,064,678 | ||||||||
|
|
|
| |||||||||
Total derivative assets and liabilities in the Statements of Assets and Liabilities | $ | - | $ | 1,064,678 | ||||||||
|
|
|
| |||||||||
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) | $ | - | $ | (1,064,678 | ) | |||||||
|
|
|
|
48
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
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 distributions 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. Each of the tax years in the four year period ended August 31, 2017 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 (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 High Yield Opportunities Fund | Sound Point Floating Rate Income Fund | |||||||||||||||||||||||||||
Year Ended August 31, 2017 | Year Ended August 31, 2016 | Year Ended August 31, 2017 | Year Ended August 31, 2016 | |||||||||||||||||||||||||
Distributions paid from: |
| |||||||||||||||||||||||||||
Ordinary income* |
| |||||||||||||||||||||||||||
Institutional Class | $ | 20,623,091 | $ | 14,904,290 | $ | 6,689,931 | $ | 2,658,210 | ||||||||||||||||||||
Y Class | 29,088,824 | 16,700,181 | 11,062,811 | 238,499 | ||||||||||||||||||||||||
Investors Class | 6,890,982 | 5,897,681 | 2,875,815 | 400,862 | ||||||||||||||||||||||||
A Class | 4,476,817 | 3,772,084 | 881,904 | 110,616 | ||||||||||||||||||||||||
C Class | 3,314,854 | 3,191,376 | 646,079 | 34,736 | ||||||||||||||||||||||||
SP Class | - | - | 274,065 | 699,266 | ||||||||||||||||||||||||
Long-term capital gains | ||||||||||||||||||||||||||||
Institutional Class | - | 308,528 | - | - | ||||||||||||||||||||||||
Y Class | - | 327,657 | - | - | ||||||||||||||||||||||||
Investors Class | - | 93,633 | - | - | ||||||||||||||||||||||||
A Class | - | 56,686 | - | - | ||||||||||||||||||||||||
C Class | - | 45,876 | - | - | ||||||||||||||||||||||||
SP Class | - | - | - | - | ||||||||||||||||||||||||
Tax Return of Capital | ||||||||||||||||||||||||||||
Institutional Class | 1,720,604 | 2,546,029 | - | - | ||||||||||||||||||||||||
Y Class | 2,843,585 | 2,703,885 | - | - | ||||||||||||||||||||||||
Investors Class | 529,582 | 772,676 | - | - | ||||||||||||||||||||||||
A Class | 390,036 | 467,780 | - | - | ||||||||||||||||||||||||
C Class | 271,445 | 378,573 | - | - | ||||||||||||||||||||||||
SP Class | - | - | - | - | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total distributions paid | $ | 70,149,820 | $ | 52,166,935 | $ | 22,430,605 | $ | 4,142,189 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
* For tax purposes, short-term capital gains are considered ordinary income distributions.
49
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
As of August 31, 2017 the components of distributable earnings (deficits) on a tax basis were as follows:
Fund | Tax Cost | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
SiM High Yield Opportunities | $ | 1,187,732,083 | $ | 23,696,933 | $ | (30,895,135 | ) | $ | (7,198,202 | ) | ||||||||||||||||||
Sound Point Floating Rate Income | 1,010,420,871 | 4,629,838 | (4,696,015 | ) | (66,177 | ) |
Fund | Net Unrealized Appreciation (Depreciation) | Undistributed Ordinary Income | Undistributed Long-term Capital Gains | Accumulated Capital and Other (Losses) | Other Temporary Differences | Distributable Earnings | ||||||||||||||||||||||||||||||||||||||
SiM High Yield Opportunities | $ | (7,198,202 | ) | $ | - | $ | - | $ | (7,909,888 | ) | $ | (399,348 | ) | $ | (15,507,438 | ) | ||||||||||||||||||||||||||||
Sound Point Floating Rate Income | (66,177 | ) | 3,225,237 | 74,395 | - | (169,846 | ) | 3,063,609 |
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, dividends payable at the end of period, deferral of late year losses, tax basis differences due to a corporate action, and the reclassification of income from real estate investment securities and publicly traded 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 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 August 31, 2017:
Fund | Paid-In-Capital | Undistributed (Overdistribution of) Net Investment Income | Accumulated Net Realized Gain (Loss) | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||||
SiM High Yield Opportunities | $ | (185 | ) | $ | (8,563,058 | ) | $ | 8,563,243 | $ | - | ||||||||||||||||||
Sound Point Floating Rate Income | - | - | - | - |
Under the Regulated Investment Company Modernization Act of 2010 (“RIC MOD”), net capital losses recognized by the Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.
As of August 31, 2017, the SiM High Yield Opportunities Fund had $258,887 long-term post RIC MOD capital loss carryforwards. The Sound Point Floating Rate Income Fund did not have any capital loss carryforwards.
The Funds are permitted for tax purposes to defer into their next fiscal year qualified late year losses. Qualified late year capital losses are any capital losses incurred after October 31 through the Funds’ fiscal year end, August 31, 2017. Qualified late year ordinary losses are specified losses generally incurred after October 31 and ordinary losses incurred after December 31 through the end of the Funds’ fiscal year, August 31, 2017. For the period ended August 31, 2017, SiM High Yield Opportunities Fund deferred $7,651,001 of late year specified ordinary losses.
50
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales and maturities of investments, other than short-term obligations, for the the year ended August 31, 2017 were as follows:
Fund | Purchases (non-U.S. Government Securities) | Purchases of U.S. Government Securities | Sales (non-U.S. Government Securities) | Sales of U.S. Government Securities | ||||||||||||||||||||||||
SiM High Yield Opportunities | $ | 641,393,871 | $ | - | $ | 575,770,317 | $ | - | ||||||||||||||||||||
Sound Point Floating Rate Income | 1,210,706,848 | - | 397,030,059 | - |
A summary of the Funds’ transactions in the USG Select Fund for the year ended August 31, 2017 were as follows:
Fund | Type of Transaction | August 31, 2016 Shares/Fair Value | Purchases | Sales | August 31, 2017 Shares/Fair Value | Dividend Income | ||||||||||||||||||||||||||||||||||||||
SiM High Yield Opportunities Fund | Direct | $ | 15,615,239 | $ | 441,057,001 | $ | 456,672,240 | $ | - | $ | 72,447 | |||||||||||||||||||||||||||||||||
Sound Point Floating Rate Income Fund | Direct | 17,644,246 | 637,859,347 | 484,895,545 | 170,608,048 | 734,338 |
9. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds:
Institutional Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 15,647,330 | $ | 150,173,704 | 29,098,011 | $ | 265,319,517 | ||||||||||||||||||||||
Reinvestment of dividends | 2,299,796 | 22,102,305 | 1,922,570 | 17,530,484 | ||||||||||||||||||||||||
Shares redeemed | (25,127,675 | ) | (241,551,109 | ) | (11,269,780 | ) | (101,717,347 | ) | ||||||||||||||||||||
Redemption fees | - | 11,780 | - | 52,977 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | (7,180,549 | ) | $ | (69,263,320 | ) | 19,750,801 | $ | 181,185,631 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 41,386,495 | $ | 398,109,836 | 27,765,315 | $ | 252,822,449 | ||||||||||||||||||||||
Reinvestment of dividends | 3,044,780 | 29,299,458 | 1,963,256 | 17,908,686 | ||||||||||||||||||||||||
Shares redeemed | (31,395,984 | ) | (301,265,477 | ) | (14,476,514 | ) | (130,154,658 | ) | ||||||||||||||||||||
Redemption fees | - | 10,944 | - | 57,606 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 13,035,291 | $ | 126,154,761 | 15,252,057 | $ | 140,634,083 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 6,496,757 | $ | 62,092,156 | 8,609,802 | $ | 78,138,524 | ||||||||||||||||||||||
Reinvestment of dividends | 741,851 | 7,110,929 | 725,197 | 6,604,510 | ||||||||||||||||||||||||
Shares redeemed | (8,857,829 | ) | (84,914,936 | ) | (16,589,602 | ) | (149,870,501 | ) | ||||||||||||||||||||
Redemption fees | - | 3,720 | - | 19,068 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | (1,619,221 | ) | $ | (15,708,131 | ) | (7,254,603 | ) | $ | (65,108,399 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
51
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
A Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 4,552,437 | $ | 43,748,413 | 3,311,111 | $ | 30,339,773 | ||||||||||||||||||||||
Reinvestment of dividends | 384,259 | 3,698,284 | 344,844 | 3,141,370 | ||||||||||||||||||||||||
Shares redeemed | (4,520,808 | ) | (43,448,453 | ) | (3,836,439 | ) | (34,733,101 | ) | ||||||||||||||||||||
Redemption fees | - | 2,156 | - | 14,139 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 415,888 | $ | 4,000,400 | (180,484 | ) | $ | (1,237,819 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
C Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
SiM High Yield Opportunities Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,130,695 | $ | 10,896,556 | 1,532,505 | $ | 14,060,397 | ||||||||||||||||||||||
Reinvestment of dividends | 314,547 | 3,038,971 | 328,087 | 2,997,639 | ||||||||||||||||||||||||
Shares redeemed | (1,955,809 | ) | (18,878,559 | ) | (1,858,565 | ) | (16,848,778 | ) | ||||||||||||||||||||
Redemption fees | - | 2,109 | - | 13,440 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | (510,567 | ) | $ | (4,940,923 | ) | 2,027 | $ | 222,698 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Institutional Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 21,726,847 | $ | 224,650,825 | 5,694,462 | $ | 57,882,223 | ||||||||||||||||||||||
Reinvestment of dividends | 538,345 | 5,566,824 | 196,489 | 1,988,198 | ||||||||||||||||||||||||
Shares redeemed | (6,095,376 | ) | (63,030,808 | ) | (3,834,677 | ) | (39,224,396 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 16,169,816 | $ | 167,186,841 | 2,056,274 | $ | 20,646,025 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016A | |||||||||||||||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 51,197,786 | $ | 529,627,770 | 2,273,967 | $ | 23,121,921 | ||||||||||||||||||||||
Reinvestment of dividends | 1,041,044 | 10,780,963 | 22,103 | 225,161 | ||||||||||||||||||||||||
Shares redeemed | (5,529,595 | ) | (57,256,921 | ) | (48,307 | ) | (492,031 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 46,709,235 | $ | 483,151,812 | 2,247,763 | $ | 22,855,051 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Investor Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016A | |||||||||||||||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 14,619,832 | $ | 150,721,431 | 2,785,550 | $ | 27,979,631 | ||||||||||||||||||||||
Reinvestment of dividends | 278,051 | 2,871,134 | 39,466 | 399,746 | ||||||||||||||||||||||||
Shares redeemed | (2,687,028 | ) | (27,739,927 | ) | (2,467,368 | ) | (25,036,083 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 12,210,855 | $ | 125,852,638 | 357,648 | $ | 3,343,294 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
A Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016A | |||||||||||||||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 3,308,134 | $ | 34,152,328 | 752,398 | $ | 7,626,353 | ||||||||||||||||||||||
Reinvestment of dividends | 84,321 | 872,006 | 10,835 | 110,257 | ||||||||||||||||||||||||
Shares redeemed | (928,871 | ) | (9,587,237 | ) | (91,976 | ) | (935,595 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 2,463,584 | $ | 25,437,097 | 671,257 | $ | 6,801,015 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
52
American Beacon FundsSM
Notes to Financial Statements
August 31, 2017
C Class | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016A | |||||||||||||||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 2,900,381 | $ | 29,947,252 | 312,358 | $ | 3,171,177 | ||||||||||||||||||||||
Reinvestment of dividends | 53,622 | 554,986 | 3,263 | 33,184 | ||||||||||||||||||||||||
Shares redeemed | (216,214 | ) | (2,236,218 | ) | (17,766 | ) | (180,234 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | 2,737,789 | $ | 28,266,020 | 297,855 | $ | 3,024,127 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
SP ClassB | ||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||
Sound Point Floating Rate Income Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 148,607 | $ | 1,527,716 | 1,717,328 | $ | 17,720,785 | ||||||||||||||||||||||
Reinvestment of dividends | 26,615 | 273,845 | 44,391 | 448,633 | ||||||||||||||||||||||||
Shares redeemed | (1,242,423 | ) | (12,812,639 | ) | (630,811 | ) | (6,338,120 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net increase (decrease) in shares outstanding | (1,067,201 | ) | $ | (11,011,078 | ) | 1,130,908 | $ | 11,831,298 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
A For the period of December 11, 2015 through August 31, 2016.
B Formally known as Investor Class.
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.
53
American Beacon SiM High Yield Opportunities FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.49 | $ | 9.43 | $ | 10.35 | $ | 10.16 | $ | 9.93 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.57 | 0.59 | 0.57 | 0.64 | 0.75 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.13 | 0.05 | (0.65 | ) | 0.47 | 0.26 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.70 | 0.64 | (0.08 | ) | 1.11 | 1.01 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.53 | ) | (0.52 | ) | (0.55 | ) | (0.69 | ) | (0.75 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.29 | ) | (0.23 | ) | (0.03 | ) | ||||||||||||||||||||||||||||
Tax return of capital | (0.05 | ) | (0.06 | )A | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.58 | ) | (0.58 | ) | (0.84 | ) | (0.92 | ) | (0.78 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsB | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.61 | $ | 9.49 | $ | 9.43 | $ | 10.35 | $ | 10.16 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnC | 7.51 | % | 7.28 | % | (0.78 | )% | 11.34 | % | 10.29 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: |
| |||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 355,492,590 | $ | 419,036,240 | $ | 230,287,454 | $ | 75,388,828 | $ | 45,471,117 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 0.85 | % | 0.91 | % | 0.88 | % | 0.86 | % | 0.93 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 0.84 | % | 0.84 | % | 0.84 | % | 0.84 | % | 0.84 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 6.00 | % | 6.30 | % | 5.38 | % | 5.88 | % | 7.11 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 6.01 | % | 6.37 | % | 5.41 | % | 5.90 | % | 7.20 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 50 | % | 57 | % | 43 | % | 38 | % | 65 | % | ||||||||||||||||||||||||||
Y Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.48 | $ | 9.42 | $ | 10.34 | $ | 10.14 | $ | 9.92 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.58 | 0.59 | 0.53 | 0.64 | 0.73 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.11 | 0.05 | (0.62 | ) | 0.46 | 0.25 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.69 | 0.64 | (0.09 | ) | 1.10 | 0.98 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.52 | ) | (0.52 | ) | (0.54 | ) | (0.67 | ) | (0.73 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.29 | ) | (0.23 | ) | (0.03 | ) | ||||||||||||||||||||||||||||
Tax return of capital | (0.05 | ) | (0.06 | )A | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.57 | ) | (0.58 | ) | (0.83 | ) | (0.90 | ) | (0.76 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsB | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.60 | $ | 9.48 | $ | 9.42 | $ | 10.34 | $ | 10.14 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnC | 7.46 | % | 7.21 | % | (0.87 | )% | 11.33 | % | 10.08 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 577,349,417 | $ | 446,395,255 | $ | 300,014,547 | $ | 247,179,395 | $ | 87,638,664 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 0.89 | % | 0.91 | % | 0.91 | % | 0.94 | % | 0.99 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 0.89 | % | 0.91 | % | 0.93 | % | 0.94 | % | 0.93 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 5.93 | % | 6.28 | % | 5.32 | % | 5.77 | % | 6.77 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 5.93 | % | 6.29 | % | 5.30 | % | 5.77 | % | 6.82 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 50 | % | 57 | % | 43 | % | 38 | % | 65 | % |
A | Return of capital is calculated based on shares outstanding at the time of distribution. |
B | Amount represents less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
54
American Beacon SiM High Yield Opportunities FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.45 | $ | 9.40 | $ | 10.32 | $ | 10.12 | $ | 9.90 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.53 | 0.50 | 0.50 | 0.56 | 0.71 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.15 | 0.10 | (0.61 | ) | 0.52 | 0.25 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.68 | 0.60 | (0.11 | ) | 1.08 | 0.96 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.51 | ) | (0.49 | ) | (0.52 | ) | (0.65 | ) | (0.71 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.29 | ) | (0.23 | ) | (0.03 | ) | ||||||||||||||||||||||||||||
Tax return of capital | (0.04 | ) | (0.06 | )A | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.55 | ) | (0.55 | ) | (0.81 | ) | (0.88 | ) | (0.74 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsB | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.58 | $ | 9.45 | $ | 9.40 | $ | 10.32 | $ | 10.12 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnC | 7.31 | % | 6.82 | % | (1.14 | )% | 11.08 | % | 9.84 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 115,679,739 | $ | 129,503,495 | $ | 196,928,349 | $ | 199,533,521 | $ | 248,052,347 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 1.13 | % | 1.17 | % | 1.19 | % | 1.11 | % | 1.15 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 1.13 | % | 1.18 | % | 1.19 | % | 1.11 | % | 1.17 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 5.70 | % | 5.97 | % | 5.05 | % | 5.68 | % | 6.81 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 5.70 | % | 5.96 | % | 5.05 | % | 5.68 | % | 6.79 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 50 | % | 57 | % | 43 | % | 38 | % | 65 | % | ||||||||||||||||||||||||||
A Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.49 | $ | 9.43 | $ | 10.36 | $ | 10.15 | $ | 9.92 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.55 | 0.54 | 0.49 | 0.57 | 0.69 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.11 | 0.07 | (0.62 | ) | 0.49 | 0.26 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.66 | 0.61 | (0.13 | ) | 1.06 | 0.95 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.50 | ) | (0.49 | ) | (0.51 | ) | (0.62 | ) | (0.69 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.29 | ) | (0.23 | ) | (0.03 | ) | ||||||||||||||||||||||||||||
Tax return of capital | (0.04 | ) | (0.06 | )A | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.54 | ) | (0.55 | ) | (0.80 | ) | (0.85 | ) | (0.72 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsB | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.61 | $ | 9.49 | $ | 9.43 | $ | 10.36 | $ | 10.15 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnC | 7.12 | % | 6.87 | % | (1.27 | )% | 10.87 | % | 9.74 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 84,955,157 | $ | 79,917,424 | $ | 81,147,262 | $ | 93,060,715 | $ | 76,146,389 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 1.20 | % | 1.23 | % | 1.22 | % | 1.33 | % | 1.41 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 1.20 | % | 1.24 | % | 1.24 | % | 1.32 | % | 1.35 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 5.62 | % | 5.99 | % | 5.01 | % | 5.44 | % | 6.53 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 5.62 | % | 5.98 | % | 4.99 | % | 5.45 | % | 6.60 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 50 | % | 57 | % | 43 | % | 38 | % | 65 | % |
A | Return of capital is calculated based on shares outstanding at the time of distribution. |
B | Amount represents less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
55
American Beacon SiM High Yield Opportunities FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.53 | $ | 9.47 | $ | 10.40 | $ | 10.16 | $ | 9.94 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.47 | 0.48 | 0.42 | 0.49 | 0.62 | |||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.12 | 0.06 | (0.62 | ) | 0.50 | 0.25 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.59 | 0.54 | (0.20 | ) | 0.99 | 0.87 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.43 | ) | (0.43 | ) | (0.44 | ) | (0.52 | ) | (0.62 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | - | - | (0.29 | ) | (0.23 | ) | (0.03 | ) | ||||||||||||||||||||||||||||
Tax return of capital | (0.04 | ) | (0.05 | )A | - | - | - | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.47 | ) | (0.48 | ) | (0.73 | ) | (0.75 | ) | (0.65 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Redemption fees added to beneficial interestsB | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.65 | $ | 9.53 | $ | 9.47 | $ | 10.40 | $ | 10.16 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total returnC | 6.33 | % | 6.08 | % | (1.98 | )% | 10.12 | % | 8.81 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 69,698,961 | $ | 73,668,689 | $ | 73,213,378 | $ | 76,536,190 | $ | 60,829,392 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupements | 1.94 | % | 1.97 | % | 1.97 | % | 2.08 | % | 2.15 | % | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupements | 1.94 | % | 1.99 | % | 1.99 | % | 2.07 | % | 2.09 | % | ||||||||||||||||||||||||||
Net investment income, before expense reimbursements or recoupements | 4.90 | % | 5.26 | % | 4.26 | % | 4.68 | % | 5.76 | % | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupements | 4.90 | % | 5.25 | % | 4.24 | % | 4.69 | % | 5.82 | % | ||||||||||||||||||||||||||
Portfolio turnover rate | 50 | % | 57 | % | 43 | % | 38 | % | 65 | % |
A | Return of capital is calculated based on shares outstanding at the time of distribution. |
B | Amount represents less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
See accompanying notes
56
American Beacon Sound Point Floating Rate Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||||||||||||||||||
Year Ended August 31, | ||||||||||||||||||||||||||||||||||||
2017 |
| 2016 |
| 2015 |
| 2014 |
| December 3, 2012A to August 31, 2013 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.20 | $ | 10.38 | $ | 10.49 | $ | 10.58 | $ | 10.00 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.46 | 0.51 | 0.52 | B | 0.57 | 0.14 | ||||||||||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.18 | (0.10 | ) | 0.06 | 0.14 | 0.50 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total income (loss) from investment operations | 0.64 | 0.41 | 0.58 | 0.71 | 0.64 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.47 | ) | (0.55 | ) | (0.52 | ) | (0.58 | ) | (0.06 | ) | ||||||||||||||||||||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | (0.17 | ) | (0.22 | ) | - | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total distributions | (0.49 | ) | (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 returnC | 6.37 | % | 4.12 | % | 5.75 | % | 6.92 | % | 6.40 | %D | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period | $ | 231,445,512 | $ | 63,147,618 | $ | 42,903,291 | $ | 19,578,492 | $ | 17,779,147 | ||||||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupments | 0.85 | % | 1.26 | % | 1.88 | % | 2.37 | % | 3.33 | %E | ||||||||||||||||||||||||||
Expenses, net of reimbursements or recoupments | 0.84 | % | 0.92 | %F | 0.90 | % | 1.58 | %G | 2.08 | %E | ||||||||||||||||||||||||||
Net investment income (loss), before expense reimbursements or recoupments | 4.51 | % | 4.78 | % | 4.06 | % | 4.56 | % | (0.86 | )%E | ||||||||||||||||||||||||||
Net investment income, net of reimbursements or recoupments | 4.52 | % | 5.12 | % | 5.04 | % | 5.35 | % | 2.11 | %E | ||||||||||||||||||||||||||
Portfolio turnover rate | 86 | % | 168 | % | 196 | % | 165 | % | 197 | % |
A | Commencement of Operations for the Predecessor Fund. |
B | Per share amounts have been calculated using the average shares method. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Not annualized. |
E | Annualized. |
F | Expense ratios may exceed stated expense caps in Note 2 due to pre-adoption expenses. |
G | 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. |
See accompanying notes
57
American Beacon Sound Point Floating Rate Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||
Year Ended August 31, 2017 | December 11, 2015A to August 31, 2016 | |||||||||||
|
| |||||||||||
Net asset value, beginning of period | $ | 10.21 | $ | 10.34 | ||||||||
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.46 | 0.53 | ||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.17 | (0.09 | ) | |||||||||
|
|
|
| |||||||||
Total income (loss) from investment operations | 0.63 | 0.44 | ||||||||||
|
|
|
| |||||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.46 | ) | (0.53 | ) | ||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | ||||||||
|
|
|
| |||||||||
Total distributions | (0.48 | ) | (0.57 | ) | ||||||||
|
|
|
| |||||||||
Net asset value, end of period | $ | 10.36 | $ | 10.21 | ||||||||
|
|
|
| |||||||||
Total returnC | 6.27 | % | 4.37 | %B | ||||||||
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 507,077,617 | $ | 22,952,034 | ||||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements or recoupments | 0.92 | % | 1.42 | %D | ||||||||
Expenses, net of reimbursements or recoupments | 0.93 | % | 0.94 | %D | ||||||||
Net investment income, before expense reimbursements or recoupments | 4.43 | % | 4.64 | %D | ||||||||
Net investment income, net of reimbursements or recoupments | 4.42 | % | 5.11 | %D | ||||||||
Portfolio turnover rate | 86 | % | 168 | %E |
A | Commencement of Operations. |
B | Not annualized. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Annualized. |
E | Portfolio turnover is for the period from September 1, 2015 through August 31, 2016 and is annualized. |
See accompanying notes
58
American Beacon Sound Point Floating Rate Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||
Year Ended August 31, 2017 | December 11, 2015A to August 31, 2016 | |||||||||||
|
| |||||||||||
Net asset value, beginning of period | $ | 10.18 | $ | 10.33 | ||||||||
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.46 | 0.50 | ||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.15 | (0.09 | ) | |||||||||
|
|
|
| |||||||||
Total income (loss) from investment operations | 0.61 | 0.41 | ||||||||||
|
|
|
| |||||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.44 | ) | (0.52 | ) | ||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | ||||||||
|
|
|
| |||||||||
Total distributions | (0.46 | ) | (0.56 | ) | ||||||||
|
|
|
| |||||||||
Net asset value, end of period | $ | 10.33 | $ | 10.18 | ||||||||
|
|
|
| |||||||||
Total returnB | 6.12 | % | 4.16 | %C | ||||||||
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 129,817,379 | $ | 3,641,581 | ||||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements or recoupments | 1.07 | % | 1.31 | %D | ||||||||
Expenses, net of reimbursements or recoupments | 1.09 | % | 1.22 | %D | ||||||||
Net investment income, before expense reimbursements or recoupments | 4.24 | % | 4.26 | %D | ||||||||
Net investment income, net of reimbursements or recoupments | 4.22 | % | 4.35 | %D | ||||||||
Portfolio turnover rate | 86 | % | 168 | %E | ||||||||
A Class | ||||||||||||
Year Ended August 31, 2017 | December 11, 2015A to August 31, 2016 | |||||||||||
|
| |||||||||||
Net asset value, beginning of period | $ | 10.20 | $ | 10.33 | ||||||||
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.42 | 0.51 | ||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.17 | (0.10 | ) | |||||||||
|
|
|
| |||||||||
Total income (loss) from investment operations | 0.59 | 0.41 | ||||||||||
|
|
|
| |||||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.42 | ) | (0.50 | ) | ||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | ||||||||
|
|
|
| |||||||||
Total distributions | (0.44 | ) | (0.54 | ) | ||||||||
|
|
|
| |||||||||
Net asset value, end of period | $ | 10.35 | $ | 10.20 | ||||||||
|
|
|
| |||||||||
Total returnB | 5.92 | % | 4.13 | %C | ||||||||
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 32,450,342 | $ | 6,849,306 | ||||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements or recoupments | 1.22 | % | 1.67 | %D | ||||||||
Expenses, net of reimbursements or recoupments | 1.24 | % | 1.24 | %D | ||||||||
Net investment income, before expense reimbursements or recoupments | 4.07 | % | 4.51 | %D | ||||||||
Net investment income, net of reimbursements or recoupments | 4.04 | % | 4.93 | %D | ||||||||
Portfolio turnover rate | 86 | % | 168 | %E |
A | Commencement of Operations. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover is for the period from September 1, 2015 through August 31, 2016 and is annualized. |
See accompanying notes
59
American Beacon Sound Point Floating Rate Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | ||||||||||||
Year Ended August 31, 2017 | December 11, 2015A to August 31, 2016 | |||||||||||
|
| |||||||||||
Net asset value, beginning of period | $ | 10.21 | $ | 10.33 | ||||||||
|
|
|
| |||||||||
Income from investment operations: | ||||||||||||
Net investment income | 0.35 | 0.45 | ||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.16 | (0.08 | ) | |||||||||
|
|
|
| |||||||||
Total income (loss) from investment operations | 0.51 | 0.37 | ||||||||||
|
|
|
| |||||||||
Less distributions: | ||||||||||||
Dividends from net investment income | (0.35 | ) | (0.45 | ) | ||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | ||||||||
|
|
|
| |||||||||
Total distributions | (0.37 | ) | (0.49 | ) | ||||||||
|
|
|
| |||||||||
Net asset value, end of period | $ | 10.35 | $ | 10.21 | ||||||||
|
|
|
| |||||||||
Total returnB | 5.03 | % | 3.67 | %C | ||||||||
|
|
|
| |||||||||
Ratios and supplemental data: | ||||||||||||
Net assets, end of period | $ | 31,434,098 | $ | 3,040,244 | ||||||||
Ratios to average net assets: | ||||||||||||
Expenses, before reimbursements or recoupments | 1.97 | % | 2.55 | %D | ||||||||
Expenses, net of reimbursements or recoupments | 1.99 | % | 1.99 | %D | ||||||||
Net investment income, before expense reimbursements or recoupments | 3.31 | % | 3.50 | %D | ||||||||
Net investment income, net of reimbursements or recoupments | 3.29 | % | 4.06 | %D | ||||||||
Portfolio turnover rate | 86 | % | 168 | %E |
A | Commencement of Operations. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover is for the period from September 1, 2015 through August 31, 2016 and is annualized. |
See accompanying notes
60
American Beacon Sound Point Floating Rate Income FundSM
Financial Highlights
(For a share outstanding throughout the period)
SPI | ||||||||||||||||||||||||||||
Year Ended August 31, | May 31A to August 31, 2014 | |||||||||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.19 | $ | 10.38 | $ | 10.49 | $ | 10.62 | B | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Income from investment operations: | �� | |||||||||||||||||||||||||||
Net investment income (loss) | 0.25 | C | 0.30 | 0.43 | C | 0.13 | ||||||||||||||||||||||
Net gains (losses) on investments (both realized and unrealized) | 0.37 | 0.07 | 0.12 | (0.00 | )D | |||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total income (loss) from investment operations | 0.62 | 0.37 | 0.55 | 0.13 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.43 | ) | (0.52 | ) | (0.49 | ) | (0.26 | ) | ||||||||||||||||||||
Distributions from net realized gains | (0.02 | ) | (0.04 | ) | (0.17 | ) | - | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total distributions | (0.45 | ) | (0.56 | ) | (0.66 | ) | (0.26 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net asset value, end of period | $ | 10.36 | $ | 10.19 | $ | 10.38 | $ | 10.49 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total returnE | 6.13 | % | 3.70 | % | 5.53 | % | 1.19 | %F | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||
Net assets, end of period | $ | 785,649 | $ | 11,651,032 | $ | 125,577 | $ | 1,138 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||
Expenses, before reimbursements or recoupments | 1.08 | % | 1.49 | % | 1.74 | % | 1.95 | %G | ||||||||||||||||||||
Expenses, net of reimbursements or recoupments | 1.12 | % | 1.19 | %H | 1.15 | % | 1.15 | %G | ||||||||||||||||||||
Net investment income, before expense reimbursements or recoupments | 4.25 | % | 4.01 | % | 3.59 | % | 3.70 | %G | ||||||||||||||||||||
Net investment income, net of reimbursements or recoupments | 4.21 | % | 4.30 | % | 4.18 | % | 4.50 | %G | ||||||||||||||||||||
Portfolio turnover rate | 86 | % | 168 | % | 196 | % | 17 | %F |
A | Commencement of Operations for the Predecessor Fund. |
B | NAV at Class inception. |
C | Per share amounts have been calculated using the average shares method. |
D | Amount represents less than $0.01 per share. |
E | 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. |
F | Not annualized. |
G | Annualized. |
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. |
See accompanying notes
61
American Beacon FundsSM
August 31, 2017 (Unaudited)
Certain tax information regarding the Funds is required to be provided to shareholders based upon the Funds’ income and distributions for the taxable year ended August 31, 2017. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2017.
The Funds designated the following items with regard to distributions paid during the fiscal year ended August 31, 2017. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Funds to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Corporate Dividends-Received Deduction: | ||||
SiM High Yield Opportunities Fund | 0.00 | % | ||
Sound Point Floating Rate Income Fund | 0.00 | % | ||
Qualified Dividend Income: | ||||
SiM High Yield Opportunities Fund | 0.98 | % | ||
Sound Point Floating Rate Income Fund | 0.00 | % | ||
Long-Term Capital Gain Distributions: | ||||
SiM High Yield Opportunities Fund | $ | - | ||
Sound Point Floating Rate Income Fund | - | |||
Short-Term Capital Gain Distributions: | ||||
SiM High Yield Opportunities Fund | $ | - | ||
Sound Point Floating Rate Income Fund | 471,939 |
Shareholders will receive notification in January 2018 of the applicable tax information necessary to prepare their 2017 income tax returns.
62
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Renewal and Approval of Management Agreements and Investment Advisory Agreements
At in-person meetings held on May 16, 2017 and June 7, 2017 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 7 meeting, approved the renewal of:
(1) the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (the “Trust”), on behalf of American Beacon Sound Point Floating Rate Income Fund (“Sound Point Fund”) and American Beacon SiM High Yield Opportunities Fund (“SiM Fund”) (collectively, the “Funds”);
(2) the Investment Advisory Agreement among the Manager, the Trust, on behalf of the Sound Point Fund, and Sound Point Capital Management, LP (“Sound Point”); and
(3) the Investment Advisory Agreement among the Manager, the Trust, on behalf of the SiM Fund, and Strategic Income Management, LLC (“SiM”).
Each of the Investment Advisory Agreements is referred to herein as the “Investment Advisory Agreement,” and Sound Point and SiM are hereinafter each referred to as a “subadvisor.” The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for its consideration of the renewal of the Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisors, Broadridge, Inc. (“Broadridge”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In advance of the Meetings, the Board’s Investment Committee and/or the Manager coordinated the production of information from Broadridge and Morningstar regarding the performance, fees and expenses of the Funds as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Agreements, the Trustees received and evaluated such information as they deemed necessary. The information requested on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
• | comparisons of the performance of an appropriate share class of each Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Broadridge and Morningstar, and to the performance of certain similar accounts, if applicable, managed by the firm; |
• | comparisons of each Fund’s management and subadvisory fee rates and expense ratio with the management fee rates paid by comparable mutual funds and their expense ratios, including peer group averages and fee and expense analyses provided by Broadridge and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided by a firm; |
• | a description of any applicable fee waivers and/or expense reimbursements in place for each Fund during the past year, and any proposed changes to those arrangements; |
• | the Manager’s profitability with respect to the services that it provided to each Fund; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors; |
63
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
• | an evaluation of other benefits to the firm or Funds as a result of their relationship, if any; |
• | information regarding the administrative, accounting-related and cash management services that the Manager provides to the Funds and the fees that the Manager receives for such services; and |
• | information regarding a firm’s financial condition, the personnel of the Manager who are assigned primary responsibility for managing the Funds, staffing levels, portfolio managers’ compensation, insurance coverage, material pending litigation, code of ethics, compliance matters, actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Funds, and the Manager’s disaster recovery plans. |
The Board noted that the Manager provides management and administrative services to the Funds pursuant to the Management Agreement. The Board considered that many mutual funds have separate contracts governing both types of services, and observed that the actual management fee rates provided by Broadridge for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
A firm may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of the firms based on information that was provided. In such cases, the Board determined that the omission of any such information was not material to its considerations. The class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
Provided below is an overview of certain factors the Board considered in connection with its renewal and approval of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the Independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to the Renewal of the Management Agreement and Each Investment Advisory Agreement
In determining whether to renew the Agreements, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for both of the Funds were considered at the Meetings, the Board considered each Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional clients); (5) the extent to which economies of scale, if any, have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect economies of scale, if any, for the benefit of Fund investors; and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund.
64
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: the Sound Point Fund’s performance for various periods since its inception in 2015 and the SiM Fund’s long-term performance; the length of service of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; and the Manager’s efforts to retain key employees and maintain staffing levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing and the size of the subadvisor. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered each subadvisor’s representations regarding its compliance program and code of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund.
Investment Performance. The Board evaluated the comparative information provided by Broadridge and the Manager regarding the performance of each Fund relative to its Broadridge performance universe, Morningstar Category, and benchmark index, as well as the Fund’s Morningstar rating. The Board considered the information provided by Broadridge regarding its independent peer selection methodology to select all Broadridge performance universes. The Board also considered that the performance universes selected by Broadridge may not provide appropriate comparisons for a Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also evaluated the comparative information provided by each subadvisor regarding the performance of each Fund relative to the performance of other comparable investment accounts managed by the subadvisor and the Fund’s benchmark index. In addition, the Board considered the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager, before and after the payment of distribution-related expenses by the Manager. The profits or losses were noted at both an aggregate level for all funds within the group of mutual funds sponsored by the Manager (the “Fund Complex”) and at an individual Fund level, with the SiM Fund being profitable for the Manager before and after the payment of distribution-related expenses and the Manager sustaining losses with respect to the Sound Point Fund before and after the payment of distribution-related expenses. The Board also considered comparative information provided by the Manager regarding the Manager’s overall profitability with respect to the Fund Complex relative to the overall profitability of other firms in the mutual fund industry, as disclosed in publicly available sources. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the Manager represented that, among other matters, the difference is attributable to the fact that the Manager does not perform administrative services for non-investment company clients and reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the fee waivers and expense reimbursements for the Funds that were in place during the last fiscal year. The Board further considered that, with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager. The Board also noted that certain share classes of the Funds maintain higher expense ratios in order to compensate third-party financial intermediaries.
65
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
In analyzing the fee rates charged by each subadvisor in connection with its investment advisory services to each Fund, the Board considered that, with respect to the Sound Point Fund, the Manager has negotiated the lowest fee rate the subadvisor charges for any comparable client accounts and, with respect to the SiM Fund, the Fund’s subadvisory fee rate schedule was generally favorable compared to other comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and those that do likely employ different methodologies in connection with these calculations.
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as each Fund grows and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in the subadvisory fee schedule for the SiM Fund and, with respect to the Sound Point Fund, the subadvisor has represented that the Fund’s subadvisory fee rate reflects economies of scale for the benefit of Fund shareholders. In addition, the Board noted the Manager’s representation that the Management Agreement contains fee schedule breakpoints at higher asset levels with respect to each Fund. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with each Fund.
Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
The performance comparisons below were made versus each Fund’s Broadridge performance universe and Morningstar Category. With respect to the Broadridge performance universe, the 1st Quintile represents the top twenty percent of the universe based on performance and the 5th Quintile representing the bottom twenty percent of the universe based on performance. References below to each Fund’s Broadridge performance universe are to the universe of mutual funds with a comparable investment classification/objective included in the analysis provided by Broadridge. In reviewing the performance of the SiM Fund, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events.
The expense comparisons below were made versus each Fund’s Broadridge expense universe and Broadridge expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Broadridge. A Broadridge expense group consists of the Fund and a representative sample of funds with similar operating structures and asset sizes, as selected by Broadridge. A Broadridge expense universe includes all funds in the investment classification/objective with a similar operating structure as the share class of the Fund included in the Broadridge comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. For
66
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
each Fund, the Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the subadvisors’ use of soft dollars was requested from the Manager and was considered by the Trustees.
Additional Considerations and Conclusions with Respect to the American Beacon Sound Point Floating Rate Income Fund
In considering the renewal of the Management Agreement with the Manager and the Investment Advisory Agreement with Sound Point for the Sound Point Fund, the Trustees considered the following additional factors:
Broadridge Total Expenses Excluding 12b-1 Fees and Morningstar Fee Level Ranking
Compared to Broadridge Expense Group | 4th Quintile | |
Compared to Broadridge Expense Universe | 5th Quintile | |
Morningstar Fee Level Ranking – Institutional Class | High Expense Ratio |
Broadridge Performance Analysis (one-year period ended February 28, 2017)
Compared to Broadridge Performance Universe | 4th Quintile |
Morningstar Performance Analysis (three-year period ended February 28, 2017)
Compared to Morningstar Category | 1st Quintile |
The Trustees also considered: (1) information provided by the subadvisor regarding fee rates charged for managing accounts in the same strategy as the Fund; (2) that the Sound Point Fund acquired all of the assets of the Sound Point Floating Rate Income Fund, a professionally managed portfolio (“Acquired Fund”), on December 11, 2015, and that the Sound Point Fund’s performance prior to that date is that of the Acquired Fund; (3) the Fund’s expenses are higher than the median of its Broadridge expense group and expense universe, but that the Fund outperformed the median of its Morningstar category for the 3-year period ended February 28, 2017; (4) the subadvisor’s long-term performance and consistent team, as well as the Manager’s representation regarding the subadvisor’s consistent process; and (5) the Manager’s recommendation to continue to retain the subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and subadvisor under the Management and Investment Advisory Agreements are fair and reasonable; and (2) determined that the American Beacon Sound Point Floating Rate Income Fund and its shareholders would benefit from the Manager’s and subadvisor’s continued management of the Fund.
Additional Considerations and Conclusions with Respect to the American Beacon SiM High Yield Opportunities Fund
In considering the renewal of the Management Agreement with the Manager and the Investment Advisory Agreement with SiM for the SiM Fund, the Trustees considered the following additional factors:
Broadridge Total Expenses Excluding 12b-1 Fees and Morningstar Fee Level Ranking
Compared to Broadridge Expense Group | 5th Quintile | |
Compared to Broadridge Expense Universe | 5th Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Above Average Expense Ratio |
67
Disclosures Regarding the Approval of the Management and
Investment Advisory Agreements
August 31, 2017 (Unaudited)
Broadridge and Morningstar Performance Analysis (five-year period ended February 28, 2017)
Compared to Broadridge Performance Universe | 1st Quintile | |
Compared to Morningstar Category | 1st Quintile |
The Trustees also considered: (1) that the Fund’s expenses are higher than the median of its Broadridge expense group and expense universe, but the Fund outperformed the average of its Broadridge performance universe and Morningstar category for the 5-year period ended February 28, 2017; (2) information provided by SiM regarding fee rates charged by it for managing accounts in the same strategy as the Fund; and (3) the Manager’s recommendation to continue to retain the subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and subadvisor under the Management and Investment Advisory Agreements are fair and reasonable; and (2) determined that the American Beacon SiM High Yield Opportunities Fund and its shareholders would benefit from the Manager’s and subadvisor’s continued management of the Fund.
68
Trustees and Officers of the American Beacon FundsSM (Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. The address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees thirty-four funds in the fund complex that includes the Trust, the American Beacon Select Funds and the American Beacon Institutional Funds Trust. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (80) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gilbert G. Alvarado (47) | Trustee since 2015 | Director, Kura MD, Inc. (local telehealth organization) (2015-present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present); Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-2015); Director, Sacramento Regional Technology Alliance (2011-2016); Director, Women’s Empowerment (2009-2014); Director, Valley Healthcare Staffing (2017–present); Trustee, American Beacon Select Funds (2015-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Joseph B. Armes (55) | Trustee since 2015 | Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2015-Present); Chairman of the Board of Capital Southwest Corporation, predecessor to CSW Industrials, Inc. (2014-present) (investment company); CEO, Capital Southwest Corporation (2013-2015); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Gerard J. Arpey (59) | Trustee since 2012 | Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Director, S.C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Brenda A. Cline (56) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc. (public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). |
69
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
NON-INTERESTED TRUSTEES (CONT.) | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
Eugene J. Duffy (63) | Trustee since 2008 | Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Thomas M. Dunning (74) | Trustee since 2008 | Chairman Emeritus, Lockton Dunning Benefits (consulting firm in employee benefits) (2008–Present); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Richard A. Massman (74) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus, Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities) (2009-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
Barbara J. McKenna, CFA (54) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
R. Gerald Turner (71) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012); Trustee, American Beacon Institutional Funds Trust (2017-Present). | ||
OFFICERS | Term | |||
One Year | ||||
Gene L. Needles, Jr. (62) | President since 2009 | President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Resolute Investment Managers, Inc. (2015-Present); President, CEO and Director, Resolute Acquisition, Inc. (2015-Present); President, CEO and Director, Resolute Topco, Inc. (2015-Present), President & CEO, Resolute Investment Holdings, LLC (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc. (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, LLC (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Director, Chairman, President and CEO, Alpha Quant Advisors, LLC (2016-Present); Director, ARK Investment Management LLC (2016-Present); Director, Shapiro Capital Management LLC (2017-Present); Member, Investment Advisory Committee, Employees Retirement System of Texas (2017-Present); Trustee, American Beacon NextShares Trust (2015-Present); President, American Beacon Select Funds (2009-Present); President, American Beacon Mileage Funds (2009-2012); President, American Beacon Master Trust (2009–2012); President, American Beacon Institutional Funds Trust (2017-Present). |
70
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Rosemary K. Behan (58) | VP, Secretary and Chief Legal Officer since 2006 | Vice President and Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Resolute Investment Holdings, LLC (2015-Present) Secretary, Resolute Investment Managers, Inc. (2015-Present); Secretary, Resolute Topco, Inc. (2015-Present); Secretary, Resolute Acquisition, Inc. (2015 – Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, LLC (2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Secretary, Alpha Quant Advisors, LLC (2016-Present); Chief Legal Officer, Vice President and Secretary, American Beacon Select Funds (2006-Present); Chief Legal Officer, Vice President and Secretary, American Beacon Mileage Funds (2006-2012); Chief Legal Officer, Vice President and Secretary, American Beacon Master Trust (2006-2012); Chief Legal Officer, Vice President and Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Brian E. Brett (57) | VP since 2004 | Senior Vice President (2012-Present) and Vice President (2004-2012), American Beacon Advisors, Inc.; Vice President, American Beacon Select Funds (2004-Present); Vice President, American Beacon Mileage Funds (2004-2012); Vice President, American Beacon Master Trust (2004-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Paul B. Cavazos(48) | VP since 2016 | Senior Vice President, American Beacon Advisors, Inc. (2016-Present); Chief Investment Officer and Assistant Treasurer, DTE Energy (2007-2016); Vice President, American Beacon Select Funds (2016-Present); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Erica Duncan (47) | VP Since 2011 | Vice President, American Beacon Advisors, Inc. (2011-Present); Vice President, American Beacon Select Funds (2011-Present); Vice President, American Beacon Mileage Funds (2011-2012); Vice President, American Beacon Master Trust (2011-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). | ||
Melinda G. Heika (56) | Treasurer since 2010 | Treasurer, American Beacon Advisors, Inc. (2010-Present); Resolute Investment Managers, Inc. (2015-Present); Treasurer, Resolute Acquisition, Inc. (2015-Present); Treasurer, Resolute Topco, Inc. (2015-Present); Treasurer, Resolute Investment Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, LLC (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Treasurer, American Beacon Select Funds (2010-Present); Treasurer, American Beacon Mileage Funds (2010-2012); Treasurer, American Beacon Master Trust (2010-2012); Treasurer, American Beacon Institutional Funds Trust (2017-Present). | ||
Terri L. McKinney (53) | VP since 2010 | Vice President (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.; Vice President, Resolute Investment Managers, Inc. (2017-Present); Vice President, Alpha Quant Advisors, LLC (2016-Present); Vice President, American Beacon Select Funds (2010-Present); Vice President, American Beacon Mileage Funds (2010-2012); Vice President, American Beacon Master Trust (2010-2012); Vice President, American Beacon Institutional Funds Trust (2017-Present). |
71
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Jeffrey K. Ringdahl (42) | VP since 2010 | Senior Vice President (2013-Present), Vice President (2010-2013), and Director (2015-Present), American Beacon Advisors, Inc.; Vice President, American Beacon Select Funds (2010-Present); Vice President, American Beacon Mileage Funds (2010-2012); Vice President, American Beacon Master Trust (2010-2012); Senior Vice President (2012-Present) and Manager (2015-Present), American Private Equity Management, LLC; Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Trustee, American Beacon NextShares Trust (2015-Present); Director and Senior Vice Present, Resolute Investment Holdings, LLC (2015-Present); Director and Senior Vice President, Resolute Topco, Inc. (2015-Present); Director and Senior Vice President, Resolute Acquisition, Inc. (2015-Present); Director and Senior Vice President, Resolute Investment Managers, Inc. (2015-Present); Director, Executive Vice President and Chief Operating Officer, Alpha Quant Advisors, LLC (2016-Present); Vice President, American Beacon Institutional Funds Trust (2017-President); Director, Shapiro Capital Management, LLC (2017-Present). | ||
Samuel J. Silver (54) | VP Since 2011 | Vice President, American Beacon Advisors, Inc. (2011-Present); Vice President, American Beacon Select Funds (2011-Present); Vice President, American Beacon Mileage Funds (2011-2012); Vice President, American Beacon Master Trust (2011-2012); American Beacon Institutional Funds Trust (2011-Present). | ||
Christina E. Sears (45) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, LLC (2012-Present); Chief Compliance Officer and Vice President, Alpha Quant Advisors, LLC (2016-Present); Chief Compliance Officer (2004-Present) and Assistant Secretary (1999-Present), American Beacon Select Funds; Chief Compliance Officer (2004-2012) and Assistant Secretary (1999-2012), American Beacon Mileage Funds; Chief Compliance Officer (2004-2012) and Assistant Secretary (1999-2012), American Beacon Master Trust; Chief Compliance Officer and Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Sonia L. Bates (60) | Asst. Treasurer since 2011 | Assistant Treasurer, American Beacon Advisors, Inc. (2011-Present); Assistant Treasurer, Resolute Investment Managers, Inc. (2015-Present); Assistant Treasurer, Resolute Acquisition, Inc. (2015-Present); Assistant. Treasurer, Resolute Topco, Inc. (2015-Present); Assistant Treasurer, Resolute Investment Holdings, LLC.; Assistant Treasurer, Lighthouse Holdings, Inc. (2011-2015); Assistant Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Assistant Treasurer, American Private Equity Management, LLC (2012-Present); Assistant Treasurer, American Beacon Select Funds (2011-Present); Assistant Treasurer American Beacon Mileage Funds (2011-2012); Assistant Treasurer, American Beacon Master Trust (2011-2012); Assistant Treasurer, American Beacon Institutional Funds Trust (2017-Present). | ||
Shelley D. Abrahams (42) | Assistant Secretary since 2008 | Assistant Secretary, American Beacon Advisors, Inc. (2008-Present); Assistant Secretary, American Beacon Select Funds (2008-Present); Assistant Secretary, American Beacon Mileage Funds (2008-2012); Assistant Secretary, American Beacon Master Trust (2008-2012); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). |
72
Trustees and Officers of the American Beacon FundsSM (Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS (CONT.) | Term | |||
One Year | ||||
Rebecca L. Harris (50) | Assistant Secretary since 2010 | Vice President, American Beacon Advisors, Inc. (2016-Present); Vice President, Resolute Investment Managers, Inc. (2017-Present); Vice President, Alpha Quant Advisors, LLC (2016-Present); Assistant Secretary, American Beacon Select Funds (2010-Present); Assistant Secretary, American Beacon Mileage Funds (2010-2012); Assistant Secretary, American Beacon Master Trust (2010-2012); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Diana N. Lai (41) | Assistant Secretary since 2012 | Assistant Secretary, American Beacon Advisors, Inc. (2012-Present); Assistant Secretary, American Beacon Select Funds (2012-Present); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). | ||
Teresa A. Oxford (59) | Assistant Secretary since 2015 | Assistant Secretary, American Beacon Advisors, Inc. (2015-Present); Assistant Secretary, Alpha Quant Advisors, LLC (2016-Present); Assistant Secretary, American Beacon Select Funds (2015-Present); Assistant Secretary, American Beacon Institutional Funds Trust (2017-Present). |
* As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75.
** Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors.
73
American Beacon FundsSM
August 31, 2017 (Unaudited)
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
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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: Call (800) 658-5811 | By Mail: American Beacon Funds 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 1-800-SEC-0330. A complete schedule of each Fund’s portfolio holdings is also made available on the Funds’ website at www.americanbeaconfunds.com, approximately sixty days after the end of each quarter for the Sound Point Floating Rate Income Fund and twenty days after the end of each month for the SiM High Yield Opportunities 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, which is available free of charge on the Fund’s website at 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, TX | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds, American Beacon SiM High Yield Opportunities Fund and American Beacon Sound Point Floating Rate Income Fund are service marks of American Beacon Advisors, Inc.
AR 8/17
ITEM 2. CODE OF ETHICS.
The Trust adopted a code of ethics that applies to its principal executive and financial officers (the “Code”). The Trust amended its code March 24, 2017 to disclose the addition of the Institutional Funds Trust, disclose a change in the Principal Financial Officer and disclosure of conflicts due to Principal Officers serving in positions with affiliates, which also serve as sub-advisors. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder reports presented in Item 1. The Code is filed herewith as Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust’s Board of Trustees has determined that Ms. Brenda A. Cline, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Ms. Brenda Cline is “independent” as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) |
Audit Fees | Fiscal Year Ended | |||||
$ | 262,542 | 8/31/2016 | ||||
$ | 262,671 | 8/31/2017 |
(b) |
Audit-Related Fees | Fiscal Year Ended | |||||
$ | 0 | 8/31/2016 | ||||
$ | 0 | 8/31/2017 |
(c) |
Tax Fees | Fiscal Year Ended | |||||
$ | 349 | 8/31/2016 | ||||
$ | 22,812 | 8/31/2017 |
(d) |
All Other Fees | Fiscal Year Ended | |||||
$ | 0 | 8/31/2016 | ||||
$ | 0 | 8/31/2017 |
(e)(1) Pursuant to its charter, the Trust’s Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust’s principal accountant:
– to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts’ financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors;
– to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser (“adviser affiliate”) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts;
– to consider whether the non-audit services provided by a Trust’s auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor’s independence;
– to review the arrangements for and scope of the annual audit and any special audits; and
– to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) | Not applicable. |
(g) |
Aggregate Non-Audit Fees for Services Rendered to the:
Registrant | Adviser | Adviser’s Affiliates Providing Ongoing Services to Registrant | Fiscal Year Ended | |||
$ 349 | $221,340 | N/A | 8/31/2016 | |||
$22,812 | $ 73,649 | N/A | 8/31/2017 |
(h) | Not applicable. |
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the shareholder reports presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President | ||
American Beacon Funds | ||
Date: | November 6, 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: | November 6, 2017 |
By | /s/ Melinda G. Heika | |
Melinda G. Heika | ||
Treasurer | ||
American Beacon Funds | ||
Date: | November 6, 2017 |