N-CSR

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: December 31, 2017

Date of reporting period: December 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.

BRIDGEWAY LARGE CAP GROWTH FUND

Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. While the Fund is managed pursuant to a tax management strategy, the Fund’s investments could create capital gains. The use of futures contracts for cash management may subject the Fund to losing more money than invested. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

BRIDGEWAY LARGE CAP VALUE FUND

Investing in value stocks may limit downside risk over time; however, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. While the Fund is managed pursuant to a tax management strategy, the Fund’s investments could create capital gains. The use of futures contracts for cash management may subject the Fund to losing more money than invested. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

American Beacon Funds December 31, 2017

Contents

President’s Message	1
Market and Performance Overviews	2
Expense Examples	9
Report of Independent Registered Public Accounting Firm	11
Schedules of Investments:
American Beacon Bridgeway Large Cap Growth Fund	12
American Beacon Bridgeway Large Cap Value Fund	17
Financial Statements	22
Notes to Financial Statements	27
Financial Highlights:
American Beacon Bridgeway Large Cap Growth Fund	46
American Beacon Bridgeway Large Cap Value Fund	51
Federal Tax Information	58
Trustees and Officers of the American Beacon Funds	59
Privacy Policy	64

Additional Fund Information   Back Cover

President’s Message

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

December 31, 2017 (Unaudited)

During the 12-month period ended December 31, 2017, domestic equity markets ignored any signs of investor skepticism that started the year as markets pushed into their ninth year of this long-running bull market. Volatility remained at suppressed levels within the S&P 500 Index, a broad measure of domestic equity markets, providing positive total returns every month and finishing the year up 21.83%. While large-cap stocks outpaced small-caps, growth stocks exhibited drastic outperformance versus value stocks across all market-cap styles. The Russell 2000 Growth Index outperformed the Russell 2000 Value Index by 14.33%, while the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 16.55%. While many investors were skeptical of the market’s advance in 2017, data during the year suggested the lift in domestic equities reflected the now-visible signs of globally synchronized economic strength.

In the first quarter of 2017, the U.S. equity markets achieved fresh, all-time highs, as optimism from the Trump administration’s “pro-growth” agenda spilled over from the fourth quarter of 2016. Despite failure to pass revisions to health-care legislation, the market remained upbeat toward Washington, D.C., on the premise of tax cuts, easing of business regulations and a boost to U.S. infrastructure investment. The economy displayed supportive evidence of further market advances and a March rate hike from the Federal Reserve (the “Fed”). The Purchasing Managers Index, the Consumer Confidence Index and the NFIB Small Business Optimism Index all flashed constructive data. During 2016, the S&P 500 Index’s trailing 12-month, year-over-year earnings growth inflected and turned positive after four quarters in negative territory. Large-caps outperformed small-caps, reversing trading patterns from the previous quarter, with Technology stocks leading the way.

In the second quarter, U.S. equities across all market caps delivered gains, shaking off growing concerns regarding the Trump administration’s ability to pass pro-growth measures and economic data that was less enthusiastic than the previous quarter, namely within Manufacturing and Consumer Health. Political uncertainty flared up after President Trump dismissed James Comey, the former FBI director. The Fed, however, delivered another 25 basis point (0.25%) rate hike and laid out plans to begin reducing its balance sheet after years of its unprecedented quantitative easing policy program. Large-cap stocks led the march higher for the second quarter, with reflationary sectors at the top – Health Care, Industrials and Financials.

In the third quarter, robust corporate earnings continued, increasing 11.6% on a trailing 12-month basis versus a year ago. Gross domestic product growth of 3.0% was released during the quarter, breaking out from the sub-3.0% growth seen in the economy since the lowest point of the financial crisis. Historic hurricanes were disruptive to Texas, Louisiana and Puerto Rico, but negative outcomes were determined to be transitory (ex-Puerto Rico), displaying the resiliency of U.S. industry. Despite concerns of stubbornly low inflation, the Fed confirmed its balance sheet roll-off beginning in October. Crude oil prices began to solidify above $50, a key support level, which boosted cyclical energy and industrial stocks. U.S. stocks across all capitalizations made gains.

In the fourth quarter, the U.S. economy and U.S. equities capped off a robust year as corporations delivered another quarter of strong earnings growth. The Technology sector, the best performing sector in the 12-month period, delivered particularly healthy results. The much-awaited Tax Cuts and Jobs Act of 2017 was passed by Congress and signed into law by President Trump on December 22. Markets jumped on this news as the permanent tax cut is expected to make U.S. companies more competitive than non-domestic peers. U.S. Treasury yields, led by the short end of the yield curve, rose during the quarter and caused interest-rate sensitive sectors, such as Real Estate and Utilities, to underperform the broader market. In December, the Fed lifted base rates for the third time during the year and lifted their U.S. 2018 economic growth forecast to 2.5% from 2.1%.

2

American Beacon Bridgeway Large Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

The Investor Class of the American Beacon Bridgeway Large Cap Growth Fund (the “Fund”) returned 26.72% for the twelve months ended December 31, 2017, compared to the Russell 1000^® Growth Index (the “Index”) return of 30.21% for the same period.

Comparison of Change in Value of a $10,000 Investment for the period from 12/31/2007 through 12/31/2017

Total Returns for the Period Ended December 31, 2017
	Ticker	1 Year			3 Years			5 Years			10 Years			Value of $10,000 12/31/2007- 12/31/2017
Institutional Class (1,7)	BRLGX		27.21	%		11.65	%		17.77	%		8.25	%		$	22,102
Y Class (1,2,7)	BLYYX		28.17	%		11.90	%		17.93	%		8.33	%		$	22,251
Investor Class (1,3,7)	BLYPX		26.72	%		11.37	%		17.60	%		8.17	%		$	21,937
A without Sales Charge (1,4,7)	BLYAX		27.00	%		11.47	%		17.66	%		8.20	%		$	21,994
A with Sales Charge (1,4,7)	BLYAX		19.69	%		9.29	%		16.27	%		7.57	%		$	20,736
C without Sales Charge (1,5,7)	BLYCX		26.82	%		11.14	%		17.45	%		8.11	%		$	21,801
C with Sales Charge (1,5,7)	BLYCX		25.82	%		11.14	%		17.45	%		8.11	%		$	21,801
Russell 1000® Growth Index (6)			30.21	%		13.79	%		17.33	%		10.00	%		$	25,930

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. 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. 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.

2. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/07 up to 2/5/16, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 12/31/07.

3

American Beacon Bridgeway Large Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

3. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/07 up to 2/5/16, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Investor Class been in existence since 12/31/07.

4. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/07 through 2/5/16, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 12/31/07. A Class shares have a maximum sales charge of 5.75%.

5. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/07 through 2/5/16, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/07. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.

6. The Russell 1000^® Growth Index is an unmanaged index of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Russell 1000 Growth Index and Russell 1000 Index are registered trademarks of the Frank Russell Company. One cannot directly invest in an index.

7. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares were 1.03%, 1.10%, 1.56%, 1.44%, and 2.19%, 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 for the period as both stock selection and sector allocation detracted value relative to the Index.

Most of the Fund’s underperformance related to security selection was attributed to holdings in the Consumer Discretionary and Information Technology sectors. Within Consumer Discretionary, Ulta Beauty down 11.5% and Autozone down 35.8% were the largest detractors. In the Information Technology sector, the Fund’s absence from Apple, which was up 48.5% in the Index, negatively impacted performance. Good security selection in the Health Care sector added relative value; however, performance within this sector was not enough to offset the aforementioned poor performance. In the Health Care sector, Align Technology up 135.2% and Intuitive Surgical up 75.8% contributed most to the Fund’s return.

From a sector allocation perspective, the Fund’s overweight in Energy, the worst performing sector, detracted value relative to the Index. An underweight allocation to Information Technology, the second best performing sector, also detracted from performance. An overweight position in the Industrials sector added relative value.

The sub-advisor continues to invest in a broadly diversified portfolio of companies that they believe have attractive valuations and above-average earnings growth potential. This approach should allow the Fund to benefit over the longer term.

Top Ten Holdings (% Net Assets)
Micron Technology, Inc.		2.3
Apple, Inc.		2.1
Boeing Co.		2.1
United Rentals, Inc.		2.0
Amazon.com, Inc.		2.0
NVIDIA Corp.		1.9
Align Technology, Inc.		1.9
UnitedHealth Group, Inc.		1.9
Applied Materials, Inc.		1.9
Lam Research Corp.		1.8
Total Fund Holdings	86

4

American Beacon Bridgeway Large Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

Sector Allocation (% Equities)
Information Technology	34.4
Consumer Discretionary	16.0
Industrials	15.5
Health Care	15.2
Consumer Staples	5.8
Materials	5.5
Financials	5.2
Telecommunication Services	1.2
Real Estate	1.2

5

American Beacon Bridgeway Large Cap Value Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

The Investor Class of the American Beacon Bridgeway Large Cap Value Fund (the “Fund”) returned 15.52% for the twelve months ended December 31, 2017. The Fund outperformed the Russell 1000^® Value Index (the “Index”) return of 13.66% for the same period.

Comparison of Change in Value of a $10,000 Investment for the period from 12/31/2007 through 12/31/2017

Total Returns for the Period Ended December 31, 2017
	Ticker	1 Year			3 Years			5 Years			10 Years			Value of $10,000 12/31/2007- 12/31/2017
Institutional Class (1,7)	BRLVX		15.88	%		9.98	%		15.92	%		8.61	%		$	22,843
Y Class (1,2,7)	BWLYX		15.82	%		9.93	%		15.84	%		8.57	%		$	22,756
Investor Class(1,3,7)	BWLIX		15.52	%		9.63	%		15.55	%		8.41	%		$	22,416
A without Sales Charge (1,4,7)	BWLAX		15.42	%		9.57	%		15.45	%		8.34	%		$	22,285
A with Sales Charge (1,4,7)	BWLAX		8.76	%		7.44	%		14.09	%		7.70	%		$	21,003
C without Sales Charge (1,5,7)	BWLCX		14.58	%		8.77	%		14.59	%		7.89	%		$	21,364
C with Sales Charge (1,5,7)	BWLCX		13.58	%		8.77	%		14.59	%		7.89	%		$	21,364
R6 Class	BWLRX		15.83	%		9.97	%		15.91	%		8.61	%		$	22,833
Russell 1000® Value Index (6)			13.66	%		8.65	%		14.04	%		7.10	%		$	19,863

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. 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. A portion of the fees charged to the Institutional Class was waived from 2008 through 2013, partially recovered in 2014, and fully recovered in 2015. Performance prior to waiving fees was lower than the actual returns shown from 2008 through 2013.

2. Fund performance for the ten-year period represents the returns achieved by the Institutional Class from 12/31/07 up to 2/3/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 12/31/07. A portion of the fees charged to the Y Class was waived in 2012, partially recovered in 2013 and fully recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012.

6

American Beacon Bridgeway Large Cap Value Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

3. Fund performance for the ten-year period represents the returns achieved by the Institutional Class from 12/31/07 up to 2/3/12, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Investor Class been in existence since 12/31/07. A portion of the fees charged to the Investor Class was waived in 2012 and fully recovered in 2013. Performance prior to waiving fees was lower than the actual returns shown in 2012.

4. Fund performance for the ten-year period represents the returns achieved by the Institutional Class from 12/31/07 through 2/3/12, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 12/31/07. A portion of the fees charged to the A Class was waived in 2012 and 2013 and fully recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012 and 2013. A Class shares have a maximum sales charge of 5.75%.

5. Fund performance for the ten-year period represents the returns achieved by the Institutional Class from 12/31/07 through 2/3/12, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/07. A portion of the fees charged to the C Class was waived in 2012 and 2013 and fully recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012 and 2013. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.

6. 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.

7. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C and R6 Class shares was 0.73%, 0.80%, 1.08%, 1.12%, 1.86%, and 0.71%, 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 outperformed the Index as both stock selection and sector allocation added value relative to the Index.

From a stock selection perspective, the Fund’s Energy, Information Technology and Consumer Staples sectors added the most relative value. Within the Energy sector, the Fund’s absence from Exxon Mobil and Schlumberger, which were down 3.8% and 17.4%, respectively, in the Index, positively impacted performance. The Fund’s allocation in Valero Energy up 39.8% also added relative value. Companies in the Information Technology sector contributing to the Fund’s return included Applied Materials up 76.3%, Lam Research up 77.0% and Micron Technology up 37.2%. Wal-Mart Stores up 48.1% was the largest contributor in the Consumer Staples sector. The Fund’s absence from Walgreens Boots Alliance, which was down 10.5% in the Index, also added relative value. The aforementioned good performance was somewhat offset by securities held in the Fund’s Health Care sector. Mallinckrodt down 29.9% and Allergan down 30.2% were the largest detractors in Health Care.

From a sector allocation standpoint, the Fund’s underweight position in Energy and Real Estate, two of the poorer performing sectors, added value relative to the Index. An overweight allocation in Telecommunication Services, the worst performing sector, detracted from the Fund’s return.

The sub-advisor continues to invest in a broadly diversified portfolio of companies that they believe have attractive valuations and above-average earnings growth potential. This approach should allow the Fund to benefit over the longer term.

Top Ten Holdings (% Net Assets)
Micron Technology, Inc.		1.9
Wal-Mart Stores, Inc.		1.8
Valero Energy Corp.		1.8
Bank of America Corp.		1.8
Citigroup, Inc.		1.6
LyondellBasell Industries N.V., Class A		1.6
Best Buy Co., Inc.		1.5
Intel Corp.		1.5
Corning, Inc.		1.4
Spirit AeroSystems Holdings, Inc., Class A		1.4
Total Fund Holdings	105

7

American Beacon Bridgeway Large Cap Value Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

Sector Allocation (% Equities)
Financials	27.3
Industrials	13.1
Consumer Discretionary	12.1
Health Care	11.4
Information Technology	10.5
Consumer Staples	8.6
Energy	6.4
Utilities	4.9
Materials	4.2
Telecommunication Services	0.9
Real Estate	0.6

8

American Beacon Funds^SM

Expense Examples

December 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 July 1, 2017 through December 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 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 Funds^SM

Expense Examples

December 31, 2017 (Unaudited)

American Beacon Bridgeway Large Cap Growth Fund
	Beginning Account Value 7/1/2017		Ending Account Value 12/31/2017		Expenses Paid During Period 7/1/2017-12/31/2017*
Institutional Class
Actual		$1,000.00		$1,148.60		$4.39
Hypothetical**		$1,000.00		$1,021.10		$4.13
Y Class
Actual		$1,000.00		$1,148.00		$4.93
Hypothetical**		$1,000.00		$1,020.60		$4.63
Investor Class
Actual		$1,000.00		$1,146.40		$6.44
Hypothetical**		$1,000.00		$1,019.20		$6.06
A Class
Actual		$1,000.00		$1,147.00		$6.55
Hypothetical**		$1,000.00		$1,019.10		$6.16
C Class
Actual		$1,000.00		$1,142.20		$10.58
Hypothetical**		$1,000.00		$1,015.30		$9.96

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.81%, 0.91%, 1.19%, 1.21%, and 1.96% 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 Bridgeway Large Cap Value Fund
	Beginning Account Value 7/1/2017		Ending Account Value 12/31/2017		Expenses Paid During Period 7/1/2017-12/31/2017*
Institutional Class
Actual		$1,000.00		$1,116.40		$3.89
Hypothetical**		$1,000.00		$1,021.50		$3.72
Y Class
Actual		$1,000.00		$1,116.10		$4.27
Hypothetical**		$1,000.00		$1,021.20		$4.08
Investor Class
Actual		$1,000.00		$1,114.80		$5.70
Hypothetical**		$1,000.00		$1,019.80		$5.45
A Class
Actual		$1,000.00		$1,114.10		$5.70
Hypothetical**		$1,000.00		$1,019.80		$5.45
C Class
Actual		$1,000.00		$1,110.20		$9.68
Hypothetical**		$1,000.00		$1,016.00		$9.25
R6 Class
Actual		$1,000.00		$1,115.90		$3.79
Hypothetical**		$1,000.00		$1,021.60		$3.62

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.73%, 0.80%, 1.07%, 1.07%, 1.82%, and 0.71% for the Institutional, Y, Investor, A, C, and R6 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 Funds^SM

Report of Independent Registered Public Accounting Firm

To the Shareholders of American Beacon Bridgeway Large Cap Growth Fund and American Beacon Bridgeway Large Cap Value Fund and the Board of Trustees of American Beacon Funds

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of American Beacon Bridgeway Large Cap Growth Fund and American Beacon Bridgeway Large Cap Value Fund (collectively referred to as the “Funds”), (two of the funds constituting American Beacon Funds (the “Trust”)), including the schedules of investments, as of December 31, 2017, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (two of the funds constituting American Beacon Funds) at December 31, 2017, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles. The financial highlights for the periods ended June 30, 2015, 2014 and 2013 of American Beacon Bridgeway Large Cap Growth Fund were audited by other auditors whose report dated August 27, 2015, expressed an opinion on those financial statements and financial highlights.

Individual fund constituting the American Beacon Funds	Statement of operations	Statements of changes in net assets	Financial highlights
American Beacon Bridgeway Large Cap Growth Fund	For the year ended December 31, 2017	For the year ended December 31, 2017, the six months ended December 31, 2016 and the year ended June 30, 2016	For the year ended December 31, 2017, the six months ended December 31, 2016 and each of the four years in the period ended June 30, 2016
American Beacon Bridgeway Large Cap Value Fund	For the year ended December 31, 2017	For each of the two years in the period ended December 31, 2017	For each of the five years in the period ended December 31, 2017

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more American Beacon investment companies since 1987.

Dallas, Texas

February 28, 2018

11

American Beacon Bridgeway Large Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.39%
Consumer Discretionary - 15.94%
Auto Components - 2.16%
Aptiv PLC		27,600		$	2,341,308
Delphi Technologies PLCA		9,199			482,671
Lear Corp.		15,500			2,738,230
					5,562,209
Automobiles - 1.03%
Thor Industries, Inc.		17,600			2,652,672
Hotels, Restaurants & Leisure - 0.94%
Domino’s Pizza, Inc.		12,800			2,418,688
Household Durables - 1.89%
NVR, Inc.A		600			2,104,932
Toll Brothers, Inc.		57,100			2,741,942
					4,846,874
Internet & Direct Marketing Retail - 4.38%
Amazon.com, Inc.A		4,300			5,028,721
Netflix, Inc.A		24,200			4,645,432
Priceline Group, Inc.A		900			1,563,966
					11,238,119
Media - 1.80%
Comcast Corp., Class A		78,500			3,143,925
Viacom, Inc., Class B		47,800			1,472,718
					4,616,643
Multiline Retail - 1.63%
Nordstrom, Inc.		46,400			2,198,432
Target Corp.		30,400			1,983,600
					4,182,032
Specialty Retail - 2.11%
Gap, Inc.		42,900			1,461,174
Ulta Salon Cosmetics & Fragrance, Inc.A		17,700			3,958,782
					5,419,956
Total Consumer Discretionary					40,937,193
Consumer Staples - 5.78%
Beverages - 1.49%
Coca-Cola Co.		83,300			3,821,804
Food & Staples Retailing - 1.28%
Sysco Corp.		54,200			3,291,566
Food Products - 2.20%
General Mills, Inc.		49,300			2,922,997
Kellogg Co.		40,000			2,719,200
					5,642,197
Personal Products - 0.81%
Estee Lauder Companies, Inc., Class A		16,300			2,074,012
Total Consumer Staples					14,829,579

See accompanying notes

12

American Beacon Bridgeway Large Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.39% (continued)
Financials - 5.14%
Capital Markets - 1.10%
SEI Investments Co.		39,200		$	2,816,912
Consumer Finance - 1.45%
Capital One Financial Corp.		37,300			3,714,334
Diversified Financial Services - 0.91%
Leucadia National Corp.		88,400			2,341,716
Insurance - 1.68%
Lincoln National Corp.		25,100			1,929,437
Reinsurance Group of America, Inc.		15,300			2,385,729
					4,315,166
Total Financials					13,188,128
Health Care - 15.09%
Biotechnology - 3.27%
AbbVie, Inc.		28,500			2,756,235
Gilead Sciences, Inc.		36,600			2,622,024
Vertex Pharmaceuticals, Inc.A		20,200			3,027,172
					8,405,431
Health Care Equipment & Supplies - 4.36%
ABIOMED, Inc.A		13,300			2,492,553
Align Technology, Inc.A		21,700			4,821,523
IDEXX Laboratories, Inc.A		24,800			3,878,224
					11,192,300
Health Care Providers & Services - 4.89%
Centene Corp.A		26,400			2,663,232
Cigna Corp.		12,000			2,437,080
HCA Healthcare, Inc.A		30,500			2,679,120
UnitedHealth Group, Inc.		21,700			4,783,982
					12,563,414
Life Sciences Tools & Services - 2.57%
IQVIA Holdings, Inc.A		26,200			2,564,980
Mettler-Toledo International, Inc.A		6,500			4,026,880
					6,591,860
Total Health Care					38,753,005
Industrials - 15.44%
Aerospace & Defense - 3.13%
Boeing Co.		18,100			5,337,871
Huntington Ingalls Industries, Inc.		11,400			2,686,980
					8,024,851
Airlines - 3.03%
American Airlines Group, Inc.		65,800			3,423,574
Delta Air Lines, Inc.		38,900			2,178,400
United Continental Holdings, Inc.A		32,500			2,190,500
					7,792,474
Commercial Services & Supplies - 2.27%
Cintas Corp.		18,000			2,804,940
Rollins, Inc.		64,800			3,015,144
					5,820,084

See accompanying notes

13

American Beacon Bridgeway Large Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.39% (continued)
Industrials - 15.44% (continued)
Industrial Conglomerates - 1.04%
Honeywell International, Inc.		17,400		$	2,668,464
Machinery - 3.96%
Deere & Co.		18,100			2,832,831
Toro Co.		34,800			2,270,004
WABCO Holdings, Inc.A		17,000			2,439,500
Xylem, Inc.		38,400			2,618,880
					10,161,215
Trading Companies & Distributors - 2.01%
United Rentals, Inc.A		30,100			5,174,491
Total Industrials					39,641,579
Information Technology - 34.17%
Communications Equipment - 1.97%
Arista Networks, Inc.A		10,400			2,450,032
F5 Networks, Inc.A		19,800			2,598,156
					5,048,188
Electronic Equipment, Instruments & Components - 3.07%
Amphenol Corp., Class A		42,800			3,757,840
Cognex Corp.		34,400			2,103,904
IPG Photonics Corp.A		9,400			2,012,822
					7,874,566
Internet Software & Services - 0.73%
GoDaddy, Inc., Class AA		37,300			1,875,444
IT Services - 2.99%
Broadridge Financial Solutions, Inc.		30,400			2,753,632
Mastercard, Inc., Class A		15,300			2,315,808
PayPal Holdings, Inc.A		35,500			2,613,510
					7,682,950
Semiconductors & Semiconductor Equipment - 14.15%
Applied Materials, Inc.		93,100			4,759,272
Intel Corp.		58,000			2,677,280
KLA-Tencor Corp.		25,000			2,626,750
Lam Research Corp.		25,400			4,675,378
Microchip Technology, Inc.		27,000			2,372,760
Micron Technology, Inc.A		141,100			5,802,032
NVIDIA Corp.		25,100			4,856,850
ON Semiconductor Corp.A		94,000			1,968,360
Teradyne, Inc.		58,800			2,461,956
Texas Instruments, Inc.		39,500			4,125,380
					36,326,018
Software - 8.36%
Cadence Design Systems, Inc.A		107,400			4,491,468
Electronic Arts, Inc.A		16,600			1,743,996
Intuit, Inc.		23,700			3,739,386
Microsoft Corp.		40,600			3,472,924
Red Hat, Inc.A		15,900			1,909,590
ServiceNow, Inc.A		26,000			3,390,140
Take-Two Interactive Software, Inc.A		24,800			2,722,544
					21,470,048

See accompanying notes

14

American Beacon Bridgeway Large Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.39% (continued)
Information Technology - 34.17% (continued)
Technology Hardware, Storage & Peripherals - 2.90%
Apple, Inc.		31,600		$	5,347,668
Western Digital Corp.		26,400			2,099,592
					7,447,260
Total Information Technology					87,724,474
Materials - 5.42%
Chemicals - 2.05%
Ecolab, Inc.		17,900			2,401,822
LyondellBasell Industries N.V., Class A		25,900			2,857,288
					5,259,110
Containers & Packaging - 1.85%
Avery Dennison Corp.		22,600			2,595,836
Crown Holdings, Inc.A		38,200			2,148,750
					4,744,586
Metals & Mining - 1.52%
Southern Copper Corp.		82,500			3,914,625
Total Materials					13,918,321
Real Estate - 1.20%
Real Estate Management & Development - 1.20%
CBRE Group, Inc., Class AA		71,400			3,092,334
Telecommunication Services - 1.21%
Wireless Telecommunication Services - 1.21%
T-Mobile US, Inc.A		48,800			3,099,288
Total Common Stocks (Cost $216,217,937)					255,183,901
SHORT-TERM INVESTMENTS - 0.56% (Cost $1,441,964)
Investment Companies - 0.56%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%B C		1,441,964			1,441,964
TOTAL INVESTMENTS - 99.95% (Cost $217,659,901)					256,625,865
OTHER ASSETS, NET OF LIABILITIES - 0.05%					121,746
TOTAL NET ASSETS - 100.00%				$	256,747,611
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.

PLC - Public Limited Company.

Futures Contracts Open on December 31, 2017:
Long Futures
Equity Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
S&P 500 E-Mini Index Futures	10	March 2018	$	1,343,422	$	1,338,000	$	(5,422	)
			$	1,343,422	$	1,338,000	$	(5,422	)

See accompanying notes

15

American Beacon Bridgeway Large Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

Index Abbreviations:
S&P 500	Standard & Poor’s U.S. Equity Large-Cap Index

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of December 31, 2017, the investments were classified as described below:

Bridgeway Large Cap Growth Fund	Level 1			Level 2		Level 3		Total
Assets
Common Stocks	$	255,183,901		$	-	$	-	$	255,183,901
Short-Term Investments		1,441,964			-		-		1,441,964
Total Investments in Securities - Assets	$	256,625,865		$	-	$	-	$	256,625,865
Financial Derivative Instruments - Liabilities
Futures Contracts	$	(5,422	)	$	-	$	-	$	(5,422	)
Total Financial Derivative Instruments - Liabilities	$	(5,422	)	$	-	$	-	$	(5,422	)

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. During the period ended December 31, 2017, there were no transfers between levels.

See accompanying notes

16

American Beacon Bridgeway Large Cap Value Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 97.97%
Consumer Discretionary - 11.87%
Auto Components - 1.13%
Lear Corp.		304,700		$	53,828,302
Automobiles - 1.99%
Ford Motor Co.		3,640,040			45,464,100
General Motors Co.		1,204,980			49,392,130
					94,856,230
Diversified Consumer Services - 0.19%
H&R Block, Inc.		342,800			8,988,216
Hotels, Restaurants & Leisure - 1.14%
Carnival Corp.		503,000			33,384,110
Royal Caribbean Cruises Ltd.		174,800			20,850,144
					54,234,254
Household Durables - 0.61%
PulteGroup, Inc.		879,000			29,226,750
Media - 1.99%
Comcast Corp., Class A		824,000			33,001,200
Twenty-First Century Fox, Inc., Class A		1,793,200			61,919,196
					94,920,396
Multiline Retail - 2.80%
Kohl’s Corp.		902,600			48,947,998
Macy’s, Inc.		1,400,400			35,276,076
Target Corp.		757,600			49,433,400
					133,657,474
Specialty Retail - 2.02%
Best Buy Co., Inc.		1,036,600			70,976,002
Burlington Stores, Inc.A		207,700			25,553,331
					96,529,333
Total Consumer Discretionary					566,240,955
Consumer Staples - 8.39%
Beverages - 2.20%
Coca-Cola Co.		1,053,700			48,343,756
PepsiCo, Inc.		474,500			56,902,040
					105,245,796
Food & Staples Retailing - 2.40%
CVS Health Corp.		375,200			27,202,000
Wal-Mart Stores, Inc.		885,000			87,393,750
					114,595,750
Food Products - 2.44%
General Mills, Inc.		581,300			34,465,277
Ingredion, Inc.		276,800			38,696,640
Kellogg Co.		634,600			43,140,108
					116,302,025
Household Products - 1.35%
Procter & Gamble Co.		698,900			64,214,932
Total Consumer Staples					400,358,503

See accompanying notes

17

American Beacon Bridgeway Large Cap Value Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 97.97% (continued)
Energy - 6.28%
Oil, Gas & Consumable Fuels - 6.28%
HollyFrontier Corp.		1,007,800		$	51,619,516
Marathon Petroleum Corp.		923,900			60,958,922
Occidental Petroleum Corp.		869,100			64,017,906
Phillips 66		356,800			36,090,320
Valero Energy Corp.		944,500			86,808,995
					299,495,659
Total Energy					299,495,659
Financials - 26.76%
Banks - 6.99%
Bank of America Corp.		2,889,100			85,286,232
CIT Group, Inc.		908,500			44,725,455
Citigroup, Inc.		1,041,500			77,498,015
Fifth Third Bancorp		1,686,200			51,159,308
Regions Financial Corp.		3,100,900			53,583,552
US Bancorp		398,200			21,335,556
					333,588,118
Capital Markets - 3.15%
Ameriprise Financial, Inc.		355,500			60,246,585
Morgan Stanley		1,083,500			56,851,245
State Street Corp.		338,100			33,001,941
					150,099,771
Consumer Finance - 5.16%
Ally Financial, Inc.		1,540,600			44,923,896
American Express Co.		480,100			47,678,731
Capital One Financial Corp.		618,600			61,600,188
Discover Financial Services		615,836			47,370,105
Synchrony Financial		1,156,800			44,664,048
					246,236,968
Diversified Financial Services - 1.10%
Voya Financial, Inc.		1,061,600			52,517,352
Insurance - 10.36%
Aflac, Inc.		430,600			37,798,068
Allstate Corp.		476,800			49,925,728
American Financial Group, Inc.		167,800			18,213,012
American International Group, Inc.		787,200			46,901,376
Chubb Ltd.		221,000			32,294,730
Everest Re Group Ltd.		171,500			37,946,090
Hartford Financial Services Group, Inc.		512,700			28,854,756
Lincoln National Corp.		711,000			54,654,570
Loews Corp.		706,200			35,331,186
Prudential Financial, Inc.		476,900			54,833,962
Reinsurance Group of America, Inc.		155,200			24,200,336
Travelers Companies, Inc.		301,800			40,936,152
XL Group Ltd.		927,200			32,600,352
					494,490,318
Total Financials					1,276,932,527
Health Care - 11.17%
Biotechnology - 2.15%
Amgen, Inc.		119,600			20,798,440

See accompanying notes

18

American Beacon Bridgeway Large Cap Value Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 97.97% (continued)
Health Care - 11.17% (continued)
Biotechnology - 2.15% (continued)
Gilead Sciences, Inc.		631,600		$	45,247,824
United Therapeutics Corp.A		247,200			36,573,240
					102,619,504
Health Care Equipment & Supplies - 1.15%
Dentsply Sirona, Inc.		833,000			54,836,390
Health Care Providers & Services - 5.11%
Aetna, Inc.		62,100			11,202,219
Anthem, Inc.		232,400			52,292,324
Centene Corp.A		240,000			24,211,200
Express Scripts Holding Co.A		725,300			54,136,392
HCA Healthcare, Inc.A		616,500			54,153,360
McKesson Corp.		308,400			48,094,980
					244,090,475
Life Sciences Tools & Services - 0.88%
IQVIA Holdings, Inc.A		427,400			41,842,460
Pharmaceuticals - 1.88%
Allergan PLC		266,800			43,643,144
Pfizer, Inc.		1,273,700			46,133,414
					89,776,558
Total Health Care					533,165,387
Industrials - 12.80%
Aerospace & Defense - 4.04%
Arconic, Inc.		1,215,300			33,116,925
Raytheon Co.		249,900			46,943,715
Spirit AeroSystems Holdings, Inc., Class A		739,000			64,477,750
United Technologies Corp.		377,600			48,170,432
					192,708,822
Airlines - 3.55%
American Airlines Group, Inc.		811,852			42,240,659
Delta Air Lines, Inc.		674,700			37,783,200
JetBlue Airways Corp.A		1,829,800			40,877,732
United Continental Holdings, Inc.A		717,800			48,379,720
					169,281,311
Building Products - 1.26%
Lennox International, Inc.		131,000			27,282,060
Owens Corning		354,900			32,629,506
					59,911,566
Commercial Services & Supplies - 1.14%
Republic Services, Inc.		806,600			54,534,226
Electrical Equipment - 0.47%
Eaton Corp. PLC		285,000			22,517,850
Industrial Conglomerates - 0.77%
General Electric Co.		2,118,600			36,969,570
Machinery - 0.52%
Deere & Co.		158,800			24,853,788

See accompanying notes

19

American Beacon Bridgeway Large Cap Value Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 97.97% (continued)
Industrials - 12.80% (continued)
Road & Rail - 1.05%
Norfolk Southern Corp.		344,700		$	49,947,030
Total Industrials					610,724,163
Information Technology - 10.24%
Electronic Equipment, Instruments & Components - 1.45%
Corning, Inc.		2,160,200			69,104,798
IT Services - 0.58%
Amdocs Ltd.		425,200			27,842,096
Semiconductors & Semiconductor Equipment - 6.50%
Intel Corp.		1,516,200			69,987,792
Lam Research Corp.		328,800			60,522,216
Micron Technology, Inc.A		2,185,400			89,863,648
ON Semiconductor Corp.A		1,699,800			35,593,812
QUALCOMM, Inc.		675,000			43,213,500
Teradyne, Inc.		257,900			10,798,273
					309,979,241
Technology Hardware, Storage & Peripherals - 1.71%
Western Digital Corp.		495,800			39,430,974
Xerox Corp.		1,454,675			42,403,776
					81,834,750
Total Information Technology					488,760,885
Materials - 4.07%
Chemicals - 3.57%
DowDuPont, Inc.		673,500			47,966,670
Eastman Chemical Co.		502,700			46,570,128
LyondellBasell Industries N.V., Class A		689,300			76,043,576
					170,580,374
Containers & Packaging - 0.50%
Avery Dennison Corp.		207,200			23,798,992
Total Materials					194,379,366
Real Estate - 0.63%
Equity Real Estate Investment Trusts (REITs) - 0.63%
Gaming and Leisure Properties, Inc.		813,006			30,081,222
Telecommunication Services - 0.93%
Diversified Telecommunication Services - 0.93%
CenturyLink, Inc.		2,674,500			44,610,660
Utilities - 4.83%
Electric Utilities - 1.88%
NextEra Energy, Inc.		304,100			47,497,379
PG&E Corp.		158,600			7,110,038
PPL Corp.		1,140,200			35,289,190
					89,896,607
Multi-Utilities - 2.95%
Ameren Corp.		737,100			43,481,529
DTE Energy Co.		415,600			45,491,576

See accompanying notes

20

American Beacon Bridgeway Large Cap Value Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 97.97% (continued)
Utilities - 4.83% (continued)
Multi-Utilities - 2.95% (continued)
Sempra Energy		484,600		$	51,813,432
					140,786,537
Total Utilities					230,683,144
Total Common Stocks (Cost $3,906,923,100)					4,675,432,471
SHORT-TERM INVESTMENTS - 2.18% (Cost $104,213,767)
Investment Companies - 2.18%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%B C		104,213,767			104,213,767
TOTAL INVESTMENTS - 100.15% (Cost $4,011,136,867)					4,779,646,238
LIABILITIES, NET OF OTHER ASSETS - (0.15%)					(7,168,827	)
TOTAL NET ASSETS - 100.00%				$	4,772,477,411
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.

PLC - Public Limited Company.

Futures Contracts Open on December 31, 2017:
Long Futures
Equity Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
S&P 500 E-Mini Index Futures	611	March 2018	$	81,886,059	$	81,751,800	$	(134,259	)
			$	81,886,059	$	81,751,800	$	(134,259	)

Index Abbreviations:
S&P 500	Standard & Poor’s U.S. Equity Large-Cap Index

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of December 31, 2017, the investments were classified as described below:

Bridgeway Large Cap Value Fund	Level 1			Level 2		Level 3		Total
Assets
Common Stocks	$	4,675,432,471		$	-	$	-	$	4,675,432,471
Short-Term Investments		104,213,767			-		-		104,213,767
Total Investments in Securities - Assets	$	4,779,646,238		$	-	$	-	$	4,779,646,238
Financial Derivative Instruments - Liabilities
Futures Contracts	$	(134,259	)	$	-	$	-	$	(134,259	)
Total Financial Derivative Instruments - Liabilities	$	(134,259	)	$	-	$	-	$	(134,259	)

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. During the period ended December 31, 2017, there were no transfers between levels.

See accompanying notes

21

American Beacon Funds^SM

Statements of Assets and Liabilities

December 31, 2017

	Bridgeway Large Cap Growth Fund			Bridgeway Large Cap Value Fund
Assets:
Investments in unaffiliated securities, at fair value†	$	255,183,901		$	4,675,432,471
Investments in affiliated securities, at fair value‡		1,441,964			104,213,767
Cash		–			42,987
Deposit with brokers for futures contracts		45,000			2,749,500
Dividends and interest receivable		119,016			7,660,035
Receivable for investments sold		–			15,289,339
Receivable for fund shares sold		215,495			9,162,113
Receivable for expense reimbursement (Note 2)		183,224			1,792
Receivable for variation margin on open futures contracts (Note 5)		14,316			118,143
Prepaid expenses		97,847			118,544
Total assets		257,300,763			4,814,788,691
Liabilities:
Payable for investments purchased		–			31,504,537
Payable for fund shares redeemed		178,706			6,883,680
Cash due to custodian		34,815			–
Management and sub-advisory fees payable (Note 2)		175,196			2,797,124
Service fees payable (Note 2)		13,109			528,248
Transfer agent fees payable (Note 2)		20,648			200,172
Custody and fund accounting fees payable		24,265			218,227
Professional fees payable		74,888			44,044
Trustee fees payable (Note 2)		11			193
Payable for prospectus and shareholder reports		4,708			106,935
Other liabilities		26,806			28,120
Total liabilities		553,152			42,311,280
Net assets	$	256,747,611		$	4,772,477,411
Analysis of net assets:
Paid-in-capital	$	219,554,420		$	3,923,463,749
Undistributed net investment income		-			(1	)
Accumulated net realized gain (loss)		(1,767,351	)		80,638,551
Unrealized appreciation of investments in unaffiliated securitiesA		38,965,964			768,509,371
Unrealized (depreciation) of futures contracts		(5,422	)		(134,259	)
Net assets	$	256,747,611		$	4,772,477,411

See accompanying notes

22

American Beacon Funds^SM

Statements of Assets and Liabilities

December 31, 2017

	Bridgeway Large Cap Growth Fund		Bridgeway Large Cap Value Fund
Shares outstanding at no par value (unlimited shares authorized):
Institutional Class		5,960,139		54,180,991
Y Class		67,607		54,311,809
Investor Class		2,403,599		48,834,761
A Class		155,767		3,398,135
C Class		26,267		3,712,170
R6 ClassB		–		3,205,784
Net assets:
Institutional Class	$	178,062,388	$	1,547,760,278
Y Class	$	2,016,161	$	1,547,228,114
Investor Class	$	71,273,896	$	1,387,184,369
A Class	$	4,625,607	$	96,229,248
C Class	$	769,559	$	102,553,616
R6 ClassB	$	–	$	91,521,786
Net asset value, offering and redemption price per share:
Institutional Class	$	29.88	$	28.57
Y Class	$	29.82	$	28.49
Investor Class	$	29.65	$	28.41
A Class	$	29.70	$	28.32
A Class (offering price)	$	31.56	$	30.05
C Class	$	29.30	$	27.63
R6 ClassB	$	–	$	28.55
† Cost of investments in unaffiliated securities	$	216,217,937	$	3,906,923,100
‡ Cost of investments in affiliated securities	$	1,441,964	$	104,213,767
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at year end.
B Class commenced operations April 28, 2017 (Note 1).

See accompanying notes

23

American Beacon Funds^SM

Statements of Operations

For the year ended December 31, 2017

	Bridgeway Large Cap Growth Fund			Bridgeway Large Cap Value Fund
Investment income:
Dividend income from unaffiliated securities	$	1,773,461		$	90,646,382
Dividend income from affiliated securities		47,510			555,870
Interest income		–			3,345
Income derived from securities lending (Note 9)		16,017			87,525
Total investment income		1,836,988			91,293,122
Expenses:
Management and sub-advisory fees (Note 2)		1,151,311			28,317,045
Transfer agent fees:
Institutional Class (Note 2)		102,007			362,887
Y Class (Note 2)		1,082			965,432
Investor Class		860			56,641
A Class		143			18,726
C Class		148			8,612
R6 ClassA		–			2,080
Custody and fund accounting fees		20,806			325,714
Professional fees		88,241			168,009
Registration fees and expenses		68,089			242,196
Service fees (Note 2):
Y Class		169			239,065
Investor Class		9,646			5,247,639
A Class		1,774			165,481
C Class		439			127,314
Distribution fees (Note 2):
A Class		3,032			343,980
C Class		3,272			1,008,430
Prospectus and shareholder report expenses		40,882			363,797
Trustee fees (Note 2)		9,784			268,226
Reorganization costs		132,450			–
Other expenses		9,548			222,377
Total expenses		1,643,683			38,453,651
Net fees waived and expenses (reimbursed) (Note 2)		(375,714	)		(1,792	)
Net expenses		1,267,969			38,451,859
Net investment income		569,019			52,841,263
Realized and unrealized gain (loss) from investments:
Net realized gain from:
Investments in unaffiliated securitiesB		15,320,055			226,111,409
Futures contracts		581,173			11,339,713
Change in net unrealized appreciation (depreciation) of:
Investments in unaffiliated securitiesC D		19,951,560			348,877,611
Futures contracts		(4,140	)		93,423
Net gain from investments		35,848,648			586,422,156
Net increase in net assets resulting from operations	$	36,417,667		$	639,263,419
A Class commenced operations April 28, 2017 (Note 1).
B The Fund did not recognize net realized gains (losses) from the sale of investments in affiliated securities.
C The Fund’s investments in affiliated securities did not have a change in unrealized appreciation (depreciation) at year end.
D Change in net unrealized appreciation of investments in unaffiliated securities does not include net unrealized appreciation of investments of $6,433,434 of the Target Fund in connection with the Reorganization (Note 1).

See accompanying notes

24

American Beacon Funds^SM

Statements of Changes in Net Assets

	Bridgeway Large Cap Growth Fund
	Year Ended December 31, 2017			Six Months Ended December 31, 2016			Year Ended June 30, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	569,019		$	227,279		$	542,052
Net realized gain from investments in unaffiliated securities and futures contracts		15,901,228			4,333,737			500,781
Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities and futures contracts		19,947,420			6,144,056			(8,621,100	)
Net increase (decrease) in net assets resulting from operations		36,417,667			10,705,072			(7,578,267	)
Distributions to shareholders:
Net investment income:
Institutional Class		(484,349	)		(860,039	)		(775,100	)
Y Class		(5,409	)		(4,225	)		-
Investor Class		(191,071	)		(2,556	)		-
A Class		(9,014	)		(872	)		-
C Class		-			(1,137	)		-
Net realized gain from investments:
Institutional Class		(6,720,047	)		-			-
Y Class		(75,954	)		-			-
Investor Class		(2,741,957	)		-			-
A Class		(173,903	)		-			-
C Class		(29,746	)		-			-
Net distributions to shareholders		(10,431,450	)		(868,829	)		(775,100	)
Capital share transactions (Note 11):
Proceeds from sales of shares		21,584,214			9,041,296			39,701,829
Reinvestment of dividends and distributions		10,260,437			841,538			753,120
Issued in reorganization		89,545,160			-			-
Cost of shares redeemed		(25,647,762	)		(22,099,149	)		(51,195,470	)
Net increase (decrease) in net assets from capital share transactions		95,742,049			(12,216,315	)		(10,740,521	)
Net increase (decrease) in net assets		121,728,266			(2,380,072	)		(19,093,888	)
Net assets:
Beginning of period		135,019,345			137,399,417			156,493,305
End of period *	$	256,747,611		$	135,019,345		$	137,400,411
*Includes undistributed (overdistribution of) net investment income	$	-		$	4,804		$	305,886

See accompanying notes

25

American Beacon Funds^SM

Statements of Changes in Net Assets

	Bridgeway Large Cap Value Fund
	Year Ended December 31, 2017			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	52,841,263		$	45,078,090
Net realized gain from investments in unaffiliated securities and futures contracts		237,451,122			70,985,632
Change in net unrealized appreciation of investments in unaffiliated securities and futures contracts		348,971,034			383,878,468
Net increase in net assets resulting from operations		639,263,419			499,942,190
Distributions to shareholders:
Net investment income:
Institutional Class		(20,161,179	)		(15,314,069	)
Y Class		(19,084,760	)		(10,949,276	)
Investor Class		(13,087,732	)		(16,243,795	)
A Class		(742,378	)		(1,480,352	)
C Class		(248,713	)		(320,550	)
R6 ClassA		(992,942	)		–
Net realized gain from investments:
Institutional Class		(66,124,077	)		(1,014,762	)
Y Class		(65,433,464	)		(761,516	)
Investor Class		(59,258,862	)		(1,387,328	)
A Class		(4,128,443	)		(137,125	)
C Class		(4,510,939	)		(91,127	)
R6 ClassA		(3,198,781	)		–
Net distributions to shareholders		(256,972,270	)		(47,699,900	)
Capital share transactions (Note 11):
Proceeds from sales of shares		1,914,217,676			2,035,885,045
Reinvestment of dividends and distributions		246,592,299			45,900,960
Cost of shares redeemed		(1,672,312,273	)		(939,299,165	)
Net increase in net assets from capital share transactions		488,497,702			1,142,486,840
Net increase in net assets		870,788,851			1,594,729,130
Net assets:
Beginning of period		3,901,688,560			2,306,959,430
End of period *	$	4,772,477,411		$	3,901,688,560
*Includes undistributed net investment income	$	(1	)	$	257,260
A Class commenced operations April 28, 2017 (Note 1).

See accompanying notes

26

American Beacon Funds^SM

Notes to Financial Statements

December 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 December 31, 2017, the Trust consists of thirty-three active series, two of which are presented in this filing: American Beacon Bridgeway Large Cap Growth Fund and American Beacon Bridgeway Large Cap Value Fund (collectively, the “Funds” and each individually a “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.

Fund Reorganization

On September 20, 2017, the Trust’s Board of Trustees (the “Board”) approved an interim investment advisory agreement among the Manager, Bridgeway Capital Management, Inc. (“Bridgeway”) and the Trust, on behalf of the American Beacon Holland Large Cap Growth Fund (the “Holland Fund”), pursuant to which Bridgeway was appointed as the Fund’s interim sub-advisor. The Board also approved the Holland Fund’s name change to the American Beacon Bridgeway Large Cap Growth II Fund (the “Target Fund”) with an effective date of September 27, 2017.

At a special meeting held on September 29, 2017, the Board approved a Plan of Reorganization and Termination (the “Plan”) to reorganize the Target Fund into the American Beacon Bridgeway Large Cap Growth Fund (the “Acquiring Fund”), another series of the Trust (the “Reorganization”). Shareholders for the Target Fund approved the Plan at a special meeting on December 14, 2017. On December 15, 2017, pursuant to the Plan, the Target Fund transferred all of its property and assets to the Acquiring Fund in exchange solely for voting shares of the Acquiring Fund and the assumption all of the Target Fund’s liabilities. The Target Fund’s shareholders received a pro rata portion of the Acquiring Fund’s shares in exchange for their shares therein and in liquidation and termination of the Target Fund. Class shares outstanding, net assets applicable to each class and NAV per share outstanding immediately before the Reorganization were as follows:

Target Fund Class Prior to Reorganization	Target Fund Shares Outstanding Prior to Reorganization		Target Fund Net Assets Prior to Reorganization		Target Fund NAV Per Share Prior to Reorganization		Acquiring Fund Class Prior to Reorganization	Acquiring Fund Shares Outstanding Prior to Reorganization		Acquiring Fund Net Assets Prior to Reorganization		Acquiring Fund NAV Per Share Prior to Reorganization		Exchange Ratio1
Institutional		935,977	$	17,375,798	$	18.56	Institutional		5,175,336	$	160,531,441	$	31.02		0.598
Y		8,504		156,423		18.39	Y		57,691		1,786,421		30.97		0.594
Investor		3,932,636		70,337,259		17.88	Investor		58,545		1,802,844		30.79		0.581
A		76,305		1,344,061		17.61	A		105,063		3,237,862		30.82		0.572
C		20,630		331,620		16.07	C		14,486		439,929		30.37		0.529

¹ Calculated by dividing the NAV of the Target Fund by the NAV of the Acquiring Fund on Reorganization date.

Class shares outstanding, net assets applicable to each class and NAV per share outstanding immediately after the Reorganization were as follows:

Acquiring Fund Class – After Reorganization	Shares Outstanding		Net Assets		NAV Per Share
Institutional		5,735,484	$	177,907,239	$	31.02
Y		62,742		1,942,844		30.97
Investor		2,342,964		72,140,103		30.79
A		148,673		4,581,922		30.82
C		25,406		771,549		30.37

27

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

The Reorganization was structured to qualify as a tax-free reorganization under the Internal Revenue Code for federal income tax purposes. As such, the Target Fund’s shareholders recognized no gain or loss for federal income tax purposes. Prior to the closing of the Reorganization, the Target Fund distributed all of its net investment income and capital gains to shareholders of record on December 12, 2017. Such a distribution may be taxable to the Target Fund’s shareholders for federal income tax purposes.

The cost, fair value and net unrealized appreciation (depreciation) of the investments of the Target Fund as of the date of Reorganization, were as follows:

Target Fund – Prior to Reorganization
Cost of investments	$	90,026,157
Fair value of investments		96,459,591
Net unrealized appreciation of investments		6,433,434

For financial reporting purposes, assets received and shares issued by the Acquiring Fund were recorded at fair value; however, the cost basis of the investments received from the Target Fund was carried forward to align ongoing reporting of the Acquiring Fund’s realized and unrealized gains and losses with the amount distributable to shareholders for tax purposes.

Assuming the Reorganization had been completed on January 1, 2017, the beginning of the Acquiring Fund’s current fiscal period, the pro forma results of operations for the current fiscal period would have been as follows:

Acquiring Fund – Pro Forma Results from Operations
Net investment income	$	642,575
Net realized and unrealized gains		83,122,703
Change in net assets resulting in operations		83,765,279

Because the combined investment portfolios for the Reorganization have been managed as a single integrated portfolio since the Reorganization was completed, it is not practicable to separate the amounts of revenue and earnings of the Target Fund that have been included in the Statements of Operations for the Acquiring Fund since the Reorganization was consummated.

In connection with the Reorganization, the Acquiring Fund incurred certain associated expenses. Such amounts were included as components of “Other liabilities” on the Statements of Assets and Liabilities and “Reorganization costs” on the Statements of Operations.

Class Disclosure

On April, 28, 2017, the Bridgeway Large Cap Value Fund created the R6 Class, a new class made available for sale to retirement plans pursuant to an amendment to the Fund’s registrations statement filed with the U.S. Securities and Exchange Commission. Refer to the Fund’s prospectus for more details.

28

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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 through employee directed benefit plans with applicable sales charges which may include CDSC.	$	1,000
R6	Large institutional retirement plan investors - sold through retirement plan sponsors.		None

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.

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.

Significant Accounting Policies

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

29

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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 Fund 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.

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 Trust’s Board of Trustees (the “Board”) deems 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 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.

30

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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 Agreements with Bridgeway Capital Management, Inc. (the “Sub-Advisor”) pursuant to which each 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 schedule:

First $250 million	0.40	%
Next $250 million	0.35	%
Over $500 million	0.30	%

The Management and Sub-Advisory Fees paid by the Fund for the year ended December 31, 2017 were as follows:

Bridgeway Large Cap Growth Fund

	Effective Fee Rate			Amount of Fees Paid
Management Fees		0.35	%	$	537,497
Sub-Advisor Fees		0.40	%		613,814
Total		0.75	%	$	1,151,311

Bridgeway Large Cap Value Fund

	Effective Fee Rate			Amount of Fees Paid
Management Fees		0.35	%	$	15,050,205
Sub-Advisor Fees		0.32	%		13,266,840
Total		0.67	%	$	28,317,045

As compensation for services provided by the Manager in connection with securities lending activities conducted by the Funds, the lending Fund pays to the Manager, with respect to cash collateral posted by 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 December 31, 2017, the Manager received securities lending fees of $1,983 and $9,727 for the securities lending activities of the Bridgeway Large Cap Growth Fund and Bridgeway Large Cap Value Fund, respectively.

31

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds. Effective April 1, 2017, the Funds terminated the Service Plan for the Y Class. During the year ended December 31, 2017 the Manager voluntarily reimbursed service fees to the A and C classes of the Bridgeway Large Cap Growth Fund in the amounts of $1,741 and $554, respectively. The Manager also voluntarily reimbursed service fees to the A and C classes of the Bridgeway Large Cap Value Fund in the amounts of $40,907 and $23,951, respectively.

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 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 December 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
Bridgeway Large Cap Growth	$	79,782
Bridgeway Large Cap Value		1,202,755

As of December 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
Bridgeway Large Cap Growth	$	7,813
Bridgeway Large Cap Value		158,429

32

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

During the year ended December 31, 2017, the Manager voluntarily reimbursed sub-transfer agent fees to the Y Class of the Bridgeway Large Cap Value Fund in the amount of $21,735.

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 December 31, 2017, the Manager earned fees on the Funds’ direct investments 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
Bridgeway Large Cap Growth	$	3,012	$	1,607	$	4,619
Bridgeway Large Cap Value		69,897		36,273		106,170

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 December 31, 2017, the Bridgeway Large Cap Growth Fund borrowed on average $2,949,958 for 2 days at an average interest rate of 2.00% with interest charges of $323. This amount is included in “Other expenses” on the Statements of Operations. For the year ended December 31, 2017, the Bridgeway Large Cap Value 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 Funds to the extent that total operating expenses exceed the Funds’ expense cap. During the year ended December 31, 2017, the Manager waived and/or reimbursed expenses as follows:

		Expense Cap
Fund	Class	1/1/2017 - 12/31/2017			Reimbursed Expenses		(Recouped) Expenses		Expiration of Reimbursed Expenses
Bridgeway Large Cap Growth	Institutional		0.81	%	$	327,896	$	–		2020
Bridgeway Large Cap Growth	Y		0.91	%		2,236		–		2020
Bridgeway Large Cap Growth	Investor		1.19	%		40,918		–		2020
Bridgeway Large Cap Growth	A		1.21	%		3,844		–		2020
Bridgeway Large Cap Growth	C		1.96	%		820		–		2020
Bridgeway Large Cap Value	R6		0.71	%(1)		1,792		–		2020

⁽¹⁾ Voluntary expense cap.

33

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

Of these amounts, $183,224 and $1,792 were disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at December 31, 2017 for the Bridgeway Large Cap Growth Fund and Bridgeway Large Cap Value Fund, respectively.

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 Funds did not record a liability for potential reimbursements due to the current assessment that reimbursements are unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:

Fund	Recovered Expenses		Excess Expense Carryover		Expired Expense Carryover		Expiration of Reimbursed Expenses
Bridgeway Large Cap Growth	$	–	$	238,079	$	–		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 December 31, 2017, Foreside collected $1,871 and $38,306 in sales commissions for Bridgeway Large Cap Growth Fund and Bridgeway Large Cap Value 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 December 31, 2017, CDSC fees of $193 were collected for Class A Shares of the Bridgeway Large Cap Value Fund. There were no CDSC fees collected for Class A Shares of the Bridgeway Large Cap Growth 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 December 31, 2017, CDSC fees of $20 and $14,217 were collected for Class C Shares of the Bridgeway Large Cap Growth Fund and Bridgeway Large Cap Value 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 $10,000 for each Board meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $10,000 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 Trusts according to its respective net assets.

34

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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.

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, ETFs, 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 generally 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.

35

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

4.  Securities and Other Investments

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.

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.

Real Estate Investment Trusts

The Funds may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. The Funds re-characterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information, which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year.

5. Financial Derivative Instruments

The Funds may utilize derivative instruments to 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

36

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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 December 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 December 31, 2017
Bridgeway Large Cap Growth		20
Bridgeway Large Cap Value		540

The following is a summary of the fair valuations of the Funds’ derivative instruments categorized by risk exposure⁽¹⁾:

Bridgeway Large Cap Growth Fund

Fair values of financial instruments on the Statements of Assets and Liabilities as of December 31, 2017:
Derivatives not accounted for as hedging instruments
Liabilities:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts				Total
Payable for variation margin from open futures contracts(2)		$	-		$	-		$	-		$	-		$	(5,422	)		$	(5,422	)
The effect of financial derivative instruments on the Statements of Operations as of December 31, 2017:
Derivatives not accounted for as hedging instruments
Realized gain (loss) from derivatives recognized as a result of operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts				Total
Futures contracts		$	-		$	-		$	-		$	-		$	581,173			$	581,173
Net change in unrealized appreciation (depreciation) of derivatives recognized as a result from operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts				Total
Futures contracts		$	-		$	-		$	-		$	-		$	(4,140	)		$	(4,140	)

37

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

Bridgeway Large Cap Value Fund

Fair values of financial instruments on the Statements of Assets and Liabilities as of December 31, 2017:
Derivatives not accounted for as hedging instruments
Liabilities:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts				Total
Payable for variation margin from open futures contracts(2)		$	-		$	-		$	-		$	-		$	(134,259	)		$	(134,259	)
The effect of financial derivative instruments on the Statements of Operations as of December 31, 2017:
Derivatives not accounted for as hedging instruments
Realized gain (loss) from derivatives recognized as a result of operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts				Total
Futures contracts		$	-		$	-		$	-		$	-		$	11,339,713			$	11,339,713
Net change in unrealized appreciation (depreciation) of derivatives recognized as a result from operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts				Total
Futures contracts		$	-		$	-		$	-		$	-		$	93,423			$	93,423

⁽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 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.

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 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.

Foreign Investing Risk

The Funds may invest in securities issued by foreign companies through ADRs and U.S. dollar-denominated foreign stocks traded on U.S. exchanges. The Funds may also invest in local currency investments. ADRs are subject

38

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

to many of the risks inherent in currency fluctuations and political and financial instability in the home country of a particular ADR or foreign stock. 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.

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).

Market Risk

Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in fixed-income instruments experiencing unusual liquidity issues, increased price volatility and, in some cases, credit downgrades and increased likelihood of default. These events have reduced the willingness and ability of some lenders to extend credit, and have made it more difficult for some borrowers to obtain financing on attractive terms, if at all. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.

In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it is difficult to predict the impact on various markets of a significant rate increase, whether brought about by U.S. policy makers or by dislocations in world markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.

Other Investment Companies Risk

The Funds may invest in shares of other registered investment companies, including ETFs and 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 the underlying funds in addition to the Funds’ direct fees and expenses and will be subject to the risks associated with investments in those funds.

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

39

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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.

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, December 31, 2017.

Bridgeway Large Cap Growth Fund

Offsetting of Financial and Derivative Assets as of December 31, 2017:
	Assets		Liabilities
Futures Contracts	$	-	$	5,422
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	-	$	5,422
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)	$	-	$	(5,422	)

Bridgeway Large Cap Value Fund

Offsetting of Financial and Derivative Assets as of December 31, 2017:
	Assets		Liabilities
Futures Contracts	$	-	$	134,259
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	-	$	134,259
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)	$	-	$	(134,259	)

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 December 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.

40

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

The tax character of distributions paid were as follows:

	Bridgeway Large Cap Growth Fund						Bridgeway Large Cap Value Fund
	Year Ended December 31, 2017		Six Months Ended December 31, 2016		Year Ended June 30, 2016		Year Ended December 31, 2017		Year Ended December 31, 2016
Distributions paid from:
Ordinary income*
Institutional Class	$	2,444,697	$	860,039	$	775,100	$	21,115,635	$	16,192,058
Y Class		27,566		4,225		-		20,051,334		11,608,153
Investors Class		990,945		2,556		-		14,070,130		17,444,134
A Class		59,745		872		-		815,141		1,598,995
C Class		8,677		1,137		-		342,565		399,395
R6 Class		-		-		-		1,038,664		-
Long-term capital gains
Institutional Class		4,759,699		-		-		65,169,621		136,773
Y Class		53,797		-		-		64,466,890		102,639
Investors Class		1,942,083		-		-		58,276,464		186,988
A Class		123,172		-		-		4,055,680		18,482
C Class		21,069		-		-		4,417,087		12,283
R6 Class		-		-		-		3,153,059		-
Total distributions paid	$	10,431,450	$	868,829	$	775,100	$	256,972,270	$	47,699,900

*For tax purposes, short-term capital gains are considered ordinary income distributions.

As of December 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)
Bridgeway Large Cap Growth	$	217,662,584	$	40,962,545	$	(1,999,264	)	$	38,963,281
Bridgeway Large Cap Value		4,011,136,867		871,801,698		(103,292,327	)		768,509,371

Fund	Net Unrealized Appreciation (Depreciation)		Undistributed Ordinary Income		Undistributed Long-Term Capital Gains		Accumulated Capital and Other (Losses)			Other Temporary Differences			Distributable Earnings
Bridgeway Large Cap Growth	$	38,963,281	$	-	$	-	$	(1,770,090	)	$	-		$	37,193,191
Bridgeway Large Cap Value		768,509,371		-		80,504,292		-			(1	)		849,013,662

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 tax deferral of post-October capital losses 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 Statements of Assets and Liabilities.

41

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

Accordingly, the following amounts represent current year permanent differences derived from reclassifications of income from real estate investment securities, reclassifications of income to return of capital, basis adjustments on transferred assets from the Target Fund, distribution re-designations and distributions in excess of current earnings as of December 31, 2017:

Fund	Paid-In-Capital			Undistributed (Overdistribution of) Net Investment Income		Accumulated Net Realized Gain (Loss)			Net Unrealized Appreciation (Depreciation)
Bridgeway Large Cap Growth	$	(119,147	)	$	116,020	$	3,127		$	–
Bridgeway Large Cap Value		–			1,219,180		(1,219,180	)		–

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. Prior to RICMOD, net capital losses incurred by the Fund were carried forward for eight years and treated as short-term losses. RICMOD requires that post enactment losses be utilized before pre-enactment net capital losses.

For the year ended December 31, 2017, the Funds did not have any capital loss carryforwards. The Bridgeway Large Cap Growth Fund utilized $7,930,923 pre-RIC MOD capital loss carryforward.

The Funds are permitted for tax purposes to defer into its next fiscal year qualified late year losses. Qualified late year capital losses are any capital losses incurred after October 31 through the Fund’s fiscal year end, December 31, 2017. Qualified late year ordinary losses are specified losses generally incurred after October 31 through the Fund’s fiscal year end, December 31, 2017. For the period ended December 31, 2017, Bridgeway Large Cap Growth Fund deferred $1,770,090 of capital losses to January 1, 2018.

8.  Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2017 were as follows:

Fund	Purchases (non-U.S. Government Securities)		Sales (non-U.S. Government Securities)
Bridgeway Large Cap Growth	$	120,132,759	$	129,497,929
Bridgeway Large Cap Value		2,322,923,198		2,045,441,958

A summary of the Funds’ transactions in the USG Select Fund for the year ended December 31, 2017 are as follows:

Fund	Type of Transaction	December 31, 2016 Share/Fair Value		Purchases		Sales		December 31, 2017 Share/Fair Value		Dividend Income
Bridgeway Large Cap Growth Fund	Direct	$	1,766,715	$	80,533,137	$	80,857,888	$	1,441,964	$	47,510
Bridgeway Large Cap Growth Fund	Securities Lending		-		65,569,572		65,569,572		-		N/A
Bridgeway Large Cap Value Fund	Direct		94,937,593		2,098,363,158		2,089,086,984		104,213,767		555,870
Bridgeway Large Cap Value Fund	Securities Lending		-		430,783,276		430,783,276		-		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

42

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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 Funds’ Schedule of Investments and the collateral is shown on the Statement 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.

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.

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.

The Funds did not have any securities on loan or hold any securities lending collateral as of the year ended December 31, 2017.

10.  Borrowing Arrangements

Effective November 16, 2017, the Funds, along with certain other funds managed by the Manager (“Participating Funds”), entered into a committed revolving line of credit (the “Committed Line”) agreement with State Street Bank and Trust Company (the “Bank”) to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Committed Line is $50 million with interest at a rate equal to the higher of (a) one-month London Inter-Bank Offered Rate (“LIBOR”) plus 1.25% per annum or (b) the Federal Funds rate plus 1.25% per annum on amounts borrowed. Each of the Participating Funds will pay a commitment fee at a rate of 0.25% per annum on the unused portion of the Committed Line amount. The Committed Line expires November 15, 2018, unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

43

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

Effective November 16, 2017, the Funds, along with certain other Participating Funds managed by the Manager, entered into an uncommitted discretionary demand revolving line of credit (the “Uncommitted Line”) agreement with the Bank to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Uncommitted Line is $50 million with interest at a rate equal to the higher of (a) one-month LIBOR plus 1.25% per annum or (b) the Federal Funds rate. The Uncommitted Line expires November 15, 2018, unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

The Participating Funds paid administration, legal and arrangement fees, which are recognized as a component of “Other expenses” on the Statements of Operations, along with commitment fees, that have been allocated among the Participating Funds based on average daily net assets. During the year ended December 31, 2017, the Funds did not utilize this facility.

11. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds:

	Institutional Class
	Year Ended December 31, 2017						Six Months Ended December 31, 2016						Year Ended June 30, 2016
Bridgeway Large Cap Growth Fund	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		573,230		$	15,764,540			347,029		$	8,235,900			1,664,057		$	38,562,092
Reinvestment of dividends		234,024			7,037,103			33,619			832,747			31,858			753,120
Issued in Reorganization		560,148			17,375,797			-			-			-			-
Shares redeemed		(869,054	)		(23,815,289	)		(911,246	)		(21,647,448	)		(2,302,986	)		(50,942,698	)
Net increase/(decrease) in shares outstanding		498,348		$	16,362,151			(530,598	)	$	(12,578,801	)		(607,071	)	$	(11,627,486	)
	Y Class
	Year Ended December 31, 2017						Six Months Ended December 31, 2016						February 5, 2016A to June 30, 2016
Bridgeway Large Cap Growth Fund	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		35,909		$	1,013,797			16,663		$	391,005			19,831		$	436,655
Reinvestment of dividends		2,711			81,363			171			4,225			-			-
Issued in Reorganization		5,051			156,423			-			-			-			-
Shares redeemed		(3,449	)		(96,277	)		(7,072	)		(168,547	)		(2,209	)		(48,222	)
Net increase in shares outstanding		40,222		$	1,155,306			9,762		$	226,683			17,622		$	388,433
	Investor Class
	Year Ended December 31, 2017						Six Months Ended December 31, 2016						February 5, 2016A to June 30, 2016
Bridgeway Large Cap Growth Fund	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		55,661		$	1,500,036			10,944		$	261,573			7,575		$	159,910
Reinvestment of dividends		98,167			2,930,272			103			2,557			-			-
Issued in Reorganization		2,283,713			70,337,259			-			-			-			-
Shares redeemed		(50,343	)		(1,467,164	)		(525	)		(13,045	)		(1,697	)		(38,429	)
Net increase in shares outstanding		2,387,198		$	73,300,403			10,522		$	251,085			5,878		$	121,481
	A Class
	Year Ended December 31, 2017						Six Months Ended December 31, 2016						February 5, 2016A to June 30, 2016
Bridgeway Large Cap Growth Fund	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		108,872		$	3,081,503			4,610		$	109,611			14,372		$	311,305
Reinvestment of dividends		6,085			181,953			35			872			-			-
Issued in Reorganization		43,610			1,344,061			-			-			-			-
Shares redeemed		(8,365	)		(233,976	)		(6,104	)		(144,565	)		(7,349	)		(166,121	)
Net increase/(decrease) in shares outstanding		150,202		$	4,373,541			(1,459	)	$	(34,082	)		7,023		$	145,184
	C Class
	Year Ended December 31, 2017						Six Months Ended December 31, 2016						February 5, 2016A to June 30, 2016
Bridgeway Large Cap Growth Fund	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		8,335		$	224,338			1,783		$	43,207			10,768		$	231,867
Reinvestment of dividends		1,008			29,746			46			1,137			-			-
Issued in Reorganization		10,919			331,620			-			-			-			-
Shares redeemed		(1,258	)		(35,056	)		(5,334	)		(125,544	)		-			-
Net increase/(decrease) in shares outstanding		19,004		$	550,648			(3,505	)	$	(81,200	)		10,768		$	231,867

44

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

	Institutional Class
	Year Ended December 31,
	2017						2016
Bridgeway Large Cap Value Fund	Shares			Amount			Shares			Amount
Shares sold		22,141,959		$	605,634,913			29,618,277		$	702,728,158
Reinvestment of dividends		2,851,013			81,738,543			587,707			15,521,344
Shares redeemed		(16,256,439	)		(452,560,664	)		(14,779,522	)		(361,176,117	)
Net increase in shares outstanding		8,736,533		$	234,812,792			15,426,462		$	357,073,385
	Y Class
	Year Ended December 31,
	2017						2016
Bridgeway Large Cap Value Fund	Shares			Amount			Shares			Amount
Shares sold		30,846,571		$	837,274,698			21,737,331		$	518,148,202
Reinvestment of dividends		2,784,424			79,606,684			418,386			11,024,436
Shares redeemed		(13,143,773	)		(357,121,560	)		(6,598,894	)		(157,373,925	)
Net increase in shares outstanding		20,487,222		$	559,759,822			15,556,823		$	371,798,713
	Investor Class
	Year Ended December 31,
	2017						2016
Bridgeway Large Cap Value Fund	Shares			Amount			Shares			Amount
Shares sold		12,127,050		$	327,627,225			31,217,772		$	738,978,810
Reinvestment of dividends		2,532,136			72,191,205			668,953			17,573,398
Shares redeemed		(26,895,237	)		(724,443,760	)		(14,003,271	)		(332,412,565	)
Net increase (decrease) in shares outstanding		(12,236,051	)	$	(324,625,330	)		17,883,454		$	424,139,643
	A Class
	Year Ended December 31,
	2017						2016
Bridgeway Large Cap Value Fund	Shares			Amount			Shares			Amount
Shares sold		1,323,482		$	35,172,571			2,195,353		$	51,983,617
Reinvestment of dividends		166,852			4,741,923			55,177			1,442,871
Shares redeemed		(4,000,004	)		(109,268,040	)		(2,884,469	)		(67,173,170	)
Net (decrease) in shares outstanding		(2,509,670	)	$	(69,353,546	)		(633,939	)	$	(13,746,682	)
	C Class
	Year Ended December 31,
	2017						2016
Bridgeway Large Cap Value Fund	Shares			Amount			Shares			Amount
Shares sold		646,529		$	16,939,095			1,058,012		$	24,046,258
Reinvestment of dividends		148,656			4,122,220			13,238			338,911
Shares redeemed		(1,057,869	)		(27,847,899	)		(919,457	)		(21,163,388	)
Net increase (decrease) in shares outstanding		(262,684	)	$	(6,786,584	)		151,793		$	3,221,781
	R6 Class
	April 28, 2017A to December 31, 2017
Bridgeway Large Cap Value Fund	Shares			Amount
Shares sold		3,096,230		$	91,569,174
Reinvestment of dividends		146,308			4,191,724
Shares redeemed		(36,754	)		(1,070,350	)
Net increase in shares outstanding		3,205,784		$	94,690,548

^A Commencement of operations.

12.  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.

45

American Beacon Bridgeway Large Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Institutional ClassA
	Year Ended December 31,			Six Months Ended December 31,			Year Ended June 30,
	2017G			2016			2016			2015			2014			2013
Net asset value, beginning of period	$	24.47		$	22.77		$	23.71		$	20.51		$	16.18		$	13.33
Income (loss) from investment operations:
Net investment income		0.10			0.04			0.07			0.17	B		0.13	B		0.16	B
Net gains (losses) on investments (both realized and unrealized)		6.56			1.82			(0.90	)		3.14			4.29			2.88
Total income (loss) from investment operations		6.66			1.86			(0.83	)		3.31			4.42			3.04
Less distributions:
Dividends from net investment income		(0.08	)		(0.16	)		(0.11	)		(0.11	)		(0.09	)		(0.19	)
Distributions from net realized gains		(1.17	)		-			-			-			-			-
Total distributions		(1.25	)		(0.16	)		(0.11	)		(0.11	)		(0.09	)		(0.19	)
Net asset value, end of period	$	29.88		$	24.47		$	22.77		$	23.71		$	20.51		$	16.18
Total returnC		27.21	%		8.15	%E		(3.52	)%		16.19	%		27.41	%D		23.06	%D
Ratios and supplemental data:
Net assets, end of period	$	178,062,388		$	133,638,400		$	136,460,611		$	156,493,513		$	56,343,594		$	47,966,566
Ratios to average net assets:
Expenses, before reimbursements		1.06	%		1.02	%F		0.89	%		0.81	%		0.87	%		0.90	%
Expenses, net of reimbursements		0.81	%		0.81	%F		0.83	%		0.81	%		0.84	%		0.84	%
Net investment income, before expense reimbursements		0.15	%		0.12	%F		0.30	%		0.75	%		0.70	%		1.10	%
Net investment income, net of reimbursements		0.40	%		0.33	%F		0.35	%		0.75	%		0.70	%		1.10	%
Portfolio turnover rate		78	%		40	%E		100	%		48	%		74	%		49	%

^A Prior to the reorganization on February 5, 2016, the Institutional Class was known as Class N.

^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 Total return would have been lower had various fees not been waived during the period.

^E Not annualized.

^F Annualized.

^G On December 15, 2017, pursuant to a plan of Reorganization on termination, the American Beacon Bridgeway Large Cap Growth II Fund (“Target Fund”) transferred all of its property and assets to the American Beacon Bridgeway Large Cap Growth Fund (“Acquiring Fund”) in exchange solely for voting shares of the Acquiring Fund and the assumption of the Target Fund’s liabilities.

See accompanying notes

46

American Beacon Bridgeway Large Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Y Class
	Year Ended December 31, 2017F			Six Months Ended December 31, 2016			February 5, 2016A to June 30, 2016
Net asset value, beginning of period	$	24.45		$	22.77		$	20.46
Income from investment operations:
Net investment income		0.05			0.03			0.03
Net gains on investments (both realized and unrealized)		6.57			1.81			2.28
Total income from investment operations		6.62			1.84			2.31
Less distributions:
Dividends from net investment income		(0.08	)		(0.16	)		-
Distributions from net realized gains		(1.17	)		-			-
Total distributions		(1.25	)		(0.16	)		-
Net asset value, end of period	$	29.82		$	24.45		$	22.77
Total returnB		27.06	%		8.06	%C		11.29	%C
Ratios and supplemental data:
Net assets, end of period	$	2,016,161		$	669,530		$	401,220
Ratios to average net assets:
Expenses, before reimbursements		1.13	%		1.09	%D		4.00	%D
Expenses, net of reimbursements		0.91	%		0.91	%D		0.91	%D
Net investment income (loss), before expense reimbursements		0.08	%		0.11	%D		(2.69	)%D
Net investment income, net of reimbursements		0.30	%		0.28	%D		0.40	%D
Portfolio turnover rate		78	%		40	%C		100	%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 rate is for the period from February 5, 2016 through June 30, 2016 and is not annualized.

^F On December 15, 2017, pursuant to a plan of Reorganization on termination, the American Beacon Bridgeway Large Cap Growth II Fund (“Target Fund”) transferred all of its property and assets to the American Beacon Bridgeway Large Cap Growth Fund (“Acquiring Fund”) in exchange solely for voting shares of the Acquiring Fund and the assumption of the Target Fund’s liabilities.

See accompanying notes

47

American Beacon Bridgeway Large Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Investor Class
	Year Ended December 31, 2017F			Six Months Ended December 31, 2016			February 5, 2016A to June 30, 2016
Net asset value, beginning of period	$	24.38		$	22.74		$	20.46
Income (loss) from investment operations:
Net investment income (loss)		(0.01	)		(0.01	)		0.01
Net gains on investments (both realized and unrealized)		6.53			1.81			2.27
Total income from investment operations		6.52			1.80			2.28
Less distributions:
Dividends from net investment income		(0.08	)		(0.16	)		-
Distributions from net realized gains		(1.17	)		-			-
Total distributions		(1.25	)		(0.16	)		-
Net asset value, end of period	$	29.65		$	24.38		$	22.74
Total returnB		26.72	%		7.90	%C		11.14	%C
Ratios and supplemental data:
Net assets, end of period	$	71,273,896		$	399,798		$	133,696
Ratios to average net assets:
Expenses, before reimbursements		1.40	%		1.55	%D		8.43	%D
Expenses, net of reimbursements		1.19	%		1.19	%D		1.18	%D
Net investment (loss), before expense reimbursements		(0.66	)%		(0.35	)%D		(7.08	)%D
Net investment income (loss), net of reimbursements		(0.45	)%		0.02	%D		0.17	%D
Portfolio turnover rate		78	%		40	%C		100	%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 rate is for the period from February 5, 2016 through June 30, 2016 and is not annualized.

^F On December 15, 2017, pursuant to a plan of Reorganization on termination, the American Beacon Bridgeway Large Cap Growth II Fund (“Target Fund”) transferred all of its property and assets to the American Beacon Bridgeway Large Cap Growth Fund (“Acquiring Fund”) in exchange solely for voting shares of the Acquiring Fund and the assumption of the Target Fund’s liabilities.

See accompanying notes

48

American Beacon Bridgeway Large Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	A Class
	Year Ended December 31, 2017G			Six Months Ended December 31, 2016			February 5, 2016A to June 30, 2016
Net asset value, beginning of period	$	24.39		$	22.74		$	20.46
Income from investment operations:
Net investment income		0.00	F		0.00	F		0.00	F
Net gains on investments (both realized and unrealized)		6.54			1.81			2.28
Total income (loss) from investment operations		6.54			1.81			2.28
Less distributions:
Dividends from net investment income		(0.06	)		(0.16	)		-
Distributions from net realized gains		(1.17	)		-			-
Total distributions		(1.23	)		(0.16	)		-
Net asset value, end of period	$	29.70		$	24.39		$	22.74
Total returnB		26.79	%		7.94	%C		11.14	%C
Ratios and supplemental data:
Net assets, end of period	$	4,625,607		$	135,710		$	159,744
Ratios to average net assets:
Expenses, before reimbursements		1.44	%		1.43	%D		5.25	%D
Expenses, net of reimbursements		1.21	%		1.21	%D		1.21	%D
Net investment income (loss), before expense reimbursements		(0.23	)%		(0.26	)%D		(4.01	)%D
Net investment income (loss), net of reimbursements		0.00	%H		(0.05	)%D		0.02	%D
Portfolio turnover rate		78	%		40	%C		100	%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 rate is for the period from February 5, 2016 through June 30, 2016 and is not annualized.

^F Amounts are less than $0.01 per share.

^G On December 15, 2017, pursuant to a plan of Reorganization on termination, the American Beacon Bridgeway Large Cap Growth II Fund (“Target Fund”) transferred all of its property and assets to the American Beacon Bridgeway Large Cap Growth Fund (“Acquiring Fund”) in exchange solely for voting shares of the Acquiring Fund and the assumption of the Target Fund’s liabilities.

^H Amount rounds to less than 0.005%.

See accompanying notes

49

American Beacon Bridgeway Large Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	C Class
	Year Ended December 31, 2017F			Six Months Ended December 31, 2016			February 5, 2016A to June 30, 2016
Net asset value, beginning of period	$	24.22		$	22.67		$	20.46
Income (loss) from investment operations:
Net investment income (loss)		(0.10	)		(0.13	)		(0.04	)
Net gains on investments (both realized and unrealized)		6.35			1.84			2.25
Total income from investment operations		6.25			1.71			2.21
Less distributions:
Dividends from net investment income		-			(0.16	)		-
Distributions from net realized gains		(1.17	)		-			-
Total distributions		(1.17	)		(0.16	)		-
Net asset value, end of period	$	29.30		$	24.22		$	22.67
Total returnB		25.78	%		7.52	%C		10.80	%C
Ratios and supplemental data:
Net assets, end of period	$	769,559		$	175,907		$	244,146
Ratios to average net assets:
Expenses, before reimbursements		2.09	%		2.18	%D		7.33	%D
Expenses, net of reimbursements		1.96	%		1.96	%D		1.96	%D
Net investment (loss), before expense reimbursements		(0.90	)%		(1.04	)%D		(5.98	)%D
Net investment income (loss), net of reimbursements		(0.77	)%		(0.81	)%D		(0.62	)%D
Portfolio turnover rate		78	%		40	%C		100	%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 rate is for the period from February 5, 2016 through June 30, 2016 and is not annualized.

^F On December 15, 2017, pursuant to a plan of Reorganization on termination, the American Beacon Bridgeway Large Cap Growth II Fund (“Target Fund”) transferred all of its property and assets to the American Beacon Bridgeway Large Cap Growth Fund (“Acquiring Fund”) in exchange solely for voting shares of the Acquiring Fund and the assumption of the Target Fund’s liabilities.

See accompanying notes

50

American Beacon Bridgeway Large Cap Value Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Institutional Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	26.08		$	22.75		$	23.89		$	21.39		$	15.85
Income (loss) from investment operations:
Net investment income		0.37			0.38			0.28			0.10			0.11
Net gains (losses) on investments (both realized and unrealized)		3.78			3.32			(0.58	)		2.94			5.87
Total income (loss) from investment operations		4.15			3.70			(0.30	)		3.04			5.98
Less distributions:
Dividends from net investment income		(0.39	)		(0.35	)		(0.29	)		(0.17	)		(0.11	)
Distributions from net realized gains		(1.27	)		(0.02	)		(0.55	)		(0.37	)		(0.33	)
Tax return of capital		-			-			(0.00	)A		-			-
Total distributions		(1.66	)		(0.37	)		(0.84	)		(0.54	)		(0.44	)
Net asset value, end of period	$	28.57		$	26.08		$	22.75		$	23.89		$	21.39
Total returnB		15.88	%		16.24	%		(1.23	)%		14.18	%		37.77	%
Ratios and supplemental data:
Net assets, end of period	$	1,547,760,278		$	1,185,013,905		$	682,849,171		$	313,660,568		$	79,889,063
Ratios to average net assets:
Expenses, before reimbursements		0.72	%		0.73	%		0.75	%		0.79	%		1.01	%
Expenses, net of reimbursements		0.72	%		0.73	%		0.79	%		0.84	%		0.84	%
Net investment income, before expense reimbursements		1.41	%		1.69	%		1.61	%		1.08	%		0.98	%
Net investment income, net of reimbursements		1.41	%		1.69	%		1.57	%		1.04	%		1.16	%
Portfolio turnover rate		48	%		56	%		43	%		31	%		38	%

^A The distributions from return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^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.

See accompanying notes

51

American Beacon Bridgeway Large Cap Value Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Y Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	26.01		$	22.69		$	23.84		$	21.35		$	15.84
Income (loss) from investment operations:
Net investment income		0.33			0.32			0.27			0.13			0.22
Net gains (losses) on investments (both realized and unrealized)		3.79			3.35			(0.57	)		2.90			5.72
Total income (loss) from investment operations		4.12			3.67			(0.30	)		3.03			5.94
Less distributions:
Dividends from net investment income		(0.37	)		(0.33	)		(0.30	)		(0.17	)		(0.10	)
Distributions from net realized gains		(1.27	)		(0.02	)		(0.55	)		(0.37	)		(0.33	)
Tax return of capital		-			-			(0.00	)A		-			-
Total distributions		(1.64	)		(0.35	)		(0.85	)		(0.54	)		(0.43	)
Net asset value, end of period	$	28.49		$	26.01		$	22.69		$	23.84		$	21.35
Total returnB		15.82	%		16.17	%		(1.26	)%		14.15	%		37.55	%
Ratios and supplemental data:
Net assets, end of period	$	1,547,228,114		$	879,852,983		$	414,585,125		$	119,162,044		$	19,913,753
Ratios to average net assets:
Expenses, before reimbursements		0.79	%		0.80	%		0.81	%		0.84	%		0.93	%
Expenses, net of reimbursements		0.79	%		0.80	%		0.81	%		0.85	%		0.94	%
Net investment income, before expense reimbursements		1.35	%		1.63	%		1.55	%		1.03	%		1.07	%
Net investment income, net of reimbursements		1.35	%		1.63	%		1.55	%		1.03	%		1.06	%
Portfolio turnover rate		48	%		56	%		43	%		31	%		38	%

^A  The distributions from return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^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.

See accompanying notes

52

American Beacon Bridgeway Large Cap Value Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Investor Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	25.93		$	22.64		$	23.77		$	21.28		$	15.81
Income (loss) from investment operations:
Net investment income		0.32			0.27			0.25			0.14			0.21
Net gains (losses) on investments (both realized and unrealized)		3.71			3.31			(0.61	)		2.82			5.68
Total income (loss) from investment operations		4.03			3.58			(0.36	)		2.96			5.89
Less distributions:
Dividends from net investment income		(0.28	)		(0.27	)		(0.22	)		(0.10	)		(0.09	)
Distributions from net realized gains		(1.27	)		(0.02	)		(0.55	)		(0.37	)		(0.33	)
Tax return of capital		-			-			(0.00	)A		-			-
Total distributions		(1.55	)		(0.29	)		(0.77	)		(0.47	)		(0.42	)
Net asset value, end of period	$	28.41		$	25.93		$	22.64		$	23.77		$	21.28
Total returnB		15.52	%		15.81	%		(1.51	)%		13.89	%		37.28	%
Ratios and supplemental data:
Net assets, end of period	$	1,387,184,369		$	1,583,853,257		$	977,719,149		$	668,659,150		$	274,113,476
Ratios to average net assets:
Expenses, before reimbursements		1.06	%		1.08	%		1.09	%		1.11	%		1.08	%
Expenses, net of reimbursements		1.06	%		1.08	%		1.09	%		1.11	%		1.09	%
Net investment income, before expense reimbursements		1.04	%		1.35	%		1.28	%		0.76	%		0.95	%
Net investment income, net of reimbursements		1.04	%		1.35	%		1.28	%		0.76	%		0.94	%
Portfolio turnover rate		48	%		56	%		43	%		31	%		38	%

^A The distributions from return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^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.

See accompanying notes

53

American Beacon Bridgeway Large Cap Value Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	A Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	25.82		$	22.53		$	23.66		$	21.22		$	15.78
Income (loss) from investment operations:
Net investment income		0.42			0.32			0.27			0.09			0.19
Net gains (losses) on investments (both realized and unrealized)		3.58			3.24			(0.64	)		2.84			5.64
Total income (loss) from investment operations		4.00			3.56			(0.37	)		2.93			5.83
Less distributions:
Dividends from net investment income		(0.23	)		(0.25	)		(0.21	)		(0.12	)		(0.06	)
Distributions from net realized gains		(1.27	)		(0.02	)		(0.55	)		(0.37	)		(0.33	)
Tax return of capital		-			-			(0.00	)A		-			-
Total distributions		(1.50	)		(0.27	)		(0.76	)		(0.49	)		(0.39	)
Net asset value, end of period	$	28.32		$	25.82		$	22.53		$	23.66		$	21.22
Total returnB		15.46	%		15.79	%		(1.56	)%		13.76	%		37.01	%
Ratios and supplemental data:
Net assets, end of period	$	96,229,248		$	152,520,884		$	147,394,607		$	103,716,652		$	31,300,069
Ratios to average net assets:
Expenses, before reimbursements		1.08	%		1.12	%		1.12	%		1.19	%		1.38	%
Expenses, net of reimbursements		1.08	%		1.12	%		1.12	%		1.21	%		1.34	%
Net investment income, before expense reimbursements		1.01	%		1.31	%		1.25	%		0.69	%		0.61	%
Net investment income, net of reimbursements		1.01	%		1.31	%		1.25	%		0.67	%		0.66	%
Portfolio turnover rate		48	%		56	%		43	%		31	%		38	%

^A The distributions from return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^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.

See accompanying notes

54

American Beacon Bridgeway Large Cap Value Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	C Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	25.27		$	22.08		$	23.27		$	21.00		$	15.70
Income (loss) from investment operations:
Net investment income		0.08			0.13			0.13			0.02			0.18
Net gains (losses) on investments (both realized and unrealized)		3.62			3.16			(0.66	)		2.69			5.47
Total income (loss) from investment operations		3.70			3.29			(0.53	)		2.71			5.65
Less distributions:
Dividends from net investment income		(0.07	)		(0.08	)		(0.11	)		(0.07	)		(0.02	)
Distributions from net realized gains		(1.27	)		(0.02	)		(0.55	)		(0.37	)		(0.33	)
Tax return of capital		-			-			(0.00	)A		-			-
Total distributions		(1.34	)		(0.10	)		(0.66	)		(0.44	)		(0.35	)
Net asset value, end of period	$	27.63		$	25.27		$	22.08		$	23.27		$	21.00
Total returnB		14.62	%		14.91	%		(2.27	)%		12.88	%		36.02	%
Ratios and supplemental data:
Net assets, end of period	$	102,553,616		$	100,447,531		$	84,411,378		$	33,536,254		$	2,346,463
Ratios to average net assets:
Expenses, before reimbursements		1.83	%		1.86	%		1.87	%		1.92	%		2.13	%
Expenses, net of reimbursements		1.83	%		1.86	%		1.87	%		1.94	%		2.09	%
Net investment income (loss), before expense reimbursements		0.28	%		0.57	%		0.48	%		(0.05	)%		(0.13	)%
Net investment income (loss), net of reimbursements		0.28	%		0.57	%		0.48	%		(0.08	)%		(0.08	)%
Portfolio turnover rate		48	%		56	%		43	%		31	%		38	%

^A The distributions from return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^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.

See accompanying notes

55

American Beacon Bridgeway Large Cap Value Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	R6 Class
	April 28, 2017A to December 31, 2017
Net asset value, beginning of period	$	26.73
Income from investment operations:
Net investment income		0.11
Net gains on investments (both realized and unrealized)		3.37
Total income from investment operations		3.48
Less distributions:
Dividends from net investment income		(0.39	)
Distributions from net realized gains		(1.27	)
Total distributions		(1.66	)
Net asset value, end of period	$	28.55
Total returnB		13.01	%C
Ratios and supplemental data:
Net assets, end of period	$	91,521,786
Ratios to average net assets:
Expenses, before reimbursements		0.75	%D
Expenses, net of reimbursements		0.71	%D
Net investment income, before expense reimbursements		1.44	%D
Net investment income, net of reimbursements		1.48	%D
Portfolio turnover rate		48	%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 April 28, 2017 through December 31, 2017 and is not annualized.

See accompanying notes

56

American Beacon Funds^SM

Shareholder Meeting Report

December 31, 2017 (Unaudited)

A special meeting of Shareholders of the American Beacon Bridgeway Large Cap Growth II Fund, a series in the American Beacon Funds (the “Trust”), was held on December 14, 2017. The Shareholders approved the Plan of Reorganization and Termination to reorganize the American Beacon Large Cap Growth II Fund into the American Beacon Bridgeway Large Cap Growth Fund, another series of the Trust. Approval of this proposal required a majority of the outstanding voting securities of each Fund. The following are the results of the shareholder votes for this proposal:

For	Against	Abstain	Non-Voting
2,231,976.33	59.90	63,528.24	1,028,075.45

57

American Beacon Funds^SM

Federal Tax Information

December 31, 2017 (Unaudited)

The Funds are required to provide to Shareholders certain tax information based upon the Fund’s income and distribution for the taxable year ended December 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 year ended December 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 Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

	Bridgeway Large Cap Growth Fund			Bridgeway Large Cap Value Fund
Corporate Dividends Received Deduction		84.50	%		100.00	%
Qualified Dividend Income		92.30	%		100.00	%

The Bridgeway Large Cap Growth Fund designated $6,899,820 as long-term capital gains distributions and $2,841,720 as short-term capital gains distributions for the year ended December 31, 2017. The Bridgeway Large Cap Value Fund designated $199,538,801 as long-term capital gains distributions and $4,500,620 as short-term capital gains distributions for the year ended December 31, 2017.

Shareholders received notification in January 2018 of the appropriate tax information necessary to prepare their 2017 income tax return.

58

Trustees and Officers of the American Beacon Funds^SM (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-five 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** (81)	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 (48)	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 (57)	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).

59

Trustees and Officers of the American Beacon Funds^SM (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
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*** (75)	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 (72)	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. (63)	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).

60

Trustees and Officers of the American Beacon Funds^SM (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
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 (54)	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).

61

Trustees and Officers of the American Beacon Funds^SM (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
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 (46)	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 (61)	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 (43)	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).

62

Trustees and Officers of the American Beacon Funds^SM (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
Rebecca L. Harris (51)	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 (42)	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.

*** Mr. Dunning retired as of 12/31/2017. Douglas A. Lindgren became a new Trustee to each of the Trusts on 1/1/2018.

63

American Beacon Funds^SM

Privacy Policy

December 31, 2017 (Unaudited)

The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.

We may collect nonpublic personal information about you from one or more of the following sources:

• information we receive from you on applications or other forms;

• information about your transactions with us or our service providers; and

• information we receive from third parties.

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.

64

Delivery of Documents

eDelivery is NOW AVAILABLE– Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

By E-mail:	On the Internet:
american_beacon.funds@ambeacon.com	Visit our website at www.americanbeaconfunds.com
By Telephone: 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 (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month.	A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

CUSTODIAN State Street Bank and Trust Boston, Massachusetts TRANSFER AGENT DST Asset Manager Solutions, Inc. 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 Bridgeway Large Cap Growth Fund, and American Beacon Bridgeway Large Cap Value Fund are service marks of American Beacon Advisors, Inc.

AR 12/17

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.

STEPHENS MID-CAP GROWTH FUND

Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in 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. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund participates in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

STEPHENS SMALL CAP GROWTH FUND

Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. 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. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund participates in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

American Beacon Funds December 31, 2017

Contents

President’s Message	1
Market and Performance Overviews	2
Expense Examples	9
Report of Independent Registered Public Accounting Firm	11
Schedules of Investments:
American Beacon Stephens Mid-Cap Growth Fund	12
American Beacon Stephens Small Cap Growth Fund	17
Financial Statements	22
Notes to Financial Statements	25
Financial Highlights:
American Beacon Stephens Mid-Cap Growth Fund	40
American Beacon Stephens Small Cap Growth Fund	45
Federal Tax Information	50
Trustees and Officers of the American Beacon Funds	51
Privacy Policy	56

Additional Fund Information Back Cover

President’s Message

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

December 31, 2017 (Unaudited)

During the 12-month period ended December 31, 2017, domestic equity markets ignored any signs of investor skepticism that started the year as markets pushed into their ninth year of this long-running bull market. Volatility remained at suppressed levels within the S&P 500 Index, a broad measure of domestic equity markets, providing positive total returns every month and finishing the year up 21.83%. While large-cap stocks outpaced small-caps, growth stocks exhibited drastic outperformance versus value stocks across all market-cap styles. The Russell 2000 Growth Index outperformed the Russell 2000 Value Index by 14.33%, while the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 16.55%. While many investors were skeptical of the market’s advance in 2017, data during the year suggested the lift in domestic equities reflected the now-visible signs of globally synchronized economic strength.

In the first quarter of 2017, the U.S. equity markets achieved fresh, all-time highs, as optimism from the Trump administration’s “pro-growth” agenda spilled over from the fourth quarter of 2016. Despite failure to pass revisions to health-care legislation, the market remained upbeat toward Washington, D.C., on the premise of tax cuts, easing of business regulations and a boost to U.S. infrastructure investment. The economy displayed supportive evidence of further market advances and a March rate hike from the Federal Reserve (the “Fed”). The Purchasing Managers Index, the Consumer Confidence Index and the NFIB Small Business Optimism Index all flashed constructive data. During 2016, the S&P 500 Index’s trailing 12-month, year-over-year earnings growth inflected and turned positive after four quarters in negative territory. Large-caps outperformed small-caps, reversing trading patterns from the previous quarter, with Technology stocks leading the way.

In the second quarter, U.S. equities across all market caps delivered gains, shaking off growing concerns regarding the Trump administration’s ability to pass pro-growth measures and economic data that was less enthusiastic than the previous quarter, namely within Manufacturing and Consumer Health. Political uncertainty flared up after President Trump dismissed James Comey, the former FBI director. The Fed, however, delivered another 25 basis point (0.25%) rate hike and laid out plans to begin reducing its balance sheet after years of its unprecedented quantitative easing policy program. Large-cap stocks led the march higher for the second quarter, with reflationary sectors at the top – Health Care, Industrials and Financials.

In the third quarter, robust corporate earnings continued, increasing 11.6% on a trailing 12-month basis versus a year ago. Gross domestic product growth of 3.0% was released during the quarter, breaking out from the sub-3.0% growth seen in the economy since the lowest point of the financial crisis. Historic hurricanes were disruptive to Texas, Louisiana and Puerto Rico, but negative outcomes were determined to be transitory (ex-Puerto Rico), displaying the resiliency of U.S. industry. Despite concerns of stubbornly low inflation, the Fed confirmed its balance sheet roll-off beginning in October. Crude oil prices began to solidify above $50, a key support level, which boosted cyclical energy and industrial stocks. U.S. stocks across all capitalizations made gains.

In the fourth quarter, the U.S. economy and U.S. equities capped off a robust year as corporations delivered another quarter of strong earnings growth. The Technology sector, the best performing sector in the 12-month period, delivered particularly healthy results. The much-awaited Tax Cuts and Jobs Act of 2017 was passed by Congress and signed into law by President Trump on December 22. Markets jumped on this news as the permanent tax cut is expected to make U.S. companies more competitive than non-domestic peers. U.S. Treasury yields, led by the short end of the yield curve, rose during the quarter and caused interest-rate sensitive sectors, such as Real Estate and Utilities, to underperform the broader market. In December, the Fed lifted base rates for the third time during the year and lifted their U.S. 2018 economic growth forecast to 2.5% from 2.1%.

2

American Beacon Stephens Mid-Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

The Investor Class of the American Beacon Stephens Mid-Cap Growth Fund (the “Fund”) returned 27.97% for the twelve months ended December 31, 2017. The Fund outperformed the Russell Midcap^® Growth Index (the “Index”) return of 25.27% for the same period.

Comparison of Change in Value of a $10,000 Investment for the period from 12/31/2007 through 12/31/2017

Total Returns for the Period ended December 31, 2017
	Ticker	1 Year			3 Years			5 Years			10 Years			Value of $10,000 12/31/2007- 12/31/2017
Institutional Class (1,2,7)	SFMIX		28.38	%		10.62	%		13.26	%		8.00	%		$	21,598
Y Class (1,3,7)	SMFYX		28.27	%		10.50	%		13.13	%		7.84	%		$	21,275
Investor Class (1,7)	STMGX		27.97	%		10.24	%		12.85	%		7.66	%		$	20,919
A without Sales Charge (1,4,7)	SMFAX		27.93	%		10.18	%		12.79	%		7.63	%		$	20,856
A with Sales Charge (1,4,7)	SMFAX		20.57	%		8.04	%		11.46	%		6.99	%		$	19,661
C without Sales Charge (1,5,7)	SMFCX		26.93	%		9.34	%		11.91	%		7.16	%		$	19,971
C with Sales Charge (1,5,7)	SMFCX		25.93	%		9.34	%		11.91	%		7.16	%		$	19,971
Russell Midcap® Growth Index (6)			25.27	%		10.30	%		15.30	%		9.10	%		$	23,895
S&P 500 Index (6)			21.83	%		11.41	%		15.79	%		8.50	%		$	22,603

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-9687-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only; and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. Please note that the recent growth rate in the securities market has helped to produce short-term returns that are not typical and may not continue in the future. A portion of the fees charged to the Investor Class was waived from 2007 through 2013 and fully recovered in 2014 and 2015. Performance prior to waiving fees was lower than the actual returns shown from 2007 through 2013.

2. A portion of the fees charged to the Institutional Class has been waived since 2007. Performance prior to waiving fees was lower than the actual returns shown since 2007.

3

American Beacon Stephens Mid-Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

3. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/07 up to 2/14/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. Therefore, total returns shown may be lower than they would have been had the Y Class been in existence since 12/31/07. A portion of the fees charged to the Y Class was waived in 2012 and 2013, fully recovered in 2014 and 2015, and waived in 2017. Performance prior to waiving fees was lower than the actual returns shown in 2012, 2013 and 2017.

4. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/07 up to 2/24/12, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the A Class been in existence since 12/31/07. A portion of the fees charged to the A Class was waived in 2012 and 2013, fully recovered in 2015 and waived in 2016 and 2017. Performance prior to waiving fees was lower than the actual returns shown in 2012, 2013, 2016 and 2017. A Class has a maximum sales charge of 5.75%.

5. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/07 up to 2/14/12, 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. Therefore, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/07. A portion of the fees charged to the C Class was waived from 2012 through 2014, fully recovered in 2015 and waived in 2016 and 2017. Performance prior to waiving fees was lower than actual returns shown from 2012 through 2014 and in 2016 and 2017. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.

6. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the United States. The Russell Midcap^® Growth Index is an unmanaged index of those stocks in the Russell Midcap Index with higher price-to-book ratios and higher forecasted growth values. Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. Russell Midcap Index, Russell Midcap Growth Index and Russell 1000 Index are registered trademarks of Frank Russell Company. One cannot directly invest in an index.

7. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares were 1.10%, 1.13%, 1.39%, 1.43%, and 2.20%, 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 outperformed the Index primarily due to stock selection, with sector allocation adding modest value relative to the Index. From a stock selection standpoint, holdings in the Information Technology and Consumer Staples sectors contributed the most to relative returns. In Information Technology, positions in Mercadolibre (up 108.5%), Cognex Corp. (up 96.5%) and IPG Photonics Corp. (up 117.1%) led in performance for the period. In Consumer Staples, the Fund avoided Rite Aid (down 76.1% for the period) and held Monster Beverage (up 42.6%) and Brown Forman Corp. (up 58.7%), which all benefited the portfolio.

In contrast, stock selection in the Consumer Discretionary sector detracted from relative returns, with Papa John’s down 36.5% and IMAX Corp. down 30.0%. Industrials also negatively impacted performance during the period, with Wageworks down 13.9% and Acuity Brands down 30.7%.

As it relates to sector allocation, the Fund’s overweight in Information Technology (the best performing sector), and underweights in both Consumer Discretionary and Consumer Staples contributed positively to returns relative to the benchmark. However, the Fund held a sizeable overweight to the Energy sector, which was the lowest performing sector, offsetting some of this positive performance. The Fund’s cash position was a drag on relative returns.

Looking forward, the Fund’s sub-advisor will continue to maintain a disciplined, long-term approach to equity investing in medium capitalization stocks with above-average growth potential.

4

American Beacon Stephens Mid-Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

Top Ten Holdings (% Net Assets)
SVB Financial Group		1.9
MercadoLibre, Inc.		1.9
Monster Beverage Corp.		1.9
FLIR Systems, Inc.		1.8
Microchip Technology, Inc.		1.8
IDEXX Laboratories, Inc.		1.7
CoStar Group, Inc.		1.7
IPG Photonics Corp.		1.7
MarketAxess Holdings, Inc.		1.6
Burlington Stores, Inc.		1.6
Total Fund Holdings	96
Sector Allocation (% Equities)
Information Technology		38.5
Health Care		21.6
Consumer Discretionary		14.4
Industrials		12.3
Financials		6.0
Energy		3.9
Consumer Staples		3.1
Materials		0.2

5

American Beacon Stephens Small Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

The Investor Class of the American Beacon Stephens Small Cap Growth Fund (the “Fund”) returned 19.23% for the twelve months ended December 31, 2017, trailing the Russell 2000^® Growth Index (the “Index”) return of 22.17% for the same period.

Comparison of Change in Value of a $10,000 Investment for the period from 12/31/2007 through 12/31/2017

Total Returns for the Period ended December 31, 2017
	Ticker	1 Year			3 Years			5 Years			10 Years			Value of $10,000 12/31/2007- 12/31/2017
Institutional Class (1,2,7)	STSIX		19.45	%		7.78	%		11.64	%		7.84	%		$	21,274
Y Class (1,3,7)	SPWYX		19.42	%		7.67	%		11.55	%		7.69	%		$	20,976
Investor Class (1,7)	STSGX		19.23	%		7.50	%		11.36	%		7.57	%		$	20,743
A without Sales Charge (1,4,7)	SPWAX		19.06	%		7.39	%		11.19	%		7.47	%		$	20,558
A with Sales Charge (1,4,7)	SPWAX		12.25	%		5.29	%		9.88	%		6.84	%		$	19,383
C without Sales Charge (1,5,7)	SPWCX		18.22	%		6.56	%		10.35	%		7.00	%		$	19,677
C with Sales Charge (1,5,7)	SPWCX		17.22	%		6.56	%		10.35	%		7.00	%		$	19,677
Russell 2000® Growth Index (6)			22.17	%		10.28	%		15.21	%		9.19	%		$	24,089
S&P 500 Index (6)			21.83	%		11.41	%		15.79	%		8.50	%		$	22,603

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. Please note that the recent growth rate in the securities market has helped to produce short-term returns that are not typical and may not continue in the future. A portion of the fees charged to the Investor Class was waived from 2007 through 2013, fully recovered in 2014, waived in 2015 and fully recovered in 2017. Performance prior to waiving fees was lower than actual returns shown from 2007 through 2013 and in 2015.

2. A portion of the fees charged to the Institutional Class was waived from 2007 through 2013 and fully recovered in 2014. Performance prior to waiving fees was lower than actual returns shown from 2007 through 2013.

6

American Beacon Stephens Small Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

3. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/07 up to 2/24/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. Therefore, total returns shown may be lower than they would have been had the Y Class been in existence since 12/31/07. A portion of the fees charged to the Y Class was waived from 2007 through 2013, fully recovered in 2014, waived in 2015 and fully recovered in 2017. Performance prior to waiving fees was lower than actual returns shown from 2007 through 2013 and in 2015.

4. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/07 up to 2/24/12, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 12/31/07. A portion of the fees charged to the A Class was waived in 2012, partially recovered in 2013 and 2014, and fully recovered in 2015. Performance prior to waiving fees was lower than actual returns shown for 2012. A Class has a maximum sales charge of 5.75%.

5. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/07 up to 2/24/12, 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 12/31/07. A portion of the fees charged to the C Class was waived in 2012, partially recovered in 2013 and 2014, and fully recovered in 2015. Performance prior to waiving fees was lower than actual returns shown for 2012. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.

6. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the United States. The Russell 2000^® Growth Index is an unmanaged index of those stocks in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index of approximately 2000 smaller-capitalization stocks from various industrial sectors. The Russell 2000 Growth Index and the Russell 2000 Index are registered trademarks of Frank Russell Company. One cannot directly invest in an index.

7. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 1.10%, 1.16%, 1.36%, 1.47% and 2.24%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund underperformed the Index due to sector allocation. A significant overweight to Energy (the worst performing sector for the Index) was the primary detractor from relative performance. A sizeable overweight to Information Technology further negatively impacted returns, while the Fund’s cash position dragged on relative performance for the period. In contrast, underweights to Real Estate, Consumer Discretionary and Health Care added modest value during the year, offsetting some of the negative relative performance.

Security selection added value for the period, led by positions in Information Technology, Industrials, Energy and Consumer Staples. In the Information Technology sector, Cognex Corp. (up 94.7%), Shopify, Inc. (up 140.6%) and Take Two Interactive Software (up 124.0%) were the largest contributors to performance. In Energy, Rice Energy, Inc. was up 9.1% while the Fund exited US Silica Holdings (down 45.4%), positively contributing to relative returns. MGP Ingredients (up 60.1%) and Calavo Growers (up 38.7%) contributed most to the Fund’s returns in Consumer Staples.

The aforementioned performance was somewhat offset by poor selection in the Fund’s Health Care, Consumer Discretionary and Materials sectors. In Health Care, being absent from the following companies detracted the most from relative performance: Nektar Therapeutics (up 386.7%), Exact Sciences Corp. (up 293.3%) and Sage Therapeutics (up 222.6%). In Consumer Discretionary, National Cinemedia was down 53.8%, IMAX Corp. down 30.2% and Papa John’s down 36.8%. And within Materials, Forterra, Inc. was down 67.4%, a further drag on returns for the period.

Looking forward, the Fund’s sub-advisor will continue to maintain a disciplined, long-term approach to equity investing in smaller capitalization stocks with above-average growth potential.

7

American Beacon Stephens Small Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

Top Ten Holdings (% Net Assets)
ICON PLC		2.0
Proto Labs, Inc.		1.8
CoStar Group, Inc.		1.7
Calavo Growers, Inc.		1.7
Ligand Pharmaceuticals, Inc.		1.6
Take-Two Interactive Software, Inc.		1.5
WageWorks, Inc.		1.5
Proofpoint, Inc.		1.5
Neogen Corp.		1.5
Trex Co., Inc.		1.4
Total Fund Holdings	110
Sector Allocation (% Equities)
Information Technology		37.8
Health Care		20.7
Industrials		17.1
Consumer Discretionary		10.4
Financials		6.9
Consumer Staples		3.1
Energy		2.5
Materials		0.9
Telecommunication Services		0.6

8

American Beacon Funds^SM

Expense Examples

December 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 July 1, 2017 through December 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 Funds^SM

Expense Examples

December 31, 2017 (Unaudited)

American Beacon Stephens Mid-Cap Growth Fund
	Beginning Account Value 7/1/2017		Ending Account Value 12/31/2017		Expenses Paid  During Period 7/1/2017-12/31/2017*
Institutional Class
Actual		$1,000.00		$1,117.10		$5.28
Hypothetical**		$1,000.00		$1,020.20		$5.04
Y Class
Actual		$1,000.00		$1,116.60		$5.82
Hypothetical**		$1,000.00		$1,019.70		$5.55
Investor Class
Actual		$1,000.00		$1,115.60		$6.61
Hypothetical**		$1,000.00		$1,019.00		$6.31
A Class
Actual		$1,000.00		$1,115.40		$7.36
Hypothetical**		$1,000.00		$1,018.20		$7.02
C Class
Actual		$1,000.00		$1,110.90		$11.07
Hypothetical**		$1,000.00		$1,014.70		$10.56

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.99%, 1.09%, 1.24%, 1.38%, and 2.08% 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 Stephens Small Cap Growth Fund
	Beginning Account Value 7/1/2017		Ending Account Value 12/31/2017		Expenses Paid During Period 7/1/2017-12/31/2017*
Institutional Class
Actual		$1,000.00		$1,101.40		$5.77
Hypothetical**		$1,000.00		$1,019.70		$5.55
Y Class
Actual		$1,000.00		$1,101.40		$6.09
Hypothetical**		$1,000.00		$1,019.40		$5.85
Investor Class
Actual		$1,000.00		$1,100.40		$6.94
Hypothetical**		$1,000.00		$1,018.60		$6.67
A Class
Actual		$1,000.00		$1,099.50		$7.20
Hypothetical**		$1,000.00		$1,018.30		$6.92
C Class
Actual		$1,000.00		$1,095.80		$10.99
Hypothetical**		$1,000.00		$1,014.70		$10.56

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.09%, 1.15%, 1.31%, 1.36%, and 2.08% 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.

10

American Beacon Funds^SM

Report of Independent Registered Public Accounting Firm

To the Shareholders of American Beacon Stephens Mid-Cap Growth Fund and American Beacon Stephens Small Cap Growth Fund and Board of Trustees of American Beacon Funds

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of American Beacon Stephens Mid-Cap Growth Fund and American Beacon Stephens Small Cap Growth Fund (collectively referred to as the “Funds), (two of the funds constituting American Beacon Funds (the “Trust”)), including the schedules of investments, as of December 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Funds (two of the funds constituting American Beacon Funds) at December 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 their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more American Beacon investment companies since 1987.

Dallas, Texas

February 28, 2018

11

American Beacon Stephens Mid-Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.86%
Consumer Discretionary - 14.37%
Automobiles - 0.58%
Tesla, Inc.A B		1,815		$	565,100
Distributors - 1.20%
LKQ Corp.A		28,675			1,166,212
Diversified Consumer Services - 1.14%
Bright Horizons Family Solutions, Inc.A		11,812			1,110,328
Hotels, Restaurants & Leisure - 1.46%
Domino’s Pizza, Inc.		2,953			557,999
MGM Resorts International		21,674			723,695
Papa John’s International, Inc.		2,451			137,525
					1,419,219
Internet & Direct Marketing Retail - 2.77%
Expedia, Inc.		10,077			1,206,922
Netflix, Inc.A		7,726			1,483,083
					2,690,005
Media - 1.51%
IMAX Corp.A		20,039			463,903
Live Nation Entertainment, Inc.A		23,401			996,181
					1,460,084
Specialty Retail - 4.46%
Burlington Stores, Inc.A		12,588			1,548,702
Ross Stores, Inc.		17,545			1,407,986
Ulta Salon Cosmetics & Fragrance, Inc.A		6,107			1,365,892
					4,322,580
Textiles, Apparel & Luxury Goods - 1.25%
Lululemon Athletica, Inc.A		15,378			1,208,557
Total Consumer Discretionary					13,942,085
Consumer Staples - 3.08%
Beverages - 3.08%
Brown-Forman Corp., Class B		17,275			1,186,274
Monster Beverage Corp.A		28,497			1,803,575
					2,989,849
Total Consumer Staples					2,989,849
Energy - 3.88%
Energy Equipment & Services - 1.77%
Core Laboratories N.V.B		7,708			844,411
Oceaneering International, Inc.		20,364			430,495
RPC, Inc.B		17,275			441,031
					1,715,937
Oil, Gas & Consumable Fuels - 2.11%
Cabot Oil & Gas Corp.		33,682			963,305
Pioneer Natural Resources Co.		4,522			781,628
Range Resources Corp.		17,894			305,272
					2,050,205
Total Energy					3,766,142

See accompanying notes

12

American Beacon Stephens Mid-Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.86% (continued)
Financials - 5.96%
Banks - 3.21%
East West Bancorp, Inc.		20,553		$	1,250,239
SVB Financial GroupA		7,995			1,868,991
					3,119,230
Capital Markets - 2.75%
Affiliated Managers Group, Inc.		5,434			1,115,328
MarketAxess Holdings, Inc.		7,693			1,552,063
					2,667,391
Total Financials					5,786,621
Health Care - 21.56%
Biotechnology - 1.19%
Alexion Pharmaceuticals, Inc.A		5,168			618,041
Exelixis, Inc.A		17,598			534,979
					1,153,020
Health Care Equipment & Supplies - 8.82%
ABIOMED, Inc.A		5,328			998,521
Align Technology, Inc.A		1,358			301,734
Dentsply Sirona, Inc.		11,457			754,214
DexCom, Inc.A		12,329			707,561
Hologic, Inc.A		22,733			971,836
IDEXX Laboratories, Inc.A		10,766			1,683,587
Intuitive Surgical, Inc.A		3,367			1,228,753
ResMed, Inc.		15,905			1,346,995
Varian Medical Systems, Inc.A		5,149			572,311
					8,565,512
Health Care Providers & Services - 1.81%
Acadia Healthcare Co., Inc.A		21,467			700,468
Henry Schein, Inc.A		15,084			1,054,070
					1,754,538
Health Care Technology - 4.38%
athenahealth, Inc.A		6,999			931,147
Cerner Corp.A		19,907			1,341,533
HMS Holdings Corp.A		53,896			913,537
Medidata Solutions, Inc.A		16,761			1,062,145
					4,248,362
Life Sciences Tools & Services - 4.70%
ICON PLCA		11,020			1,235,893
Illumina, Inc.A		6,867			1,500,371
PRA Health Sciences, Inc.A		10,091			918,987
QIAGEN N.V.A		29,362			908,167
					4,563,418
Pharmaceuticals - 0.66%
Pacira Pharmaceuticals, Inc.A		13,968			637,639
Total Health Care					20,922,489
Industrials - 12.26%
Aerospace & Defense - 0.56%
HEICO Corp., Class A		6,819			539,042

See accompanying notes

13

American Beacon Stephens Mid-Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.86% (continued)
Industrials - 12.26% (continued)
Commercial Services & Supplies - 1.30%
Copart, Inc.A		29,119		$	1,257,650
Electrical Equipment - 1.68%
Rockwell Automation, Inc.		4,478			879,255
Sensata Technologies Holding N.V.A		14,715			752,084
					1,631,339
Industrial Conglomerates - 0.91%
Roper Technologies, Inc.		3,425			887,075
Machinery - 0.52%
Middleby Corp.A		3,760			507,412
Professional Services - 3.82%
IHS Markit Ltd.A		17,917			808,953
Verisk Analytics, Inc.A		16,009			1,536,864
WageWorks, Inc.A		21,870			1,355,940
					3,701,757
Road & Rail - 1.19%
JB Hunt Transport Services, Inc.		10,080			1,158,998
Trading Companies & Distributors - 2.28%
Fastenal Co.		20,232			1,106,488
MSC Industrial Direct Co., Inc., Class A		11,447			1,106,467
					2,212,955
Total Industrials					11,896,228
Information Technology - 38.52%
Communications Equipment - 2.08%
Harris Corp.		8,155			1,155,156
Palo Alto Networks, Inc.A		5,962			864,132
					2,019,288
Electronic Equipment, Instruments & Components - 6.02%
Cognex Corp.		23,960			1,465,394
FLIR Systems, Inc.		38,095			1,775,989
IPG Photonics Corp.A		7,571			1,621,178
National Instruments Corp.		23,557			980,678
					5,843,239
Internet Software & Services - 4.31%
CoStar Group, Inc.A		5,513			1,637,085
GrubHub, Inc.A B		10,001			718,072
MercadoLibre, Inc.		5,792			1,822,511
					4,177,668
IT Services - 5.51%
Euronet Worldwide, Inc.A		13,037			1,098,628
Fiserv, Inc.A		5,812			762,128
Global Payments, Inc.		11,163			1,118,979
Square, Inc., Class AA		26,849			930,855
WEX, Inc.A		10,187			1,438,710
					5,349,300

See accompanying notes

14

American Beacon Stephens Mid-Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.86% (continued)
Information Technology - 38.52% (continued)
Semiconductors & Semiconductor Equipment - 5.63%
Lam Research Corp.		4,640		$	854,085
Microchip Technology, Inc.		19,412			1,705,926
NVIDIA Corp.		3,919			758,326
NXP Semiconductors N.V.A		5,208			609,805
ON Semiconductor Corp.A		22,502			471,192
Xilinx, Inc.		15,735			1,060,854
					5,460,188
Software - 14.97%
ANSYS, Inc.A		5,659			835,212
Aspen Technology, Inc.A		18,955			1,254,821
Autodesk, Inc.A		11,854			1,242,655
Cadence Design Systems, Inc.A		32,433			1,356,348
Check Point Software Technologies Ltd.A		4,706			487,636
Electronic Arts, Inc.A		12,188			1,280,471
Fortinet, Inc.A		19,850			867,246
PTC, Inc.A		11,262			684,392
Red Hat, Inc.A		10,164			1,220,696
salesforce.com, Inc.A		7,107			726,549
Splunk, Inc.A		9,329			772,814
Tableau Software, Inc., Class AA		10,594			733,105
Take-Two Interactive Software, Inc.A		11,177			1,227,011
Tyler Technologies, Inc.A		3,297			583,734
Ultimate Software Group, Inc.A		5,762			1,257,441
					14,530,131
Total Information Technology					37,379,814
Materials - 0.23%
Chemicals - 0.23%
Albemarle Corp.		1,743			222,912
Total Common Stocks (Cost $62,391,739)					96,906,140
SHORT-TERM INVESTMENTS - 0.31% (Cost $295,830)
Investment Companies - 0.31%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%C D		295,830			295,830
SECURITIES LENDING COLLATERAL - 1.91% (Cost $1,853,081)
Investment Companies - 1.91%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%C D		1,853,081			1,853,081
TOTAL INVESTMENTS - 102.08% (Cost $64,540,650)					99,055,051
LIABILITIES, NET OF OTHER ASSETS - (2.08%)					(2,014,748	)
TOTAL NET ASSETS - 100.00%				$	97,040,303
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 December 31, 2017.

^C The Fund is affiliated by having the same investment advisor.

^D 7-day yield.

PLC - Public Limited Company.

See accompanying notes

15

American Beacon Stephens Mid-Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of December 31, 2017, the investments were classified as described below:

Stephens Mid-Cap Growth Fund	Level 1		Level 2		Level 3		Total
Assets
Common Stocks	$	96,906,140	$	-	$	-	$	96,906,140
Short-Term Investments		295,830		-		-		295,830
Securities Lending Collateral		1,853,081		-		-		1,853,081
Total Investments in Securities - Assets	$	99,055,051	$	-	$	-	$	99,055,051

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. During the period ended December 31, 2017, there were no transfers between levels.

See accompanying notes

16

American Beacon Stephens Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.44%
Consumer Discretionary - 10.35%
Auto Components - 0.57%
Motorcar Parts of America, Inc.A		130,714		$	3,266,543
Diversified Consumer Services - 1.76%
Bright Horizons Family Solutions, Inc.A		71,267			6,699,098
Chegg, Inc.A		210,035			3,427,771
					10,126,869
Hotels, Restaurants & Leisure - 3.01%
Chuy’s Holdings, Inc.A		214,303			6,011,199
Papa John’s International, Inc.		19,840			1,113,223
Potbelly Corp.A		216,800			2,666,640
Wingstop, Inc.		191,648			7,470,439
					17,261,501
Media - 0.68%
IMAX Corp.A		169,850			3,932,027
Multiline Retail - 1.24%
Ollie’s Bargain Outlet Holdings, Inc.A		133,912			7,130,814
Specialty Retail - 2.71%
Aaron’s, Inc.		183,390			7,308,091
Boot Barn Holdings, Inc.A B		286,064			4,751,523
Monro, Inc.		61,143			3,482,094
					15,541,708
Textiles, Apparel & Luxury Goods - 0.38%
Canada Goose Holdings, Inc.A		68,730			2,169,119
Total Consumer Discretionary					59,428,581
Consumer Staples - 3.12%
Beverages - 0.98%
MGP Ingredients, Inc.		73,182			5,626,232
Food Products - 1.65%
Calavo Growers, Inc.B		112,525			9,497,110
Personal Products - 0.49%
elf Beauty, Inc.A B		124,998			2,788,706
Total Consumer Staples					17,912,048
Energy - 2.47%
Energy Equipment & Services - 1.83%
Core Laboratories N.V.B		27,343			2,995,426
Oceaneering International, Inc.		115,004			2,431,184
RigNet, Inc.A		166,887			2,494,961
RPC, Inc.B		101,012			2,578,836
					10,500,407
Oil, Gas & Consumable Fuels - 0.64%
Carrizo Oil & Gas, Inc.A		92,790			1,974,571
PDC Energy, Inc.A		33,158			1,708,964
					3,683,535
Total Energy					14,183,942

See accompanying notes

17

American Beacon Stephens Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.44% (continued)
Financials - 6.86%
Banks - 3.30%
Allegiance Bancshares, Inc.A		48,078		$	1,810,137
Ameris Bancorp		89,331			4,305,754
East West Bancorp, Inc.		52,212			3,176,056
Hilltop Holdings, Inc.		176,093			4,460,435
SVB Financial GroupA		13,497			3,155,194
Veritex Holdings, Inc.A		72,578			2,002,427
					18,910,003
Capital Markets - 1.31%
MarketAxess Holdings, Inc.		37,286			7,522,451
Consumer Finance - 2.25%
EZCORP, Inc., Class AA		345,009			4,209,110
FirstCash, Inc.		70,110			4,728,919
Green Dot Corp., Class AA		66,085			3,982,282
					12,920,311
Total Financials					39,352,765
Health Care - 20.57%
Biotechnology - 3.11%
Ligand Pharmaceuticals, Inc.A		65,340			8,947,006
MiMedx Group, Inc.A B		298,759			3,767,351
Repligen Corp.A		141,797			5,144,395
					17,858,752
Health Care Equipment & Supplies - 4.72%
ABIOMED, Inc.A		43,423			8,137,904
Neogen Corp.A		101,399			8,336,012
NuVasive, Inc.A		112,546			6,582,815
Penumbra, Inc.A		42,816			4,028,986
					27,085,717
Health Care Providers & Services - 2.26%
AAC Holdings, Inc.A B		171,651			1,544,859
Acadia Healthcare Co., Inc.A		154,763			5,049,917
HealthEquity, Inc.A		137,362			6,409,311
					13,004,087
Health Care Technology - 5.09%
athenahealth, Inc.A		36,424			4,845,849
HealthStream, Inc.A		161,823			3,747,821
HMS Holdings Corp.A		409,132			6,934,787
Medidata Solutions, Inc.A		112,391			7,122,218
Omnicell, Inc.A		135,432			6,568,452
					29,219,127
Life Sciences Tools & Services - 3.76%
Bio-Techne Corp.		32,511			4,211,800
ICON PLCA		101,474			11,380,309
PRA Health Sciences, Inc.A		65,571			5,971,551
					21,563,660
Pharmaceuticals - 1.63%
Pacira Pharmaceuticals, Inc.A		153,913			7,026,129
Supernus Pharmaceuticals, Inc.A		58,031			2,312,535
					9,338,664
Total Health Care					118,070,007

See accompanying notes

18

American Beacon Stephens Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.44% (continued)
Industrials - 16.98%
Aerospace & Defense - 3.50%
Aerovironment, Inc.A		76,038		$	4,270,294
Axon Enterprise, Inc.A B		172,329			4,566,719
HEICO Corp., Class A		93,051			7,355,682
KeyW Holding Corp.A B		414,389			2,432,463
Kratos Defense & Security Solutions, Inc.A		138,443			1,466,111
					20,091,269
Air Freight & Logistics - 1.78%
Echo Global Logistics, Inc.A		199,023			5,572,644
Hub Group, Inc., Class AA		97,186			4,655,209
					10,227,853
Building Products - 1.43%
Trex Co., Inc.A		75,726			8,207,941
Machinery - 5.40%
Kornit Digital Ltd.A B		257,239			4,154,410
Lindsay Corp.		37,122			3,274,160
Mueller Water Products, Inc., Class A		471,642			5,909,674
Proto Labs, Inc.A		101,105			10,413,815
RBC Bearings, Inc.A		57,109			7,218,578
					30,970,637
Professional Services - 1.53%
WageWorks, Inc.A		141,864			8,795,568
Trading Companies & Distributors - 3.34%
Beacon Roofing Supply, Inc.A		100,099			6,382,312
MSC Industrial Direct Co., Inc., Class A		61,669			5,960,926
SiteOne Landscape Supply, Inc.A		89,220			6,843,174
					19,186,412
Total Industrials					97,479,680
Information Technology - 37.56%
Electronic Equipment, Instruments & Components - 3.19%
Cognex Corp.		115,885			7,087,527
FLIR Systems, Inc.		150,810			7,030,762
National Instruments Corp.		100,735			4,193,598
					18,311,887
Internet Software & Services - 10.39%
2U, Inc.A		72,308			4,664,589
Alarm.com Holdings, Inc.A		39,720			1,499,430
ANGI Homeservices, Inc., Class AA B		384,096			4,017,644
CoStar Group, Inc.A		32,511			9,654,142
Envestnet, Inc.A		157,746			7,863,638
Five9, Inc.A		223,894			5,570,483
GrubHub, Inc.A B		50,265			3,609,027
Mimecast Ltd.A		148,524			4,258,183
Q2 Holdings, Inc.A		148,925			5,487,886
Shopify, Inc., Class AA		38,022			3,840,222
SPS Commerce, Inc.A		50,240			2,441,162
Stamps.com, Inc.A		35,687			6,709,156
					59,615,562

See accompanying notes

19

American Beacon Stephens Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 99.44% (continued)
Information Technology - 37.56% (continued)
IT Services - 3.19%
Euronet Worldwide, Inc.A		87,120		$	7,341,603
MAXIMUS, Inc.		52,935			3,789,087
WEX, Inc.A		50,652			7,153,582
					18,284,272
Semiconductors & Semiconductor Equipment - 7.46%
Cavium, Inc.A		79,800			6,689,634
CyberOptics Corp.A B		69,787			1,046,805
Inphi Corp.A B		68,530			2,508,198
Integrated Device Technology, Inc.A		164,002			4,875,779
MACOM Technology Solutions Holdings, Inc.A B		99,815			3,247,980
Microsemi Corp.A		153,128			7,909,061
Power Integrations, Inc.		90,024			6,621,265
Rudolph Technologies, Inc.A		152,922			3,654,836
Semtech Corp.A		184,068			6,295,126
					42,848,684
Software - 13.33%
8x8, Inc.A		421,541			5,943,728
Aspen Technology, Inc.A		111,143			7,357,666
CyberArk Software Ltd.A B		79,396			3,286,200
Globant S.A.A B		75,471			3,506,383
Guidewire Software, Inc.A		106,307			7,894,358
Manhattan Associates, Inc.A		126,435			6,263,590
Proofpoint, Inc.A		94,717			8,411,817
PROS Holdings, Inc.A		190,289			5,033,144
Qualys, Inc.A		107,045			6,353,121
Take-Two Interactive Software, Inc.A		80,282			8,813,358
Tyler Technologies, Inc.A		35,723			6,324,757
Ultimate Software Group, Inc.A		33,592			7,330,782
					76,518,904
Total Information Technology					215,579,309
Materials - 0.91%
Chemicals - 0.91%
Balchem Corp.		64,682			5,213,369
Telecommunication Services - 0.62%
Wireless Telecommunication Services - 0.62%
Boingo Wireless, Inc.A		157,390			3,541,275
Total Common Stocks (Cost $393,585,204)					570,760,976
SHORT-TERM INVESTMENTS - 0.22% (Cost $1,257,376)
Investment Companies - 0.22%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%C D		1,257,376			1,257,376
SECURITIES LENDING COLLATERAL - 8.38% (Cost $48,083,424)
Investment Companies - 8.38%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%C D		48,083,424			48,083,424
TOTAL INVESTMENTS - 108.04% (Cost $442,926,004)					620,101,776
LIABILITIES, NET OF OTHER ASSETS - (8.04%)					(46,138,538	)
TOTAL NET ASSETS - 100.00%				$	573,963,238

See accompanying notes

20

American Beacon Stephens Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

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 December 31, 2017.

^C The Fund is affiliated by having the same investment advisor.

^D 7-day yield.

PLC - Public Limited Company.

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of December 31, 2017, the investments were classified as described below:

Stephens Small Cap Growth Fund	Level 1		Level 2		Level 3		Total
Assets
Common Stocks	$	570,760,976	$	-	$	-	$	570,760,976
Short-Term Investments		1,257,376		-		-		1,257,376
Securities Lending Collateral		48,083,424		-		-		48,083,424
Total Investments in Securities - Assets	$	620,101,776	$	-	$	-	$	620,101,776

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. During the period ended December 31, 2017, there were no transfers between levels.

See accompanying notes

21

American Beacon Funds^SM

Statements of Assets and Liabilities

December 31, 2017

	Stephens Mid-Cap Growth Fund		Stephens Small Cap Growth Fund
Assets:
Investments in unaffiliated securities, at fair value† §	$	96,906,140	$	570,760,976
Investments in affiliated securities, at fair value‡		2,148,911		49,340,800
Cash		10,432		–
Dividends and interest receivable		9,475		43,223
Receivable for investments sold		360,309		4,165,320
Receivable for fund shares sold		157,571		922,333
Receivable for expense reimbursement (Note 2)		5,925		–
Prepaid expenses		26,553		45,869
Total assets		99,625,316		625,278,521
Liabilities:
Payable for investments purchased		275,945		2,052,924
Payable for fund shares redeemed		336,134		565,752
Payable upon return of securities loaned (Note 9)§		1,853,081		48,083,424
Management and sub-advisory fees payable (Note 2)		66,278		474,406
Service fees payable (Note 2)		1,582		12,319
Transfer agent fees payable (Note 2)		5,711		26,398
Custody and fund accounting fees payable		10,133		38,688
Professional fees payable		33,265		36,292
Trustee fees payable (Note 2)		4		27
Payable for prospectus and shareholder reports		2,866		24,952
Other liabilities		14		101
Total liabilities		2,585,013		51,315,283
Net assets	$	97,040,303	$	573,963,238
Analysis of net assets:
Paid-in-capital	$	61,422,466	$	388,124,432
Accumulated net realized gain		1,103,436		8,663,034
Unrealized appreciation of investments in unaffiliated securitiesA		34,514,401		177,175,772
Net assets	$	97,040,303	$	573,963,238
Shares outstanding at no par value (unlimited shares authorized):
Institutional Class		2,713,799		22,806,633
Y Class		252,448		4,340,368
Investor Class		770,067		2,917,975
A Class		726,308		315,629
C Class		102,837		58,370
Net assets:
Institutional Class	$	60,933,913	$	433,520,624
Y Class	$	5,639,207	$	82,072,563
Investor Class	$	14,749,984	$	51,839,469
A Class	$	13,854,727	$	5,553,261
C Class	$	1,862,472	$	977,321
Net asset value, offering and redemption price per share:
Institutional Class	$	22.45	$	19.01
Y Class	$	22.34	$	18.91
Investor Class	$	19.15	$	17.77
A Class	$	19.08	$	17.59
A Class (offering price)	$	20.24	$	18.66
C Class	$	18.11	$	16.74
† Cost of investments in unaffiliated securities	$	62,391,739	$	393,585,204
‡ Cost of investments in affiliated securities	$	2,148,911	$	49,340,800
§ Fair value of securities on loan	$	1,812,167	$	46,663,553
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at year end.

See accompanying notes

22

American Beacon Funds^SM

Statements of Operations

For the year ended December 31, 2017

	Stephens Mid-Cap Growth Fund			Stephens Small Cap Growth Fund
Investment income:
Dividend income from unaffiliated securities (net of foreign taxes)†	$	631,370		$	1,422,722
Dividend income from affiliated securities		13,202			44,765
Income derived from securities lending (Note 8)		12,830			253,805
Total investment income		657,402			1,721,292
Expenses:
Management and sub-advisory fees (Note 2)		785,420			5,844,957
Transfer agent fees:
Institutional Class (Note 2)		42,188			206,017
Y Class (Note 2)		3,328			64,012
Investor Class		2,221			4,065
A Class		902			436
C Class		145			101
Custody and fund accounting fees		14,473			54,564
Professional fees		39,551			56,860
Registration fees and expenses		58,218			112,304
Service fees (Note 2):
Y Class		761			20,186
Investor Class		40,944			126,161
A Class		20,047			7,263
C Class		1,756			1,053
Distribution fees (Note 2):
A Class		37,354			16,892
C Class		17,417			11,099
Prospectus and shareholder report expenses		12,610			89,141
Trustee fees (Note 2)		5,228			38,286
Other expenses		6,465			33,198
Total expenses		1,089,028			6,686,595
Net fees waived and expenses (reimbursed) / recouped (Note 2)		(47,661	)		9,196
Net expenses		1,041,367			6,695,791
Net investment (loss)		(383,965	)		(4,974,499	)
Realized and unrealized gain (loss) from investments:
Net realized gain from:
Investments in unaffiliated securitiesA		7,127,682			35,805,473
Change in net unrealized appreciation of:
Investments in unaffiliated securitiesB		15,861,967			75,670,510
Net gain from investments		22,989,649			111,475,983
Net increase in net assets resulting from operations	$	22,605,684		$	106,501,484
† Foreign taxes	$	2,520		$	9,178
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 Funds^SM

Statements of Changes in Net Assets

	Stephens Mid-Cap Growth Fund						Stephens Small Cap Growth Fund
	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment (loss)	$	(383,965	)	$	(569,314	)	$	(4,974,499	)	$	(4,351,324	)
Net realized gain (loss) from investments in unaffiliated securities		7,127,682			(1,032,123	)		35,805,473			(4,569,025	)
Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities		15,861,967			5,243,617			75,670,510			67,768,829
Net increase in net assets resulting from operations		22,605,684			3,642,180			106,501,484			58,848,480
Distributions to shareholders:
Net realized gain from investments:
Institutional Class		(2,690,238	)		(2,746,156	)		(14,512,324	)		(3,634,109	)
Y Class		(245,604	)		(101,600	)		(2,773,676	)		(676,175	)
Investor Class		(774,146	)		(825,119	)		(1,840,808	)		(440,539	)
A Class		(751,075	)		(878,585	)		(199,473	)		(61,811	)
C Class		(100,863	)		(90,663	)		(36,826	)		(11,705	)
Net distributions to shareholders		(4,561,926	)		(4,642,123	)		(19,363,107	)		(4,824,339	)
Capital share transactions (Note 10):
Proceeds from sales of shares		20,138,157			23,413,554			95,024,755			351,061,950
Reinvestment of dividends and distributions		4,482,386			4,535,561			19,039,862			4,720,165
Cost of shares redeemed		(26,940,208	)		(55,624,853	)		(217,450,885	)		(329,962,031	)
Net increase (decrease) in net assets from capital share transactions		(2,319,665	)		(27,675,738	)		(103,386,268	)		25,820,084
Net increase (decrease) in net assets		15,724,093			(28,675,681	)		(16,247,891	)		79,844,225
Net assets:
Beginning of period		81,316,210			109,991,891			590,211,129			510,366,904
End of period	$	97,040,303		$	81,316,210		$	573,963,238		$	590,211,129

See accompanying notes

24

American Beacon Funds^SM

Notes to Financial Statements

December 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 December 31, 2017, the Trust consists of thirty-three active series, two of which are presented in this filing: American Beacon Stephens Mid-Cap Growth Fund and American Beacon Stephens Small Cap Growth Fund (collectively, the “Funds” and each individually a “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.

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 through 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.

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.

25

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

Significant Accounting Policies

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.

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.

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 Trust’s Board of Trustees (the “Board”) deems 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 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

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Notes to Financial Statements

December 31, 2017

under the Management Agreement, the Manager will receive an annualized management fee based on a percentage of each Fund’s 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 Stephens Investment Management Group LLC (the “Sub-Advisor”) pursuant to which each Fund have 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 schedule:

Stephens Mid-Cap Growth Fund

First $100 million	0.50	%
Over $100 million	0.45	%

Stephens Small Cap Growth Fund

First $200 million	0.65	%
Over $200 million	0.60	%

The Management and Sub-Advisory Fees paid by the Funds for the year ended December 31, 2017 were as follows:

Stephens Mid-Cap Growth Fund

	Effective Fee Rate			Amount of Fees Paid
Management Fees		0.35	%	$	324,247
Sub-Advisor Fees		0.50	%		461,173
Total		0.85	%	$	785,420

Stephens Small Cap Growth Fund

	Effective Fee Rate			Amount of Fees Paid
Management Fees		0.35	%	$	2,134,376
Sub-Advisor Fees		0.63	%		3,710,581
Total		0.98	%	$	5,844,957

As compensation for services provided by the Manager in connection with securities lending activities conducted by the Funds, the lending Fund pays to the Manager, with respect to cash collateral posted by 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 December 31, 2017, the Manager received securities lending fees of $1,436 and $33,940 for the securities lending activities of the Stephens Mid-Cap Growth Fund and Stephens Small Cap Growth Fund, respectively.

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Notes to Financial Statements

December 31, 2017

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 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds. Effective April 1, 2017, the Funds terminated the Service Plan for the Y Class. During the year ended December 31, 2017 the Manager voluntarily reimbursed service fees to the A and C Classes of the Stephens Mid-Cap Growth Fund in the amount of $2,366 and $857, respectively. The Manager also voluntarily reimbursed service fees to the A and C Classes of the Stephens Small Cap Growth Fund in the amount of $2,873 and $612, respectively as reflected in “Service fees” on the Statement of Operations.

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 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 December 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
Stephens Mid-Cap Growth	$	42,649
Stephens Small Cap Growth		248,810

As of December 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
Stephens Mid-Cap Growth	$	4,506
Stephens Small Cap Growth		21,300

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Notes to Financial Statements

December 31, 2017

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 December 31, 2017, the Manager earned fees on the Funds’ direct investments 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
Stephens Mid-Cap Growth	$	1,757	$	1,955	$	3,712
Stephens Small Cap Growth		6,777		34,297		41,074

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 December 31, 2017, the Stephens Mid-Cap Growth Fund borrowed on average $1,310,394 for 2 days at an average interest rate of 1.74% with interest charges of $125 and the Stephens Small Cap Growth Fund borrowed on average $2,454,156 for 12 days at an average interest rate of 1.80% with interest charges of $1,445. These amounts are recorded as “Other expenses” in the Statements of Operations.

Expense Reimbursement Plan

The Manager contractually agreed to reduce fees and/or reimburse expenses for the classes of the Funds to the extent that total operating expenses exceed the Funds’ expense cap. During the year ended December 31, 2017, the Manager waived and/or reimbursed expenses as follows:

		Expense Cap								Expiration of Reimbursed Expenses
Fund	Class	1/1/2017 - 12/31/2017			Reimbursed Expenses		(Recouped) Expenses
Stephens Mid-Cap Growth	Institutional		0.99	%	$	46,780	$	-			2020
Stephens Mid-Cap Growth	Y		1.09	%		705		-			2020
Stephens Mid-Cap Growth	A		1.39	%		153		-			2020
Stephens Mid-Cap Growth	C		2.14	%		23		-			2020
Stephens Small Cap Growth	Investor		1.35	%		-		(9,196	)		2020

Of these amounts, $5,925 was disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at December 31, 2017 for the Stephens Mid-Cap Growth Fund.

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Notes to Financial Statements

December 31, 2017

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 Funds did not record a liability for potential reimbursements due to the current assessment that reimbursements are unlikely. The carryover of excess expenses potentially reimbursable to the Manager, but not recorded as a liability are as follows:

Fund	Recovered Expenses			Excess Expense Carryover		Expired Expense Carryover		Expiration of Reimbursed Expenses
Stephens Mid-Cap Growth	$	-		$	174	$	-		2018
Stephens Mid-Cap Growth		-			54,783		-		2019
Stephens Small Cap Growth		(9,196	)		53		-		2018

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 December 31, 2017, Foreside collected $2,913 and $1,554 in sales commissions for Stephens Mid-Cap Growth Fund and Stephens Small Cap Growth 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 December 31, 2017, there were no CDSC fees collected for Class A Shares of the Funds.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the 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 December 31, 2017, CDSC fees of $165 and $24 were collected for Class C Shares of the Stephens Mid-Cap Growth Fund and the Stephens Small Cap Growth 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 $10,000 for each Board meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $10,000 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 Trusts 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

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Notes to Financial Statements

December 31, 2017

(“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.

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, ETFs 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 generally 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

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.

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Notes to Financial Statements

December 31, 2017

Other Investment Company Securities and Other Exchange-Traded Products

The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Funds become a shareholder of that investment company. As a result, the Funds’ shareholders indirectly will bear 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.  Principal Risks

Investing in the Funds may involve certain risks including, but not limited to, those described below.

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 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.

Foreign Investing Risk

The Funds may invest in securities issued by foreign companies through ADRs and U.S. dollar-denominated foreign stocks traded on U.S. exchanges. The Funds may also invest in local currency investments. American Depository Reciepts (“ADRs”) are subject to many of the risks inherent in currency fluctuations and political and financial instability in the home country of a particular ADR or foreign stock. 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.

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Notes to Financial Statements

December 31, 2017

Investment Risk

An investment in the Funds is not a deposit with a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. When you sell your shares of the Funds, they could be worth less than what you paid for them. Therefore, you may lose money by investing in the Funds.

Market Risk

Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in fixed-income instruments experiencing unusual liquidity issues, increased price volatility and, in some cases, credit downgrades and increased likelihood of default. These events have reduced the willingness and ability of some lenders to extend credit, and have made it more difficult for some borrowers to obtain financing on attractive terms, if at all. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.

In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it is difficult to predict the impact on various markets of a significant rate increase, whether brought about by U.S. policy makers or by dislocations in world markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.

Other Investment Companies Risk

The Funds may invest in shares of other registered investment companies, including ETFs and 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 the underlying funds in addition to the Funds’ direct fees and expenses and will be subject to the risks associated with investments in those funds.

Sector Risk

Sector risk is the risk associated with the Funds holding a significant amount of investments in similar businesses, which could be affected by the same economic or market conditions.

Securities Lending Risk

To the extent the Funds lend 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.

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Notes to Financial Statements

December 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, December 31, 2017.

Stephens Mid-Cap Growth Fund

Offsetting of Financial and Derivative Assets as of December 31, 2017:
	Remaining Contractual Maturity of the Agreements As of December 31, 2017
	Overnight and Continuous		<30 days		Between 30 & 90 days		>90 days		Total
Securities Lending Transactions
Common Stocks	$	1,853,081	$	-	$	-	$	-	$	1,853,081
Total Borrowings	$	1,853,081	$	-	$	-	$	-	$	1,853,081
Gross amount of recognized liabilities for securities lending transactions									$	1,853,081

Stephens Small Cap Growth Fund

Offsetting of Financial and Derivative Assets as of December 31, 2017:
	Remaining Contractual Maturity of the Agreements As of December 31, 2017
	Overnight and Continuous		<30 days		Between 30 & 90 days		>90 days		Total
Securities Lending Transactions
Common Stocks	$	48,083,424	$	-	$	-	$	-	$	48,083,424
Total Borrowings	$	48,083,424	$	-	$	-	$	-	$	48,083,424
Gross amount of recognized liabilities for securities lending transactions									$	48,083,424

6.  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 unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 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.

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Notes to Financial Statements

December 31, 2017

The tax character of distributions paid were as follows:

	Stephens Mid-Cap Growth Fund				Stephens Small Cap Growth Fund
	Year Ended December 31, 2017		Year Ended December 31, 2016		Year Ended December 31, 2017		Year Ended December 31, 2016
Distributions paid from:
Long-term capital gains
Institutional Class	$	2,690,238	$	2,746,156	$	14,512,324	$	3,634,109
Y Class		245,604		101,600		2,773,676		676,175
Investors Class		774,146		825,119		1,840,808		440,539
A Class		751,075		878,585		199,473		61,811
C Class		100,863		90,663		36,826		11,705
Total distributions paid	$	4,561,926	$	4,642,123	$	19,363,107	$	4,824,339

As of December 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)
Stephens Mid-Cap Growth	$	65,691,390	$	35,799,619	$	(2,435,958	)	$	33,363,661
Stephens Small Cap Growth		447,252,280		185,994,237		(13,144,741	)		172,849,496

Fund	Net Unrealized Appreciation (Depreciation)		Undistributed Ordinary Income		Undistributed Long-Term Capital Gains		Accumulated Capital and Other (Losses)		Other Temporary Differences		Distributable Earnings
Stephens Mid-Cap Growth	$	33,363,661	$	-	$	2,254,174	$	-	$	2	$	35,617,837
Stephens Small Cap Growth		172,849,496		-		12,989,310		-		-		185,838,806

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.

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 non-utilization of net operating losses as of December 31, 2017:

Fund	Paid-In-Capital			Undistributed (Overdistribution of) Net Investment Income		Accumulated Net Realized Gain (Loss)		Net Unrealized Appreciation (Depreciation)
Stephens Mid-Cap Growth	$	(383,965	)	$	383,965	$	-	$	-
Stephens Small Cap Growth		(5,293,249	)		4,974,499		318,750		-

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.

During the year December 31, 2017, Stephens Small Cap Growth Fund utilized $2,328,516 long term capital loss carryforward.

35

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

7.  Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2017 were as follows:

Fund	Purchases (non-U.S. Government Securities)		Sales (non-U.S. Government Securities)
Stephens Mid-Cap Growth	$	21,399,201	$	27,030,144
Stephens Small Cap Growth		129,520,403		247,335,583

A summary of the Funds’ transactions in the USG Select Fund for the year ended December 31, 2017 are as follows:

Fund	Type of Transaction	December 31, 2016 Share/Fair Value		Purchases		Sales		December 31, 2017 Share/Fair Value		Dividend Income
Stephens Mid-Cap Growth Fund	Direct	$	1,747,402	$	22,669,631	$	24,121,203	$	295,830	$	13,202
Stephens Mid-Cap Growth Fund	Securities Lending		1,346,615		38,630,678		38,124,212		1,853,081		N/A
Stephens Small Cap Growth Fund	Direct		28,216,747		118,455,298		145,414,669		1,257,376		44,765
Stephens Small Cap Growth Fund	Securities Lending		17,065,741		293,041,226		262,023,543		48,083,424		N/A

8.  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 Funds’ Schedule of Investments and the collateral is shown on the Statement 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.

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.

36

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

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 December 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
Stephens Mid-Cap Growth	$	1,812,167	$	1,853,081	$	-	$	1,853,081
Stephens Small Cap Growth		46,663,553		48,083,424		-		48,083,424

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.

9.  Borrowing Arrangements

Effective November 16, 2017, the Funds, along with certain other funds managed by the Manager (“Participating Funds”), entered into a committed revolving line of credit (the “Committed Line”) agreement with State Street Bank and Trust Company (the “Bank”) to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Committed Line is $50 million with interest at a rate equal to the higher of (a) one-month London Inter-Bank Offered Rate (“LIBOR”) plus 1.25% per annum or (b) the Federal Funds rate plus 1.25% per annum on amounts borrowed. Each of the Participating Funds will pay a commitment fee at a rate of 0.25% per annum on the unused portion of the Committed Line amount. The Committed Line expires November 15, 2018 unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

Effective November 16, 2017, the Funds, along with certain other Participating Funds managed by the Manager, entered into an uncommitted discretionary demand revolving line of credit (the “Uncommitted Line”) agreement with the Bank to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Uncommitted Line is $50 million with interest at a rate equal to the higher of (a) one-month LIBOR plus 1.25% per annum or (b) the Federal Funds rate. The Uncommitted Line expires November 15, 2018, unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

The Participating Funds paid administration, legal and arrangement fees, which are recognized as a component of “Other expenses” on the Statements of Operations, along with commitment fees, that have been allocated among the Participating Funds based on average daily net assets. During the year ended December 31, 2017, the Funds did not utilize this facility.

37

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

10.  Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds:

	Institutional Class
	Year Ended December 31,
	2017						2016
Stephens Mid-Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		668,863		$	13,919,732			1,177,720		$	20,399,984
Reinvestment of dividends		117,773			2,652,250			146,529			2,693,187
Shares redeemed		(830,684	)		(17,481,948	)		(2,800,521	)		(48,457,431	)
Net (decrease) in shares outstanding		(44,048	)	$	(909,966	)		(1,476,272	)	$	(25,364,260	)
	Y Class
	Year Ended December 31,
	2017						2016
Stephens Mid-Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		170,499		$	3,611,313			44,603		$	820,474
Reinvestment of dividends		10,385			232,728			5,101			93,381
Shares redeemed		(66,224	)		(1,391,934	)		(49,219	)		(887,718	)
Net increase in shares outstanding		114,660		$	2,452,107			485		$	26,137
	Investor Class
	Year Ended December 31,
	2017						2016
Stephens Mid-Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		67,121		$	1,177,130			10,957		$	170,834
Reinvestment of dividends		39,069			750,512			50,612			802,201
Shares redeemed		(165,370	)		(3,048,034	)		(169,686	)		(2,603,913	)
Net (decrease) in shares outstanding		(59,180	)	$	(1,120,392	)		(108,117	)	$	(1,630,878	)
	A Class
	Year Ended December 31,
	2017						2016
Stephens Mid-Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		56,836		$	995,135			122,839		$	1,906,539
Reinvestment of dividends		39,072			747,844			54,477			860,740
Shares redeemed		(252,690	)		(4,653,221	)		(176,308	)		(2,782,925	)
Net increase (decrease) in shares outstanding		(156,782	)	$	(2,910,242	)		1,008		$	(15,646	)
	C Class
	Year Ended December 31,
	2017						2016
Stephens Mid-Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		25,836		$	434,847			7,487		$	115,723
Reinvestment of dividends		5,452			99,052			5,675			86,052
Shares redeemed		(20,605	)		(365,071	)		(60,007	)		(892,866	)
Net increase (decrease) in shares outstanding		10,683		$	168,828			(46,845	)	$	(691,091	)
	Institutional Class
	Year Ended December 31,
	2017						2016
Stephens Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		4,504,922		$	79,205,971			14,462,163		$	223,106,635
Reinvestment of dividends		748,200			14,290,622			215,695			3,556,821
Shares redeemed		(9,812,486	)		(177,676,084	)		(7,271,033	)		(109,035,001	)
Net increase (decrease) in shares outstanding		(4,559,364	)	$	(84,179,491	)		7,406,825		$	117,628,455

38

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

	Y Class
	Year Ended December 31,
	2017						2016
Stephens Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		613,505		$	10,869,740			7,449,981		$	116,530,831
Reinvestment of dividends		141,907			2,696,242			39,938			655,773
Shares redeemed		(1,364,123	)		(24,219,003	)		(12,060,037	)		(196,540,679	)
Net (decrease) in shares outstanding		(608,711	)	$	(10,653,021	)		(4,570,118	)	$	(79,354,075	)
	Investor Class
	Year Ended December 31,
	2017						2016
Stephens Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		225,973		$	3,803,038			791,664		$	10,678,980
Reinvestment of dividends		101,889			1,818,722			28,155			435,840
Shares redeemed		(681,438	)		(11,357,320	)		(1,486,689	)		(20,770,152	)
Net (decrease) in shares outstanding		(353,576	)	$	(5,735,560	)		(666,870	)	$	(9,655,332	)
	A Class
	Year Ended December 31,
	2017						2016
Stephens Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		68,302		$	1,115,642			46,390		$	691,272
Reinvestment of dividends		11,268			199,210			3,955			60,700
Shares redeemed		(222,857	)		(3,683,945	)		(172,992	)		(2,427,677	)
Net (decrease) in shares outstanding		(143,287	)	$	(2,369,093	)		(122,647	)	$	(1,675,705	)
	C Class
	Year Ended December 31,
	2017						2016
Stephens Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		1,859		$	30,364			4,104		$	54,232
Reinvestment of dividends		2,084			35,066			747			11,031
Shares redeemed		(32,639	)		(514,533	)		(89,847	)		(1,188,522	)
Net (decrease) in shares outstanding		(28,696	)	$	(449,103	)		(84,996	)	$	(1,123,259	)

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.

39

American Beacon Stephens Mid-Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Institutional Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	18.29		$	18.11		$	19.24		$	19.76		$	15.38
Income (loss) from investment operations:
Net investment (loss)		(0.07	)		(0.26	)		(0.13	)		(0.04	)		(0.05	)
Net gains (losses) on investments (both realized and unrealized)		5.26			1.49			(0.11	)		0.72			5.12
Total income (loss) from investment operations		5.19			1.23			(0.24	)		0.68			5.07
Less distributions:
Dividends from net investment income		-			-			-			-			(0.01	)
Distributions from net realized gains		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.66	)
Tax return of capitalA		-			-			-			-			(0.02	)
Total distributions		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.69	)
Net asset value, end of period	$	22.45		$	18.29		$	18.11		$	19.24		$	19.76
Total returnB		28.38	%		6.76	%		(1.23	)%		3.41	%		33.14	%
Ratios and supplemental data:
Net assets, end of period	$	60,933,913		$	50,451,447		$	76,666,136		$	87,620,400		$	63,235,775
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.07	%		1.09	%		1.01	%		1.05	%		1.12	%
Expenses, net of reimbursements or recoupmentsC		0.99	%		1.00	%		0.99	%		1.00	%		0.99	%
Net investment (loss), before expense reimbursements or recoupments		(0.36	)%		(0.60	)%		(0.54	)%		(0.53	)%		(0.70	)%
Net investment (loss), net of reimbursements or recoupments		(0.28	)%		(0.51	)%		(0.53	)%		(0.48	)%		(0.58	)%
Portfolio turnover rate		24	%		22	%		19	%		37	%		25	%

^A  The distributions from return of capital is calculated based on outstanding shares at the time of distribution.

^B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^C  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

40

American Beacon Stephens Mid-Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Y Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	18.22		$	18.06		$	19.22		$	19.76		$	15.38
Income (loss) from investment operations:
Net investment income (loss)		0.12			(0.10	)		(0.15	)		(0.06	)		(0.08	)
Net gains (losses) on investments (both realized and unrealized)		5.03			1.31			(0.12	)		0.72			5.15
Total income (loss) from investment operations		5.15			1.21			(0.27	)		0.66			5.07
Less distributions:
Dividends from net investment income		-			-			-			-			(0.01	)
Distributions from net realized gains		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.68	)
Tax return of capitalA		-			-			-			-			(0.00	)B
Total distributions		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.69	)
Net asset value, end of period	$	22.34		$	18.22		$	18.06		$	19.22		$	19.76
Total returnC		28.27	%		6.67	%		(1.39	)%		3.31	%		33.14	%
Ratios and supplemental data:
Net assets, end of period	$	5,639,207		$	2,510,649		$	2,479,918		$	3,109,192		$	1,672,420
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.11	%		1.12	%		1.06	%		1.10	%		1.14	%
Expenses, net of reimbursements or recoupmentsD		1.09	%		1.12	%		1.09	%		1.10	%		1.09	%
Net investment (loss), before expense reimbursements or recoupments		(0.42	)%		(0.63	)%		(0.60	)%		(0.57	)%		(0.73	)%
Net investment (loss), net of reimbursements or recoupments		(0.40	)%		(0.63	)%		(0.63	)%		(0.58	)%		(0.68	)%
Portfolio turnover rate		24	%		22	%		19	%		37	%		25	%

^A  The distributions from return of capital is calculated based on outstanding shares at the time of distribution.

^B  Amount represents less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

41

American Beacon Stephens Mid-Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Investor Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	15.77		$	15.80		$	16.97		$	17.64		$	13.83
Income (loss) from investment operations:
Net investment (loss)		(0.21	)		(0.27	)		(0.32	)		(0.36	)		(0.08	)
Net gains on investments (both realized and unrealized)		4.62			1.29			0.04			0.89			4.58
Total income (loss) from investment operations		4.41			1.02			(0.28	)		0.53			4.50
Less distributions:
Dividends from net investment income		-			-			-			-			(0.01	)
Distributions from net realized gains		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.68	)
Tax return of capitalA		-			-			-			-			(0.00	)B
Total distributions		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.69	)
Net asset value, end of period	$	19.15		$	15.77		$	15.80		$	16.97		$	17.64
Total returnC		27.97	%		6.42	%		(1.63	)%		2.97	%		32.71	%
Ratios and supplemental data:
Net assets, end of period	$	14,749,984		$	13,078,292		$	14,814,940		$	19,551,562		$	31,912,432
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.29	%		1.38	%		1.32	%		1.27	%		1.38	%
Expenses, net of reimbursements or recoupmentsD		1.29	%		1.38	%		1.35	%		1.38	%		1.37	%
Net investment (loss), before expense reimbursements or recoupments		(0.58	)%		(0.89	)%		(0.85	)%		(0.77	)%		(0.98	)%
Net investment (loss), net of reimbursements or recoupments		(0.58	)%		(0.89	)%		(0.89	)%		(0.88	)%		(0.97	)%
Portfolio turnover rate		24	%		22	%		19	%		37	%		25	%

^A  The distributions from return of capital is calculated based on outstanding shares at the time of distribution.

^B  Amount represents less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

42

American Beacon Stephens Mid-Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	A Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	15.72		$	15.77		$	16.94		$	17.61		$	13.83
Income (loss) from investment operations:
Net investment (loss)		(0.28	)		(0.14	)		(0.20	)		(0.19	)		(0.10	)
Net gains (losses) on investments (both realized and unrealized)		4.67			1.14			(0.08	)		0.72			4.57
Total income (loss) from investment operations		4.39			1.00			(0.28	)		0.53			4.47
Less distributions:
Dividends from net investment income		-			-			-			-			(0.01	)
Distributions from net realized gains		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.68	)
Tax return of capitalA		-			-			-			-			(0.00	)B
Total distributions		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.69	)
Net asset value, end of period	$	19.08		$	15.72		$	15.77		$	16.94		$	17.61
Total returnC		27.93	%		6.30	%		(1.63	)%		2.97	%		32.49	%
Ratios and supplemental data:
Net assets, end of period	$	13,854,727		$	13,886,296		$	13,907,563		$	16,505,844		$	18,395,962
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.39	%		1.42	%		1.36	%		1.45	%		1.57	%
Expenses, net of reimbursements or recoupmentsD		1.39	%		1.41	%		1.39	%		1.45	%		1.49	%
Net investment (loss), before expense reimbursements or recoupments		(0.67	)%		(0.92	)%		(0.90	)%		(0.94	)%		(1.16	)%
Net investment (loss), net of reimbursements or recoupments		(0.67	)%		(0.92	)%		(0.93	)%		(0.94	)%		(1.09	)%
Portfolio turnover rate		24	%		22	%		19	%		37	%		25	%

^A  The distributions from return of capital is calculated based on outstanding shares at the time of distribution.

^B  Amount represents less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

43

American Beacon Stephens Mid-Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	C Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	15.08		$	15.28		$	16.57		$	17.38		$	13.75
Income (loss) from investment operations:
Net investment (loss)		(0.11	)		(0.60	)		(0.17	)		(0.27	)		(0.16	)
Net gains (losses) on investments (both realized and unrealized)		4.17			1.45			(0.23	)		0.66			4.47
Total income (loss) from investment operations		4.06			0.85			(0.40	)		0.39			4.31
Less distributions:
Dividends from net investment income		-			-			-			-			(0.00	)A
Distributions from net realized gains		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.68	)
Tax return of capitalB		-			-			-			-			(0.00	)A
Total distributions		(1.03	)		(1.05	)		(0.89	)		(1.20	)		(0.68	)
Net asset value, end of period	$	18.11		$	15.08		$	15.28		$	16.57		$	17.38
Total returnC		26.93	%		5.52	%		(2.39	)%		2.21	%		31.35	%
Ratios and supplemental data:
Net assets, end of period	$	1,862,472		$	1,389,526		$	2,123,334		$	1,901,906		$	1,625,535
Ratios to average net assets:
Expenses, before reimbursements or recoupments		2.11	%		2.19	%		2.11	%		2.22	%		2.28	%
Expenses, net of reimbursements or recoupmentsD		2.11	%		2.18	%		2.14	%		2.20	%		2.24	%
Net investment (loss), before expense reimbursements or recoupments		(1.40	)%		(1.70	)%		(1.65	)%		(1.69	)%		(1.87	)%
Net investment (loss), net of reimbursements or recoupments		(1.39	)%		(1.69	)%		(1.68	)%		(1.68	)%		(1.84	)%
Portfolio turnover rate		24	%		22	%		19	%		37	%		25	%

^A  Amount represents less than $0.01 per share.

^B  The distributions from return of capital is calculated based on outstanding shares 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.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

44

American Beacon Stephens Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Institutional Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	16.45		$	15.08		$	16.57		$	17.83		$	12.99
Income (loss) from investment operations:
Net investment income (loss)		(0.23	)		0.00	A		(0.13	)		(0.07	)		(0.05	)
Net gains (losses) on investments (both realized and unrealized)		3.44			1.51			(0.65	)		(0.49	)		5.60
Total income (loss) from investment operations		3.21			1.51			(0.78	)		(0.56	)		5.55
Less distributions:
Dividends from net investment income		-			-			-			-			(0.00	)A
Distributions from net realized gains		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.67	)
Tax return of capitalB		-			-			-			-			(0.04	)
Total distributions		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.71	)
Net asset value, end of period	$	19.01		$	16.45		$	15.08		$	16.57		$	17.83
Total returnC		19.52	%		9.98	%		(4.69	)%		(3.14	)%		42.93	%
Ratios and supplemental data:
Net assets, end of period	$	433,520,624		$	450,286,537		$	300,919,215		$	359,958,471		$	317,341,400
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.08	%		1.09	%		1.08	%		1.08	%		1.11	%
Expenses, net of reimbursements or recoupmentsD		1.08	%		1.09	%		1.08	%		1.10	%		1.09	%
Net investment (loss), before expense reimbursements or recoupments		(0.79	)%		(0.78	)%		(0.67	)%		(0.59	)%		(0.73	)%
Net investment (loss), net of reimbursements or recoupments		(0.79	)%		(0.78	)%		(0.67	)%		(0.61	)%		(0.71	)%
Portfolio turnover rate		22	%		40	%		25	%		46	%		39	%

^A  Amount represents less than $0.01 per share.

^B  The distributions from return of capital is calculated based on outstanding shares 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.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

45

American Beacon Stephens Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Y Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	16.38		$	15.02		$	16.54		$	17.81		$	12.98
Income (loss) from investment operations:
Net investment (loss)		(0.28	)		(0.52	)		(0.14	)		(0.12	)		(0.04	)
Net gains (losses) on investments (both realized and unrealized)		3.46			2.02			(0.67	)		(0.45	)		5.58
Total income (loss) from investment operations		3.18			1.50			(0.81	)		(0.57	)		5.54
Less distributions:
Dividends from net investment income		-			-			-			-			(0.00	)A
Distributions from net realized gains		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.68	)
Tax return of capitalB		-			-			-			-			(0.03	)
Total distributions		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.71	)
Net asset value, end of period	$	18.91		$	16.38		$	15.02		$	16.54		$	17.81
Total returnC		19.42	%		9.96	%		(4.88	)%		(3.20	)%		42.88	%
Ratios and supplemental data:
Net assets, end of period	$	82,072,563		$	81,069,652		$	142,980,166		$	171,901,004		$	208,196,284
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.14	%		1.15	%		1.14	%		1.16	%		1.19	%
Expenses, net of reimbursements or recoupmentsD		1.14	%		1.15	%		1.14	%		1.16	%		1.19	%
Net investment (loss), before expense reimbursements or recoupments		(0.85	)%		(0.81	)%		(0.74	)%		(0.67	)%		(0.79	)%
Net investment (loss), net of reimbursements or recoupments		(0.85	)%		(0.81	)%		(0.74	)%		(0.69	)%		(0.78	)%
Portfolio turnover rate		22	%		40	%		25	%		46	%		39	%

^A  Amount represents less than $0.01 per share.

^B  The distributions from return of capital is calculated based on outstanding shares 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.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

46

American Beacon Stephens Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Investor Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	15.45		$	14.20		$	15.71		$	16.98		$	12.42
Income (loss) from investment operations:
Net investment (loss)		(0.37	)		(0.41	)		(0.82	)		(0.16	)		(0.04	)
Net gains (losses) on investments (both realized and unrealized)		3.34			1.80			0.02			(0.41	)		5.31
Total income (loss) from investment operations		2.97			1.39			(0.80	)		(0.57	)		5.27
Less distributions:
Dividends from net investment income		-			-			-			-			(0.00	)A
Distributions from net realized gains		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.69	)
Tax return of capitalB		-			-			-			-			(0.02	)
Total distributions		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.71	)
Net asset value, end of period	$	17.77		$	15.45		$	14.20		$	15.71		$	16.98
Total returnC		19.23	%		9.76	%		(5.08	)%		(3.35	)%		42.62	%
Ratios and supplemental data:
Net assets, end of period	$	51,839,469		$	50,544,287		$	55,921,959		$	147,227,308		$	169,799,314
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.29	%		1.35	%		1.40	%		1.31	%		1.39	%
Expenses, net of reimbursements or recoupmentsD		1.31	%		1.35	%		1.39	%		1.37	%		1.35	%
Net investment (loss), before expense reimbursements or recoupments		(1.01	)%		(1.02	)%		(1.01	)%		(0.81	)%		(1.01	)%
Net investment (loss), net of reimbursements or recoupments		(1.03	)%		(1.02	)%		(1.00	)%		(0.88	)%		(0.96	)%
Portfolio turnover rate		22	%		40	%		25	%		46	%		39	%

^A  Amount represents less than $0.01 per share.

^B  The distributions from return of capital is calculated based on outstanding shares 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.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

47

American Beacon Stephens Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	A Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	15.32		$	14.10		$	15.61		$	16.91		$	12.40
Income (loss) from investment operations:
Net investment (loss)		(0.62	)		(0.31	)		(0.19	)		(0.18	)		(0.10	)
Net gains (losses) on investments (both realized and unrealized)		3.54			1.67			(0.61	)		(0.42	)		5.32
Total income (loss) from investment operations		2.92			1.36			(0.80	)		(0.60	)		5.22
Less distributions:
Dividends from net investment income		-			(0.00	)A		-			-			(0.00	)A
Distributions from net realized gains		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.71	)
Tax return of capitalB		-			-			-			-			(0.00	)A
Total distributions		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.71	)
Net asset value, end of period	$	17.59		$	15.32		$	14.10		$	15.61		$	16.91
Total returnC		19.06	%		9.61	%		(5.11	)%		(3.54	)%		42.28	%
Ratios and supplemental data:
Net assets, end of period	$	5,553,261		$	7,029,682		$	8,197,136		$	9,701,510		$	10,941,646
Ratios to average net assets:
Expenses, before reimbursements or recoupments		1.40	%		1.46	%		1.44	%		1.51	%		1.57	%
Expenses, net of reimbursements or recoupmentsD		1.40	%		1.46	%		1.48	%		1.52	%		1.59	%
Net investment (loss), before expense reimbursements or recoupments		(1.11	)%		(1.14	)%		(1.03	)%		(1.02	)%		(1.18	)%
Net investment (loss), net of reimbursements or recoupments		(1.11	)%		(1.14	)%		(1.08	)%		(1.03	)%		(1.20	)%
Portfolio turnover rate		22	%		40	%		25	%		46	%		39	%

^A  Amount represents less than $0.01 per share.

^B  The distributions from return of capital is calculated based on outstanding shares 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.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

48

American Beacon Stephens Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	C Class
	Year Ended December 31,
	2017			2016			2015			2014			2013
Net asset value, beginning of period	$	14.71		$	13.65		$	15.26		$	16.66		$	12.32
Income (loss) from investment operations:
Net investment (loss)		(1.25	)		(1.08	)		(0.31	)		(0.24	)		(0.13	)
Net gains (losses) on investments (both realized and unrealized)		3.93			2.28			(0.59	)		(0.46	)		5.18
Total income (loss) from investment operations		2.68			1.20			(0.90	)		(0.70	)		5.05
Less distributions:
Dividends from net investment income		-			-			-			-			(0.00	)A
Distributions from net realized gains		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.71	)
Tax return of capitalB		-			0.00			-			-			-
Total distributions		(0.65	)		(0.14	)		(0.71	)		(0.70	)		(0.71	)
Net asset value, end of period	$	16.74		$	14.71		$	13.65		$	15.26		$	16.66
Total returnC		18.22	%		8.76	%		(5.89	)%		(4.20	)%		41.17	%
Ratios and supplemental data:
Net assets, end of period	$	977,321		$	1,280,971		$	2,348,424		$	2,771,316		$	2,446,766
Ratios to average net assets:
Expenses, before reimbursements or recoupments		2.14	%		2.23	%		2.19	%		2.26	%		2.33	%
Expenses, net of reimbursements or recoupmentsD		2.14	%		2.23	%		2.26	%		2.27	%		2.34	%
Net investment (loss), before expense reimbursements or recoupments		(1.86	)%		(1.91	)%		(1.79	)%		(1.76	)%		(1.93	)%
Net investment (loss), net of reimbursements or recoupments		(1.86	)%		(1.91	)%		(1.85	)%		(1.77	)%		(1.94	)%
Portfolio turnover rate		22	%		40	%		25	%		46	%		39	%

^A  Amount represents less than $0.01 per share.

^B  The distributions from return of capital is calculated based on outstanding shares 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.

^D  Expense ratios may exceed stated expense caps in Note 2 due to security lending expenses, which are not reimbursable under the agreement with the Manager.

See accompanying notes

49

American Beacon Funds^SM

Federal Tax Information

December 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 December 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 December 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:

Stephens Mid-Cap Growth	0.00	%
Stephens Small Cap Growth	0.00	%

Qualified Dividend Income:

Stephens Mid-Cap Growth	0.00	%
Stephens Small Cap Growth	0.00	%

Long-Term Capital Gain Distributions:

Stephens Mid-Cap Growth	$	4,561,926
Stephens Small Cap Growth		19,363,107

Short-Term Capital Gain Distributions:

Stephens Mid-Cap Growth	$	-
Stephens Small Cap Growth		-

Shareholders received notification in January 2018 of the applicable tax information necessary to prepare their 2017 income tax returns.

50

Trustees and Officers of the American Beacon Funds^SM (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-five 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** (81)	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 (48)	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 (57)	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).

51

Trustees and Officers of the American Beacon Funds^SM (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
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*** (75)	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 (72)	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. (63)	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).

52

Trustees and Officers of the American Beacon Funds^SM (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
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 (54)	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).

53

Trustees and Officers of the American Beacon Funds^SM (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
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 (46)	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 (61)	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 (43)	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).

54

Trustees and Officers of the American Beacon Funds^SM (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
Rebecca L. Harris (51)	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 (42)	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.

*** Mr. Dunning retired as of 12/31/2017. Douglas A. Lindgren became a new Trustee to each of the Trusts on 1/1/2018.

55

American Beacon Funds^SM

Privacy Policy

December 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.

56

Delivery of Documents

eDelivery is NOW AVAILABLE– Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

By E-mail:	On the Internet:
american_beacon.funds@ambeacon.com	Visit our website at www.americanbeaconfunds.com
By Telephone: 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 (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month.	A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

CUSTODIAN State Street Bank and Trust Boston, Massachusetts TRANSFER AGENT DST Asset Manager Solutions, Inc. 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 Stephens Mid-Cap Growth Fund and American Beacon Stephens Small Cap Growth Fund are service marks of American Beacon Advisors, Inc.

AR 12/17

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.

BAHL & GAYNOR SMALL CAP GROWTH 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. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund participates in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.

American Beacon Funds December 31, 2017

Contents

President’s Message	1
Market and Performance Overview	2
Expense Example	5
Report of Independent Registered Public Accounting Firm	7
Schedules of Investments:
American Beacon Bahl & Gaynor Small Cap Growth Fund	8
Financial Statements	12
Notes to Financial Statements	15
Financial Highlights:
American Beacon Bahl & Gaynor Small Cap Growth Fund	31
Federal Tax Information	34
Trustees and Officers of the American Beacon Funds	35
Privacy Policy	40

Additional Fund Information Back Cover

President’s Message

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

December 31, 2017 (Unaudited)

During the 12-month period ended December 31, 2017, domestic equity markets ignored any signs of investor skepticism that started the year as markets pushed into their ninth year of this long-running bull market. Volatility remained at suppressed levels within the S&P 500 Index, a broad measure of domestic equity markets, providing positive total returns every month and finishing the year up 21.83%. While large-cap stocks outpaced small-caps, growth stocks exhibited drastic outperformance versus value stocks across all market-cap styles. The Russell 2000 Growth Index outperformed the Russell 2000 Value Index by 14.33%, while the Russell 1000 Growth Index outperformed the Russell 1000 Value Index by 16.55%. While many investors were skeptical of the market’s advance in 2017, data during the year suggested the lift in domestic equities reflected the now-visible signs of globally synchronized economic strength.

In the first quarter of 2017, the U.S. equity markets achieved fresh, all-time highs, as optimism from the Trump administration’s “pro-growth” agenda spilled over from the fourth quarter of 2016. Despite failure to pass revisions to health-care legislation, the market remained upbeat toward Washington, D.C., on the premise of tax cuts, easing of business regulations and a boost to U.S. infrastructure investment. The economy displayed supportive evidence of further market advances and a March rate hike from the Federal Reserve (the “Fed”). The Purchasing Managers Index, the Consumer Confidence Index and the NFIB Small Business Optimism Index all flashed constructive data. During 2016, the S&P 500 Index’s trailing 12-month, year-over-year earnings growth inflected and turned positive after four quarters in negative territory. Large-caps outperformed small-caps, reversing trading patterns from the previous quarter, with Technology stocks leading the way.

In the second quarter, U.S. equities across all market caps delivered gains, shaking off growing concerns regarding the Trump administration’s ability to pass pro-growth measures and economic data that was less enthusiastic than the previous quarter, namely within Manufacturing and Consumer Health. Political uncertainty flared up after President Trump dismissed James Comey, the former FBI director. The Fed, however, delivered another 25 basis point (0.25%) rate hike and laid out plans to begin reducing its balance sheet after years of its unprecedented quantitative easing policy program. Large-cap stocks led the march higher for the second quarter, with reflationary sectors at the top – Health Care, Industrials and Financials.

In the third quarter, robust corporate earnings continued, increasing 11.6% on a trailing 12-month basis versus a year ago. Gross domestic product growth of 3.0% was released during the quarter, breaking out from the sub-3.0% growth seen in the economy since the lowest point of the financial crisis. Historic hurricanes were disruptive to Texas, Louisiana and Puerto Rico, but negative outcomes were determined to be transitory (ex-Puerto Rico), displaying the resiliency of U.S. industry. Despite concerns of stubbornly low inflation, the Fed confirmed its balance sheet roll-off beginning in October. Crude oil prices began to solidify above $50, a key support level, which boosted cyclical energy and industrial stocks. U.S. stocks across all capitalizations made gains.

In the fourth quarter, the U.S. economy and U.S. equities capped off a robust year as corporations delivered another quarter of strong earnings growth. The Technology sector, the best performing sector in the 12-month period, delivered particularly healthy results. The much-awaited Tax Cuts and Jobs Act of 2017 was passed by Congress and signed into law by President Trump on December 22. Markets jumped on this news as the permanent tax cut is expected to make U.S. companies more competitive than non-domestic peers. U.S. Treasury yields, led by the short end of the yield curve, rose during the quarter and caused interest-rate sensitive sectors, such as Real Estate and Utilities, to underperform the broader market. In December, the Fed lifted base rates for the third time during the year and lifted their U.S. 2018 economic growth forecast to 2.5% from 2.1%.

2

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

The Investor Class of the American Beacon Bahl & Gaynor Small Cap Growth Fund (the “Fund”) returned 13.23% for the twelve months ended December 31, 2017. The Fund underperformed the Russell 2000 Growth Index (the “Index”) return of 22.17% for the same period.

Comparison of Change in Value of a $10,000 Investment for the period from 7/15/2014 through 12/31/2017

Total Returns for the Period Ended December 31, 2017
	Ticker	1 Year			3 Year			Since Inception (7/15/2014)			Value of $10,000 7/15/2014- 12/31/2017
Institutional Class (1,5)	GBSIX		13.65	%		11.56	%		12.19	%		$	14,893
Y Class (1,5)	GBSYX		13.52	%		11.46	%		12.10	%		$	14,852
Investor Class (1,5)	GBSPX		13.23	%		11.14	%		11.77	%		$	14,700
A without Sales Charge (1,2,5)	GBSAX		13.21	%		11.14	%		11.76	%		$	14,698
A with Sales Charge (1,2,5)	GBSAX		6.72	%		8.97	%		9.87	%		$	13,853
C without Sales Charge (1,3,5)	GBSCX		12.38	%		10.29	%		10.90	%		$	14,310
C with Sales Charge (1,3,5)	GBSCX		11.38	%		10.29	%		10.90	%		$	14,310
Russell 2000 Growth Index (4)			22.17	%		10.28	%		11.13	%		$	14,416
S&P 500 Index (4)			21.83	%		11.41	%		11.47	%		$	14,567

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 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.

2. A Class shares have a maximum sales charge of 5.75%.

3

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

3. C Class shares have a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.

4. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the United States. The Russell 2000 Growth Index and the Russell 2000 Index are registered trademarks of Frank Russell Company. The Russell 2000 Growth Index is an unmanaged index of those stocks in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index of approximately 2000 smaller-capitalization stocks from various industrial sectors. 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 were 1.85%, 1.98%, 2.09%, 2.18%, and 3.09%, 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 underperformed the Index due to both stock selection and sector allocation relative to the Index. From a stock selection standpoint, the Fund’s holdings in the Health Care, Information Technology and Industrials sectors detracted the most from relative performance. In the Health Care sector, the Fund’s absence from Nektar Therapeutics up 386.7%, Exact Sciences Corp. up 293.3% and Sage Therapeutics up 222.5% negatively impacted returns. Also dragging on performance was the Fund’s Medidata Solutions position, which was down 19.8%. Within the Information Technology sector, NIC, Inc. was down 31.3%, The Hackett Group down 10.0% and Methode Electronics down 4.7%. Companies in the Industrials sector that further detracted from relative performance were Ritchie Bros Auctioneers down 9.4%, Apogee Enterprises down 14.3% and Matthews Intl Corp. down 31.1%.

Offsetting some of the aforementioned performance were positions in the Energy, Consumer Staples and Consumer Discretionary sectors. In Energy, the Fund avoided US Silica down 42.2% and Carrizo Oil & Gas (down 43.0%), while its position in Gaslog Ltd. was up 42.7%. Within Consumer Staples, Inter Parfums Inc. up 35.0% and Calavo Growers Inc. up 40.6% led in performance. Marriott Vacations Worldwide up 61.7%, Pool Corp. up 12.9% and Thor Industries, Inc. up 31.7% were holdings that added to relative performance in Consumer Discretionary.

As it relates to sector allocation, the Fund was underweight Health Care (one of the best performing Index sectors) and held a sizeable overweight to Financials relative to the benchmark. Slight overweights to Consumer Staples and Industrials were also detractors for the period. Offsetting some of this poor performance were underweights to both Energy (the lowest performing sector) and Consumer Discretionary.

The Fund’s basic philosophy remains focused on investing in companies using a fundamental investment approach that seeks price appreciation, capital preservation and income.

Top Ten Holdings (% Net Assets)
Monolithic Power Systems, Inc.		3.4
Cantel Medical Corp.		3.1
Texas Roadhouse, Inc.		2.6
Pool Corp.		2.6
Marriott Vacations Worldwide Corp.		2.4
Evercore, Inc., Class A		2.4
Watsco, Inc.		2.4
PolyOne Corp.		2.1
MainSource Financial Group, Inc.		2.1
Omnicell, Inc.		2.1
Total Fund Holdings	73
Sector Allocation (% Equities)
Information Technology		25.0
Industrials		17.5
Health Care		15.6
Consumer Discretionary		14.7
Financials		10.6
Consumer Staples		5.9
Materials		4.4
Real Estate		3.8
Energy		1.3
Utilities		1.2

4

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Expense Examples

December 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 July 1, 2017 through December 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.

5

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Expense Examples

December 31, 2017 (Unaudited)

American Beacon Bahl & Gaynor Small Cap Growth Fund
	Beginning Account Value 7/1/2017		Ending Account Value 12/31/2017		Expenses Paid During Period 7/1/2017-12/31/2017*
Institutional Class
Actual	$	1,000.00	$	1,075.10	$	5.13
Hypothetical**	$	1,000.00	$	1,020.30	$	4.99
Y Class
Actual	$	1,000.00	$	1,075.30	$	5.65
Hypothetical**	$	1,000.00	$	1,019.80	$	5.50
Investor Class
Actual	$	1,000.00	$	1,072.90	$	7.11
Hypothetical**	$	1,000.00	$	1,018.30	$	6.92
A Class
Actual	$	1,000.00	$	1,073.60	$	7.21
Hypothetical**	$	1,000.00	$	1,018.20	$	7.02
C Class
Actual	$	1,000.00	$	1,068.70	$	11.11
Hypothetical**	$	1,000.00	$	1,014.50	$	10.82

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.98%, 1.08%, 1.36%, 1.38%, and 2.13% 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.

6

American Beacon Funds^SM

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of American Beacon Bahl & Gaynor Small Cap Growth Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of American Beacon Bahl & Gaynor Small Cap Growth Fund (the “Fund”) (one of the funds constituting American Beacon Funds (the “Trust”)), including the schedule of investments, as of December 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, the financial highlights for each of the three years in the period then ended and the period from July 15, 2014 (commencement of operations) to December 31, 2014 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting American Beacon Funds) at December 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 its financial highlights for each of the three years in the period then ended and the period from July 15, 2014 (commencement of operations) to December 31, 2014, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more American Beacon investment companies since 1987.

Dallas, Texas

February 28, 2018

7

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 98.32%
Consumer Discretionary - 14.42%
Auto Components - 2.19%
Gentex Corp.		10,830		$	226,889
LCI Industries		5,065			658,450
					885,339
Distributors - 2.58%
Pool Corp.		8,045			1,043,034
Hotels, Restaurants & Leisure - 5.06%
Marriott Vacations Worldwide Corp.		7,300			987,033
Texas Roadhouse, Inc.		20,110			1,059,395
					2,046,428
Household Durables - 0.81%
Flexsteel Industries, Inc.		7,005			327,694
Leisure Products - 1.65%
Brunswick Corp.		12,060			665,953
Media - 0.40%
Cinemark Holdings, Inc.		4,665			162,435
Specialty Retail - 0.48%
Winmark Corp.		1,490			192,806
Textiles, Apparel & Luxury Goods - 1.25%
Columbia Sportswear Co.		3,455			248,346
Superior Uniform Group, Inc.		9,685			258,686
					507,032
Total Consumer Discretionary					5,830,721
Consumer Staples - 5.83%
Food & Staples Retailing - 1.24%
PriceSmart, Inc.		5,810			500,241
Food Products - 2.91%
Calavo Growers, Inc.A		8,345			704,318
J&J Snack Foods Corp.		3,125			474,469
					1,178,787
Personal Products - 1.68%
Inter Parfums, Inc.		15,640			679,558
Total Consumer Staples					2,358,586
Energy - 1.30%
Oil, Gas & Consumable Fuels - 1.30%
GasLog Ltd.		23,680			526,880
Financials - 10.39%
Banks - 6.22%
Chemical Financial Corp.		3,765			201,315
First Interstate BancSystem, Inc., Class A		19,510			781,375
Glacier Bancorp, Inc.		6,770			266,670
MainSource Financial Group, Inc.		23,535			854,556
S&T Bancorp, Inc.		10,280			409,247
					2,513,163

See accompanying notes

8

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 98.32% (continued)
Financials - 10.39% (continued)
Capital Markets - 2.42%
Evercore, Inc., Class A		10,875		$	978,750
Insurance - 1.75%
Horace Mann Educators Corp.		16,085			709,348
Total Financials					4,201,261
Health Care - 15.35%
Health Care Equipment & Supplies - 5.95%
Abaxis, Inc.		4,365			216,155
Atrion Corp.		595			375,207
Cantel Medical Corp.		12,360			1,271,473
LeMaitre Vascular, Inc.		16,980			540,643
					2,403,478
Health Care Providers & Services - 3.60%
Chemed Corp.		2,535			616,056
Patterson Cos., Inc.		8,645			312,344
US Physical Therapy, Inc.		7,300			527,060
					1,455,460
Health Care Technology - 3.90%
Medidata Solutions, Inc.B		7,595			481,295
Omnicell, Inc.B		17,420			844,870
Simulations Plus, Inc.		15,485			249,309
					1,575,474
Life Sciences Tools & Services - 1.90%
Bio-Techne Corp.		4,020			520,791
Medpace Holdings, Inc.B		6,855			248,562
					769,353
Total Health Care					6,203,765
Industrials - 17.16%
Building Products - 3.71%
Apogee Enterprises, Inc.		11,315			517,435
Simpson Manufacturing Co., Inc.		8,345			479,086
Universal Forest Products, Inc.		13,400			504,108
					1,500,629
Commercial Services & Supplies - 5.39%
Healthcare Services Group, Inc.		11,465			604,435
Matthews International Corp., Class A		5,960			314,688
MSA Safety, Inc.		7,595			588,765
Ritchie Bros Auctioneers, Inc.		22,495			673,275
					2,181,163
Construction & Engineering - 1.53%
Valmont Industries, Inc.		3,725			617,791
Industrial Conglomerates - 1.48%
Raven Industries, Inc.		17,420			598,377
Machinery - 0.91%
Hyster-Yale Materials Handling, Inc.		4,320			367,891

See accompanying notes

9

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 98.32% (continued)
Industrials - 17.16% (continued)
Trading Companies & Distributors - 4.14%
Applied Industrial Technologies, Inc.		10,430		$	710,283
Watsco, Inc.		5,660			962,427
					1,672,710
Total Industrials					6,938,561
Information Technology - 24.54%
Electronic Equipment, Instruments & Components - 6.08%
Littelfuse, Inc.		2,980			589,504
Mesa Laboratories, Inc.A		3,425			425,728
Methode Electronics, Inc.		11,025			442,102
National Instruments Corp.		8,940			372,172
SYNNEX Corp.		4,620			628,089
					2,457,595
Internet Software & Services - 2.02%
NIC, Inc.		37,980			630,468
Reis, Inc.		8,945			184,714
					815,182
IT Services - 2.91%
CSG Systems International, Inc.		8,790			385,178
Forrester Research, Inc.		6,710			296,582
Hackett Group, Inc.		31,575			496,043
					1,177,803
Semiconductors & Semiconductor Equipment - 8.79%
Cabot Microelectronics Corp.		6,555			616,694
Cirrus Logic, Inc.B		8,195			424,993
Monolithic Power Systems, Inc.		12,060			1,355,061
NVE Corp.		2,385			205,110
Power Integrations, Inc.		3,005			221,018
Silicon Motion Technology Corp., ADRA		13,850			733,496
					3,556,372
Software - 4.74%
Blackbaud, Inc.		8,490			802,220
Monotype Imaging Holdings, Inc.		19,660			473,806
Pegasystems, Inc.		13,550			638,883
					1,914,909
Total Information Technology					9,921,861
Materials - 4.32%
Chemicals - 4.32%
Balchem Corp.		5,360			432,016
PolyOne Corp.		19,955			868,043
Stepan Co.		5,660			446,970
					1,747,029
Total Materials					1,747,029
Real Estate - 3.77%
Equity Real Estate Investment Trusts (REITs) - 2.18%
CoreSite Realty Corp.		6,105			695,359
QTS Realty Trust, Inc., Class A		3,455			187,123
					882,482

See accompanying notes

10

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 98.32% (continued)
Real Estate - 3.77% (continued)
Real Estate Management & Development - 1.59%
RE/MAX Holdings, Inc., Class A		13,255		$	642,868
Total Real Estate					1,525,350
Utilities - 1.24%
Gas Utilities - 1.24%
ONE Gas, Inc.		6,855			502,197
Total Common Stocks (Cost $34,304,267)					39,756,211
SHORT-TERM INVESTMENTS - 1.60% (Cost $646,632)
Investment Companies - 1.60%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%C D		646,632			646,632
SECURITIES LENDING COLLATERAL - 3.19% (Cost $1,288,716)
Investment Companies - 3.19%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%C D		1,288,716			1,288,716
TOTAL INVESTMENTS - 103.11% (Cost $36,239,615)					41,691,559
LIABILITIES, NET OF OTHER ASSETS - (3.11%)					(1,259,033	)
TOTAL NET ASSETS - 100.00%				$	40,432,526
Percentages are stated as a percent of net assets.

^A All or a portion of this security is on loan at December 31, 2017.

^B Non-income producing security.

^C The Fund is affiliated by having the same investment advisor.

^D 7-day yield.

ADR – American Depository Reciept.

Futures Contracts Open on December 31, 2017:
Long Futures
Equity Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
Russell 2000 E-Mini Index Futures	8	March 2018	$	619,277	$	614,600	$	(4,677	)
			$	619,277	$	614,600	$	(4,677	)

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of December 31, 2017, the investments were classified as described below:

Bahl & Gaynor Small Cap Growth Fund	Level 1			Level 2		Level 3		Total
Assets
Common Stocks	$	39,756,211		$	-	$	-	$	39,756,211
Short-Term Investments		646,632			-		-		646,632
Securities Lending Collateral		1,288,716			-		-		1,288,716
Total Investments in Securities - Assets	$	41,691,559		$	-	$	-	$	41,691,559
Financial Derivative Instruments - Liabilities
Futures Contracts	$	(4,677	)	$	-	$	-	$	(4,677	)
Total Financial Derivative Instruments - Liabilities	$	(4,677	)	$	-	$	-	$	(4,677	)

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. During the period ended December 31, 2017, there were no transfers between levels.

See accompanying notes

11

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Statement of Assets and Liabilities

December 31, 2017

Assets:
Investments in unaffiliated securities, at fair value† §	$	39,756,211
Investments in affiliated securities, at fair value‡		1,935,348
Deposit with brokers for futures contracts		23,600
Dividends and interest receivable		35,036
Receivable for fund shares sold		23,355
Receivable for expense reimbursement (Note 2)		16,194
Prepaid expenses		23,432
Total assets		41,813,176
Liabilities:
Payable for fund shares redeemed		5,730
Payable for variation margin from open futures contracts (Note 5)		7,856
Payable upon return of securities loaned (Note 9)§		1,288,716
Management and sub-advisory fees payable (Note 2)		31,911
Service fees payable (Note 2)		2,632
Transfer agent fees payable (Note 2)		2,478
Custody and fund accounting fees payable		8,666
Professional fees payable		29,948
Trustee fees payable (Note 2)		2
Payable for prospectus and shareholder reports		1,429
Other liabilities		1,282
Total liabilities		1,380,650
Net assets	$	40,432,526
Analysis of net assets:
Paid-in-capital	$	35,006,590
Undistributed net investment income		40
Accumulated net realized (loss)		(21,371	)
Unrealized appreciation of investments in unaffiliated securitiesA		5,451,944
Unrealized (depreciation) of futures contracts		(4,677	)
Net assets	$	40,432,526
Shares outstanding at no par value (unlimited shares authorized):
Institutional Class		1,184,093
Y Class		1,088,141
Investor Class		315,853
A Class		287,736
C Class		38,745
Net assets:
Institutional Class	$	16,498,344
Y Class	$	15,114,316
Investor Class	$	4,344,476
A Class	$	3,955,277
C Class	$	520,113
Net asset value, offering and redemption price per share:
Institutional Class	$	13.93
Y Class	$	13.89
Investor Class	$	13.75
A Class	$	13.75
A Class (offering price)	$	14.59
C Class	$	13.42
† Cost of investments in unaffiliated securities	$	34,304,267
‡ Cost of investments in affiliated securities	$	1,935,348
§ Fair value of securities on loan	$	1,261,238
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at year end.

See accompanying notes

12

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Statement of Operations

For the year ended December 31, 2017

Investment income:
Dividend income from unaffiliated securities (net of foreign taxes)†	$	476,165
Dividend income from affiliated securities		4,130
Income derived from securities lending (Note 9)		3,451
Total investment income		483,746
Expenses:
Management and sub-advisory fees (Note 2)		283,341
Transfer agent fees:
Institutional Class (Note 2)		4,401
Y Class (Note 2)		11,189
Investor Class		1,484
A Class		456
C Class		71
Custody and fund accounting fees		12,841
Professional fees		37,749
Registration fees and expenses		63,585
Service fees (Note 2):
Y Class		2,236
Investor Class		8,605
A Class		4,872
C Class		765
Distribution fees (Note 2):
A Class		8,120
C Class		5,102
Prospectus and shareholder report expenses		9,939
Trustee fees (Note 2)		1,978
Other expenses		4,322
Total expenses		461,056
Net fees waived and expenses (reimbursed) (Note 2)		(98,429	)
Net expenses		362,627
Net investment income		121,119
Realized and unrealized gain (loss) from investments:
Net realized gain from:
Investments in unaffiliated securitiesA		1,615,880
Futures contracts		19,435
Change in net unrealized appreciation (depreciation) of:
Investments in unaffiliated securitiesB		2,517,772
Futures contracts		(1,892	)
Net gain from investments		4,151,195
Net increase in net assets resulting from operations	$	4,272,314
† Foreign taxes	$	1,531
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

13

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Statement of Changes in Net Assets

	Year Ended December 31, 2017			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	121,119		$	49,381
Net realized gain from investments in unaffiliated securities and futures contracts		1,635,315			93,102
Change in net unrealized appreciation of investments in unaffiliated securities and futures contracts		2,515,880			2,932,772
Net increase in net assets resulting from operations		4,272,314			3,075,255
Distributions to shareholders:
Net investment income:
Institutional Class		(52,087	)		(18,862	)
Y Class		(48,628	)		(16,961	)
Investor Class		(10,982	)		(8,783	)
A Class		(9,279	)		(5,812	)
C Class		–			(497	)
Net realized gain from investments:
Institutional Class		(615,487	)		–
Y Class		(574,620	)		–
Investor Class		(163,276	)		–
A Class		(149,011	)		–
C Class		(20,233	)		–
Net distributions to shareholders		(1,643,603	)		(50,915	)
Capital share transactions (Note 11):
Proceeds from sales of shares		23,004,549			11,394,900
Reinvestment of dividends and distributions		1,597,617			49,550
Cost of shares redeemed		(7,548,368	)		(923,263	)
Net increase in net assets from capital share transactions		17,053,798			10,521,187
Net increase in net assets		19,682,509			13,545,527
Net assets:
Beginning of period		20,750,017			7,204,490
End of period*	$	40,432,526		$	20,750,017
*Includes undistributed net investment income	$	40		$	–

See accompanying notes

14

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 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 a diversified, open-end management investment company. As of December 31, 2017, the Trust consists of thirty-three active series, one of which is presented in this filing: American Beacon Bahl & Gaynor Small Cap Growth Fund (the “Fund”). The remaining thirty-two 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.

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 through 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.

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.

15

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

Significant Accounting Policies

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 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.

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.

Allocation of Income, Trust Expenses, Gains, and Losses

Investment income, realized and unrealized gains and losses from investments of the Fund 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 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 Trust’s Board of Trustees (the “Board”) deems 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.

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.

16

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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 significant ownership of more than 5% of the Fund’s outstanding shares could have a material impact on the Fund. As of December 31, 2017, based on management’s evaluation of the shareholder account base, exclusive of omnibus accounts, one account has been identified as representing an affiliated significant ownership of approximately 10% of the Fund’s outstanding 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 $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 Fund, and the Manager have entered into an Investment Advisory Agreement with Bahl & Gaynor, Inc. (the “Sub-Advisor”) 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 schedule:

First $500 million	0.525	%
Over $500 million	0.50	%

The Management and Sub-Advisory Fees paid by the Fund for the year ended December 31, 2017 were as follows:

	Effective Fee Rate			Amount of Fees Paid
Management Fees		0.350	%	$	113,567
Sub-Advisor Fees		0.525	%		169,774
Total		0.875	%	$	283,341

As compensation for services provided by the Manager in connection with securities lending activities conducted by the Fund, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee 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 Statement of Operations. During the year ended December 31, 2017, the Manager received securities lending fees of $414 for the securities lending activities of the Fund.

17

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund. 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 services 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 Board’s 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 and Y Classes on an annual basis. During the year ended December 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
Bahl & Gaynor Small Cap Growth	$	14,504

As of December 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
Bahl & Gaynor Small Cap Growth	$	1,784

During the year ended December 31, 2017 the Manager voluntarily reimbursed sub-transfer agent fees to the Y Class of the Fund in the amount of $118.

18

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

Investments in Affiliated Funds

The Fund may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). Cash collateral received by the Fund in connection with securities lending may also be invested in the USG Select Fund. The Fund and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as 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 December 31, 2017, the Manager earned fees on the Fund’s direct investments 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
Bahl & Gaynor Small Cap Growth	$	528	$	880	$	1,408

Interfund Credit Facility

Pursuant to an exemptive order issued by the 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 December 31, 2017, the Fund borrowed on average $520,665 for 12 days at an average interest rate of 1.70% with interest charges of $278. This amount is included in “Other expenses” on the Statement of Operations.

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 Fund’s expense cap. During the year ended December 31, 2017, the Manager waived and/or reimbursed expenses as follows:

		Expense Cap							Expiration of Reimbursed Expenses
Fund	Class	1/1/2017 - 12/31/2017			Reimbursed Expenses		(Recouped) Expenses
Bahl & Gaynor Small Cap Growth	Institutional		0.98	%	$	39,478	$	-		2020
Bahl & Gaynor Small Cap Growth	Y		1.08	%		39,941		-		2020
Bahl & Gaynor Small Cap Growth	Investor		1.36	%		7,278		-		2020
Bahl & Gaynor Small Cap Growth	A		1.38	%		10,142		-		2020
Bahl & Gaynor Small Cap Growth	C		2.13	%		1,590		-		2020

Of these amounts, $16,194 was disclosed as a receivable from the Manager on the Statement of Assets and Liabilities at December 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 reimbursed by the Fund for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs

19

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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 Fund did not record a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely. The carryover of excess expenses potentially reimbursable to the Manager, but not recorded as a liability are as follows:

Fund	Recouped Expenses		Excess Expense Carryover		Expired Expense Carryover		Expiration of Reimbursed Expenses
Bahl & Gaynor Small Cap Growth	$	–	$	123,829	$	–		2018
Bahl & Gaynor Small Cap Growth		–		99,554		–		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 December 31, 2017, Foreside collected $4,536 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 December 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 December 31, 2017, CDSC fees of $174 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 $10,000 for each Board meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $10,000 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 Trusts 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.

20

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

Investments in open-end mutual funds are valued at the closing NAV per share of the mutual fund on the day of valuation.

Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the 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 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

Common stocks, preferred securities, ETFs, 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 generally 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

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

21

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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.

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.

Real Estate Investment Trusts

The Fund may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. The Fund re-characterizes distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information, which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year.

5.  Financial Derivative Instruments

The Fund may utilize derivative instruments to gain market exposure on cash balances or reduce market exposure in anticipation of liquidity needs. 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.

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

22

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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 December 31, 2017, the Fund entered into future contracts primarily for exposing cash to markets.

The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the 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 December 31, 2017
Bahl & Gaynor Small Cap Growth		6

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 December 31, 2017:
Liabilities:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts				Total
Payable for variation margin from open futures contracts(2)		$	-		$	-		$	-		$	-		$	(4,677	)		$	(4,677	)

The effect of financial derivative instruments on the Statement of Operations as of December 31, 2017:
Derivatives not accounted for as hedging instruments
Realized gain (loss) from derivatives recognized as a result of operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts			Total
Futures contracts		$	-		$	-		$	-		$	-		$	19,435		$	19,435
Net change in unrealized appreciation (depreciation) of derivatives recognized as a result from operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts			Equity contracts			Total
Futures contracts		$	-		$	-		$	-		$	-		$	(1,892)		$	(1,892	)

⁽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.

6.  Principal Risks

Investing in the Fund may involve certain risks including, but not limited to, those described below.

Dividend Risk

An issuer of stock held by the Fund may choose not to declare a dividend or the dividend rate might not remain at current levels. Dividend paying stocks might not experience the same level of earnings growth or capital appreciation as non-dividend paying stocks.

Equity Investment Risk

Equity securities are subject to market risk. The Fund’s investments in equity securities may include common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, REITs, depository receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges. Such investments may expose the

23

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

Fund to 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. Depository 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 depository receipt or foreign stock.

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.

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).

Investment Risk

An investment in the Fund is not a deposit with a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. When you sell your shares of the Fund, they could be worth less than what you paid for them. Therefore, you may lose money by investing in the Fund.

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

24

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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 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.

Securities Lending Risk

To the extent the Fund lends its securities, it may be subject to the following risks; i) borrowers of the Fund’s 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 Fund’s 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.

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 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, December 31, 2017.

Offsetting of Financial and Derivative Assets as of December 31, 2017:
	Assets		Liabilities
Futures Contracts	$	-	$	4,677
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	-	$	4,677
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)	$	-	$	(4,677	)

	Remaining Contractual Maturity of the Agreements As of December 31, 2017
	Overnight and Continuous		<30 days		Between 30 & 90 days		>90 days		Total
Securities Lending Transactions
Common Stocks	$	1,288,716	$	-	$	-	$	-	$	1,288,716
Total Borrowings	$	1,288,716	$	-	$	-	$	-	$	1,288,716
Gross amount of recognized liabilities for securities lending transactions									$	1,288,716

25

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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. Each of the tax years in the four year period ended December 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:

	Bahl & Gaynor Small Cap Growth Fund
	Year Ended December 31, 2017		Year Ended December 31, 2016
Distributions paid from:
Ordinary income*
Institutional Class	$	171,158	$	18,188
Y Class		159,794		16,392
Investors Class		42,569		8,679
A Class		38,107		5,691
C Class		3,914		431
Long-term capital gains
Institutional Class		496,416		674
Y Class		463,454		569
Investors Class		131,689		104
A Class		120,183		121
C Class		16,319		66
Total distributions paid	$	1,643,603	$	50,915

*For tax purposes, short-term capital gains are considered ordinary income distributions.

As of December 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)
Bahl & Gaynor Small Cap Growth	$	36,506,536	$	5,711,007	$	(525,986	)	$	5,185,021

Fund	Net Unrealized Appreciation (Depreciation)		Undistributed Ordinary Income		Undistributed Long-Term Capital Gains		Accumulated Capital and Other (Losses)			Other Temporary Differences		Distributable Earnings
Bahl & Gaynor Small Cap Growth	$	5,185,021	$	40	$	291,312	$	(50,439	)	$	2	$	5,425,936

26

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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 tax deferral of post-October capital losses 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 dividend re-designations as of December 31, 2017:

Fund	Paid-In-Capital		Undistributed (Overdistribution of) Net Investment Income			Accumulated Net Realized Gain (Loss)		Net Unrealized Appreciation (Depreciation)
Bahl & Gaynor Small Cap Growth	$	–	$	(103	)	$	103	$	–

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.

For the year ended December 31, 2017, the Fund did not have any capital loss carryforwards.

The Fund is permitted for tax purposes to defer into its next fiscal year qualified late year losses. Qualified late year capital losses are any capital losses incurred after October 31 through the Fund’s fiscal year end, December 31, 2017. Qualified late year ordinary losses are specified losses generally incurred after October 31 through the Fund’s fiscal year end, December 31, 2017. For the period ended December 31, 2017, Bahl & Gaynor Small Cap Growth Fund deferred $50,439 of short-term capital losses to January 1, 2018.

8.  Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2017 were as follows:

Fund	Purchases (non-U.S. Government Securities)		Sales (non-U.S. Government Securities)
Bahl & Gaynor Small Cap Growth	$	27,575,453	$	12,283,114

A summary of the Fund’s transactions in the USG Select Fund for the year ended December 31, 2017 were as follows:

Fund	Type of Transaction	December 31, 2016 Share/Fair Value		Purchases		Sales		December 31, 2017 Share/Fair Value		Dividend Income
Bahl & Gaynor Small Cap Growth	Direct	$	628,203	$	27,966,562	$	27,948,133	$	646,632	$	4,130
Bahl & Gaynor Small Cap Growth	Securities Lending		-		17,204,614		15,915,898		1,288,716		N/A

9.  Securities Lending

The Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at

27

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

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 Statement of Assets and Liabilities as a payable.

Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retained 80%, 10%, and 10%, respectively, of the income generated from securities lending.

While securities are on loan, the Fund continues to receive certain income associated with that security and any gain or loss in the market price that may occur during the term of the loan. In the case of domestic equities, the value of any dividend is received in the form of a substitute payment approximately equal to the dividend. In the case of foreign securities, a negotiated amount is received that is less than the actual dividend, but higher than the dividend amount minus the foreign tax that the Fund would be subject to on the dividend.

Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.

As of December 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
Bahl & Gaynor Small Cap Growth	$	1,261,238	$	1,288,716	$	-	$	1,288,716

Cash collateral is listed on the Fund’s Schedule of Investments and is shown on the Statement of Assets and Liabilities. Income earned on these investments is included in “Income derived from securities lending” on the Statement of Operations.

Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Fund’s Schedule of Investments or Statement of Assets and Liabilities.

10.  Borrowing Arrangements

Effective November 16, 2017, the Fund, along with certain other funds managed by the Manager (“Participating Funds”), entered into a committed revolving line of credit (the “Committed Line”) agreement with

28

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

State Street Bank and Trust Company (the “Bank”) to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Committed Line is $50 million with interest at a rate equal to the higher of (a) one-month London Inter-Bank Offered Rate (“LIBOR”) plus 1.25% per annum or (b) the Federal Funds rate plus 1.25% per annum on amounts borrowed. Each of the Participating Funds will pay a commitment fee at a rate of 0.25% per annum on the unused portion of the Committed Line amount. The Committed Line expires November 15, 2018 unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

Effective November 16, 2017, the Fund, along with certain other Participating Funds managed by the Manager, entered into an uncommitted discretionary demand revolving line of credit (the “Uncommitted Line”) agreement with the Bank to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Uncommitted Line is $50 million with interest at a rate equal to the higher of (a) one-month LIBOR plus 1.25% per annum or (b) the Federal Funds rate. The Uncommitted Line expires November 15, 2018 unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

The Participating Funds paid administration, legal and arrangement fees, which are recognized as a component of “Other expenses” on the Statement of Operations, along with commitment fees, that have been allocated among the Participating Funds based on average daily net assets. During the year ended December 31, 2017, the Fund did not utilize this facility.

11.  Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Fund:

	Institutional Class
	Year Ended December 31,
	2017						2016
Bahl & Gaynor Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		587,631		$	7,935,906			279,042		$	3,182,952
Reinvestment of dividends		47,615			667,574			1,466			18,862
Shares redeemed		(43,420	)		(610,922	)		(5,890	)		(66,509	)
Net increase in shares outstanding		591,826		$	7,992,558			274,618		$	3,135,305
	Y Class
	Year Ended December 31,
	2017						2016
Bahl & Gaynor Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		718,311		$	9,452,536			290,672		$	3,267,497
Reinvestment of dividends		41,376			578,020			1,225			15,718
Shares redeemed		(209,551	)		(2,914,447	)		(20,725	)		(219,124	)
Net increase in shares outstanding		550,136		$	7,116,109			271,172		$	3,064,091
	Investor Class
	Year Ended December 31,
	2017						2016
Bahl & Gaynor Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		270,909		$	3,653,794			251,437		$	2,931,223
Reinvestment of dividends		12,591			174,257			686			8,739
Shares redeemed		(251,801	)		(3,338,876	)		(17,200	)		(202,363	)
Net increase in shares outstanding		31,699		$	489,175			234,923		$	2,737,599
	A Class
	Year Ended December 31,
	2017						2016
Bahl & Gaynor Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		134,265		$	1,773,476			169,878		$	1,935,789
Reinvestment of dividends		11,445			158,290			454			5,785
Shares redeemed		(41,561	)		(547,100	)		(31,702	)		(391,741	)
Net increase in shares outstanding		104,149		$	1,384,666			138,630		$	1,549,833

29

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Notes to Financial Statements

December 31, 2017

	C Class
	Year Ended December 31,
	2017						2016
Bahl & Gaynor Small Cap Growth Fund	Shares			Amount			Shares			Amount
Shares sold		14,676		$	188,837			6,362		$	77,439
Reinvestment of dividends		1,442			19,476			36			446
Shares redeemed		(10,566	)		(137,023	)		(4,090	)		(43,526	)
Net increase in shares outstanding		5,552		$	71,290			2,308		$	34,359

12.  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.

30

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Institutional Class
	Year Ended December 31,									July 15, 2014A to December 31, 2014
	2017			2016			2015
Net asset value, beginning of period	$	12.77		$	10.17		$	10.71		$	10.00
Income (loss) from investment operations:
Net investment income		0.04			0.03			0.08			0.02
Net gains (losses) on investments (both realized and unrealized)		1.71			2.60			(0.39	)		0.71
Total income (loss) from investment operations		1.75			2.63			(0.31	)		0.73
Less distributions:
Dividends from net investment income		(0.05	)		(0.03	)		(0.06	)		(0.02	)
Distributions from net realized gains		(0.54	)		-			(0.16	)		-
Tax return of capital		-			-			(0.01	)		-
Total distributions		(0.59	)		(0.03	)		(0.23	)		(0.02	)
Net asset value, end of period	$	13.93		$	12.77		$	10.17		$	10.71
Total returnB		13.65	%		25.88	%		(2.96	)%		7.28	%C
Ratios and supplemental data:
Net assets, end of period	$	16,498,344		$	7,563,970		$	3,231,461		$	3,102,721
Ratios to average net assets:
Expenses, before reimbursements		1.32	%		1.85	%		3.04	%		8.98	%D
Expenses, net of reimbursements		0.98	%		0.98	%		0.98	%		0.98	%D
Net investment income (loss), before expense reimbursements		0.18	%		(0.30	)%		(1.33	)%		(7.51	)%D
Net investment income, net of reimbursements		0.52	%		0.57	%		0.72	%		0.49	%D
Portfolio turnover rate		38	%		23	%		54	%		12	%E
	Y Class
	Year Ended December 31,									July 15, 2014A to December 31, 2014
	2017			2016			2015
Net asset value, beginning of period	$	12.75		$	10.16		$	10.71		$	10.00
Income (loss) from investment operations:
Net investment income		0.05			0.04			0.06			0.01
Net gains (losses) on investments (both realized and unrealized)		1.68			2.58			(0.38	)		0.72
Total income (loss) from investment operations		1.73			2.62			(0.32	)		0.73
Less distributions:
Dividends from net investment income		(0.05	)		(0.03	)		(0.06	)		(0.02	)
Distributions from net realized gains		(0.54	)		-			(0.16	)		-
Tax return of capital		-			-			(0.01	)		-
Total distributions		(0.59	)		(0.03	)		(0.23	)		(0.02	)
Net asset value, end of period	$	13.89		$	12.75		$	10.16		$	10.71
Total returnB		13.52	%		25.80	%		(3.05	)%		7.28	%C
Ratios and supplemental data:
Net assets, end of period	$	15,114,316		$	6,856,954		$	2,711,465		$	387,622
Ratios to average net assets:
Expenses, before reimbursements		1.38	%		1.98	%		2.76	%		11.71	%D
Expenses, net of reimbursements		1.08	%		1.08	%		1.08	%		1.08	%D
Net investment income (loss), before expense reimbursements		0.12	%		(0.43	)%		(0.98	)%		(10.06	)%D
Net investment income, net of reimbursements		0.42	%		0.47	%		0.70	%		0.57	%D
Portfolio turnover rate		38	%		23	%		54	%		12	%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 rate is for the period from July 15, 2014 through December 31, 2014 and is not annualized.

See accompanying notes

31

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Investor Class
	Year Ended December 31,									July 15, 2014A to December 31, 2014
	2017			2016			2015
Net asset value, beginning of period	$	12.65		$	10.12		$	10.69		$	10.00
Income (loss) from investment operations:
Net investment income		0.02			0.03			0.05			0.01
Net gains (losses) on investments (both realized and unrealized)		1.66			2.53			(0.39	)		0.70
Total income (loss) from investment operations		1.68			2.56			(0.34	)		0.71
Less distributions:
Dividends from net investment income		(0.04	)		(0.03	)		(0.06	)		(0.02	)
Distributions from net realized gains		(0.54	)		-			(0.16	)		-
Tax return of capital		-			-			(0.01	)		-
Total distributions		(0.58	)		(0.03	)		(0.23	)		(0.02	)
Net asset value, end of period	$	13.75		$	12.65		$	10.12		$	10.69
Total returnB		13.23	%		25.31	%		(3.25	)%		7.08	%C
Ratios and supplemental data:
Net assets, end of period	$	4,344,476		$	3,595,277		$	498,128		$	239,138
Ratios to average net assets:
Expenses, before reimbursements		1.57	%		2.09	%		3.19	%		12.62	%D
Expenses, net of reimbursements		1.36	%		1.36	%		1.36	%		1.36	%D
Net investment (loss), before expense reimbursements		(0.09	)%		(0.51	)%		(1.47	)%		(11.12	)%D
Net investment income, net of reimbursements		0.12	%		0.23	%		0.35	%		0.14	%D
Portfolio turnover rate		38	%		23	%		54	%		12	%E
	A Class
	Year Ended December 31,									July 15, 2014A to December 31,
	2017			2016			2015			2014
Net asset value, beginning of period	$	12.64		$	10.11		$	10.69		$	10.00
Income (loss) from investment operations:
Net investment income		0.03			0.04			0.03			0.00
Net gains (losses) on investments (both realized and unrealized)		1.65			2.52			(0.38	)		0.71
Total income (loss) from investment operations		1.68			2.56			(0.35	)		0.71
Less distributions:
Dividends from net investment income		(0.03	)		(0.03	)		(0.06	)		(0.02	)
Distributions from net realized gains		(0.54	)		–			(0.16	)		–
Tax return of capital		–			–			(0.01	)		–
Total distributions		(0.57	)		(0.03	)		(0.23	)		(0.02	)
Net asset value, end of period	$	13.75		$	12.64		$	10.11		$	10.69
Total returnB		13.30	%		25.34	%		(3.34	)%		7.08	%C
Ratios and supplemental data:
Net assets, end of period	$	3,955,277		$	2,321,426		$	454,614		$	163,704
Ratios to average net assets:
Expenses, before reimbursements		1.69	%		2.18	%		2.88	%		13.84	%D
Expenses, net of reimbursements		1.38	%		1.38	%		1.38	%		1.38	%D
Net investment (loss), before expense reimbursements		(0.20	)%		(0.61	)%		(1.08	)%		(12.35	)%D
Net investment income, net of reimbursements		0.11	%		0.18	%		0.41	%		0.10	%D
Portfolio turnover rate		38	%		23	%		54	%		12	%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 rate is for the period from July 15, 2014 through December 31, 2014 and is not annualized.

See accompanying notes

32

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	C Class
	Year Ended December 31,									July 15, 2014A to December 31,
	2017			2016			2015			2014
Net asset value, beginning of period	$	12.42		$	10.00		$	10.65		$	10.00
Income (loss) from investment operations:
Net investment (loss)		(0.06	)		(0.05	)		(0.01	)		(0.02	)
Net gains (losses) on investments (both realized and unrealized)		1.60			2.49			(0.41	)		0.69
Total income (loss) from investment operations		1.54			2.44			(0.42	)		0.67
Less distributions:
Dividends from net investment income		–			(0.02	)		(0.06	)		(0.02	)
Distributions from net realized gains		(0.54	)		–			(0.16	)		–
Tax return of capital		–			–			(0.01	)		–
Total distributions		(0.54	)		(0.02	)		(0.23	)		(0.02	)
Net asset value, end of period	$	13.42		$	12.42		$	10.00		$	10.65
Total returnB		12.38	%		24.35	%		(4.01	)%		6.68	%C
Ratios and supplemental data:
Net assets, end of period	$	520,113		$	412,390		$	308,822		$	142,469
Ratios to average net assets:
Expenses, before reimbursements		2.44	%		3.09	%		3.84	%		13.72	%D
Expenses, net of reimbursements		2.13	%		2.13	%		2.13	%		2.13	%D
Net investment (loss), before expense reimbursements		(0.96	)%		(1.56	)%		(2.09	)%		(12.23	)%D
Net investment (loss), net of reimbursements		(0.65	)%		(0.60	)%		(0.38	)%		(0.64	)%D
Portfolio turnover rate		38	%		23	%		54	%		12	%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 rate is for the period from July 15, 2014 through December 31, 2014 and is not annualized.

See accompanying notes

33

American Beacon Bahl & Gaynor Small Cap Growth Fund^SM

Federal Tax Information

December 31, 2017 (Unaudited)

Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distributions for the taxable year ended December 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 Fund designated the following items with regard to distributions paid during the fiscal year ended December 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 Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

Corporate Dividends-Received Deduction:

Bahl & Gaynor Small Cap Growth 94.28 % 

Qualified Dividend Income:

Bahl & Gaynor Small Cap Growth 96.88 % 

Long-Term Capital Gain Distributions:

Bahl & Gaynor Small Cap Growth $ 1,228,061

Short-Term Capital Gain Distributions:

Bahl & Gaynor Small Cap Growth $ 294,463

Shareholders received notification in January 2018 of the applicable tax information necessary to prepare their 2017 income tax returns.

34

Trustees and Officers of the American Beacon Funds^SM (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-five 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** (81)	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 (48)	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 (57)	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).

35

Trustees and Officers of the American Beacon Funds^SM (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
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*** (75)	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 (72)	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. (63)	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).

36

Trustees and Officers of the American Beacon Funds^SM (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
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 (54)	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).

37

Trustees and Officers of the American Beacon Funds^SM (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
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 (46)	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 (61)	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 (43)	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).

38

Trustees and Officers of the American Beacon Funds^SM (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
Rebecca L. Harris (51)	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 (42)	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.

*** Mr. Dunning retired as of 12/31/2017. Douglas A. Lindgren became a new Trustee to each of the Trusts on 1/1/2018.

39

American Beacon Funds^SM

Privacy Policy

December 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.

40

Delivery of Documents

eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

By E-mail:	On the Internet:
american_beacon.funds@ambeacon.com	Visit our website at www.americanbeaconfunds.com
By Telephone: 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 (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month.	A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

CUSTODIAN State Street Bank and Trust Boston, Massachusetts TRANSFER AGENT DST Asset Manager Solutions, Inc. 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 Bahl & Gaynor Small Cap Growth Fund are service marks of American Beacon Advisors, Inc.

AR 12/17

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.

AHL MANAGED FUTURES STRATEGY FUND

Investing in derivative instruments involves liquidity, credit, interest rate and market risks. The use of quantitative models may lead to high levels of trading and concentration among certain investments, resulting in higher trading costs and return volatility. Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Regulatory changes may impair the Fund’s ability to qualify for federal income tax treatment as a regulated investment company, which could result in the Fund and shareholders incurring significant income tax expense. The Fund may have high portfolio turnover risk, which could increase the Fund’s transaction costs and possibly have a negative impact on performance. 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.

IONIC STRATEGIC ARBITRAGE FUND

The Fund’s strategy of investing in a variety of arbitrage strategies entails certain risks including that the sub-advisor’s judgments about allocation between such strategies, as well as individual arbitrage opportunities, may not perform to expectations, resulting in the Fund’s underperformance or even losses versus other similar funds. Arbitrage is the simultaneous purchase and sale of an asset or assets to take advantage of a perceived pricing anomaly. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. The Fund may have high portfolio turnover, which could increase the Fund’s transaction costs and possibly have a negative impact on performance. Small- or mid-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. The use of fixed-income securities, including convertible securities, entails interest rate and credit risks. In addition, the value of a convertible security could fluctuate based on the value of the underlying stock. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in derivative instruments involves liquidity, credit, interest rate and market risks. Short sales involve special risks, including greater reliance on the sub-advisor’s ability to accurately anticipate the future value of a security or instrument; the Fund’s losses are potentially unlimited in a short sale.

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 December 31, 2017

Contents

President’s Message	1
Market and Performance Overviews	2
Expense Examples	8
Report of Independent Registered Public Accounting Firm	10
Schedules of Investments:
AHL Managed Futures Strategy Fund	12
Ionic Strategic Arbitrage Fund	24
Financial Statements	39
Notes to Financial Statements	43
Financial Highlights:
AHL Managed Futures Strategy Fund	76
Ionic Strategic Arbitrage Fund	81
Affirmation of the Commodity Pool Operator	86
Federal Tax Information	87
Trustees and Officers	88
Privacy Policy	93

Additional Information Back Cover

President’s Message

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

Alternative Investments

Market Overview

December 31, 2017 (Unaudited)

Equity and bond markets produced solid returns throughout 2017, which was a period of unusually low volatility and provided tailwinds for traditional investment strategies. The S&P 500 Index and Bloomberg Barclays U.S. Aggregate Bond Index returned 21.8% and 3.5%, respectively. However, the market environment produced mixed results for alternative investment strategies.

The decline in volatility during 2017 was substantial as 90-day realized volatility for the S&P 500 Index ended the year at its lowest level in more than 50 years. Low volatility was not limited to equities as yields on 10-year Treasuries remained within a trading range of 60 basis points (0.60%) – the narrowest range in more than 50 years. Part of the impetus for such unprecedented low volatility seems to have been continued investor complacency fueled by accelerating economic growth and euphoria over the prospects for tax cuts. While marking its ninth consecutive year of gains, the S&P 500 Index remarkably did not report a single monthly decline in 2017.

Even more unusual, however, were the range-bound Treasury yields given a more hawkish Federal Reserve, increasing inflation expectations and the lowest unemployment rate in nearly 20 years. These factors, coupled with a pronounced flattening in the two- to 10-year Treasury yield curve to a low of 57 basis points (0.57%) – the flattest yield curve since 2007 – typically lead to higher volatility or expectations of recession. However, such was not the case last year. While these conflicting signals can perhaps be explained by sustained purchases of longer-dated Treasuries by foreign central banks, the fact that Treasury yields exhibited such low volatility remains surprising.

Traditional asset classes and higher-beta strategies thrived in 2017, while relative-value-oriented managers were challenged. Not surprisingly, the HFRX Equity Hedge Index gained 10.0% and the HFRX Absolute Return Index returned a modest 3.4%. The HFRX ED/Merger Arbitrage Index gained 2.2% as a decline in corporate transaction activity limited opportunities for event-driven strategies in general. Their performance was further affected in the fourth quarter when several large merger deals faltered. Trend-following strategies also produced meager returns in comparison to traditional asset classes as exhibited by the Morningstar Managed Futures category average return of 3.0% for the year. While the equity markets generally offered stable, consistent trends, many other sectors were trendless and difficult to trade.

2

American Beacon AHL Managed Futures Strategy Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

The Investor Class of the American Beacon AHL Managed Futures Strategy Fund (the “Fund”) returned 4.78% for the twelve months ended December 31, 2017.

Comparison of Change in Value of a $10,000 Investment for the period from 8/19/2014 through 12/31/2017

Total Returns for the Period ended December 31, 2017
	Ticker	1 Year			3 Years			Since Inception (8/19/2014)			Value of $10,000 8/19/2014- 12/31/2017
Institutional Class (1,5)	AHLIX		5.21	%		1.22	%		4.94	%		$	11,764
Y Class (1,5)	AHLYX		5.13	%		1.13	%		4.83	%		$	11,722
Investor Class (1,5)	AHLPX		4.78	%		0.82	%		4.51	%		$	11,603
A without Sales Charge (1,2,5)	AHLAX		4.67	%		0.78	%		4.48	%		$	11,590
A with Sales Charge (1,2,5)	AHLAX		(1.33	)%		(1.20	)%		2.66	%		$	10,924
C without Sales Charge (1,3,5)	AHLCX		4.06	%		0.06	%		3.74	%		$	11,315
C with Sales Charge (1,3,5)	AHLCX		3.06	%		0.06	%		3.74	%		$	11,315
BofA Merrill Lynch 3-Month Treasury Bill Index (4)			0.86	%		0.41	%		0.37	%		$	10,124

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 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.

2. A Class shares have a maximum sales charge of 5.75%.

3. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.

3

American Beacon AHL Managed Futures Strategy Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

4. The BofA Merrill Lynch 3-Month Treasury Bill Index is designed to measure the total return on cash, including price and interest income, based on short- term government Treasury bills of about 90-day maturity. One cannot directly invest in an index.

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 were 1.90%, 1.97%, 2.13%, 2.29%, and 3.04%, 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 the period, Equities was the only sector to have positive performance making it far and away the best performing sector returning approximately 14.6%. The stellar performance was led by long positions in the Korean Kospi which added approximately 2.7% followed by long positions in the S&P 500 which contributed approximately 1.9% to the Fund.

The remaining sectors in the Fund all detracted from performance for the annual period. The worst performer in the strategy was Fixed Income, which lost approximately 4.9%, and all markets were negative for the year. Short Sterling detracted the most (down 0.6%) with the bulk of the losses coming from long positions in September when the Bank of England hinted at a rate rise in November. Long positioning in the German 10-year bund for the majority of the period lost approximately 0.6%.

Commodities also detracted from Fund returns by about 1.9%. Precious Metals positions hurt performance the most, led by mixed positioning in Gold (down 1.5%) and primarily short positioning in Silver (down 1.1%).

Lastly, the Currency sector was detrimental to Fund performance losing approximately 1.7% for the period. Losses were led by the Japanese yen versus U.S dollar pair (down 1.5%) which was long the yen for most of the year except for August and September. A long position in the British pound versus the U.S. dollar lost approximately 0.9%.

Looking forward, the Fund’s sub-advisor will continue to implement its trading strategy designed to capitalize on price trends (up or down) in a broad range of global equities, fixed income, currency, and commodity futures markets; seeking to achieve the Fund’s goal of capital growth.

Commodities		% of VaR	*
Natural Gas	Short	7.24
Crude Oil	Long	6.54
Copper	Long	5.61
RBOB Gasoline	Long	3.04
Silver	Short	2.34
Currencies		% of VaR	*
JPY/USD	Short	5.37
EUR/USD	Long	3.97
GBP/USD	Long	2.57
AUD/USD	Long	2.10
CLP/USD	Long	1.87
Equities		% of VaR	*
Korean Kospi	Long	2.34
Hang Seng	Long	1.87
Russell 2000 Index	Long	1.64
Nasdaq 100 Index	Long	1.64
Australian SPI 200 Index	Long	1.40
Interest Rate		% of VaR	*
U.S. Treasuries	Long	1.87
Eurodollar	Long	1.40
Euro Bond	Long	0.93
Japanese Bonds	Long	0.70
Euribor	Short	0.70

* Value at Risk (“VaR”) is a measure of the potential loss in value of a portfolio over a defined period for a given confidence interval. A one-day VaR at the 95% confidence level represents that there is a 5% probability that the mark-to-market loss on the portfolio over a one-day horizon will exceed the value (assuming normal markets and no trading in the portfolio).

4

American Beacon Ionic Strategic Arbitrage Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

The Investor Class of the American Beacon Ionic Strategic Arbitrage Fund (the “Fund”) returned -0.49% for the twelve months ended December 31, 2017.

Comparison of Change in Value of a $10,000 Investment for the period from 9/01/2013 through 12/31/2017

Total Returns for the Period ended December 31, 2017
	Ticker	1 Year			3 Years			Since Inception (9/1/2013)			Value of $10,000 9/1/2013- 12/31/2017
Institutional Class (1,7)	IONIX		(0.04	)%		1.93	%		2.37	%		$	11,069
Y Class (1,2,7)	IONYX		(0.27	)%		1.88	%		2.34	%		$	11,054
Investor Class (1,3,7)	IONPX		(0.49	)%		1.64	%		2.17	%		$	10,976
A without Sales Charge (1,4,7)	IONAX		(0.51	)%		1.63	%		2.17	%		$	10,974
A with Sales Charge (1,4,7)	IONAX		(5.24	)%		0.01	%		1.03	%		$	10,455
C without Sales Charge (1,5,7)	IONCX		(1.33	)%		0.96	%		1.70	%		$	10,758
C with Sales Charge (1,5,7)	IONCX		(2.33	)%		0.96	%		1.70	%		$	10,758
Bloomberg Barclays U.S. Aggregate Index (6)			3.54	%		2.24	%		3.10	%		$	11,416
BofA Merrill Lynch 3-Month LIBOR Index (6)			1.11	%		0.67	%		0.53	%		$	10,233

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. Simultaneous with the commencement of the Fund’s investment operations on June 30, 2015, the Ionic Absolute Return Fund LLC (“Private Fund”), a privately offered investment fund managed by the Fund’s sub-advisor transferred its assets to the Institutional Class shares of the Fund. A portion of the fees charged to each Class of the Fund has been waived since 6/30/15. Performance prior to waiving fees was lower than actual returns shown.

2. Fund performance for the three-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the Y Class. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 9/1/13.

5

American Beacon Ionic Strategic Arbitrage Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

3. Fund performance for the three-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the Investor Class. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 9/1/13.

4. Fund performance for the three-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the A Class. Expenses of the A Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 9/1/13. A Class shares have a maximum sales charge of 5.75%.

5. Fund performance for the three-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the C Class. Expenses of the C Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 9/1/13. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.

6. The BofA Merrill Lynch 3-Month LIBOR Index represents the London interbank offered rate (LIBOR) with a constant 3-month average maturity. LIBOR is a composite of the rates of interest at which banks borrow from one another in the London market, and it is a widely used benchmark for short-term interest rates. The 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. One cannot directly invest in an index.

7. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares were 3.20%, 3.27%, 3.51%, 3.64%, and 4.38%, 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.

Relative to the performance of the equities markets, the Fund has tended to perform better when more volatility was present (positive performance in 11 of the 13 months since inception when S&P was down) and underperform during periods of steady gains and low or decreasing volatility, as was the case in 2017. Using the 11.1 average price of the VIX Index as a benchmark (the lowest since its inception in 1990), 2017 can be considered one of the least volatile years on record. While a recovery of corporate earnings has likely contributed to the current low volatility environment, quantitative easing among central bankers around the world since 2008 appears to have been the biggest factor behind this sustained low volatility.

The lack of volatility remained a headwind for the Fund overall and the Fund’s Volatility Arbitrage strategy in particular. Losses in the Volatility Arbitrage strategy were primarily attributable to long volatility-oriented exposure in foreign exchange and emerging market equity positions. U.S. equity positions designed to benefit from the gap between realized and implied volatility mitigated some of these losses. Positions established to benefit from changing volatility levels in gold throughout the year were also accretive to performance.

The Fund’s Convertible Arbitrage strategy contributed positively to performance during the period. Though headline equity volatility declined sharply in 2017, a high level of dispersion benefited the strategy, creating price movement in a number of underlying equity positions that were additive to performance. Tighter credit spreads over the course of the year were also beneficial and, coupled with a lack of new issuance, caused valuations in the U.S. convertible market to move higher.

The Fund’s Equity Arbitrage strategy added to returns over the period and, in particular, had a strong fourth quarter. Positions in closed-end funds in the Energy and MLP sector were top contributors in the fourth quarter as well as two event-oriented positions in the Technology and Healthcare sectors. Over the course of the year, an index ETF position designed to benefit from lower volatility was the strongest performer. While lower overall equity volatility negatively impacted warrant positions in the strategy, two capital structure arbitrage positions in the Technology sector and a merger arbitrage position were the primary drivers of underperformance during the fourth quarter when a number of large corporate transactions faltered and caused spread widening across the event driven space.

The Credit/Interest Rate Arbitrage strategy detracted from performance over the period. This was primarily attributable to the impact that the pronounced flattening in the yield curve had on the Fund’s positions in mortgage derivatives. Over the course of year, the spread between two-year and ten-year treasuries narrowed

6

American Beacon Ionic Strategic Arbitrage Fund^SM

Performance Overview

December 31, 2017 (Unaudited)

significantly. In response to these narrowing spreads, the Fund reduced exposure to mortgage derivatives and increased positions in closed-end funds focusing on the floating rate loan sector. These closed-end funds generated solid gains as net asset value discounts narrowed meaningfully.

The Fund’s sub-advisor continues to allocate assets among arbitrage strategies, including Convertible, Credit/Interest Rate, Equity and Volatility Arbitrage, seeking capital appreciation with low volatility and low correlation to the broader equity, interest rate and currency markets.

Positions By Investment Strategy			Fund
Convertible Arbitrage			31
Credit/Interest Rate Arbitrage			5
Equity Arbitrage			46
Volatility Arbitrage			14
Total			96
Investment Strategy Exposure (%)	LMV	*	SMV	**
Convertible Arbitrage	40		(28	)
Credit/Interest Rate Arbitrage	26		-
Equity Arbitrage	32		(47	)
Volatility Arbitrage	27		(12	)
Total	125		(87	)

* Long Market Value

** Short Market Value

7

American Beacon Funds^SM

Expense Examples

December 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 July 1, 2017 through December 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 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.

8

American Beacon Funds^SM

Expense Examples

December 31, 2017 (Unaudited)

American Beacon AHL Managed Futures Strategy Fund
	Beginning Account Value 7/1/2017		Ending Account Value 12/31/2017		Expenses Paid During Period 7/1/2017-12/31/2017*
Institutional Class
Actual		$1,000.00		$1,058.20		$7.99
Hypothetical**		$1,000.00		$1,017.40		$7.83
Y Class
Actual		$1,000.00		$1,058.50		$8.51
Hypothetical**		$1,000.00		$1,016.90		$8.34
Investor Class
Actual		$1,000.00		$1,057.00		$9.95
Hypothetical**		$1,000.00		$1,015.50		$9.75
A Class
Actual		$1,000.00		$1,055.90		$10.00
Hypothetical**		$1,000.00		$1,015.50		$9.80
C Class
Actual		$1,000.00		$1,053.00		$13.92
Hypothetical**		$1,000.00		$1,011.60		$13.64

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.54%, 1.64%, 1.92%, 1.94%, and 2.69% 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 Ionic Strategic Arbitrage Fund
	Beginning Account Value 7/1/2017		Ending Account Value 12/31/2017		Expenses Paid During Period 7/1/2017-12/31/2017*
Institutional Class
Actual		$1,000.00		$1,000.70		$12.51
Hypothetical**		$1,000.00		$1,012.70		$12.58
Y Class
Actual		$1,000.00		$999.50		$14.16
Hypothetical**		$1,000.00		$1,011.00		$14.24
Investor Class
Actual		$1,000.00		$998.50		$15.26
Hypothetical**		$1,000.00		$1,009.90		$15.35
A Class
Actual		$1,000.00		$998.20		$15.71
Hypothetical**		$1,000.00		$1,009.50		$15.80
C Class
Actual		$1,000.00		$993.40		$18.64
Hypothetical**		$1,000.00		$1,006.50		$18.76

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 2.48%, 2.81%, 3.03%, 3.12%, and 3.71% 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.

9

American Beacon Funds^SM

Report of Independent Registered Public Accounting Firm

To the Shareholders of American Beacon AHL Managed Futures Strategy Fund and American Beacon Ionic Strategic Arbitrage Fund and the Board of Trustees of American Beacon Funds

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of assets and liabilities of American Beacon AHL Managed Futures Strategy Fund and the statement of assets and liabilities of American Beacon Ionic Strategic Arbitrage Fund (collectively referred to as the “Funds”), (two of the funds constituting American Beacon Funds (the “Trust”)), including the (consolidated) schedules of investments, as of December 31, 2017, and the related (consolidated) statements of operations and changes in net assets, and the (consolidated) financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the (consolidated) financial position of each of the Funds (two of the funds constituting American Beacon Funds) at December 31, 2017, and the (consolidated) results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.

Individual fund constituting the American Beacon Funds	Statement of operations	Statements of changes in net assets	Financial highlights
American Beacon AHL Managed Futures Strategy Fund and its subsidiary	For the year ended December 31, 2017	For each of the two years in the period ended December 31, 2017	For each of the three years in the period ended December 31, 2017 and the period from August 19, 2014 (commencement of operations) to December 31, 2014
American Beacon Ionic Strategic Arbitrage Fund	For the year ended December 31, 2017	For each of the two years in the period ended December 31, 2017	For each of the two years in the period ended December 31, 2017 and the period from June 30, 2015 (commencement of operations) to December 31, 2015

Basis for Opinion

These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received.

10

American Beacon Funds^SM

Report of Independent Registered Public Accounting Firm

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more American Beacon investment companies since 1987.

Dallas, Texas

February 28, 2018

11

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

	Shares			Fair Value
SHORT-TERM INVESTMENTS - 89.90%
Investment Companies - 3.93%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%A B C			20,549,617		$	20,549,617
	Principal Amount
U.S. Treasury Obligations - 85.97%
U.S. Treasury Bills,
0.977%, Due 1/11/2018A		$	56,500,000			56,483,368
1.018%, Due 1/25/2018A			56,100,000			56,055,915
1.034%, Due 2/1/2018A			56,000,000			55,940,947
1.060%, Due 2/8/2018A			81,000,000			80,895,833
1.091%, Due 3/1/2018			5,000,000			4,989,749
1.150%, Due 3/8/2018A			47,500,000			47,389,043
1.361%, Due 3/29/2018A			59,500,000			59,305,448
1.249%, Due 4/12/2018A			74,500,000			74,212,347
1.514%, Due 6/21/2018A			14,000,000			13,900,833
						449,173,483
Total Short-Term Investments (Cost $469,850,037)						469,723,100
TOTAL INVESTMENTS – 89.90% (Cost $469,850,037)						469,723,100
OTHER ASSETS, NET OF LIABILITIES – 10.10%						52,761,346
TOTAL NET ASSETS - 100.00%					$	522,484,446
Percentages are stated as a percent of net assets.

^A All or a portion represents positions held by the American Beacon Cayman Managed Futures Strategy Fund, Ltd.

^B The Fund is affiliated by having the same investment advisor.

^C 7-day yield.

Futures Contracts Open on December 31, 2017:
Long Futures
Commodity Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
Brent Crude FuturesA	351	January 2018	$	22,290,807	$	23,471,370	$	1,180,563
Copper FuturesA	286	March 2018		22,839,827		23,598,575		758,748
Gasoline RBOB FuturesA	239	January 2018		17,521,193		18,026,240		505,047
Gold 100oz FuturesA	182	February 2018		23,601,303		23,829,260		227,957
LME Copper FuturesA	207	March 2018		35,041,919		37,505,812		2,463,893
LME Lead FuturesA	172	March 2018		10,826,740		10,696,250		(130,490	)
LME Nickel FuturesA	4	February 2018		281,906		305,712		23,806
LME Nickel FuturesA	60	March 2018		4,105,749		4,593,600		487,851
LME Primary Aluminum FuturesA	4	January 2018		214,958		225,825		10,867
LME Primary Aluminum FuturesA	588	March 2018		31,692,838		33,391,050		1,698,212
LME Zinc FuturesA	322	March 2018		25,537,006		26,770,275		1,233,269
Low Sulphur Gasoil FuturesA	244	January 2018		13,747,159		14,646,100		898,941
Low Sulphur Gasoil FuturesA	2	February 2018		119,627		120,350		723
NY Harbor ULSD FuturesA	169	January 2018		13,822,174		14,679,374		857,200
WTI Crude FuturesA	457	January 2018		26,727,587		27,611,940		884,353
			$	248,370,793	$	259,471,733	$	11,100,940

See accompanying notes

12

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Currency Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
Australian Dollar Currency Futures	510	March 2018	$	39,363,868	$	39,836,100	$	472,232
British Pound Currency Futures	621	March 2018		52,170,355		52,618,106		447,751
Canadian Dollar Currency Futures	323	March 2018		25,669,428		25,807,700		138,272
Euro Currency Futures	631	March 2018		94,129,554		95,245,506		1,115,952
			$	211,333,205	$	213,507,412	$	2,174,207
Equity Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
Amsterdam Index Futures	89	January 2018	$	11,797,430	$	11,638,275	$	(159,155	)
CAC40 Index Futures	138	January 2018		8,976,038		8,800,053		(175,985	)
DAX Index Futures	38	March 2018		15,042,715		14,727,214		(315,501	)
Euro Stoxx 50 Index Futures	336	March 2018		14,439,795		14,093,167		(346,628	)
FTSE 100 Index Futures	252	March 2018		25,364,327		26,037,403		673,076
FTSE/JSE Top 40 Index Futures	420	March 2018		17,666,046		18,039,645		373,599
FTSE/MIB Index Futures	61	March 2018		8,274,176		7,968,372		(305,804	)
Hang Seng Index Futures	326	January 2018		38,143,050		38,441,279		298,229
KOSPI 200 Index Futures	427	March 2018		32,143,837		32,522,080		378,243
Mini MSCI EAFE Index Futures	184	March 2018		18,580,398		18,818,600		238,202
Mini MSCI Emerging Markets Index Futures	288	March 2018		16,120,355		16,757,280		636,925
MSCI Taiwan Stock Index Futures	294	January 2018		11,404,236		11,554,200		149,964
NASDAQ 100 E-Mini Futures	214	March 2018		27,476,562		27,429,450		(47,112	)
Nikkei 225 (SGX) Futures	163	March 2018		16,385,107		16,462,783		77,676
OMXS30 Index Futures	318	January 2018		6,299,817		6,114,339		(185,478	)
Russell 2000 E-Mini Index Futures	307	March 2018		23,472,565		23,585,275		112,710
S&P 500 E-Mini Index Futures	302	March 2018		40,233,414		40,407,600		174,186
S&P/TSX 60 Index Futures	142	March 2018		21,648,780		21,700,914		52,134
SPI 200 Futures	323	March 2018		38,081,126		38,021,489		(59,637	)
TOPIX Index Futures	127	March 2018		20,269,651		20,484,599		214,948
			$	411,819,425	$	413,604,017	$	1,784,592
Interest Rate Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
3-Month Euro Euribor Futures	1,883	March 2019	$	566,520,847	$	566,209,407	$	(311,440	)
3-Month Euro Euribor Futures	270	December 2019		81,061,813		80,964,855		(96,958	)
3-Month Euro Euribor Futures	1	September 2020		299,510		299,089		(421	)
90-Day Sterling Futures	81	March 2019		13,579,339		13,581,541		2,202
Australian 10-Year Bond Futures	66	March 2018		6,713,626		6,667,378		(46,248	)
Euro-Bund Futures	210	March 2018		41,151,999		40,770,529		(381,470	)
Euro-Buxl 30-Year Bond Futures	57	March 2018		11,431,850		11,215,498		(216,352	)
Japanese 10-Year Government Bond Futures	78	March 2018		104,470,401		104,401,598		(68,803	)
Long GILT Futures	58	March 2018		9,774,652		9,819,989		45,337
U.S. Ultra Bond Futures	74	March 2018		12,405,324		12,406,563		1,239
			$	847,409,361	$	846,336,447	$	(1,072,914	)

See accompanying notes

13

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Short Futures
Commodity Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount			Contract Value			Unrealized Appreciation (Depreciation)
Cocoa FuturesA	323	March 2018	$	(6,191,572	)	$	(6,111,160	)	$	80,412
Coffee FuturesA	231	March 2018		(11,018,513	)		(10,932,075	)		86,438
Corn FuturesA	747	March 2018		(13,191,144	)		(13,100,513	)		90,631
Kansas City Hard Red Winter Wheat FuturesA	357	March 2018		(7,760,129	)		(7,626,413	)		133,716
LME Copper FuturesA	68	March 2018		(11,262,450	)		(12,320,750	)		(1,058,300	)
LME Lead FuturesA	97	March 2018		(6,033,335	)		(6,032,188	)		1,147
LME Nickel FuturesA	27	March 2018		(1,769,421	)		(2,067,120	)		(297,699	)
LME Primary Aluminum FuturesA	4	January 2018		(211,092	)		(225,825	)		(14,733	)
LME Primary Aluminum FuturesA	244	March 2018		(12,671,630	)		(13,856,150	)		(1,184,520	)
LME Zinc FuturesA	118	March 2018		(9,215,647	)		(9,810,225	)		(594,578	)
Natural Gas FuturesA	970	January 2018		(26,405,429	)		(28,644,100	)		(2,238,671	)
Natural Gas Swap FuturesA	148	March 2018		(1,035,123	)		(1,017,130	)		17,993
Natural Gas Swap FuturesA	148	April 2018		(1,035,123	)		(1,014,170	)		20,953
Natural Gas Swap FuturesA	148	May 2018		(1,035,123	)		(1,026,010	)		9,113
Natural Gas Swap FuturesA	148	June 2018		(1,035,123	)		(1,037,480	)		(2,357	)
Natural Gas Swap FuturesA	148	July 2018		(1,035,123	)		(1,038,590	)		(3,467	)
Natural Gas Swap FuturesA	148	August 2018		(1,035,123	)		(1,031,930	)		3,193
Natural Gas Swap FuturesA	148	September 2018		(1,035,123	)		(1,040,440	)		(5,317	)
Natural Gas Swap FuturesA	168	October 2018		(1,256,882	)		(1,204,140	)		52,742
Natural Gas Swap FuturesA	168	November 2018		(1,256,882	)		(1,258,740	)		(1,858	)
Natural Gas Swap FuturesA	168	December 2018		(1,256,882	)		(1,294,020	)		(37,138	)
Natural Gas Swap FuturesA	168	January 2019		(1,256,882	)		(1,285,620	)		(28,738	)
Natural Gas Swap FuturesA	168	February 2019		(1,256,882	)		(1,259,580	)		(2,698	)
Silver FuturesA	237	March 2018		(19,225,426	)		(20,316,825	)		(1,091,399	)
Soybean FuturesA	375	March 2018		(18,231,536	)		(18,032,812	)		198,724
Sugar #11 World FuturesA	640	February 2018		(9,962,916	)		(10,866,688	)		(903,772	)
			$	(166,680,511	)	$	(173,450,694	)	$	(6,770,183	)
Currency Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount			Contract Value			Unrealized Appreciation (Depreciation)
Japanese Yen Currency Futures	1,067	March 2018	$	(118,236,741	)	$	(118,890,475	)	$	(653,734	)
Mexican Peso Futures	691	March 2018		(17,461,374	)		(17,302,640	)		158,734
New Zealand Dollar Currency Futures	52	March 2018		(3,608,448	)		(3,685,240	)		(76,792	)
Swiss Franc Currency Futures	116	March 2018		(14,738,846	)		(14,974,150	)		(235,304	)
U.S. Dollar Index Futures	623	March 2018		(58,046,329	)		(57,207,598	)		838,731
			$	(212,091,738	)	$	(212,060,103	)	$	31,635
Interest Rate Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount			Contract Value			Unrealized Appreciation (Depreciation)
90-Day Eurodollar Futures	1,050	March 2019	$	(256,824,682	)	$	(256,711,875	)	$	112,807
90-Day Eurodollar Futures	628	December 2019		(153,393,282	)		(153,341,900	)		51,382
90-Day Eurodollar Futures	481	September 2020		(117,417,156	)		(117,412,100	)		5,056
90-Day Sterling Futures	68	December 2019		(11,374,151	)		(11,384,539	)		(10,388	)
Australian 3-Year Bond Futures	785	March 2018		(68,170,790	)		(68,212,075	)		(41,285	)
Euro-Bobl Futures	369	March 2018		(58,312,731	)		(58,315,769	)		(3,038	)
Euro-Schatz Futures	331	March 2018		(44,494,401	)		(44,506,129	)		(11,728	)
U.S. Long Bond Futures	54	March 2018		(8,150,822	)		(8,262,000	)		(111,178	)
U.S. Treasury 10-Year Note Futures	373	March 2018		(46,113,438	)		(46,269,485	)		(156,047	)
U.S. Treasury 2-Year Note Futures	605	March 2018		(129,813,030	)		(129,536,173	)		276,857
U.S. Treasury 2-Year Note Futures	678	March 2018		(79,004,259	)		(78,759,235	)		245,024
			$	(973,068,742	)	$	(972,711,280	)	$	357,462

See accompanying notes

14

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Forward Foreign Currency Contracts Open on December 31, 2017:
Currency Purchased*		Currency Sold*		Settlement Date	Counterparty		Unrealized Appreciation		Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
PHP	50,065	USD	49,462	1/10/2018		DUB	$	603	$	-		$	603
PHP	450,586	USD	445,810	1/10/2018		DUB		4,776		-			4,776
PHP	1,301,692	USD	1,283,367	1/10/2018		DUB		18,325		-			18,325
PHP	8,911,585	USD	8,794,466	1/10/2018		DUB		117,119		-			117,119
USD	150,213	PHP	150,195	1/10/2018		DUB		18		-			18
USD	50,147	PHP	50,065	1/10/2018		DUB		82		-			82
USD	50,120	PHP	50,065	1/10/2018		DUB		55		-			55
INR	19,210,917	USD	18,954,602	1/12/2018		DUB		256,315		-			256,315
INR	20,149,943	USD	19,661,892	1/12/2018		DUB		488,051		-			488,051
TWD	84,075	USD	84,300	1/18/2018		DUB		-		(225	)		(225	)
TWD	756,672	USD	759,852	1/18/2018		DUB		-		(3,180	)		(3,180	)
TWD	1,345,195	USD	1,349,619	1/18/2018		DUB		-		(4,424	)		(4,424	)
TWD	1,681,494	USD	1,689,646	1/18/2018		DUB		-		(8,152	)		(8,152	)
TWD	1,765,569	USD	1,777,173	1/18/2018		DUB		-		(11,604	)		(11,604	)
TWD	3,951,511	USD	3,925,827	1/18/2018		DUB		25,684		-			25,684
USD	167,399	TWD	168,149	1/18/2018		DUB		-		(750	)		(750	)
USD	167,123	TWD	168,149	1/18/2018		DUB		-		(1,026	)		(1,026	)
USD	166,906	TWD	168,149	1/18/2018		DUB		-		(1,243	)		(1,243	)
USD	167,532	TWD	168,149	1/18/2018		DUB		-		(617	)		(617	)
USD	166,989	TWD	168,149	1/18/2018		DUB		-		(1,160	)		(1,160	)
USD	166,933	TWD	168,149	1/18/2018		DUB		-		(1,216	)		(1,216	)
USD	167,336	TWD	168,149	1/18/2018		DUB		-		(813	)		(813	)
USD	83,628	TWD	84,075	1/18/2018		DUB		-		(447	)		(447	)
USD	83,495	TWD	84,075	1/18/2018		DUB		-		(580	)		(580	)
USD	83,579	TWD	84,075	1/18/2018		DUB		-		(496	)		(496	)
USD	83,724	TWD	84,075	1/18/2018		DUB		-		(351	)		(351	)
USD	83,660	TWD	84,075	1/18/2018		DUB		-		(415	)		(415	)
USD	83,459	TWD	84,075	1/18/2018		DUB		-		(616	)		(616	)
USD	83,722	TWD	84,075	1/18/2018		DUB		-		(353	)		(353	)
USD	83,629	TWD	84,075	1/18/2018		DUB		-		(446	)		(446	)
USD	83,431	TWD	84,075	1/18/2018		DUB		-		(644	)		(644	)
KRW	186,892	USD	184,180	1/22/2018		DUB		2,712		-			2,712
KRW	467,231	USD	460,409	1/22/2018		DUB		6,822		-			6,822
KRW	23,361,547	USD	23,010,935	1/22/2018		DUB		350,612		-			350,612
KRW	23,828,778	USD	23,401,795	1/22/2018		DUB		426,983		-			426,983
BRL	30,147	USD	30,970	1/3/2018		HUS		-		(823	)		(823	)
BRL	30,147	USD	30,994	1/3/2018		HUS		-		(847	)		(847	)
BRL	60,294	USD	62,000	1/3/2018		HUS		-		(1,706	)		(1,706	)
BRL	60,294	USD	62,000	1/3/2018		HUS		-		(1,706	)		(1,706	)
BRL	60,294	USD	60,768	1/3/2018		HUS		-		(474	)		(474	)
BRL	60,294	USD	62,000	1/3/2018		HUS		-		(1,706	)		(1,706	)
BRL	60,294	USD	62,000	1/3/2018		HUS		-		(1,706	)		(1,706	)
BRL	90,440	USD	92,766	1/3/2018		HUS		-		(2,326	)		(2,326	)
BRL	90,440	USD	92,766	1/3/2018		HUS		-		(2,326	)		(2,326	)
BRL	90,440	USD	92,881	1/3/2018		HUS		-		(2,441	)		(2,441	)
BRL	90,440	USD	92,809	1/3/2018		HUS		-		(2,369	)		(2,369	)
BRL	90,440	USD	92,971	1/3/2018		HUS		-		(2,531	)		(2,531	)
BRL	90,440	USD	91,141	1/3/2018		HUS		-		(701	)		(701	)
BRL	90,440	USD	91,113	1/3/2018		HUS		-		(673	)		(673	)
BRL	90,440	USD	91,113	1/3/2018		HUS		-		(673	)		(673	)
BRL	90,440	USD	92,968	1/3/2018		HUS		-		(2,528	)		(2,528	)
BRL	90,440	USD	92,824	1/3/2018		HUS		-		(2,384	)		(2,384	)
BRL	355,732	USD	364,850	1/3/2018		HUS		-		(9,118	)		(9,118	)
BRL	414,519	USD	424,947	1/3/2018		HUS		-		(10,428	)		(10,428	)
BRL	542,643	USD	557,634	1/3/2018		HUS		-		(14,991	)		(14,991	)
BRL	544,451	USD	558,493	1/3/2018		HUS		-		(14,042	)		(14,042	)
BRL	560,731	USD	575,104	1/3/2018		HUS		-		(14,373	)		(14,373	)
BRL	572,789	USD	588,928	1/3/2018		HUS		-		(16,139	)		(16,139	)

See accompanying notes

15

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Currency Purchased*		Currency Sold*		Settlement Date	Counterparty		Unrealized Appreciation		Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
BRL	649,362	USD	666,007	1/3/2018		HUS	$	-	$	(16,645	)	$	(16,645	)
BRL	679,509	USD	698,023	1/3/2018		HUS		-		(18,514	)		(18,514	)
BRL	790,751	USD	811,547	1/3/2018		HUS		-		(20,796	)		(20,796	)
BRL	934,551	USD	958,358	1/3/2018		HUS		-		(23,807	)		(23,807	)
BRL	942,088	USD	965,430	1/3/2018		HUS		-		(23,342	)		(23,342	)
BRL	1,024,992	USD	1,051,883	1/3/2018		HUS		-		(26,891	)		(26,891	)
BRL	1,099,153	USD	1,128,933	1/3/2018		HUS		-		(29,780	)		(29,780	)
BRL	1,198,939	USD	1,230,660	1/3/2018		HUS		-		(31,721	)		(31,721	)
BRL	1,386,753	USD	1,429,637	1/3/2018		HUS		-		(42,884	)		(42,884	)
BRL	33,342,377	USD	34,199,134	1/3/2018		HUS		-		(856,757	)		(856,757	)
USD	10,118,505	BRL	10,038,889	1/3/2018		HUS		79,616		-			79,616
USD	2,187,133	BRL	2,185,946	1/3/2018		HUS		1,187		-			1,187
USD	2,079,917	BRL	2,071,991	1/3/2018		HUS		7,926		-			7,926
USD	1,975,983	BRL	1,974,315	1/3/2018		HUS		1,668		-			1,668
USD	1,935,362	BRL	1,924,271	1/3/2018		HUS		11,091		-			11,091
USD	1,709,540	BRL	1,718,368	1/3/2018		HUS		-		(8,828	)		(8,828	)
USD	1,654,496	BRL	1,652,950	1/3/2018		HUS		1,546		-			1,546
USD	1,617,152	BRL	1,591,752	1/3/2018		HUS		25,400		-			25,400
USD	1,430,044	BRL	1,422,025	1/3/2018		HUS		8,019		-			8,019
USD	1,419,854	BRL	1,398,812	1/3/2018		HUS		21,042		-			21,042
USD	1,109,069	BRL	1,091,315	1/3/2018		HUS		17,754		-			17,754
USD	1,076,606	BRL	1,085,285	1/3/2018		HUS		-		(8,679	)		(8,679	)
USD	993,226	BRL	994,845	1/3/2018		HUS		-		(1,619	)		(1,619	)
USD	911,544	BRL	916,463	1/3/2018		HUS		-		(4,919	)		(4,919	)
USD	897,692	BRL	904,404	1/3/2018		HUS		-		(6,712	)		(6,712	)
USD	871,997	BRL	874,258	1/3/2018		HUS		-		(2,261	)		(2,261	)
USD	838,650	BRL	844,111	1/3/2018		HUS		-		(5,461	)		(5,461	)
USD	776,069	BRL	781,707	1/3/2018		HUS		-		(5,638	)		(5,638	)
USD	728,180	BRL	723,524	1/3/2018		HUS		4,656		-			4,656
USD	722,906	BRL	722,318	1/3/2018		HUS		588		-			588
USD	715,840	BRL	713,274	1/3/2018		HUS		2,566		-			2,566
USD	645,399	BRL	633,083	1/3/2018		HUS		12,316		-			12,316
USD	617,524	BRL	621,024	1/3/2018		HUS		-		(3,500	)		(3,500	)
USD	593,433	BRL	591,179	1/3/2018		HUS		2,254		-			2,254
USD	579,290	BRL	572,790	1/3/2018		HUS		6,500		-			6,500
USD	569,539	BRL	560,731	1/3/2018		HUS		8,808		-			8,808
USD	510,711	BRL	514,606	1/3/2018		HUS		-		(3,895	)		(3,895	)
USD	485,257	BRL	482,349	1/3/2018		HUS		2,908		-			2,908
USD	453,640	BRL	453,408	1/3/2018		HUS		232		-			232
USD	460,592	BRL	452,202	1/3/2018		HUS		8,390		-			8,390
USD	453,145	BRL	452,202	1/3/2018		HUS		943		-			943
USD	429,962	BRL	422,055	1/3/2018		HUS		7,907		-			7,907
USD	401,436	BRL	399,445	1/3/2018		HUS		1,991		-			1,991
USD	392,987	BRL	391,909	1/3/2018		HUS		1,078		-			1,078
USD	361,207	BRL	361,762	1/3/2018		HUS		-		(555	)		(555	)
USD	332,507	BRL	331,615	1/3/2018		HUS		892		-			892
USD	332,457	BRL	331,615	1/3/2018		HUS		842		-			842
USD	276,863	BRL	276,446	1/3/2018		HUS		417		-			417
USD	241,110	BRL	241,175	1/3/2018		HUS		-		(65	)		(65	)
USD	240,842	BRL	241,175	1/3/2018		HUS		-		(333	)		(333	)
USD	240,950	BRL	241,175	1/3/2018		HUS		-		(225	)		(225	)
USD	204,576	BRL	203,491	1/3/2018		HUS		1,085		-			1,085
USD	181,923	BRL	180,881	1/3/2018		HUS		1,042		-			1,042
USD	151,394	BRL	150,734	1/3/2018		HUS		660		-			660
USD	92,102	BRL	90,440	1/3/2018		HUS		1,662		-			1,662
USD	92,150	BRL	90,440	1/3/2018		HUS		1,710		-			1,710
USD	92,148	BRL	90,440	1/3/2018		HUS		1,708		-			1,708
USD	92,134	BRL	90,440	1/3/2018		HUS		1,694		-			1,694
USD	60,687	BRL	60,294	1/3/2018		HUS		393		-			393

See accompanying notes

16

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Currency Purchased*		Currency Sold*		Settlement Date	Counterparty		Unrealized Appreciation		Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
USD	60,687	BRL	60,294	1/3/2018		HUS	$	393	$	-		$	393
USD	61,422	BRL	60,294	1/3/2018		HUS		1,128		-			1,128
USD	61,412	BRL	60,294	1/3/2018		HUS		1,118		-			1,118
USD	60,697	BRL	60,294	1/3/2018		HUS		403		-			403
USD	61,838	BRL	60,294	1/3/2018		HUS		1,544		-			1,544
USD	30,336	BRL	30,147	1/3/2018		HUS		189		-			189
USD	30,350	BRL	30,147	1/3/2018		HUS		203		-			203
USD	30,348	BRL	30,147	1/3/2018		HUS		201		-			201
USD	30,334	BRL	30,147	1/3/2018		HUS		187		-			187
USD	30,343	BRL	30,147	1/3/2018		HUS		196		-			196
USD	30,334	BRL	30,147	1/3/2018		HUS		187		-			187
USD	30,718	BRL	30,147	1/3/2018		HUS		571		-			571
USD	30,692	BRL	30,147	1/3/2018		HUS		545		-			545
USD	30,701	BRL	30,147	1/3/2018		HUS		554		-			554
USD	30,914	BRL	30,147	1/3/2018		HUS		767		-			767
USD	30,911	BRL	30,147	1/3/2018		HUS		764		-			764
USD	30,906	BRL	30,147	1/3/2018		HUS		759		-			759
USD	30,901	BRL	30,147	1/3/2018		HUS		754		-			754
USD	30,903	BRL	30,147	1/3/2018		HUS		756		-			756
USD	30,900	BRL	30,147	1/3/2018		HUS		753		-			753
USD	30,339	BRL	30,147	1/3/2018		HUS		192		-			192
USD	30,324	BRL	30,147	1/3/2018		HUS		177		-			177
USD	30,330	BRL	30,147	1/3/2018		HUS		183		-			183
USD	30,343	BRL	30,147	1/3/2018		HUS		196		-			196
USD	30,339	BRL	30,147	1/3/2018		HUS		192		-			192
USD	30,339	BRL	30,147	1/3/2018		HUS		192		-			192
USD	30,330	BRL	30,147	1/3/2018		HUS		183		-			183
USD	30,348	BRL	30,147	1/3/2018		HUS		201		-			201
USD	30,348	BRL	30,147	1/3/2018		HUS		201		-			201
USD	30,341	BRL	30,147	1/3/2018		HUS		194		-			194
USD	30,706	BRL	30,147	1/3/2018		HUS		559		-			559
USD	30,900	BRL	30,147	1/3/2018		HUS		753		-			753
USD	30,900	BRL	30,147	1/3/2018		HUS		753		-			753
COP	66,841	USD	66,177	1/31/2018		HUS		664		-			664
COP	66,841	USD	65,897	1/31/2018		HUS		944		-			944
COP	66,841	USD	66,320	1/31/2018		HUS		521		-			521
COP	66,841	USD	66,930	1/31/2018		HUS		-		(89	)		(89	)
COP	66,841	USD	66,236	1/31/2018		HUS		605		-			605
COP	66,841	USD	66,101	1/31/2018		HUS		740		-			740
COP	66,841	USD	66,029	1/31/2018		HUS		812		-			812
COP	66,841	USD	67,051	1/31/2018		HUS		-		(210	)		(210	)
COP	66,841	USD	67,063	1/31/2018		HUS		-		(222	)		(222	)
COP	66,841	USD	66,032	1/31/2018		HUS		809		-			809
COP	66,841	USD	66,690	1/31/2018		HUS		151		-			151
COP	66,841	USD	66,123	1/31/2018		HUS		718		-			718
COP	66,841	USD	65,936	1/31/2018		HUS		905		-			905
COP	66,841	USD	65,870	1/31/2018		HUS		971		-			971
COP	66,841	USD	65,995	1/31/2018		HUS		846		-			846
COP	66,841	USD	67,362	1/31/2018		HUS		-		(521	)		(521	)
COP	66,841	USD	65,673	1/31/2018		HUS		1,168		-			1,168
COP	66,841	USD	67,193	1/31/2018		HUS		-		(352	)		(352	)
COP	66,841	USD	66,870	1/31/2018		HUS		-		(29	)		(29	)
COP	66,841	USD	65,910	1/31/2018		HUS		931		-			931
COP	66,841	USD	66,000	1/31/2018		HUS		841		-			841
COP	66,841	USD	66,237	1/31/2018		HUS		604		-			604
COP	66,841	USD	67,136	1/31/2018		HUS		-		(295	)		(295	)
COP	66,841	USD	66,199	1/31/2018		HUS		642		-			642
COP	66,841	USD	66,586	1/31/2018		HUS		255		-			255
COP	66,841	USD	67,255	1/31/2018		HUS		-		(414	)		(414	)

See accompanying notes

17

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Currency Purchased*		Currency Sold*		Settlement Date		Counterparty		Unrealized Appreciation		Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
COP	66,841	USD	66,859		1/31/2018		HUS	$	-	$	(18	)	$	(18	)
COP	66,841	USD	66,649		1/31/2018		HUS		192		-			192
COP	66,841	USD	66,277		1/31/2018		HUS		564		-			564
COP	66,841	USD	66,094		1/31/2018		HUS		747		-			747
COP	66,841	USD	66,979		1/31/2018		HUS		-		(138	)		(138	)
COP	133,682	USD	134,559		1/31/2018		HUS		-		(877	)		(877	)
COP	133,682	USD	134,522		1/31/2018		HUS		-		(840	)		(840	)
COP	133,682	USD	133,220		1/31/2018		HUS		462		-			462
COP	133,682	USD	132,884		1/31/2018		HUS		798		-			798
COP	133,682	USD	132,388		1/31/2018		HUS		1,294		-			1,294
COP	133,682	USD	132,185		1/31/2018		HUS		1,497		-			1,497
COP	133,682	USD	133,981		1/31/2018		HUS		-		(299	)		(299	)
COP	133,682	USD	132,216		1/31/2018		HUS		1,466		-			1,466
COP	133,682	USD	134,096		1/31/2018		HUS		-		(414	)		(414	)
COP	133,682	USD	133,458		1/31/2018		HUS		224		-			224
COP	133,682	USD	134,250		1/31/2018		HUS		-		(568	)		(568	)
COP	133,682	USD	134,681		1/31/2018		HUS		-		(999	)		(999	)
COP	133,682	USD	134,667		1/31/2018		HUS		-		(985	)		(985	)
COP	133,682	USD	134,624		1/31/2018		HUS		-		(942	)		(942	)
COP	133,682	USD	133,343		1/31/2018		HUS		339		-			339
COP	133,682	USD	134,205		1/31/2018		HUS		-		(523	)		(523	)
COP	133,682	USD	134,175		1/31/2018		HUS		-		(493	)		(493	)
COP	200,522	USD	200,244		1/31/2018		HUS		278		-			278
COP	200,522	USD	199,469		1/31/2018		HUS		1,053		-			1,053
COP	200,522	USD	201,636		1/31/2018		HUS		-		(1,114	)		(1,114	)
COP	200,522	USD	199,521		1/31/2018		HUS		1,001		-			1,001
COP	200,522	USD	199,325		1/31/2018		HUS		1,197		-			1,197
COP	735,249	USD	730,048		1/31/2018		HUS		5,201		-			5,201
USD	65,639	COP	66,841		1/31/2018		HUS		-		(1,202	)		(1,202	)
BRL	30,046	USD	30,170		2/2/2018		HUS		-		(124	)		(124	)
BRL	30,046	USD	30,170		2/2/2018		HUS		-		(124	)		(124	)
BRL	30,046	USD	30,170		2/2/2018		HUS		-		(124	)		(124	)
BRL	30,046	USD	30,169		2/2/2018		HUS		-		(123	)		(123	)
BRL	30,046	USD	30,171		2/2/2018		HUS		-		(125	)		(125	)
BRL	30,046	USD	30,170		2/2/2018		HUS		-		(124	)		(124	)
BRL	30,046	USD	30,170		2/2/2018		HUS		-		(124	)		(124	)
BRL	30,046	USD	30,175		2/2/2018		HUS		-		(129	)		(129	)
BRL	30,046	USD	30,162		2/2/2018		HUS		-		(116	)		(116	)
BRL	30,046	USD	30,111		2/2/2018		HUS		-		(65	)		(65	)
BRL	30,046	USD	30,102		2/2/2018		HUS		-		(56	)		(56	)
BRL	30,046	USD	30,096		2/2/2018		HUS		-		(50	)		(50	)
BRL	30,046	USD	30,100		2/2/2018		HUS		-		(54	)		(54	)
BRL	30,046	USD	30,093		2/2/2018		HUS		-		(47	)		(47	)
BRL	30,046	USD	30,175		2/2/2018		HUS		-		(129	)		(129	)
BRL	30,046	USD	30,105		2/2/2018		HUS		-		(59	)		(59	)
BRL	30,046	USD	30,175		2/2/2018		HUS		-		(129	)		(129	)
BRL	60,091	USD	60,341		2/2/2018		HUS		-		(250	)		(250	)
BRL	60,091	USD	60,339		2/2/2018		HUS		-		(248	)		(248	)
BRL	60,091	USD	60,332		2/2/2018		HUS		-		(241	)		(241	)
BRL	60,091	USD	60,339		2/2/2018		HUS		-		(248	)		(248	)
BRL	60,091	USD	60,339		2/2/2018		HUS		-		(248	)		(248	)
BRL	60,091	USD	60,339		2/2/2018		HUS		-		(248	)		(248	)
BRL	60,091	USD	60,321		2/2/2018		HUS		-		(230	)		(230	)
BRL	60,091	USD	60,350		2/2/2018		HUS		-		(259	)		(259	)
BRL	60,091	USD	60,350		2/2/2018		HUS		-		(259	)		(259	)
BRL	60,091	USD	60,226		2/2/2018		HUS		-		(135	)		(135	)
BRL	60,091	USD	60,203		2/2/2018		HUS		-		(112	)		(112	)
BRL	60,091	USD	60,203		2/2/2018		HUS		-		(112	)		(112	)
BRL	60,091	USD	60,203		2/2/2018		HUS		-		(112	)		(112	)

See accompanying notes

18

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Currency Purchased*		Currency Sold*		Settlement Date		Counterparty		Unrealized Appreciation		Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
BRL	90,137	USD	90,509		2/2/2018		HUS	$	-	$	(372	)	$	(372	)
BRL	90,137	USD	90,484		2/2/2018		HUS		-		(347	)		(347	)
BRL	150,228	USD	150,734		2/2/2018		HUS		-		(506	)		(506	)
BRL	150,228	USD	150,689		2/2/2018		HUS		-		(461	)		(461	)
BRL	330,501	USD	331,257		2/2/2018		HUS		-		(756	)		(756	)
BRL	630,956	USD	633,398		2/2/2018		HUS		-		(2,442	)		(2,442	)
BRL	10,005,165	USD	10,080,065		2/2/2018		HUS		-		(74,900	)		(74,900	)
CLP	81,248	USD	79,482		2/5/2018		HUS		1,766		-			1,766
CLP	81,248	USD	79,734		2/5/2018		HUS		1,514		-			1,514
CLP	81,248	USD	79,208		2/5/2018		HUS		2,040		-			2,040
CLP	81,248	USD	79,626		2/5/2018		HUS		1,622		-			1,622
CLP	81,248	USD	79,473		2/5/2018		HUS		1,775		-			1,775
CLP	81,248	USD	79,177		2/5/2018		HUS		2,071		-			2,071
CLP	81,248	USD	79,267		2/5/2018		HUS		1,981		-			1,981
CLP	81,248	USD	79,109		2/5/2018		HUS		2,139		-			2,139
CLP	81,248	USD	79,360		2/5/2018		HUS		1,888		-			1,888
CLP	81,248	USD	78,710		2/5/2018		HUS		2,538		-			2,538
CLP	81,248	USD	78,675		2/5/2018		HUS		2,573		-			2,573
CLP	81,248	USD	79,780		2/5/2018		HUS		1,468		-			1,468
CLP	81,248	USD	79,315		2/5/2018		HUS		1,933		-			1,933
CLP	81,248	USD	79,185		2/5/2018		HUS		2,063		-			2,063
CLP	81,248	USD	79,321		2/5/2018		HUS		1,927		-			1,927
CLP	81,248	USD	79,194		2/5/2018		HUS		2,054		-			2,054
CLP	81,248	USD	79,032		2/5/2018		HUS		2,216		-			2,216
CLP	162,496	USD	159,267		2/5/2018		HUS		3,229		-			3,229
CLP	162,496	USD	159,198		2/5/2018		HUS		3,298		-			3,298
CLP	162,496	USD	158,398		2/5/2018		HUS		4,098		-			4,098
CLP	162,496	USD	158,949		2/5/2018		HUS		3,547		-			3,547
CLP	162,496	USD	158,891		2/5/2018		HUS		3,605		-			3,605
CLP	162,496	USD	159,516		2/5/2018		HUS		2,980		-			2,980
CLP	162,496	USD	157,958		2/5/2018		HUS		4,538		-			4,538
CLP	162,496	USD	158,181		2/5/2018		HUS		4,315		-			4,315
CLP	162,496	USD	157,389		2/5/2018		HUS		5,107		-			5,107
CLP	162,496	USD	157,421		2/5/2018		HUS		5,075		-			5,075
CLP	162,496	USD	158,218		2/5/2018		HUS		4,278		-			4,278
CLP	162,496	USD	158,270		2/5/2018		HUS		4,226		-			4,226
CLP	162,496	USD	157,451		2/5/2018		HUS		5,045		-			5,045
CLP	162,496	USD	159,593		2/5/2018		HUS		2,903		-			2,903
CLP	162,496	USD	159,610		2/5/2018		HUS		2,886		-			2,886
CLP	162,496	USD	158,371		2/5/2018		HUS		4,125		-			4,125
CLP	162,496	USD	158,655		2/5/2018		HUS		3,841		-			3,841
CLP	243,744	USD	238,824		2/5/2018		HUS		4,920		-			4,920
CLP	243,744	USD	237,632		2/5/2018		HUS		6,112		-			6,112
CLP	243,744	USD	241,741		2/5/2018		HUS		2,003		-			2,003
CLP	303,867	USD	301,506		2/5/2018		HUS		2,361		-			2,361
CLP	305,492	USD	303,162		2/5/2018		HUS		2,330		-			2,330
CLP	324,992	USD	322,072		2/5/2018		HUS		2,920		-			2,920
CLP	328,242	USD	328,131		2/5/2018		HUS		111		-			111
CLP	357,491	USD	357,881		2/5/2018		HUS		-		(390	)		(390	)
CLP	365,616	USD	362,202		2/5/2018		HUS		3,414		-			3,414
CLP	378,616	USD	375,153		2/5/2018		HUS		3,463		-			3,463
CLP	461,488	USD	457,802		2/5/2018		HUS		3,686		-			3,686
CLP	484,238	USD	484,005		2/5/2018		HUS		233		-			233
CLP	487,488	USD	487,266		2/5/2018		HUS		222		-			222
CLP	536,237	USD	537,433		2/5/2018		HUS		-		(1,196	)		(1,196	)
CLP	573,611	USD	568,948		2/5/2018		HUS		4,663		-			4,663
CLP	604,485	USD	599,623		2/5/2018		HUS		4,862		-			4,862
CLP	609,360	USD	604,858		2/5/2018		HUS		4,502		-			4,502
CLP	609,360	USD	608,104		2/5/2018		HUS		1,256		-			1,256

See accompanying notes

19

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Currency Purchased*		Currency Sold*		Settlement Date	Counterparty		Unrealized Appreciation		Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
CLP	688,983	USD	683,119	2/5/2018		HUS	$	5,864	$	-		$	5,864
CLP	701,982	USD	696,064	2/5/2018		HUS		5,918		-			5,918
CLP	758,856	USD	751,463	2/5/2018		HUS		7,393		-			7,393
CLP	771,856	USD	770,166	2/5/2018		HUS		1,690		-			1,690
CLP	784,855	USD	784,875	2/5/2018		HUS		-		(20	)		(20	)
CLP	812,480	USD	813,736	2/5/2018		HUS		-		(1,256	)		(1,256	)
CLP	841,729	USD	834,770	2/5/2018		HUS		6,959		-			6,959
CLP	874,228	USD	867,684	2/5/2018		HUS		6,544		-			6,544
CLP	893,728	USD	894,587	2/5/2018		HUS		-		(859	)		(859	)
CLP	919,727	USD	912,094	2/5/2018		HUS		7,633		-			7,633
CLP	1,002,600	USD	1,002,585	2/5/2018		HUS		15		-			15
CLP	1,002,600	USD	992,796	2/5/2018		HUS		9,804		-			9,804
CLP	1,035,099	USD	1,027,360	2/5/2018		HUS		7,739		-			7,739
CLP	1,096,848	USD	1,086,640	2/5/2018		HUS		10,208		-			10,208
CLP	1,252,844	USD	1,240,995	2/5/2018		HUS		11,849		-			11,849
CLP	1,299,967	USD	1,303,034	2/5/2018		HUS		-		(3,067	)		(3,067	)
CLP	1,361,716	USD	1,348,121	2/5/2018		HUS		13,595		-			13,595
CLP	1,429,964	USD	1,412,724	2/5/2018		HUS		17,240		-			17,240
CLP	2,112,447	USD	2,082,936	2/5/2018		HUS		29,511		-			29,511
CLP	2,112,447	USD	2,082,602	2/5/2018		HUS		29,845		-			29,845
CLP	2,144,946	USD	2,121,961	2/5/2018		HUS		22,985		-			22,985
CLP	2,437,439	USD	2,417,522	2/5/2018		HUS		19,917		-			19,917
CLP	2,599,935	USD	2,580,063	2/5/2018		HUS		19,872		-			19,872
CLP	3,737,407	USD	3,708,601	2/5/2018		HUS		28,806		-			28,806
CLP	6,662,333	USD	6,605,924	2/5/2018		HUS		56,409		-			56,409
USD	1,079,331	CLP	1,137,472	2/5/2018		HUS		-		(58,141	)		(58,141	)
USD	1,009,730	CLP	1,056,224	2/5/2018		HUS		-		(46,494	)		(46,494	)
USD	853,303	CLP	893,728	2/5/2018		HUS		-		(40,425	)		(40,425	)
USD	770,286	CLP	812,480	2/5/2018		HUS		-		(42,194	)		(42,194	)
USD	770,096	CLP	812,480	2/5/2018		HUS		-		(42,384	)		(42,384	)
USD	692,702	CLP	731,232	2/5/2018		HUS		-		(38,530	)		(38,530	)
USD	623,257	CLP	649,984	2/5/2018		HUS		-		(26,727	)		(26,727	)
USD	611,051	CLP	649,984	2/5/2018		HUS		-		(38,933	)		(38,933	)
USD	621,661	CLP	649,984	2/5/2018		HUS		-		(28,323	)		(28,323	)
USD	610,128	CLP	649,984	2/5/2018		HUS		-		(39,856	)		(39,856	)
USD	549,008	CLP	575,236	2/5/2018		HUS		-		(26,228	)		(26,228	)
USD	545,299	CLP	568,736	2/5/2018		HUS		-		(23,437	)		(23,437	)
USD	538,742	CLP	568,736	2/5/2018		HUS		-		(29,994	)		(29,994	)
USD	534,680	CLP	568,736	2/5/2018		HUS		-		(34,056	)		(34,056	)
USD	458,246	CLP	487,488	2/5/2018		HUS		-		(29,242	)		(29,242	)
USD	457,478	CLP	487,488	2/5/2018		HUS		-		(30,010	)		(30,010	)
USD	458,551	CLP	487,488	2/5/2018		HUS		-		(28,937	)		(28,937	)
USD	458,266	CLP	487,488	2/5/2018		HUS		-		(29,222	)		(29,222	)
USD	464,681	CLP	487,488	2/5/2018		HUS		-		(22,807	)		(22,807	)
USD	458,815	CLP	480,988	2/5/2018		HUS		-		(22,173	)		(22,173	)
USD	422,462	CLP	450,114	2/5/2018		HUS		-		(27,652	)		(27,652	)
USD	382,275	CLP	406,240	2/5/2018		HUS		-		(23,965	)		(23,965	)
USD	383,148	CLP	406,240	2/5/2018		HUS		-		(23,092	)		(23,092	)
USD	382,117	CLP	406,240	2/5/2018		HUS		-		(24,123	)		(24,123	)
USD	381,284	CLP	406,240	2/5/2018		HUS		-		(24,956	)		(24,956	)
USD	384,813	CLP	406,240	2/5/2018		HUS		-		(21,427	)		(21,427	)
USD	382,625	CLP	406,240	2/5/2018		HUS		-		(23,615	)		(23,615	)
USD	381,309	CLP	406,240	2/5/2018		HUS		-		(24,931	)		(24,931	)
USD	381,948	CLP	406,240	2/5/2018		HUS		-		(24,292	)		(24,292	)
USD	310,061	CLP	329,867	2/5/2018		HUS		-		(19,806	)		(19,806	)
USD	305,015	CLP	324,992	2/5/2018		HUS		-		(19,977	)		(19,977	)
USD	306,200	CLP	324,992	2/5/2018		HUS		-		(18,792	)		(18,792	)
USD	251,658	CLP	268,118	2/5/2018		HUS		-		(16,460	)		(16,460	)
USD	231,363	CLP	243,744	2/5/2018		HUS		-		(12,381	)		(12,381	)

See accompanying notes

20

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Currency Purchased*		Currency Sold*		Settlement Date	Counterparty		Unrealized Appreciation		Unrealized (Depreciation)			Net Unrealized Appreciation (Depreciation)
USD	205,906	CLP	219,370	2/5/2018		HUS	$	-	$	(13,464	)	$	(13,464	)
USD	196,055	CLP	207,995	2/5/2018		HUS		-		(11,940	)		(11,940	)
USD	159,874	CLP	170,621	2/5/2018		HUS		-		(10,747	)		(10,747	)
USD	153,337	CLP	162,496	2/5/2018		HUS		-		(9,159	)		(9,159	)
USD	154,266	CLP	162,496	2/5/2018		HUS		-		(8,230	)		(8,230	)
USD	153,993	CLP	162,496	2/5/2018		HUS		-		(8,503	)		(8,503	)
USD	154,014	CLP	162,496	2/5/2018		HUS		-		(8,482	)		(8,482	)
USD	148,144	CLP	157,621	2/5/2018		HUS		-		(9,477	)		(9,477	)
USD	144,636	CLP	154,371	2/5/2018		HUS		-		(9,735	)		(9,735	)
USD	111,313	CLP	118,622	2/5/2018		HUS		-		(7,309	)		(7,309	)
USD	110,352	CLP	116,997	2/5/2018		HUS		-		(6,645	)		(6,645	)
USD	77,018	CLP	81,248	2/5/2018		HUS		-		(4,230	)		(4,230	)
USD	77,000	CLP	81,248	2/5/2018		HUS		-		(4,248	)		(4,248	)
USD	77,084	CLP	81,248	2/5/2018		HUS		-		(4,164	)		(4,164	)
USD	77,055	CLP	81,248	2/5/2018		HUS		-		(4,193	)		(4,193	)
USD	77,009	CLP	81,248	2/5/2018		HUS		-		(4,239	)		(4,239	)
USD	77,021	CLP	81,248	2/5/2018		HUS		-		(4,227	)		(4,227	)
USD	77,028	CLP	81,248	2/5/2018		HUS		-		(4,220	)		(4,220	)
USD	77,028	CLP	81,248	2/5/2018		HUS		-		(4,220	)		(4,220	)
EUR	4,188,257	USD	4,115,956	1/11/2018		RBS		72,301		-			72,301
USD	10,646,844	EUR	10,868,582	1/11/2018		RBS		-		(221,738	)		(221,738	)
USD	9,798,426	HKD	9,777,957	1/11/2018		RBS		20,469		-			20,469
USD	7,085,524	KRW	7,387,800	1/11/2018		RBS		-		(302,276	)		(302,276	)
USD	3,901,926	JPY	3,876,751	1/11/2018		RBS		25,175		-			25,175
PEN	231,075	USD	230,967	1/26/2018		RBS		108		-			108
PEN	308,101	USD	308,328	1/26/2018		RBS		-		(227	)		(227	)
PEN	308,101	USD	308,165	1/26/2018		RBS		-		(64	)		(64	)
PEN	308,101	USD	307,801	1/26/2018		RBS		300		-			300
PEN	308,101	USD	308,324	1/26/2018		RBS		-		(223	)		(223	)
PEN	385,126	USD	383,612	1/26/2018		RBS		1,514		-			1,514
PEN	1,386,453	USD	1,379,634	1/26/2018		RBS		6,819		-			6,819
PEN	2,695,881	USD	2,679,036	1/26/2018		RBS		16,845		-			16,845
USD	834,851	PEN	847,277	1/26/2018		RBS		-		(12,426	)		(12,426	)
USD	759,060	PEN	770,252	1/26/2018		RBS		-		(11,192	)		(11,192	)
USD	457,554	PEN	462,151	1/26/2018		RBS		-		(4,597	)		(4,597	)
USD	377,986	PEN	385,126	1/26/2018		RBS		-		(7,140	)		(7,140	)
USD	228,543	PEN	231,076	1/26/2018		RBS		-		(2,533	)		(2,533	)
USD	152,152	PEN	154,050	1/26/2018		RBS		-		(1,898	)		(1,898	)
USD	152,554	PEN	154,050	1/26/2018		RBS		-		(1,496	)		(1,496	)
USD	152,580	PEN	154,050	1/26/2018		RBS		-		(1,470	)		(1,470	)
USD	152,806	PEN	154,050	1/26/2018		RBS		-		(1,244	)		(1,244	)
USD	152,281	PEN	154,050	1/26/2018		RBS		-		(1,769	)		(1,769	)
USD	76,431	PEN	77,025	1/26/2018		RBS		-		(594	)		(594	)
							$	2,603,085	$	(3,084,017	)	$	(480,932	)

* All values denominated in USD.

See accompanying notes

21

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

Glossary:
Counterparty Abbreviations:
DUB	Deutsche Bank AG
HUS	HSBC Bank (USA)
RBS	Royal Bank of Scotland PLC
Currency Abbreviations:
BRL	Brazilian Real
CLP	Chilean Peso
COP	Colombian Peso
EUR	Euro
HKD	Hong Kong Dollar
INR	Indian Rupee
JPY	Japanese Yen
KRW	South Korean Won
PEN	Peruvian Nuevo Sol
PHP	Philippine Peso
TWD	Taiwan Dollar
USD	United States Dollar
Index Abbreviations:
CAC40	Euronet Paris - French Stock Market Index
DAX	Deutsche Boerse AG German Stock Index
Euro Stoxx 50	Eurozone Blue-chip Index
FTSE 100	Financial Times Stock Exchange 100 Index
FTSE/JSE Top 40	Largest 40 companies ranked by full market value in the FTSE/JSE All-Share Index
FTSE/MIB	Borsa Italiana- Italian Stock Market Index
Hang Seng	Hong Kong Stock Market Index
KOSPI	South Korean Stock Market Index
MSCI	Morgan Stanley Capital International
MSCI EAFE	Morgan Stanley Capital International - Europe, Australasia, and Far East
NASDAQ	National Association of Securities Dealers Automated Quotations
NIKKEI 225	Nikkei Stock Average
OMXS30	Stockholm Stock Exchange’s leading share index
S&P 500	Standard & Poor’s U.S. Equity Large-Cap Index
S&P/TSX	Canadian Equity Market Index
SPI 200	Australian Equity Market Index Future
TOPIX	Tokyo Stock Exchange Tokyo Price Index
Exchange Abbreviations:
LME	London Metal Exchange
JSE	Johannesburg Stock Exchange
SGX	Singapore Stock Exchange
Other Abbreviations:
Bobl	Medium term debt that is issued by the Federal Republic of Germany
Bund	German Federal Government Bond
Buxl	Long term debt that is issued by the Federal Republic of Germany
EURIBOR	Euro Interbank Offered Rate
GILT	Bank of England Bonds
OZ	Ounce
RBOB	Reformulated Gasoline Blendstock for Oxygen Blending
Sugar #11	World Benchmark for raw sugar
ULSD	Ultra-low-sulfur-diesel
WTI	West Texas Intermediate

See accompanying notes

22

American Beacon AHL Managed Futures Strategy Fund^SM

Consolidated Schedule of Investments

December 31, 2017

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of December 31, 2017, the investments were classified as described below:

AHL Managed Futures Strategy Fund	Level 1			Level 2			Level 3		Total
Assets
Short-Term Investments
Investment Companies	$	20,549,617		$	-		$	-	$	20,549,617
U.S. Treasury Obligations		-			449,173,483			-		449,173,483
Total Investments in Securities - Assets	$	20,549,617		$	449,173,483		$	-	$	469,723,100
Financial Derivative Instruments - Assets
Futures Contracts	$	19,217,960		$	-		$	-	$	19,217,960
Forward Foreign Currency Contracts		-			2,603,085			-		2,603,085
Total Financial Derivative Instruments - Assets	$	19,217,960		$	2,603,085		$	-	$	21,821,045
Financial Derivative Instruments - Liabilities
Futures Contracts	$	(11,612,221	)	$	-		$	-	$	(11,612,221	)
Forward Foreign Currency Contracts		-			(3,084,017	)		-		(3,084,017	)
Total Financial Derivative Instruments - Liabilities	$	(11,612,221	)	$	(3,084,017	)	$	-	$	(14,696,238	)

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. During the period ended December 31, 2017, there were no transfers between levels.

See accompanying notes

23

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
SECURITIES HELD LONG - 101.39%
COMMON STOCKS - 4.39%
Consumer Discretionary - 0.90%
Media - 0.61%
Naspers Ltd., Class N, Sponsored ADR		10,590		$	599,394
Textiles, Apparel & Luxury Goods - 0.29%
361 Degrees International Ltd.A		845,894			292,148
Total Consumer Discretionary					891,542
Financials - 0.53%
Banks - 0.53%
Bank of Kyoto Ltd.A		9,946			517,404
Health Care - 0.10%
Health Care Equipment & Supplies - 0.10%
Becton Dickinson and Co.		473			101,250
Industrials - 0.75%
Airlines - 0.25%
Ryanair Holdings PLCA B		13,626			245,296
Commercial Services & Supplies - 0.28%
Stericycle, Inc.B		4,151			282,226
Marine - 0.22%
DryShips, Inc.		60,890			214,942
Total Industrials					742,464
Information Technology - 0.81%
Internet Software & Services - 0.47%
SINA Corp.B		832			83,458
Sohu.com, Inc.B		8,800			381,480
					464,938
Semiconductors & Semiconductor Equipment - 0.34%
NXP Semiconductors N.V.B		2,888			338,156
Total Information Technology					803,094
Materials - 0.87%
Chemicals - 0.37%
Monsanto Co.		3,132			365,755
Metals & Mining - 0.50%
Grupo Mexico S.A.B. de C.V., Series B		147,957			488,587
Total Materials					854,342
Real Estate - 0.12%
Equity Real Estate Investment Trusts (REITs) - 0.12%
Williams Scotsman Corp.B		79,352			114,267
Telecommunication Services - 0.31%
Wireless Telecommunication Services - 0.31%
SoftBank Group Corp., ADR		1,000			39,755

See accompanying notes

24

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
COMMON STOCKS - 4.39% (continued)
Telecommunication Services - 0.31% (continued)
Wireless Telecommunication Services - 0.31% (continued)
SoftBank Group Corp.A		3,372		$	266,399
					306,154
Total Telecommunication Services					306,154
Total Common Stocks (Cost $4,089,953)					4,330,517
WARRANTS - 2.91%
Consumer Discretionary - 0.87%
Distributors - 0.13%
Daseke, Inc., 02/27/2022, Strike Price $11.50B		64,111			130,787
Hotels, Restaurants & Leisure - 0.71%
Del Taco Restaurants, Inc., 06/30/2020, Strike Price $11.50B		235,824			695,681
Media - 0.03%
Hemisphere Media Group, Inc., 04/04/2018, Strike Price $12.00B		261,303			33,969
Total Consumer Discretionary					860,437
Consumer Staples - 0.79%
Food Products - 0.79%
Hostess Brands, Inc., 11/04/2021, Strike Price $11.50B		147,337			343,295
Simply Good Foods Co., 07/07/2022, Strike Price $11.50B		112,570			436,772
					780,067
Total Consumer Staples					780,067
Financials - 0.93%
Banks - 0.84%
Bank of America Corp., 10/28/2018, Strike Price $30.79B		60,275			128,989
TCF Financial Corp., 11/14/2018, Strike Price $16.93B		179,929			701,723
					830,712
Diversified Financial Services - 0.09%
Avista Healthcare Public Acquisition Corp., 12/02/2021, Strike Price $5.75B		61,402			17,199
M I Acquisitions, Inc., 11/14/2020, Strike Price $11.50B		41,000			16,400
National Energy Services Reunited Corp., 06/05/2022, Strike Price $5.75B		34,108			28,309
Stellar Acquisition III, Inc., 03/22/2022, Strike Price $11.50B		78,069			24,209
					86,117
Total Financials					916,829
Health Care - 0.04%
Biotechnology - 0.04%
BioTime, Inc., 10/01/2018, Strike Price $4.55B		270,287			33,137
Industrials - 0.12%
Trading Companies & Distributors - 0.12%
Nexeo Solutions, Inc., 06/09/2021, Strike Price $11.50B		186,573			120,339
Information Technology - 0.00%
Technology Hardware, Storage & Peripherals - 0.00%
Eastman Kodak Co., 09/03/2018, Strike Price $16.12B		166,714			1,684

See accompanying notes

25

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Shares		Fair Value
WARRANTS - 2.91% (continued)
Materials - 0.16%
Chemicals - 0.16%
AgroFresh Solutions, Inc., 02/19/2019, Strike Price $11.50B		380,583		$	156,039
Metals & Mining - 0.00%
Alio Gold, Inc., 05/30/2018, Strike Price CAD 7.00B		65,713			1,438
Total Materials					157,477
Total Warrants (Cost $2,810,714)					2,869,970
CONVERTIBLE PREFERRED STOCKS - 17.52%
Financials - 5.26%
Capital Markets - 5.26%
Mandatory Exchangeable Trust, 5.750%, Due 6/3/2019C		5,600			1,092,605
Mandatory Exchangeable Trust, 5.188%, Due 12/1/2020C		16,048			1,664,579
Virtus Investment Partners, Inc., 7.250%, Due 2/1/2020, Series D		23,879			2,433,270
					5,190,454
Total Financials					5,190,454
Health Care - 2.73%
Health Care Providers & Services - 0.65%
Anthem, Inc., 5.250%, Due 5/1/2018		11,397			638,232
Pharmaceuticals - 2.08%
Allergan PLC, 5.500%, Due 3/1/2018, Series A		2,473			1,449,796
Teva Pharmaceutical Industries Ltd., 7.000%, Due 12/15/2018		1,712			607,452
					2,057,248
Total Health Care					2,695,480
Industrials - 1.12%
Machinery - 1.12%
Rexnord Corp., 5.750%, Due 11/15/2019, Series A		18,947			1,104,231
Information Technology - 3.66%
Electronic Equipment, Instruments & Components - 1.64%
Belden, Inc., 6.750%, Due 7/15/2019		15,721			1,620,049
Semiconductors & Semiconductor Equipment - 2.02%
MTS Systems Corp., 8.750%, Due 7/1/2019		16,785			1,995,736
SunEdison, Inc., 6.750%, Series AD		500			1,245
					1,996,981
Total Information Technology					3,617,030
Materials - 2.20%
Chemicals - 2.20%
Rayonier Advanced Materials, Inc., 8.000%, Due 8/15/2019, Series A		14,988			2,170,562
Utilities - 2.55%
Independent Power & Renewable Electricity Producers - 1.16%
Dynegy, Inc., 7.000%, Due 7/1/2019		14,466			1,145,997
Multi-Utilities - 1.39%
Dominion Energy, Inc., 6.750%, Due 8/15/2019, Series A		26,544			1,371,263
Total Utilities					2,517,260
Total Convertible Preferred Stocks (Cost $17,143,195)					17,295,017

See accompanying notes

26

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Principal Amount*			Fair Value
CONVERTIBLE OBLIGATIONS - 18.67%
Basic Materials - 2.35%
Cleveland-Cliffs, Inc., 1.500%, Due 1/15/2025C		$	2,116,000		$	2,317,020
Communications - 4.51%
51job, Inc., 3.250%, Due 4/15/2019			1,315,000			1,933,050
InterDigital, Inc., 1.500%, Due 3/1/2020			1,315,000			1,568,137
SINA Corp., 1.000%, Due 12/1/2018			863,000			951,458
						4,452,645
Consumer, Cyclical - 3.19%
RH, 0.010%, Due 7/15/2020C			335,000			325,787
Suzuki Motor Corp., 0.000%, Due 3/31/2023E		JPY	200,000,000			2,826,714
						3,152,501
Consumer, Non-Cyclical - 1.46%
Depomed, Inc., 2.500%, Due 9/1/2021			242,000			204,339
Live Nation Entertainment, Inc., 2.500%, Due 5/15/2019			956,000			1,233,837
						1,438,176
Energy - 1.03%
Ensco Jersey Finance Ltd., 3.000%, Due 1/31/2024			1,145,000			1,016,188
Financial - 2.27%
IH Merger Sub LLC, 3.500%, Due 1/15/2022C			1,930,000			2,241,212
Industrial - 1.74%
Kaman Corp., 3.250%, Due 5/1/2024C			1,547,000			1,720,071
Technology - 2.12%
Medidata Solutions, Inc., 1.000%, Due 8/1/2018			956,000			1,104,180
Rambus, Inc., 1.375%, Due 2/1/2023C			986,000			984,768
						2,088,948
Total Convertible Obligations (Cost $17,400,566)						18,426,761
FOREIGN CORPORATE OBLIGATIONS - 4.30%
Consumer, Non-Cyclical - 2.65%
Terumo Corp., 0.010%, Due 12/6/2021E		JPY	210,000,000			2,611,604
Industrial - 1.65%
Golar LNG Ltd., 2.750%, Due 2/15/2022C			1,536,000			1,630,080
Total Foreign Corporate Obligations (Cost $3,914,526)						4,241,684
COLLATERALIZED MORTGAGE OBLIGATIONS - 15.75%
Agency CMO Interest Only - 11.56%
Fannie Mae Interest Strip,
8.500%, Due 3/25/2023, 211 2			179,814			27,276
5.000%, Due 4/25/2034, 351 5			232,710			46,839
5.500%, Due 8/25/2035, 359 14			863,495			179,584
5.500%, Due 10/25/2035, 359 12			866,139			187,637
7.000%, Due 2/25/2037, 381 17			669,645			166,591
Fannie Mae REMIC Trust,
6.500%, Due 3/25/2027, 1997-9 H			657,204			87,341
7.000%, Due 10/25/2031, 2016-3 IK			803,907			170,089
4.500%, Due 12/25/2033, 2003-119 GI			106,282			26,046
5.000%, Due 3/25/2039, 2009-11 TIF			764,676			147,633
5.000%, Due 5/25/2039, 2009-50 GI			797,065			124,877
5.000%, Due 2/25/2040, 2010-16 PI			121,623			27,888
5.500%, Due 12/25/2043, 2014-38 QI			1,355,950			356,720
5.000%, Due 5/25/2045, 2015-30 EI			1,382,200			278,205
5.000%, Due 10/25/2045, 2015-70 JI			1,144,582			231,634
5.500%, Due 7/25/2046, 2016-45 MI			2,503,521			556,107

See accompanying notes

27

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Principal Amount*			Fair Value
COLLATERALIZED MORTGAGE OBLIGATIONS - 15.75% (continued)
Agency CMO Interest Only - 11.56% (continued)
Freddie Mac REMIC Trust,
5.500%, Due 10/15/2025, 3046 BI IO		$	1,148,878		$	128,474
8.500%, Due 1/15/2030, 2206 IO			111,846			24,299
5.500%, Due 3/15/2033, 2581 IL			683,295			161,479
5.500%, Due 4/15/2036, 4624 BI			2,095,665			440,012
1.000%, Due 3/15/2038, 3421 IO			8,741,962			351,777
1.751%, Due 10/15/2041, 4413 WIF			726,239			37,484
3.000%, Due 12/15/2042, 4594 IJ			3,388,116			429,575
4.231%, Due 12/15/2042, 303 157F			1,523,086			297,115
6.000%, Due 6/15/2045, 4496 ID			1,142,162			230,460
Ginnie Mae REMIC Trust,
5.000%, Due 6/20/2035, 2014-183 IM			1,571,363			346,040
5.500%, Due 9/20/2036, 2016-78 TI			3,813,215			321,396
5.000%, Due 9/20/2038, 2016-12 KI			963,698			236,835
5.500%, Due 5/16/2039, 2009-76 GI			885,325			146,667
4.500%, Due 1/16/2040, 2016-44 PI			1,772,444			366,250
4.000%, Due 2/20/2040, 2015-162 LI			1,353,903			221,014
6.000%, Due 9/20/2040, 2016-75 IO			1,814,336			424,201
3.500%, Due 10/20/2041, 2013-81 PI			3,739,190			454,662
3.500%, Due 5/16/2042, 2015-84 IO			3,232,485			605,018
5.000%, Due 5/16/2042, 2013-44 IB			1,132,348			277,886
5.000%, Due 6/20/2043, 2013-86 IA			283,527			62,914
5.500%, Due 1/20/2044, 2014-2 TI			332,845			65,363
5.000%, Due 12/16/2045, 2015-180 CI			1,791,299			417,935
4.500%, Due 5/20/2046, 2016-69 WI			2,322,132			498,288
3.500%, Due 11/20/2046, 2016-163 MI			4,468,331			512,729
1.947%, Due 6/20/2065, 2015-H17 BIF H			4,012,115			450,109
1.730%, Due 2/20/2066, 2016-H04 KIF H			4,461,299			393,152
2.014%, Due 2/20/2066, 2016-H07 NIF H			4,415,113			463,587
2.031%, Due 4/20/2066, 2016-H13 EIF H			3,821,596			434,706
						11,413,894
Agency CMO Interest Only Inverse Floater - 4.19%
Fannie Mae REMIC Trust,
6.198%, Due 3/25/2032, 2002-8 SC, (1 mo. LIBOR + 7.750%)G			488,911			101,138
5.500%, Due 7/25/2033, 2004-62 TP, (1 mo. LIBOR + 38.500%)G			1,715,872			342,630
5.078%, Due 7/25/2035, 2005-66 LS, (1 mo. LIBOR + 6.630%)G			1,964,997			323,813
5.018%, Due 6/25/2036, 2006-44 SF, (1 mo. LIBOR + 6.570%)G			3,081,236			465,929
5.058%, Due 7/25/2036, 2007-28 GS, (1 mo. LIBOR + 6.610%)G			749,998			125,482
Freddie Mac REMIC Trust,
10.348%, Due 7/15/2033, 2647 IV, (1 mo. LIBOR + 13.750%)G			507,357			292,472
4.573%, Due 3/15/2035, 2950 SN, (1 mo. LIBOR + 6.050%)G			705,465			105,589
5.223%, Due 10/15/2036, 3232 ST, (1 mo. LIBOR + 6.700%)G			153,434			22,473
4.973%, Due 3/15/2037, 3284 BI IO, (1 mo. LIBOR + 6.450%)G			970,968			172,548
5.653%, Due 7/15/2037, 3355 KI, (1 mo. LIBOR + 7.130%)G			2,060,854			238,285
4.553%, Due 9/15/2037, 3368 AI, (1 mo. LIBOR + 6.030%)G			1,172,550			170,627
1.844%, Due 4/15/2039, 4314 ITF			3,130,151			160,032
4.862%, Due 9/15/2041, 3997 ES, (1 mo. LIBOR + 6.930%)G			25,869			25,934
0.544%, Due 4/15/2043, 4517 KI, (1 mo. LIBOR + 1.071%)G			3,508,955			100,017
Ginnie Mae REMIC Trust,
6.009%, Due 6/16/2032, 2002-41 SY, (1 mo. LIBOR + 7.500%)G			89,936			11,090
6.209%, Due 2/16/2033, 2003-11 SK, (1 mo. LIBOR + 7.700%)G			217,215			28,009
6.149%, Due 6/20/2033, 2004-56 S, (1 mo. LIBOR + 7.650%)G			350,021			70,906
4.939%, Due 10/16/2033, 2003-92 SN, (1 mo. LIBOR + 6.430%)G			146,118			19,445
5.099%, Due 11/20/2033, 2003-98 SC, (1 mo. LIBOR + 6.600%)G			1,041,666			169,044
5.599%, Due 6/20/2034, 2004-46 S, (1 mo. LIBOR + 7.100%)G			2,263,908			433,632
4.599%, Due 9/20/2034, 2004-86 SP, (1 mo. LIBOR + 6.100%)G			132,159			13,762
4.599%, Due 1/20/2035, 2009-25 SB, (1 mo. LIBOR + 6.100%)G			790,252			10,606
5.069%, Due 11/16/2036, 2008-83 SD, (1 mo. LIBOR + 6.560%)G			83,491			14,162
5.149%, Due 12/20/2037, 2007-81 SP, (1 mo. LIBOR + 6.650%)G			1,933,302			323,430
4.499%, Due 5/20/2040, 2016-75 SA, (1 mo. LIBOR + 6.000%)G			2,585,745			371,226
5.439%, Due 11/20/2044, 2014-161 SL, (1 mo. LIBOR + 6.800%)G			110,104			18,657
						4,130,938
Total Collateralized Mortgage Obligations (Cost $15,981,701)						15,544,832

See accompanying notes

28

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Shares			Fair Value
INVESTMENT COMPANIES - 12.22%
Closed-End Funds - 12.22%
Aberdeen Asia-Pacific Income Fund, Inc.		136,314			$	665,212
BlackRock Corporate High Yield Fund, Inc.		43,203				472,641
BlackRock Resources & Commodities Strategy Trust		112,529				1,099,408
Cushing Energy Income Fund		36,285				339,628
Eaton Vance Senior Income Trust		100,727				656,740
Highland Floating Rate Opportunities FundB		100,213				1,553,302
Invesco Dynamic Credit Opportunities Fund		37,917				444,008
Invesco Senior Income Trust		203,371				892,799
Morgan Stanley Emerging Markets Domestic Debt Fund, Inc.		69,869				537,991
Nuveen Credit Strategies Income Fund		116,450				957,219
Pershing Square Holdings Ltd./FundA B		146,705				2,004,934
Prudential Short Duration High Yield Fund, Inc.		55,485				819,514
Voya Prime Rate Trust		166,159				842,426
Western Asset Global High Income Fund, Inc.		24,687				252,301
Western Asset High Income Opportunity Fund, Inc.		104,163				528,106
Total Closed-End Funds						12,066,229
Total Investment Companies (Cost $11,865,540)						12,066,229
EXCHANGE-TRADED INSTRUMENTS - 5.85%
Exchange-Traded Funds - 1.60%
CurrencyShares Japanese Yen Trust ETFB		300				25,542
iShares MSCI Emerging Markets ETF		4,888				230,323
SPDR Bloomberg Barclays Short Term High Yield Bond ETF		47,888				1,319,793
Total Exchange-Traded Funds						1,575,658
Exchange-Traded Notes - 4.25%
ETRACS 2x Leveraged Long Wells Fargo Business Development Co. Index ETN		30,427				500,524
ETRACS 2X Monthly Leveraged Algerian MLP Infrastructure Index ETN, Series B		30,066				1,133,188
ETRACS Monthly Pay 2x Leveraged Closed-End Fund ETN		28,151				510,096
ETRACS Monthly Pay 2x Leveraged Mortgage REIT ETN		28,548				503,872
iPath S&P 500 VIX Mid-Term Futures ETNB		39,404				689,570
VelocityShares Daily Inverse VIX Short Term ETNB		6,417				862,702
Total Exchange-Traded Notes						4,199,952
Total Exchange-Traded Instruments (Cost $5,638,661)						5,775,610
SHORT-TERM INVESTMENTS - 19.78% (Cost $19,527,208)
Investment Companies - 19.78%
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.13%I J		19,527,208				19,527,208
TOTAL SECURITIES HELD LONG (Cost $98,372,064)						100,077,828
SECURITIES SOLD SHORT - (53.82%)
COMMON STOCKS - (43.17%)
Consumer Discretionary - (7.37%)
Automobiles - (2.49%)
Suzuki Motor Corp.A		(42,500	)			(2,461,604	)
Hotels, Restaurants & Leisure - (1.99%)
Del Taco Restaurants, Inc.B		(162,050	)			(1,964,046	)
Media - (2.79%)
Hemisphere Media Group, Inc., Class AB		(54,543	)			(629,972	)
Live Nation Entertainment, Inc.B		(22,695	)			(966,126	)
New York Times Co., Class A		(62,441	)			(1,155,158	)
						(2,751,256	)

See accompanying notes

29

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Shares			Fair Value
COMMON STOCKS - (43.17%) (continued)
Consumer Discretionary - (7.37%) (continued)
Specialty Retail - (0.10%)
Restoration HardwareB		(1,175	)		$	(101,297	)
Total Consumer Discretionary						(7,278,203	)
Consumer Staples - (2.19%)
Food Products - (2.19%)
Hostess Brands, Inc.B		(59,757	)			(885,001	)
Simply Good Foods Co.B		(89,441	)			(1,275,429	)
						(2,160,430	)
Total Consumer Staples						(2,160,430	)
Energy - (0.67%)
Energy Equipment & Services - 0.00%
Ensco PLC, Class A		(59	)			(348	)
Oil, Gas & Consumable Fuels - (0.67%)
Golar LNG Ltd.		(22,059	)			(657,579	)
Total Energy						(657,927	)
Financials - (6.79%)
Banks - (4.84%)
Associated Banc-Corp		(53,363	)			(1,355,420	)
Bank of America Corp.		(53,636	)			(1,583,335	)
TCF Financial Corp.		(89,479	)			(1,834,320	)
						(4,773,075	)
Capital Markets - (1.95%)
Virtus Investment Partners, Inc.		(16,766	)			(1,928,928	)
Total Financials						(6,702,003	)
Health Care - (4.71%)
Biotechnology - (0.04%)
BioTime, Inc.B		(20,287	)			(43,617	)
Health Care Equipment & Supplies - (2.06%)
Becton Dickinson and Co.		(473	)			(101,288	)
Terumo Corp.A		(40,778	)			(1,926,794	)
						(2,028,082	)
Health Care Providers & Services - (0.53%)
Anthem, Inc.		(2,328	)			(523,823	)
Health Care Technology - (0.77%)
Medidata Solutions, Inc.B		(12,020	)			(761,707	)
Pharmaceuticals - (1.31%)
Allergan PLC		(7,438	)			(1,216,708	)
Depomed, Inc.B		(8,900	)			(71,645	)
						(1,288,353	)
Total Health Care						(4,645,582	)

See accompanying notes

30

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Shares			Fair Value
COMMON STOCKS - (43.17%) (continued)
Industrials - (4.35%)
Airlines - (0.29%)
Ryanair Holdings PLC, Sponsored ADRB		(2,725	)		$	(283,918	)
Machinery - (0.83%)
Rexnord Corp.A		(31,265	)			(813,515	)
Professional Services - (1.76%)
51job, Inc., ADRB		(28,595	)			(1,740,006	)
Road & Rail - (0.37%)
Daseke, Inc.B		(25,666	)			(366,767	)
Trading Companies & Distributors - (1.10%)
Kaman Corp.		(14,364	)			(845,178	)
Nexeo Solutions, Inc.B		(26,598	)			(242,042	)
						(1,087,220	)
Total Industrials						(4,291,426	)
Information Technology - (10.00%)
Communications Equipment - (0.70%)
InterDigital, Inc.		(9,105	)			(693,346	)
Electronic Equipment, Instruments & Components - (3.07%)
Belden, Inc.		(16,662	)			(1,285,807	)
MTS Systems Corp.		(32,433	)			(1,741,652	)
						(3,027,459	)
Internet Software & Services - (4.96%)
Alibaba Group Holding Ltd., Sponsored ADRB		(17,486	)			(3,015,111	)
Altaba, Inc.B		(9,625	)			(672,306	)
Tencent Holdings Ltd., ADR		(12,193	)			(633,060	)
Weibo Corp., Sponsored ADRB		(5,623	)			(581,756	)
						(4,902,233	)
Semiconductors & Semiconductor Equipment - (0.41%)
Rambus, Inc.B		(28,662	)			(407,573	)
Software - (0.86%)
VMware, Inc., Class AB		(6,752	)			(846,161	)
Total Information Technology						(9,876,772	)
Materials - (4.15%)
Chemicals - (2.65%)
AgroFresh Solutions, Inc.B		(88,469	)			(654,671	)
Rayonier Advanced Materials, Inc.		(96,063	)			(1,964,488	)
						(2,619,159	)
Metals & Mining - (1.50%)
Cleveland-Cliffs, Inc.B		(137,163	)			(988,945	)
Southern Copper Corp.		(10,334	)			(490,348	)
						(1,479,293	)
Total Materials						(4,098,452	)

See accompanying notes

31

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

	Shares				Fair Value
COMMON STOCKS - (43.17%) (continued)
Real Estate - (1.42%)
Equity Real Estate Investment Trusts (REITs) - (1.42%)
Invitation Homes, Inc.			(59,548	)		$	(1,403,546	)
Utilities - (1.52%)
Independent Power & Renewable Electricity Producers - (0.86%)
Dynegy, Inc.B			(71,530	)			(847,631	)
Multi-Utilities - (0.66%)
Dominion Energy, Inc.			(8,019	)			(650,020	)
Total Utilities							(1,497,651	)
TOTAL COMMON STOCKS (Proceeds $(41,100,222))							(42,611,992	)
	Principal Amount
CORPORATE OBLIGATIONS - (1.64%)
Energy - (0.83%)
Ensco PLC, 4.500%, Due 10/1/2024		$	(981,000	)			(824,040	)
Materials - (0.81%)
Cleveland-Cliffs, Inc., 5.750%, Due 3/1/2025C			(839,000	)			(798,099	)
TOTAL CORPORATE OBLIGATIONS (Proceeds $(1,609,860))							(1,622,139	)
	Shares
EXCHANGE-TRADED INSTRUMENTS - (9.01%)
Exchange-Traded Funds - (9.01%)
CurrencyShares Euro TrustB			(20,744	)			(2,398,214	)
Direxion Daily Gold Miners Index Bear 3X Shares ETFB			(9,244	)			(219,083	)
Direxion Daily Gold Miners Index Bull 3X Shares ETFB			(17,368	)			(550,566	)
iShares China Large-Cap ETF			(72,749	)			(3,358,821	)
iShares MSCI EAFE ETF			(28,861	)			(2,029,217	)
SPDR Euro Stoxx 50 ETF			(5,165	)			(210,267	)
SPDR S&P 500 ETF Trust			(450	)			(120,087	)
VanEck Vectors Gold Miners ETF			(239	)			(5,554	)
Total Exchange-Traded Funds							(8,891,809	)
TOTAL EXCHANGE-TRADED INSTRUMENTS (Proceeds $(8,982,522))							(8,891,809	)
TOTAL SECURITIES SOLD SHORT (Proceeds $(51,692,604))							(53,125,940	)
TOTAL INVESTMENTS IN SECURITIES (EXCLUDES SECURITIES SOLD SHORT) - 101.39% (Cost $98,372,064)							100,077,828
TOTAL PURCHASED OPTIONS CONTRACTS - 6.55% (Premiums Paid $9,189,118)							6,464,733
TOTAL WRITTEN OPTIONS CONTRACTS - (3.79%) (Premiums Received $(2,947,551))							(3,744,290	)
TOTAL SECURITIES SOLD SHORT - (53.82%) (Proceeds $(51,692,604))							(53,125,940	)
OTHER ASSETS, NET OF OTHER LIABILITIES - 49.67%							49,037,519
NET ASSETS - 100.00%						$	98,709,850
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 $(1,288,861) or (1.30)% of net assets. Valuation was determined using significant unobservable inputs.

^B Non-income producing security.

^C Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $8,861,003 or 8.98% of net assets. The Fund has no right to demand registration of these securities.

See accompanying notes

32

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

^D A type of Preferred Stock that has no maturity date.

^E Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration.

^F Coupon rate may change based on changes of the underlying collateral or prepayments of principal. The coupon rate shown represents the rate at period end.

^G 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 December 31, 2017.

^H Value was determined using significant unobservable inputs.

^I The Fund is affiliated by having the same investment advisor.

^J 7-day yield.

ADR - American Depositary Receipt.

CMO - Collateralized Mortgage Obligation.

ETF - Exchange Traded Fund.

ETN - Exchange Traded Note.

Euro Stoxx 50 - Eurozone Blue-chip Index.

LIBOR - London Interbank Offered Rate.

LLC - Limited Liability Company.

MLP - Master Limited Partnership.

MSCI - Morgan Stanley Capital International.

MSCI EAFE - Morgan Stanley Capital International - Europe, Australasia, and Far East.

PLC - Public Limited Company.

PRIME - A rate, charged by banks, based on the U.S. Federal Funds rate.

S&P 500 - Standard & Poor’s U.S. Equity Large-Cap Index.

SPDR - Standard & Poor’s Depository Receipt.

VIX - Volatility Index.

Futures Contracts Open on December 31, 2017:
Long Futures
Equity Futures Contracts
Description	Number of Contracts	Expiration Date	Notional Amount		Contract Value		Unrealized Appreciation (Depreciation)
S&P 500 E-Mini Index Futures	195	March 2018	$	25,995,852	$	26,091,000	$	95,148
			$	25,995,852	$	26,091,000	$	95,148

OTC Swap Agreements Outstanding on December 31, 2017:
Total Return Swap Agreements
Pay/Receive Floating Rate	Description	Reference Entity	Counterparty	Floating Rate			Expiration Date		Reference Quantity		Notional Amount		Premiums Paid (Received)		Unrealized Appreciation (Depreciation)
Pay	1-Month USD-LIBOR plus 0.65%	Dell Technologies, Inc.	DUB		2.127	%		8/3/2018		32,793		2,629,671	$	-	$	35,744
Pay	1-Month USD-LIBOR plus 1.20%	SunTrust Banks, Inc.	DUB		1.877	%		8/3/2018		126,078		2,599,728		-		(8,591	)
Pay	1-Month USD-LIBOR plus 1.20%	Zions Bancorporation	DUB		1.877	%		8/3/2018		239,101		4,180,681		-		297,681
Receive	1-Month USD-LIBOR plus 0.30%	SunTrust Banks, Inc.	DUB		1.177	%		8/3/2018		175,075		11,308,157		-		63
Receive	1-Month USD-LIBOR plus 0.30%	Zions Bancorporation	DUB		1.877	%		8/3/2018		225,226		11,210,486		-		(237,752	)
Receive	3-Month USD-LIBOR minus 1.10%	VMware, Inc.	DUB		0.377	%		10/23/2018		18,000		2,193,660		-		(62,100	)
Pay	1-Month USD-LIBOR minus 1.20%	ASBISc Enterprises PLC	DUB		0.277	%		11/29/2018		197,816		1,117,660		-		101,595
Receive	1-Month USD-LIBOR minus 0.30%	ASBISc Enterprises PLC	DUB		1.177	%		11/29/2018		178,034		4,468,653		-		(53,410	)
													$	-	$	73,230

See accompanying notes

33

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

Purchased Options Contracts Open on December 31, 2017:
Equity Options
Description	Counterparty	Exercise Price		Expiration Date	Currency	Number of Contracts		Notional Amount		Premiums Paid		Fair Value		Unrealized Appreciation (Depreciation)
Call - Altaba, Inc.	CCP		52.50	1/19/2018	USD		115		11,500	$	105,287	$	200,675	$	95,388
Call - Altaba, Inc.	CCP		67.50	1/19/2018	USD		300		30,000		141,566		93,300		(48,266	)
Call - Dell Technologies, Inc. Class V	CCP		70.00	1/19/2018	USD		284		28,400		374,892		323,760		(51,132	)
Call - Rayonier Advanced Materials, Inc.	CCP		20.00	1/19/2018	USD		63		6,300		1,294		5,670		4,376
Call - SunTrust Banks, Inc.*	DUB		60.00	1/19/2018	USD		606		60,600		127,891		318,150		190,259
Call - VMware, Inc.	CCP		115.00	1/19/2018	USD		112		11,200		35,453		123,312		87,859
Put - Dominion Energy, Inc.	CCP		82.50	1/19/2018	USD		5		500		628		863		235
Put - Golar LNG Ltd.	CCP		15.00	1/19/2018	USD		514		51,400		55,020		1,285		(53,735	)
Put - Tesla, Inc.	CCP		110.00	1/19/2018	USD		143		14,300		17,167		215		(16,952	)
Put - Rexnord Corp.	CCP		20.00	2/16/2018	USD		31		3,100		1,102		310		(792	)
Call - Associated Banc-Corp.	CCP		25.00	3/16/2018	USD		1,000		100,000		109,042		132,500		23,458
Call - Depomed, Inc.	CCP		11.00	3/16/2018	USD		62		6,200		964		930		(34	)
Call - Southwestern Energy Co.	CCP		8.00	3/16/2018	USD		73		7,300		2,485		1,022		(1,463	)
Call - Time Warner, Inc.	CCP		92.50	3/16/2018	USD		283		28,300		137,685		65,090		(72,595	)
Call - VMware, Inc.	CCP		140.00	3/16/2018	USD		293		29,300		48,495		46,147		(2,348	)
Put - Dynegy, Inc.	CCP		11.00	3/16/2018	USD		164		16,400		9,049		9,430		381
Call - Weibo Corp.	CCP		140.00	4/20/2018	USD		56		5,600		16,191		10,780		(5,411	)
Call - Zions Bancorp*	DUB		48.00	4/20/2018	USD		200		20,000		62,000		92,000		30,000
Call - Rayonier Advanced Materials, Inc.	CCP		25.00	5/18/2018	USD		32		3,200		1,297		2,080		783
Call - Rexnord Corp.	CCP		30.00	5/18/2018	USD		57		5,700		2,310		2,137		(173	)
Call - Teva Pharmaceutical Industries Ltd.	CCP		12.50	6/15/2018	USD		182		18,200		27,399		127,582		100,183
Put - TCF Financial Corp.	CCP		22.50	7/20/2018	USD		1,000		100,000		269,317		272,500		3,183
Put - Tesla, Inc.	CCP		260.00	1/18/2019	USD		63		6,300		161,428		165,879		4,451
										$	1,707,962	$	1,995,617	$	287,655

Exchange-Traded Fund Options
Description	Counterparty	Exercise Price		Expiration Date	Currency	Number of Contracts		Notional Amount		Premiums Paid		Fair Value		Unrealized Appreciation (Depreciation)
Call - iShares China Large-Cap ETF	CCP		48.00	1/19/2018	USD		1,200		120,000	$	10,850	$	19,200	$	8,350
Call - SPDR EURO STOXX 50 ETF	CCP		42.00	1/19/2018	USD		4,408		440,800		264,663		26,448		(238,215	)
Put - CurrencyShares Euro Trust ETF	CCP		103.00	1/19/2018	USD		615		61,500		4,134		308		(3,826	)
Put - Direxion Daily Gold Miners Index Bear 3X Shares ETF	CCP		4.00	1/19/2018	USD		3,006		300,600		576,311		22,545		(553,766	)
Put - iShares China Large-Cap ETF	CCP		39.00	1/19/2018	USD		2,560		256,000		537,710		2,560		(535,150	)
Put - iShares iBoxx High Yield Corporate Bond ETF	CCP		86.00	1/19/2018	USD		900		90,000		36,431		11,700		(24,731	)
Put - iShares MSCI EAFE ETF	CCP		62.00	1/19/2018	USD		1,000		100,000		106,041		2,500		(103,541	)
Put - iShares MSCI EAFE ETF	CCP		71.00	1/19/2018	USD		500		50,000		90,521		45,000		(45,521	)

See accompanying notes

34

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

Description	Counterparty	Exercise Price		Expiration Date	Currency	Number of Contracts		Notional Amount		Premiums Paid		Fair Value		Unrealized Appreciation (Depreciation)
Put - iShares MSCI Emerging Markets ETF	CCP		44.00	1/19/2018	USD		744		74,400	$	163,538	$	5,952	$	(157,586	)
Put - SPDR Euro Stoxx 50 ETF	CCP		42.00	1/19/2018	USD		500		50,000		55,521		57,500		1,979
Call - CurrencyShares Euro Trust ETF	CCP		115.00	3/16/2018	USD		500		50,000		72,886		105,500		32,614
Call - CurrencyShares Euro Trust ETF	CCP		120.00	3/16/2018	USD		2,723		272,300		261,084		108,920		(152,164	)
Call - iShares MSCI EAFE ETF	CCP		70.00	3/16/2018	USD		1,100		110,000		172,746		184,800		12,054
Call - VanEck Vectors Gold Miners ETF	CCP		20.00	3/16/2018	USD		800		80,000		188,488		280,000		91,512
Put - CurrencyShares Euro Trust ETF	CCP		114.00	3/16/2018	USD		500		50,000		60,336		40,500		(19,836	)
Put - iShares iBoxx High Yield Corporate Bond ETF	CCP		84.00	3/16/2018	USD		375		37,500		22,141		19,125		(3,016	)
Call - CurrencyShares Euro Trust ETF	CCP		113.00	1/18/2019	USD		3,066		306,600		1,254,916		1,893,255		638,339
Call - CurrencyShares Euro Trust ETF	CCP		112.00	1/18/2019	USD		525		52,500		256,096		359,625		103,529
Call - CurrencyShares Euro Trust ETF	CCP		116.00	1/18/2019	USD		760		76,000		286,184		328,700		42,516
Call - CurrencyShares Japanese Yen Trust ETF	CCP		92.00	1/18/2019	USD		50		5,000		17,002		7,375		(9,627	)
Put - CurrencyShares Euro Trust ETF	CCP		113.00	1/18/2019	USD		1,000		100,000		289,375		179,000		(110,375	)
Put - CurrencyShares Euro Trust ETF	CCP		102.00	1/18/2019	USD		400		40,000		144,217		9,400		(134,817	)
Put - CurrencyShares Euro Trust ETF	CCP		103.00	1/18/2019	USD		1,650		165,000		654,376		47,025		(607,351	)
Put - CurrencyShares Euro Trust ETF	CCP		101.00	1/18/2019	USD		150		15,000		48,531		3,000		(45,531	)
Put - CurrencyShares Euro Trust ETF	CCP		108.00	1/18/2019	USD		567		56,700		364,513		45,360		(319,153	)
Put - CurrencyShares Euro Trust ETF	CCP		106.00	1/18/2019	USD		381		38,100		207,672		23,241		(184,431	)
Put - CurrencyShares Euro Trust ETF	CCP		104.00	1/18/2019	USD		1,589		158,900		653,253		54,026		(599,227	)
Put - CurrencyShares Japanese Yen Trust ETF	CCP		87.00	1/18/2019	USD		930		93,000		354,683		311,550		(43,133	)
Put - CurrencyShares Japanese Yen Trust ETF	CCP		85.00	1/18/2019	USD		869		86,900		224,193		195,525		(28,668	)
Put - CurrencyShares Japanese Yen Trust ETF	CCP		85.00	1/17/2020	USD		25		2,500		8,763		7,562		(1,201	)
Put - CurrencyShares Japanese Yen Trust ETF	CCP		83.00	1/17/2020	USD		86		8,600		22,837		18,490		(4,347	)
										$	7,410,012	$	4,415,692	$	(2,994,320	)

Index Options
Description	Counterparty	Exercise Price	Expiration Date	Currency	Number of Contracts		Notional Amount		Premiums Paid		Fair Value		Unrealized Appreciation (Depreciation)
Put - S&P 500 Index	CCP	2,450.00	1/19/2018	USD		2		200	$	361	$	410	$	49
Put - S&P 500 Index	CCP	2,475.00	1/19/2018	USD		9		900		1,850		1,764		(86	)
Call - S&P 500 Index	CCP	2,700.00	1/31/2018	USD		41		4,100		68,933		51,250		(17,683	)
									$	71,144	$	53,424	$	(17,720	)

See accompanying notes

35

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

Written Options Contracts Open on December 31, 2017:
Equity Options
Description	Counterparty	Exercise Price		Expiration Date	Currency	Number of Contracts		Notional Amount		Premiums Received			Fair Value			Unrealized Appreciation (Depreciation)
Call - AgroFresh Solutions, Inc.	CCP		7.50	1/19/2018	USD		83		8,300	$	(12,746	)	$	(1,660	)	$	11,086
Call - Hostess Brands, Inc.	CCP		15.00	1/19/2018	USD		178		17,800		(27,908	)		(6,230	)		21,678
Call - VMware, Inc.	CCP		90.00	1/19/2018	USD		235		23,500		(648,575	)		(830,725	)		(182,150	)
Put - Altaba, Inc.	CCP		67.50	1/19/2018	USD		300		30,000		(112,262	)		(18,900	)		93,362
Put - Hostess Brands, Inc.	CCP		15.00	1/19/2018	USD		250		25,000		(14,664	)		(12,500	)		2,164
Call - Time Warner, Inc.	CCP		100.00	3/16/2018	USD		283		28,300		(42,532	)		(12,735	)		29,797
Put - Bank of America Corp.	CCP		25.00	1/18/2019	USD		1,056		105,600		(202,176	)		(122,496	)		79,680
										$	(1,060,863	)	$	(1,005,246	)	$	55,617

Exchange-Traded Fund Options
Description	Counterparty	Exercise Price		Expiration Date	Currency	Number of Contracts		Notional Amount		Premiums Received			Fair Value			Unrealized Appreciation/ (Depreciation)
Call - CurrencyShares Euro Trust ETF	CCP		108.00	1/19/2018	USD		565		56,500	$	(109,049	)	$	(450,305	)	$	(341,256	)
Call - CurrencyShares Euro Trust ETF	CCP		113.00	1/19/2018	USD		1,300		130,000		(133,895	)		(351,000	)		(217,105	)
Call - CurrencyShares Euro Trust ETF	CCP		105.00	1/19/2018	USD		500		50,000		(174,135	)		(542,500	)		(368,365	)
Put - CurrencyShares Japanese Yen Trust ETF	CCP		87.00	1/19/2018	USD		847		84,700		(220,115	)		(152,460	)		67,655
Put - CurrencyShares Euro Trust ETF	CCP		113.00	1/19/2018	USD		700		70,000		(79,303	)		(4,200	)		75,103
Put - CurrencyShares Euro Trust ETF	CCP		101.00	1/19/2018	USD		179		17,900		(31,911	)		(179	)		31,732
Put - Direxion Daily Gold Miners Index Bear 3X Shares ETF	CCP		20.00	1/19/2018	USD		250		25,000		(138,625	)		(6,250	)		132,375
Put - CurrencyShares Euro Trust ETF	CCP		102.00	1/19/2018	USD		549		54,900		(137,032	)		(275	)		136,757
Put - iShares China Large-Cap ETF	CCP		48.00	1/19/2018	USD		700		70,000		(223,266	)		(136,500	)		86,766
Call - CurrencyShares Euro Trust ETF	CCP		116.00	3/16/2018	USD		660		66,000		(111,378	)		(99,660	)		11,718
Call - CurrencyShares Euro Trust ETF	CCP		113.00	3/16/2018	USD		100		10,000		(16,644	)		(36,500	)		(19,856	)
Put - CurrencyShares Japanese Yen Trust ETF	CCP		85.00	3/16/2018	USD		700		70,000		(90,292	)		(63,700	)		26,592
										$	(1,465,645	)	$	(1,843,529	)	$	(377,884	)

Index Options
Description	Counterparty	Exercise Price	Expiration Date	Currency	Number of Contracts		Notional Amount		Premiums Received			Fair Value			Unrealized Appreciation (Depreciation)
Call - S&P 500 Index	CCP	2,475.00	1/19/2018	USD		11		1,100	$	(72,147	)	$	(224,235	)	$	(152,088	)
Call - S&P 500 Index	CCP	2,600.00	1/19/2018	USD		68		6,800		(180,669	)		(544,680	)		(364,011	)
Put - S&P 500 Index	CCP	2,600.00	1/19/2018	USD		10		1,000		(10,994	)		(6,600	)		4,394
Call - S&P 500 Index	CCP	2,670.00	3/16/2018	USD		25		2,500		(157,233	)		(120,000	)		37,233
									$	(421,043	)	$	(895,515	)	$	(474,472	)

* The position was traded Over-the-Counter.

See accompanying notes

36

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

Glossary:
Counterparty Abbreviations:
DUB	Deutsche Bank AG
Currency Abbreviations:
CAD	Canadian Dollar
JPY	Japanese Yen
USD	United States Dollar
Index Abbreviations:
S&P 500	Standard & Poor’s U.S. Equity Large-Cap Index
Other Abbreviations:
CCP	Central Counterparty Clearing House
ETF	Exchange-Traded Fund
Euro Stoxx 50	Eurozone Blue-chip Index
LIBOR	London Interbank Offered Rate
MSCI	Morgan Stanley Capital International
MSCI EAFE	Morgan Stanley Capital International - Europe, Australasia, and Far East
PLC	Public Limited Company
SPDR	Standard & Poor’s Depositary Receipt

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of December 31, 2017, the investments were classified as described below:

Ionic Strategic Arbitrage Fund	Level 1			Level 2			Level 3		Total
Assets
Common Stocks	$	3,009,270		$	1,321,247		$	-	$	4,330,517
Warrants		2,869,970			-			-		2,869,970
Convertible Preferred Stocks		17,295,017			-			-		17,295,017
Convertible Obligations		-			18,426,761			-		18,426,761
Foreign Corporate Obligations		-			4,241,684			-		4,241,684
Collateralized Mortgage Obligations		-			13,803,278			1,741,554		15,544,832
Investment Companies		10,061,295			2,004,934			-		12,066,229
Exchange-Traded Instruments		5,775,610			-			-		5,775,610
Short-Term Investments		19,527,208			-			-		19,527,208
Total Investments in Securities - Assets	$	58,538,370		$	39,797,904		$	1,741,554	$	100,077,828
Liabilities
Common Stocks (Sold Short)	$	(38,223,594	)	$	(4,388,398	)	$	-	$	(42,611,992	)
Corporate Obligations (Sold Short)		-			(1,622,139	)		-		(1,622,139	)
Exchange-Traded Instruments (Sold Short)		(8,891,809	)		-			-		(8,891,809	)
Total Investments in Securities - Liabilities		(47,115,403	)		(6,010,537	)		-		(53,125,940	)
Total Investments in Securities	$	11,422,967		$	33,787,367		$	1,741,554	$	46,951,888
Financial Derivative Instruments - Assets
Futures Contracts	$	95,148		$	-		$	-	$	95,148
Swap Contract Agreements		-			435,083			-		435,083
Purchased Options Contracts		6,464,733			-			-		6,464,733
Total Financial Derivative Instruments - Assets	$	6,559,881		$	435,083		$	-	$	6,994,964
Financial Derivative Instruments - Liabilities
Swap Contract Agreements	$	-		$	(361,853	)	$	-	$	(361,853	)
Written Options Contracts		(3,744,290	)		-			-		(3,744,290	)
Total Financial Derivative Instruments - Liabilities	$	(3,744,290	)	$	(361,853	)	$	-	$	(4,106,143	)

See accompanying notes

37

American Beacon Ionic Strategic Arbitrage Fund^SM

Schedule of Investments

December 31, 2017

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of the Fund’s assets and liabilities. During the period ended December 31, 2017, there were transfers from Level 1 to Level 2, with a fair value of $2,522,338, as a result of a determination made by the Valuation Committee that adjustments should be applied to certain international securities due to significant movement in the market. There were transfers from Level 2 to Level 1, with a fair value of $1,092,605, due to active trading and therefore an updated pricing source. The transfers from Level 2 to Level 3, with a fair value of $884,815, are due to the securities being priced by 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 12/31/2016	Purchases	Sales	Accrued Discounts (Premiums)		Realized Gain (Loss)			Change in Unrealized Appreciation (Depreciation)		Transfer into Level 3		Transfer out of Level 3		Balance as of 12/31/2017		Change in Unrealized Appreciation (Depreciation) at Period end**
Collateralized Mortgage Obligations	$2,155,189	$7,628	$936,922	$	-	$	(373,853	)	$	4,697	$	884,815	$	-	$	1,741,554	$	(257,226	)

** Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation (depreciation) on the Statements of Operations.

The collateralized mortgage obligations, classified as Level 3, were valued using single broker quotes. However, these securities were transferred into the Level 3 category due to limited market transparency and/or lack of corroboration to support the quoted prices.

See accompanying notes

38

American Beacon Funds^SM

Statements of Assets and Liabilities

December 31, 2017

	AHL Managed Futures Strategy FundA			Ionic Strategic Arbitrage Fund
Assets:
Investments in unaffiliated securities, at fair value†	$	449,173,483		$	80,550,620
Investments in affiliated securities, at fair value‡		20,549,617			19,527,208
Purchased options contracts outstanding (premiums paid $9,189,118)		–			6,464,733
Foreign currency deposits with brokers for futures contracts, at fair value¤		17,554,657			–
Swap income receivable		-			29,648
Cash with brokers		6,210,539			49,930,111
Deposit with brokers for futures contracts		26,566,367			965,250
Dividends and interest receivable		13,665			553,115
Receivable for investments sold		-			3,712,642
Receivable for fund shares sold		2,908,890			184,450
Receivable for tax reclaims		-			2,351
Receivable for expense reimbursement (Note 2)		1,087,897			112,876
Receivable for variation margin on open futures contracts (Note 5)		1,795,935			-
Unrealized appreciation from swap agreements		-			435,083
Unrealized appreciation from forward foreign currency contracts		2,603,085			-
Prepaid expenses		40,167			32,894
Total assets		528,504,302			162,500,981
Liabilities:
Payable for investments purchased		-			1,730,246
Payable for fund shares redeemed		510,089			627,351
Payable for foreign currency, at fair value^		-			271,398
Payable for foreign currency with brokers, at fair value+		-			3,445,662
Payable for variation margin from open futures contracts (Note 5)		-			129,227
Securities sold short, at fair value±		-			53,125,940
Cash due to custodian		-			17,192
Written option contracts, at fair value (premiums received $2,947,551)		-			3,744,290
Swap income payable		-			8,877
Dividends and interest expense payable		-			41,941
Management and sub-advisory fees payable (Note 2)		567,209			117,274
Service fees payable (Note 2)		9,694			434
Transfer agent fees payable (Note 2)		21,544			6,379
Custody and fund accounting fees payable		1,694,743			15,582
Professional fees payable		62,761			139,694
Trustee fees payable (Note 2)		22			5
Payable for prospectus and shareholder reports		65,679			7,772
Unrealized depreciation from swap agreements		-			361,853
Unrealized depreciation from forward foreign currency contracts		3,084,017			-
Other liabilities		4,098			14
Total liabilities		6,019,856			63,791,131
Net assets	$	522,484,446		$	98,709,850
Analysis of net assets:
Paid-in-capital	$	514,340,530		$	121,390,651
Undistributed net investment income		395,553			1,372,186
Accumulated net realized gain (loss)		320,014			(20,977,503	)
Unrealized appreciation (depreciation) of investmentsB		(126,937	)		1,705,764
Unrealized appreciation of forward currency contracts		(480,932	)		-
Unrealized appreciation of foreign currency transactions		430,479			4,834
Unrealized appreciation of futures contracts		7,605,739			95,148
Unrealized appreciation of swap agreements		-			73,230
Unrealized (depreciation) of purchased options		-			(2,724,385	)
Unrealized (depreciation) of written options		-			(796,739	)
Unrealized (depreciation) of short sales		-			(1,433,336	)
Net assets	$	522,484,446		$	98,709,850

See accompanying notes

39

American Beacon Funds^SM

Statements of Assets and Liabilities

December 31, 2017

	AHL Managed Futures Strategy FundA		Ionic Strategic Arbitrage Fund
Shares outstanding at no par value (unlimited shares authorized):
Institutional Class		37,042,161		3,153,071
Y Class		9,644,118		8,439,203
Investor Class		1,939,236		185,042
A Class		323,698		13,715
C Class		559,395		9,801
Net assets:
Institutional Class	$	391,617,624	$	26,386,023
Y Class	$	101,513,775	$	70,589,684
Investor Class	$	20,241,387	$	1,539,554
A Class	$	3,408,861	$	113,957
C Class	$	5,702,799	$	80,632
Net asset value, offering and redemption price per share:
Institutional Class	$	10.57	$	8.37
Y Class	$	10.53	$	8.36
Investor Class	$	10.44	$	8.32
A Class	$	10.53	$	8.31
A Class (offering price)	$	11.17	$	8.72
C Class	$	10.19	$	8.23
† Cost of investments in unaffiliated securities	$	449,300,420	$	78,844,856
‡ Cost of investments in affiliated securities	$	20,549,617	$	19,527,208
¤ Cost of foreign currency deposits with broker for futures contracts	$	16,524,192	$	-
^ Cost of foreign currency	$	-	$	(267,398	)
+ Cost of foreign currency with broker	$	-	$	(3,467,208	)
± Proceeds of securities sold short	$	-	$	51,692,604
A Consolidated financial statement. See Note 1 in the Notes to Financial Statements for additional information.
B The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at year end.

See accompanying notes

40

American Beacon Funds^SM

Statements of Operations

For the year ended December 31, 2017

	AHL Managed Futures Strategy FundA			Ionic Strategic Arbitrage Fund
Investment income:
Dividend income from unaffiliated securities (net of foreign taxes)†	$	-		$	1,930,105
Dividend income from affiliated securities		92,205			126,844
Interest income		3,737,607			1,458,940
Other income		-			158,228
Total investment income		3,829,812			3,674,117
Expenses:
Management and sub-advisory fees (Note 2)		6,663,952			1,685,674
Transfer agent fees:
Institutional Class (Note 2)		146,910			26,307
Y Class (Note 2)		58,664			61,519
Investor Class		2,534			1,289
A Class		752			3
C Class		228			3
Custody and fund accounting fees		2,469,016			23,391
Professional fees		100,063			281,204
Registration fees and expenses		86,774			81,685
Service fees (Note 2):
Y Class		14,847			13,603
Investor Class		57,760			5,613
A Class		22,115			174
C Class		7,179			21
Distribution fees (Note 2):
A Class		36,859			292
C Class		47,862			1,091
Prospectus and shareholder report expenses		188,726			20,651
Trustee fees (Note 2)		30,785			8,188
Prime broker fees		-			11,866
Dividends and interest on securities sold short		-			1,317,169
Other expenses		49,148			4,394
Total expenses		9,984,174			3,544,137
Net fees waived and expenses (reimbursed) (Note 2)		(2,099,369	)		(207,392	)
Net expenses		7,884,805			3,336,745
Net investment income (loss)		(4,054,993	)		337,372
Realized and unrealized gain (loss) from investments:
Net realized gain (loss) from:
Investments in unaffiliated securitiesB		(16,601	)		(47,427,956	)
Purchased options contracts		-			(4,695,236	)
Foreign currency transactions		542,508			(262,049	)
Forward foreign currency contracts		(3,743,646	)		-
Futures contracts		33,270,023			1,819,934
Swap agreements		-			186,831
Written options contracts		-			(479,820	)
Short sales		-			53,261,221
Change in net unrealized appreciation (depreciation) of:
Investments in unaffiliated securitiesC		(130,830	)		(11,430,213	)
Purchased options contracts		-			1,424,834
Foreign currency transactions		660,440			143,224
Forward foreign currency contracts		1,244,061			-
Futures contracts		(1,895,868	)		(24,181	)
Swap agreements		-			73,230
Written options contracts		-			(1,923,885	)
Short sales		-			8,595,514
Net gain (loss) from investments		29,930,087			(738,552	)
Net increase (decrease) in net assets resulting from operations	$	25,875,094		$	(401,180	)
† Foreign taxes	$	-		$	12,197
A Consolidated financial statement. See Note 1 in the Notes to Financial Statements for additional information.
B The Fund did not recognize net realized gains (losses) from the sale of investments in affiliated securities.
C The Fund’s investments in affiliated securities did not have a change in unrealized appreciation (depreciation) at year end.

See accompanying notes

41

American Beacon Funds^SM

Statements of Changes in Net Assets

	AHL Managed Futures Strategy FundA						Ionic Strategic Arbitrage Fund
	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017			Year Ended December 31, 2016
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(4,054,993	)	$	(5,980,464	)	$	337,372		$	1,404,577
Net realized gain (loss) from investments in unaffiliated securities, purchased options contracts, foreign currency transactions, forward foreign currency contracts, futures contracts, swap agreements, written options contracts, and short sales		30,052,284			(27,761,623	)		2,402,925			458,283
Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities, purchased options contracts, foreign currency transactions, forward foreign currency contracts, futures contracts, swap agreements, written options contracts, and short sales		(122,197	)		7,600,291			(3,141,477	)		637,345
Net increase (decrease) in net assets resulting from operations		25,875,094			(26,141,796	)		(401,180	)		2,500,205
Distributions to shareholders:
Net investment income:
Institutional Class		-			-			(1,853,900	)		(4,423,015	)
Y Class		-			-			(4,957,963	)		(2,709,587	)
Investor Class		-			-			(105,355	)		(62,954	)
A Class		-			-			(7,498	)		(5,200	)
C Class		-			-			(4,803	)		(7,268	)
Net realized gain from investments:
Institutional Class		(15,176,418	)		-			(202,770	)		(5,146,294	)
Y Class		(3,701,486	)		-			(542,277	)		(3,152,676	)
Investor Class		(777,705	)		-			(12,119	)		(73,248	)
A Class		(142,135	)		-			(851	)		(6,051	)
C Class		(229,781	)		-			(646	)		(8,457	)
Net distributions to shareholders		(20,027,525	)		-			(7,688,182	)		(15,594,750	)
Capital share transactions (Note 10):
Proceeds from sales of shares		172,256,169			529,925,260			55,899,547			151,226,921
Reinvestment of dividends and distributions		17,912,969			-			7,581,413			15,540,914
Cost of shares redeemed		(138,380,771	)		(142,912,043	)		(127,532,637	)		(74,737,699	)
Net increase (decrease) in net assets from capital share transactions		51,788,367			387,013,217			(64,051,677	)		92,030,136
Net increase (decrease) in net assets		57,635,936			360,871,421			(72,141,039	)		78,935,591
Net assets:
Beginning of period		464,848,510			103,977,089			170,850,889			91,915,298
End of period*	$	522,484,446		$	464,848,510		$	98,709,850		$	170,850,889
*Includes undistributed net investment income	$	395,553		$	1,423,199		$	1,372,186		$	1,709,862
A Consolidated financial statement. See Note 1 in the Notes to Financial Statements for additional information.

See accompanying notes

42

American Beacon Funds^SM

Notes to Financial Statements

December 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 non-diversified, open-end management investment companies. As of December 31, 2017, the Trust consists of thirty-three active series, two of which are presented in this filing: American Beacon AHL Managed Futures Strategy Fund and American Beacon Ionic Strategic Arbitrage Fund (collectively, the “Funds” and each individually a “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.

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 through 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.

Consolidation of Subsidiaries

The consolidated Schedule of Investments of the AHL Managed Futures Strategy Fund (the “CFC Fund”) includes the accounts of the American Beacon Cayman Managed Futures Strategy Fund, Ltd., a wholly-owned and controlled subsidiary (the “Subsidiary”). All inter-company accounts and transactions have been eliminated in consolidation for the CFC Fund.

For Federal tax purposes, taxable income for the CFC Fund and its Subsidiary are calculated separately. The Subsidiary is classified as a controlled foreign corporation under the Internal Revenue Code of 1986 (the “Code”) and the Subsidiary’s taxable income is included in the calculation of the CFC Fund’s taxable income. Net losses of the Subsidiary are not deductible by the CFC Fund either in the current period or future periods. The Subsidiary has a fiscal year end of December 31st for financial statement consolidation purposes and a nonconforming tax year end of November 30th.

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The CFC Fund may invest up to 25% of its total assets in the Subsidiary, which acts as an investment vehicle in order to effect certain investments consistent with the CFC Fund’s investment objectives and policies. The CFC Fund expects to achieve a significant portion of its exposure to commodities and commodities-related investments through investment in the Subsidiary. Unlike the CFC Fund, the Subsidiary may invest without limitation in commodities and commodities-related investments.

Fund	Inception Date of Subsidiary		Subsidiary Net Assets at December 31, 2017		% of Total Net Assets of the CFC Fund at December 31, 2017			Net Realized Gain (Loss) from Investments Held in Subsidiary
American Beacon Cayman Managed Futures Strategy Fund, Ltd.		August 19, 2014	$	123,027,706		23.5	%	$	(8,669,907	)

CFTC Regulation

On August 13, 2013, the Commodity Futures Trading Commission (“CFTC”) adopted rules to harmonize conflicting United States Securities and Exchange Commission (the “SEC’’) and CFTC disclosure, reporting and recordkeeping requirements for registered investment companies that do not meet an exemption from the definition of commodity pool. The harmonization rules provide that the CFTC will accept the SEC’s disclosure, reporting, and recordkeeping regime as substituted compliance for substantially all of the otherwise applicable CFTC regulations as long as such investment companies meet the applicable SEC requirements.

The CFC Fund is a commodity pool, as defined in the regulation of the CFTC and operated by the Manager, a commodity pool operator regulated by 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.

Significant Accounting Policies

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.

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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.

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 Trust’s Board of Trustees (the “Board”) deems 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 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, equal to 0.35%.

The Trust, on behalf of the Funds, and the Manager have entered into Investment Advisory Agreements with AHL Partners LLP and Ionic Capital Management LLC (the “Sub-Advisors”) for the AHL Managed Futures Strategy Fund and the Ionic Strategic Arbitrage Fund, respectively, pursuant to which each Fund has agreed to pay an annualized sub-advisory fee that is calculated and accrued daily equal to 1.00% of the Fund’s average daily net assets.

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December 31, 2017

The Management and Sub-Advisory Fees paid by the Funds for the year ended December 31, 2017 were as follows:

AHL Managed Futures Strategy Fund

	Effective Fee Rate			Amount of Fees Paid
Management Fees		0.35	%	$	1,727,691
Sub-Advisor Fees		1.00	%		4,936,261
Total		1.35	%	$	6,663,952

Ionic Strategic Arbitrage Fund

	Effective Fee Rate			Amount of Fees Paid
Management Fees		0.35	%	$	437,027
Sub-Advisor Fees		1.00	%		1,248,647
Total		1.35	%	$	1,685,674

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 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds. Effective April 1, 2017, the Funds terminated the Service Plan for the Y Class. During the year ended December 31, 2017 the Manager voluntarily reimbursed service fees to the Y and C Classes of the Ionic Strategic Arbitrage Fund in the amount of $2,037 and $142, respectively.

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

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to 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 December 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
AHL Managed Futures Strategy	$	188,724
Ionic Strategic Arbitrage		82,925

As of December 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
AHL Managed Futures Strategy	$	17,316
Ionic Strategic Arbitrage		5,094

During the year ended December 31, 2017 the Manager voluntarily reimbursed sub-transfer agent fees to the Y Class of the AHL Managed Futures Strategy Fund in the amount of $2,060.

Investments in Affiliated Funds

The Funds may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). The Funds and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the USG Select Fund and receives management fees and administrative fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the year ended December 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
AHL Managed Futures Strategy	$	9,012
Ionic Strategic Arbitrage		14,679

Interfund Credit Facility

Pursuant to an exemptive order issued by the 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 December 31, 2017, the Ionic Strategic Arbitrage Fund borrowed on average $3,653,217 for 3 days at an average interest rate of 1.48% with interest charges paid of $446. The amount is included in “Other Expenses” on the Statements of Operations. The AHL Managed Futures Strategy Fund did not utilize the credit facility.

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December 31, 2017

Expense Reimbursement Plan

The Manager contractually agreed to reduce fees and/or reimburse expenses for the classes of the Funds to the extent that total operating expenses exceed the Funds’ expense cap. During the year ended December 31, 2017, the Manager waived and/or reimbursed expenses as follows:

		Expense Cap								Expiration of Reimbursed Expenses
Fund	Class	1/1/2017 - 12/31/2017			Reimbursed Expenses		(Recouped) Expenses
AHL Managed Futures Strategy	Institutional		1.54	%	$	1,661,183	$	-			2020
AHL Managed Futures Strategy	Y		1.64	%		293,904		-			2020
AHL Managed Futures Strategy	Investor		1.92	%		64,965		-			2020
AHL Managed Futures Strategy	A		1.94	%		59,814		-			2020
AHL Managed Futures Strategy	C		2.69	%		19,503		-			2020
Ionic Strategic Arbitrage	Institutional		1.54	%		93,674		-			2020
Ionic Strategic Arbitrage	Y		1.64	%		117,183		(5,231	)		2020
Ionic Strategic Arbitrage	Investor		1.92	%		3,226		(1,656	)		2020
Ionic Strategic Arbitrage	A		1.94	%		203		(26	)		2020
Ionic Strategic Arbitrage	C		2.69	%		47		(28	)		2020

Of these amounts, $1,087,897 and $112,876 were disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at December 31, 2017 for the AHL Managed Futures Strategy Fund and Ionic Strategic Arbitrage Fund, respectively.

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 Fund did not record a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:

Fund	Recovered Expenses			Excess Expense Carryover		Expired Expense Carryover		Expiration of Reimbursed Expenses
AHL Managed Futures Strategy	$	-		$	416,132	$	-		2018
AHL Managed Futures Strategy		-			1,444,427		-		2019
Ionic Strategic Arbitrage		(6,941	)		108,786		-		2018
Ionic Strategic Arbitrage		-			33,392		-		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 December 31, 2017, Foreside collected $2,876 and $38 in sales commissions for AHL Managed Futures Strategy Fund and Ionic Strategic Arbitrage 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 December 31, 2017, there were no CDSC fees collected for Class A Shares of the Funds.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Funds’ Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original

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purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended December 31, 2017, CDSC fees of $1,909 were collected for Class C Shares of the AHL Managed Futures Strategy Fund. There were no CDSC fees collected for Class C Shares of the Ionic Strategic Arbitrage 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 $10,000 for each Board meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $10,000 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 Trusts according to its respective net assets.

Concentration of Ownership

From time to time, the Funds may have a concentration of one or more accounts constituting a significant percentage of shares outstanding. Investment activities by holders of accounts that represent a significant ownership of more than 5% of the Funds’ outstanding shares could have a material impact on the Funds. As of December 31, 2017, based on management’s evaluation of the shareholder account base, exclusive of omnibus accounts, one account has been identified as representing a non-affiliated significant ownership of approximately 7% of the AHL Managed Futures Strategy Fund’s outstanding shares.

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.

For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Manager determines that developments between the close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of a Fund’s portfolio securities, the Manager will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices

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December 31, 2017

to reflect fair value, the Manager reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. In addition, the Funds may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Funds’ pricing time of 4:00 p.m. Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. These securities are fair valued using a pricing service and are categorized as Level 2 in the fair value hierarchy. The pricing service, using methods approved by the Board, considers the correlation of the trading patterns of the foreign security to intraday trading in the U.S. markets, based on indices of domestic securities and other appropriate indicators such as prices of relevant American Depository Receipts (“ADR”) and futures contracts. The Valuation Committee, established by the Board, may also fair value securities in other situations, such as when a particular foreign market is closed but a Fund is open. The Funds use outside pricing services to provide closing prices and information to evaluate and/or adjust those prices. As a means of evaluating its security valuation process, the Valuation Committee routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices.

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, 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. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

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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.

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.

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December 31, 2017

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

Agency Mortgage-Backed Securities

Certain mortgage-backed securities (“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.

American Depositary Receipts (“ADRs”)

ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers, and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Fund’s possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the 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.

Commodity Instruments

Exposure to physical commodities may subject the AHL Managed Futures Strategy Fund to greater volatility than investments in traditional securities. The value of such investments may be affected by overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as supply and demand, drought, floods, weather, embargoes, tariffs and international economic, political and regulatory developments. Their value may also respond to investor perception of instability in the national or international economy, whether or not justified by the facts. However, these investments may help to moderate fluctuations in the value of the Fund’s other holdings, because these investments may not correlate with investments in traditional securities. Economic and other events (whether real or perceived) can reduce the demand for commodities, which may reduce market prices and cause the value of the Fund’s shares to fall. No active trading market may exist for certain commodities investments, which may impair the ability of the Fund to sell or realize the full value of such investments in the event of the need to liquidate such investments. Certain commodities are subject to limited pricing flexibility because of supply and demand factors. Others are subject to broad price fluctuations as a result of the volatility of the prices for certain raw materials and the instability of supplies of other materials. These additional variables may create additional investment risks and result in greater volatility than investments in traditional securities. Because physical commodities do not generate investment income, the return on such investments will be derived solely from the appreciation or depreciation on such

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December 31, 2017

investments. Certain types of commodities instruments (such as commodity-linked swaps and commodity-linked structured notes) are subject to the risk that the counterparty to the instrument will not perform or will be unable to perform in accordance with the terms of the instrument.

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.

Exchange-Traded Notes (“ETNs”)

The Ionic Strategic Arbitrage Fund may invest in ETNs. ETNs are debt obligations that are traded on exchanges and the returns of which are linked to the performance of market indexes. In addition to trading ETNs on exchanges, investors may redeem ETNs directly with the issuer on a weekly basis, typically in a minimum amount of 50,000 units, or hold the ETNs until maturity. ETNs may be riskier than ordinary debt securities and may have no principal protection. The Fund’s investment in an ETN may be influenced by many unpredictable factors, including highly volatile commodities prices, changes in supply and demand relationships, weather, agriculture, trade, changes in interest rates, and monetary and other governmental policies, action and inaction. Investing in ETNs is not equivalent to investing directly in index components or the relevant index itself. Because ETNs are debt securities, they possess credit risk; if the issuer has financial difficulties or goes bankrupt, the investor may not receive the return it was promised. Because ETNs are unsecured, unsubordinated debt securities, an investment in an ETN exposes the Fund to the risk that an ETN’s issuer may be unable to repay the note upon maturity. As a result, the value of the ETN may decline, including to zero. In addition, as with investments in ETFs and investment companies, the Fund will bear its proportionate share of the fees and expenses of the ETN, which may cause the Fund’s operating expenses to be higher and its performance to be lower than it would if it invested directly in the

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securities of the index or other reference assets of the ETN. There may be times when an ETN share trades at a premium or discount to its market benchmark. The Fund’s decision to sell its ETN holdings may be limited by the availability of a liquid market. If the Fund must sell some or all of its ETN holdings and the market for such ETN is weak, it may have to sell such holdings at a discount.

Fixed-Income Investments

The Funds may hold debt, including government and corporate debt, and other fixed-income securities. Typically, the values of fixed-income securities change inversely with prevailing interest rates. Therefore, a fundamental risk of fixed-income securities is interest rate risk, which is the risk that their value will generally decline as prevailing interest rates rise, which may cause the Funds’ net asset value to likewise decrease, and vice versa. How specific fixed-income securities may react to changes in interest rates will depend on the specific characteristics of each security.

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.

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 December 31, 2017 are disclosed in the Notes to the Schedules of Investments. The Funds did not hold any illiquid securities as of the year ended December 31, 2017.

Interest-Only and Principal-Only Mortgage-Backed Securities

Stripped mortgage-backed securities (“SMBS”) are derivative multi-class mortgage securities. SMBS may be issued by agencies or instrumentalities of the U.S. Government and private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose entities of the foregoing. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all

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of the interest (the “IO” class), while the other class will receive the entire principal (the principal-only or “PO” class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including pre-payments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund’s yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated pre-payments of principal, a Fund may fail to recoup some or all of its initial investment in these securities even if the security is in one of the highest rating categories.

Interest-only instruments generally increase in value in a rising interest rate environment, which typically results in a slower rate of prepayments on the underlying mortgages and extends the period during which interest payments are required to be made on the IO security. Interest only securities are subject to prepayment risk, which is the risk that prepayments will accelerate in a declining interest rate environment and will reduce the number of remaining interest payments even though there is no default on the underlying mortgages. Principal only instruments generally increase in value in a declining interest rate environment, which typically results in a faster rate of prepayments on the underlying mortgages. Since a PO security is usually purchased at a discount, faster prepayments result in a higher rate of return when the face value of the security is paid back sooner than expected.

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 Funds’ 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.

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 Funds may invest in mortgage or other 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 Funds’ 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.

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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, 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.

Preferred Stock

A preferred stock blends the characteristics of a bond and common stock. It can offer the higher yield of a bond and has priority over common stock in equity ownership, but does not have the seniority of a bond and its participation in the issuer’s growth may be limited. Preferred stock generally has preference over common stock in the receipt of dividends and in any residual assets after payment to creditors should the issuer be dissolved. Although the dividend is set at a fixed or variable rate, in some circumstances it can be changed or omitted by the issuer. Preferred stocks are subject to the risks associated with other types of equity securities, as well as additional risks, such as credit risk, interest rate risk, potentially greater volatility and risks related to deferral, non-cumulative dividends, subordination, liquidity, limited voting rights, and special redemption rights.

Real Estate Investment Trusts

The Funds may own shares of real estate investment trusts (“REITs”) which report information on the source of their distributions annually. The Funds re-characterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information, which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year.

Rights and Warrants

Rights are short-term warrants issued in conjunction with new stock or bond issues. Warrants are options to purchase an issuer’s securities at a stated price during a stated term. If the market price of the underlying common stock does not exceed the warrant’s exercise price during the life of the warrant, the warrant will expire worthless. Warrants usually have no voting rights, pay no dividends and have no rights with respect to the assets of the corporation issuing them. The percentage increase or decrease in the value of a warrant may be greater than the percentage increase or decrease in the value of the underlying common stock. Warrants may be purchased with values that vary depending on the change in value of one or more specified indices (“index warrants”). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of the exercise. The market for warrants or rights may be very limited and it may be difficult to sell them promptly at an acceptable price. There is no specific limit on the percentage of assets the Funds may invest in rights and warrants.

Short Sales

The Funds may enter into short sale transactions. A short sale is a transaction in which a Fund sells a security it does not own in anticipation of a decline in the market price of the security. Securities sold in short sale

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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 December 31, 2017, short positions were held by the Funds and are disclosed in the Schedules of Investments.

Special Purpose Acquisition Company

A special purpose acquisition company (“SPAC”) is a collective investment structure that allows public stock market investors to invest in private equity type transactions, particular leveraged buyouts. SPACs are shell or blank-check companies, governed by the SEC, that have no operations but go public with the intention of merging with or acquiring a company with the proceeds of the SPAC’s initial public offering (“IPO”). For the year ended December 31, 2017, the Ionic Strategic Arbitrage Fund did not hold SPAC securities in the portfolio.

U.S. Treasury Obligations

U.S. Treasury obligations include bills (initial maturities of one year or less), notes (initial maturities between two and ten years), and bonds (initial maturities over ten years) issued by the U.S. Treasury, Separately Traded Registered Interest and Principal component parts of such obligations (known as “STRIPS”) and inflation-indexed securities. The prices of these securities (like all debt securities) change between issuance and maturity in response to fluctuating market interest rates. U.S. Treasury obligations are subject to credit risk and interest rate risk.

Variable or Floating Rate Obligations

The interest rates payable on certain fixed-income securities in which the Ionic Strategic Arbitrage Fund may invest are not fixed and may fluctuate based upon changes in market rates. A variable rate obligation has an interest rate which is adjusted at predesignated periods in response to changes in the market rate of interest on which the interest rate is based. Variable and floating rate obligations are less effective than fixed rate instruments at locking in a particular yield. Nevertheless, such obligations may fluctuate in value in response to interest rate changes if there is a delay between changes in market interest rates and the interest reset date for the obligation, or for other reasons.

The Fund may invest in floating rate debt instruments (“floaters”) and engage in credit spread trades. The interest rate on a floater is a variable rate which is tied to another interest rate, such as a money-market index or U.S. Treasury bill rate. The interest rate on a floater resets periodically, typically every six months. While, because of the interest rate reset feature, floaters provide the Fund with a certain degree of protection against rises in interest rates, the Fund will participate in any declines in interest rates as well. A credit spread trade is an investment position relating to a difference in the prices or interest rates of two securities or currencies, where the value of the investment position is determined by movements in the difference between the prices or interest rates, as the case may be, of the respective securities or currencies.

5.  Financial Derivative Instruments

The Funds may utilize derivative instruments to 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.

Forward Foreign Currency Contracts

The AHL Managed Futures Strategy Fund may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Fund’s securities denominated in

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foreign currencies. Forward foreign 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.

During the year ended December 31, 2017, the AHL Managed Futures Strategy Fund entered into forward foreign currency contracts primarily for speculative purposes.

The Fund’s forward foreign 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 Year Ended December 31, 2017
Fund	Purchased Contracts		Sold Contracts
AHL Managed Futures Strategy	$	267,384,748	$	178,703,967

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 December 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 December 31, 2017
AHL Managed Futures Strategy		26,043
Ionic Strategic Arbitrage		79

Options Contracts

The Ionic Strategic Arbitrage 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

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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 Statements of Assets and Liabilities. Certain options may be written with premiums to be determined on a future date. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying futures, swap, security or currency transaction to determine the realized gain or loss when the underlying transaction is sold. The Fund, as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market.

The Fund may also purchase put and call options. Purchasing call options tends to increase the Fund’s exposure to favorable movements of the underlying instrument in exchange for paying an upfront premium. Purchasing put options tends to decrease the Fund’s exposure to unfavorable movements of the underlying instrument. The Fund pays a premium which is included on the Fund’s 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 December 31, 2017, the Ionic Strategic Arbitrage Fund purchased/sold options primarily for return enhancement and hedging.

The Fund’s option contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of options contracts. For the purpose of this disclosure, volume is measured by the notional value of contracts outstanding at each quarter end.

Average Purchased Option Notional Amounts Outstanding
Fund	Year Ended December 31, 2017
Ionic Strategic Arbitrage	$	4,155,275

Average Written Option Notional Amounts Outstanding
Fund	Year Ended December 31, 2017
Ionic Strategic Arbitrage	$	1,366,425

Straddle Options

The Funds 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.

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Swap Agreements

A swap is a transaction in which the Fund and a counterparty agree to pay or receive payments at specified dates based upon or calculated by reference to changes in specified prices or rates (e.g., interest rates in the case of interest rate swaps) or the performance of specified securities or indices based on a specified amount (the “notional” amount). Nearly any type of derivative, including forward contracts, can be structured as a swap.

Swap agreements can be structured to provide exposure to a variety of different types of investments or market factors. For example, in an interest rate swap, fixed-rate payments may be exchanged for floating rate payments; in a currency swap, U.S. dollar-denominated payments may be exchanged for payments denominated in a foreign currency; and in a total return swap, payments tied to the investment return on a particular asset, group of assets or index may be exchanged for payments that are effectively equivalent to interest payments or for payments tied to the return on another asset, group of assets, or index. Swaps may have a leverage component, and adverse changes in the value or level of the underlying asset, reference rate or index can result in gains or losses that are substantially greater than the amount invested in the swap itself.

Some swaps currently are, and more in the future will be, centrally cleared. Swaps that are centrally-cleared are exposed to the creditworthiness of the clearing organizations (and, consequently, that of their members – generally, banks and broker-dealers) involved in the transaction. For example, an investor could lose margin payments it has deposited with the clearing organization as well as the net amount of gains not yet paid by the clearing organization if it breaches its agreement with the investor or becomes insolvent or goes into bankruptcy. In the event of bankruptcy of the clearing organization, the investor may be able to recover only a portion of the net amount of gains on its transactions and of the margin owed to it, potentially resulting in losses to the investor.

Swaps that are not centrally cleared, involve the risk that a loss may be sustained as a result of the insolvency or bankruptcy of the counterparty or the failure of the counterparty to make required payments or otherwise comply with the terms of the agreement. To mitigate this risk, the Fund will only enter into swap agreements with counterparties considered by a Sub-Advisor to present minimum risk of default and the Fund normally obtains collateral to secure its exposure. Changing conditions in a particular market area, whether or not directly related to the referenced assets that underlie the swap agreement, may have an adverse impact on the creditworthiness of a counterparty.

The centrally cleared and OTC swap agreements into which the Fund enters normally provide for the obligations of the Fund and its counterparty in the event of a default or other early termination to be determined on a net basis. Similarly, periodic payments on a swap transaction that are due by each party on the same day normally are netted. To the extent that a swap agreement is subject to netting, the Fund’s cover and asset segregation responsibilities will normally be with respect to the net amount owed by the Fund. However, the Fund may be required to segregate liquid assets equal to the full notional amount of certain swaps, such as written credit default swaps on physically settled forwards or written options. The amount that the Fund must segregate may be reduced by the value of any collateral that it has pledged to secure its own obligations under the swap.

Total Return Swap Agreements

The Ionic Strategic Arbitrage 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.

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The Fund’s total return swap contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of total return swap contracts. For the purpose of this disclosure, volume is measured by the notional value of contracts outstanding at each quarter end:

Average Total Return Swap Notional Amounts Outstanding
Fund	Year Ended December 31, 2017
Ionic Strategic Arbitrage		15,843,687

The following is a summary of the fair valuations of the Funds’ derivative instruments categorized by risk exposure⁽¹⁾:

AHL Managed Futures Strategy Fund

Fair values of financial instruments on the Statements of Assets and Liabilities as of December 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)		$			$	3,171,672			$	11,926,492			$	739,904			$	3,379,892			$	19,217,960
Unrealized appreciation from forward foreign currency contracts			-			2,603,085				-				-				-				2,603,085
Liabilities:	Credit contracts			Foreign exchange contracts				Commodity contracts				Interest rate contracts				Equity contracts				Total
Payable for variation margin from open futures contracts(2)		$	-		$	(965,830	)		$	(7,595,735	)		$	(1,455,356	)		$	(1,595,300	)		$	(11,612,221	)
Unrealized depreciation from forward foreign currency contracts			-			(3,084,017	)			-				-				-				(3,084,017	)

The effect of financial derivative instruments on the Statements of Operations as of December 31, 2017:
Derivatives not accounted for as hedging instruments
Realized gain (loss) from derivatives recognized as a result of operations:	Credit contracts			Foreign exchange contracts				Commodity contracts				Interest rate contracts				Equity contracts				Total
Forward foreign currency contracts		$	-		$	(3,743,646	)		$	-			$	-			$	-			$	(3,743,646	)
Futures contracts			-			(6,654,751	)			(8,620,671	)			(21,988,702	)			70,534,147				33,270,023
Net change in unrealized appreciation (depreciation) of derivatives recognized as a result from operations:	Credit contracts			Foreign exchange contracts				Commodity contracts				Interest rate contracts				Equity contracts				Total
Forward foreign currency contracts		$	-		$	1,244,061			$	-			$	-			$	-			$	1,244,061
Futures contracts			-			402,555				(224,922	)			(1,680,766	)			(392,735	)			(1,895,868	)

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Ionic Strategic Arbitrage Fund

Fair values of financial instruments on the Statements of Assets and Liabilities as of December 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		$	-		$	-		$	-		$	-			$	6,464,733			$	6,464,733
Receivable for variation margin from open futures contracts(2)			-			-			-			-				95,148				95,148
Unrealized appreciation from swap agreements			-			-			-			-				435,083				435,083
Liabilities:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts				Equity contracts				Total
Written options contracts outstanding		$	-		$	-		$	-		$	-			$	(3,744,290	)		$	(3,744,290	)
Unrealized depreciation from swap agreements			-			-			-			-				(361,853	)			(361,853	)
The effect of financial derivative instruments on the Statements of Operations as of December 31, 2017:
Derivatives not accounted for as hedging instruments
Realized gain (loss) from derivatives recognized as a result of operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts				Equity contracts				Total
Purchased options contracts		$	-		$	-		$	-		$	(174,963	)		$	(4,520,273	)		$	(4,695,236	)
Futures contracts			-			134,431			-			(2,270	)			1,687,773				1,819,934
Swap agreements			-			-			-			-				186,831				186,831
Written options contracts			-			-			-			-				(479,820	)			(479,820	)
Net change in unrealized appreciation (depreciation) of derivatives recognized as a result from operations:	Credit contracts			Foreign exchange contracts			Commodity contracts			Interest rate contracts				Equity contracts				Total
Purchased options contracts		$	-		$	-		$	-		$	-			$	1,424,834			$	1,424,834
Futures contracts			-			-			-			-				(24,181	)			(24,181	)
Swap agreements			-			-			-			-				73,230				73,230
Written options contracts			-			-			-			-				(1,923,885	)			(1,923,885	)

⁽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 Funds’ Schedules of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

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 Funds and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types,

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they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.

Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors surrounding the settlement of certain forward settling transactions, such as delayed delivery or sale-buyback financing transactions by and between a Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral.

6.  Principal Risks

Investing in the Funds may involve certain risks including, but not limited to, those described below.

Allocation and Correlation Risk

The sub-advisor’s judgments about, and allocations between arbitrage strategies, asset classes and market exposures may adversely affect the Funds’ performance. There can be no assurance, particularly during periods of market disruption and stress, that the Funds will, in fact, experience a low level of correlation with a traditional portfolio of stocks and bonds or with the debt or equity markets generally. This risk may be increased by the use of derivatives to increase allocations to various market exposures.

Arbitrage Risk

The Ionic Strategic Arbitrage Fund may use a variety of arbitrage strategies in pursuing its investment strategy. The underlying relationships among securities in which the Fund takes long and short positions may change in an adverse manner, or may fail to change in the manner expected, in which case the Fund may realize losses. The expected gain on an individual arbitrage investment is normally considerably smaller than the possible loss should the transaction be unexpectedly terminated.

The expected timing of each transaction is also important since the length of time that the Fund’s capital must be committed to any given transaction may affect the rate of return realized by the Fund, and unanticipated delays could cause the Fund to lose money or not achieve the desired rate of return.

The success of the Fund’s investment strategies is dependent on the sub-advisor’s ability to exploit pricing inefficiencies among interrelated instruments. Although arbitrage positions are considered to have a lower risk profile than directional trades as the former attempt to exploit price differentials rather than overall price movements, such strategies are by no means without risk. Pricing inefficiencies, even if correctly identified, may not converge within the time frame within which the Fund maintains its positions. Even pure “riskless” arbitrage – which is rare – can result in significant losses if the arbitrage cannot be sustained (due, for example, to margin calls) until expiration. The Fund’s strategies are subject to the risks of disruptions in historical price relationships, the restricted availability of credit and the obsolescence or inaccuracy of valuation models. Market disruptions may also force the Fund to close out one or more positions. Such disruptions have in the past resulted in substantial losses for funds employing similar strategies.

The Fund expects a major component of its investment strategies to involve spreads between two or more securities. To the extent the price relationships between such securities remain constant, no gain or loss may occur. Such spread strategies do, however, entail a substantial risk that the price differential could change unfavorably and result in losses.

Commodities Risk

The AHL Managed Futures Strategy Fund’s investments in commodity-linked derivative instruments may subject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked

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derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as changes in supply and demand, drought, floods, weather, livestock disease, embargoes, tariffs, war, acts of terrorism and international economic, political and regulatory developments. The Fund and the Subsidiary each may concentrate its assets in a particular sector of the commodities market (such as oil, metal or agricultural products). As a result, the Fund and the Subsidiary may be more susceptible to risks associated with those sectors. The Fund’s investments in commodity-related instruments may lead to losses in excess of the Fund’s investment in such products. Such losses can significantly and adversely affect the NAV of the Fund and, consequently, a shareholder’s interest in the Fund.

Counterparty Risk

The Funds are subject to the risk that a party or participant to a transaction, such as a broker or derivative counterparty, will be unwilling or unable to satisfy its obligation to make timely principal, interest or settlement payments or to otherwise honor its obligations to the Funds.

Credit Risk

The Funds are subject to the risk that the 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.

Currency Risk

The Funds may have exposure to foreign currencies by making direct investments in non-U.S. currencies or in securities denominated in non-U.S. currencies, purchasing or selling forward foreign currency exchange contracts in non-U.S. currencies, including both non-deliverable forwards (“NDFs”) and deliverable forwards, non-U.S. currency futures contracts, options (including non-deliverable options (“NDOs”) on non-U.S. currencies and non-U.S. currency futures) and swaps for cross-currency investments. Foreign currencies 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.

Derivatives Risk

Derivatives may involve significant risk. The use of derivative instruments may expose the Funds to additional risks that they would not be subject to if they invested directly in the securities or other instruments underlying those derivatives, including the high degree of leverage often embedded in such instruments, and potential material and prolonged deviations between the theoretical value and realizable value of a derivative. Some derivatives have the potential for unlimited loss, regardless of the size of the Funds’ initial investment. Derivatives may be illiquid and may be more volatile than other types of investments. The Funds may buy or sell derivatives not traded on an exchange and which may be subject to heightened liquidity and valuation risk. Derivative investments can increase portfolio turnover and transaction costs. Derivatives also are subject to counterparty risk. As a result, the Funds may obtain no recovery of their 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 Funds to greater losses in the event of a default by a counterparty.

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 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

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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.

Foreign Investing Risk

The Funds may invest in securities issued by foreign companies through ADRs and U.S. dollar-denominated foreign stocks traded on U.S. exchanges. The Funds may also invest in local currency investments. ADRs are subject to many of the risks inherent in currency fluctuations and political and financial instability in the home country of a particular ADR or foreign stock. 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.

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).

Hedging Risk

If the Funds use a hedging instrument at the wrong time or judges the market conditions incorrectly, or the hedged instrument does not correlate to the risk sought to be hedged, the hedge might be unsuccessful, reduce the Funds’ return, or create a loss.

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 because of increased broker commissions resulting from such transactions. These costs are not reflected in the Fund’s annual operating expenses or in the expense example, but they can have a negative impact on performance. Frequent trading by the Fund could also result in increased realized net capital gains, distributions of which are taxable to the Fund’s shareholders (including net short-term capital gain distributions, which are taxable to them as ordinary income).

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

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debt securities may fluctuate more widely in price and yield and may fall in price when the economy is weak or expected to become weak. High-yield securities are considered to be speculative with respect to an issuer’s ability to pay interest and principal and carry a greater risk that the issuers of lower-rated securities will default on the timely payment of principal and interest. Below investment grade securities may experience greater price volatility and less liquidity than investment grade securities.

Illiquid and Restricted Securities Risk

Securities not registered in the U.S. under the Securities Act of 1933, as amended (the “Securities Act”), including Rule 144A securities, are restricted as to their resale. Such securities may not be listed on an exchange and may have no active trading market. They may be more difficult to purchase or sell at an advantageous time or price because such securities may not be readily marketable in broad public markets. The Funds may not be able to sell a restricted security when the sub-advisor considers it desirable to do so and/or may have to sell the security at a lower price than the Funds believe is its fair market value. In addition, transaction costs may be higher for restricted securities and the Funds may receive only limited information regarding the issuer of a restricted security. The Funds may have to bear the expense of registering restricted securities for resale and the risk of substantial delays in effecting the registration.

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, June 2017, and December 2017 and has signaled additional increases in 2018. 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.

Leverage Risk

The Funds’ use of futures, forward foreign 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 Funds will have the potential for greater losses than if the Funds do not use the derivative instruments that have a leveraging effect. Leverage may result in losses that exceed the amount originally invested and may accelerate the rate of losses. Leverage tends to magnify, sometimes significantly, the effect of an increase or decrease in the Funds’ exposure to an asset or class of assets and may cause the Funds’ NAV to be volatile.

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.

Market Direction Risk

Since the Funds will typically hold both long and short positions, an investment in the Funds will involve market risks associated with different types of investment decisions than those made for a typical “long only”

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fund. The Funds’ results could suffer both when there is a general market advance and the Funds hold significant “short” positions, and when there is a general market decline and the Funds hold significant “long” positions.

Market Risk

Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in fixed-income instruments experiencing unusual liquidity issues, increased price volatility and, in some cases, credit downgrades and increased likelihood of default. These events have reduced the willingness and ability of some lenders to extend credit, and have made it more difficult for some borrowers to obtain financing on attractive terms, if at all. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.

In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it is difficult to predict the impact on various markets of a significant rate increase, whether brought about by U.S. policy makers or by dislocations in world markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.

Mortgage-Backed and Mortgage Related Securities Risk

Certain mortgage-backed and mortgage related securities may include securities backed by pools of loans made to “subprime” borrowers or borrowers with blemished credit histories; the risk of defaults is generally higher in the case of mortgage pools that include such subprime mortgages. A security backed by the U.S. Treasury or the full faith and credit of the United States is guaranteed by the applicable entity only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. Additionally, circumstances could arise that would prevent the payment of interest or principal. This could result in losses to the Funds. Securities held by the Funds that are issued by government-sponsored enterprises, such as the Fannie Mae, Freddie Mac, and FHLB are not guaranteed by the U.S. Treasury, are not backed by the full faith and credit of the U.S. Government and no assurance can be given that the U.S. Government will provide financial support. U.S. Government securities and securities of government sponsored enterprises are also subject to credit risk, interest rate risk and market risk. The Funds’ investment in CMOs may offer a higher yield than U.S. government securities, but they may also be subject to greater price fluctuation and credit risk. The cash flows and yields on IO and PO are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. Inverse IOs and POs, which are fixed-income securities with a floating or variable rate of interest, may exhibit substantially greater price volatility than fixed rate obligations having similar credit quality, redemption provisions and maturity.

Non-Diversification Risk

The Funds are non-diversified, which means the Funds may focus their investments in the securities of a comparatively small number of issuers. Investments in securities of a limited number of issuers exposes the Funds to greater market risk and potential losses than if assets were diversified among the securities of a greater number of issuers.

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Obsolescence Risk

The Funds are unlikely to be successful in its quantitative trading strategies unless the assumptions underlying the models are realistic and either remain realistic and relevant in the future or are adjusted to account for changes in the overall market environment. If such assumptions are inaccurate or become inaccurate and are not promptly adjusted, it is likely that profitable trading signals will not be generated. If and to the extent that the models do not reflect certain factors, and the sub-advisor does not successfully address such omission through its testing and evaluation and modify the models accordingly, major losses may result – all of which will be borne by the Funds.

Options Risk

In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. These costs will reduce an profit that might have realized had it bought the underlying security at the time it purchased the call option. For a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the Funds will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. If the Funds sell a put option, there is a risk that the Funds may be required to buy the underlying asset at a disadvantageous price. If the Funds sell a call option, there is a risk that the Funds may be required to sell the underlying asset at a disadvantageous price. If the Funds sell a call option on an underlying asset that the Funds own and the underlying asset has increased in value when the call option is exercised, the Funds will be required to sell the underlying asset at the call price and will not be able to realize any of the underlying asset’s value above the call price.

Other Investment Companies Risk

The Funds may invest in shares of other registered investment companies, including ETFs and 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 the underlying funds in addition to the Funds’ direct fees and expenses and will be subject to the risks associated with investments in those funds.

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.

Short Position Risk

The Funds will incur a loss as a result of a short position if the price of the instrument sold short increases in value between the date of the short sale and the date on which an offsetting position is purchased. Short positions may be considered speculative transactions and involve special risks, including greater reliance on the sub-advisor’s ability to accurately anticipate the future value of a security or instrument. The Funds’ losses are potentially unlimited in a short position transaction.

Subsidiary Risk

By investing in the Subsidiary, the AHL Managed Futures Strategy Fund is indirectly exposed to the risk associated with the Subsidiary’s Investments. The derivatives and other investments held by the Subsidiary are

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generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund. There can be no assurance that the investment objective of the Fund or the Subsidiary will be achieved.

The Subsidiary is not registered under the 1940 Act, and, unless otherwise noted in this Report, is not subject to all the investor protections of the 1940 Act. In addition, changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to operate as described in the Fund’s Prospectus and SAI and could adversely affect the Fund’s performance.

Swap Agreement Risk

Swaps can involve greater risks than a direct investment in an underlying asset, because swaps typically include a certain amount of embedded leverage and as such are subject to leveraging risk. If swaps are used as a hedging strategy, the Funds are subject to the risk that the hedging strategy may not eliminate the risk that is intended to offset, due to, among other reasons, the occurrence of unexpected price movements or the non-occurrence of expected price movements. Swaps also may be difficult to value. Interest rate swaps, total return swaps, currency swaps, credit default swaps and commodities swaps are subject to counterparty risk, credit risk and liquidity risk. In addition, interest rate swaps are subject to interest rate risk, total return swaps are subject to market risk, and interest rate risk if the underlying securities are bonds or other debt obligations, currency swaps are subject to currency risk, and commodities swaps are subject to commodities risk.

Tax Risk

To qualify as a regulated investment company under Subchapter M (“RIC”), the AHL Managed Futures Strategy Fund must derive at least 90 percent of its gross income for each taxable year from qualifying income, which is described in more detail in the SAI. Income from certain commodity-linked derivative instruments in which the AHL Managed Futures Strategy Fund invests is not considered qualifying income. The Fund will therefore restrict the income from direct investments in commodity-linked derivative instruments that do not generate qualifying income, such as commodity-linked swaps, to a maximum of 10 percent of its gross income for each taxable year. The Fund’s investment in the Subsidiary is expected to provide the Fund with exposure to the commodities markets within the limitations of the federal tax requirements of Subchapter M.

The Internal Revenue Service (“IRS”) has issued a large number of private letter rulings (which the AHL Managed Futures Strategy Fund may not cite as precedent) beginning in 2006 that income a RIC derives from a wholly owned foreign subsidiary (such as the Subsidiary) that earns income derived from commodity-linked derivative instruments is qualifying income. The IRS suspended the issuance of new such rulings in July 2011 but has not taken any actions regarding its previously issued rulings. According, the Fund has not sought to obtain such a ruling and is relying on the advice of counsel regarding the tax treating of distributions by the Subsidiary to the Fund of such income. The tax treatment of the Fund’s commodity-linked investments may be materially adversely affected by future legislation, Treasury regulations, and/or guidance issued by the IRS that could affect whether income from such investments is qualifying income under Subchapter M, or otherwise materially affect the character, timing and/or amount of the Fund’s taxable income or any gains and distributions made by the Fund.

Valuation Risk

The Funds may value certain assets at a price different from the price at which they can be sold. This risk may be especially pronounced for investments, such as certain derivatives, which may be illiquid or which may become illiquid.

Volatility Risk

The Funds may have investments that appreciate or decrease significantly in value over short periods of time. This may cause the Funds’ NAV to experience significant increases or declines in value over short periods of time.

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Warrants Risk

Warrants may be more speculative than certain other types of investments because warrants do not carry with them dividend or voting rights with respect to the underlying securities, or any rights in the assets of the issuer. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date.

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, December 31, 2017.

AHL Managed Futures Strategy Fund

Offsetting of Financial and Derivative Assets as of December 31, 2017:
	Assets			Liabilities
Futures Contracts	$	19,217,960		$	11,612,221
Forward Foreign Currency Contracts		2,603,085			3,084,017
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	21,821,045		$	14,696,238
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(19,217,960	)		(11,612,221	)
Total derivative assets and liabilities subject to an MNA	$	2,603,085		$	3,084,017

Financial Assets, Derivatives, and Collateral Received/(Pledged) by Counterparty as of December 31, 2017:
						Gross Amounts Not Offset in the Statements of Assets and Liabilities
Counterparty	Gross Amounts of Assets Presented in the Statements  of Assets and Liabilities		Derivatives Available for Offset			Non-Cash Collateral Pledged		Cash Collateral Pledged		Net Amount
Deutsche Bank AG	$	1,698,157	$	(38,758	)	$	-	$	-	$	1,659,399
HSBC Bank (USA)		761,397		(761,397	)		-		-		-
Royal Bank of Scotland PLC		143,531		(143,531	)		-		-		-
Total	$	2,603,085	$	(943,686	)	$	-	$	-	$	1,659,399
						Gross Amounts Not Offset in the Statements of Assets and Liabilities
Counterparty	Gross Amounts of Liabilities Presented in the Statements of Assets and Liabilities		Derivatives Available for Offset			Non-Cash Collateral Received		Cash Collateral Received		Net Amount
Deutsche Bank AG	$	38,758	$	(38,758	)	$	-	$	-	$	-
HSBC Bank (USA)		2,474,372		(761,397	)		-		-		1,712,975
Royal Bank of Scotland PLC		570,887		(143,531	)		-		-		427,356
Total	$	3,084,017	$	(943,686	)	$	-	$	-	$	2,140,331

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Ionic Strategic Arbitrage Fund

Offsetting of Financial and Derivative Assets as of December 31, 2017:
	Assets			Liabilities
Futures Contracts	$	95,148		$	-
Swap Agreement—OTC		435,083			361,853
Purchased Options Contracts		6,464,733			-
Written Options Contracts		-			3,744,290
Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	6,994,964		$	4,106,143
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(6,339,622	)		(3,744,290	)
Total derivative assets and liabilities subject to an MNA	$	655,342		$	361,853

Financial Assets, Derivatives, and Collateral Received/(Pledged) by Counterparty as of December 31, 2017:
						Gross Amounts Not Offset in the Statements of Assets and Liabilities
Counterparty	Gross Amounts of Assets Presented in the Statements of Assets and  Liabilities		Derivatives Available for Offset			Non-Cash Collateral Pledged		Cash Collateral Pledged		Net Amount
Deutsche Bank AG	$	655,342	$	(361,853	)	$	-	$	-	$	293,489
Total	$	655,342	$	(361,853	)	$	-	$	-	$	293,489
						Gross Amounts Not Offset in the Statements of Assets and Liabilities
Counterparty	Gross Amounts of Liabilities Presented in the Statements of Assets and Liabilities		Derivatives Available for Offset			Non-Cash Collateral Received		Cash Collateral Received		Net Amount
Deutsche Bank AG	$	361,853	$	(361,853	)	$	-	$	-	$	-
Total	$	361,853	$	(361,853	)	$	-	$	-	$	-

7.  Federal Income and Excise Taxes

It is the policy of each Fund to qualify as a regulated investment company, 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 of the AHL Managed Futures Strategy Fund in the four year period ended December 31, 2017 remain subject to examination by the IRS. Each of the tax years of the Ionic Strategic Arbitrage Fund in the two year period ended December 31, 2017 remain subject to examination by the IRS. 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 Funds also utilize earnings and profits distributed to shareholders on redemptions of shares as part of the dividends paid deduction.

71

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

The tax character of distributions paid were as follows:

	AHL Managed Futures Strategy Fund				Ionic Strategic Arbitrage Fund
	Year Ended December 31, 2017		Year Ended December 31, 2016		Year Ended December 31, 2017		Year Ended December 31, 2016
Distributions paid from:
Ordinary income*
Institutional Class	$	13,769,404	$	-	$	2,056,670	$	9,569,309
Y Class		3,358,319		-		5,500,240		5,862,263
Investors Class		705,603		-		117,474		136,202
A Class		128,958		-		8,349		11,251
C Class		208,478		-		5,449		15,725
Long-term capital gains
Institutional Class		1,407,014		-		-		-
Y Class		343,167		-		-		-
Investors Class		72,102		-		-		-
A Class		13,177		-		-		-
C Class		21,303		-		-		-
Total distributions paid	$	20,027,525	$	-	$	7,688,182	$	15,594,750

*For tax purposes, short-term capital gains are considered ordinary income distributions.

As of December 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)
AHL Managed Futures Strategy	$	498,591,619	$	1,555,212	$	(13,761,752	)	$	(12,206,540	)
Ionic Strategic Arbitrage		122,933,099		-		(21,563,329	)		(21,563,329	)

Fund	Net Unrealized Appreciation (Depreciation)			Undistributed Ordinary Income		Undistributed Long-Term Capital Gains		Accumulated Capital and Other (Losses)			Other Temporary Differences		Distributable Earnings
AHL Managed Futures Strategy	$	(12,206,540	)	$	5,441,699	$	-	$	(2,348,474	)	$	-	$	(9,113,315	)
Ionic Strategic Arbitrage		(21,563,329	)		1,649,537		-		(2,767,009	)		-		(22,680,801	)

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 realization of unrealized gains (losses) from certain derivative instruments, the tax deferral of losses from wash sales, deemed distributions on convertible obligations, CPDI, unsettled short positions, straddles, and the realization for tax purposes of unrealized gain (loss) on investments in passive foreign investment companies.

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 re-classes, paydowns, gains (losses) from sales of investments in passive foreign investments companies, reclassifications of income from closed-end funds, reclassification of income from investment subsidiary, sales of CPDI securities, non-utilization of net operating losses, and dividend reclassed as of December 31, 2017:

Fund	Paid-In-Capital			Undistributed (Overdistribution of) Net Investment Income		Accumulated Net Realized Gain (Loss)			Net Unrealized Appreciation (Depreciation)
AHL Managed Futures Strategy	$	(8,297,581	)	$	3,027,347	$	5,270,234		$	–
Ionic Strategic Arbitrage		(6,955	)		6,254,471		(6,247,516	)		–

72

American Beacon Funds^SM

Notes to Financial Statements

December 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.

During the year December 31, 2017 the Funds had the following post RIC MOD capital loss carryforwards:

Fund	Short-Term Capital Loss Carryforwards		Long-Term Capital Loss Carryforwards
AHL Managed Futures Strategy	$	-	$	-
Ionic Strategic Arbitrage		2,767,009		-

The AHL Managed Futures Strategy Fund utilized $9,365,911 short-term and $2,267,413 long-term capital loss carryforwards.

The Funds are permitted for tax purposes to defer into its next fiscal year qualified late year losses. Qualified late year capital losses are any capital losses incurred after October 31 through the Fund’s fiscal year end, December 31, 2017. Qualified late year ordinary losses are specified losses generally incurred after October 31 through the Fund’s fiscal year end, December 31, 2017. For the period ended December 31, 2017, AHL Managed Futures Strategy Fund deferred $2,348,474 of long-term capital losses to January 1, 2018.

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 December 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
AHL Managed Futures Strategy	$	–	$	–	$	–	$	–
Ionic Strategic Arbitrage		725,542,306		–		731,347,717		251,560

A summary of the Funds’ transactions in the USG Select Fund for the year ended December 31, 2017 are as follows:

Fund	Type of Transaction	December 31, 2016 Share/Fair Value		Purchases		Sales		December 31, 2017 Share/Fair Value		Dividend Income
AHL Managed Futures Strategy Fund	Direct	$	6,472,219	$	522,068,349	$	507,990,951	$	20,549,617	$	–
Ionic Strategic Arbitrage Fund	Direct		26,003,015		185,333,342		191,809,149		19,527,208		126,844

9.  Borrowing Arrangements

Effective November 16, 2017, the Funds, along with certain other funds managed by the Manager (“Participating Funds”), entered into a committed revolving line of credit (the “Committed Line”) agreement with State Street Bank and Trust Company (the “Bank”) to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Committed Line is $50 million with interest at a rate equal to the higher of (a) one-month London Inter-Bank Offered Rate (“LIBOR”) plus 1.25% per annum or (b) the Federal Funds rate plus 1.25% per annum on amounts borrowed. Each of the Participating Funds will pay a commitment fee at a rate of 0.25% per annum on the unused portion of the Committed Line amount. The Committed Line expires November 15, 2018, unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

Effective November 16, 2017, the Funds, along with certain other Participating Funds managed by the Manager, entered into an uncommitted discretionary demand revolving line of credit (the “Uncommitted Line”)

73

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

agreement with the Bank to be used to facilitate portfolio liquidity. The maximum borrowing amount under the Uncommitted Line is $50 million with interest at a rate equal to the higher of (a) one-month LIBOR plus 1.25% per annum or (b) the Federal Funds rate. The Uncommitted Line expires November 15, 2018, unless extended by the Bank or terminated by the Participating Funds in accordance with the agreement.

The Participating Funds paid administration, legal and arrangement fees, which are recognized as a component of “Other expenses” on the Statements of Operations, along with commitment fees, that have been allocated among the Participating Funds based on average daily net assets. During the year ended December 31, 2017, the Funds did not utilize this facility.

10.  Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds:

	Institutional Class
	Year Ended December 31,
	2017						2016
AHL Managed Futures Strategy Fund	Shares			Amount			Shares			Amount
Shares sold		7,451,038		$	78,692,257			36,676,562		$	405,489,405
Reinvestment of dividends		1,287,360			13,568,774			–			–
Shares redeemed		(5,564,778	)		(59,037,244	)		(4,808,709	)		(50,573,425	)
Net increase in shares outstanding		3,173,620		$	33,223,787			31,867,853		$	354,915,980
	Y Class
	Year Ended December 31,
	2017						2016
AHL Managed Futures Strategy Fund	Shares			Amount			Shares			Amount
Shares sold		6,676,574		$	70,665,751			7,234,887		$	77,938,263
Reinvestment of dividends		309,816			3,253,064			–			–
Shares redeemed		(2,374,706	)		(25,121,656	)		(5,440,111	)		(56,680,165	)
Net increase in shares outstanding		4,611,684		$	48,797,159			1,794,776		$	21,258,098
	Investor Class
	Year Ended December 31,
	2017						2016
AHL Managed Futures Strategy Fund	Shares			Amount			Shares			Amount
Shares sold		1,687,457		$	17,930,723			1,675,967		$	17,882,088
Reinvestment of dividends		73,170			760,973			–			–
Shares redeemed		(2,839,239	)		(29,951,903	)		(2,228,763	)		(23,475,932	)
Net increase (decrease) in shares outstanding		(1,078,612	)	$	(11,260,207	)		(552,796	)	$	(5,593,844	)
	A Class
	Year Ended December 31,
	2017						2016
AHL Managed Futures Strategy Fund	Shares			Amount			Shares			Amount
Shares sold		264,861		$	2,796,774			2,367,863		$	25,330,655
Reinvestment of dividends		13,126			136,644			–			–
Shares redeemed		(2,205,353	)		(23,344,020	)		(1,063,982	)		(11,177,116	)
Net increase (decrease) in shares outstanding		(1,927,366	)	$	(20,410,602	)		1,303,881		$	14,153,539
	C Class
	Year Ended December 31,
	2017						2016
AHL Managed Futures Strategy Fund	Shares			Amount			Shares			Amount
Shares sold		208,982		$	2,170,664			311,614		$	3,284,849
Reinvestment of dividends		19,028			193,514			-			-
Shares redeemed		(90,329	)		(925,948	)		(97,924	)		(1,005,405	)
Net increase in shares outstanding		137,681		$	1,438,230			213,690		$	2,279,444

74

American Beacon Funds^SM

Notes to Financial Statements

December 31, 2017

	Institutional Class
	Year Ended December 31,
	2017						2016
Ionic Strategic Arbitrage Fund	Shares			Amount			Shares			Amount
Shares sold		1,293,798		$	11,685,820			10,355,095		$	101,720,394
Reinvestment of dividends		245,805			2,052,471			1,059,724			9,569,308
Shares redeemed		(10,088,419	)		(91,015,474	)		(6,125,998	)		(60,759,740	)
Net increase (decrease) in shares outstanding		(8,548,816	)	$	(77,277,183	)		5,228,821		$	50,529,962
	Y Class
	Year Ended December 31,
	2017						2016
Ionic Strategic Arbitrage Fund	Shares			Amount			Shares			Amount
Shares sold		4,718,667		$	42,559,363			4,591,033		$	45,246,870
Reinvestment of dividends		646,428			5,397,670			642,526			5,808,428
Shares redeemed		(3,685,753	)		(33,003,848	)		(1,105,881	)		(10,870,913	)
Net increase in shares outstanding		1,679,342		$	14,953,185			4,127,678		$	40,184,385
	Investor Class
	Year Ended December 31,
	2017						2016
Ionic Strategic Arbitrage Fund	Shares			Amount			Shares			Amount
Shares sold		184,473		$	1,646,602			439,879		$	4,148,557
Reinvestment of dividends		14,153			117,475			15,151			136,202
Shares redeemed		(383,986	)		(3,434,249	)		(305,900	)		(3,016,109	)
Net increase (decrease) in shares outstanding		(185,360	)	$	(1,670,172	)		149,130		$	1,268,650
	A Class
	Year Ended December 31,
	2017						2016
Ionic Strategic Arbitrage Fund	Shares			Amount			Shares			Amount
Shares sold		530		$	4,762			-		$	-
Reinvestment of dividends		1,007			8,349			1,251			11,251
Shares redeemed		(618	)		(5,483	)		(120	)		(1,082	)
Net increase in shares outstanding		919		$	7,628			1,131		$	10,169
	C Class
	Year Ended December 31,
	2017						2016
Ionic Strategic Arbitrage Fund	Shares			Amount			Shares			Amount
Shares sold		340		$	3,000			11,323		$	111,100
Reinvestment of dividends		664			5,448			1,771			15,725
Shares redeemed		(8,370	)		(73,583	)		(9,268	)		(89,855	)
Net increase (decrease) in shares outstanding		(7,366	)	$	(65,135	)		3,826		$	36,970

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.

75

American Beacon AHL Managed Futures Strategy Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Institutional Class
	Year Ended December 31,									August 19, 2014A to December 31,
	2017			2016			2015			2014
Net asset value, beginning of period	$	10.44		$	10.46		$	10.95		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.08	)		0.20			(0.06	)		0.24
Net gains (losses) on investments (both realized and unrealized)		0.63			(0.22	)		(0.07	)		1.10
Total income (loss) from investment operations		0.55			(0.02	)		(0.13	)		1.34
Less distributions:
Dividends from net investment income		-			-			(0.21	)		(0.31	)
Distributions from net realized gains		(0.42	)		-			(0.15	)		(0.08	)
Tax return of capital		-			-			(0.00	)B		-
Total distributions		(0.42	)		-			(0.36	)		(0.39	)
Net asset value, end of period	$	10.57		$	10.44		$	10.46		$	10.95
Total returnC		5.31	%		(0.19	)%		(1.15	)%		13.43	%D
Ratios and supplemental data:
Net assets, end of period	$	391,617,624		$	353,601,987		$	20,932,502		$	28,765,259
Ratios to average net assets:
Expenses, before reimbursements		1.98	%		1.90	%		2.25	%		4.97	%E
Expenses, net of reimbursements		1.54	%		1.54	%		1.54	%		1.54	%E
Net investment income (loss), before expense reimbursements		(1.20	)%		(1.69	)%		(2.29	)%		2.73	%E
Net investment income (loss), net of reimbursements		(0.77	)%		(1.33	)%		(1.57	)%		6.17	%E
Portfolio turnover rateF		-	%		-	%		-	%		-	%

^A  Commencement of operations.

^B  The return of capital is based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Not annualized.

^E  Annualized.

^F  Portfolio turnover is based on the lesser of long-term purchases or sales divided by the average long-term fair value during the period. The Fund did not invest in any long-term securities during the reporting period.

See accompanying notes

76

American Beacon AHL Managed Futures Strategy Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Y Class
	Year Ended December 31,									August 19, 2014A to December 31,
	2017			2016			2015			2014
Net asset value, beginning of period	$	10.41		$	10.45		$	10.94		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.07	)		(0.08	)		(0.05	)		0.30
Net gains (losses) on investments (both realized and unrealized)		0.61			0.04			(0.08	)		1.03
Total income (loss) from investment operations		0.54			(0.04	)		(0.13	)		1.33
Less distributions:
Dividends from net investment income		-			-			(0.21	)		(0.31	)
Distributions from net realized gains		(0.42	)		-			(0.15	)		(0.08	)
Tax return of capital		-			-			(0.00	)B		-
Total distributions		(0.42	)		-			(0.36	)		(0.39	)
Net asset value, end of period	$	10.53		$	10.41		$	10.45		$	10.94
Total returnC		5.23	%		(0.38	)%		(1.15	)%		13.33	%D
Ratios and supplemental data:
Net assets, end of period	$	101,513,775		$	52,391,912		$	33,817,374		$	464,644
Ratios to average net assets:
Expenses, before reimbursements		2.04	%		1.97	%		2.28	%		7.71	%E
Expenses, net of reimbursements		1.64	%		1.64	%		1.64	%		1.64	%E
Net investment income (loss), before expense reimbursements		(1.25	)%		(1.76	)%		(1.70	)%		12.50	%E
Net investment income (loss), net of reimbursements		(0.84	)%		(1.44	)%		(1.06	)%		18.58	%E
Portfolio turnover rateF		–	%		–	%		–	%		–	%

^A  Commencement of operations.

^B  The return of capital is based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Not annualized.

^E  Annualized.

^F  Portfolio turnover is based on the lesser of long-term purchases or sales divided by the average long-term fair value during the period. The Fund did not invest in any long-term securities during the reporting period.

See accompanying notes

77

American Beacon AHL Managed Futures Strategy Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Investor Class
	Year Ended December 31,									August 19, 2014A to December 31,
	2017			2016			2015			2014
Net asset value, beginning of period	$	10.35		$	10.41		$	10.93		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.11	)		(0.25	)		(0.09	)		0.30
Net gains (losses) on investments (both realized and unrealized)		0.62			0.19			(0.08	)		1.02
Total income (loss) from investment operations		0.51			(0.06	)		(0.17	)		1.32
Less distributions:
Dividends from net investment income		-			-			(0.20	)		(0.31	)
Distributions from net realized gains		(0.42	)		-			(0.15	)		(0.08	)
Tax return of capital		-			-			(0.00	)B		-
Total distributions		(0.42	)		-			(0.35	)		(0.39	)
Net asset value, end of period	$	10.44		$	10.35		$	10.41		$	10.93
Total returnC		4.98	%		(0.58	)%		(1.54	)%		13.23	%D
Ratios and supplemental data:
Net assets, end of period	$	20,241,387		$	31,223,150		$	37,185,001		$	3,023,636
Ratios to average net assets:
Expenses, before reimbursements		2.20	%		2.13	%		2.40	%		5.98	%E
Expenses, net of reimbursements		1.92	%		1.92	%		1.92	%		1.92	%E
Net investment income (loss), before expense reimbursements		(1.48	)%		(1.93	)%		(2.07	)%		10.41	%E
Net investment income (loss), net of reimbursements		(1.20	)%		(1.72	)%		(1.59	)%		14.47	%E
Portfolio turnover rateF		–	%		–	%		–	%		–	%

^A  Commencement of operations.

^B  The return of capital is based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Not annualized.

^E  Annualized.

^F  Portfolio turnover is based on the lesser of long-term purchases or sales divided by the average long-term fair value during the period. The Fund did not invest in any long-term securities during the reporting period.

See accompanying notes

78

American Beacon AHL Managed Futures Strategy Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	A Class
	Year Ended December 31,									August 19, 2014A to December 31,
	2017			2016			2015			2014
Net asset value, beginning of period	$	10.36		$	10.44		$	10.93		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.41	)		0.23			(0.52	)		0.32
Net gains (losses) on investments (both realized and unrealized)		1.00			(0.31	)		0.36			1.00
Total income (loss) from investment operations		0.59			(0.08	)		(0.16	)		1.32
Less distributions:
Dividends from net investment income		-			-			(0.18	)		(0.31	)
Distributions from net realized gains		(0.42	)		-			(0.15	)		(0.08	)
Tax return of capital		-			-			(0.00	)B		-
Total distributions		(0.42	)		-			(0.33	)		(0.39	)
Net asset value, end of period	$	10.53		$	10.36		$	10.44		$	10.93
Total returnC		5.77	%		(0.77	)%		(1.45	)%		13.23	%D
Ratios and supplemental data:
Net assets, end of period	$	3,408,861		$	23,330,824		$	9,890,720		$	9,019,308
Ratios to average net assets:
Expenses, before reimbursements		2.35	%		2.29	%		2.55	%		5.31	%E
Expenses, net of reimbursements		1.94	%		1.94	%		1.94	%		1.94	%E
Net investment income (loss), before expense reimbursements		(1.62	)%		(2.08	)%		(3.59	)%		32.48	%E
Net investment income (loss), net of reimbursements		(1.21	)%		(1.74	)%		(2.98	)%		35.85	%E
Portfolio turnover rateF		-	%		-	%		-	%		-	%

^A  Commencement of operations.

^B  The return of capital is based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Not annualized.

^E  Annualized.

^F  Portfolio turnover is based on the lesser of long-term purchases or sales divided by the average long-term fair value during the period. The Fund did not invest in any long-term securities during the reporting period.

See accompanying notes

79

American Beacon AHL Managed Futures Strategy Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	C Class
	Year Ended December 31,									August 19, 2014A to December 31,
	2017			2016			2015			2014
Net asset value, beginning of period	$	10.20		$	10.34		$	10.90		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		(0.17	)		(0.08	)		(0.09	)		0.27
Net gains (losses) on investments (both realized and unrealized)		0.58			(0.06	)		(0.16	)		1.02
Total income (loss) from investment operations		0.41			(0.14	)		(0.25	)		1.29
Less distributions:
Dividends from net investment income		–			–			(0.16	)		(0.31	)
Distributions from net realized gains		(0.42	)		–			(0.15	)		(0.08	)
Tax return of capital		–			–			(0.00	)B		–
Total distributions		(0.42	)		–			(0.31	)		(0.39	)
Net asset value, end of period	$	10.19		$	10.20		$	10.34		$	10.90
Total returnC		4.06	%		(1.35	)%		(2.30	)%		12.93	%D
Ratios and supplemental data:
Net assets, end of period	$	5,702,799		$	4,300,637		$	2,151,492		$	401,475
Ratios to average net assets:
Expenses, before reimbursements		3.10	%		3.04	%		3.32	%		8.75	%E
Expenses, net of reimbursements		2.69	%		2.69	%		2.69	%		2.68	%E
Net investment income (loss), before expense reimbursements		(2.31	)%		(2.84	)%		(2.88	)%		7.02	%E
Net investment income (loss), net of reimbursements		(1.90	)%		(2.49	)%		(2.25	)%		13.09	%E
Portfolio turnover rateF		–	%		–	%		–	%		–	%

^A  Commencement of operations.

^B  The return of capital is based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

^C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^D  Not annualized.

^E  Annualized.

^F  Portfolio turnover is based on the lesser of long-term purchases or sales divided by the average long-term fair value during the period. The Fund did not invest in any long-term securities during the reporting period.

See accompanying notes

80

American Beacon Ionic Strategic Arbitrage Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Institutional Class
	Year Ended December 31,						June 30, 2015A to December 31,
	2017			2016			2015
Net asset value, beginning of period	$	9.06		$	9.89		$	10.00
Income (loss) from investment operations:
Net investment income		0.33			0.16			0.04
Net gains (losses) on investments (both realized and unrealized)		(0.34	)		(0.02	)		0.11
Total income (loss) from investment operations		(0.01	)		0.14			0.15
Less distributions:
Dividends from net investment income		(0.61	)		(0.45	)		(0.06	)
Distributions from net realized gains		(0.07	)		(0.52	)		(0.20	)
Total distributions		(0.68	)		(0.97	)		(0.26	)
Net asset value, end of period	$	8.37		$	9.06		$	9.89
Total returnB		(0.15	)%		1.39	%		1.46	%C
Ratios and supplemental data:
Net assets, end of period	$	26,386,023		$	105,989,910		$	63,421,998
Ratios to average net assets:
Expenses, before reimbursements		2.67	%		3.14	%		3.55	%D
Expenses, net of reimbursementsE		2.47	%		3.10	%		2.84	%D
Net investment income (loss), before expense reimbursements		0.15	%		1.05	%		(0.31	)%D
Net investment income, net of reimbursements		0.35	%		1.09	%		0.40	%D
Portfolio turnover rate		390	%		436	%		159	%C

^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  Includes non-operating expenses consisting of prime broker fees and dividends from securities sold short. The Expenses, net of reimbursements, excluding non-operating expenses is 1.54% for the year ended December 31, 2017.

See accompanying notes

81

American Beacon Ionic Strategic Arbitrage Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Y Class
	Year Ended December 31,						June 30, 2015A to December 31,
	2017			2016			2015
Net asset value, beginning of period	$	9.06		$	9.90		$	10.00
Income (loss) from investment operations:
Net investment income		0.02			0.10			0.06
Net gains (losses) on investments (both realized and unrealized)		(0.04	)		0.03			0.10
Total income (loss) from investment operations		(0.02	)		0.13			0.16
Less distributions:
Dividends from net investment income		(0.61	)		(0.45	)		(0.06	)
Distributions from net realized gains		(0.07	)		(0.52	)		(0.20	)
Total distributions		(0.68	)		(0.97	)		(0.26	)
Net asset value, end of period	$	8.36		$	9.06		$	9.90
Total returnB		(0.27	)%		1.28	%		1.56	%C
Ratios and supplemental data:
Net assets, end of period	$	70,589,684		$	61,253,803		$	26,059,687
Ratios to average net assets:
Expenses, before reimbursements or recoupments		2.94	%		3.31	%		3.83	%D
Expenses, net of reimbursements or recoupmentsE		2.79	%		3.30	%		3.27	%D
Net investment income, before expense reimbursements or recoupments		0.08	%		0.88	%		0.83	%D
Net investment income, net of reimbursements or recoupments		0.23	%		0.88	%		1.40	%D
Portfolio turnover rate		390	%		436	%		159	%C

^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  Includes non-operating expenses consisting of prime broker fees and dividends from securities sold short. The Expenses, net of reimbursements, excluding non-operating expenses is 1.64% for the year ended December 31, 2017.

See accompanying notes

82

American Beacon Ionic Strategic Arbitrage Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	Investor Class
	Year Ended December 31,						June 30, 2015A to December 31,
	2017			2016			2015
Net asset value, beginning of period	$	9.01		$	9.88		$	10.00
Income (loss) from investment operations:
Net investment income		0.08			0.30			0.02
Net gains (losses) on investments (both realized and unrealized)		(0.12	)		(0.20	)		0.12
Total income (loss) from investment operations		(0.04	)		0.10			0.14
Less distributions:
Dividends from net investment income		(0.58	)		(0.45	)		(0.06	)
Distributions from net realized gains		(0.07	)		(0.52	)		(0.20	)
Total distributions		(0.65	)		(0.97	)		(0.26	)
Net asset value, end of period	$	8.32		$	9.01		$	9.88
Total returnB		(0.49	)%		0.98	%		1.36	%C
Ratios and supplemental data:
Net assets, end of period	$	1,539,554		$	3,339,009		$	2,186,944
Ratios to average net assets:
Expenses, before reimbursements or recoupments		3.00	%		3.47	%		4.23	%D
Expenses, net of reimbursements or recoupmentsE		2.93	%		3.50	%		3.23	%D
Net investment income (loss), before expense reimbursements or recoupments		(0.08	)%		0.32	%		(1.52	)%D
Net investment income (loss), net of reimbursements or recoupments		(0.01	)%		0.29	%		(0.53	)%D
Portfolio turnover rate		390	%		436	%		159	%C

^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  Includes non-operating expenses consisting of prime broker fees and dividends from securities sold short. The Expenses, net of reimbursements, excluding non-operating expenses is 1.92% for the year ended December 31, 2017.

See accompanying notes

83

American Beacon Ionic Strategic Arbitrage Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	A Class
	Year Ended December 31,						June 30, 2015A to December 31,
	2017			2016			2015
Net asset value, beginning of period	$	9.01		$	9.88		$	10.00
Income (loss) from investment operations:
Net investment income		0.03			0.07			0.08
Net gains (losses) on investments (both realized and unrealized)		(0.07	)		0.03			0.06
Total income (loss) from investment operations		(0.04	)		0.10			0.14
Less distributions:
Dividends from net investment income		(0.59	)		(0.45	)		(0.06	)
Distributions from net realized gains		(0.07	)		(0.52	)		(0.20	)
Total distributions		(0.66	)		(0.97	)		(0.26	)
Net asset value, end of period	$	8.31		$	9.01		$	9.88
Total returnB		(0.51	)%		0.98	%		1.36	%C
Ratios and supplemental data:
Net assets, end of period	$	113,957		$	115,308		$	115,261
Ratios to average net assets:
Expenses, before reimbursements or recoupments		3.23	%		3.65	%		7.35	%D
Expenses, net of reimbursements or recoupmentsE		3.08	%		3.58	%		3.37	%D
Net investment income (loss), before expense reimbursements or recoupments		(0.22	)%		0.27	%		(3.54	)%D
Net investment income (loss), net of reimbursements or recoupments		(0.07	)%		0.34	%		0.44	%D
Portfolio turnover rate		390	%		436	%		159	%C

^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  Includes non-operating expenses consisting of prime broker fees and dividends from securities sold short. The Expenses, net of reimbursements, excluding non-operating expenses is 1.94% for the year ended December 31, 2017.

See accompanying notes

84

American Beacon Ionic Strategic Arbitrage Fund^SM

Financial Highlights

(For a share outstanding throughout the period)

	C Class
	Year Ended December 31,						June 30, 2015A to December 31,
	2017			2016			2015
Net asset value, beginning of period	$	8.90		$	9.85		$	10.00
Income (loss) from investment operations:
Net investment income (loss)		0.00	F		(0.01	)		0.05
Net gains (losses) on investments (both realized and unrealized)		(0.11	)		0.03			0.05
Total income (loss) from investment operations		(0.11	)		0.02			0.10
Less distributions:
Dividends from net investment income		(0.49	)		(0.45	)		(0.05	)
Distributions from net realized gains		(0.07	)		(0.52	)		(0.20	)
Total distributions		(0.56	)		(0.97	)		(0.25	)
Net asset value, end of period	$	8.23		$	8.90		$	9.85
Total returnB		(1.21	)%		0.17	%		1.00	%C
Ratios and supplemental data:
Net assets, end of period	$	80,632		$	152,859		$	131,408
Ratios to average net assets:
Expenses, before reimbursements or recoupments		3.75	%		4.40	%		8.14	%D
Expenses, net of reimbursements or recoupmentsE		3.73	%		4.34	%		4.11	%D
Net investment (loss), before expense reimbursements or recoupments		(0.83	)%		(0.46	)%		(4.30	)%D
Net investment (loss), net of reimbursements or recoupments		(0.82	)%		(0.40	)%		(0.28	)%D
Portfolio turnover rate		390	%		436	%		159	%C

^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  Includes non-operating expenses consisting of prime broker fees and dividends from securities sold short. The Expenses, net of reimbursements, excluding non-operating expenses is 2.69% for the year ended December 31, 2017.

^F  Amount represents less than 0.005% of average net assets.

See accompanying notes

85

American Beacon Funds^SM

Affirmation of the Commodity Pool Operator

December 31, 2017 (Unaudited)

To the best of my knowledge and belief, the information contained in the attached financial statements for the American Beacon AHL Managed Futures Strategy Fund for the period from January 1, 2017 to December 31, 2017, is accurate and complete.

Melinda G. Heika, Treasurer

American Beacon Advisors, Inc.

Commodity Pool Operator for the American Beacon AHL Managed Futures Strategy Fund

86

American Beacon Funds^SM

Federal Tax Information

December 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 December 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 December 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:

AHL Managed Futures Strategy	0.00	%
Ionic Strategic Arbitrage	10.28	%

Qualified Dividend Income:

AHL Managed Futures Strategy	0.00	%
Ionic Strategic Arbitrage	12.81	%

Long-Term Capital Gain Distributions:

AHL Managed Futures Strategy	$	1,856,763
Ionic Strategic Arbitrage		-

Short-Term Capital Gain Distributions:

AHL Managed Futures Strategy	$	18,170,762
Ionic Strategic Arbitrage		758,663

Shareholders received notification in January 2018 of the applicable tax information necessary to prepare their 2017 income tax returns.

87

Trustees and Officers of the American Beacon Funds^SM (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-five 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** (81)	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 (48)	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 (57)	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).

88

Trustees and Officers of the American Beacon Funds^SM (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
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*** (75)	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 (72)	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. (63)	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).

89

Trustees and Officers of the American Beacon Funds^SM (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
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 (54)	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).

90

Trustees and Officers of the American Beacon Funds^SM (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
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 (46)	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 (61)	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 (43)	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).

91

Trustees and Officers of the American Beacon Funds^SM (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
Rebecca L. Harris (51)	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 (42)	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.

*** Mr. Dunning retired as of 12/31/2017. Douglas A. Lindgren became a new Trustee to each of the Trusts on 1/1/2018.

92

American Beacon Funds^SM

Privacy Policy

December 31, 2017 (Unaudited)

The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.

We may collect nonpublic personal information about you from one or more of the following sources:

• information we receive from you on applications or other forms;

• information about your transactions with us or our service providers; and

• information we receive from third parties.

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.

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Delivery of Documents

eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

By E-mail:	On the Internet:
american_beacon.funds@ambeacon.com	Visit our website at www.americanbeaconfunds.com
By 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 (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately sixty days after the end of each month.	A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

CUSTODIAN State Street Bank and Trust Boston, Massachusetts TRANSFER AGENT DST Asset Managers Solutions, Inc. 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 AHL Managed Futures Strategy Fund and American Beacon Ionic Strategic Arbitrage Fund are service marks of American Beacon Advisors, Inc.

AR 12/17

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
$270,762		12/31/2016
$256,113		12/31/2017
(b) Audit-Related Fees	Fiscal Year Ended
$0		12/31/2016
$0		12/31/2017
(c) Tax Fees	Fiscal Year Ended
$58,474		12/31/2016
$172,043		12/31/2017
(d) All Other Fees	Fiscal Year Ended
$0		12/31/2016
$0		12/31/2017

(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
$	58,474	$	215,882	N/A		12/31/2016
$	172,043	$	110,167	N/A		12/31/2017

(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: March 9, 2018

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: March 9, 2018

By /s/ Melinda G. Heika

Melinda G. Heika

Treasurer

American Beacon Funds

Date: March 9, 2018

EX-99.CODE

AMERICAN BEACON FUNDS

AMERICAN BEACON SELECT FUNDS

AMERICAN BEACON INSTITUTIONAL FUNDS TRUST

(collectively, the “Trusts”)

Code of Ethics for Principal Executive and Financial Officers

Dated: March 24, 2017

Purpose

The Trusts have adopted this Code of Ethics for Principal Executive and Financial Officers (the “Code”), which applies to the Trusts’ Principal Executive Officer and Principal Financial Officer (the “Covered Officers” as set forth in Exhibit A), for the purpose of promoting:

• honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• full, fair, accurate, timely, and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission (the “SEC”) and in other public communications made by the registrant;

• compliance with applicable governmental laws, rules, and regulations;

• the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

• accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

Conflicts of Interest

For purposes of this Code, a “conflict of interest” occurs when a Covered Officer’s “personal interests” interfere with the interests of, or his/her service to, the Trusts. For example, a conflict of interest would arise if a Covered Officer, or a member of his/her family, receives improper personal benefits as a result of his/her position with the Trusts.

Certain conflicts of interest arise out of the relationship between Covered Officers and the Trusts and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trusts because of their status as “affiliated persons” of the Trusts.

Conflicts also may arise from a Covered Officer’s position or employment at American Beacon Advisors, Inc. (“AmBeacon”), the Trusts’ manager, and his/her position with each Trust. The Covered Officers may also hold positions or be employed by AmBeacon’s affiliated companies, some of which may be sub-advisors to the Trusts. This Code recognizes that the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on AmBeacon, its affiliates and the Trusts. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trusts and AmBeacon and is consistent with the performance by the

Covered Officers of their duties as officers of the Trusts. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trusts.

Each Covered Officer should not:

• use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trusts whereby the Covered Officer would benefit personally to the detriment of the Trusts; or

• cause the Trusts to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of the Trusts.

At times, certain situations may arise that may, or may not, be considered conflicts of interest under this Code. Covered Officers are encouraged to discuss such situations with the Trusts’ Chief Legal Officer (“CLO”). Examples of these types of situations include:

• service as a director on the board of any public or private company;

• the receipt of any non-nominal gifts in excess of $150;

• the receipt of any entertainment from any company with which the Trusts have current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;

• any ownership interest in, or any consulting or employment relationship with, any of the Trusts’ service providers, other than AmBeacon or its affiliates, the distributor for the Trusts’ shares, or any affiliated person thereof;

• a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trusts for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

Disclosure and Compliance

Each Covered Officer:

• should familiarize himself/herself with the disclosure requirements generally applicable to the Trusts;

• should not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts’ Trustees and auditors, and to governmental regulators and self-regulatory organizations;

• should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Trusts and AmBeacon with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents

2

the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and

• is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

Reporting and Accountability

Each Covered Officer must:

• upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands the Code;

• annual thereafter affirm to the Board that he/she has complied with the requirements of the Code;

• complete at least annually the Officer Questionnaire by detailing any directorships with public or private companies and/or material relationships or transactions with affiliated persons of any Trust or its series, except for directorships or other positions with AmBeacon and its affiliates, which are already known by the CLO;

• not retaliate against any other Covered Officer or any employee of the Trusts or their affiliated persons for reports of potential violations that are made in good faith; and

• notify the CLO promptly if he/she knows of any violations of this Code. Failure to do so is itself a violation of this Code.

The CLO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. In addition, the CLO is authorized and encouraged to consult with counsel to the Trusts and counsel to the Independent Trustees of the Trusts’ Boards of Trustees. However, any approvals or waivers sought by the Covered Officers will be considered by the Independent Trustees.

The Trusts will follow these procedures in investigating and enforcing this Code:

• the CLO will take all appropriate action to investigate any potential violations reported to him;

• if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action;

• any matter that the CLO believes is a violation will be reported to the Independent Trustees;

• if the Independent Trustees concur that a violation has occurred, they will inform and make a recommendation to the applicable Trust’s Board of Trustees, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of AmBeacon or its board; or a recommendation to dismiss the Covered Officer;

• the Independent Trustees will be responsible for granting waivers, as appropriate; and

• any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

3

Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, AmBeacon, the distributor for the Trusts’ shares, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts’ and AmBeacon’ codes of ethics under Rule 17j-1 under the Investment Company Act and the more detailed policies and procedures set forth in the Trusts’ Statement of Policy on Material Non-Public Information are separate requirements applying to the Covered Officers and others, and are not part of nor replaced by this Code.

Amendments

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of Independent Trustees.

Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board of Trustees, its counsel and AmBeacon.

Internal Use

This Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion.

4

EXHIBIT A

Persons Covered by this Code of Ethics

	Position with each Trust	Name
Principal Executive Officer	President	Gene L. Needles, Jr.
Principal Financial Officer	Treasurer/Principal Accounting Officer	Melinda G. Heika

EX-99.CERT

For period ended 12/31/2017

Registrant Name: American Beacon Funds

File Number: 811-4984

EXHIBIT 99.CERT

I, Melinda G. Heika, certify that:

1. I have reviewed this report on Form N-CSR of American Beacon Funds;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2018	/s/ Melinda G. Heika
	Melinda G. Heika
	Treasurer
	American Beacon Funds

I, Gene L. Needles, Jr., certify that:

1. I have reviewed this report on Form N-CSR of American Beacon Funds;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2018	/s/ Gene L. Needles, Jr.
	Gene L. Needles, Jr.
	President
	American Beacon Funds

EX-99.906CERT

For period ended 12/31/2017

Registrant Name: American Beacon Funds

File Number: 811-4984

EXHIBIT 99.906CERT

Gene L. Needles, Jr. and Melinda G. Heika, respectively, the President and Treasurer of the American Beacon Funds (the “Registrant”), each certify to the best of his or her knowledge and belief that:

1. the Registrant’s report on Form N-CSR for the period ended December 31, 2017 (the “Form N-CSR”) fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Gene L. Needles, Jr.	/s/ Melinda G. Heika
Gene L. Needles, Jr.	Melinda G. Heika
President	Treasurer
American Beacon Funds	American Beacon Funds

Date: March 9, 2018

A signed original of this written statement required by Section 906 has been provided to American Beacon Funds and will be retained by American Beacon Funds and furnished to the Securities and Exchange Commission or its staff.