N-CSRS 1 d559689dncsrs.htm N-CSRS (2-28-18) N-CSRS (2-28-18)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSRS

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-4984

 

 

AMERICAN BEACON FUNDS

(Exact name of registrant as specified in charter)

 

 

220 East Las Colinas Boulevard, Suite 1200

Irving, Texas 75039

(Address of principal executive offices)-(Zip code)

 

 

GENE L. NEEDLES, JR., PRESIDENT

220 East Las Colinas Boulevard, Suite 1200

Irving, Texas 75039

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (817) 391-6100

Date of fiscal year end: August 31, 2018

Date of reporting period: February 28, 2018

 

 

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.

LOGO

About American Beacon Advisors

 

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

SiM HIGH YIELD OPPORTUNITIES FUND

Investments in high-yield securities are subject to greater levels of credit, interest rate, market and liquidity risks than investment-grade securities. Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in derivative instruments involves liquidity, credit, interest rate and market risks.

SOUND POINT FLOATING RATE INCOME FUND

Investments in high-yield securities, including loans, restricted securities and floating rate securities are subject to greater levels of credit, interest rate, market, and liquidity risks than investment-grade securities. In addition, loans are subject to the risk that the Fund may not be able to obtain the collateral securing the loan in a timely manner and the value of the collateral may not cover the amount owed on the loan.

Please see the prospectus for a complete discussion of the Funds’ risks. There can be no assurances that the investment objectives of these Funds will be met.

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

 

American Beacon Advisors

February 28, 2018

Contents

 

 

President’s Message

    1  

Performance Overviews

     2  

Expense Examples

    6  

Schedules of Investments:

  

American Beacon SiM High Yield Opportunities Fund

     8  

American Beacon Sound Point Floating Rate Income Fund

     14  

Financial Statements

     25  

Notes to Financial Statements

     29  

Financial Highlights:

  

American Beacon SiM High Yield Opportunities Fund

     52  

American Beacon Sound Point Floating Rate Income Fund

     57  

Additional Fund Information

     Back Cover  

President’s Message

 

 

LOGO  

Dear Shareholders,

 

Since 1986, American Beacon has endeavored to provide investors with a disciplined approach to realizing long-term investment goals: Institutional wisdom + earned alpha = enduring value.

 

u   We believe institutional wisdom comes from having more than 30 years of experience as manager of one of the country’s largest pension plans. As a fiduciary, we have built an investment due-diligence and oversight infrastructure, which we leverage across all our investment products. When selecting our investment managers, we focus on their people, processes and performance. We perform due-diligence reviews with each investment manager on a quarterly basis.

 

u We believe earned alpha – that is, the returns of an actively managed fund beyond a benchmark – comes from employing and engaging

  investment managers we believe are best-in-class and who have defined, repeatable and proven processes. Our experience has shown us that, while it’s important to be mindful of short-term considerations, having a long-term focus helps manage expectations, mitigate risks and realize goals. Thus, we seek relationships with leading investment managers who display a willingness to undertake time-intensive research strategies. The resulting investment portfolios are differentiated from their peers and allow incremental changes to help address periods of market volatility and economic uncertainty.

 

u We believe enduring value comes from “putting a portfolio in place and sticking with the plan.” Our mutual funds provide you with access to institutional-quality, research-intensive investment managers with diverse processes and styles. In the long run, having such access and spending time in the market – rather than trying to time the market – may better position you to reach your long-term investment goals.

The markets and U.S. economy were robust during calendar year 2017. However, during periods of market volatility and economic uncertainty – such as what we’ve seen thus far in 2018 – investing for the long term requires conviction. It isn’t about identifying and anticipating the next big market move. It’s about identifying the right investment products for riding out those moves. It’s about developing an approach based on long-term participation, while seeking some measure of protection against ongoing volatility.

As a manager of managers, we strive to provide investment products that may enable investors to participate during market upswings while potentially insulating against market downswings. Many of the sub-advisors to our mutual funds pursue upside capture and/or downside protection using proprietary strategies. The investment teams behind our mutual funds seek to produce consistent, long-term results rather than focus only on short-term movements in the markets. In managing our investment products, we emphasize identifying opportunities that offer the potential for high quality and lower risk.

At American Beacon, our approach is more than a concept. It’s the cornerstone of our culture. And we strive to apply it at every turn as we seek to provide a well-diversified line of investment products for your portfolio.

Thank you for your continued interest in American Beacon. For additional information about our investment products or to access your account information, please visit our website at www.americanbeaconfunds.com.

Best Regards,

 

LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

 

1

American Beacon SiM High Yield Opportunities FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

The Investor Class of the American Beacon SiM High Yield Opportunities Fund (the “Fund”) returned 2.62% for the six months ended February 28, 2018. The Fund outperformed the Bank of America Merrill Lynch U.S. High Yield Master II Index (the “Index”) return of 1.01% for the same period.

 

Total Returns for the Period ended February 28, 2018  
    

Ticker

   

6 Months*

   

1 Year

   

3 Years

   

5 Years

   

Since Inception

(2/14/2011)

Institutional Class (1,2,4)

    SHOIX        2.88 %        4.77 %        5.20 %        5.48 %        7.04 %

Y Class (1,2,4)

    SHOYX        2.87 %        4.62 %        5.18 %        5.40 %        6.93 %

Investor Class (1,2,4)

    SHYPX        2.62 %        4.34 %        4.87 %        5.13 %        6.62 %

A without Sales Charge (1,2,4)

    SHOAX        2.77 %        4.34 %        4.83 %        5.05 %        6.56 %

A with Sales Charge (1,2,4)

    SHOAX        -2.12 %        -0.66 %        3.16 %        4.02 %        5.83 %

C without Sales Charge (1,2,4)

    SHOCX        2.37 %        3.56 %        4.06 %        4.27 %        5.80 %

C with Sales Charge (1,2,4)

    SHOCX        1.37 %        2.56 %        4.06 %        4.27 %        5.80 %
                             

BofA Merrill Lynch U.S. High Yield Master II Index (3)

           1.01 %        4.12 %        5.23 %        5.35 %        6.41 %

 

* Not Annualized.

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A Class shares have a maximum sales charge of 4.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase.

 

2. A portion of the fees charged to the Institutional Class of the Fund has been waived since Fund inception. Performance prior to waiving fees was lower than actual returns shown. A portion of the fees charged to the Investor Class of the Fund was waived in 2011 and 2012 and partially recovered in 2013 and 2016. Performance prior to waiving fees was lower than actual returns shown in 2011 and 2012. A portion of the fees charged to the A and C Classes of the Fund was waived from 2011 through 2014 and partially recovered in 2015 and 2016. Performance prior to waiving fees was lower than the actual returns shown from 2011 through 2014. A portion of the fees charged to the Y Class of the Fund was waived from 2011 through 2013, partially recovered in 2015 and waived in 2016. Performance prior to waving fees was lower than actual returns shown from 2011 through 2013 and in 2016.

 

3. The BofA Merrill Lynch U.S. High Yield Master II Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market. Qualifying securities must have a below-investment-grade rating and an investment-grade rated country of risk. In addition, qualifying securities must have at least one-year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $100 million. Defaulted securities and securities eligible for the dividends-received deduction are excluded from the Index. One cannot directly invest in an index.

 

4. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares were 0.85%, 0.90%, 1.14%, 1.21%, and 1.95%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

From a sector selection perspective, the Fund’s Energy, Service, and Finance sector holdings were the Fund’s top contributors to outperformance.

From a sector allocation standpoint, null weighting the Telecom sector added value to Fund performance. Conversely, an overweight to the Consumer sector detracted from relative returns.

From a credit quality selection perspective, the Fund’s relative performance was aided by security selection in the CCC, B, and BB-rated credit categories.

From a credit quality allocation standpoint, the Fund’s overweight to the CCC-rated and underweight to the BB-rated credit categories contributed positively to the Fund’s relative performance. In contrast, null weighting the CC-rated credit category detracted from the Fund’s returns.

 

 

2

American Beacon SiM High Yield Opportunities FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

The sub-advisor’s investment process of identifying long-term secular themes and seeking out-of-favor sectors through bottom-up fundamental research remains in place.

 

Top Ten Holdings (% Net Assets)        
MEG Energy Corp., 7.000%, Due 3/31/2024           2.1  
California Resources Corp., 8.000%, Due 12/15/2022           2.0  
Hellenic Republic Government Bond, 3.000%, Due 2/24/2023, Series PSI           1.9  
Qorvo, Inc., 7.000%, Due 12/1/2025           1.7  
MEDNAX, Inc., 5.250%, Due 12/1/2023           1.7  
JBS USA LUX S.A. / JBS USA Finance, Inc., 5.875%, Due 7/15/2024           1.7  
Gartner, Inc., 5.125%, Due 4/1/2025           1.6  
Men’s Wearhouse, Inc., 7.000%, Due 7/1/2022           1.6  
Kissner Holdings LP / Kissner Milling Co., Ltd. / BSC Holding, Inc. / Kissner USA, 8.375%, Due 12/1/2022           1.6  
CVR Partners LP / CVR Nitrogen Finance Corp., 9.250%, Due 6/15/2023           1.6  
Total Fund Holdings      95       
       
Sector Allocation (% Investments)        
Consumer, Non-Cyclical           30.1  
Industrial           17.0  
Consumer, Cyclical           15.3  
Energy           14.3  
Technology           7.0  
Communications           5.2  
Basic Materials           3.2  
Financials           2.6  
Foreign Sovereign Obligations           2.5  
Utilities           1.5  
Consumer           1.0  
Materials           0.2  
Foreign Convertible Obligations           0.1  
Consumer Staples           0.0  
       
Country Allocation (% Fixed Income)        
United States           68.9  
Canada           13.8  
Brazil           3.4  
United Kingdom           2.7  
Luxembourg           2.1  
Greece           1.9  
Argentina           1.5  
Mexico           1.3  
Cayman Islands           1.3  
Monaco           1.2  
Supranational           1.1  
Netherlands           0.7  
Spain           0.1  

S&P credit ratings for long-term obligations (or issuers thereof) are AAA, AA, A, BBB, BB, B, CCC, CC, C, and D in decreasing order. For example, obligations rated AAA are judged to be of the highest quality, BBB to be of medium grade, CCC are judged to be speculative and obligations rated D are in default. Obligations rated in one of the four highest categories are considered to be investment grade while all other ratings are considered non-investment grade.

 

 

3

American Beacon Sound Point Floating Rate Income FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

The Investor Class of the American Beacon Sound Point Floating Rate Income Fund (the “Fund”) returned 2.64% for the six months ended February 28, 2018. On a net of fees basis, the Fund underperformed the Credit Suisse Leveraged Loan Index (the “Index”) return of 2.86% for the same period. For further comparison, the Fund has returned 6.03% since inception, compared to the Index return of 4.51% for the same period.

 

Total Returns for the Period ended February 28, 2018  
      

Ticker

     

6 Months*

     

1 Year

     

3 Years

     

5 Years

   

Since Inception

(12/3/2012)

Institutional Class (1,2,6)

      SPFLX          2.75 %          5.12 %          5.72 %          5.87 %        6.19 %

Y Class (1,2,3,6)

      SPFYX          2.64 %          4.96 %          5.57 %          5.77 %        6.10 %

Investor Class (1,2,3,6)

      SPFPX          2.66 %          4.90 %          5.45 %          5.70 %        6.03 %

A without Sales Charge (1,2,3,6)

      SOUAX          2.57 %          4.72 %          5.35 %          5.64 %        5.97 %

A with Sales Charge (1,2,3,6)

      SOUAX          -0.04 %          2.06 %          4.47 %          5.11 %        5.45 %

C without Sales Charge (1,2,3,6)

      SOUCX          2.11 %          3.86 %          4.77 %          5.29 %        5.64 %

C with Sales Charge (1,2,3,6)

      SOUCX          1.11 %          2.86 %          4.77 %          5.29 %        5.64 %

SP Class (1,2,4,6)

      SPFRX          2.60 %          4.86 %          5.37 %          5.65 %        5.99 %
                                       

Credit Suisse Leveraged Loan Index (5)

               2.86 %          4.39 %          4.36 %          4.28 %        4.51 %

 

* Not annualized.

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A Class shares have a maximum sales charge of 2.50%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase.

 

2. A portion of the fees charged to the Institutional Class of the Fund has been waived since Fund inception. Performance prior to waiving fees was lower than actual returns shown. A portion of fees charged to the Investor, Y, A, C, and SP Classes of the Fund was waived from Class inception through 2016 and partially recovered in 2017. Performance prior to waiving fees was lower than actual returns shown from inception through 2016.

 

3. Fund performance represents the returns achieved by the Institutional Class from 12/3/12 up to 12/11/15, the inception date of the Y, Investor, A, and C Classes, and the returns of each Class since its inception. Expenses of the Institutional Class are lower than the other Classes. Therefore, total returns shown may be higher than they would have been had each Class been in existence since 12/3/12.

 

4. Fund performance represents the returns achieved by the Institutional Class from 12/3/12 up to 5/31/14, the inception date of the SP Class, and the returns of the SP Class since its inception. Expenses of the Institutional Class are lower than the SP Class. Therefore, total returns shown may be higher than they would have been had the SP Class been in existence since 12/3/12.

 

5. The Credit Suisse Leveraged Loan Index is an index designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. One cannot directly invest in an index.

 

6. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and SP Class shares were 0.86%, 0.95%, 1.11%, 1.26%, 2.01%, and 1.14%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund’s underweight position in the commodity-sensitive sectors, primarily Energy and Metals/Materials, was the main source of underperformance as those sectors outperformed despite bouts of volatility near the end of the period. The Fund has been underweight these sectors since late-2014 when commodity prices first started deteriorating. The Fund’s significant outperformance in 2014 and 2015 was due to that positioning. As the commodity markets have turned, however, the Fund’s relative performance has trailed that of the Index.

Conversely, the Fund’s continued underweight in Retail contributed positively to relative performance, as many companies face adverse secular trends and continue to lose market share to e-commerce (i.e. Amazon). The sub-advisor’s strategy seeks to avoid highly-leveraged, cyclical sectors (such as energy, mining, retail, and lodging) as they inevitably experience volatile corrections, as demonstrated in early February. Likewise, the strategy also avoided overly-hyped sectors as market valuations became unattractive.

 

 

4

American Beacon Sound Point Floating Rate Income FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

Also during the six-month period ended February 28, 2018, the Fund’s total assets increased from $969 million to over $1.3 billion as investors were encouraged by the floating-rate nature of the Fund and its incremental yield. During this time, a significant amount of assets was invested in new holdings, and a portion was held in cash to help provide liquidity, if needed. These factors detracted slightly from returns as nearly all sectors of the bank loan market were positive during the period.

The sub-advisor continues to focus on uncovering opportunities with lower volatility and lower credit risk, and providing a high level of current income consistent with strong, risk-adjusted returns.

 

Top Ten Holdings (% Net Assets)        
Avantor, Inc., 5.648%, Due 11/21/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.000%)           1.1  
McAfee, LLC, 6.148%, Due 9/30/2024, 2017 USD Term Loan B, (1 mo. LIBOR + 4.500%)           1.0  
GrafTech Finance, Inc., 5.081%, Due 2/12/2025, 2018 Term Loan B           0.9  
Securus Technologies Holdings, Inc., 6.148%, Due 11/1/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.500%)           0.9  
Intelsat Jackson Holdings S.A., 5.706%, Due 11/27/2023, 2017 Term Loan B3, (3 mo. LIBOR + 3.750%)           0.9  
Brand Energy & Infrastructure Services, Inc., 5.996%, Due 6/21/2024, 2017 Term Loan, (3 mo. LIBOR + 4.250%)           0.9  
Hyperion Insurance Group Ltd., 5.188%, Due 12/20/2024, 2017 Repriced Term Loan, (1 mo. LIBOR + 3.500%)           0.9  
TKC Holdings, Inc., 6.030%, Due 2/1/2023, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)           0.9  
Sinclair Television Group Inc., Due 12/12/2024, 2017 Term Loan B           0.9  
FeeCo Holdings LP, Due 1/30/2025, 2018 1st Lien Term Loan           0.8  
Total Fund Holdings      344       
       
Sector Weightings (% Investments)        
Manufacturing           20.6  
Service           19.7  
Consumer           16.3  
Technology           9.5  
Financials           8.4  
Telecommunications           6.6  
Health Care           5.0  
Basic Materials           4.7  
Energy           3.5  
Transportation           2.7  
Media           0.9  
Utilities           0.9  
Defense           0.8  
Consumer, Cyclical           0.2  
Industrials           0.1  
Consumer, Non-Cyclical           0.1  

 

 

5

American Beacon FundsSM

Expense Examples

February 28, 2018 (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 September 1, 2017 through February 28, 2018.

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.

 

 

6

American Beacon FundsSM

Expense Examples

February 28, 2018 (Unaudited)

 

 

American Beacon SiM High Yield Opportunities Fund  
    Beginning Account Value
9/1/2017		   Ending Account Value
2/28/2018		   Expenses Paid During
Period
9/1/2017-2/28/2018*
Institutional Class            
Actual       $1,000.00       $1,028.80       $4.23
Hypothetical**       $1,000.00       $1,020.60       $4.21
Y Class            
Actual       $1,000.00       $1,028.70       $4.33
Hypothetical**       $1,000.00       $1,020.50       $4.31
Investor Class            
Actual       $1,000.00       $1,026.30       $5.68
Hypothetical**       $1,000.00       $1,019.20       $5.66
A Class            
Actual       $1,000.00       $1,027.70       $5.38
Hypothetical**       $1,000.00       $1,019.50       $5.36
C Class            
Actual       $1,000.00       $1,023.70       $9.28
Hypothetical**       $1,000.00       $1,015.60       $9.25

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.84%, 0.86%, 1.13%, 1.07%, and 1.85% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

 

American Beacon Sound Point Floating Rate Income Fund  
    Beginning Account Value
9/1/2017		   Ending Account Value
2/28/2018		   Expenses Paid During
Period
9/1/2017-2/28/2018*
Institutional Class            
Actual       $1,000.00       $1,027.50       $4.22
Hypothetical**       $1,000.00       $1,020.60       $4.21
Y Class            
Actual       $1,000.00       $1,026.40       $4.32
Hypothetical**       $1,000.00       $1,020.50       $4.31
Investor Class            
Actual       $1,000.00       $1,026.60       $5.13
Hypothetical**       $1,000.00       $1,019.70       $5.11
A Class            
Actual       $1,000.00       $1,025.70       $5.98
Hypothetical**       $1,000.00       $1,018.90       $5.96
C Class            
Actual       $1,000.00       $1,022.00       $9.58
Hypothetical**       $1,000.00       $1,015.30       $9.54
SP Class            
Actual       $1,000.00       $1,026.00       $5.78
Hypothetical**       $1,000.00       $1,019.10       $5.76

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.84%, 0.86%, 1.02%, 1.19%, 1.91%, and 1.15% for the Institutional, Y, Investor, A, C, and SP Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

 

 

7

American Beacon SiM High Yield Opportunities FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 1.18%            
Consumer Staples - 0.01%            
Food & Staples Retailing - 0.01%            
Nueva Pescanova, S.L.A       301,134         $ 183,692
           

 

 

  
           
Energy - 0.64%            
Oil, Gas & Consumable Fuels - 0.64%            
Cona Resources Ltd.       2,389,894           3,631,774
KNOT Offshore Partners LP, MLP       207,261           4,124,494
           

 

 

  
              7,756,268
           

 

 

  

Total Energy

               7,756,268
           

 

 

  
           
Financials - 0.30%            
Mortgage Real Estate Investment Trusts (REITs) - 0.30%            
Annaly Capital Management, Inc.       359,000           3,600,770
           

 

 

  
           
Materials - 0.23%            
Chemicals - 0.23%            
CVR Partners LP, MLP       816,191           2,815,859
           

 

 

  
           

Total Common Stocks (Cost $20,154,670)

               14,356,589
           

 

 

  
           
CONVERTIBLE PREFERRED STOCKS - 0.16% (Cost $3,758,766)            
Energy - 0.16%            
Oil, Gas & Consumable Fuels - 0.16%            
Sanchez Energy Corp., Series B       108,200           1,937,581
           

 

 

  
           
PREFERRED STOCKS - 0.26% (Cost $3,117,500)            
Energy - 0.26%            
Oil, Gas & Consumable Fuels - 0.26%            
Scorpio Tankers, Inc.       124,700           3,111,265
           

 

 

  
           
    Principal Amount*        
           
BANK LOAN OBLIGATIONSB - 0.96% (Cost $11,392,181)            
Consumer Discretionary - 0.96%            
Gol LuxCo S.A., 6.500%, Due 8/31/2020, 1st Lien Term LoanC     $     11,450,000           11,679,000
           

 

 

  
           
CORPORATE OBLIGATIONS - 58.46%            
Basic Materials - 1.56%            
CVR Partners LP / CVR Nitrogen Finance Corp., 9.250%, Due 6/15/2023D       17,915,000           18,989,900
           

 

 

  
           
Communications - 2.47%            
Salem Media Group, Inc., 6.750%, Due 6/1/2024D       15,185,000           14,805,375
Univision Communications, Inc., 5.125%, Due 2/15/2025D       16,450,000           15,195,688
           

 

 

  
              30,001,063
           

 

 

  
           
Consumer, Cyclical - 7.80%            
Caesars Resort Collection LLC / CRC Finco, Inc., 5.250%, Due 10/15/2025D       18,520,000           18,103,300
Carlson Travel, Inc., 9.500%, Due 12/15/2024D       11,095,000           10,678,937
Men’s Wearhouse, Inc., 7.000%, Due 7/1/2022       19,480,000           19,382,600
MGM Resorts International, 7.750%, Due 3/15/2022       11,255,000           12,549,325
Station Casinos LLC, 5.000%, Due 10/1/2025D       18,755,000           18,286,125
Titan International, Inc., 6.500%, Due 11/30/2023D       15,540,000           15,850,800
           

 

 

  
              94,851,087
           

 

 

  
           
Consumer, Non-Cyclical - 22.95%            
Acadia Healthcare Co., Inc.,            

5.125%, Due 7/1/2022

       5,500,000           5,566,550

5.625%, Due 2/15/2023

       12,143,000           12,458,111

 

See accompanying notes

 

8

American Beacon SiM High Yield Opportunities FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
CORPORATE OBLIGATIONS - 58.46% (continued)            
Consumer, Non-Cyclical - 22.95% (continued)            
B&G Foods, Inc., 5.250%, Due 4/1/2025     $ 10,290,000         $ 9,904,125
DaVita, Inc., 5.000%, Due 5/1/2025       9,500,000           9,321,875
Envision Healthcare Corp., 5.125%, Due 7/1/2022D       11,750,000           11,838,125
Gartner, Inc., 5.125%, Due 4/1/2025D       19,210,000           19,690,250
Halyard Health, Inc., 6.250%, Due 10/15/2022       12,175,000           12,525,031
HCA, Inc.,            

4.750%, Due 5/1/2023

       12,479,000           12,697,383

4.500%, Due 2/15/2027

       10,441,000           10,193,026
Hearthside Group Holdings LLC/Hearthside Finance Co., 6.500%, Due 5/1/2022D       15,547,000           15,663,603
Kindred Healthcare, Inc., 6.375%, Due 4/15/2022       16,509,000           16,715,362
LifePoint Health, Inc., 5.375%, Due 5/1/2024       17,000,000           16,617,500
MEDNAX, Inc., 5.250%, Due 12/1/2023D       19,950,000           20,423,812
Post Holdings, Inc., 5.000%, Due 8/15/2026D       17,221,000           16,359,950
Prime Security Services Borrower LLC / Prime Finance, Inc., 9.250%, Due 5/15/2023D       11,792,000           12,838,540
Select Medical Corp., 6.375%, Due 6/1/2021       16,135,000           16,456,087
Service Corp. International, 4.625%, Due 12/15/2027       15,340,000           14,994,850
Simmons Foods, Inc., 5.750%, Due 11/1/2024D       18,280,000           17,320,300
Tenet Healthcare Corp., 4.500%, Due 4/1/2021       15,000,000           15,048,000
TreeHouse Foods, Inc., 6.000%, Due 2/15/2024D       12,444,000           12,677,325
           

 

 

  
              279,309,805
           

 

 

  
           
Energy - 7.27%            
California Resources Corp., 8.000%, Due 12/15/2022D       31,220,000           24,741,850
CVR Refining LLC / Coffeyville Finance, Inc., 6.500%, Due 11/1/2022       12,375,000           12,668,906
Denbury Resources, Inc., 5.500%, Due 5/1/2022       19,221,000           14,800,170
Energen Corp., 7.125%, Due 2/15/2028       5,830,000           6,121,500
Murphy Oil Corp.,            

6.875%, Due 8/15/2024

       1,799,000           1,891,433

7.050%, Due 5/1/2029

       6,150,000           6,580,500

5.875%, Due 12/1/2042

       11,166,000           10,440,210
Sanchez Energy Corp., 6.125%, Due 1/15/2023       14,935,000           11,201,250
           

 

 

  
              88,445,819
           

 

 

  
           
Financial - 0.89%            
MPT Operating Partnership LP / MPT Finance Corp., 5.000%, Due 10/15/2027           11,120,000           10,864,240
           

 

 

  
           
Industrial - 9.71%            
AECOM, 5.875%, Due 10/15/2024       9,309,000           9,704,633
Airxcel, Inc., 8.500%, Due 2/15/2022D       8,352,000           8,696,520
Crown Americas LLC / Crown Americas Capital Corp. IV, 4.500%, Due 1/15/2023       15,325,000           15,478,250
Engility Corp., 8.875%, Due 9/1/2024       16,705,000           17,707,300
JPW Industries Holding Corp., 9.000%, Due 10/1/2024D       11,765,000           12,323,837
Kratos Defense & Security Solutions, Inc., 6.500%, Due 11/30/2025D       17,812,000           18,569,010
LSB Industries, Inc., 8.500%, Due 8/1/2019E J       18,027,000           17,981,932
MasTec, Inc., 4.875%, Due 3/15/2023       3,359,000           3,350,603
Multi-Color Corp., 4.875%, Due 11/1/2025D       14,930,000           14,332,800
           

 

 

  
              118,144,885
           

 

 

  
           
Technology - 5.81%            
DynCorp International, Inc., 11.875%, Due 11/30/2020, PIK (1.50%)       15,676,879           16,382,339
Leidos, Inc.,            

7.125%, Due 7/1/2032

       10,336,000           11,447,120

5.500%, Due 7/1/2033

       6,996,000           6,777,592
Microsemi Corp., 9.125%, Due 4/15/2023D       13,415,000           14,857,112
Qorvo, Inc., 7.000%, Due 12/1/2025       19,550,000           21,260,625
           

 

 

  
              70,724,788
           

 

 

  

Total Corporate Obligations (Cost $717,041,201)

               711,331,587
           

 

 

  
           

 

See accompanying notes

 

9

American Beacon SiM High Yield Opportunities FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
CONVERTIBLE OBLIGATIONS - 3.30%            
Communications - 1.12%            
Gogo, Inc., 3.750%, Due 3/1/2020     $ 15,710,000         $ 13,655,541
           

 

 

  
           
Consumer, Cyclical - 1.04%            
Titan Machinery, Inc., 3.750%, Due 5/1/2019       12,755,000           12,606,455
           

 

 

  
           
Industrial - 1.14%            
Scorpio Tankers, Inc., 2.375%, Due 7/1/2019D       15,336,000           13,917,527
           

 

 

  
           

Total Convertible Obligations (Cost $41,526,946)

               40,179,523
           

 

 

  
           
FOREIGN CORPORATE OBLIGATIONS - 30.27%            
Basic Materials - 1.57%            
Kissner Holdings LP / Kissner Milling Co., Ltd. / BSC Holding, Inc. / Kissner USA, 8.375%, Due 12/1/2022D       18,820,000           19,102,300
           

 

 

  
           
Communications - 1.42%            
Virgin Media Finance PLC, 6.000%, Due 10/15/2024D       17,100,000           17,271,000
           

 

 

  
           
Consumer, Cyclical - 5.98%            
Codere Finance 2 Luxembourg S.A., 7.625%, Due 11/1/2021D           12,750,000           12,806,355
Gol Finance, Inc., 7.000%, Due 1/31/2025D       14,935,000           14,710,975
Gol Linhas Aereas S.A., 10.750%, Due 2/12/2023A D       5,000,000           5,050,000
Ladbrokes Group Finance PLC, 5.125%, Due 9/8/2023F     GBP 9,700,000           14,342,846
Servicios Corporativos Javer S.A.B. de C.V., 9.875%, Due 4/6/2021D       7,673,000           7,845,643
Viking Cruises Ltd., 5.875%, Due 9/15/2027D       18,450,000           17,988,750
           

 

 

  
              72,744,569
           

 

 

  
           
Consumer, Non-Cyclical - 6.30%            
Clearwater Seafoods, Inc., 6.875%, Due 5/1/2025D       17,920,000           17,651,200
IHS Markit Ltd., 5.000%, Due 11/1/2022D       14,819,000           15,337,665
JBS USA LUX S.A. / JBS USA Finance, Inc., 5.875%, Due 7/15/2024D       20,840,000           20,323,168
Minerva Luxembourg S.A., 6.500%, Due 9/20/2026D       13,525,000           13,423,562
Nueva Pescanova, S.L.,            

3.000%, Due 5/23/2024, Tranche AA

     EUR 430,439           371,176

1.000%, Due 5/23/2029, PIK (1.000%) Tranche BA G

     EUR 624,121           288,061

1.000%, Due 5/23/2034, PIK (1.000%) Tranche CA G

     EUR 300,667           27,629
Ritchie Bros Auctioneers, Inc., 5.375%, Due 1/15/2025D       9,172,000           9,275,644
           

 

 

  
              76,698,105
           

 

 

  
           
Energy - 5.54%            
Athabasca Oil Corp., 9.875%, Due 2/24/2022D       18,722,000           18,722,000
Baytex Energy Corp.,            

5.125%, Due 6/1/2021D

       6,649,000           6,250,060

5.625%, Due 6/1/2024D

       6,515,000           5,847,212
CES Energy Solutions Corp., 6.375%, Due 10/21/2024D     CAD 13,567,000           10,731,379
MEG Energy Corp., 7.000%, Due 3/31/2024D       30,283,000           25,816,257
           

 

 

  
              67,366,908
           

 

 

  
           
Financial - 1.30%            
Cooke Omega Investments, Inc. / Alpha VesselCo Holdings, Inc., 8.500%, Due 12/15/2022D       15,695,000           15,851,950
           

 

 

  
           
Industrial - 5.67%            
ATS Automation Tooling Systems, Inc., 6.500%, Due 6/15/2023D       15,494,000           16,229,965
Eagle Bulk Shipco LLC, 8.250%, Due 11/28/2022       4,810,000           4,882,150
MPC Container Ships Invest B.V., 6.408%, Due 9/22/2022F G       8,000,000           7,940,000
Navios Maritime Acquisition Corp. / Navios Acquisition Finance US, Inc., 8.125%, Due 11/15/2021D       15,235,000           12,454,613
Navios Maritime Holdings, Inc. / Navios Maritime Finance II US, Inc., 11.250%, Due 8/15/2022D       12,315,000           12,484,331
Tervita Escrow Corp., 7.625%, Due 12/1/2021D       14,930,000           15,004,650
           

 

 

  
              68,995,709
           

 

 

  
           

 

See accompanying notes

 

10

American Beacon SiM High Yield Opportunities FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
FOREIGN CORPORATE OBLIGATIONS - 30.27% (continued)            
Technology - 1.02%            
Sensata Technologies B.V., 4.875%, Due 10/15/2023D     $ 12,205,000         $ 12,388,075
           

 

 

  
           
Utilities - 1.47%            
Stoneway Capital Corp., 10.000%, Due 3/1/2027D       16,225,000           17,908,344
           

 

 

  
           

Total Foreign Corporate Obligations (Cost $364,071,600)

               368,326,960
           

 

 

  
           
FOREIGN SOVEREIGN OBLIGATIONS - 2.47%            
Hellenic Republic Government Bond, 3.000%, Due 2/24/2023, Series PSIE F J     EUR 18,685,000           22,538,158
Mexican Bonos, 6.500%, Due 6/10/2021, Series M     MXN     147,500,000           7,583,821
           

 

 

  
           

Total Foreign Sovereign Obligations (Cost $26,484,863)

               30,121,979
           

 

 

  
           
    Shares        
SHORT-TERM INVESTMENTS - 1.52% (Cost $18,497,727)            
Investment Companies - 1.52%            

American Beacon U.S. Government Money Market Select Fund, Select Class, 1.31%H I

       18,497,727           18,497,727
           

 

 

  
           

TOTAL INVESTMENTS - 98.58% (Cost $1,206,045,454)

               1,199,542,211

OTHER ASSETS, NET OF LIABILITIES - 1.42%

               17,314,323
           

 

 

  

TOTAL NET ASSETS - 100.00%

             $ 1,216,856,534
           

 

 

  
           

Percentages are stated as a percent of net assets.

*In U.S. Dollars unless otherwise noted.

                  

A Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $5,920,558 or 0.49% of net assets. Value was determined using significant unobservable inputs.

B Bank loan obligations, unless otherwise stated, carry a floating rate of interest. The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

C Fixed Rate.

D Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $686,635,784 or 56.43% of net assets. The Fund has no right to demand registration of these securities.

E Step Up/Down - A zero coupon bond that converts to a fixed rate or variable interest rate at a designated future date. The rate disclosed represents the coupon rate at February 28, 2018. The maturity date disclosed represents the final maturity date.

F 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.

G 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.

H The Fund is affiliated by having the same investment advisor.

I 7-day yield.

J Variable Rate.

LLC - Limited Liability Company.

LP - Limited Partnership.

MLP - Master Limited Partnership.

PIK - Payment in Kind.

PLC - Public Limited Company.

 

Futures Contracts Open on February 28, 2018:           
Short Futures Contracts  
Currency Futures Contracts  
Description      Number of
Contracts		      Expiration Date      Notional Amount      Contract Value      Unrealized
Appreciation
(Depreciation)		  
British Pound Currency Futures      171      March 2018      $ (14,405,526 )     $ (14,725,237 )     $ (319,711 ) 
Canadian Dollar Currency Futures      188      March 2018        (14,679,033 )       (14,656,480 )       22,553  
Euro Currency Futures      154      March 2018        (22,871,030 )       (23,517,725 )       (646,695 ) 
              

 

 

     

 

 

     

 

 

  
               $ (51,955,589 )     $ (52,899,442 )     $ (943,853 ) 
              

 

 

     

 

 

     

 

 

  

 

See accompanying notes

 

11

American Beacon SiM High Yield Opportunities FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

Glossary:

 

Currency Abbreviations:

CAD

    Canadian Dollar

EUR

    Euro

GBP

    Pound Sterling

MXN

    Mexican Peso

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of February 28, 2018, the investments were classified as described below:

 

SiM High Yield Opportunities Fund

   Level 1           Level 2            Level 3           Total  

Assets

               

Common Stocks

   $ 14,172,897       $ -        $ 183,692       $ 14,356,589  

Convertible Preferred Stocks

     1,937,581         -          -         1,937,581  

Preferred Stocks

     3,111,265         -          -         3,111,265  

Bank Loan Obligations

     -         11,679,000          -         11,679,000  

Corporate Obligations

     -         711,331,587          -         711,331,587  

Convertible Obligations

     -         40,179,523          -         40,179,523  

Foreign Corporate Obligations

     -         362,590,094          5,736,866         368,326,960  

Foreign Sovereign Obligations

     -         30,121,979          -         30,121,979  

Short-Term Investments

     18,497,727         -          -         18,497,727  
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Investments in Securities - Assets

   $ 37,719,470       $ 1,155,902,183        $ 5,920,558       $ 1,199,542,211  
 

 

 

      

 

 

       

 

 

      

 

 

  

Financial Derivative Instruments - Assets

               

Futures Contracts

   $ 22,553       $ -        $ -       $ 22,553  
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Financial Derivative Instruments - Assets

   $ 22,553       $ -        $ -       $ 22,553  
 

 

 

      

 

 

       

 

 

      

 

 

  

Financial Derivative Instruments - Liabilities

               

Futures Contracts

   $ (966,406 )      $ -        $ -       $ (966,406 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Financial Derivative Instruments - Liabilities

   $ (966,406 )      $ -        $ -       $ (966,406 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

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 February 28, 2018, there were no transfers between levels.

The following table is a reconciliation of Level 3 assets within the Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:

 

Security Type   Balance as
of
8/31/2017		     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
2/28/2018		     Change in
Unrealized
Appreciation
(Depreciation)
at Period end**		  
Common Stocks   $ 179,243     $ -     $ -     $ -     $ -     $ 4,449     $ -     $ -     $ 183,692     $ 22,367  
Foreign Corporate Obligations     5,417,085       3,185 *      -       8,958       -       307,638       -       -       5,736,866       258,289  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $ 5,596,328     $ 3,185     $ -     $ 8,958     $ -     $ 312,087     $ -     $ -     $ 5,920,558     $ 280,656  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

See accompanying notes

 

12

American Beacon SiM High Yield Opportunities FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

The following is a summary of significant unobservable inputs used in the fair valuation of the assets categorized within Level 3 of the fair value hierarchy:

 

Security Type    Fair Value
At 2/28/18		      Valuation Technique    Unobservable Inputs    Range of
Inputs
Common Stocks    $ 183,692      Valuation based on private quotes submitted to an Intermediary agent in foreign market.    Private quotes1    n/a
Foreign Corporate Obligations    $ 5,050,000      Comparison of Yields to similar Debt Instruments   

Comparative Yields,

Liquidity Discount2

    10.33%

3.00%

Foreign Corporate Obligations    $ 371,176     

Enterprise Value,

Discounted Cash Flow

   

EBITDA Multiple3

Discount Rate

    8.0x

10.0%

Foreign Corporate Obligations    $ 288,061     

Enterprise Value,

Discounted Cash Flow

   

EBITDA Multiple3

Discount Rate

    8.0x

12.0%

Foreign Corporate Obligations    $ 27,629     

Enterprise Value,

Discounted Cash Flow

   

EBITDA Multiple3

Discount Rate

    8.0x

15.0%

1 The equity shares were received from a bankruptcy restructuring. The valuation is based on private quotes submitted to an intermediary agent in a foreign market. The valuation estimate will change based on market participants’ perceptions of the value of the company.

2 This obligation is an unsecured corporate bond. Valuation may change if the yields of the comparative bond change or if the market imputes a higher liquidity discount to this bond than presently incorporated into the fair value.

3 These obligations were received from a bankruptcy restructuring. The key assumptions used in the valuation include EBITDA multiples based on comparable companies. The valuation estimate will change if any of the assumptions change.

 

See accompanying notes

 

13

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 0.08%            
Consumer Discretionary - 0.00%            
Diversified Consumer Services - 0.00%            
TwentyEighty, Inc., Class A       412         $ -
           

 

 

  
           
Financials - 0.00%            
Diversified Financial Services - 0.00%            
RCS 2L EscrowA       667           2,168
           

 

 

  
           
Industrials - 0.07%            
Machinery - 0.07%            
Aretec Group, Inc.J       15,975           958,500
           

 

 

  
           
Information Technology - 0.01%            
Internet Software & Services - 0.01%            
Answers Corp.       23           333
Answers Holdings, Inc.       4,206           60,987
           

 

 

  
              61,320
           

 

 

  
           

Total Information Technology

               61,320
           

 

 

  
           

Total Common Stocks (Cost $96,743)

               1,021,988
           

 

 

  
           
WARRANTS - 0.00% (Cost $0)            
Materials - 0.00%            
Euramax Holdings, Inc.A B J       21           -
           

 

 

  
           
    Principal Amount        
           
BANK LOAN OBLIGATIONSC - 93.24%            
Basic Materials - 4.45%            
84 Lumber Company, 6.871%, Due 10/25/2023, 2017 Term Loan B, (1 mo. LIBOR + 5.250%)     $     4,030,983           4,076,332
Albaugh, LLC, Due 12/23/2024, 2017 Term Loan BD       994,000           1,003,324
Archroma Finance S.a.r.l., 5.955%, Due 8/11/2024, USD 2017 Term Loan B2, (3 mo. LIBOR + 4.250%)       1,998,990           2,000,649
Atkore International, Inc., 4.450%, Due 12/22/2023, 2016 1st Lien Term Loan, (3 mo. LIBOR + 2.750%)       5,000,000           5,029,150
Distribution International, Inc., 6.700%, Due 12/15/2021, New Term Loan, (3 mo. LIBOR + 5.000%)       1,102,000           975,270
Fairmount Santrol, Inc., 7.693%, Due 11/1/2022, 2017 Term Loan B, (3 mo. LIBOR + 6.000%)       4,497,000           4,547,591
GrafTech Finance, Inc., 5.081%, Due 2/12/2025, 2018 Term Loan B           12,654,000           12,638,182
Green Plains Renewable Energy, Inc., 7.150%, Due 8/18/2023, 2017 Term Loan B, (1 mo. LIBOR + 5.500%)       3,184,020           3,227,800
H.B. Fuller Company, 3.840%, Due 10/20/2024, 2017 Term Loan B, (1 mo. LIBOR + 2.250%)       862,838           866,617
Invictus,            

Due 1/23/2026, 2nd Lien Term LoanD

       1,317,000           1,326,061

Due 1/24/2025, 1st Lien Term LoanD

       1,840,000           1,852,273
New Arclin U.S. Holding Corp.,            

5.200%, Due 2/14/2024, 2018 Term Loan, (3 mo. LIBOR + 3.500%)

       1,990,000           2,008,666

10.443%, Due 2/14/2025, 2nd Lien Term Loan, (3 mo. LIBOR + 8.750%)

       2,720,000           2,743,800
Tensar Corporation, 6.443%, Due 7/9/2021, Term Loan, (3 mo. LIBOR + 4.750%)       718,975           701,001
TMS International Corp., 4.631%, Due 8/21/2024, 2017 Term Loan B, (2 mo. LIBOR + 3.000%)       2,902,725           2,920,867
Tronox Blocked Borrower LLC, 4.693%, Due 9/22/2024, Term Loan B, (3 mo. LIBOR + 3.000%)       340,116           342,136
Tronox Finance LLC, 4.693%, Due 9/22/2024, Term Loan B, (3 mo. LIBOR + 3.000%)       784,884           789,546
Vantage Specialty Chemicals, Inc.            

5.654%, Due 10/5/2024, 2017 1st Lien Term Loan, (2 mo. LIBOR + 4.000%)

       4,329,000           4,363,286

10.022%, Due 10/5/2025, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.250%)

       4,438,000           4,460,190
Zep Inc., 5.772%, Due 8/12/2024, 2017 1st Lien Term Loan, (2 mo. LIBOR + 4.000%)       5,322,660           5,353,691
           

 

 

  
              61,226,432
           

 

 

  
           

 

See accompanying notes

 

14

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Consumer - 15.31%            
ABG Intermediate Holdings 2 LLC, 5.193%, Due 9/26/2024, 2017 1st Lien Add-On Term Loan, (3 mo. LIBOR + 3.500%)     $ 6,709,185         $ 6,755,344
Alphabet Holding Co., Inc., 5.148%, Due 9/26/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 3.500%)D       8,666,678           8,341,677
Alphabet Holding Company, Inc., 9.398%, Due 9/26/2025, 2017 2nd Lien Term Loan       4,713,000           4,430,220
AP NMT Acquisition BV, 7.444%, Due 8/13/2021, USD 1st Lien Term Loan, (3 mo. LIBOR + 5.750%)       1,844,852           1,838,598
Augusta Sportswear Group, Inc., 6.148%, Due 10/26/2023, Term Loan B, (1 mo. LIBOR + 4.500%)D       511,582           483,445
Badger Buyer Corp., 5.693%, Due 9/26/2024, Term Loan B, (3 mo. LIBOR + 4.000%)       5,043,683           5,087,815
Belron Finance US LLC, 4.294%, Due 11/7/2024, USD Term Loan B, (3 mo. LIBOR + 2.500%)       2,370,000           2,381,850
Caesars Resort Collection, LLC, 4.398%, Due 12/22/2024, 2017 1st Lien Term Loan B, (1 mo. LIBOR + 2.750%)       7,973,000           8,021,874
Casablanca US Holdings, Inc., 6.522%, Due 3/15/2024, 1st Lien Term Loan, (2 mo. LIBOR + 4.750%)       6,947,500           6,982,237
Cineworld Limited, Due 2/18/2025, 2018 USD Term LoanD       3,606,000           3,600,591
Comfort Holding, LLC,            

6.331%, Due 2/5/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.750%)

       6,808,550           6,642,626

11.581%, Due 2/3/2025, 2nd Lien Term Loan, (1 mo. LIBOR + 10.000%)

       3,000,000           2,835,000
Corsair Components, Inc., 6.443%, Due 9/6/2024, 2017 1st Lien Term Loan B, (3 mo. LIBOR + 4.750%)       1,588,020           1,597,945
CVS Holdings I, LP,            

4.790%, Due 2/6/2025, 2018 1st Lien Term Loan, (3 mo. LIBOR + 3.000%)D

       1,447,000           1,441,574

8.540%, Due 2/6/2026, 2018 2nd Lien Term Loan, (3 mo. LIBOR + 6.750%)D

       1,605,000           1,600,987
Del Monte Foods, Inc., 5.158%, Due 2/18/2021, 1st Lien Term Loan, (PRIME + 2.250%)       304,041           257,675
Deluxe Entertainment Services Group, Inc., 7.272%, Due 2/28/2020, Term Loan 2014, (3 mo. LIBOR + 5.500%)D       4,581,383           4,527,002
DHX Media Ltd., 5.398%, Due 12/29/2023, Term Loan B, (1 mo. LIBOR + 3.750%)D       5,130,602           5,137,015
Encompass Digital Media, Inc., 6.200%, Due 6/6/2021, 1st Lien Term Loan, (3 mo. LIBOR + 4.500%)       3,136,906           3,042,799
G-III Apparel Group, Ltd., 7.313%, Due 12/1/2022, Term Loan B, (PRIME + 4.250%)       1,304,571           1,315,178
Genoa, a QoL Healthcare Company, LLC, 4.898%, Due 10/28/2023, 2017 1st Lien Term Loan, (1 mo. LIBOR + 3.250%)       333,788           335,667
Give & Go Prepared Foods Corp., 6.193%, Due 7/29/2023, 2017 1st Lien Add-On Term Loan, (3 mo. LIBOR + 4.250%)       6,200,460           6,215,961
Global Eagle Entertainment, Inc., 9.358%, Due 1/6/2023, 1st Lien Term Loan, (6 mo. LIBOR + 7.500%)D           10,555,292           10,608,069
Greektown Holdings, LLC, 4.648%, Due 3/21/2024, 2017 Term Loan B, (1 mo. LIBOR + 3.000%)       1,648,256           1,645,174
HLF Financing S.a r.l., 7.148%, Due 2/15/2023, Term Loan B, (1 mo. LIBOR + 5.500%)       10,606,250           10,665,963
Horizon Global Corporation,            

Due 2/6/2024, 2018 Term Loan BD

       1,297,000           1,293,757

6.148%, Due 6/30/2021, 2017 Term Loan B, (1 mo. LIBOR + 4.500%)

       61,560           61,406
Intrawest Resorts Holdings, Inc., 4.898%, Due 7/31/2024, Term Loan B1, (1 mo. LIBOR + 3.250%)D       10,466,000           10,498,759
Laureate Education, Inc., 5.148%, Due 4/26/2024, 2017 Term Loan B, (1 mo. LIBOR + 3.500%)       6,470,358           6,505,751
Leslie’s Poolmart, Inc., 5.277%, Due 8/16/2023, 2016 Term Loan, (2 mo. LIBOR + 3.500%)D       9,803,508           9,813,998
Mohegan Tribal Gaming Authority, 5.648%, Due 10/13/2023, 2016 Term Loan B, (PRIME + 3.000%)       2,791,073           2,810,499
NBG Acquisition, Inc., 7.193%, Due 4/26/2024, Term Loan, (3 mo. LIBOR + 5.500%)       1,379,325           1,389,670
NPC International, Inc., 5.154%, Due 4/19/2024, 1st Lien Term Loan, (2 mo. LIBOR + 3.500%)       6,938,135           6,995,930
P.F. Chang’s China Bistro Inc., 6.509%, Due 8/18/2022, 2017 Term Loan B, (6 mo. LIBOR + 5.000%)       2,745,120           2,700,512
Paradigm Acquisition Corp.,            

10.024%, Due 9/29/2025, 2nd Lien Term Loan, (3 mo. LIBOR + 8.500%)

       1,807,000           1,802,482

5.943%, Due 10/11/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)

       7,083,000           7,153,830
ProQuest LLC, 5.398%, Due 10/24/2021, New Term Loan B, (1 mo. LIBOR + 3.750%)       5,183,526           5,246,713
PT Intermediate Holdings III, LLC, 5.654%, Due 12/7/2024, 1st Lien Term Loan B, (3 mo. LIBOR + 4.000%)       5,045,000           5,095,450
Q Holding Company, 6.693%, Due 12/16/2021, Term Loan B, (3 mo. LIBOR + 5.000%)       6,217,204           6,283,293

 

See accompanying notes

 

15

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Consumer - 15.31% (continued)            
Quincy Newspapers, Inc., 4.924%, Due 10/13/2022, Term Loan B, (PRIME + 2.250%)     $ 205,644         $ 206,672
Raley’s, 6.898%, Due 5/18/2022, Term Loan, (1 mo. LIBOR + 5.250%)       817,048           824,197
Recess Holdings, Inc.,            

3.750%, Due 9/29/2024, 2017 Delayed Draw Term LoanD E

       239,405           240,753

5.254%, Due 9/29/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.750%)

       1,767,166           1,777,115

9.254%, Due 9/29/2025, 2017 2nd Lien Term Loan, (6 mo. LIBOR + 7.750%)

       3,227,000           3,178,595
Revlon Consumer Products Corporation, 5.148%, Due 9/7/2023, 2016 Term Loan B, (1 mo. LIBOR + 3.500%)       356,000           286,135
Shutterfly, Inc.,            

Due 8/17/2024, Term Loan B2D

       1,098,000           1,102,809

4.100%, Due 8/17/2024, Delayed Draw Term Loan B

       681,000           679,298
Staples, Inc., 5.787%, Due 9/12/2024, 2017 Term Loan B, (3 mo. LIBOR + 4.000%)           10,177,493           10,107,573
Stratose Intermediate Holdings II, LLC, 4.898%, Due 6/22/2023, 1st Lien Term Loan, (1 mo. LIBOR + 3.250%)       2,871,079           2,885,434
Tacala, LLC, 4.825%, Due 1/31/2025, 1st Lien Term Loan, (3 mo. LIBOR + 3.250%)D       664,000           667,320
TGP Holdings III LLC,            

6.693%, Due 9/25/2024, 1st Lien Term Loan, (3 mo. LIBOR + 5.000%)

       6,842,782           6,906,968

Due 9/25/2024, Delayed Draw Term LoanD E

       1,076,068           1,086,161

10.193%, Due 9/25/2025, 2nd Lien Term Loan, (3 mo. LIBOR + 8.500%)

       1,554,000           1,569,540
TouchTunes Interactive Networks, Inc.,            

6.398%, Due 5/29/2021, 1st Lien Term Loan, (1 mo. LIBOR + 4.750%)J

       890,656           893,996

6.398%, Due 5/28/2021, Incremental Term Loan, (1 mo. LIBOR + 4.750%)

       1,488,550           1,494,132
USS Ultimate Holdings, Inc., 5.398%, Due 8/25/2024, 1st Lien Term Loan, (1 mo. LIBOR + 3.750%)       3,318,683           3,347,721
           

 

 

  
              210,698,755
           

 

 

  
           
Defense - 0.73%            
Garda World Security Corporation, 7.000%, Due 5/24/2024, 2017 Term Loan, (PRIME + 2.500%)       4,239,088           4,275,290
MB Aerospace Holdings Inc., 5.080%, Due 1/22/2025, 2017 Term Loan, (3 mo. LIBOR + 3.500%)       4,524,000           4,569,240
Michael Baker International, LLC, 6.094%, Due 11/15/2022, 2017 Term Loan B, (1 mo. LIBOR + 4.500%)       1,156,000           1,156,000
           

 

 

  
              10,000,530
           

 

 

  
           
Energy - 3.27%            
BCP Renaissance Parent LLC, 5.772%, Due 10/31/2024, 2017 Term Loan B, (3 mo. LIBOR + 4.000%)       2,680,000           2,702,110
California Resources Corp., 6.340%, Due 12/31/2022, 2017 1st Lien Term Loan       6,507,000           6,580,204
Lucid Energy Group II LLC, 4.588%, Due 2/17/2025, 2018 1st Lien Term Loan, (1 mo. LIBOR + 3.000%)       2,527,000           2,528,592
Navios Maritime Midstream Partners L.P., 6.130%, Due 6/18/2020, Term Loan B, (3 mo. LIBOR + 4.500%)       74,100           73,915
PowerTeam Services, LLC, Due 2/27/2025, 2018 1st Lien Term LoanD       5,564,000           5,550,090
Seadrill Partners Finco LLC, 7.693%, Due 2/21/2021, Term Loan B, (3 mo. LIBOR + 6.000%)D       12,497,216           10,816,340
Southcross Energy Partners, L.P., 5.943%, Due 8/4/2021, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)       7,536,354           7,440,265
Traverse Midstream Partners LLC, 5.850%, Due 9/27/2024, 2017 Term Loan, (6 mo. LIBOR + 4.000%)       804,000           809,363
Vine Oil & Gas LP, 8.523%, Due 12/12/2021, Term Loan B, (1 mo. LIBOR + 6.875%)       8,504,000           8,504,000
           

 

 

  
              45,004,879
           

 

 

  
           
Financial - 7.69%            
AmeriLife Group, LLC,            

10.346%, Due 1/10/2023, 2nd Lien Term Loan, (1 mo. LIBOR + 8.750%)

       203,000           198,940

6.398%, Due 6/18/2022, 1st Lien Term Loan, (1 mo. LIBOR + 4.750%)

       1,463,126           1,463,126
Asurion LLC, Due 11/3/2023, 2017 Term Loan B5D       1,140,256           1,145,957
Blucora, Inc., 4.693%, Due 5/22/2024, 2017 Term Loan B, (3 mo. LIBOR + 3.000%)       2,051,600           2,061,858
Citco Funding LLC, 4.648%, Due 3/31/2022, 2017 Term Loan, (1 mo. LIBOR + 3.000%)       6,513,991           6,562,846
Confie Seguros Holding II Co.,            

11.484%, Due 5/8/2019, 2nd Lien Term Loan, (3 mo. LIBOR + 9.500%)

       3,456,000           3,349,452

7.233%, Due 4/19/2022, 2016 Term Loan B, (1 mo. LIBOR + 5.250%)

       9,962,884           9,962,884

 

See accompanying notes

 

16

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Financial - 7.69% (continued)            
Empire Generating Co, LLC,            

6.030%, Due 3/14/2021, Term Loan B, (3 mo. LIBOR + 4.250%)D

     $ 3,487,684         $ 2,886,058

6.030%, Due 3/14/2021, Term Loan C, (3 mo. LIBOR + 4.250%)D

       344,814           284,472
FeeCo Holdings LP,            

Due 1/30/2025, 2018 1st Lien Term LoanD

       10,963,300           10,990,708

Due 1/30/2026, 2018 2nd Lien Term LoanD

       5,912,000           5,882,440
First Eagle Holdings, Inc., 4.693%, Due 12/1/2022, 2017 1st Lien Term Loan B, (3 mo. LIBOR + 3.000%)       1,511,565           1,524,413
Freedom Mortgage Corporation, 7.103%, Due 2/23/2022, 1st Lien Term Loan, (1 mo. LIBOR + 5.500%)       5,887,500           5,939,016
Genworth Financial, Inc., Due 2/22/2023, Term LoanD       3,284,000           3,267,580
GreenSky Holdings, LLC, 5.688%, Due 8/26/2024, Term Loan, (1 mo. LIBOR + 4.000%)       743,138           744,995
Higginbotham & Associates, LLC, 5.340%, Due 12/19/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 3.750%)       6,327,000           6,327,000
Hyperion Insurance Group Ltd., 5.188%, Due 12/20/2024, 2017 Repriced Term Loan, (1 mo. LIBOR + 3.500%)D           12,183,000           12,286,556
Jane Street Group LLC, Due 8/25/2022, 2017 Term Loan B D       8,349,313           8,383,211
Kestra Financial, Inc., 6.943%, Due 6/15/2022, Term Loan, (3 mo. LIBOR + 5.250%)       2,956,000           2,926,440
Lightstone Generation LLC,            

5.398%, Due 1/30/2024, 2018 Term Loan C, (1 mo. LIBOR + 3.750%)

       338,682           340,565

5.398%, Due 1/30/2024, 2018 Term Loan B, (1 mo. LIBOR + 3.750%)

       5,333,818           5,363,474
Liquidnet Holdings, Inc., 5.398%, Due 7/15/2024, 2017 Term Loan, (1 mo. LIBOR + 3.750%)       628,875           630,447
NXT Capital, Inc., 5.150%, Due 11/22/2022, 2016 Term Loan, (1 mo. LIBOR + 3.500%)       2,640,330           2,679,935
St. Georges University, 5.400%, Due 7/6/2022, 2016 Term Loan B, (1 mo. LIBOR + 3.750%)       523,772           527,045
Tortoise Investments, LLC, 5.654%, Due 11/20/2024, 2017 Term Loan, (3 mo. LIBOR + 4.000%)       656,000           664,200
VICI Properties LLC, 3.596%, Due 12/20/2024, Replacement Term Loan B, (1 mo. LIBOR + 2.000%)       2,436,000           2,447,425
Vistra Group Limited, Due 10/26/2022, USD 1st Lien Term LoanD       5,000,000           4,998,450
Walter Investment Management Corp., Due 6/30/2022, 2013 Term LoanD       2,074,000           2,047,204
           

 

 

  
              105,886,697
           

 

 

  
           
Health Care - 4.72%            
21st Century Oncology Holdings, Inc., 7.855%, Due 1/16/2023, Exit Term Loan, (3 mo. LIBOR + 6.125%)       2,592,659           2,500,309
Avantor, Inc., 5.648%, Due 11/21/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.000%)       15,333,000           15,479,890
Carestream Dental Equiment, Inc, 4.943%, Due 9/1/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.250%)       2,060,835           2,062,133
CCS Intermediate Holdings, LLC, Due 7/22/2021, 1st Lien Term LoanD       1,700,000           1,589,500
Curo Health Services Holdings, Inc., 5.810%, Due 2/7/2022, 2015 1st Lien Term Loan, (3 mo. LIBOR + 4.000%)D       5,974,578           5,954,025
Davis Vision, Inc., 4.490%, Due 12/2/2024, 1st Lien Term Loan B, (3 mo. LIBOR + 3.000%)       5,629,000           5,600,855
Equian LLC, 5.154%, Due 5/20/2024, Add on Term Loan B, (3 mo. LIBOR + 3.250%)       1,990,000           1,998,716
Heartland Dental, LLC,            

6.450%, Due 7/13/2023, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.750%)

       8,532,615           8,681,936

10.150%, Due 7/26/2024, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.500%)D

       4,975,000           5,049,625
Indivior Finance S.a.r.l., 6.110%, Due 12/18/2022, USD 2017 Term Loan B, (3 mo. LIBOR + 4.500%)       6,000,000           6,060,000
Innoviva, Inc., 6.373%, Due 8/11/2022, 2017 Term Loan B, (3 mo. LIBOR + 4.500%)       3,217,500           3,253,697
Matrix Medical Network of Arizona, LLC, Due 2/7/2025, 2018 Term Loan BD       4,000,000           4,035,000
MDVIP, Inc., 5.838%, Due 11/8/2024, 2017 Term Loan, (1 mo. LIBOR + 4.250%)       2,301,000           2,301,000
YI, LLC,            

5.693%, Due 11/7/2024, 2017 1st Lien Term Loan, (1 Week LIBOR + 4.000%)

       317,600           318,394

2.047%, Due 11/7/2024, 2017 1st Lien Delayed Draw Term LoanD E

       79,400           79,599
           

 

 

  
              64,964,679
           

 

 

  
           
Manufacturing - 19.71%            
Advanced Integration Technology LP, 6.724%, Due 3/21/2023, 2017 Term Loan B, (1 mo. LIBOR + 4.750%)           5,284,512           5,310,934
American Bath Group LLC, 6.943%, Due 9/30/2023, 2017 Term Loan B, (3 mo. LIBOR + 5.250%)       4,899,552           4,946,489
American Bath Group, LLC, 11.443%, Due 9/27/2024, 2016 2nd Lien Term Loan, (3 mo. LIBOR + 9.750%)       537,000           537,000

 

See accompanying notes

 

17

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Manufacturing - 19.71% (continued)            
American Traffic Solutions, Inc.,            

Due 2/23/2025, 2018 1st Lien Term LoanD

     $     7,250,000         $ 7,286,250

8.000%, Due 5/24/2024, 1st Lien Term Loan, (PRIME + 3.500%)

       2,534,265           2,546,936
AP Exhaust Acquisition, LLC, 6.811%, Due 5/10/2024, 1st Lien Term Loan, (3 mo. LIBOR + 5.000%)       594,508           592,278
Aptean, Inc., 11.200%, Due 12/14/2023, 2016 2nd Lien Term Loan, (3 mo. LIBOR + 9.500%)       1,000,000           1,004,170
Ardent Legacy Acquisitions, Inc., 7.148%, Due 8/4/2021, 2015 Term Loan B, (1 mo. LIBOR + 5.500%)       481,250           481,852
ASG Technologies Group, Inc., 5.148%, Due 7/31/2024, 2018 Term Loan, (1 mo. LIBOR + 3.500%)       1,801,485           1,803,737
Associated Asphalt Partners, LLC, 6.898%, Due 4/5/2024, 2017 Term Loan B, (1 mo. LIBOR + 5.250%)       3,017,012           2,866,162
Big Ass Fans, LLC, 5.943%, Due 5/21/2024, Term Loan, (3 mo. LIBOR + 4.250%)       7,500,000           7,556,250
Blackboard, Inc., 6.734%, Due 6/30/2021, Term Loan B4, (3 mo. LIBOR + 5.000%)       8,970,177           8,684,297
Blount International Inc., 5.830%, Due 4/12/2023, USD 2017 Term Loan B, (1 mo. LIBOR + 4.250%)       6,000,000           6,082,500
Bright Bidco B.V., 5.186%, Due 6/30/2024, 2018 Term Loan B, (1 mo. LIBOR + 3.500%)       9,183,850           9,321,608
Chef’s Warehouse Leasing Co., LLC (The), 5.650%, Due 6/22/2022, 1st Lien Term Loan, (1 mo. LIBOR + 4.000%)       729,908           735,383
Commercial Vehicle Group, Inc., 7.648%, Due 4/12/2023, Term Loan B, (1 mo. LIBOR + 6.000%)       2,886,463           2,893,679
Constellis Holdings, LLC,            

6.693%, Due 4/21/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 5.000%)

       4,783,185           4,831,017

10.693%, Due 4/21/2025, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 9.000%)

       5,861,000           5,904,957
DAE Aviation Holdings, Inc., 5.400%, Due 7/7/2022, 1st Lien Term Loan, (1 mo. LIBOR + 3.750%)       955,556           963,325
DexKo Global Inc.,            

Due 7/24/2024, 2018 USD Incremental Term LoanD E

       3,000,000           3,030,000

5.245%, Due 7/24/2024, 2018 USD Term Loan, (2 mo. LIBOR + 3.500%)

       1,827,420           1,842,843
Duke Finance, LLC, 5.943%, Due 2/21/2024, 2017 Incremental Term Loan, (3 mo. LIBOR + 4.250%)       5,124,140           5,127,368
EaglePicher Technologies, LLC, Due 2/27/2026, 2nd Lien Term LoanD       2,397,000           2,391,008
Electrical Components International, Inc., 6.443%, Due 5/28/2021, 2014 Term Loan B, (3 mo. LIBOR + 4.750%)       6,997,094           7,040,826
Euramax International, Inc., 8.000%, Due 2/6/2021, Unsecured Term Loan, Cash (2.000%) or PIK (14.000%)       323,611           265,361
GlobalLogic Holdings Inc., 5.443%, Due 7/31/2023, 2018 Term Loan B, (2 mo. LIBOR + 3.750%)       5,955,000           5,984,775
Greenway Health, LLC, 5.940%, Due 2/14/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)       7,960,000           8,006,407
Hi-Crush Partners LP, 5.660%, Due 12/16/2024, 2017 Term Loan B, (3 mo. LIBOR + 4.000%)D       3,577,000           3,603,827
Information Resources, Inc., 6.194%, Due 1/18/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)       3,506,503           3,527,331
Innovative Xcessories & Services LLC, 6.210%, Due 11/29/2022, Term Loan B, (3 mo. LIBOR + 4.750%)       7,107,083           7,195,922
Interior Logic Group, Inc., 7.648%, Due 3/1/2024, 2017 Term Loan B, (1 mo. LIBOR + 6.000%)       7,700,000           7,719,250
Internap Corporation, 8.580%, Due 4/6/2022, 2017 Term Loan, (1 mo. LIBOR + 7.000%)       910,425           919,529
Janus International Group, LLC, Due 2/12/2025, 2018 1st Lien Term LoanD       1,040,000           1,037,400
Key Safety Systems, Inc., 6.280%, Due 8/29/2021, New 1st Lien Term Loan, (3 mo. LIBOR + 4.500%)       2,657,000           2,652,563
LANDesk Group, Inc.,            

10.650%, Due 1/20/2025, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 9.000%)

       2,828,000           2,714,880

5.900%, Due 1/20/2024, 2017 Term Loan B, (1 mo. LIBOR + 4.250%)

       1,489,372           1,462,504
Livingston International Inc.,            

9.943%, Due 4/18/2020, 2nd Lien Term Loan, (3 mo. LIBOR + 8.250%)

       750,000           712,500

7.443%, Due 3/20/2020, Term Loan B3, (3 mo. LIBOR + 5.750%)

       4,981,509           4,969,056
LTI Holdings, Inc.,            

Due 2/16/2024, 2018 Term LoanD

       937,000           940,514

6.398%, Due 5/16/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.750%)

       4,788,935           4,821,883
Mirion Technologies, Inc., 6.443%, Due 3/31/2022, Term Loan B, (3 mo. LIBOR + 4.750%)       814,542           810,983
Mitchell International, Inc.,            

4.943%, Due 11/29/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.250%)

       4,949,821           4,961,304

1.625%, Due 11/29/2024, 2017 Delayed Draw Term LoanD E

       399,179           400,105
Navios Maritime Partners L.P., 6.540%, Due 9/14/2020, 2017 Term Loan B, (3 mo. LIBOR + 5.000%)       2,165,626           2,173,747

 

See accompanying notes

 

18

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Manufacturing - 19.71% (continued)            
Netsmart Technologies, Inc.,            

11.148%, Due 10/5/2023, 2nd Lien Term Loan, (1 mo. LIBOR + 9.500%)

     $ 354,000         $ 354,000

6.193%, Due 4/19/2023, 2016 Term Loan C1, (3 mo. LIBOR + 4.500%)

       1,607,794           1,619,853
NN, Inc.,            

5.398%, Due 10/19/2022, 2016 Term Loan B, (1 mo. LIBOR + 3.750%)

           6,272,650           6,319,695

4.898%, Due 3/22/2021, 2017 Term Loan, (1 mo. LIBOR + 3.250%)

       1,369,640           1,375,639
Novetta Solutions, LLC, 6.700%, Due 10/16/2022, 2015 Term Loan, (3 mo. LIBOR + 5.000%)       429,724           414,550
Oxbow Carbon LLC, 5.398%, Due 1/4/2023, 2017 1st Lien Term Loan B, (1 mo. LIBOR + 3.750%)       1,789,000           1,806,890
PAE Holding Corporation, 7.148%, Due 10/20/2022, 1st Lien Term Loan, (1 mo. LIBOR + 5.500%)       5,868,451           5,892,922
PGT, Inc., 6.398%, Due 2/16/2022, 2016 Term Loan, (1 mo. LIBOR + 4.750%)J       2,290,694           2,310,737
PLZ Aeroscience Corporation, 5.169%, Due 7/31/2022, USD Term Loan, (3 mo. LIBOR + 3.500%)       4,296,966           4,327,861
Polycom, Inc., 6.874%, Due 9/27/2023, 1st Lien Term Loan, (1 mo. LIBOR + 5.250%)       3,077,702           3,088,597
Power Products, LLC, 5.745%, Due 12/20/2022, 2017 Term Loan B, (3 mo. LIBOR + 4.000%)       2,472,782           2,509,874
Pro Mach Group, Inc., Due 2/26/2025, 2018 Term Loan BD       1,920,000           1,924,800
Q Technologies Inc., 10.148%, Due 4/5/2023, Term Loan B, (1 mo. LIBOR + 8.500%)J       4,069,488           4,018,619
Ramundsen Holdings, LLC, 5.943%, Due 2/1/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)       1,551,278           1,562,912
SIRVA Worldwide, Inc., 8.162%, Due 11/14/2022, 2016 Term Loan, (3 mo. LIBOR + 6.500%)       1,918,333           1,927,925
SiteOne Landscape Supply, Inc., 4.400%, Due 4/29/2022, 2017 1st Lien Term Loan, (1 mo. LIBOR + 2.750%)       361,601           363,185
SolarWinds Holdings, Inc., 5.148%, Due 2/5/2023, 2017 Term Loan, (1 mo. LIBOR + 3.500%)       5,887,102           5,901,819
Spectrum Plastics Group, Inc.,            

4.898%, Due 1/31/2025, 1st Lien Term Loan, (1 mo. LIBOR + 3.250%)

       1,496,950           1,498,821

Due 1/31/2025, Delayed Draw Term LoanE D

       148,050           148,235
Springer Science+Business Media Deutschland GmbH, 5.148%, Due 8/15/2022, USD Term Loan B13, (1 mo. LIBOR + 3.500%)       975,233           978,481
Stratus Technologies, Inc., 6.600%, Due 4/28/2021, 1st Lien Term Loan, (3 mo. LIBOR + 5.000%)       2,681,345           2,681,345
TigerLuxOne S.a.r.l., 6.443%, Due 2/16/2024, 1st Lien Term Loan B, (3 mo. LIBOR + 4.750%)       3,349,688           3,347,175
Transplace Holdings, Inc., 5.829%, Due 10/7/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.250%)       6,961,000           7,026,294
TRC Companies, Inc., 5.148%, Due 6/21/2024, Term Loan, (1 mo. LIBOR + 3.500%)       4,821,915           4,833,970
Trico Group LLC, 8.484%, Due 1/26/2025, 2018 Term Loan, (PRIME + 5.500%)       1,446,000           1,444,193
TurboCombustor Technology, Inc, 6.193%, Due 12/2/2020, New Term Loan B, (3 mo. LIBOR + 4.500%)       7,520,314           7,341,707
Verisk Analytics, Inc., 6.700%, Due 6/1/2023, 1st Lien Term Loan, (3 mo. LIBOR + 5.000%)       775,195           781,009
VIP Cinema Holdings, Inc., 7.700%, Due 3/1/2023, USD Term Loan B, (3 mo. LIBOR + 6.000%)       4,100,250           4,123,334
WD Wolverine Holdings, LLC, 7.148%, Due 8/16/2022, 1st Lien Term Loan, (1 mo. LIBOR + 5.500%)       3,925,000           3,826,875
Werner FinCo LP, 5.648%, Due 7/24/2024, 2017 Term Loan, (1 mo. LIBOR + 4.000%)D       9,425,390           9,519,644
West Corporation, 5.648%, Due 10/10/2024, 2017 Term Loan, (1 mo. LIBOR + 4.000%)D       6,925,000           6,981,716
Winnebago Industries, Inc., 5.042%, Due 11/8/2023, 2017 Term Loan, (3 mo. LIBOR + 3.500%)       4,260,533           4,313,790
WP CPP Holdings, LLC, 5.272%, Due 12/28/2019, Term Loan B3, (1 mo. LIBOR + 3.500%)       8,117,052           8,101,873
           

 

 

  
              271,329,050
           

 

 

  
           
Media - 0.78%            
Meredith Corp., 4.658%, Due 1/31/2025, Term Loan B, (3 mo. LIBOR + 3.000%)D       10,733,000           10,791,710
           

 

 

  
           
Service - 18.18%            
ABB Concise Optical Group LLC, 6.580%, Due 6/15/2023, 2016 Term Loan B, (3 mo. LIBOR + 5.000%)       243,690           244,299
Air Medical Group Holdings, Inc., Due 9/7/2024, 2017 Term Loan B2D       9,815,000           9,915,604
Amaya Holdings B.V., 5.193%, Due 8/1/2021, Repriced Term Loan B, (3 mo. LIBOR + 3.500%)       2,212,864           2,226,916
Aricent Technologies,            

10.088%, Due 4/14/2022, 2nd Lien Term Loan, (1 mo. LIBOR + 8.500%)

       6,618,000           6,657,311

6.088%, Due 4/14/2021, 1st Lien Term Loan, (1 mo. LIBOR + 4.500%)

       10,180,898           10,203,194
Aristocrat Leisure Limited, 3.744%, Due 10/19/2024, 2017 Incremental Term Loan, (3 mo. LIBOR + 2.000%)       2,658,000           2,668,924
ASP MCS Acquisition Corp., 6.398%, Due 5/18/2024, Term Loan B, (1 mo. LIBOR + 4.750%)       2,830,775           2,855,544
BCPE Eagle Buyer LLC, 5.981%, Due 3/18/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.250%)       7,393,920           7,319,981
Boing US Holdco Inc., 9.287%, Due 10/3/2025, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 7.500%)       4,259,000           4,259,000

 

See accompanying notes

 

19

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Service - 18.18% (continued)            
Brand Energy & Infrastructure Services, Inc., 5.996%, Due 6/21/2024, 2017 Term Loan, (3 mo. LIBOR + 4.250%)D     $     12,296,335         $ 12,382,163
Casablanca US Holdings, Inc., 10.772%, Due 3/15/2025, 2nd Lien Term Loan, (3 mo. LIBOR + 9.000%)       3,000,000           3,037,500
CDS U.S. Intermediate Holdings, Inc.,            

9.943%, Due 7/10/2023, 2nd Lien Term Loan, (3 mo. LIBOR + 8.250%)

       2,639,796           2,624,960

5.443%, Due 7/8/2022, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.750%)

       9,736,150           9,709,376
Cengage Learning Acquisitions, Inc., 5.838%, Due 6/7/2023, 2016 Term Loan B, (1 mo. LIBOR + 4.250%)D       5,223,000           4,793,565
CH Hold Corp., 4.648%, Due 2/1/2024, 1st Lien Term Loan, (1 mo. LIBOR + 3.000%)       7,101,624           7,137,132
ConvergeOne Holdings Corporation, 6.450%, Due 6/20/2024, 2017 Term Loan B, (3 mo. LIBOR + 4.750%)       506,455           507,721
Cvent, Inc., 5.324%, Due 11/29/2023, 1st Lien Term Loan, (1 mo. LIBOR + 3.750%)       6,012,000           6,054,565
DTI Holdco, Inc., 7.022%, Due 9/30/2023, 2016 Term Loan B, (2 mo. LIBOR + 5.250%)       4,673,199           4,705,350
EVO Payments International LLC, 5.640%, Due 12/22/2023, 1st Lien Term Loan, (1 mo. LIBOR + 4.000%)       4,962,500           5,014,209
Extreme Reach, Inc.,            

11.626%, Due 1/24/2021, 2nd Lien Term Loan, (3 mo. LIBOR + 10.000%)

       217,000           204,614

7.950%, Due 2/7/2020, 1st Lien Term Loan, (3 mo. LIBOR + 6.250%)

       413,334           414,884
FHC Health Systems, Inc., 5.648%, Due 12/23/2021, 2014 Term Loan, (1 mo. LIBOR + 4.000%)       161,481           160,471
I-Logic Technologies Bidco Limited, 5.642%, Due 12/23/2024, USD Term Loan B, (3 mo. LIBOR + 4.000%)       3,836,000           3,855,180
IG Investment Holdings LLC, 5.193%, Due 10/29/2021, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.500%)       2,185,432           2,208,204
Imagine! Print Solutions, Inc.,            

10.450%, Due 6/21/2023, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.750%)

       1,019,000           937,480

6.450%, Due 6/21/2022, 2017 Term Loan, (3 mo. LIBOR + 4.750%)

       5,519,367           5,215,802
Jackson Hewitt Inc., 8.772%, Due 7/24/2020, Term Loan B, (3 mo. LIBOR + 7.000%)       135,148           133,375
Keystone Acquisition Corp., 6.943%, Due 5/1/2024, 1st Lien Term Loan, (3 mo. LIBOR + 5.250%)       3,406,463           3,414,979
Kingpin Intermediate Holdings LLC,            

5.730%, Due 6/28/2024, 2017 1st Lien Term Loan B, (3 mo. LIBOR + 4.250%)

       5,646,637           5,738,395

10.230%, Due 6/28/2025, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.750%)

       1,733,000           1,763,327
KUEHG Corp., 9.943%, Due 8/18/2025, 2017 2nd Lien Term Loan, (1 Week LIBOR + 8.250%)       2,776,000           2,803,760
Lions Gate Entertainment Corp., 3.898%, Due 12/8/2023, 2017 Term Loan B, (1 mo. LIBOR + 2.250%)       2,030,760           2,041,767
LSC Communications, Inc., 7.148%, Due 9/30/2022, 2017 Term Loan B, (1 mo. LIBOR + 5.500%)       1,451,800           1,459,059
LSF9 Atlantis Holdings, LLC, 7.575%, Due 5/1/2023, 2017 Term Loan, (1 mo. LIBOR + 6.000%)       2,082,638           2,077,952
McGraw-Hill Global Education Holdings, LLC, 5.648%, Due 5/4/2022, 2016 Term Loan B, (1 mo. LIBOR + 4.000%)       1,706,912           1,679,174
Mister Car Wash Holdings, Inc., 4.904%, Due 8/20/2021, Term Loan B, (2 mo. LIBOR + 3.250%)       634,914           638,489
NEP/NCP Holdco, Inc., 4.898%, Due 7/21/2022, Incremental Term Loan, (1 mo. LIBOR + 3.250%)       2,716,350           2,723,141
New Millennium HoldCo, Inc., 8.148%, Due 12/21/2020, Exit Term Loan, (1 mo. LIBOR + 6.500%)       990,800           336,872
nThrive, Inc., 6.148%, Due 10/20/2022, 2016 1st Lien Term Loan, (1 mo. LIBOR + 4.500%)       2,051,780           2,055,206
Pearl Intermediate Parent LLC,            

4.340%, Due 2/14/2025, 2018 1st Lien Term Loan, (3 mo. LIBOR + 2.750%)D

       1,803,545           1,787,764

Due 2/14/2025, 2018 Delayed Draw Term LoanD E

       530,455           525,813
Playpower, Inc., 6.443%, Due 6/23/2021, 2015 1st Lien Term Loan, (3 mo. LIBOR + 4.750%)       683,148           683,148
Polyconcept Investments B.V., 6.398%, Due 8/16/2023, USD 2016 Term Loan B, (1 mo. LIBOR + 4.750%)       2,750,090           2,763,841
PSAV Holdings LLC,            

Due 2/21/2025, 2018 1st Lien Term LoanD

       2,437,000           2,443,092

Due 8/22/2025, 2018 2nd Lien Term LoanD

       4,364,000           4,374,910
PSC Industrial Holdings Corp.,            

10.088%, Due 10/3/2025, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.500%)

       3,025,000           2,968,281

5.838%, Due 10/3/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.250%)

       8,057,000           8,122,503
Quorum Health Corporation, 8.398%, Due 4/29/2022, Term Loan B, (1 mo. LIBOR + 6.750%)       1,892,008           1,929,848
Red Ventures LLC, 5.648%, Due 11/8/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.000%)D       10,357,055           10,417,437
SAI Global Limited, 6.193%, Due 11/18/2023, USD 1st Lien Term Loan, (3 mo. LIBOR + 4.500%)       990,000           985,050
STG-Fairway Acquisitions, Inc., 6.943%, Due 6/30/2022, 2015 1st Lien Term Loan, (3 mo. LIBOR + 5.250%)       8,370,000           8,328,150
SurveyMonkey Inc., 6.200%, Due 4/13/2024, 2017 Term Loan, (3 mo. LIBOR + 4.500%)       4,802,896           4,802,896

 

See accompanying notes

 

20

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Service - 18.18% (continued)            
TEN-X, LLC, 5.648%, Due 9/27/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.000%)     $ 7,502,000         $ 7,469,216
TKC Holdings, Inc.,            

6.030%, Due 2/1/2023, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)D

           12,156,510           12,285,734

9.780%, Due 2/1/2024, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.000%)D

       4,588,000           4,615,528
Travel Leaders Group, LLC, 6.350%, Due 1/25/2024, New 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.500%)       2,263,921           2,289,390
Tweddle Group, Inc., 7.772%, Due 10/24/2022, 2016 Term Loan, (3 mo. LIBOR + 6.000%)       1,163,750           1,152,113
TwentyEighty, Inc.,            

4.500%, Due 3/31/2020, PIK (8.750%) Term Loan C, (3 mo. LIBOR + 0.250%)

       41,740           38,819

4.000%, Due 3/31/2020, PIK (7.000%) Term Loan B, (3 mo. LIBOR + 4.000%)

       43,317           40,284
UFC Holdings, LLC, 4.900%, Due 8/18/2023, 1st Lien Term Loan, (1 mo. LIBOR + 3.250%)       3,336,837           3,351,953
Utility One Source L.P., 7.148%, Due 4/18/2023, Term Loan B, (1 mo. LIBOR + 5.500%)D       5,331,878           5,478,505
Vestcom Parent Holdings, Inc., 5.648%, Due 12/19/2023, 2016 1st Lien Term Loan, (PRIME + 3.000%)       4,950,000           4,974,750
William Morris Endeavor Entertainment, LLC, 4.900%, Due 5/6/2021, 1st Lien Term Loan       2,475,000           2,490,469
World Triathlon Corp., 5.943%, Due 6/26/2021, Term Loan, (3 mo. LIBOR + 4.250%)       2,961,637           2,961,637
WP CityMD Bidco LLC, 5.693%, Due 6/7/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.000%)       3,721,673           3,730,977
Xplornet Communications, Inc., 6.443%, Due 9/9/2021, Term Loan B, (3 mo. LIBOR + 4.750%)       7,094,073           7,120,676
           

 

 

  
              250,312,229
           

 

 

  
           
Technology - 8.89%            
Access CIG, LLC,            

Due 2/14/2025, 2018 1st Lien Term LoanD

       3,699,856           3,725,311

Due 2/14/2025, 2018 Delayed Draw Term LoanD E

       772,144           777,456
Answers Finance LLC, 6.648%, Due 4/15/2021, 1st Lien Exit Term Loan, (1 mo. LIBOR + 5.000%)       15,048           14,521
AP Gaming I, LLC, 5.898%, Due 2/15/2024, 2018 1st Lien Term Loan, (1 Week LIBOR + 4.250%)       1,089,525           1,099,745
Aptean, Inc., 5.950%, Due 12/20/2022, 2017 1st Lien Term Loan, (3 mo. LIBOR + 4.250%)       693,758           696,935
AqGen Ascensus, Inc.,            

4.280%, Due 12/5/2022, 2017 1st Lien Delayed Draw Term LoanD E

       2,599,000           2,618,493

5.154%, Due 12/5/2022, 2017 Repriced Term Loan, (2 mo. LIBOR + 3.500%)

       1,369,707           1,381,692
Barracuda Networks, Inc., 5.061%, Due 2/12/2025, 1st Lien Term Loan, (3 mo. LIBOR + 3.250%)       3,026,000           3,040,495
Cast and Crew Payroll, LLC, 4.700%, Due 9/27/2024, 2017 1st Lien Term Loan B, (3 mo. LIBOR + 3.000%)       3,378,533           3,398,601
Compuware Corp., 5.150%, Due 12/15/2021, Term Loan B3, (2 mo. LIBOR + 3.500%)       5,756,896           5,826,439
Convergint Technologies LLC,            

4.658%, Due 2/3/2025, 2018 1st Lien Term Loan, (3 mo. LIBOR + 3.000%)

       3,949,806           3,942,420

Due 2/3/2025, 2018 Delayed Draw Term LoanD E

       423,194           422,402
DigiCert, Inc.,            

6.522%, Due 10/31/2024, 2017 Term Loan B1, (3 mo. LIBOR + 4.750%)

       6,010,000           6,073,886

9.772%, Due 10/31/2025, 2017 2nd Lien Term Loan, (3 mo. LIBOR + 8.000%)

       7,437,734           7,512,111
EIG Investors Corp., 5.955%, Due 2/9/2023, 2017 Term Loan, (3 mo. LIBOR + 4.000%)       4,740,100           4,765,507
LegalZoom.com, Inc., 6.094%, Due 11/21/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.500%)       3,176,000           3,191,880
Lighthouse Network, LLC,            

6.148%, Due 11/20/2024, 1st Lien Term Loan, (1 mo. LIBOR + 4.500%)

       2,313,000           2,334,696

10.148%, Due 11/20/2025, 2nd Lien Term Loan, (1 mo. LIBOR + 8.500%)

       1,908,000           1,900,845
McAfee, LLC,            

6.148%, Due 9/30/2024, 2017 USD Term Loan B, (1 mo. LIBOR + 4.500%)

       13,296,638           13,358,334

10.148%, Due 9/29/2025, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.500%)

       8,032,000           8,052,080
Navicure, Inc., 5.330%, Due 11/1/2024, 1st Lien Term Loan B, (1 mo. LIBOR + 3.750%)       6,038,000           6,060,642
OEConnection LLC, 5.693%, Due 11/22/2024, 1st Lien Term Loan, (3 mo. LIBOR + 4.000%)       2,344,000           2,344,000
Ping Identity Corporation, Due 1/22/2025, 2018 Term Loan BD       5,000,000           5,018,750
Priority Payment Systems LLC, 6.650%, Due 1/3/2023, Term Loan, (1 mo. LIBOR + 5.000%)       845,000           853,450
Project Ruby Ultimate Parent Corp., 5.148%, Due 2/9/2024, 2017 Term Loan B, (1 mo. LIBOR + 3.500%)       6,969,026           7,021,294
Riverbed Technology, Inc., 4.900%, Due 4/24/2022, 2016 Term Loan, (3 mo. LIBOR + 3.250%)       7,220,000           7,108,668
SciQuest, Inc., 5.648%, Due 12/28/2024, 2017 Term Loan, (1 mo. LIBOR + 4.000%)       4,553,000           4,541,618
SS&C Technologies Holdings Europe S.A.R.L., Due 2/28/2025, 2018 Term Loan B4D       1,654,125           1,649,990
SS&C Technologies Inc., Due 2/28/2025, 2018 Term Loan B3D       4,636,875           4,625,278
Syncsort Incorporated, 6.693%, Due 8/9/2024, 2017 Term Loan B, (3 mo. LIBOR + 5.000%)       6,700,208           6,702,285
Weld North Education, LLC, 6.090%, Due 2/7/2025, Term Loan B, (3 mo. LIBOR + 4.250%)       1,323,000           1,327,961
Xperi Corporation, 4.148%, Due 12/1/2023, 2018 Term Loan B1, (1 mo. LIBOR + 2.500%)       957,515           961,508
           

 

 

  
              122,349,293
           

 

 

  
           

 

See accompanying notes

 

21

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount       Fair Value
           
BANK LOAN OBLIGATIONS - 93.24% (continued)            
Telecommunications - 6.16%            
CenturyLink, Inc., 4.398%, Due 1/31/2025, 2017 Term Loan B, (1 mo. LIBOR + 2.750%)     $ 5,185,000         $ 5,092,966
Charter Communications Operating, LLC, 3.650%, Due 4/30/2025, 2017 Term Loan B, (1 mo. LIBOR + 2.000%)       4,555,000           4,563,563
Colorado Buyer Inc, 4.780%, Due 5/1/2024, Term Loan B, (3 mo. LIBOR + 3.000%)       3,702,395           3,720,240
Global Tel*Link Corporation,            

5.693%, Due 5/23/2020, 1st Lien Term Loan, (3 mo. LIBOR + 4.000%)D

           10,897,592           10,941,837

9.943%, Due 11/23/2020, 2nd Lien Term Loan, (3 mo. LIBOR + 8.250%)

       1,288,000           1,286,390
Intelsat Jackson Holdings S.A.,            

5.706%, Due 11/27/2023, 2017 Term Loan B3, (3 mo. LIBOR + 3.750%)

       12,598,000           12,501,247

6.456%, Due 1/14/2024, 2017 Term Loan B4, (3 mo. LIBOR + 4.500%)

       771,000           785,040

6.625%, Due 1/14/2024, 2017 Term Loan B5F

       514,000           515,527
Merrill Communications LLC, 7.022%, Due 6/1/2022, 2015 Term Loan, (3 mo. LIBOR + 5.250%)       38,500           38,548
NeuStar, Inc., 5.422%, Due 8/8/2024, Term Loan B2, (2 mo. LIBOR + 3.750%)       4,987,500           4,989,595
Securus Technologies Holdings, Inc.,            

9.898%, Due 11/1/2025, 2017 2nd Lien Term Loan, (1 mo. LIBOR + 8.250%)

       3,426,000           3,467,112

6.148%, Due 11/1/2024, 2017 1st Lien Term Loan, (1 mo. LIBOR + 4.500%)D

       12,379,000           12,510,589
Sinclair Television Group Inc., Due 12/12/2024, 2017 Term Loan BD       12,198,000           12,213,247
Syniverse Holdings, Inc., Due 2/8/2023, 2018 Term LoanD       2,862,000           2,884,352
Telesat Canada, 4.700%, Due 11/17/2023, Term Loan B4, (3 mo. LIBOR + 3.000%)       4,612,804           4,632,039
U.S. Telepacific Corporation, 6.693%, Due 5/2/2023, 2017 Term Loan B, (3 mo. LIBOR + 5.000%)D       4,789,752           4,631,691
           

 

 

  
              84,773,983
           

 

 

  
           
Transportation - 2.55%            
Accuride Corporation, 6.943%, Due 11/17/2023, 2017 Term Loan B, (3 mo. LIBOR + 5.250%)       274,905           279,716
Boing US Holdco Inc., 5.287%, Due 10/3/2024, 2017 1st Lien Term Loan, (3 mo. LIBOR + 3.500%)       5,110,000           5,132,382
Daseke, Inc., 6.648%, Due 2/27/2024, 2017 Term Loan B, (1 mo. LIBOR + 5.000%)       6,409,935           6,458,009
Gruden Acquisition, Inc., 7.193%, Due 8/18/2022, 2017 Term Loan, (3 mo. LIBOR + 5.500%)       4,892,529           4,941,454
SMB Shipping Logistics, LLC, 5.480%, Due 1/31/2024, 1st Lien Term Loan, (6 mo. LIBOR + 4.000%)       8,103,812           8,107,216
U.S. Farathane, LLC, 5.193%, Due 12/23/2021, 2017 Term Loan B4, (3 mo. LIBOR + 3.500%)       2,504,031           2,522,811
United Road Services, Inc., 6.898%, Due 9/1/2024, 2017 Term Loan B, (1 mo. LIBOR + 5.250%)       7,615,453           7,729,684
           

 

 

  
              35,171,272
           

 

 

  
           
Utilities - 0.80%            
Astoria Energy LLC, 5.650%, Due 12/24/2021, Term Loan B, (1 mo. LIBOR + 4.000%)       1,035,967           1,037,697
Compass Power Generation LLC, 5.391%, Due 12/20/2024, 2017 Term Loan B, (3 mo. LIBOR + 3.750%)       507,000           511,122
Entergy Rhode Island State Energy, L.P., 6.400%, Due 12/17/2022, Term Loan B, (1 mo. LIBOR + 4.750%)       144,356           143,634
Helix Gen Funding LLC, 5.443%, Due 6/2/2024, Term Loan B, (3 mo. LIBOR + 3.750%)       5,039,497           5,082,988
PrimeLine Utility Services, LLC, 7.148%, Due 11/12/2022, Term Loan, (1 mo. LIBOR + 5.500%)       163,479           163,888
Star West Generation LLC, 6.450%, Due 5/10/2020, 2015 Term Loan B, (3 mo. LIBOR + 4.750%)       1,850,505           1,674,707
WG Partners Acquisition, LLC, 5.193%, Due 11/15/2023, Term Loan B, (3 mo. LIBOR + 3.500%)       2,417,511           2,429,598
           

 

 

  
              11,043,634
           

 

 

  
           

Total Bank Loan Obligations (Cost $1,279,930,777)

               1,283,553,143
           

 

 

  
           
CORPORATE OBLIGATIONS - 0.26%            
Consumer, Cyclical - 0.19%            
Constellation Merger Sub, Inc., 8.500%, Due 9/15/2025G           2,702,000           2,646,271
           

 

 

  
           
Consumer, Non-Cyclical - 0.07%            
LSC Communications, Inc., 8.750%, Due 10/15/2023G       845,000           866,125
           

 

 

  
           

Total Corporate Obligations (Cost $3,545,597)

               3,512,396
           

 

 

  
           
FOREIGN CORPORATE OBLIGATIONS - 0.12% (Cost $1,643,819)            
Financial - 0.12%            
Cooke Omega Investments, Inc. / Alpha VesselCo Holdings, Inc., 8.500%, Due 12/15/2022G       1,692,000           1,708,920
           

 

 

  

 

See accompanying notes

 

22

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
SHORT-TERM INVESTMENTS - 15.80% (Cost $217,537,218)            
Investment Companies - 15.80%            

American Beacon U.S. Government Money Market Select Fund, Select Class, 1.31%H I

       217,537,218         $ 217,537,218
           

 

 

  
           

TOTAL INVESTMENTS - 109.50% (Cost $1,502,754,154)

               1,507,333,665

LIABILITIES, NET OF OTHER ASSETS - (9.50%)

               (130,736,598 )
           

 

 

  

TOTAL NET ASSETS - 100.00%

             $ 1,376,597,067
           

 

 

  
           
Percentages are stated as a percent of net assets.                  

A Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $2,168 or 0.00% of net assets. Valuation was determined using significant unobservable inputs.

B Non-income producing security.

C Bank loan obligations, unless otherwise stated, carry a floating rate of interest. The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

D Coupon rates may not be available for bank loans that are unsettled and/or unfunded as of February 28, 2018.

E Unfunded Loan Commitment. At period end, the amount of unfunded loan commitments was $3,666,734 or 0.27% of net assets. Of this amount, $667,076, $423,193, $148,050, $399,179, $663,182, $239,405, $1,076,068, and $50,581 relate to AqGen Ascensus, Inc., Convergint Technologies LLC, KPEX Holdings Inc., Mitchell International, Inc., Pearl Intermediate Parent LLC, Recess Holdings, Inc., TGP Holdings III, LLC, and YI, LLC, respectively.

F Fixed Rate.

G Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $5,221,316 or 0.38% of net assets. The Fund has no right to demand registration of these securities.

H The Fund is affiliated by having the same investment advisor.

I 7-day yield.

J Value was determined using significant unobservable inputs.

LIBOR - London Interbank Offered Rate.

LLC - Limited Liability Company.

LP - Limited Partnership.

PIK - Payment in Kind.

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

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of February 28, 2018, the investments were classified as described below:

 

Sound Point Floating Rate Income Fund

   Level 1           Level 2            Level 3           Total  

Assets

               

Common Stocks

   $ 61,320 (1)      $ -        $ 960,668       $ 1,021,988  

Warrants

     -         -          0 (1)        -  

Bank Loan Obligations(2)

     -         1,283,553,143          -         1,283,553,143  

Corporate Obligations

     -         3,512,396          -         3,512,396  

Foreign Corporate Obligations

     -         1,708,920          -         1,708,920  

Short-Term Investments

     217,537,218         -          -         217,537,218  
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Investments in Securities - Assets

   $ 217,598,538       $ 1,288,774,459        $ 960,668       $ 1,507,333,665  
 

 

 

      

 

 

       

 

 

      

 

 

  

 

(1) Includes investments held in the Fund’s portfolio with $0 fair value.
(2) Unfunded loan commitments represent $3,666,734 at period end.

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 February 28, 2018, there were no transfers between levels.

 

See accompanying notes

 

23

American Beacon Sound Point Floating Rate Income FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

The following table is a reconciliation of Level 3 assets within the Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:

 

Security Type   Balance as
of
8/31/2017		    

Net

Purchases

    

Net

Sales

     Accrued
Discounts
(Premiums)		     Realized
Gain
(Loss)		     Change in
Unrealized
Appreciation
(Depreciation)		     Transfer
into
Level 3		     Transfer
out of
Level 3		     Balance as
of
2/28/2018		     Change in
Unrealized
Appreciation
(Depreciation)
at Period end**		  
Bank Loan Obligations   $ 11,689,075     $ 21,517     $ 3,609,171     $ 5,311     $ 2,804     $ (20,687 )    $ -     $ 8,088,849     $ -     $ (27,840 ) 
Common Stocks     311,513       -       -       -       -       649,155       -       -       960,668 (1)      924,288  
Warrants     0 (1)      -       -       -       -       -       -       -       0 (1)      -  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $ 12,000,588     $ 21,517     $ 3,609,171     $ 5,311     $ 2,804     $ 628,468     $ -     $ 8,088,849     $ 960,668     $ 896,448  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

** Change in unrealized appreciation (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation (depreciation) on the Statements of Operations.
(1)  Investments held in the Fund’s portfolio with $0 fair value.

Common stock and a warrant, classified as Level 3, have been fair valued at $960,668 and $0, respectively, by the Valuation Committee.

 

See accompanying notes

 

24

American Beacon FundsSM

Statements of Assets and Liabilities

February 28, 2018 (Unaudited)

 

 

    SiM High Yield
Opportunities Fund		           Sound Point
Floating Rate
Income Fund		  

Assets:

      

Investments in unaffiliated securities, at fair value†

   $ 1,181,044,484       $ 1,289,796,447  

Investments in affiliated securities, at fair value‡

     18,497,727         217,537,218  

Cash

     -         3,958,719  

Deposit with brokers for futures contracts

     2,269,393         -  

Dividends and interest receivable

     20,729,534         6,630,109  

Receivable for investments sold

     1,217,128         39,040,903  

Receivable for fund shares sold

     3,110,513         13,354,951  

Receivable for expense reimbursement (Note 2)

     2,313         -  

Prepaid expenses

     121,950         170,231  
 

 

 

      

 

 

  

Total assets

     1,226,993,042         1,570,488,578  
 

 

 

      

 

 

  

Liabilities:

      

Payable for investments purchased

     5,096,223         186,425,293  

Payable for fund shares redeemed

     2,597,198         2,337,935  

Payable for expense reimbursement (Note 2)

     -         13,617  

Payable for variation margin from open futures contracts (Note 5)

     577,277         -  

Cash due to custodian

     364,000         -  

Dividends payable

     475,118         312,750  

Dividends and interest expense payable

     43         -  

Unfunded loan commitments

     -         3,666,734  

Management and sub-advisory fees payable (Note 2)

     673,986         687,764  

Service fees payable (Note 2)

     103,045         87,937  

Transfer agent fees payable (Note 2)

     77,533         62,714  

Custody and fund accounting fees payable

     87,123         188,368  

Professional fees payable

     23,089         31,278  

Payable for prospectus and shareholder reports

     57,093         -  

Other liabilities

     4,780         77,121  
 

 

 

      

 

 

  

Total liabilities

     10,136,508         193,891,511  
 

 

 

      

 

 

  

Net Assets

   $ 1,216,856,534       $ 1,376,597,067  
 

 

 

      

 

 

  

Analysis of Net Assets:

      

Paid-in-capital

   $ 1,233,922,769       $ 1,372,733,498  

Undistributed (overdistribution of) net investment income

     (8,035,440 )        406,016  

Accumulated net realized (loss)

     (1,595,176 )        (1,121,958 ) 

Unrealized appreciation (depreciation) of investments in unaffiliated securitiesA

     (6,503,243 )        4,579,511  

Unrealized appreciation of foreign currency transactions

     11,477         -  

Unrealized appreciation (depreciation) of futures contracts

     (943,853 )        -  
 

 

 

      

 

 

  

Net assets

   $ 1,216,856,534       $ 1,376,597,067  
 

 

 

      

 

 

  

 

See accompanying notes

 

25

American Beacon FundsSM

Statements of Assets and Liabilities

February 28, 2018 (Unaudited)

 

 

    SiM High Yield
Opportunities Fund		           Sound Point
Floating Rate
Income Fund		  

Shares outstanding at no par value (unlimited shares authorized):

      

Institutional Class

     37,411,533         27,868,098  
 

 

 

      

 

 

  

Y Class

     64,977,005         73,412,534  
 

 

 

      

 

 

  

Investor Class

     12,139,080         23,884,316  
 

 

 

      

 

 

  

A Class

     5,470,953         3,878,999  
 

 

 

      

 

 

  

C Class

     6,724,684         3,770,144  
 

 

 

      

 

 

  

SP Class

     N/A         92,281  
 

 

 

      

 

 

  

Net assets:

      

Institutional Class

   $ 359,443,333       $ 288,668,010  
 

 

 

      

 

 

  

Y Class

   $ 623,723,954       $ 760,875,028  
 

 

 

      

 

 

  

Investor Class

   $ 116,216,049       $ 246,848,782  
 

 

 

      

 

 

  

A Class

   $ 52,589,068       $ 40,182,240  
 

 

 

      

 

 

  

C Class

   $ 64,884,130       $ 39,065,994  
 

 

 

      

 

 

  

SP Class

     N/A       $ 957,013  
 

 

 

      

 

 

  

Net asset value, offering and redemption price per share:

      

Institutional Class

   $ 9.61       $ 10.36  
 

 

 

      

 

 

  

Y Class

   $ 9.60       $ 10.36  
 

 

 

      

 

 

  

Investor Class

   $ 9.57       $ 10.34  
 

 

 

      

 

 

  

A Class

   $ 9.61       $ 10.36  
 

 

 

      

 

 

  

A Class (offering price)

   $ 10.09       $ 10.63  
 

 

 

      

 

 

  

C Class

   $ 9.65       $ 10.36  
 

 

 

      

 

 

  

SP Class

     N/A       $ 10.37  
 

 

 

      

 

 

  

† Cost of investments in unaffiliated securities

   $ 1,187,547,727       $ 1,285,216,936  

‡ Cost of investments in affiliated securities

   $ 18,497,727       $ 217,537,218  
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at period end.  

 

See accompanying notes

 

26

American Beacon FundsSM

Statements of Operations

For the period ended February 28, 2018 (Unaudited)

 

 

    SiM High Yield
Opportunities Fund		           Sound Point Floating
Rate Income Fund		  

Investment income:

      

Dividend income from unaffiliated securities (net of foreign taxes)†

   $ 866,285       $ -  

Dividend income from affiliated securities

     72,937         901,413  

Interest income (net of foreign taxes)†

     39,402,873         30,306,048  
 

 

 

      

 

 

  

Total investment income

     40,342,095         31,207,461  
 

 

 

      

 

 

  

Expenses:

      

Management and sub-advisory fees (Note 2)

     4,418,799         3,822,224  

Transfer agent fees:

      

Institutional Class (Note 2)

     151,589         39,209  

Y Class (Note 2)

     264,296         286,026  

Investor Class

     3,473         2,279  

A Class

     7,737         1,239  

C Class

     2,086         890  

SP Class

     -         225  

Custody and fund accounting fees

     51,873         112,153  

Professional fees

     55,753         42,699  

Registration fees and expenses

     69,088         162,047  

Service fees (Note 2):

      

Investor Class

     201,090         197,338  

A Class

     9,408         25,225  

C Class

     25,016         23,516  

Distribution fees (Note 2):

      

A Class

     75,467         44,489  

C Class

     336,769         174,948  

SP Class

     -         1,011  

Prospectus and shareholder report expenses

     65,794         17,244  

Trustee fees (Note 2)

     32,733         22,874  

Other expenses

     29,840         16,748  
 

 

 

      

 

 

  

Total expenses

     5,800,811         4,992,384  
 

 

 

      

 

 

  

Net fees waived and expenses (reimbursed) / recouped (Note 2)

     (24,796 )        56,516  
 

 

 

      

 

 

  

Net expenses

     5,776,015         5,048,900  
 

 

 

      

 

 

  

Net investment income

     34,566,080         26,158,561  
 

 

 

      

 

 

  

Realized and unrealized gain (loss) from investments:

      

Net realized gain (loss) from:

      

Investments in unaffiliated securitiesA

     10,361,849         (1,523,737 ) 

Foreign currency transactions

     (64,035 )        -  

Futures contracts

     (833,016 )        -  

Change in net unrealized appreciation (depreciation) of:

      

Investments in unaffiliated securitiesB

     (11,163,184 )        4,618,064  

Foreign currency transactions

     (8,561 )        -  

Futures contracts

     120,825         -  
 

 

 

      

 

 

  

Net gain (loss) from investments

     (1,586,122 )        3,094,327  
 

 

 

      

 

 

  

Net increase in net assets resulting from operations

   $ 32,979,958       $ 29,252,888  
 

 

 

      

 

 

  

† Foreign taxes

   $ 39,740       $ -  

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 period end.

 

 

See accompanying notes

 

27

American Beacon FundsSM

Statements of Changes in Net Assets

 

 

    SiM High Yield Opportunities Fund           Sound Point Floating Rate Income Fund  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		           Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)                       (unaudited)              

Increase (Decrease) in Net Assets:

              

Operations:

              

Net investment income

   $ 34,566,080       $ 70,121,842       $ 26,158,561       $ 21,944,378  

Net realized gain (loss) from investments in unaffiliated securities, foreign currency transactions, and futures contracts

     9,464,798         3,324,238         (1,523,737 )        3,428,894  

Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities, foreign currency transactions, and futures contracts

     (11,050,920 )        11,115,714         4,618,064         (97,215 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  

Net increase in net assets resulting from operations

     32,979,958         84,561,794         29,252,888         25,276,057  
 

 

 

      

 

 

      

 

 

      

 

 

  

Distributions to Shareholders:

 

Net investment income:

              

Institutional Class

     (10,504,049 )        (20,623,091 )        (6,159,387 )        (6,542,503 ) 

Y Class

     (17,696,044 )        (29,088,824 )        (14,452,804 )        (10,872,357 ) 

Investor Class

     (3,093,123 )        (6,890,982 )        (3,646,994 )        (2,806,600 ) 

A Class

     (1,652,932 )        (4,476,817 )        (789,989 )        (857,851 ) 

C Class

     (1,592,607 )        (3,314,854 )        (649,766 )        (622,300 ) 

SP Class

     -         -         (18,210 )        (257,055 ) 

Net realized gain from investments:

              

Institutional Class

     -         -         (653,654 )        (147,428 ) 

Y Class

     -         -         (1,522,613 )        (190,454 ) 

Investor Class

     -         -         (381,529 )        (69,215 ) 

A Class

     -         -         (87,467 )        (24,053 ) 

C Class

     -         -         (88,440 )        (23,779 ) 

SP Class

     -         -         (2,075 )        (17,010 ) 

Return of capital:

              

Institutional Class

     -         (1,720,604 )        -         -  

Y Class

     -         (2,843,585 )        -         -  

Investor Class

     -         (529,582 )        -         -  

A Class

     -         (390,036 )        -         -  

C Class

     -         (271,445 )        -         -  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net distributions to shareholders

     (34,538,755 )        (70,149,820 )        (28,452,928 )        (22,430,605 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  

Capital Share Transactions (Note 10):

 

Proceeds from sales of shares

     294,697,026         665,020,665         596,089,358         970,627,322  

Reinvestment of dividends and distributions

     32,015,132         65,249,947         27,036,757         20,919,758  

Cost of shares redeemed

     (311,472,691 )        (690,058,534 )        (180,339,605 )        (172,663,750 ) 

Redemption fees

     -         30,709         -         -  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net increase in net assets from capital share transactions

     15,239,467         40,242,787         442,786,510         818,883,330  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net increase in net assets

     13,680,670         54,654,761         443,586,470         821,728,782  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net Assets:

 

Beginning of period

     1,203,175,864         1,148,521,103         933,010,597         111,281,815  
 

 

 

      

 

 

      

 

 

      

 

 

  

End of period*

   $ 1,216,856,534       $ 1,203,175,864       $ 1,376,597,067       $ 933,010,597  
 

 

 

      

 

 

      

 

 

      

 

 

  

*Includes undistributed (overdistribution of) of net investment income

   $ (8,035,440 )      $ (8,062,765 )      $ 406,016       $ (35,395 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  

 

See accompanying notes

 

28

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

1.  Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust. The Funds, each a series within the Trust, are registered under the Investment Company Act of 1940 (the “Act”), as amended, as diversified, open-end management investment companies. As of February 28, 2018, the Trust consists of thirty-three active series, two of which are presented in this filing: American Beacon SiM High Yield Opportunities Fund and American Beacon Sound Point Floating Rate Income Fund (collectively, the “Funds” and each individually a “Fund”). The remaining thirty-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; 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 - sold directly through intermediary channels.    $ 2,500  
A Class    All investors who invest through intermediary organizations, such as broker-dealers or third party administrator. Retail investors who invest directly through a financial intermediary such as a broker, bank, or registered investment advisor which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”).    $ 2,500  
C Class    Retail investors who invest directly through a financial intermediary such as a broker or through employee directed benefit plans with applicable sales charges which may include CDSC.    $ 1,000  
SP Class    Retail investors who invest directly through a financial intermediary such as a broker, or through employee directed benefit plans and were formerly shareholders of the Investor Class Shares of the Sound Point Floating Rate Income Fund prior to its reorganization.    $ 1,000  

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include service, distribution, transfer agent, and sub-transfer agent fees that vary amongst the classes as described more fully in Note 2.

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”).

 

 

29

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Security Transactions and Investment Income

Security transactions are recorded as of the trade date for financial reporting purposes. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled beyond a standard settlement period for the security after the trade date.

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 convertible securities, premiums attributable to the conversion feature are not amortized. Estimated tax liabilities on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized appreciation (depreciation) on investments on the Statement of Operations, as appropriate. Tax liabilities realized as a result of such security sales are reflected as a component of net realized gain (loss) on investments on the Statement of Operations. Paydown gains (losses) on mortgage-related and other asset-backed securities, if any, are recorded as components of interest income on the Statements of Operations. Income or short-term capital gain distributions received from registered investment companies, if any, are recorded as dividend income. Long-term gain distributions received from registered investment companies, if any, are recorded as realized gains.

Debt obligations may be placed on a non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed for non-accrual when the issuer resumes interest payments or when collectability of interest is probable. Realized gains (losses) from securities sold are determined on the basis of specific lot identification.

Currency Translation

All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of the exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses on the Funds’ Statements of Operations.

Distributions to Shareholders

Distributions, if any, of net investment income are generally paid at least annually and recorded on the ex-dividend date. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP. To the extent necessary to fully distribute capital gains, the Funds may designate earnings and profits distributed to shareholders on the redemption of shares.

Commission Recapture

The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Funds’ investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Funds. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Funds. This amount is reported with the net realized gain in the Funds’ Statements of Operations, if applicable. For the year ended February 28, 2018, the Fund did not have commission recapture income.

 

 

30

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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.

Redemption Fees

All Classes of the SiM High Yield Opportunities Fund imposed a 2% redemption fee on shares held for less than 90 days. The fee was deducted from the redemption proceeds and was intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Fund. The “first-in, first-out” method was used to determine the holding period. The fee was allocated to all classes of this Fund pro-rata based on the net assets. Effective December 29, 2016, the redemption fee was terminated by the Trust’s Board of Trustees (the “Board”).

Other

Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

2.  Transactions with Affiliates

Management and Investment Sub-Advisory Agreements

The Funds and the Manager are parties to a Management Agreement that obligates the Manager to provide the Funds with investment advisory and administrative services. As compensation for performing the duties under the Management Agreement, the Manager will receive an annualized management fee based on a percentage of each 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 % 

 

 

31

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

The Trust, on behalf of the Funds, and the Manager have entered into an Investment Advisory Agreement with the following Sub-Advisors pursuant to which each Funds has agreed to pay an annualized sub-advisory fee that is calculated and accrued daily based on the Funds’ average daily net assets according to the following schedules:

Strategic Income Management, LLC

 

First $250 million

      0.45 % 

Next $250 million

      0.40 % 

Next $500 million

      0.35 % 

Over $1 billion

      0.30 % 

Sound Point Capital Management, LP

 

All Assets

      0.35 % 

The Management and Sub-Advisory Fees paid by the Funds for the period ended February 28, 2018 were as follows:

SiM High Yield Opportunities Fund

 

    Effective Fee Rate           Amount of Fees Paid  

Management Fees

     0.35 %      $ 2,145,713  

Sub-Advisor Fees

     0.37 %        2,273,086  
 

 

 

      

 

 

  

Total

     0.72 %      $ 4,418,799  
 

 

 

      

 

 

  

Sound Point Floating Rate Income Fund

 

    Effective Fee Rate           Amount of Fees Paid  

Management Fees

     0.35 %      $ 1,911,112  

Sub-Advisor Fees

     0.35 %        1,911,112  
 

 

 

      

 

 

  

Total

     0.70 %      $ 3,822,224  
 

 

 

      

 

 

  

Distribution Plans

The Funds, except for the A, C, and SP Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fee received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A, C, and SP Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A and SP Classes and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Investor, A, and C Classes. of the Funds. As compensation for performing the duties

 

 

32

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

required under the Service Plans, the Manager receives an annualized fee, up to 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.

Sub-Transfer Agent Fees

The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional and Y Classes of the Funds and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. Certain services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly by the Funds’ transfer agent. Accordingly, the Funds, pursuant to 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 period ended February 28, 2018, the sub-transfer agent fees, as reflected in “Transfer agent fees” on the Statements of Operations, were as follows:

 

Fund

    Sub-Transfer Agent Fees  

SiM High Yield Opportunities

    $ 413,258  

Sound Point Floating Rate Income

      313,584  

As of February 28, 2018, the Funds owed the Manager the following reimbursement of sub-transfer agent fees, as reflected in “Transfer agent fees payable” on the Statements of Assets and Liabilities:

 

Fund

    Reimbursement
Sub-Transfer Agent Fees		  

SiM High Yield Opportunities

    $ 65,218  

Sound Point Floating Rate Income

      60,438  

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 period ended February 28, 2018, the Manager earned fees on the Funds’ direct investments in the USG Select Fund as shown below:

 

Fund

    Direct Investments in
USG Select Fund		  

SiM High Yield Opportunities

    $ 6,604  

Sound Point Floating Rate Income

      82,925  

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

 

 

33

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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 two 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 period ended February 28, 2018, the SiM High Yield Opportunities Fund borrowed on average $4,314,472 for 7 days at 1.86% with interest charges of $1,582. These amounts are recorded within “Other expenses” on the accompanying Statements of Operations. For the period ended February 28, 2018, the Sound Point Floating Rate Income 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 period ended February 28, 2018, the Manager waived and/or reimbursed expenses as follows:

 

          Expense Cap                  Expiration of
Reimbursed
Expenses		  

Fund

    Class    9/1/2017 -
2/28/2018		     Reimbursed
Expenses		      (Recouped)
Expenses		    

SiM High Yield Opportunities

    Institutional      0.84 %    $ 24,796      $ -       2021  

Sound Point Floating Rate Income

    Institutional      0.84 %      -        (51,807 )      2021  

Sound Point Floating Rate Income

    A      N/A       -        (3,447 )      2021  

Sound Point Floating Rate Income

    C      N/A       -        (958 )      2021  

Sound Point Floating Rate Income

    SP      N/A       -        (304 )      2021  

Of these amounts, $2,313 was disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at February 28, 2018 for the SiM High Yield Opportunities Fund and $13,617 was disclosed as a payable to the Manager on the Statements of Assets and Liabilities at February 28, 2018 for the Sound Point Floating Rate Income Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of such fee reductions and expense reimbursements. Under the policy, the Manager can be reimbursed by the Funds for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs within three years after the Manager’s own waiver or reimbursement and (b) does not cause the Funds’ annual operating expenses to exceed the lesser of the contractual percentage limit in effect at the time of the waiver/reimbursement or time of recoupment. The reimbursed expenses listed above will expire in 2021. The carryover of excess expenses potentially reimbursable to the Manager are as follows:

 

Fund

    Recouped
Expenses		     Excess Expense
Carryover		      Expired Expense
Carryover		      Expiration of
Reimbursed
Expenses		  

SiM High Yield Opportunities

    $ -     $ 60,056      $ -        2018  

SiM High Yield Opportunities

      -       175,131        -        2019  

SiM High Yield Opportunities

      -       44,356        -        2020  

Sound Point Floating Rate Income

      56,516 (1)      83,562        -        2019  

Sound Point Floating Rate Income

      -       14,168        -        2020  

(1)Of this amount, $51,807, $3,447, $958, and $304 relate to Institutional, A, C, and SP classes respectively.

Sales Commissions

The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the period ended

 

 

34

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

February 28, 2018, Foreside collected $5,514 and $10,904 for SiM High Yield Opportunities Fund and Sound Point Floating Rate Income Fund, respectively, from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Funds’ Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the period ended February 28, 2018, CDSC fees of $462 were collected for the Class A Shares of the Sound Point Floating Rate Income Fund. There were no CDSC fees collected for the Class A Shares of the SiM High Yield Opportunities 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 period ended February 28, 2018, CDSC fees of $2,243 and $9,866 were collected for Class C Shares of the SiM High Yield Opportunities Fund and Sound Point Floating Rate Income Fund, respectively.

Trustee Fees and Expenses

As compensation for their service to the Trust, the American Beacon Select Funds and the American Beacon Institutional Funds Trust, each Trustee receives an annual retainer of $120,000, plus $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 $2,500 fee each quarter for his attendance at the committee meetings. Effective January 1, 2018, the Board Vice Chair receives an additional annual retainer of $10,000. 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

The price of the Fund’s shares is based on the Fund’s Net Asset Value (“NAV”). The NAV of the Fund, or each of its share classes, as applicable, is determined by dividing the total value of portfolio investments and other assets, less any liabilities attributable to the Fund or class, by the total number of shares outstanding of the Fund or class.

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. Certain fixed-income securities purchased on a delayed-delivery basis are marked-to-market daily until settlement at the forward settlement date.

 

 

35

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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, ETFs, preferred securities, and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are generally categorized as Level 2 of the fair value hierarchy.

Fixed-income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. Treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates, and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy. Fixed-income securities purchased on a delayed-delivery basis are marked-to-market daily until settlement at the forward settlement date and are categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy.

 

 

36

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Level 3 trading assets and trading liabilities, at fair value

The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows:

Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and may be categorized as Level 3 of the fair value hierarchy.

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of the Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.

The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued, pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.

When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of pricing, the Trust cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.

4.  Securities and Other Investments

Bank Loans and Senior Loans

Loans are typically administered by a bank, insurance company, finance company or other financial institution (the “agent”) for a lending syndicate of financial institutions. In a typical loan, the agent administers the terms of the loan agreement and is responsible for the collection of principal and interest and fee payments from the borrower and the apportionment of these payments to all lenders that are parties to the loan agreement. In addition, an institution (which may be the agent) may hold collateral on behalf of the lenders. Typically, under loan agreements, the agent is given broad authority in monitoring the borrower’s performance and is obligated to use the same care it would use in the management of its own property. In asserting rights against a borrower, the Funds normally will be dependent on the willingness of the lead bank to assert these rights, or upon a vote of all the lenders to authorize the action. If an agent becomes insolvent, or has a receiver, conservator, or similar official appointed for it by the appropriate regulatory authority, or becomes a debtor in a bankruptcy proceeding, the agent’s appointment may be terminated and a successor agent would be appointed. If an appropriate regulator or court determines that assets held by the agent for the benefit of purchasers of loans are subject to the claims of the agent’s general or secured creditors, the Funds might incur certain costs and delays in realizing payment on a

 

 

37

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

loan or suffer a loss of principal and/or interest. The Funds may be subject to similar risks when it buys a participation interest or an assignment from an intermediary.

Bank loans can be fixed and floating rate loans arranged through private negotiations between a company or a non-U.S. government and one or more financial institutions (lenders). The Funds may invest in senior loans, which are floating rate loans that hold a senior position in the capital structure of U.S. and foreign corporations, partnerships or other business entities that, under normal circumstances, allow them to have priority of claim ahead of other obligations of a borrower in the event of liquidation. Bank loans and senior loans may be collateralized or uncollateralized. They pay interest at rates that float above, or are adjusted periodically based on, a benchmark that reflects current interest rates. The Funds may invest in such loans in the form of participations in loans and assignments of all or a portion of loans from third parties. In connection with purchasing participations in such instruments, the Funds generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Funds may not benefit directly from any collateral supporting the loan in which it has purchased the participation. When the Funds purchases assignments from lenders, the Funds will acquire direct rights against the borrower on the loan.

The Funds earn a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in “Interest income” on the Statements of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included on the Statements of Assets and Liabilities and Statements of Operations.

Common Stock

Common stock generally takes the form of shares in a corporation which represent an ownership interest. It ranks below preferred stock and debt securities in claims for dividends and for assets of the company in a liquidation or bankruptcy. The value of a company’s common stock may fall as a result of factors directly relating to that company, such as decisions made by its management or decreased demand for the company’s products or services. A stock’s value may also decline because of factors affecting not just the company, but also companies in the same industry or sector. The price of a company’s stock may also be affected by changes in financial markets that are relatively unrelated to the company, such as changes in interest rates, currency exchange rates or industry regulation. Companies that elect to pay dividends on their common stock generally only do so after they invest in their own business and make required payments to bondholders and on other debt and preferred stock. Therefore, the value of a company’s common stock will usually be more volatile than its bonds, other debt and preferred stock. Common stock may be exchange-traded or 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.

 

 

38

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Corporate Debt and Other Fixed-Income Securities

Typically, the values of fixed-income securities change inversely with prevailing interest rates. Therefore, a fundamental risk of fixed-income securities is interest rate risk, which is the risk that their value will generally decline as prevailing interest rates rise, which may cause a Fund’s net asset value to likewise decrease, and vice versa. How specific fixed-income securities may react to changes in interest rates will depend on specific characteristics of each security. Fixed-income securities are also subject to credit risk, which is the risk that the credit strength of an issuer of a fixed-income security will weaken and/or that the issuer will be unable to make timely principal and interest payments and that the security may go into default.

Delayed Funding Loans and Revolving Credit Facilities

A Fund may enter into, or acquire participations in, delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specific term. A revolving credit facility differs from a delayed funding loan in that as the borrower repays the loan, an amount equal to the repayment may be borrowed again during the term of the revolving credit facility. Delayed funding loans and revolving credit facilities usually provide for floating or variable rates of interest. These commitments may have the effect of requiring a Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will at all times segregate or “earmark” assets, determined to be liquid in accordance with procedures established by the Trust’s Board, in an amount sufficient to meet such commitments.

A Fund may invest in delayed funding loans and revolving credit facilities with credit quality comparable to that of issuers of its securities investments. Delayed funding loans and revolving credit facilities may be subject to restrictions on transfer, and only limited opportunities may exist to resell such instruments. As a result, a Fund may be unable to sell such investments at an opportune time or may have to resell them at less than fair market value.

Floating Rate Loan Interest

The Funds may invest in floating rate loan interests. The floating rate loan interests held by the Funds are typically issued to companies (the “borrower”) by banks, other financial institutions, and privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. The Funds considers these investments to be investments in debt securities for purposes of its investment policies.

When the Funds purchase a floating rate loan interest it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, the Funds may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by the Funds upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. The Funds may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

 

 

39

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Floating rate loan interests are usually freely callable at the borrower’s option. The Funds may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in the Funds having a contractual relationship only with the lender, not with the borrower. The Funds will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Funds generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower, and the Funds may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Funds will assume the credit risk of both the borrower and the lender that is selling the Participation. The Funds’ investment in Participations involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Funds may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Funds having a direct contractual relationship with the borrower, and the Funds may enforce compliance by the borrower with the terms of the loan agreement.

In connection with floating rate loan interests, the Funds may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, the Funds earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in “Interest income” on the Statement of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included on the Statements of Assets and Liabilities and Statements of Operations.

Foreign Debt Securities

The Funds may invest in foreign fixed and floating rate income securities (including emerging market securities) all or a portion of which may be non-U.S. dollar denominated and which include: (a) debt obligations issued or guaranteed by foreign national, provincial, state, municipal or other governments with taxing authority or by their agencies or instrumentalities, including Brady Bonds; (b) debt obligations of supranational entities; (c) debt obligations of the U.S. Government issued in non-dollar securities; (d) debt obligations and other fixed income securities of foreign corporate issuers (both dollar and non-dollar denominated); and (e) U.S. corporate issuers (both Eurodollar and non-dollar denominated). There is no minimum rating criteria for the Funds’ investments in such securities. Investing in the securities of foreign issuers involves special considerations that are not typically associated with investing in the securities of U.S. issuers. In addition, emerging markets are markets that have risks that are different and higher than those in more developed markets.

Foreign Securities

The Funds may invest in U.S. dollar-denominated and non-U.S. dollar denominated equity and debt securities of foreign issuers and foreign branches of U.S. banks, including negotiable CDs, bankers’ acceptances, and commercial paper. Foreign issuers are issuers organized and doing business principally outside the United States and include corporations, banks, non-U.S. governments, and quasi-governmental organizations. While investments in foreign securities may be intended to reduce risk by providing further diversification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political or social instability, nationalization, expropriation, or confiscatory taxation); the potentially adverse effects of unavailability of public information regarding issuers, different governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States; different laws and customs governing securities tracking; and possibly limited access to the courts to enforce the Funds’ rights as an investor.

 

 

40

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

High-Yield Securities

Non-investment-grade securities are rated below the four highest credit grades by at least one of the public rating agencies (or are unrated if not publicly rated). Participation in high-yielding securities transactions generally involves greater returns in the form of higher average yields. However, participation in such transactions involves greater risks, including sensitivity to economic changes, solvency, and relative liquidity in the secondary trading market. Lower ratings may reflect a greater possibility that the financial condition of the issuer, or adverse changes in general economic conditions, or both, may impair the ability of the issuer to make payments of interest and principal. The prices and yields of lower-rated securities generally fluctuate more than higher-quality securities, and such prices may decline significantly in periods of general economic difficulty or rising interest.

Illiquid and Restricted Securities

The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933 (the “Securities Act”). Illiquid securities have included securities that have not been registered under the Securities Act, securities that are otherwise not readily marketable, and repurchase agreements having a remaining maturity of longer than seven calendar days. Disposal of both illiquid and restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Illiquid and restricted securities outstanding at the period ended February 28, 2018 are disclosed in the Notes to the Schedules of Investments.

Regulation S under the Securities Act permits the sale abroad of securities that are not registered for sale in the United States and includes a provision for U.S. investors, such as the Funds, to purchase such unregistered securities if certain conditions are met.

Inflation-Indexed Bonds

The Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted based on the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statement of Operations, even though investors do not receive their principal until maturity.

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. Restricted securities outstanding during the period ended February 28, 2018 are disclosed in the Notes to the Schedules of Investments.

 

 

41

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Preferred Stock

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

Payment-In-Kind Securities

The Funds may invest in payment-in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the “Unrealized appreciation (depreciation) of investments” to “Dividend and interest receivable” in the Statement of Assets and Liabilities.

Real Estate Investment Trusts

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

5.  Financial Derivative Instruments

The Funds may utilize derivative instruments to gain market exposure on cash balances or reduce market exposure in anticipation of liquidity needs. When considering the Funds’ use of derivatives, it is important to note that the Funds do not use derivatives for the purpose of creating financial leverage.

Futures Contracts

Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities or that the counterparty will fail to perform its obligations.

Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. 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

 

 

42

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

During the period ended February 28, 2018, the SiM High Yield Opportunities Fund entered into future contracts primarily for return enhancement and hedging.

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

 

Average Futures Contracts  Outstanding

  

Fund

   Period Ended February 28, 2018  

SiM High Yield Opportunities

     420  

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

SiM High Yield Opportunities Fund

 

Fair values of financial instruments on the Statements of Assets and Liabilities as of February 28, 2018:  
    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)     $ -         $ 22,553         $ -         $ -         $ -         $ 22,553

Liabilities:

   Credit contracts       Foreign exchange
contracts		       Commodity
contracts		       Interest rate
contracts		       Equity contracts       Total
Payable for variation margin from open futures contracts(2)     $ -         $ (966,406 )         $ -         $ -         $ -         $ (966,406 )

 

The effect of financial derivative instruments on the Statements of Operations as of February 28, 2018:      
    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     $ -         $ (833,016 )         $ -         $ -         $ -         $ (833,016 )

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     $ -         $ 120,825         $ -         $ -         $ -         $ 120,825

(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 Statements of Assets and Liabilities.

6.  Principal Risks

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

Callable Securities Risk

The Funds may invest in fixed-income securities with call features. A call feature allows the issuer of the security to redeem or call the security prior to its stated maturity date. In periods of falling interest rates, issuers

 

 

43

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

may be more likely to call in securities that are paying higher coupon rates than prevailing interest rates. In the event of a call the Funds would lose the income that would have been earned to maturity on that security, and the proceeds received by the Funds may be invested in securities paying lower coupon rates and may not benefit from any increase in value that might otherwise result from declining interest rates.

Credit Risk

The Funds are subject to the risk that the issuer or guarantor of a debt security, or the counterparty to a derivatives contract or a loan, will fail to make timely payment of interest or principal or otherwise honor its obligations or default completely.

Currency Risk

The Fund may have exposure to foreign currencies by making direct investments in non-U.S. currencies or in securities denominated in non-U.S. currencies, purchasing or selling forward foreign currency exchange contracts in non-U.S. currencies, non-U.S. currency futures contracts and swaps for cross-currency investments. Foreign currencies will fluctuate, and may decline, in value relative to the U.S. dollar and other currencies and thereby affect the Fund’s investments in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, or in derivatives that provide exposure to, foreign (non-U.S.) currencies.

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.

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).

 

 

44

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Floating Rate Securities Risk

The interest rates payable on floating rate securities are not fixed and may fluctuate based upon changes in market rates. The interest rate on a floating rate security is a variable rate which is tied to another interest rate, such as a money-market index or Treasury bill rate. Floating rate securities are subject to interest rate risk and credit risk. As short-term interest rates decline, interest payable on floating rate securities typically decreases. Alternatively, during periods of rising interest rates, interest payable on floating rate securities typically increases. Changes in interest rates on floating rate securities may lag behind changes in market rates or may have limits on the maximum increases in interest rates. The value of floating rate securities may decline if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline.

High-Yield Securities Risk

Investing in high-yield, below investment-grade securities (commonly referred to as “junk bonds”) generally involves significantly greater risks of loss of your money than an investment in investment grade securities. High-yield debt securities may fluctuate more widely in price and yield and may fall in price when the economy is weak or expected to become weak. High-yield securities are considered to be speculative with respect to an issuer’s ability to pay interest and principal and carry a greater risk that the issuers of lower-rated securities will default on the timely payment of principal and interest. Below investment grade securities may experience greater price volatility and less liquidity than investment grade securities.

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 several times since December 2015 and has signaled additional increases in the near future. Interest rates may rise, perhaps significantly and/or rapidly, potentially resulting in substantial losses to the Funds. The prices of fixed-income securities or derivatives are also affected by their duration. Fixed-income securities or derivatives with longer duration generally have greater sensitivity to changes in interest rates. An increase in interest rates can impact markets broadly as well. Some investors buy securities with borrowed money; an increase in interest rates can cause a decline in those markets.

Liquidity Risk

The Funds are susceptible to the risk that certain fixed-income investments, may have limited marketability or be subject to restrictions on sale, and may be difficult or impossible to purchase or sell at favorable times or prices. The Funds could lose money if they are unable to dispose of an investment at a time that is most beneficial

 

 

45

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

to the Funds. The Funds may be required to dispose of investments at unfavorable times or prices to satisfy obligations, which may result in losses or may be costly to the Funds. For example, the Funds may be forced to sell certain investments at unfavorable prices to meet redemption requests or other cash needs. Judgment plays a greater role in pricing illiquid investments than in investments with more active markets.

Loan Interests Risk

Unlike publicly traded common stocks which trade on national exchanges, there is no central place or exchange for loans, including bank loans and senior loans, to trade. Loans trade in an over-the-counter market, and confirmation and settlement, which are effected through standardized procedures and documentation, may take significantly longer than seven days to complete. Extended trade settlement periods may, in unusual market conditions with a high volume of shareholder redemptions, present risk to shareholders regarding a Fund’s ability to pay redemption proceeds within the allowable time periods stated in its prospectus. The secondary market for floating rate loans also may be subject to irregular trading activity and wide bid/ask spreads. The lack of an active trading market for certain loans may impair the ability of a Fund to sell its loan interests at a time when it may otherwise be desirable to do so or may require a Fund to sell them at prices that are less than what a Fund regards as their fair market value and may make it difficult to value such loans. Interest in loans made to finance highly leveraged companies or transactions, such as corporate acquisitions, may be especially vulnerable to adverse changes in economic or market conditions. When a Fund’s loan interest is a participation, the Fund is subject to the risk that the party selling the participation interest will not remit a Fund’s pro rata share of loan payments to the Fund, and the Fund may have less control over the exercise of remedies than the party selling the participation interest.

Market Risk

Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations.

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

Other Investment Companies Risk

The Funds may invest in shares of other government money market funds. To the extent that the Funds invest in shares of other government money market funds, the Funds will indirectly bear the fees and expenses charged by those investment companies in addition to the Funds’ direct fees and expenses and will be subject to the risks associated with investments in those funds. For example, money market funds are subject to interest rate risk, credit risk, and market risk.

 

 

46

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Prepayment and Extension Risk

Prepayment risk is the risk that the principal amount of a bond may be repaid prior to the bond’s maturity date. Due to a decline in interest rates or excess cash flow, a debt security may be called or otherwise prepaid before maturity. If this occurs, no additional interest will be paid on the investment and the Funds may have to invest at a lower rate, may not benefit from an increase in value that may result from declining interest rates, and may lose any premium it paid to acquire the security. Variable and floating rate securities may be less sensitive to prepayment risk. Extension risk is the risk that a decrease in prepayments may, as a result of higher interest rates or other factors, result in the extension of a security’s effective maturity, heighten interest rate risk and increase the potential for a decline in price.

Unrated Securities Risk

Because the Funds may purchase securities that are not rated by any rating organization, the sub-advisor, after assessing their credit quality, may internally assign ratings to certain of those securities in categories similar to those of rating organizations. Some unrated securities may not have an active trading market or may be difficult to value, which means a Fund might have difficulty selling them promptly at an acceptable price. Unrated securities may be subject to greater liquidity risk and price volatility.

Offsetting Assets and Liabilities

The Funds are parties to enforceable master netting agreements between brokers and counterparties which provide for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements such as repurchase agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, February 28, 2018.

SiM High Yield Opportunities Fund

 

Offsetting of Financial and Derivative Assets as of February 28, 2018:  
    Assets           Liabilities  
Futures Contracts   $ 22,553       $ 966,406  
 

 

 

      

 

 

  
Total derivative assets and liabilities in the Statement of Assets and Liabilities   $ 22,553       $ 966,406  
 

 

 

      

 

 

  
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)   $ (22,553 )      $ (966,406 ) 
 

 

 

      

 

 

  

7.  Federal Income and Excise Taxes

It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.

The Funds do not have any unrecorded tax liabilities in the accompanying financial statements. Each of the tax years in the four year period ended August 31, 2018 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.

 

 

47

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

The Funds may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation (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.

As of February 28, 2018 the tax cost for the Funds and their respective gross unrealized appreciation (depreciation) were as follows:

 

Fund

   Tax Cost           Unrealized
Appreciation		           Unrealized
(Depreciation)		           Net Unrealized
Appreciation
(Depreciation)		  
SiM High Yield Opportunities   $ 1,217,547,947       $ 23,734,367       $ (41,607,801 )      $ (17,873,434 ) 
Sound Point Floating Rate Income     1,502,754,154         8,856,489         (4,277,608 )        4,578,881  

Under the Regulated Investment Company Modernization Act of 2010 (“RIC MOD”), net capital losses recognized by the Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.

As of August 31, 2017, the SiM High Yield Opportunities Fund had $258,887 long-term post RIC MOD capital loss carryforwards. The Sound Point Floating Rate Income Fund did not have any capital loss carryforwards.

8.  Investment Transactions

The aggregate cost of purchases and proceeds from sales and maturities of investments, other than short-term obligations, for the period ended February 28, 2018 were as follows:

 

Fund

   Purchases
(non-U.S.
Government
Securities)		           Purchases of
U.S. Government
Securities		           Sales (non-U.S.
Government
Securities)		           Sales of
U.S. Government
Securities		  
SiM High Yield Opportunities   $ 326,916,035       $ -       $ 326,783,264       $ -  
Sound Point Floating Rate Income     857,800,072         -         411,787,577         -  

A summary of the Funds’ transactions in the USG Select Fund for the period ended February 28, 2018 were as follows:

 

Fund

   Type of
Transaction		           August 31,
2017
Shares/Fair
Value		           Purchases           Sales           February 28,
2018
Shares/Fair
Value		           Dividend
Income		  
SiM High Yield Opportunities     Direct       $ -       $ 242,029,609       $ 223,531,882       $ 18,497,727       $ 71,937  
Sound Point Floating Rate Income     Direct         170,748,662         345,482,007         298,693,451         217,537,218         901,413  

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

 

 

48

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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 period ended February 28, 2018, 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  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

SiM High Yield Opportunities Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     6,818,930       $ 66,186,965         15,647,330       $ 150,173,704  
Reinvestment of dividends     1,069,711         10,381,316         2,299,796         22,102,305  
Shares redeemed     (7,469,209 )        (72,264,513 )        (25,127,675 )        (241,551,109 ) 
Redemption fees     -         -         -         11,780  
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     419,432       $ 4,303,768         (7,180,549 )      $ (69,263,320 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    Y Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

SiM High Yield Opportunities Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     18,908,952       $ 183,526,542         41,386,495       $ 398,109,836  
Reinvestment of dividends     1,635,971         15,861,792         3,044,780         29,299,458  
Shares redeemed     (15,702,946 )        (151,702,433 )        (31,395,984 )        (301,265,477 ) 
Redemption fees     -         -         -         10,944  
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     4,841,977       $ 47,685,901         13,035,291       $ 126,154,761  
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    Investor Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

SiM High Yield Opportunities Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     2,633,846       $ 25,525,929         6,496,757       $ 62,092,156  
Reinvestment of dividends     306,764         2,966,446         741,851         7,110,929  
Shares redeemed     (2,881,846 )        (27,846,687 )        (8,857,829 )        (84,914,936 ) 
Redemption fees     -         -         -         3,720  
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     58,764       $ 645,688         (1,619,221 )      $ (15,708,131 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
             

 

 

49

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

    A Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

SiM High Yield Opportunities Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     1,799,639       $ 17,522,358         4,552,437       $ 43,748,413  
Reinvestment of dividends     147,310         1,430,562         384,259         3,698,284  
Shares redeemed     (5,312,585 )        (51,508,181 )        (4,520,808 )        (43,448,453 ) 
Redemption fees     -         -         -         2,156  
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     (3,365,636 )      $ (32,555,261 )        415,888       $ 4,000,400  
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    C Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

SiM High Yield Opportunities Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     198,525       $ 1,935,232         1,130,695       $ 10,896,556  
Reinvestment of dividends     141,084         1,375,016         314,547         3,038,971  
Shares redeemed     (837,130 )        (8,150,877 )        (1,955,809 )        (18,878,559 ) 
Redemption fees     -         -         -         2,109  
 

 

 

      

 

 

      

 

 

      

 

 

  
Net (decrease) in shares outstanding     (497,521 )      $ (4,840,629 )        (510,567 )      $ (4,940,923 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    Institutional Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Sound Point Floating Rate Income Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     7,937,118       $ 82,172,873         21,726,847       $ 224,650,825  
Reinvestment of dividends     579,036         5,993,990         538,345         5,566,824  
Shares redeemed     (3,006,577 )        (31,107,643 )        (6,095,376 )        (63,030,808 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     5,509,577       $ 57,059,220         16,169,816       $ 167,186,841  
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    Y Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Sound Point Floating Rate Income Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     33,838,292       $ 350,525,377         51,197,786       $ 529,627,770  
Reinvestment of dividends     1,495,014         15,478,277         1,041,044         10,780,963  
Shares redeemed     (10,877,770 )        (112,688,287 )        (5,529,595 )        (57,256,921 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     24,455,536       $ 253,315,367         46,709,235       $ 483,151,812  
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    Investor Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Sound Point Floating Rate Income Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     13,046,114       $ 134,796,241         14,619,832       $ 150,721,431  
Reinvestment of dividends     389,256         4,019,270         278,051         2,871,134  
Shares redeemed     (2,119,556 )        (21,895,257 )        (2,687,028 )        (27,739,927 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     11,315,814       $ 116,920,254         12,210,855       $ 125,852,638  
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    A Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Sound Point Floating Rate Income Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     1,576,403       $ 16,320,240         3,308,134       $ 34,152,328  
Reinvestment of dividends     84,264         872,250         84,321         872,006  
Shares redeemed     (916,509 )        (9,484,569 )        (928,871 )        (9,587,237 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     744,158       $ 7,707,921         2,463,584       $ 25,437,097  
 

 

 

      

 

 

      

 

 

      

 

 

  
             

 

 

50

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

    C Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Sound Point Floating Rate Income Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     1,157,315       $ 11,987,158         2,900,381       $ 29,947,252  
Reinvestment of dividends     63,079         652,930         53,622         554,986  
Shares redeemed     (485,895 )        (5,027,689 )        (216,214 )        (2,236,218 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     734,499       $ 7,612,399         2,737,789       $ 28,266,020  
 

 

 

      

 

 

      

 

 

      

 

 

  
             
    SP Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Sound Point Floating Rate Income Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     27,697       $ 287,469         148,607       $ 1,527,716  
Reinvestment of dividends     1,934         20,040         26,615         273,845  
Shares redeemed     (13,154 )        (136,160 )        (1,242,423 )        (12,812,639 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     16,477       $ 171,349         (1,067,201 )      $ (11,011,078 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  

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.

 

 

51

American Beacon SiM High Yield Opportunities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Institutional Class  
    Six Months
Ended
February 28,		           Year Ended August 31,  
                           
    2018       2017           2016     2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.61       $ 9.49       $ 9.43       $ 10.35       $ 10.16       $ 9.93  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.28         0.57         0.59         0.57         0.64         0.75  

Net gains (losses) on investments (both realized and unrealized)

     –         0.13         0.05         (0.65 )        0.47         0.26  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.28         0.70         0.64         (0.08 )        1.11         1.01  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.28 )        (0.53 )        (0.52 )        (0.55 )        (0.69 )        (0.75 ) 

Distributions from net realized gains

     –         –         –         (0.29 )        (0.23 )        (0.03 ) 

Tax return of capital

     –         (0.05 )A        (0.06 )A        –         –         –  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.28 )        (0.58 )        (0.58 )        (0.84 )        (0.92 )        (0.78 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Redemption fees added to beneficial interests

     –         –         – B        – B        – B        – B 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.61       $ 9.61       $ 9.49       $ 9.43       $ 10.35       $ 10.16  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnC

     2.88 %D        7.51 %        7.28 %        (0.78 )%        11.34 %        10.29 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 359,443,333       $ 355,492,590       $ 419,036,240       $ 230,287,454       $ 75,388,828       $ 45,471,117  

Ratios to average net assets:

                      

Expenses, before reimbursements

     0.85 %E        0.85 %        0.91 %        0.88 %        0.86 %        0.93 % 

Expenses, net of reimbursements

     0.84 %E        0.84 %        0.84 %        0.84 %        0.84 %        0.84 % 

Net investment income, before expense reimbursements

     5.73 %E        6.00 %        6.30 %        5.38 %        5.88 %        7.11 % 

Net investment income, net of reimbursements

     5.74 %E        6.01 %        6.37 %        5.41 %        5.90 %        7.20 % 

Portfolio turnover rate

     27 %D        50 %        57 %        43 %        38 %        65 % 

 

A  Tax return of capital is calculated based on outstanding shares at the time of distribution.
B  Amount represents less than $0.01 per share. Effective December 29, 2016, the redemption fee was terminated by the Trust’s Board of Trustees.
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.

 

See accompanying notes

 

52

American Beacon SiM High Yield Opportunities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Y Class  
    Six Months
Ended
February 28,		           Year Ended August 31,  
                           
    2018       2017           2016     2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.60       $ 9.48       $ 9.42       $ 10.34       $ 10.14       $ 9.92  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.28         0.58         0.59         0.53         0.64         0.73  

Net gains (losses) on investments (both realized and unrealized)

     –         0.11         0.05         (0.62 )        0.46         0.25  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.28         0.69         0.64         (0.09 )        1.10         0.98  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.28 )        (0.52 )        (0.52 )        (0.54 )        (0.67 )        (0.73 ) 

Distributions from net realized gains

     –         –         –         (0.29 )        (0.23 )        (0.03 ) 

Tax return of capital

     –         (0.05 )A        (0.06 )A        –         –         –  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.28 )        (0.57 )        (0.58 )        (0.83 )        (0.90 )        (0.76 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Redemption fees added to beneficial interests

     –         –         – B        – B        – B        – B 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.60       $ 9.60       $ 9.48       $ 9.42       $ 10.34       $ 10.14  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnC

     2.87 %D        7.46 %        7.21 %        (0.87 )%        11.33 %        10.08 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 623,723,954       $ 577,349,417       $ 446,395,255       $ 300,014,547       $ 247,179,395       $ 87,638,664  

Ratios to average net assets:

                      

Expenses, before reimbursements

     0.86 %E        0.89 %        0.91 %        0.91 %        0.94 %        0.99 % 

Expenses, net of reimbursements

     0.86 %E        0.89 %        0.91 %        0.93 %        0.94 %        0.93 % 

Net investment income, before expense reimbursements

     5.73 %E        5.93 %        6.28 %        5.32 %        5.77 %        6.77 % 

Net investment income, net of reimbursements

     5.73 %E        5.93 %        6.29 %        5.30 %        5.77 %        6.82 % 

Portfolio turnover rate

     27 %D        50 %        57 %        43 %        38 %        65 % 

 

A  Tax return of capital is calculated based on outstanding shares at the time of distribution.
B  Amount represents less than $0.01 per share. Effective December 29, 2016, the redemption fee was terminated by the Trust’s Board of Trustees.
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.

 

See accompanying notes

 

53

American Beacon SiM High Yield Opportunities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Investor Class  
    Six Months
Ended
February 28,		           Year Ended August 31,  
                           
    2018       2017           2016     2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.58       $ 9.45       $ 9.40       $ 10.32       $ 10.12       $ 9.90  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.26         0.53         0.50         0.50         0.56         0.71  

Net gains (losses) on investments (both realized and unrealized)

     (0.01 )        0.15         0.10         (0.61 )        0.52         0.25  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.25         0.68         0.60         (0.11 )        1.08         0.96  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.26 )        (0.51 )        (0.49 )        (0.52 )        (0.65 )        (0.71 ) 

Distributions from net realized gains

     –         –         –         (0.29 )        (0.23 )        (0.03 ) 

Tax return of capital

     –         (0.04 )A        (0.06 )A        –         –         –  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.26 )        (0.55 )        (0.55 )        (0.81 )        (0.88 )        (0.74 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Redemption fees added to beneficial interests

     –         –         – B        – B        – B        – B 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.57       $ 9.58       $ 9.45       $ 9.40       $ 10.32       $ 10.12  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnC

     2.63 %D        7.31 %        6.82 %        (1.14 )%        11.08 %        9.84 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 116,216,049       $ 115,679,739       $ 129,503,495       $ 196,928,349       $ 199,533,521       $ 248,052,347  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.13 %E        1.13 %        1.17 %        1.19 %        1.11 %        1.15 % 

Expenses, net of reimbursements

     1.13 %E        1.13 %        1.18 %        1.19 %        1.11 %        1.17 % 

Net investment income, before expense reimbursements

     5.45 %E        5.70 %        5.97 %        5.05 %        5.68 %        6.81 % 

Net investment income, net of reimbursements

     5.45 %E        5.70 %        5.96 %        5.05 %        5.68 %        6.79 % 

Portfolio turnover rate

     27 %D        50 %        57 %        43 %        38 %        65 % 

 

A  Tax return of capital is calculated based on outstanding shares at the time of distribution.
B  Amount represents less than $0.01 per share. Effective December 29, 2016, the redemption fee was terminated by the Trust’s Board of Trustees.
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.

 

See accompanying notes

 

54

American Beacon SiM High Yield Opportunities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    A Class  
    Six Months
Ended
February 28,		           Year Ended August 31,  
                           
    2018       2017           2016     2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.61       $ 9.49       $ 9.43       $ 10.36       $ 10.15       $ 9.92  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.22         0.55         0.54         0.49         0.57         0.69  

Net gains (losses) on investments (both realized and unrealized)

     0.05         0.11         0.07         (0.62 )        0.49         0.26  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.27         0.66         0.61         (0.13 )        1.06         0.95  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.27 )        (0.50 )        (0.49 )        (0.51 )        (0.62 )        (0.69 ) 

Distributions from net realized gains

     –         –         –         (0.29 )        (0.23 )        (0.03 ) 

Tax return of capital

     –         (0.04 )A        (0.06 )A        –         –         –  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.27 )        (0.54 )        (0.55 )        (0.80 )        (0.85 )        (0.72 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Redemption fees added to beneficial interests

     –         –         – B        – B        – B        – B 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.61       $ 9.61       $ 9.49       $ 9.43       $ 10.36       $ 10.15  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnC

     2.77 %D        7.12 %        6.87 %        (1.27 )%        10.87 %        9.74 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 52,589,068       $ 84,955,157       $ 79,917,424       $ 81,147,262       $ 93,060,715       $ 76,146,389  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.07 %E        1.20 %        1.23 %        1.22 %        1.33 %        1.41 % 

Expenses, net of reimbursements

     1.07 %E        1.20 %        1.24 %        1.24 %        1.32 %        1.35 % 

Net investment income, before expense reimbursements

     5.48 %E        5.62 %        5.99 %        5.01 %        5.44 %        6.53 % 

Net investment income, net of reimbursements

     5.48 %E        5.62 %        5.98 %        4.99 %        5.45 %        6.60 % 

Portfolio turnover rate

     27 %D        50 %        57 %        43 %        38 %        65 % 

 

A  Tax return of capital is calculated based on outstanding shares at the time of distribution.
B  Amount represents less than $0.01 per share. Effective December 29, 2016, the redemption fee was terminated by the Trust’s Board of Trustees.
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.

 

See accompanying notes

 

55

American Beacon SiM High Yield Opportunities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    C Class  
    Six Months
Ended
February 28,		           Year Ended August 31,  
                           
    2018       2017           2016     2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.65       $ 9.53       $ 9.47       $ 10.40       $ 10.16       $ 9.94  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.22         0.47         0.48         0.42         0.49         0.62  

Net gains (losses) on investments (both realized and unrealized)

     0.01         0.12         0.06         (0.62 )        0.50         0.25  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.23         0.59         0.54         (0.20 )        0.99         0.87  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.23 )        (0.43 )        (0.43 )        (0.44 )        (0.52 )        (0.62 ) 

Distributions from net realized gains

     –         –         –         (0.29 )        (0.23 )        (0.03 ) 

Tax return of capital

     –         (0.04 )A        (0.05 )A        –         –         –  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.23 )        (0.47 )        (0.48 )        (0.73 )        (0.75 )        (0.65 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Redemption fees added to beneficial interests

     –         –         – B        – B        – B        – B 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.65       $ 9.65       $ 9.53       $ 9.47       $ 10.40       $ 10.16  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnC

     2.37 %D        6.33 %        6.08 %        (1.98 )%        10.12 %        8.81 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 64,884,130       $ 69,698,961       $ 73,668,689       $ 73,213,378       $ 76,536,190       $ 60,829,392  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.85 %E        1.94 %        1.97 %        1.97 %        2.08 %        2.15 % 

Expenses, net of reimbursements

     1.85 %E        1.94 %        1.99 %        1.99 %        2.07 %        2.09 % 

Net investment income, before expense reimbursements

     4.73 %E        4.90 %        5.26 %        4.26 %        4.68 %        5.76 % 

Net investment income, net of reimbursements

     4.73 %E        4.90 %        5.25 %        4.24 %        4.69 %        5.82 % 

Portfolio turnover rate

     27 %D        50 %        57 %        43 %        38 %        65 % 

 

A  Tax return of capital is calculated based on outstanding shares at the time of distribution.
B  Amount represents less than $0.01 per share. Effective December 29, 2016, the redemption fee was terminated by the Trust’s Board of Trustees.
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.

 

See accompanying notes

 

56

American Beacon Sound Point Floating Rate Income FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Institutional Class  
    Six Months
Ended
February 28,		           Year Ended August 31,     December 3,
2012A to
August 31,		  
                       
    2018       2017           2016     2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 10.35       $ 10.20       $ 10.38       $ 10.49       $ 10.58       $ 10.00  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.25         0.46         0.51         0.52 B        0.57         0.14  

Net gains (losses) on investments (both realized and unrealized)

     0.04         0.18         (0.10 )        0.06         0.14         0.50  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.29         0.64         0.41         0.58         0.71         0.64  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.25 )        (0.47 )        (0.55 )        (0.52 )        (0.58 )        (0.06 ) 

Distributions from net realized gains

     (0.03 )        (0.02 )        (0.04 )        (0.17 )        (0.22 )        –  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.28 )        (0.49 )        (0.59 )        (0.69 )        (0.80 )        (0.06 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 10.36       $ 10.35       $ 10.20       $ 10.38       $ 10.49       $ 10.58  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnC

     2.75 %D        6.37 %        4.12 %        5.75 %        6.92 %        6.40 %D 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 288,668,010       $ 231,445,512       $ 63,147,618       $ 42,903,291       $ 19,578,492       $ 17,779,147  

Ratios to average net assets:

                      

Expenses, before reimbursements

     0.80 %E        0.85 %        1.26 %        1.88 %        2.37 %        3.33 %E 

Expenses, net of reimbursements

     0.84 %E        0.84 %        0.92 %F        0.90 %        1.58 %G        2.08 %E 

Net investment income (loss), before expense reimbursements

     4.92 %E        4.51 %        4.78 %        4.06 %        4.56 %        (0.86 )%E 

Net investment income, net of reimbursements

     4.88 %E        4.52 %        5.12 %        5.04 %        5.35 %        2.11 %E 

Portfolio turnover rate

     40 %D        86 %        168 %        196 %        165 %        197 % 

 

A  Commencement of operations for the Predecessor Fund.
B  Per share amounts have been calculated using the average shares method.
C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D  Not annualized.
E  Annualized.
F  Expense ratios may exceed stated expense caps in Note 2 due to pre-adoption expenses.
G  The expense limitation for the Institutional Class Shares was reduced from 1.60% to 0.90% upon reorganization into the Trust. Prior to the reorganization on May 31, 2014, the Fund was organized as a closed-end, non-diversified, management investment company.

 

See accompanying notes

 

57

American Beacon Sound Point Floating Rate Income FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Y Class  
   

Six Months

Ended
February 28,
2018

          

Year Ended
August 31,

2017

          

December 11,
2015A to
August 31,

2016

  
 

 

 

  
    (unaudited)                          

Net asset value, beginning of period

   $ 10.36       $ 10.21       $ 10.34  
 

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

          

Net investment income

     0.25         0.46         0.53  

Net gains (losses) on investments (both realized and unrealized)

     0.03         0.17         (0.09 ) 
 

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.28         0.63         0.44  
 

 

 

      

 

 

      

 

 

  

Less distributions:

          

Dividends from net investment income

     (0.25 )        (0.46 )        (0.53 ) 

Distributions from net realized gains

     (0.03 )        (0.02 )        (0.04 ) 
 

 

 

      

 

 

      

 

 

  

Total distributions

     (0.28 )        (0.48 )        (0.57 ) 
 

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 10.36       $ 10.36       $ 10.21  
 

 

 

      

 

 

      

 

 

  

Total returnB

     2.64 %C        6.27 %        4.37 %C 
 

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

          

Net assets, end of period

   $ 760,875,028       $ 507,077,617       $ 22,952,034  

Ratios to average net assets:

          

Expenses, before reimbursements

     0.86 %D        0.92 %        1.42 %D 

Expenses, net of reimbursements

     0.86 %D        0.93 %        0.94 %D 

Net investment income, before expense reimbursements

     4.85 %D        4.43 %        4.64 %D 

Net investment income, net of reimbursements

     4.85 %D        4.42 %        5.11 %D 

Portfolio turnover rate

     40 %C        86 %        168 %E 

 

A  Commencement of operations.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Not annualized.
D  Annualized.
E  Portfolio turnover rate is for the period from December 11, 2015 through August 31, 2016 and is not annualized.

 

See accompanying notes

 

58

American Beacon Sound Point Floating Rate Income FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Investor Class  
   

Six Months

Ended
February 28,
2018

          

Year Ended
August 31,

2017

          

December 11,
2015A to
August 31,

2016

  
 

 

 

  
    (unaudited)                          

Net asset value, beginning of period

   $ 10.33       $ 10.18       $ 10.33  
 

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

          

Net investment income

     0.24         0.46         0.50  

Net gains (losses) on investments (both realized and unrealized)

     0.04         0.15         (0.09 ) 
 

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.28         0.61         0.41  
 

 

 

      

 

 

      

 

 

  

Less distributions:

          

Dividends from net investment income

     (0.24 )        (0.44 )        (0.52 ) 

Distributions from net realized gains

     (0.03 )        (0.02 )        (0.04 ) 
 

 

 

      

 

 

      

 

 

  

Total distributions

     (0.27 )        (0.46 )        (0.56 ) 
 

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 10.34       $ 10.33       $ 10.18  
 

 

 

      

 

 

      

 

 

  

Total returnB

     2.66 %C        6.12 %        4.16 %C 
 

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

          

Net assets, end of period

   $ 246,848,782       $ 129,817,379       $ 3,641,581  

Ratios to average net assets:

          

Expenses, before reimbursements

     1.02 %D        1.07 %        1.31 %D 

Expenses, net of reimbursements

     1.02 %D        1.09 %        1.22 %D 

Net investment income, before expense reimbursements

     4.70 %D        4.24 %        4.26 %D 

Net investment income, net of reimbursements

     4.70 %D        4.22 %        4.35 %D 

Portfolio turnover rate

     40 %C        86 %        168 %E 

 

A  Commencement of operations.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Not annualized.
D  Annualized.
E  Portfolio turnover rate is for the period from December 11, 2015 through August 31, 2016 and is not annualized.

 

See accompanying notes

 

59

American Beacon Sound Point Floating Rate Income FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    A Class  
   

Six Months

Ended
February 28,
2018

          

Year Ended
August 31,

2017

          

December 11,
2015A to
August 31,

2016

  
 

 

 

  
    (unaudited)                          

Net asset value, beginning of period

   $ 10.35       $ 10.20       $ 10.33  
 

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

          

Net investment income

     0.23         0.42         0.51  

Net gains (losses) on investments (both realized and unrealized)

     0.04         0.17         (0.10 ) 
 

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.27         0.59         0.41  
 

 

 

      

 

 

      

 

 

  

Less distributions:

          

Dividends from net investment income

     (0.23 )        (0.42 )        (0.50 ) 

Distributions from net realized gains

     (0.03 )        (0.02 )        (0.04 ) 
 

 

 

      

 

 

      

 

 

  

Total distributions

     (0.26 )        (0.44 )        (0.54 ) 
 

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 10.36       $ 10.35       $ 10.20  
 

 

 

      

 

 

      

 

 

  

Total returnB

     2.57 %C        5.92 %        4.13 %C 
 

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

          

Net assets, end of period

   $ 40,182,240       $ 32,450,342       $ 6,849,306  

Ratios to average net assets:

          

Expenses, before reimbursements

     1.17 %D        1.22 %        1.67 %D 

Expenses, net of reimbursements

     1.19 %D        1.24 %        1.24 %D 

Net investment income, before expense reimbursements

     4.54 %D        4.07 %        4.51 %D 

Net investment income, net of reimbursements

     4.52 %D        4.04 %        4.93 %D 

Portfolio turnover rate

     40 %C        86 %        168 %E 

 

A  Commencement of operations.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Not annualized.
D  Annualized.
E  Portfolio turnover rate is for the period from December 11, 2015 through August 31, 2016 and is not annualized.

 

See accompanying notes

 

60

American Beacon Sound Point Floating Rate Income FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    C Class  
   

Six Months

Ended
February 28,
2018

          

Year Ended
August 31,

2017

          

December 11,
2015A to
August 31,

2016

  
 

 

 

  
    (unaudited)                          

Net asset value, beginning of period

   $ 10.35       $ 10.21       $ 10.33  
 

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

          

Net investment income

     0.19         0.35         0.45  

Net gains (losses) on investments (both realized and unrealized)

     0.04         0.16         (0.08 ) 
 

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.23         0.51         0.37  
 

 

 

      

 

 

      

 

 

  

Less distributions:

          

Dividends from net investment income

     (0.19 )        (0.35 )        (0.45 ) 

Distributions from net realized gains

     (0.03 )        (0.02 )        (0.04 ) 
 

 

 

      

 

 

      

 

 

  

Total distributions

     (0.22 )        (0.37 )        (0.49 ) 
 

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 10.36       $ 10.35       $ 10.21  
 

 

 

      

 

 

      

 

 

  

Total returnB

     2.20 %C        5.03 %        3.67 %C 
 

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

          

Net assets, end of period

   $ 39,065,994       $ 31,434,098       $ 3,040,244  

Ratios to average net assets:

          

Expenses, before reimbursements

     1.91 %D        1.97 %        2.55 %D 

Expenses, net of reimbursements

     1.91 %D        1.99 %        1.99 %D 

Net investment income, before expense reimbursements

     3.80 %D        3.31 %        3.50 %D 

Net investment income, net of reimbursements

     3.79 %D        3.29 %        4.06 %D 

Portfolio turnover rate

     40 %C        86 %        168 %E 

 

A  Commencement of operations.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Not annualized.
D  Annualized.
E  Portfolio turnover rate is for the period from December 11, 2015 through August 31, 2016 and is not annualized.

 

See accompanying notes

 

61

American Beacon Sound Point Floating Rate Income FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    SP Class A  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,           May 31, 2014B
to August 31,
2014		  
            2017           2016           2015          
 

 

 

  
    (unaudited)                                                  

Net asset value, beginning of period

   $ 10.36       $ 10.19       $ 10.38       $ 10.49       $ 10.62 C 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                  

Net investment income

     0.75         0.25 D        0.30         0.43 D        0.13  

Net gains (losses) on investments (both realized and unrealized)

     (0.48 )        0.37         0.07         0.12         (0.00 )E 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income from investment operations

     0.27         0.62         0.37         0.55         0.13  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                  

Dividends from net investment income

     (0.23 )        (0.43 )        (0.52 )        (0.49 )        (0.26 ) 

Distributions from net realized gains

     (0.03 )        (0.02 )        (0.04 )        (0.17 )        –  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.26 )        (0.45 )        (0.56 )        (0.66 )        (0.26 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 10.37       $ 10.36       $ 10.19       $ 10.38       $ 10.49  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnF

     2.60 %G        6.13 %        3.70 %        5.53 %        1.19 %G 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                  

Net assets, end of period

   $ 957,013       $ 785,649       $ 11,651,032       $ 125,577       $ 1,138  

Ratios to average net assets:

                  

Expenses, before reimbursements

     1.07 %H        1.08 %        1.49 %        1.74 %        1.95 %H 

Expenses, net of reimbursements

     1.15 %H        1.12 %        1.19 %I        1.15 %        1.15 %H 

Net investment income, before expense reimbursements

     4.64 %H        4.25 %        4.01 %        3.59 %        3.70 %H 

Net investment income, net of reimbursements

     4.56 %H        4.21 %        4.30 %        4.18 %        4.50 %H 

Portfolio turnover rate

     40 %G        86 %        168 %        196 %        17 %G 

 

A  Prior to the reorganization on December 11, 2015, the SP Class was known as the Investor Class.
B  Commencement of operations for the Predecessor Fund is December 31, 2010.
C  NAV at Class inception.
D  Per share amounts have been calculated using the average shares method.
E  Amount represents less than $0.01 per share.
F  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.
G  Not annualized.
H  Annualized.
I  Expense ratios may exceed stated expense caps in Note 2 due to pre-adoption expenses.

 

See accompanying notes

 

62

  

 

 

 

 

 

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63

  

 

 

 

 

 

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64

LOGO

 

 

 

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:

 

LOGO   LOGO
 
By E-mail:   On the Internet:
american_beacon.funds@ambeacon.com   Visit our website at www.americanbeaconfunds.com
   
     
 

LOGO

By Telephone:

Call (800) 658-5811

  

LOGO

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

 
 
 
   
     
Availability of Quarterly Portfolio Schedules   Availability of Proxy Voting Policy and Records
 
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-2736. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of each Fund’s portfolio holdings is also made available on the Funds’ website at www.americanbeaconfunds.com, approximately sixty days after the end of each quarter for the Sound Point Floating Rate Income Fund and twenty days after the end of each month for the SiM High Yield Opportunities Fund.  

Availability of Proxy Voting Policy and Records

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, which is available free of charge on the Fund’s website at www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

DST Asset Manager Solutions, Inc.

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, TX

    

DISTRIBUTOR

Resolute Investment Distributors, Inc.

Irving, Texas

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.

 

American Beacon Funds, American Beacon SiM High Yield Opportunities Fund and American Beacon Sound Point Floating Rate Income Fund are service marks of American Beacon Advisors, Inc.

SAR 2/18

LOGO

About American Beacon Advisors

 

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

 

Important Information: Investing in derivative instruments involves liquidity, credit, interest rate and market risks. Investments in high- yield securities are subject to greater levels of credit, interest rate, market and liquidity risks than investment-grade securities. Although the Fund has a flexible approach to investing, diversification does not ensure against loss. Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

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

 

American Beacon Advisors

February 28, 2018

Contents

 

 

President’s Message

     1  

Performance Overview

     2  

Expense Examples

     4  

Schedule of Investments:

  

American Beacon Flexible Bond Fund

     6  

Financial Statements

     23  

Notes to Financial Statements

     27  

Financial Highlights:

  

American Beacon Flexible Bond Fund

     56  

Affirmation of Commodity Pool

     61  

Additional Fund Information

    Back Cover  

President’s Message

 

 

 

LOGO  

Dear Shareholders,

 

Since 1986, American Beacon has endeavored to provide investors with a disciplined approach to realizing long-term investment goals: Institutional wisdom + earned alpha = enduring value.

 

u   We believe institutional wisdom comes from having more than 30 years of experience as manager of one of the country’s largest pension plans. As a fiduciary, we have built an investment due-diligence and oversight infrastructure, which we leverage across all our investment products. When selecting our investment managers, we focus on their people, processes and performance. We perform due-diligence reviews with each investment manager on a quarterly basis.

 

u We believe earned alpha – that is, the returns of an actively managed fund beyond a benchmark – comes from employing and engaging investment

managers we believe are best-in-class and who have defined, repeatable and proven processes. Our experience has shown us that, while it’s important to be mindful of short-term considerations, having a long-term focus helps manage expectations, mitigate risks and realize goals. Thus, we seek relationships with leading investment managers who display a willingness to undertake time-intensive research strategies. The resulting investment portfolios are differentiated from their peers and allow incremental changes to help address periods of market volatility and economic uncertainty.

 

u We believe enduring value comes from “putting a portfolio in place and sticking with the plan.” Our mutual funds provide you with access to institutional-quality, research-intensive investment managers with diverse processes and styles. In the long run, having such access and spending time in the market – rather than trying to time the market – may better position you to reach your long-term investment goals.

The markets and U.S. economy were robust during calendar year 2017. However, during periods of market volatility and economic uncertainty – such as what we’ve seen thus far in 2018 – investing for the long term requires conviction. It isn’t about identifying and anticipating the next big market move. It’s about identifying the right investment products for riding out those moves. It’s about developing an approach based on long-term participation, while seeking some measure of protection against ongoing volatility.

As a manager of managers, we strive to provide investment products that may enable investors to participate during market upswings while potentially insulating against market downswings. Many of the sub-advisors to our mutual funds pursue upside capture and/or downside protection using proprietary strategies. The investment teams behind our mutual funds seek to produce consistent, long-term results rather than focus only on short-term movements in the markets. In managing our investment products, we emphasize identifying opportunities that offer the potential for high quality and lower risk.

At American Beacon, our approach is more than a concept. It’s the cornerstone of our culture. And we strive to apply it at every turn as we seek to provide a well-diversified line of investment products for your portfolio.

Thank you for your continued interest in American Beacon. For additional information about our investment products or to access your account information, please visit our website at www.americanbeaconfunds.com.

Best Regards,

 

LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

 

1

American Beacon Flexible Bond FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

The Investor Class of the American Beacon Flexible Bond Fund (the “Fund”) returned 1.04% for the six months ended February 28, 2018. The Fund outperformed the Bloomberg Barclays U.S. Aggregate Bond Index return of -2.18% and the BofA Merrill Lynch 3-Month LIBOR Constant Maturity Index return of 0.61% for the same period.

 

Total Returns for the Period ended February 28, 2018       
   

Ticker

  

6 Months*

  

1 Year

  

3 Years

  

5 Years

   

Since Inception

(7/5/2011)

Institutional Class (1,2,4)

   AFXIX       1.22 %       4.70 %       2.03 %       1.31 %        2.59 %

Y Class (1,2,4)

   AFXYX       1.11 %       4.60 %       1.92 %       1.21 %        2.49 %

Investor Class (1,2,4)

   AFXPX       1.04 %       4.32 %       1.63 %       0.95 %        2.27 %

A without Sales Charge (1,2,4)

   AFXAX       1.03 %       4.30 %       1.61 %       0.88 %        2.15 %

A with Sales Charge (1,2,4)

   AFXAX       -3.80 %       -0.69 %       -0.02 %       -0.10 %        1.41 %

C without Sales Charge (1,2,4)

   AFXCX       0.66 %       3.53 %       0.85 %       0.12 %        1.48 %

C with Sales Charge (1,2,4)

   AFXCX       -0.34 %       2.53 %       0.85 %       0.12 %        1.48 %
                        

Bloomberg Barclays U.S. Aggregate Bond Index (3)

         -2.18%       0.51 %       1.14 %       1.71 %        2.60 %

BofA Merrill Lynch 3-Month LIBOR Constant Maturity Index (3)

         0.61 %       1.17 %       0.73 %       0.54 %        0.50 %

 

* Not annualized.

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 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 returns reported in the financial highlights. A Class shares have a maximum sales charge of 4.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase.

 

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

 

3. The BofA Merrill Lynch 3 Month LIBOR Constant Maturity Index represents the London interbank offered rate (LIBOR) with a constant 3-month average maturity. LIBOR is a composite of the rates of interest at which banks borrow from one another in the London market, and it is a widely used benchmark for short-term interest rates. The Bloomberg Barclays U.S. Aggregate Bond Index is a market weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities.

 

4. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A and C Class shares were 1.12%, 1.20%, 1.39%, 1.51%, and 2.25%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund performed well during the period producing positive returns while interest rates rose and the broader bond market (Bloomberg Barclays Aggregate) was negative. The Fund’s duration remained under one year, which was a significant factor in protecting it from rising interest rates. By comparison, the Bloomberg Barclays U.S. Aggregate Bond Index duration ended the period at 6.1 years. Additionally, a large portion of the Fund’s core holdings were global corporate, sovereign and asset-backed securities, which provided incremental yield to the portfolio. Spread sectors produced mixed results over the period. Floating rate bank loans and high-yield bonds added value as they are inherently more protected from rising rates. On the other hand, investment-grade credit positions gave up a little ground. Overall, the Fund’s weighted-average credit quality remained investment grade.

Within currencies, the Fund reported gains in its long positions in the Malaysian ringgit, Polish zloty, British pound, and South African rand all of which appreciated in value relative to the U.S. dollar.

The Fund reported losses, however, in its short currency positions notably the euro, Taiwan new dollar, and Korean won all of which appreciated during the period relative to the U.S. dollar. The Fund’s largest long foreign currency position, the Mexican peso, suffered over the period as trade protectionism rhetoric from the U.S. and

 

 

2

American Beacon Flexible Bond FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

uncertainty surrounding this year’s presidential election hurt the currency’s prospects. This long position has persisted for several years as the fundamental attractiveness continues despite recent losses.

Looking forward, the Fund’s investment managers will continue to allocate investments across a wide range of global markets seeking to achieve the Fund’s goal of providing a positive total return, regardless of market conditions, over a full market cycle.

 

Top Ten Holdings (% Net Assets)        
U.S. Treasury Notes/Bonds 1.625%, Due 07/31/2019           4.5  
U.S. Treasury Notes/Bonds 1.712%, Due 07/31/2019           3.1  
U.S. Treasury Notes/Bonds 1.722%, Due 04/30/2019           2.4  
Federal National Mortgage Association 3.500%, Due 04/01/2048           2.1  
Japan Treasury Discount Bill, Due 03/31/2018           1.9  
Brazil Notas do Tesouro Nacional Serie F 10.000%, Due 01/31/2017           1.6  
Mexican Bonos Due 7.750%, Due 11/13/2042           1.4  
U.S. Treasury Notes/Bonds 2.000%, Due 05/31/2024           1.4  
Morgan Stanley Due 3.025%, Due 04/30/2018           1.3  
U.S. Treasury Notes/Bonds 2.000%, Due 08/31/2025           1.2  
Total Fund Holdings      388       
       
Sector Allocation (% Investments)        
U.S. Treasury Obligations           20.3  
Foreign Sovereign Obligations           17.4  
Asset-Backed Obligations           15.4  
Financial           14.7  
Collateralized Mortgage Obligations           13.1  
Foreign Government Obligations           4.3  
Consumer, Cyclical           2.9  
U.S. Agency Mortgage-Backed Obligations           2.2  
Energy           2.1  
Communications           1.8  
Consumer, Non-Cyclical           1.6  
Technology           0.9  
Consumer           0.8  
Industrial           0.6  
Commercial Mortgage-Backed Obligations           0.5  
Municipal Obligations           0.3  
Manufacturing           0.3  
Utilities           0.2  
Exchange-Traded Instruments           0.2  
Basic Materials           0.2  
Telecommunications           0.1  
Health Care           0.1  
       
Top Ten Country Weightings (% Investments)        
United States           64.0  
Cayman Islands           6.0  
Mexico           4.0  
Japan           3.9  
South Africa           2.1  
Malaysia           2.1  
Brazil           2.0  
United Kingdom           1.8  
Poland           1.6  
Australia           1.5  

 

 

3

American Beacon Flexible Bond FundSM

Expense Examples

February 28, 2018 (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 September 1, 2017 through February 28, 2018.

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.

 

 

4

American Beacon Flexible Bond FundSM

Expense Examples

February 28, 2018 (Unaudited)

 

 

American Beacon Flexible Bond Fund  
    Beginning Account Value
9/1/2017		   Ending Account Value
2/28/2018		   Expenses Paid During
Period
9/1/2017-2/28/2018*
Institutional Class            
Actual       $1,000.00       $1,012.20       $4.49
Hypothetical**       $1,000.00       $1,020.30       $4.51
Y Class            
Actual       $1,000.00       $1,011.10       $4.94
Hypothetical**       $1,000.00       $1,019.90       $4.96
Investor Class            
Actual       $1,000.00       $1,010.40       $6.33
Hypothetical**       $1,000.00       $1,018.50       $6.36
A Class            
Actual       $1,000.00       $1,010.30       $6.43
Hypothetical**       $1,000.00       $1,018.40       $6.46
C Class            
Actual       $1,000.00       $1,006.50       $10.15
Hypothetical**       $1,000.00       $1,014.70       $10.19

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.90%, 0.99%, 1.27%, 1.29%, and 2.04% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

 

 

5

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
BANK LOAN OBLIGATIONSA - 1.48%            
Basic Materials - 0.16%            
Golden Nugget, Inc., 4.979%, Due 10/4/2023, 2017 Incremental Term Loan, (1 mo. LIBOR + 3.250%)     $ 198,992         $ 200,510
           

 

 

  
           
Consumer - 0.79%            
Burlington Coat Factory Warehouse Corporation, 4.090%, Due 11/17/2024, 2017 Term Loan B5, (3 mo. LIBOR + 2.500%)           294,263           294,721
Hilton Worldwide Finance, LLC, 3.621%, Due 10/25/2023, Term Loan B2, (1 mo. LIBOR + 2.000%)       690,972           694,641
           

 

 

  
              989,362
           

 

 

  
           
Energy - 0.08%            
Energy Future Intermediate Holding Co. LLC, 4.474%, Due 6/30/2018, 2017 DIP Term Loan, (1 Week LIBOR + 3.000%)       100,000           99,988
           

 

 

  
           
Health Care - 0.08%            
Centene Corporation, 0.000%, Due 9/13/2018, Bridge Term LoanB M       100,000           99,625
           

 

 

  
           
Manufacturing - 0.25%            
Air Canada, 3.984%, Due 10/6/2023, 2017 Term Loan B, (3 mo. LIBOR + 2.000%)       89,775           90,112
Allison Transmission, Inc., 3.650%, Due 9/23/2022, New Term Loan B3, (1 mo. LIBOR + 2.000%)       222,875           224,749
           

 

 

  
              314,861
           

 

 

  
           
Telecommunications - 0.12%            
CenturyLink, Inc., 4.398%, Due 1/31/2025, 2017 Term Loan B, (1 mo. LIBOR + 2.750%)       50,000           49,113
Charter Communications Operating, LLC, 3.650%, Due 4/30/2025, 2017 Term Loan B, (1 mo. LIBOR + 2.000%)       98,500           98,685
           

 

 

  
              147,798
           

 

 

  
           

Total Bank Loan Obligations (Cost $1,845,922)

               1,852,144
           

 

 

  
           
CORPORATE OBLIGATIONS - 17.61%            
Communications - 1.55%            
Amazon.com, Inc., 4.050%, Due 8/22/2047C       100,000           99,370
AT&T, Inc.,            

2.450%, Due 6/30/2020

       100,000           98,925

2.850%, Due 2/14/2023

       260,000           258,719
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.908%, Due 7/23/2025       100,000           102,800
DISH DBS Corp., 7.875%, Due 9/1/2019       100,000           105,500
NBCUniversal Enterprise, Inc., 2.095%, Due 4/1/2021, (3 mo. USD LIBOR + 0.400%)C D       775,000           778,523
Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC, 3.360%, Due 3/20/2023C       187,500           187,969
T-Mobile USA, Inc., 6.500%, Due 1/15/2024       15,000           15,713
Verizon Communications, Inc.,            

3.125%, Due 3/16/2022

       200,000           198,699

4.125%, Due 3/16/2027

       100,000           101,582
           

 

 

  
              1,947,800
           

 

 

  
           
Consumer, Cyclical - 2.62%            
American Airlines Pass Through Trust, 3.250%, Due 4/15/2030       97,245           93,586
Continental Airlines Pass Through Trust, 6.125%, Due 4/29/2018       210,000           211,313
Daimler Finance North America LLC,            

2.300%, Due 1/6/2020C

       200,000           197,829

2.354%, Due 2/22/2021C E

       665,000           665,075
eBay, Inc., 2.637%, Due 1/30/2023, (3 mo. USD LIBOR + 0.870%)D       91,000           91,428
Ford Motor Credit Co. LLC,            

2.489%, Due 6/15/2018, (3 mo. USD LIBOR + 0.900%)D

       745,000           746,052

2.979%, Due 8/3/2022

       250,000           242,051
General Motors Financial Co., Inc.,            

2.650%, Due 4/13/2020, (3 mo. USD LIBOR + 0.930%)D

       795,000           803,876

3.003%, Due 6/30/2022, (3 mo. USD LIBOR + 1.310%)D

       160,000           163,157
PetSmart, Inc., 5.875%, Due 6/1/2025C       100,000           78,000
           

 

 

  
              3,292,367
           

 

 

  
           

 

See accompanying notes

 

6

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
CORPORATE OBLIGATIONS - 17.61% (continued)            
Consumer, Non-Cyclical - 1.31%            
Becton Dickinson and Co., 2.881%, Due 12/29/2020E     $ 160,000         $ 160,186
Cardinal Health, Inc., 2.616%, Due 6/15/2022       210,000           203,217
Celgene Corp., 2.750%, Due 2/15/2023       70,000           67,875
Conagra Brands, Inc., 2.204%, Due 10/9/2020E       50,000           50,037
Constellation Brands, Inc., 2.250%, Due 11/6/2020       90,000           88,203
Dignity Health, 2.637%, Due 11/1/2019       300,000           298,822
ERAC USA Finance LLC, 4.500%, Due 8/16/2021C       100,000           104,323
HCA Healthcare, Inc., 6.250%, Due 2/15/2021       50,000           52,625
HCA, Inc., 6.500%, Due 2/15/2020       100,000           105,500
Smithfield Foods, Inc., 3.350%, Due 2/1/2022C       195,000           191,587
Teva Pharmaceutical Finance IV LLC, 2.250%, Due 3/18/2020       50,000           48,375
Universal Health Services, Inc.,            

3.750%, Due 8/1/2019C

       100,000           100,750

4.750%, Due 8/1/2022C

       70,000           70,875
Zimmer Biomet Holdings, Inc., 3.150%, Due 4/1/2022       100,000           98,408
           

 

 

  
              1,640,783
           

 

 

  
           
Energy - 0.88%            
Cheniere Corpus Christi Holdings LLC, 5.875%, Due 3/31/2025       70,000           74,025
Extraction Oil & Gas, Inc., 7.375%, Due 5/15/2024C       100,000           105,500
Kinder Morgan, Inc.,            

5.000%, Due 2/15/2021C

       205,000           213,885

5.200%, Due 3/1/2048

       130,000           130,123
MPLX LP,            

4.500%, Due 4/15/2038

       35,000           33,958

4.900%, Due 4/15/2058

       40,000           38,480
Murphy Oil Corp., 5.750%, Due 8/15/2025       100,000           99,650
Newfield Exploration Co., 5.375%, Due 1/1/2026       100,000           103,250
ONEOK, Inc., 4.250%, Due 2/1/2022       85,000           87,150
Sabine Pass Liquefaction LLC,            

5.750%, Due 5/15/2024

       100,000           107,989

5.000%, Due 3/15/2027

       100,000           103,864
           

 

 

  
              1,097,874
           

 

 

  
           
Financial - 9.73%            
2013-2 Aviation Loan Trust, 3.699%, Due 12/15/2022, (3 mo. USD LIBOR + 2.110%)C D       57,374           57,254
AGFC Capital Trust I, 3.472%, Due 1/15/2067, (3 mo. USD LIBOR + 1.750%)C D       300,000           153,000
American Express Credit Corp., 2.382%, Due 7/31/2018, (3 mo. USD LIBOR + 0.610%)D       820,000           821,104
Ares Capital Corp., 3.500%, Due 2/10/2023       150,000           145,390
Athene Global Funding, 2.750%, Due 4/20/2020C       200,000           198,407
Bank of America Corp.,            

5.650%, Due 5/1/2018

       500,000           502,895

2.762%, Due 1/15/2019, (3 mo. USD LIBOR + 1.040%)D

       700,000           705,130

2.565%, Due 4/1/2019, (3 mo. USD LIBOR + 0.870%)D

       535,000           539,062

2.369%, Due 7/21/2021, (3 mo. USD LIBOR + 0.660%)D

       200,000           197,147

3.004%, Due 12/20/2023C E

       107,000           104,741

4.125%, Due 1/22/2024

       100,000           103,432

4.383%, Due 10/21/2025E F G

     MXN     3,000,000           194,158
Blackstone CQP Holdco LP, 6.500%, Due 3/20/2021C       50,000           50,437
Brookfield Finance LLC, 4.000%, Due 4/1/2024       50,000           50,572
CIT Group, Inc., 5.800%, Due 6/15/2022, (3 mo. USD LIBOR + 3.972%)D       100,000           101,000
Citibank NA, 2.189%, Due 2/12/2021E       590,000           589,675
Citigroup, Inc.,            

2.450%, Due 4/27/2018, (3 mo. USD LIBOR + 0.690%)D

       595,000           595,428

2.900%, Due 12/8/2021

       240,000           236,900

2.750%, Due 4/25/2022

       50,000           48,898

2.876%, Due 7/24/2023, (3 mo. USD LIBOR + 0.950%)D

       50,000           48,794

2.985%, Due 5/17/2024, (3 mo. USD LIBOR + 1.100%)D

       150,000           152,524
Exela Intermediate LLC / Exela Finance, Inc., 10.000%, Due 7/15/2023C       50,000           49,813
Five Corners Funding Trust, 4.419%, Due 11/15/2023C       100,000           104,908
Goldman Sachs Group, Inc.,            

7.500%, Due 2/15/2019

       232,000           242,245

2.600%, Due 4/23/2020

       130,000           128,985

5.750%, Due 1/24/2022

       58,000           62,904

2.876%, Due 10/31/2022E

       100,000           98,033

 

See accompanying notes

 

7

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
CORPORATE OBLIGATIONS - 17.61% (continued)            
Financial - 9.73% (continued)            
Goldman Sachs Group, Inc., (continued)            

2.556%, Due 2/23/2023E

     $ 1,150,000         $ 1,150,815

2.545%, Due 6/5/2023, (3 mo. USD LIBOR + 1.050%)D

       200,000           202,435

2.741%, Due 7/24/2023, (3 mo. USD LIBOR + 1.000%)D

       100,000           100,980
International Lease Finance Corp.,            

3.875%, Due 4/15/2018

       130,000           130,247

5.875%, Due 4/1/2019

       80,000           82,598

4.625%, Due 4/15/2021

       70,000           72,316
JPMorgan Chase & Co.,            

2.750%, Due 6/23/2020

       250,000           249,273

4.400%, Due 7/22/2020

       10,000           10,343

3.486%, Due 3/1/2021, (3 mo. USD LIBOR + 1.480%)D

       300,000           310,445

3.220%, Due 3/1/2025, (3 mo. USD LIBOR + 1.155%)D

       100,000           98,085
KeyCorp, 2.900%, Due 9/15/2020       100,000           99,808
Metropolitan Life Global Funding I, 1.833%, Due 9/19/2019C E       450,000           450,898
Morgan Stanley,            

3.025%, Due 4/25/2018, (3 mo. USD LIBOR + 1.280%)D

       1,600,000           1,602,494

7.300%, Due 5/13/2019

       300,000           315,687

5.500%, Due 7/24/2020

       350,000           370,329
Navient Corp., 4.875%, Due 6/17/2019       100,000           101,125
Provident Funding Associates LP / PFG Finance Corp., 6.375%, Due 6/15/2025C       50,000           51,125
Regions Financial Corp., 2.750%, Due 8/14/2022       100,000           97,476
Voya Financial, Inc., 4.700%, Due 1/23/2048C E       50,000           47,771
Wells Fargo & Co.,            

2.600%, Due 7/22/2020

       100,000           99,203

2.625%, Due 7/22/2022

       300,000           291,233
           

 

 

  
              12,217,522
           

 

 

  
           
Industrial - 0.51%            
Crown Americas LLC / Crown Americas Capital Corp., 4.750%, Due 2/1/2026C       100,000           98,500
GATX Corp., 2.507%, Due 11/5/2021E       100,000           100,505
Harris Corp., 2.247%, Due 4/30/2020E       100,000           100,252
Roper Technologies, Inc., 2.800%, Due 12/15/2021       240,000           235,596
Textron, Inc., 2.361%, Due 11/10/2020E       100,000           100,023
           

 

 

  
              634,876
           

 

 

  
           
Technology - 0.77%            
Broadcom Corp. / Broadcom Cayman Finance Ltd., 3.000%, Due 1/15/2022       100,000           97,727
Dell International LLC / EMC Corp.,            

3.480%, Due 6/1/2019C

       50,000           50,317

4.420%, Due 6/15/2021C

       270,000           275,670
Electronic Arts, Inc., 3.700%, Due 3/1/2021       70,000           71,539
First Data Corp., 5.375%, Due 8/15/2023C       210,000           213,656
Hewlett Packard Enterprise Co., 3.600%, Due 10/15/2020       260,000           262,986
           

 

 

  
              971,895
           

 

 

  
           
Utilities - 0.24%            
Dominion Energy, Inc., 2.000%, Due 8/15/2021       110,000           105,646
FirstEnergy Corp., 2.850%, Due 7/15/2022, Series A       100,000           97,191
Sempra Energy, 2.039%, Due 3/15/2021E       100,000           100,171
           

 

 

  
              303,008
           

 

 

  
           

Total Corporate Obligations (Cost $22,326,581)

               22,106,125
           

 

 

  
           
FOREIGN CORPORATE OBLIGATIONS - 6.74%            
Communications - 0.26%            
SFR Group S.A., 5.625%, Due 5/15/2024F     EUR     100,000           123,512
Tencent Holdings Ltd., 2.875%, Due 2/11/2020C       200,000           200,124
           

 

 

  
              323,636
           

 

 

  
           
Consumer, Cyclical - 0.29%            
1011778 BC ULC / New Red Finance, Inc., 4.250%, Due 5/15/2024C       100,000           95,500
Alimentation Couche-Tard, Inc., 2.700%, Due 7/26/2022C       150,000           145,066
IHO Verwaltungs GmbH, 3.750%, Due 9/15/2026, (PIK + 4.500%)F     EUR 100,000           128,710
           

 

 

  
              369,276
           

 

 

  
           

 

See accompanying notes

 

8

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
FOREIGN CORPORATE OBLIGATIONS - 6.74% (continued)            
Consumer, Non-Cyclical - 0.31%            
Allergan Funding SCS, 3.000%, Due 3/12/2020     $ 100,000         $ 99,931
Teva Pharmaceutical Finance Netherlands III B.V.,            

1.400%, Due 7/20/2018

       100,000           99,749

2.200%, Due 7/21/2021

       200,000           185,307
           

 

 

  
              384,987
           

 

 

  
           
Energy - 1.09%            
Cenovus Energy, Inc., 5.700%, Due 10/15/2019       100,000           103,778
Enbridge, Inc., 2.108%, Due 1/10/2020E       150,000           150,026
Petrobras Global Finance B.V.,            

8.375%, Due 5/23/2021

       150,000           167,773

5.999%, Due 1/27/2028C

       291,000           286,635
Ras Laffan Liquefied Natural Gas Co., Ltd. III, 6.750%, Due 9/30/2019F       250,000           263,750
Sinopec Group Overseas Development 2014 Ltd., 4.375%, Due 4/10/2024F       200,000           205,963
Sinopec Group Overseas Development 2017 Ltd., 2.250%, Due 9/13/2020C       200,000           195,738
           

 

 

  
              1,373,663
           

 

 

  
           
Financial - 4.57%            
Barclays PLC, 8.250%, Due 12/15/2018, (5-Yr. Semi-Annual USD Swap + 6.705%)D       100,000           103,750
BNP Paribas S.A., 2.950%, Due 5/23/2022C       200,000           196,345
BNZ International Funding Ltd., 2.400%, Due 2/21/2020C       250,000           247,507
BPCE S.A., 2.864%, Due 5/31/2022, (3 mo. USD LIBOR + 0.880%)D       250,000           253,700
Credit Suisse AG, 6.500%, Due 8/8/2023C       100,000           110,250
Credit Suisse Group Funding Guernsey Ltd., 3.750%, Due 3/26/2025       250,000           246,781
Deutsche Bank AG, 4.250%, Due 10/14/2021       200,000           203,992
DNB Bank ASA, 2.375%, Due 6/2/2021C       300,000           293,600
Emerald Bay S.A., 0.010%, Due 10/8/2020C     EUR 49,000           55,446
Lloyds Banking Group PLC,            

7.625%, Due 6/27/2023, (5-Yr. GBP Swap + 5.010%)D F

     GBP     500,000           786,439

2.907%, Due 11/7/2023E

       200,000           193,501
Macquarie Bank Ltd., 2.047%, Due 4/4/2019C E       445,000           445,234
Macquarie Group Ltd., 3.189%, Due 11/28/2023C E       130,000           126,164
Mitsubishi UFJ Financial Group, Inc.,            

2.190%, Due 9/13/2021

       200,000           193,745

2.998%, Due 2/22/2022

       210,000           206,814
Mizuho Financial Group, Inc., 2.632%, Due 4/12/2021C       210,000           206,442
National Australia Bank Ltd., 2.414%, Due 5/22/2020, (3 mo. USD LIBOR + 0.510%)C D       485,000           487,151
Nationwide Building Society, 10.250%, Due 12/31/2049, Series CCDSE F     GBP 25,000           53,003
Nordea Bank AB, 4.875%, Due 5/13/2021C       200,000           209,092
Royal Bank of Scotland PLC, 6.934%, Due 4/9/2018F     EUR 50,000           61,438
Santander UK PLC, 2.500%, Due 3/14/2019       300,000           299,651
Sumitomo Mitsui Financial Group, Inc., 2.784%, Due 7/12/2022       100,000           97,721
Toronto-Dominion Bank, 2.704%, Due 4/7/2021, (3 mo. USD LIBOR + 1.000%)D       150,000           153,083
UBS AG, 5.125%, Due 5/15/2024F       300,000           309,537
UBS Group Funding Switzerland AG, 2.789%, Due 8/15/2023C E       200,000           202,004
           

 

 

  
              5,742,390
           

 

 

  
           
Industrial - 0.08%            
Park Aerospace Holdings Ltd., 5.500%, Due 2/15/2024C       100,000           100,500
           

 

 

  
           
Technology - 0.14%            
Seagate HDD Cayman, 3.750%, Due 11/15/2018       170,000           171,581
           

 

 

  
           

Total Foreign Corporate Obligations (Cost $8,541,299)

               8,466,033
           

 

 

  
           
FOREIGN SOVEREIGN OBLIGATIONS - 21.41%            
Argentina Bonar Bonds, 24.918%, Due 4/3/2022, (BADLARP Index + 2.000%)D     ARS 267,000           14,681
Argentina POM Politica Monetaria, 27.835%, Due 6/21/2020, Series POME     ARS     4,326,000           245,172
Argentine Republic Government International Bond,            

3.875%, Due 1/15/2022F

     EUR 300,000           375,516

5.875%, Due 1/11/2028

       100,000           93,450

6.875%, Due 1/11/2048

       100,000           91,500

 

See accompanying notes

 

9

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
FOREIGN SOVEREIGN OBLIGATIONS - 21.41% (continued)            
Australia Government Bond, 2.750%, Due 10/21/2019, Series 143F     AUD 1,065,000         $ 838,278
Brazil Notas do Tesouro Nacional Serie F, 10.000%, Due 1/1/2027     BRL 6,150,000           1,973,822
Corp. Andina de Fomento, 2.000%, Due 5/10/2019     $ 425,000           421,991
Dominican Republic International Bond, 7.500%, Due 5/6/2021C       260,000           280,280
Egypt Government International Bond, 5.577%, Due 2/21/2023C       200,000           203,386
Georgia Government International Bond, 6.875%, Due 4/12/2021F       200,000           218,762
Guatemala Government Bond, 5.750%, Due 6/6/2022C       240,000           252,485
Hellenic Republic Government Bond, 4.750%, Due 4/17/2019C F     EUR 50,000           63,064
Honduras Government International Bond, 8.750%, Due 12/16/2020C       240,000           264,130
Hungary Government International Bond, 6.250%, Due 1/29/2020       380,000           403,655
Indonesia Treasury Bond,            

8.375%, Due 3/15/2024

     IDR 4,090,000,000           327,236

9.000%, Due 3/15/2029

     IDR 500,000,000           41,536

8.750%, Due 2/15/2044

     IDR     9,500,000,000           780,532
Japan Treasury Discount Bill,            

(0.165%), Due 3/12/2018, Series 706

     JPY 90,000,000           843,549

(0.163%), Due 3/19/2018, Series 726

     JPY 250,000,000           2,343,238

(0.145%), Due 4/16/2018, Series 732

     JPY 100,000,000           937,390
Kenya Government International Bond, 5.875%, Due 6/24/2019C       200,000           205,250
Kommunalbanken A/S, 1.930%, Due 6/16/2020, (3 mo. USD LIBOR + 0.330%)C D       634,000           638,172
Kuwait International Government Bond, 3.500%, Due 3/20/2027C       200,000           195,782
Malaysia Government Bond,            

3.659%, Due 10/15/2020

     MYR 2,080,000           533,804

4.048%, Due 9/30/2021

     MYR 1,105,000           286,504

3.882%, Due 3/10/2022, Series 0117

     MYR 1,490,000           383,950

3.480%, Due 3/15/2023

     MYR 2,885,000           726,441

3.955%, Due 9/15/2025

     MYR 785,000           199,619

3.900%, Due 11/30/2026

     MYR 290,000           72,946

3.899%, Due 11/16/2027

     MYR 1,330,000           335,447
Mexican Bonos Desarr,            

8.500%, Due 5/31/2029H

     MXN 25,600,000           1,440,056

7.750%, Due 11/23/2034H

     MXN 6,500,000           342,912

8.500%, Due 11/18/2038H

     MXN 24,500,000           1,382,532

7.750%, Due 11/13/2042H

     MXN 33,000,000           1,724,344
Nigeria Government International Bond, 5.125%, Due 7/12/2018F       200,000           200,608
Peru Government Bond, 6.150%, Due 8/12/2032C F     PEN 3,280,000           1,099,833
Republic of Poland Government Bond,            

0.000%, Due 4/25/2019, Series 0419

     PLN 635,000           182,565

3.250%, Due 7/25/2019, Series 0719

     PLN 2,130,000           636,766

1.500%, Due 4/25/2020, Series 0420

     PLN 2,230,000           649,540

3.250%, Due 7/25/2025

     PLN 1,630,000           480,843
Republic of South Africa Government Bond,            

6.500%, Due 2/28/2041

     ZAR     13,760,000           882,390

8.750%, Due 2/28/2048

     ZAR 17,970,000           1,474,473
Republic of South Africa Government International Bond, 5.500%, Due 3/9/2020       200,000           207,600
Saudi Government International Bond, 4.625%, Due 10/4/2047C       200,000           192,505
Serbia International Bond, 5.875%, Due 12/3/2018C       240,000           245,040
Sri Lanka Government International Bond, 6.250%, Due 7/27/2021C       200,000           207,310
Turkey Government Bond, 10.600%, Due 2/11/2026     TRY 1,405,000           349,633
Turkey Government International Bond, 5.625%, Due 3/30/2021       200,000           207,888
Ukraine Government International Bond, 7.750%, Due 9/1/2019F       150,000           156,315
Vietnam Government International Bond, 6.750%, Due 1/29/2020C       200,000           211,756
           

 

 

  
           

Total Foreign Sovereign Obligations (Cost $28,144,647)

               26,866,477
           

 

 

  
           
ASSET-BACKED OBLIGATIONS - 15.18%            
Ameriquest Mortgage Securities, Inc. Asset-Backed Pass-Through Ctfs Ser, 3.571%, Due 6/25/2034, 2004 R4 M2, (1 mo. USD LIBOR + 1.950%)D       839,573           798,696
Apidos CLO, 5.545%, Due 10/20/2027, 2015-22A C, (3 mo. USD LIBOR + 3.800%)C D       400,000           404,743
Blackrock European CLO IV DAC, 0.850%, Due 7/15/2030, 4A AC E     EUR 250,000           306,463
Carlyle Global Market Strategies CLO Ltd.,            

2.745%, Due 4/20/2027, 2015-1A AR, (3 mo. USD LIBOR + 1.000%)C D

       300,000           300,645

3.230%, Due 4/27/2027, 2015-2A A1, (3 mo. USD LIBOR + 1.470%)C D

       250,000           250,206
Carlyle Global Market Strategies Euro CLO DAC, 0.730%, Due 9/21/2029, 2015-2A AA1RC E     EUR 250,000           306,266
Carrington Mortgage Loan Trust Series, 1.881%, Due 2/25/2037, 2007 FRE1 A3, (1 mo. USD LIBOR + 0.260%)D       500,000           455,828

 

See accompanying notes

 

10

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
ASSET-BACKED OBLIGATIONS - 15.18% (continued)            
Catamaran CLO Ltd., 2.363%, Due 1/27/2028, 2013-1A ARC E     $ 250,000         $ 250,826
CIFC Funding Ltd., 2.502%, Due 4/15/2027, 2015-2A ARC E       250,000           249,998
Citigroup Mortgage Loan Trust, 1.701%, Due 1/25/2037, 2007 AMC2 A3A, (1 mo. USD LIBOR + 0.080%)D       128,035           91,105
Countrywide Asset-Backed Certificates, 1.751%, Due 12/25/2036, 2006 12 1A, (1 mo. USD LIBOR + 0.130%)D       121,938           110,892
CWABS Asset-Backed Certificates Trust, 2.626%, Due 8/25/2035, 2005 3 MV5, (1 mo. USD LIBOR + 1.005%)D       400,000           403,876
Domino’s Pizza Master Issuer LLC,            

2.995%, Due 7/25/2047, 2017 1A A2I, (3 mo. USD LIBOR + 1.250%)C D

       398,000           398,040

3.082%, Due 7/25/2047, 2017 1A A2IIC

       398,000           388,635
Dryden 31 Senior Loan Fund, 2.814%, Due 4/18/2026, 2014-31A AR, (3 mo. USD LIBOR + 1.080%)C D       260,000           260,257
First Franklin Mortgage Loan Trust, 1.981%, Due 11/25/2035, 2005 FF10 A5, (1 mo. USD LIBOR + 0.360%)D       1,000,000           941,795
First Investors Auto Owner Trust, 4.700%, Due 4/18/2022, 2016 1A DC       500,000           506,787
GoldenTree Loan Opportunities VII Ltd., 2.895%, Due 4/25/2025, 2013-7A A, CLO, (3 mo. USD LIBOR + 1.150%)C D       266,437           266,491
GSAMP Trust, 1.741%, Due 12/25/2036, 2007 FM1 A2B, (1 mo. USD LIBOR + 0.120%)D       1,367,619           726,873
Halcyon Loan Advisors Funding Ltd., 2.665%, Due 4/20/2027, 2015-1A ARC D       250,000           250,105
Invitation Homes Trust,            

2.940%, Due 6/17/2032, 2015 SFR2 A, (1 mo. LIBOR + 1.350%)C D

       289,981           290,869

2.268%, Due 3/17/2037, 2018 SFR1 AC E

       100,000           100,060
JFIN CLO Ltd., 2.695%, Due 4/21/2025, 2014-1A ARC E       300,000           299,969
Madison Park Funding XIII Ltd., 2.849%, Due 1/19/2025, 2014-13A AR, CLO, (3 mo. USD LIBOR + 1.110%)C D       250,000           250,108
Madison Park Funding XIV Ltd., 4.995%, Due 7/20/2026, 2014-14A DR, (3 mo. USD LIBOR + 3.250%)C D       250,000           250,468
Marathon CLO V Ltd., 2.762%, Due 11/21/2027, 2013-5A A1RC E       250,000           250,054
Mastr Specialized Loan Trust, 1.881%, Due 2/25/2036, 2006 2 A, (1 mo. USD LIBOR + 0.260%)C D       637,014           605,034
Morgan Stanley ABS Capital I, Inc. Trust,            

1.671%, Due 7/25/2036, 2006 WMC2 A2FP, (1 mo. USD LIBOR + 0.050%)D

       45,340           24,633

1.771%, Due 11/25/2036, 2007 HE1 A2C, (1 mo. USD LIBOR + 0.150%)D

       432,993           298,338

1.681%, Due 12/25/2036, 2007 HE3 A2A, (1 mo. USD LIBOR + 0.060%)D

       393,891           249,332
Morgan Stanley Home Equity Loan Trust, 1.721%, Due 4/25/2037, 2007 2 A1, (1 mo. USD LIBOR + 0.100%)D       986,311           644,599
Nomura Home Equity Loan, Inc. Home Equity Loan Trust Series, 1.951%, Due 10/25/2036, 2006 AF1 A4, (1 mo. USD LIBOR + 0.330%)D       1,010,428           367,653
Oakwood Mortgage Investors, Inc., 6.610%, Due 6/15/2031, 2001 C A3E       304,429           99,373
OCP CLO Ltd.,            

2.581%, Due 4/17/2027, 2015-8A A1RC E

       250,000           250,045

2.522%, Due 7/15/2027, 2015-9A A1RC E

       250,000           250,175

2.573%, Due 10/26/2027, 2015-10A A1RC E

       200,000           200,004
Octagon Investment Partners 24 Ltd.,            

2.792%, Due 5/21/2027, 2015-1A A1R, CLOC E

       250,000           250,107

3.242%, Due 5/21/2027, 2015-1A A2AR, CLOC E

       250,000           250,097
OHA Credit Partners VIII Ltd., 2.865%, Due 4/20/2025, 2013-8A A, CLO, (3 mo. USD LIBOR + 1.120%)C D       374,840           375,520
OHA Credit Partners XI Ltd., 6.045%, Due 10/20/2028, 2015-11A D, CLO, (3 mo. USD LIBOR + 4.300%)C D       250,000           254,073
Prestige Auto Receivables Trust, 5.150%, Due 11/15/2021, 2016 1A DC       400,000           406,741
RAAC Series Trust, 2.021%, Due 9/25/2045, 2006 SP1 M1, (1 mo. USD LIBOR + 0.400%)D       800,000           766,020
RASC Series Trust, 2.061%, Due 1/25/2036, 2005 KS12 M1, (1 mo. USD LIBOR + 0.440%)D       134,744           134,920
Renaissance Home Equity Loan Trust, 5.612%, Due 4/25/2037, 2007 1 AF3I       934,749           473,273
Shackleton CLO Ltd., 2.665%, Due 10/20/2027, 2015-8A A1RC E       250,000           250,115
Sierra Madre Funding Ltd., 1.960%, Due 9/7/2039, 2004-1A A1A, (1 mo. USD LIBOR + 0.380%)C D       417,784           353,792
Sound Point CLO VIII Ltd., 2.582%, Due 4/15/2027, 2015-1A ARC E       250,000           250,165
Springleaf Funding Trust, 2.680%, Due 7/15/2030, 2017 AA AC       200,000           197,124
Taco Bell Funding LLC, 3.832%, Due 5/25/2046, 2016 1A A2IC       355,500           358,223
Thacher Park CLO Ltd., 2.905%, Due 10/20/2026, 2014-1A AR, (3 mo. USD LIBOR + 1.160%)C D       500,000           501,484
Tralee CLO III Ltd., 2.775%, Due 10/20/2027, 2014-3A ARC E       250,000           250,386
Venture XVI CLO Ltd., 1.786%, Due 1/15/2028, 2014-16A ARRC E       100,000           100,008
Venture XX CLO Ltd., 2.542%, Due 4/15/2027, 2015-20A ARC E       250,000           249,997
Vibrant CLO VII Ltd., 3.015%, Due 9/15/2030, 2017-7A A1, (3 mo. USD LIBOR + 1.270%)C D       400,000           402,713

 

See accompanying notes

 

11

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
ASSET-BACKED OBLIGATIONS - 15.18% (continued)            
VOLT XXXVIII LLC, 3.875%, Due 9/25/2045, 2015 NP12 A1C I     $ 204,801         $ 205,291
Voya CLO Ltd., 2.465%, Due 7/25/2026, 2014-3A A1RC E       250,000           250,006
Wells Fargo Home Equity Asset-Backed Securities Trust, 1.851%, Due 4/25/2037, 2007 2 A3, (1 mo. USD LIBOR + 0.230%)D       354,246           335,688
Westlake Automobile Receivables Trust,            

4.100%, Due 6/15/2021, 2016 2A DC

       250,000           253,604

3.410%, Due 5/15/2023, 2018 1A DC

       80,000           79,874
           

 

 

  
           

Total Asset-Backed Obligations (Cost $18,658,289)

               19,048,462
           

 

 

  
           
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.84%            
Adjustable Rate Mortgage Trust, 3.645%, Due 9/25/2035, 2005-5 2A1E       41,672           39,519
Alternative Loan Trust,            

6.000%, Due 10/25/2033, 2003-J2 A1

       15,784           16,352

2.351%, Due 11/25/2035, 2005-56 1A1, (1 mo. USD LIBOR + 0.730%)D

       723,404           713,352

6.500%, Due 9/25/2036, 2006-J5 1A1

       574,161           472,195

1.804%, Due 7/20/2046, 2006-OA9 2A1A, (1 mo. USD LIBOR + 0.210%)D

       7,552           5,550

1.811%, Due 9/25/2046, 2006-OA11 A1B, (1 mo. USD LIBOR + 0.190%)D

       9,909           8,802
American Home Mortgage Investment Trust,            

3.606%, Due 10/25/2034, 2004-3 5A, (12 mo. USD LIBOR + 1.500%)D

       12,051           12,101

3.428%, Due 9/25/2045, 2005-2 4A1, (6 mo. USD LIBOR + 1.500%)D

       2,799           2,807
Banc of America Alternative Loan Trust, 2.021%, Due 5/25/2035, 2005-4 CB6, (1 mo. USD LIBOR + 0.400%)D       29,619           24,862
Banc of America Funding Trust, 1.894%, Due 5/20/2047, 2007-C 7A5, (1 mo. USD LIBOR + 0.300%)D       178,490           163,640
Bank of America Mortgage Trust, 4.162%, Due 7/20/2032, 2002-G 1A3E       2,558           2,594
Bear Stearns ALT-A Trust,            

3.503%, Due 11/25/2036, 2006-6 32A1E

       94,067           79,939

3.762%, Due 12/25/2046, 2006-7 23A1E

       589,988           466,903
Bear Stearns ARM Trust,            

2.781%, Due 11/25/2030, 2000-2 A1E

       18,806           18,157

3.450%, Due 8/25/2033, 2003-5 2A1E

       39,610           39,595

3.732%, Due 8/25/2033, 2003-5 1A1E

       32,412           32,068

3.625%, Due 4/25/2034, 2004-1 22A1E

       499           496

3.861%, Due 11/25/2034, 2004-9 22A1E

       8,714           8,774

3.722%, Due 5/25/2047, 2007-3 1A1E

       19,010           18,248
Chase Mortgage Finance Trust Series,            

5.500%, Due 11/25/2035, 2005-S3 A10

       173,117           164,945

3.701%, Due 2/25/2037, 2007-A1 1A5E

       18,719           18,863

3.448%, Due 3/25/2037, 2007-A1 12M3E

       147,315           126,088
CHL Mortgage Pass-Through Trust,            

3.821%, Due 6/25/2033, 2003-27 A1E

       18,805           18,868

2.381%, Due 9/25/2034, 2004-16 1A4A, (1 mo. USD LIBOR + 0.760%)D

       23,462           23,068

2.201%, Due 4/25/2035, 2005-3 2A1, (1 mo. USD LIBOR + 0.580%)D

       87,771           80,714

2.081%, Due 5/25/2035, 2005-9 1A3, (1 mo. USD LIBOR + 0.460%)D

       88,771           81,621

3.293%, Due 11/20/2035, 2005-HYB7 6A1E

       665,879           605,971

5.750%, Due 5/25/2037, 2007-5 A51

       40,298           36,238

3.453%, Due 2/25/2047, 2007-HYB2 3A1E

       137,539           123,546
Citigroup Mortgage Loan Trust, Inc.,            

3.500%, Due 8/25/2035, 2005-3 2A2AE

       19,228           19,290

2.830%, Due 9/25/2035, 2005-6 A3, (1Yr.CMT + 1.800%)D

       19,738           19,250
CSMC Mortgage-Backed Trust, 6.000%, Due 7/25/2036, 2006-6 1A4       353,534           296,629
First Horizon Alternative Mortgage Securities Trust, 3.441%, Due 9/25/2036, 2006-AA5 A1E       156,601           144,411
Flagstar Mortgage Trust, 3.500%, Due 3/25/2048, 2018-1 A5C E       240,000           239,334
GSMPS Mortgage Loan Trust,            

1.971%, Due 3/25/2035, 2005-RP2 1AF, (1 mo. USD LIBOR + 0.350%)C D

       572,692           524,571

1.971%, Due 9/25/2035, 2005-RP3 1AF, (1 mo. USD LIBOR + 0.350%)C D

       604,139           542,959

2.021%, Due 4/25/2036, 2006-RP2 1AF1, (1 mo. USD LIBOR + 0.400%)C D

       327,783           270,029
GSR Mortgage Loan Trust,            

6.000%, Due 3/25/2032, 2003-2F 3A1

       1,331           1,355

3.233%, Due 6/25/2034, 2004-7 3A1E

       15,143           14,976

3.634%, Due 11/25/2035, 2005-AR7 6A1E

       14,249           14,362
IM Pastor 4 FTA, 0.000%, Due 3/22/2044, 4 A, (3 mo. EUR EURIBOR + 0.140%)D F     EUR      707,049           799,385
JP Morgan Alternative Loan Trust, 5.656%, Due 5/26/2037, 2008-R3 3A1C E N       194,330           167,609
JP Morgan Mortgage Trust,            

3.000%, Due 9/25/2044, 2014-IVR3 2A1C E

       159,401           158,600

3.190%, Due 10/26/2048, 2017-5 A1C E

       479,439           477,112
Morgan Stanley Mortgage Loan Trust, 3.276%, Due 6/25/2036, 2006-8AR 5A4E       13,259           13,558
NACC Reperforming Loan REMIC Trust, 7.500%, Due 3/25/2034, 2004-R1 A2C       74,276           72,941

 

See accompanying notes

 

12

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

 

    Principal Amount*       Fair Value
           
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.84% (continued)            
Nationstar Mortgage Loan Trust, 3.750%, Due 12/25/2052, 2013-A AC E     $ 89,649         $ 90,855
New Century Alternative Mortgage Loan Trust, 5.909%, Due 7/25/2036, 2006-ALT1 AF2E       7,351           4,294
New Residential Mortgage Loan Trust,            

3.750%, Due 5/28/2052, 2015-1A A3C E

       129,016           130,304

3.750%, Due 5/25/2054, 2014-2A A3C E

       188,194           189,978

5.660%, Due 11/25/2054, 2014-3A B3C E

       381,536           399,996

3.750%, Due 8/25/2055, 2015-2A A1C E

       384,965           388,811

4.000%, Due 3/25/2057, 2017-2A A3C E

       295,997           301,702

3.121%, Due 6/25/2057, 2017-5A A1, (1 mo. USD LIBOR + 1.500%)C D

       298,127           306,217
Newgate Funding PLC,            

0.000%, Due 12/1/2050, 2007-1X BB, (3 mo. EUR EURIBOR + 0.220%)D F

     EUR 82,741           91,907

0.000%, Due 12/15/2050, 2007-2X BB, (3 mo. EUR EURIBOR + 0.250%)D F

     EUR 160,031           174,931
Prime Mortgage Trust,2.121%, Due 2/25/2035, 2006-CL1 A1, (1 mo. USD LIBOR + 0.500%)D       49,236           46,768
RALI Series Trust,            

5.750%, Due 9/25/2035, 2005-QS13 2A4

       537,796           526,453

1.871%, Due 2/25/2036, 2006-QA2 1A1, (1 mo. USD LIBOR + 0.250%)D

       392,833           311,978

1.721%, Due 5/25/2037, 2007-QA3 A1, (1 mo. USD LIBOR + 0.100%)D

       238,764           218,832
Residential Asset Securitization Trust, 3.583%, Due 12/25/2034, 2004-IP2 4AE       43,076           42,777
RFMSI Series Trust, 6.000%, Due 5/25/2037, 2007-S5 A4       666,459           635,097
Ripon Mortgages PLC, 1.326%, Due 8/20/2056, 2017-A1 1A, (3 mo. GBP LIBOR + 0.800%)C D     GBP 293,121           406,270
Structured Asset Mortgage Investments II Trust, 2.081%, Due 5/25/2045, 2005-AR2 2A1, (1 mo. USD LIBOR + 0.460%)D       66,423           61,787
Structured Asset Mortgage Investments Trust, 2.270%, Due 11/19/2033, 2003-AR3 A1, (1 mo. USD LIBOR + 0.680%)D       313,901           302,887
WaMu Mortgage Backed Pass Through Certificates Series, 2.578%, Due 12/19/2039, 2001-AR5 1AE       56,604           56,351
WaMu Mortgage Pass-Through Certificates Series Trust,            

3.338%, Due 3/25/2035, 2005-AR3 A1E

       22,539           22,147

3.245%, Due 9/25/2036, 2006-AR10 1A1E

       509,452           493,369

2.767%, Due 1/25/2037, 2006-AR18 1A1E

       846,569           778,770

3.380%, Due 3/25/2037, 2007-HY3 4A1E

       93,166           92,578
Washington Mutual Mortgage Pass-Through Certificates WMALT Series Trust,            

5.500%, Due 11/25/2035, 2005-9 2A2

       139,661           129,414

1.781%, Due 2/25/2037, 2007-HY1 A2A, (1 mo. USD LIBOR + 0.160%)D

       221,273           178,364
Washington Mutual MSC Mortgage Pass-Through Certificates Series Trust, 3.426%, Due 2/25/2033, 2003-AR1 2AE       1,718           1,666
Wells Fargo Mortgage Backed Securities Trust, 3.544%, Due 3/25/2035, 2005-AR3 2A1E       34,713           35,193
           

 

 

  

Total Collateralized Mortgage Obligations (Cost $13,133,494)

               13,601,943
           

 

 

  
           
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 0.52%            
BBCMS Mortgage Trust, 4.088%, Due 8/15/2036, 2017-DELC EC E D       200,000           199,155
Caesars Palace Las Vegas Trust, 3.835%, Due 10/15/2034, 2017-VICI BC       250,000           253,144
FREMF Mortgage Trust, 4.130%, Due 5/25/2024, 2017-KF32 B, (1 mo. LIBOR + 2.550%)C D       197,912           200,376
           

 

 

  

Total Commercial Mortgage-Backed Obligations (Cost $655,301)

               652,675
           

 

 

  
           
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 5.67%            
Federal Home Loan Bank,            

1.319%, Due 3/8/2018

          1,315,000           1,314,626

1.325%, Due 3/9/2018

       455,000           454,853
Federal Home Loan Mortgage Corp.,            

2.821%, Due 7/25/2029, 2017-DNA1 M1, (1 mo. USD LIBOR + 1.200%)D

       347,532           351,556

2.821%, Due 8/25/2029, 2017-HQA1 M1, (1 mo. USD LIBOR + 1.200%)D

       230,994           233,138
Federal National Mortgage Association,            

5.621%, Due 5/25/2025, 2015-C02 1M2, (1 mo. USD LIBOR + 4.000%)D

       383,463           419,599

6.621%, Due 7/25/2025, 2015-C03 2M2, (1 mo. USD LIBOR + 5.000%)D

       169,773           188,377

7.321%, Due 4/25/2028, 2015-C04 1M2, (1 mo. USD LIBOR + 5.700%)D

       480,307           557,295

2.921%, Due 7/25/2029, 2017-C01 1M1, (1 mo. USD LIBOR + 1.300%)D

       243,538           245,748

2.771%, Due 9/25/2029, 2017-C02 2M1, (1 mo. USD LIBOR + 1.150%)D

       353,912           356,505

2.221%, Due 7/25/2030, 2018-C01 1M1E

       99,359           99,491

3.871%, Due 7/25/2030, 2018-C01 1M2E

       200,000           204,404

6.000%, Due 2/25/2044, 2004-T3 1A1

       8,218           9,075

3.000%, Due 2/1/2046

       95,852           92,936

3.500%, Due 4/1/2048

       2,600,000           2,591,217
           

 

 

  

Total U.S. Agency Mortgage-Backed Obligations (Cost $6,959,989)

               7,118,820
           

 

 

  
           

 

See accompanying notes

 

13

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Principal Amount*       Fair Value
           
U.S. TREASURY OBLIGATIONS - 14.52%            
U.S. Treasury Inflation Protected Securities,            

0.250%, Due 1/15/2025G

     $ 1,082,484         $ 1,053,407

2.375%, Due 1/15/2025G

       562,384           627,923

0.625%, Due 1/15/2026G

       466,889           464,284

0.375%, Due 7/15/2027G

       302,343           293,060

3.875%, Due 4/15/2029G

       56,986           75,598
U.S. Treasury Notes/Bonds,            

1.625%, Due 7/31/2019J

       5,700,000           5,655,469

1.250%, Due 8/31/2019

       110,000           108,449

2.000%, Due 1/31/2020

       290,000           288,629

1.375%, Due 3/31/2020

       1,300,000           1,275,371

1.875%, Due 12/15/2020J

       1,400,000           1,380,258

1.375%, Due 6/30/2023

       50,000           46,748

2.250%, Due 1/31/2024

       200,000           194,648

2.750%, Due 2/15/2024

       300,000           300,176

2.000%, Due 4/30/2024

       500,000           478,555

2.500%, Due 5/15/2024

       1,100,000           1,083,844

2.000%, Due 5/31/2024

       1,800,000           1,721,039

2.375%, Due 8/15/2024

       500,000           488,066

2.250%, Due 11/15/2024

       200,000           193,273

2.125%, Due 5/15/2025

       50,000           47,732

2.000%, Due 8/15/2025

       1,600,000           1,511,250

1.625%, Due 2/15/2026

       200,000           182,555

2.375%, Due 5/15/2027J

       780,000           748,099
           

 

 

  

Total U.S. Treasury Obligations (Cost $18,529,488)

               18,218,433
           

 

 

  
           
MUNICIPAL OBLIGATIONS - 0.25%            
City of Chicago IL, 7.750%, Due 1/1/2042, Series B       100,000           108,036
State of Illinois, 7.350%, Due 7/1/2035       100,000           109,698
Texas Public Finance Authority, 8.250%, Due 7/1/2024       100,000           102,738
           

 

 

  

Total Municipal Obligations (Cost $312,754)

               320,472
           

 

 

  
    Shares        
           
EXCHANGE-TRADED INSTRUMENTS - 0.17% (Cost $214,450)            
Exchange-Traded Funds - 0.17%            
iShares iBoxx $ High Yield Corporate Bond ETF       2,500           215,450
           

 

 

  
    Principal Amount*        
           
SHORT-TERM INVESTMENTS - 11.02%            
U.S. Treasury Obligations - 5.52%            
U.S. Treasury Notes/Bonds,            

1.722%, Due 4/30/2019, (3 mo. Treasury money market yield + 0.070%)D

     $ 3,065,000           3,068,275

1.712%, Due 7/31/2019, (3 mo. Treasury money market yield + 0.060%)D

       3,855,000           3,859,622
           

 

 

  
              6,927,897
           

 

 

  
    Shares        
           
Investment Companies - 5.26%            
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.31%K L       6,603,369           6,603,369
           
Certificate of Deposits - 0.24%            
Barclays Bank PLC, 1.940%, Due 9/4/2018       300,000           299,480
           

 

 

  
           

Total Short-Term Investments (Cost $13,827,471)

               13,830,746
           

 

 

  
           

TOTAL INVESTMENTS - 105.41% (Cost $133,149,685)

               132,297,780

PURCHASED OPTIONS AND SWAPTIONS CONTRACTS - 0.08% (Premiums Paid $157,637)

               98,196

WRITTEN OPTIONS AND SWAPTIONS CONTRACTS - (0.16%) (Premiums Received $(262,926))

               (199,414 )

LIABILITIES, NET OF OTHER ASSETS - (5.33%)

               (6,691,696 )
           

 

 

  

TOTAL NET ASSETS - 100.00%

             $ 125,504,866
           

 

 

  
           

Percentages are stated as a percent of net assets.

* In U.S. Dollars unless otherwise noted.

                  

 

See accompanying notes

 

14

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

A Bank loan obligations, unless otherwise stated, carry a floating rate of interest. The coupon rate shown on floating or adjustable rate securities represents the rate at period end.

B Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $99,625 or 0.08% of net assets. Valuation was determined using significant unobservable inputs.

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 $29,807,505 or 23.75% of net assets. The Fund has no right to demand registration of these securities.

D 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 February 28, 2018.

E 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.

F 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.

G Inflation-Indexed Note.

H Par value represents units rather than shares.

I Step Up/Down - A zero coupon bond that converts to a fixed rate or variable interest rate at a designated future date. The rate disclosed represents the coupon rate at February 28, 2018. The maturity date disclosed represents the final maturity date.

J This security or a piece thereof is held as segregated collateral at period end but may not be inclusive of post-settlement trade activity.

K The Fund is affiliated by having the same investment advisor.

L 7-day yield.

M Coupon rates are not available for bank loans that are unsettled and/or unfunded as of February 28, 2018.

N Value was determined using significant unobservable inputs.

BADLARP - Benchmark rate provided by the Banco Central de la Republica Argentina.

CLO - Collateralized Loan Obligation.

CMT - Constant Maturity Treasury.

DIP – Debtor in Possession.

ETF - Exchange-Traded Fund.

EURIBOR - Euro Interbank Offered Rate.

LLC - Limited Liability Company.

LP - Limited Partnership.

PIK - Payment in Kind.

PLC - Public Limited Company.

DAC - Designated Activity Company.

 

Futures Contracts Open on February 28, 2018:
Long Futures Contracts
Interest Rate Futures Contracts
Description      Number of
Contracts		      Expiration Date      Notional Amount      Contract Value      Unrealized
Appreciation
(Depreciation)		  
U.S. Treasury 2-Year Note Futures      5      June 2018      $ 1,062,439      $ 1,062,344      $ (95 ) 
U.S. Treasury Notes/Bonds      27      June 2018        3,072,339        3,076,102        3,763  
U.S. Treasury Notes/Bonds      47      June 2018        5,629,774        5,642,202        12,428  
              

 

 

     

 

 

     

 

 

  
     $ 9,764,552      $ 9,780,648      $ 16,096  
              

 

 

     

 

 

     

 

 

  
Short Futures Contracts                       
Interest Rate Futures Contracts                       
Description      Number of
Contracts		      Expiration Date      Notional Amount      Contract Value      Unrealized
Appreciation
(Depreciation)		  
3-Month Euro Euribor Futures      32      December 2019      $ (9,743,980 )     $ (9,743,544 )     $ 436  
90-Day Eurodollar Futures      78      June 2019        (19,125,433 )       (18,971,550 )       153,883  
Euro-BTP Futures      18      March 2018        (2,996,309 )       (3,004,365 )       (8,056 ) 
Euro-Bund Futures      23      March 2018        (4,490,866 )       (4,472,605 )       18,261  
Euro-OAT Futures      23      March 2018        (4,412,260 )       (4,311,026 )       101,234  
Long GILT Futures      65      June 2018        (10,795,948 )       (10,843,961 )       (48,013 ) 
U.S. Treasury Notes/Bonds      1      June 2018        (142,287 )       (143,438 )       (1,151 ) 
U.S. Treasury Notes/Bonds      2      June 2018        (307,642 )       (311,750 )       (4,108 ) 
              

 

 

     

 

 

     

 

 

  
     $ (52,014,725 )     $ (51,802,239 )     $ 212,486  
              

 

 

     

 

 

     

 

 

  

 

 

See accompanying notes

 

15

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

Centrally Cleared Swap Agreements Outstanding on February 28, 2018:  
Interest Rate Swaps  
Pay/Receive
Floating Rate		    Floating Rate Index    Fixed
Rate
(%)		      Expiration
Date		    Curr    Notional
Amount(4)
(000s)		      Premiums
Paid
(Received)		     Fair Value     Unrealized
Appreciation
(Depreciation)		  
Receive    3-Month USD-LIBOR      1.75      12/16/2018    USD      300      $ (275 )    $ 1,207     $ 1,482  
Receive    3-Month USD-LIBOR      1.75      12/16/2018    USD      4,000        (5,054 )      16,161       21,215  
Receive    3-Month USD-LIBOR      1.25      6/21/2019    USD      2,700        15,236       39,624       24,388  
Receive    6-Month GBP-LIBOR      1.65      1/22/2020    GBP      400        (8,749 )      (6,706 )      2,043  
Receive    3-Month USD-LIBOR      1.25      6/21/2020    USD      1,400        22,857       41,895       19,038  
Receive    6-Month GBP-LIBOR      2.00      3/18/2022    GBP      200        (11,269 )      (7,663 )      3,606  
Pay    3-Month USD-LIBOR      2.25      12/16/2022    USD      400        742       (9,319 )      (10,061 ) 
Pay    6-Month GBP-LIBOR      1.00      3/21/2023    GBP      2,400        23,412       60,644       37,232  
Receive    6-Month EUR-EURIBOR      0.50      3/21/2023    EUR      1,900        22,964       2,952       (20,012 ) 
Receive    6-Month JPY-LIBOR      0.30      3/18/2026    JPY      110,000        (6,024 )      (3,886 )      2,138  
Receive    3-Month USD-LIBOR      2.25      6/15/2026    USD      200        (8,533 )      8,874       17,407  
Receive    3-Month USD-LIBOR      1.75      12/21/2026    USD      590        (5,384 )      52,826       58,210  
Receive    3-Month USD-LIBOR      1.75      12/21/2026    USD      8,100        (89,250 )      706,903       796,153  
Receive    3-Month USD-LIBOR      1.50      6/21/2027    USD      1,900        146,162       215,178       69,016  
Receive    28-Day MXN-TIIE      7.35      9/30/2027    MXN      5,800        (3,173 )      (11,999 )      (8,826 ) 
Pay    6-Month JPY-LIBOR      0.30      3/20/2028    JPY      130,000        7,492       4,431       (3,061 ) 
Receive    6-Month EUR-EURIBOR      1.50      3/21/2048    EUR      400        7,798       13,613       5,815  
Pay    3-Month USD-LIBOR      2.50      6/20/2048    USD      400        46,098       41,569       (4,529 ) 
                 

 

 

    

 

 

    

 

 

  
   $ 155,050     $ 1,166,304     $ 1,011,254  
                 

 

 

    

 

 

    

 

 

  
Credit Default Swaps on Credit Indices – Buy Protection(1)  
Index/Tranches   Fixed
Rate (%)		     Expiration
Date		   Implied Credit
Spread at
2/28/2018(3)
(%)		     Curr   Notional
Amount(4)
(000s)		     Premiums
Paid
(Received)		     Fair Value(5)     Unrealized
Appreciation
(Depreciation)		  
iTraxx Europe Senior Financials     1.00     6/20/2022     0.4200     EUR     300     $ (1,458 )    $ (9,113 )    $ (7,655 ) 
Markit CDX HY     5.00     12/20/2022     3.3432     USD     2,300       (170,435 )      (155,657 )      14,778  
iTraxx Europe Senior Financials     1.00     12/20/2022     0.5242     EUR     400       (9,732 )      (11,044 )      (1,312 ) 
           

 

 

    

 

 

    

 

 

  
            $ (181,625 )    $ (175,814 )    $ 5,811  
           

 

 

    

 

 

    

 

 

  
Credit Default Swaps on Credit Indices – Sell Protection(2)  
Index/Tranches   Fixed
Rate (%)		     Expiration
Date		   Implied Credit
Spread at
2/28/2018(3)
(%)		     Curr   Notional
Amount(4)
(000s)		     Premiums
Paid
(Received)		     Fair Value(5)     Unrealized
Appreciation
(Depreciation)		  
Markit CDX HY     5.00     12/20/2022     3.3900     USD     1,400     $ 93,161     $ 94,748     $ 1,587  
           

 

 

    

 

 

    

 

 

  
            $ 93,161     $ 94,748     $ 1,587  
           

 

 

    

 

 

    

 

 

  

 

OTC Swap Agreements Outstanding on February 28, 2018:        
Credit Default Swaps on Corporate and Sovereign Securities – Sell Protection(2)                    
Reference Entity  

Counter-

Party

   Fixed
Rate (%)		     Expiration
Date		   Implied Credit
Spread at
2/28/2018(3)
(%)		     Curr   Notional
Amount(4)
(000s)		     Premiums
Paid
(Received)		     Fair Value     Unrealized
Appreciation
(Depreciation)		  
Qatar Government International Bond   BRC     1.00     12/20/2018     0.2197     USD     100     $ 448     $ 631     $ 183  
Qatar Government International Bond   GST     1.00     12/20/2018     0.2197     USD     100       374       631       257  
Republic Of Colombia   BRC     1.00     6/20/2021     0.6510     USD     200       (4,455 )      2,206       6,661  
United Mexican States   BRC     1.00     12/20/2021     0.7978     USD     100       (2,899 )      727       3,626  
Federal Republic Of Brazil   GST     1.00     6/20/2022     1.3998     USD     100       (5,607 )      (1,583 )      4,024  
Republic Of Argentina   GST     5.00     6/20/2022     2.3215     USD     50       3,649       5,167       1,518  
Republic Of Argentina   BRC     5.00     6/20/2022     2.3215     USD     50       3,619       5,167       1,548  
Brazilian Government International Bond   GST     1.00     12/20/2022     1.5546     USD     100       (4,429 )      (2,411 )      2,018  
             

 

 

    

 

 

    

 

 

  
              $ (9,300 )    $ 10,535     $ 19,835  
             

 

 

    

 

 

    

 

 

  

 

See accompanying notes

 

16

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

Total Return Swap Agreements  
Pay/Receive
Floating Rate		   Description   Reference Entity  

Counter-

party

   Floating
Rate (%)		     Expiration
Date		     Reference
Quantity		     Notional
Amount		     Premiums
Paid
(Received)		     Unrealized
Appreciation
(Depreciation)		  
Receive   3-Month USD-LIBOR   Markit iBoxx High Yield Index   CBK     1.734       9/20/2018       2,961       800,000     $ -     $ 6,952  
               

 

 

    

 

 

  
                $ -     $ 6,952  
               

 

 

    

 

 

  

(1) If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(3) Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swaps agreements on corporate issues and sovereign issues of an emerging country as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(4) The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(5) The quoted market prices and resulting values for credit default swaps on asset-backed securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/ sold as of the period end. Increasing fair values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

Purchased Options Contracts Outstanding on February 28, 2018:  
Interest Rate Swaptions  
Description  

Counter-

party

   Floating Rate Index   Pay/
Receive
Floating
Rate		  

Exercise

Rate
(%)

     Expiration
Date		   Number of
Contracts		     Premiums
Paid		     Fair Value     Unrealized
Appreciation
(Depreciation)		  
Put – OTC 5-Year IRS   GSC   6-Month GBP-LIBOR   Pay     1.47     3/1/2018     800,000     $ 5,321     $ -     $ (5,321 ) 
Put – OTC 30-Year IRS   GST   3-Month USD-LIBOR   Pay     2.97     9/24/2018     1,200,000       62,100       46,116       (15,984 ) 
Put – OTC 30-Year IRS   CBK   3-Month USD-LIBOR   Pay     2.97     9/24/2018     600,000       30,525       23,058       (7,467 ) 
Call – OTC 2-Year IRS   MSC   3-Month USD-LIBOR   Pay     1.65     11/15/2018     4,700,000       26,673       387       (26,286 ) 
Put – OTC 30-Year IRS   MSC   3-Month USD-LIBOR   Pay     3.05     12/12/2018     600,000       28,848       22,935       (5,913 ) 
             

 

 

    

 

 

    

 

 

  
      $ 153,467     $ 92,496     $ (60,971 ) 
             

 

 

    

 

 

    

 

 

  
Index Options  
Description   Counterparty   Exercise
Price		   Expiration
Date		   Currency   Number of
Contracts		     Premiums
Paid		     Fair Value    

Unrealized

Appreciation

(Depreciation)

  
Put – S&P 500 Index   MSC   2,300.00   3/29/2018   USD     15     $ 4,170     $ 5,700     $ 1,530  
           

 

 

    

 

 

    

 

 

  
  $ 4,170     $ 5,700     $ 1,530  
           

 

 

    

 

 

    

 

 

  

 

See accompanying notes

 

17

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

 

Written Options Contracts Outstanding on February 28, 2018:  
Interest Rate Swaptions  
Description  

Counter-

party

   Floating Rate Index   Pay/
Receive
Floating
Rate		   Exercise
Rate
(%)		     Expiration
Date		   Number of
Contracts		     Premiums
Received		     Fair Value     Unrealized
Appreciation
(Depreciation)		  
Put – OTC 5-Year IRS   MSC   3-Month USD-LIBOR   Receive     3.00     3/1/2018     1,100,000     $ (6,336 )    $ –     $ 6,336  
Put – OTC 5-Year IRS   GST   3-Month USD-LIBOR   Receive     2.60     9/24/2018     5,800,000       (61,840 )      (93,184 )      (31,344 ) 
Put – OTC 5-Year IRS   CBK   3-Month USD-LIBOR   Receive     2.60     9/24/2018     2,800,000       (29,120 )      (44,985 )      (15,865 ) 
Call – OTC 10-Year IRS   MSC   3-Month USD-LIBOR   Receive     2.00     11/15/2018     1,000,000       (26,389 )      (1,399 )      24,990  
Put – OTC 5-Year IRS   MSC   3-Month USD-LIBOR   Receive     2.70     12/12/2018     3,000,000       (31,758 )      (45,894 )      (14,136 ) 
             

 

 

    

 

 

    

 

 

  
      $ (155,443 )    $ (185,462 )    $ (30,019 ) 
             

 

 

    

 

 

    

 

 

  
Interest Rate Floors  
Description  

Counter-

party

   Floating Rate
Index		   Pay/
Receive
Floating
Rate		   Exercise
Rate
(%)		     Expiration
Date		   Number of
Contracts		     Premiums
Received		     Fair Value     Unrealized
Appreciation
(Depreciation)		  
Put – INT FLR USD   GSC   3-Month USD-LIBOR   Receive     1.00     8/15/2019     10,000,000     $ (32,000 )    $ (34 )    $ 31,966  
Put – INT FLR USD   BRC   3-Month USD-LIBOR   Receive     1.00     8/15/2019     10,000,000       (45,770 )      (35 )      45,735  
Put – INT FLR USD   DUB   3-Month USD-LIBOR   Receive     1.00     8/15/2019     5,000,000       (22,500 )      (18 )      22,482  
             

 

 

    

 

 

    

 

 

  
      $ (100,270 )    $ (87 )    $ 100,183  
             

 

 

    

 

 

    

 

 

  
OTC European Foreign Currency Options  
Description   Counterparty   Exercise
Price		     Expiration
Date		   Currency   Number of
Contracts		     Premiums
Received		     Fair Value     Unrealized
Appreciation
(Depreciation)		  
OTC ECAL FN   FBF     102.73     3/6/2018   USD     600,000     $ (1,125 )    $ –     $ 1,125  
OTC EPUT FN   FBF     101.73     3/6/2018   USD     300,000       (655 )      (5,742 )      (5,087 ) 
OTC EPUT FN   FBF     97.85     3/6/2018   USD     400,000       (2,250 )      (3,840 )      (1,590 ) 
OTC EPUT FN   FBF     97.86     3/6/2018   USD     400,000       (2,250 )      (3,869 )      (1,619 ) 
OTC ECAL EUR versus USD   GSC     1.26     4/19/2018   EUR     166,000       (933 )      (414 )      519  
           

 

 

    

 

 

    

 

 

  
  $ (7,213 )    $ (13,865 )    $ (6,652 ) 
           

 

 

    

 

 

    

 

 

  

 

Borrowing and Other Financing Transactions on February 28, 2018:  
Reverse Repurchase Agreements  
Counterparty    Borrowing Rate   Borrowing Date    Maturity Date    Amount Borrowed     Payable for Reverse
Repurchase Agreements		  
Bank of Nova Scotia(1)    1.59%   2/1/2018    4/2/2018    $ 3,676,875 (4)    $ 3,676,875  
JPMorgan Chase Bank, N.A.(2)    1.62%   1/25/2018    4/25/2018      766,350 (5)      766,350  
Toronto Dominion Bank(3)    1.45%   2/26/2018    3/2/2018      1,387,750 (6)      1,387,750  
          

 

 

    

 

 

  
           $ 5,830,975     $ 5,830,975  
          

 

 

    

 

 

  

(1) Collateralized by a U.S. Treasury N/B valued at $3,676,875, 1.625%, 07/31/2019.

(2) Collateralized by a U.S. Treasury N/B valued at $766,350, 2.375%, 05/15/2027.

(3) Collateralized by a U.S. Treasury N/B valued at $1,387,750, 1.875%, 12/15/2020.

(4) The average amount of borrowing during the period ended February 28, 2018 was $3,676,875 at a weighted average interest rate of 1.59%.

(5) The average amount of borrowing during the period ended February 28, 2018 was $766,350 at a weighted average interest rate of 1.62%.

(6) The average amount of borrowing during the period ended February 28, 2018 was $1,387,750 at a weighted average interest rate of 1.45%.

 

Forward Foreign Currency Contracts Open on February 28, 2018:           
Currency Purchased*        Currency Sold*        Settlement Date    Counterparty        Unrealized
Appreciation		     Unrealized
(Depreciation)		     Net Unrealized
Appreciation
(Depreciation)		  
EUR     94,236        USD     95,967        4/12/2018      BNP        $ –     $ (1,731 )    $ (1,731 ) 
EUR     205,607        USD     203,976        4/12/2018      BNP          1,631       –       1,631  
EUR     314,529        USD     316,649        4/12/2018      BNP          –       (2,120 )      (2,120 ) 
EUR     500,591        USD     509,661        4/13/2018      BNP          –       (9,070 )      (9,070 ) 
USD     509,852        CHF     503,797        4/13/2018      BNP          6,055       –       6,055  
USD     210,310        CAD     201,842        3/2/2018      BOA          8,468       –       8,468  

 

See accompanying notes

 

18

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

Currency Purchased*        Currency Sold*      Settlement Date    Counterparty      Unrealized
Appreciation		     Unrealized
(Depreciation)		     Net Unrealized
Appreciation
(Depreciation)		  
USD     194,215        EUR     192,760      3/2/2018      BOA      $ 1,455     $ –     $ 1,455  
USD     312,394        SGD     320,808      3/14/2018      BOA        –       (8,414 )      (8,414 ) 
USD     104,853        MXN     104,076      3/21/2018      BOA        777       –       777  
USD     134,000        COP     130,942      3/28/2018      BOA        3,058       –       3,058  
EGP     125,039        USD     120,000      4/26/2018      BOA        5,039       –       5,039  
TRY     190,733        USD     190,597      5/15/2018      BOA        136       –       136  
RUB     69,548        USD     70,000      6/7/2018      BOA        –       (452 )      (452 ) 
USD     4,006,628        JPY     4,126,128      3/8/2018      BRC        –       (119,500 )      (119,500 ) 
GBP     293,579        USD     295,664      3/27/2018      BRC        –       (2,085 )      (2,085 ) 
JPY     311,731        USD     304,102      3/27/2018      BRC        7,629       –       7,629  
USD     303,233        JPY     311,731      3/27/2018      BRC        –       (8,498 )      (8,498 ) 
USD     303,697        GBP     293,579      3/27/2018      BRC        10,118       -       10,118  
CAD     195,769        USD     203,654      4/13/2018      BRC        –       (7,885 )      (7,885 ) 
AUD     200,403        USD     202,746      4/13/2018      BRC        -       (2,343 )      (2,343 ) 
USD     208,804        AUD     200,403      4/13/2018      BRC        8,401       -       8,401  
USD     202,569        CAD     195,769      4/13/2018      BRC        6,800       -       6,800  
IDR     226,437        USD     232,342      4/24/2018      BRC        -       (5,905 )      (5,905 ) 
MYR     160,976        USD     163,286      5/30/2018      BRC        -       (2,310 )      (2,310 ) 
BRL     320,935        USD     320,935      3/2/2018      CBK        -       –       –  
GBP     843,917        USD     860,841      3/2/2018      CBK        -       (16,924 )      (16,924 ) 
USD     321,133        BRL     320,935      3/2/2018      CBK        198       -       198  
ARS     40,627        USD     41,400      3/5/2018      CBK        -       (773 )      (773 ) 
ARS     40,627        USD     41,400      3/5/2018      CBK        -       (773 )      (773 ) 
USD     40,438        ARS     40,627      3/5/2018      CBK        -       (189 )      (189 ) 
EUR     14,645        USD     14,761      3/8/2018      CBK        -       (116 )      (116 ) 
USD     1,028,573        EUR     1,009,316      3/8/2018      CBK        19,257       -       19,257  
USD     118,645        EUR     122,053      3/9/2018      CBK        -       (3,408 )      (3,408 ) 
INR     25,393        USD     25,266      3/13/2018      CBK        127       -       127  
USD     25,475        INR     25,393      3/13/2018      CBK        82       -       82  
USD     314,891        KRW     323,667      3/14/2018      CBK        -       (8,776 )      (8,776 ) 
USD     282,904        TWD     290,234      3/14/2018      CBK        -       (7,330 )      (7,330 ) 
GBP     2,562,016        USD     2,495,785      3/15/2018      CBK        66,231       -       66,231  
USD     1,184,756        GBP     1,170,814      3/15/2018      CBK        13,942       -       13,942  
MXN     113,233        USD     110,153      3/21/2018      CBK        3,080       -       3,080  
USD     88,301        MXN     88,316      3/21/2018      CBK        -       (15 )      (15 ) 
COP     131,297        USD     131,077      3/28/2018      CBK        220       -       220  
USD     862,130        GBP     845,252      4/4/2018      CBK        16,878       -       16,878  
ARS     39,987        USD     39,790      4/5/2018      CBK        197       -       197  
JPY     201,347        USD     197,707      4/26/2018      CBK        3,640       -       3,640  
JPY     420,570        USD     407,085      4/26/2018      CBK        13,485       -       13,485  
CHF     604,355        USD     614,420      4/26/2018      CBK        -       (10,065 )      (10,065 ) 
USD     606,199        JPY     621,917      4/26/2018      CBK        -       (15,718 )      (15,718 ) 
USD     408,162        CHF     413,898      4/26/2018      CBK        -       (5,736 )      (5,736 ) 
USD     192,749        CHF     190,457      4/26/2018      CBK        2,292       -       2,292  
INR     25,128        USD     25,174      6/20/2018      CBK        -       (46 )      (46 ) 
USD     865,635        GBP     843,917      3/2/2018      DUB        21,718       -       21,718  
BRL     320,935        USD     321,133      3/2/2018      FBF        -       (198 )      (198 ) 
USD     319,352        BRL     320,935      3/2/2018      FBF        -       (1,583 )      (1,583 ) 
BRL     319,882        USD     318,328      4/3/2018      FBF        1,554       -       1,554  
RUB     129,298        USD     130,000      6/7/2018      FBF        -       (702 )      (702 ) 
EUR     21,960        USD     22,109      3/2/2018      GSC        -       (149 )      (149 ) 
EUR     1,254,160        USD     1,268,038      3/2/2018      GSC        -       (13,878 )      (13,878 ) 
USD     1,103,460        EUR     1,083,360      3/2/2018      GSC        20,100       -       20,100  
USD     202,839        EUR     201,300      3/2/2018      GSC        1,539       -       1,539  
USD     190,332        AUD     184,855      3/2/2018      GSC        5,477       -       5,477  
KRW     323,667        USD     324,297      3/14/2018      GSC        -       (630 )      (630 ) 
NZD     1,117,711        USD     1,131,500      3/14/2018      GSC        -       (13,789 )      (13,789 ) 
USD     641,285        NZD     634,571      3/14/2018      GSC        6,714       -       6,714  
USD     483,774        NZD     483,140      3/14/2018      GSC        634       -       634  

 

See accompanying notes

 

19

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

Currency Purchased*        Currency Sold*      Settlement Date    Counterparty      Unrealized
Appreciation		     Unrealized
(Depreciation)		     Net Unrealized
Appreciation
(Depreciation)		  
USD     89,944        MXN     89,215      3/21/2018      GSC      $ 729     $ -     $ 729  
ARS     182,798        USD     185,710      3/28/2018      GSC        -       (2,912 )      (2,912 ) 
USD     1,271,170        EUR     1,257,387      4/4/2018      GSC        13,783       -       13,783  
ARS     12,315        USD     12,710      5/16/2018      GSC        -       (395 )      (395 ) 
USD     325,109        KRW     324,471      6/20/2018      GSC        638       -       638  
GBP     41,308        USD     41,920      3/8/2018      HUS        -       (612 )      (612 ) 
INR     1,886,694        USD     1,890,679      3/8/2018      HUS        -       (3,985 )      (3,985 ) 
USD     1,896,801        INR     1,886,694      3/8/2018      HUS        10,107       -       10,107  
USD     456,219        GBP     447,508      3/8/2018      HUS        8,711       -       8,711  
SEK     1,412,435        USD     1,396,332      3/9/2018      HUS        16,103       -       16,103  
USD     1,057,860        SEK     1,038,200      3/9/2018      HUS        19,660       -       19,660  
USD     1,318,713        ZAR     1,390,846      4/11/2018      HUS        -       (72,133 )      (72,133 ) 
TRY     1,065,055        USD     1,053,365      4/13/2018      HUS        11,690       -       11,690  
RUB     39,348        USD     39,205      4/17/2018      HUS        143       -       143  
RUB     162,157        USD     160,378      4/17/2018      HUS        1,779       -       1,779  
PLN     1,403,619        USD     1,400,478      4/17/2018      HUS        3,141       -       3,141  
USD     1,178,481        PLN     1,169,683      4/17/2018      HUS        8,798       -       8,798  
NOK     1,801,026        USD     1,807,075      4/20/2018      HUS        -       (6,049 )      (6,049 ) 
USD     587,413        NOK     583,431      4/20/2018      HUS        3,982       -       3,982  
USD     278,945        NOK     279,032      4/20/2018      HUS        -       (87 )      (87 ) 
SEK     1,877,880        USD     1,945,672      4/23/2018      HUS        -       (67,792 )      (67,792 ) 
NOK     147,667        USD     151,287      4/27/2018      HUS        -       (3,620 )      (3,620 ) 
NOK     299,013        USD     305,086      4/27/2018      HUS        -       (6,073 )      (6,073 ) 
USD     305,775        EUR     300,170      4/27/2018      HUS        5,605       -       5,605  
USD     153,387        EUR     150,698      4/27/2018      HUS        2,689       -       2,689  
ZAR     101,575        USD     99,746      5/11/2018      HUS        1,829       -       1,829  
CAD     304,351        USD     308,482      5/15/2018      HUS        -       (4,131 )      (4,131 ) 
USD     308,222        NOK     306,304      5/15/2018      HUS        1,918       -       1,918  
NOK     1,244,045        USD     1,232,239      5/16/2018      HUS        11,806       -       11,806  
USD     773,650        AUD     769,068      5/17/2018      HUS        4,582       -       4,582  
COP     177,543        USD     178,728      5/7/2018      JPM        -       (1,185 )      (1,185 ) 
COP     219,318        USD     220,620      5/7/2018      JPM        -       (1,302 )      (1,302 ) 
COP     254,131        USD     256,188      5/7/2018      JPM        -       (2,057 )      (2,057 ) 
COP     275,018        USD     275,398      5/7/2018      JPM        -       (380 )      (380 ) 
COP     310,527        USD     312,632      5/7/2018      JPM        -       (2,105 )      (2,105 ) 
COP     500,602        USD     504,366      5/7/2018      JPM        -       (3,764 )      (3,764 ) 
JPY     1,695,217        USD     1,693,899      5/11/2018      JPM        1,318       -       1,318  
USD     463,749        JPY     470,894      5/11/2018      JPM        -       (7,145 )      (7,145 ) 
EUR     355,841        USD     358,199      5/18/2018      JPM        -       (2,358 )      (2,358 ) 
EUR     368,112        USD     370,923      5/18/2018      JPM        -       (2,811 )      (2,811 ) 
USD     9,811,570        EUR     9,681,341      5/18/2018      JPM        130,229       -       130,229  
USD     2,950,753        TWD     2,963,063      5/23/2018      JPM        -       (12,310 )      (12,310 ) 
ARS     6,778        USD     6,961      5/16/2018      RBS        -       (183 )      (183 ) 
TWD     290,234        USD     289,065      3/14/2018      SCB        1,169       -       1,169  
SGD     320,808        USD     322,617      3/14/2018      SCB        -       (1,809 )      (1,809 ) 
RUB     213,185        USD     208,948      5/25/2018      SCB        4,237       -       4,237  
USD     323,354        SGD     321,470      6/20/2018      SCB        1,884       -       1,884  
USD     291,012        TWD     292,022      6/20/2018      SCB        -       (1,010 )      (1,010 ) 
EGP     98,841        USD     94,000      7/30/2018      SCB        4,841       -       4,841  
EUR     471,513        USD     457,985      3/19/2018      SSB        13,528       -       13,528  
JPY     480,433        USD     463,685      3/19/2018      SSB        16,748       -       16,748  
USD     457,813        JPY     480,433      3/19/2018      SSB        -       (22,620 )      (22,620 ) 
USD     474,012        EUR     471,513      3/19/2018      SSB        2,499       -       2,499  
IDR     167,238        USD     167,344      4/24/2018      SSB        -       (106 )      (106 ) 
COP     99,888        USD     101,021      5/11/2018      SSB        -       (1,133 )      (1,133 ) 
BRL     101,780        USD     100,229      5/16/2018      SSB        1,551       -       1,551  
                 

 

 

    

 

 

    

 

 

  
                  $ 562,629     $ (501,178 )    $ 61,451  
                 

 

 

    

 

 

    

 

 

  

* All values denominated in USD.

 

See accompanying notes

 

20

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

 

Glossary:
  
Counterparty Abbreviations:
BNP    BNP Paribas, N.A.
BOA    Bank of America, N.A.
BRC    Barclays Bank PLC
CBK    Citibank, N.A.
FBF    Credit Suisse International
DUB    Deutsche Bank AG
GSC    Goldman Sachs Capital Markets
GST    Goldman Sachs International
HUS    HSBC Bank (USA)
JPM    JPMorgan Chase Bank, N.A.
MSC    Morgan Stanley & Co. Inc.
RBS    Royal Bank of Scotland PLC
SCB    Standard Chartered Bank
SSB    State Street Bank & Trust Co.
Currency Abbreviations:
ARS    Argentine Peso
AUD    Australian Dollar
BRL    Brazilian Real
CAD    Canadian Dollar
CHF    Swiss Franc
COP    Colombian Peso
EGP    Egyptian Pound
EUR    Euro
GBP    Pound Sterling
IDR    Indonesian Rupiah
INR    Indian Rupee
JPY    Japanese Yen
KRW    South Korean Won
MXN    Mexican Peso
MYR    Malaysian Ringgit
NZD    New Zealand Dollar
NOK    Norwegian Krone
PEN    Peruvian Nuevo Sol
PLN    Polish Zloty
RUB    Russian Ruble
SEK    Swedish Krona
SGD    Singapore Dollar
TRY    Turkish Lira
TWD    Taiwan Dollar
USD    United States Dollar
ZAR    South African Rand
Index Abbreviations:
CDX    Credit Default Swap Index
HY    High Yield
iBoxx    Investment Grade Bond Index
iTraxx    Credit Default Swap Index
S&P 500    Standard & Poor’s U.S. Equity Large-Cap Index
Other Abbreviations:
CCP    Central Counterparty Clearing House
Bund    German Federal Government Bond
BTP    Buoni del Tesoro Poliennali
ECAL    European-Style Call
EPUT    European-Style Put
ETF    Exchange Traded Fund
EURIBOR    Euro Interbank Offered Rate
GILT    Bank of England Bonds
IRS    Interest Rate Swap
LIBOR    London Interbank Offered Rate
OAT    Obligations Assimilables du Trésor
OTC    Over-the-Counter
TIIE    Interbank Equilibrium Interest Rate

 

See accompanying notes

 

21

American Beacon Flexible Bond FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of February 28, 2018, the investments were classified as described below:

 

Flexible Bond Fund

   Level 1           Level 2            Level 3           Total  

Assets

               

Bank Loan Obligations

   $ -       $ 1,752,519        $ 99,625       $ 1,852,144  

Corporate Obligations

     -         22,106,125          -         22,106,125  

Foreign Corporate Obligations

     -         8,466,033          -         8,466,033  

Foreign Sovereign Obligations

     -         26,866,477          -         26,866,477  

Asset-Backed Obligations

     -         19,048,462          -         19,048,462  

Collateralized Mortgage Obligations

     -         13,434,334          167,609         13,601,943  

Commercial Mortgage-Backed Obligations

     -         652,675          -         652,675  

U.S. Agency Mortgage-Backed Obligations

     -         7,118,820          -         7,118,820  

U.S. Treasury Obligations

     -         18,218,433          -         18,218,433  

Municipal Obligations

     -         320,472          -         320,472  

Exchange-Traded Instruments

     215,450         -          -         215,450  

Short-Term Investments

               

U.S. Treasury Obligations

     -         6,927,897          -         6,927,897  

Investment Companies

     6,603,369         -          -         6,603,369  

Certificate of Deposits

     -         299,480          -         299,480  
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Investments in Securities - Assets

   $ 6,818,819       $ 125,211,727        $ 267,234       $ 132,297,780  
 

 

 

      

 

 

       

 

 

      

 

 

  

Financial Derivative Instruments - Assets

               

Futures Contracts

   $ 290,005       $ -        $ -       $ 290,005  

Swap Contract Agreements

     -         1,100,895          -         1,100,895  

Purchased Options and Swaptions Contracts

     5,700         92,496          -         98,196  

Forward Foreign Currency Contracts

     -         562,629          -         562,629  
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Financial Derivative Instruments - Assets

   $ 295,705       $ 1,756,020        $ -       $ 2,051,725  
 

 

 

      

 

 

       

 

 

      

 

 

  

Financial Derivative Instruments - Liabilities

               

Futures Contracts

   $ (61,423 )      $ -        $ -       $ (61,423 ) 

Swap Contract Agreements

     -         (55,456 )         -         (55,456 ) 

Written Options and Swaptions Contracts

     -         (199,414 )         -         (199,414 ) 

Reverse Repurchase Agreements

     -         (5,830,975 )         -         (5,830,975 ) 

Forward Foreign Currency Contracts

     -         (501,178 )         -         (501,178 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Financial Derivative Instruments - Liabilities

   $ (61,423 )      $ (6,587,023 )       $ -       $ (6,648,446 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

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 February 28, 2018, there were no transfers between levels.

The following table is a reconciliation of Level 3 assets within the Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period:

 

Security Type   Balance as
of
8/31/2017		     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
2/28/2018		     Change in
Unrealized
Appreciation
(Depreciation)
at Period end**		  
Bank Loan Obligations   $ -     $ 99,625     $ -     $ 113     $ -     $ (113 )    $ -     $ -     $ 99,625     $ (113 ) 
Collateralized Mortgage Obligations     179,680       -       17,536       528       1,814       3,123       -       -       167,609       (6,931 ) 
 

 

 

  
  $ 179,680     $ 99,625     $ 17,536     $ 641     $ 1,814     $ 3,010     $ -     $ -     $ 267,234     $ (7,044 ) 
 

 

 

  

 

** 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 obligation was classified as a Level 3 security because the security was priced using a single broker quote. The valuation of the unfunded bank loan obligation was classified as Level 3 security due to the use of unobservable inputs.

 

See accompanying notes

 

22

American Beacon Flexible Bond FundSM

Statement of Assets and Liabilities

February 28, 2018 (Unaudited)

 

 

Assets:

  

Investments in unaffiliated securities, at fair value†

   $ 125,694,411  

Investments in affiliated securities, at fair value‡

     6,603,369  

Foreign currency, at fair value^

     228,920  

Purchased options contracts outstanding (premiums paid $157,637)

     98,196  

Foreign currency deposits with brokers for futures contracts, at fair value¤

     2,535  

Swap premium paid

     394,012  

Swap income receivable

     85,083  

Deposit with brokers for futures contracts

     638,972  

Cash collateral held at custodian for the benefit of the broker

     1,027,000  

Dividends and interest receivable

     602,845  

Receivable for investments sold

     1,929,204  

Receivable for fund shares sold

     34,500  

Receivable for tax reclaims

     4,203  

Receivable for expense reimbursement (Note 2)

     24,152  

Receivable for variation margin on open futures contracts (Note 5)

     236,490  

Unrealized appreciation from swap agreements

     1,100,895  

Unrealized appreciation from forward foreign currency contracts

     562,629  

Prepaid expenses

     34,441  
 

 

 

  

Total assets

     139,301,857  
 

 

 

  

Liabilities:

 

Payable for investments purchased

     4,790,641  

Payable for fund shares redeemed

     36,320  

Payable for foreign currency at broker, at fair value*

     1,249  

Payable for reverse repurchase agreements#

     5,830,975  

Swap premium received

     336,725  

Cash due to broker

     1,222,796  

Cash due to custodian

     468,666  

Written options and swaptions contracts, at fair value (premiums received $262,926)

     199,414  

Swap income payable

     93,234  

Management and sub-advisory fees payable (Note 2)

     101,391  

Service fees payable (Note 2)

     5,872  

Transfer agent fees payable (Note 2)

     5,289  

Custody and fund accounting fees payable

     86,452  

Professional fees payable

     59,691  

Payable for prospectus and shareholder reports

     933  

Unrealized depreciation from swap agreements

     55,456  

Unrealized depreciation from forward foreign currency contracts

     501,178  

Other liabilities

     709  
 

 

 

  

Total liabilities

     13,796,991  
 

 

 

  

Net assets

   $ 125,504,866  
 

 

 

  

Analysis of net assets:

 

Paid-in-capital

   $ 141,051,749  

Undistributed net investment income

     351,503  

Accumulated net realized (loss)

     (16,385,916 ) 

Unrealized (depreciation) of investments in unaffiliated securitiesA

     (851,905 ) 

Unrealized (depreciation) of purchased options and swaptions contracts

     (59,441 ) 

Unrealized (depreciation) of foreign currency transactions

     (108 ) 

Unrealized appreciation of forward foreign currency contracts

     61,451  

Unrealized appreciation of futures contracts

     228,582  

Unrealized appreciation of swap agreements

     1,045,439  

Unrealized appreciation of written options and swaptions contracts

     63,512  
 

 

 

  

Net assets

   $ 125,504,866  
 

 

 

  

 

See accompanying notes

 

23

American Beacon Flexible Bond FundSM

Statement of Assets and Liabilities

February 28, 2018 (Unaudited)

 

 

Shares outstanding at no par value (unlimited shares authorized):

 

Institutional Class

     8,376,181  
 

 

 

  

Y Class

     3,384,989  
 

 

 

  

Investor Class

     528,293  
 

 

 

  

A Class

     266,274  
 

 

 

  

C Class

     210,973  
 

 

 

  

Net assets:

  

Institutional Class

   $ 82,410,236  
 

 

 

  

Y Class

   $ 33,256,258  
 

 

 

  

Investor Class

   $ 5,181,187  
 

 

 

  

A Class

   $ 2,599,358  
 

 

 

  

C Class

   $ 2,057,827  
 

 

 

  

Net asset value, offering and redemption price per share:

  

Institutional Class

   $ 9.84  
 

 

 

  

Y Class

   $ 9.82  
 

 

 

  

Investor Class

   $ 9.81  
 

 

 

  

A Class

   $ 9.76  
 

 

 

  

A Class (offering price)

   $ 10.25  
 

 

 

  

C Class

   $ 9.75  
 

 

 

  

† Cost of investments in unaffiliated securities

   $ 126,546,316  

‡ Cost of investments in affiliated securities

   $ 6,603,369  

* Cost of foreign currency at broker

   $ 2,169  

¤ Cost of foreign currency deposits with broker for futures contracts

   $ 2,618  

^ Cost of foreign currency

   $ 231,529  

# Cost of reverse repurchase agreements

   $ 5,830,975  
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at period end.  

 

See accompanying notes

 

24

American Beacon Flexible Bond FundSM

Statement of Operations

For the period ended February 28, 2018 (Unaudited)

 

 

Investment income:

  

Dividend income from affiliated securities

   $ 30,625  

Interest income (net of foreign taxes)†

     2,232,787  
 

 

 

  

Total investment income

     2,263,412  
 

 

 

  

Expenses:

  

Management and sub-advisory fees (Note 2)

     539,399  

Transfer agent fees:

  

Institutional Class (Note 2)

     10,146  

Y Class (Note 2)

     16,395  

Investor Class

     741  

A Class

     563  

C Class

     130  

Custody and fund accounting fees

     51,473  

Professional fees

     70,681  

Registration fees and expenses

     32,830  

Service fees (Note 2):

  

Investor Class

     5,775  

A Class

     2,646  

C Class

     1,347  

Distribution fees (Note 2):

  

A Class

     4,411  

C Class

     10,736  

Prospectus and shareholder report expenses

     8,631  

Trustee fees (Note 2)

     3,453  

Other expenses

     5,806  
 

 

 

  

Total expenses

     765,163  
 

 

 

  

Net fees waived and expenses (reimbursed) (Note 2)

     (155,432 ) 
 

 

 

  

Net expenses

     609,731  
 

 

 

  

Net investment income

     1,653,681  
 

 

 

  

Realized and unrealized gain (loss) from investments:

  

Net realized gain (loss) from:

  

Investments in unaffiliated securitiesA

     395,024  

Purchased options and swaptions contracts

     62,774  

Foreign currency transactions

     (65,230 ) 

Forward foreign currency contracts

     (396,400 ) 

Futures contracts

     270,518  

Swap agreements

     (252,794 ) 

Written options and swaptions contracts

     9,481  

Change in net unrealized appreciation (depreciation) of:

  

Investments in unaffiliated securitiesB

     (1,167,185 ) 

Purchased options and swaptions contracts

     98,000  

Foreign currency transactions

     909  

Forward foreign currency contracts

     (263,728 ) 

Futures contracts

     253,220  

Swap agreements

     1,012,370  

Written options and swaptions contracts

     (141,012 ) 
 

 

 

  

Net (loss) from investments

     (184,053 ) 
 

 

 

  

Net increase in net assets resulting from operations

   $ 1,469,628  
 

 

 

  

† Foreign taxes

   $ (2,209 ) 

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 period end.

 

 

See accompanying notes

 

25

American Beacon Flexible Bond FundSM

Statement of Changes in Net Assets

 

 

    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)              

Increase (decrease) in net assets:

      

Operations:

      

Net investment income

   $ 1,653,681       $ 3,455,876  

Net realized gain (loss) from investments in unaffiliated securities, purchased options and swaptions contracts, foreign currency transactions, forward foreign currency contracts, futures contracts, swap agreements, and written options and swaptions contracts

     23,373         (1,169,992 ) 

Change in net unrealized appreciation (depreciation) of investments in unaffiliated securities, purchased options and swaptions contracts, foreign currency transactions, forward foreign currency contracts, futures contracts, swap agreements, and written options and swaptions contracts

     (207,426 )        4,800,739  
 

 

 

      

 

 

  

Net increase in net assets resulting from operations

     1,469,628         7,086,623  
 

 

 

      

 

 

  

Distributions to shareholders:

 

Net investment income:

      

Institutional Class

     (934,947 )        (1,731,406 ) 

Y Class

     (351,929 )        (554,390 ) 

Investor Class

     (47,962 )        (61,714 ) 

A Class

     (37,768 )        (122,695 ) 

C Class

     (14,230 )        (28,533 ) 

Return of capital:

      

Institutional Class

     -         (229,228 ) 

Y Class

     -         (78,298 ) 

Investor Class

     -         (6,313 ) 

A Class

     -         (16,691 ) 

C Class

     -         (3,340 ) 
 

 

 

      

 

 

  

Net distributions to shareholders

     (1,386,836 )        (2,832,608 ) 
 

 

 

      

 

 

  

Capital share transactions (Note 10):

 

Proceeds from sales of shares

     11,276,367         25,658,079  

Reinvestment of dividends and distributions

     1,377,271         2,804,731  

Cost of shares redeemed

     (17,213,192 )        (44,182,974 ) 
 

 

 

      

 

 

  

Net (decrease) in net assets from capital share transactions

     (4,559,554 )        (15,720,164 ) 
 

 

 

      

 

 

  

Net (decrease) in net assets

     (4,476,762 )        (11,466,149 ) 
 

 

 

      

 

 

  

Net assets:

 

Beginning of period

     129,981,628         141,447,777  
 

 

 

      

 

 

  

End of period*

   $ 125,504,866       $ 129,981,628  
 

 

 

      

 

 

  

*Includes undistributed net investment income

   $ 351,503       $ 84,658  
 

 

 

      

 

 

  

 

See accompanying notes

 

26

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

1.  Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust. The Fund, a series within the Trust, is registered under the Investment Company Act of 1940 (the “Act”), as amended, as a diversified, open-end management investment company. As of February 28, 2018, the Trust consists of thirty-three active series, one of which is presented in this filing (the “Fund”): American Beacon Flexible Bond 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.

The Flexible Bond Fund is a commodity pool, as defined in the regulations of the Commodity Futures Trading Commission (the “CFTC”) and operated by the Manager, a commodity pool operator registered with the CFTC.

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, transfer agent, and sub-transfer agent fees that vary amongst the classes as described more fully in Note 2.

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”).

 

 

27

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Security Transactions and Investment Income

Security transactions are recorded as of the trade date for financial reporting purposes. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled beyond a standard settlement period for the security after the trade date.

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For convertible securities, premiums attributable to the conversion feature are not amortized. Realized gains (losses) from securities sold are determined on the basis of specific lot identification. Estimated tax liabilities on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized appreciation (depreciation) on investments on the Statement of Operations, as appropriate. Tax liabilities realized as a result of such security sales are reflected as a component of net realized gain (loss) on investments on the Statement of Operations. Paydown gains (losses) on mortgage-related and other asset-backed securities, if any, are recorded as components of interest income on the Statements of Operations. Income or short-term capital gain distributions received from registered investment companies, if any, are recorded as dividend income. Long-term gain distributions received from registered investment companies, if any, are recorded as realized gains.

Debt obligations may be placed on a non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed for non-accrual when the issuer resumes interest payments or when collectability of interest is probable.

Currency Translation

All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of the exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses on the Fund’s Statement of Operations.

Distributions to Shareholders

Distributions, if any, of net investment income are generally paid at least annually and recorded on the ex-dividend date. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP. To the extent necessary to fully distribute capital gains, the Fund may designate earnings and profits distributed to shareholders on the redemption of shares.

Commission Recapture

The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations, if applicable. For the period ended February 28, 2018, the Fund did not have commission recapture income.

 

 

28

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Allocation of Income, Trust Expenses, Gains, and Losses

Investment income, realized and unrealized gains and losses from investments of the Fund is allocated daily to each class of shares based upon the relative proportion of net assets of each class to the total net assets of the Fund. Expenses directly charged or attributable to any Fund will be paid from the assets of the Fund. Generally, expenses of the Trust will be allocated among and charged to the assets of the Fund on a basis that the 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. 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 February 28, 2018, based on management’s evaluation of the shareholder account base, 4 accounts in the Fund have been identified as representing an unaffiliated significant ownership of approximately 35% of the Fund’s outstanding Institutional Class shares.

2.  Transactions with Affiliates

Management and Investment Sub-Advisory Agreements

The Fund and the Manager are parties to a Management Agreement that obligates the Manager to provide the Fund with investment advisory and administrative services. As compensation for performing the duties under the Management Agreement, the Manager will receive an annualized management fee based on a percentage of the Fund’s average daily net assets that is calculated and accrued daily according to the following schedule:

 

First $15 billion

      0.35 % 

Next $15 billion

      0.325 % 

Over $30 billion

      0.30 % 

The Trust, on behalf of the Fund, and the Manager have entered into an Investment Advisory Agreement with the following Sub-Advisors pursuant to which the Fund has agreed to pay an annualized sub-advisory fee that is calculated and accrued daily based on the Fund’s average daily net assets according to the following schedules:

Brandywine Global Investment Management, LLC

 

All Assets

      0.55 % 

Pacific Investment Management Company LLC

 

All Assets

      0.60 % 

 

 

29

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Payden & Rygel

 

First $100 million

      0.40 % 

Over $100 million

      0.35 % 

The Management and Sub-Advisory Fees paid by the Fund for the period ended February 28, 2018 were as follows:

 

     Effective Fee Rate            Amount of Fees Paid  

Management Fees

      0.35 %       $ 220,806  

Sub-Advisor Fees

      0.52 %         318,593  
  

 

 

       

 

 

  

Total

      0.87 %       $ 539,399  
  

 

 

       

 

 

  

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 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 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.

Sub-Transfer Agent Fees

The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional and Y Classes of the Fund and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Fund primarily through the use of omnibus accounts on behalf of 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 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 period ended February 28, 2018, the sub-transfer agent fees, as reflected in “Transfer agent fees” on the Statement of Operations, were as follows:

 

Fund

    Sub-Transfer Agent Fees  

Flexible Bond

    $ 24,318  

 

 

30

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

As of February 28, 2018, the Fund owed the Manager the following reimbursement of sub-transfer agent fees, as reflected in “Transfer agent fees payable” on the Statement of Assets and Liabilities:

 

Fund

    Reimbursement
Sub-Transfer Agent Fees		  

Flexible Bond

    $ 3,535  

Investments in Affiliated Funds

The Fund may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). The Fund and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the USG Select Fund and receives management fees and administrative fees totaling 0.10% of the average daily net assets of the USG Select Fund. During the period ended February 28, 2018, the Manager earned fees on the Fund’s direct investments in the USG Select Fund as shown below:

 

Fund

    Direct Investments in
USG Select Fund		  

Flexible Bond

    $ 2,828  

Interfund Credit Facility

Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in a credit facility whereby each Fund, under certain conditions, is permitted to lend money directly to and borrow directly from other participating Funds for temporary purposes. The interfund credit facility is advantageous to the Fund because it provides added liquidity, and eliminates the need to maintain higher cash balances to meet redemptions. This situation could arise when shareholder redemptions exceed anticipated volumes and certain funds have insufficient cash on hand to satisfy such redemptions or when sales of securities do not settle as expected, resulting in a cash shortfall for a fund. When a Fund liquidates portfolio securities to meet redemption requests, they often do not receive payment in settlement for up to two 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 period ended February 28, 2018, the Flexible Bond Fund borrowed on average $1,365,503 for 1 day at an average interest rate of 1.74% with interest charges paid of $66. The 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 period ended February 28, 2018, the Manager waived and/or reimbursed expenses as follows:

 

          Expense Cap                   Expiration of
Reimbursed
Expenses		  

Fund

    Class    9/1/2017 -
2/28/2018		     Reimbursed
Expenses		      (Recouped)
Expenses		     

Flexible Bond

    Institutional      0.90 %    $ 106,511      $ –        2021  

Flexible Bond

    Y      0.99 %      38,449        –        2021  

Flexible Bond

    Investor      1.27 %      3,260        –        2021  

Flexible Bond

    A      1.29 %      4,779        –        2021  

Flexible Bond

    C      2.04 %      2,433        –        2021  

 

 

 

31

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Of these amounts, $24,152 was disclosed as a receivable from the Manager on the Statement of Assets and Liabilities at February 28, 2018. 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 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 2021. 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

    Recouped
Expenses		      Excess Expense
Carryover		      Expired Expense
Carryover		      Expiration of
Reimbursed
Expenses		  

Flexible Bond

    $             –      $ 274,583      $         –        2018  

Flexible Bond

      –        395,527        –        2019  

Sales Commissions

The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the period ended February 28, 2018, Foreside collected $29 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 period ended February 28, 2018, CDSC fees of $3,811 were 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 period ended February 28, 2018, CDSC fees of $35,800 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 $2,500 fee each quarter for his attendance at the committee meetings. Effective January 1, 2018, the Board Vice Chair receives an additional retainer of $10,000. 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.

 

 

32

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

3.  Security Valuation and Fair Value Measurements

The price of the Fund’s shares is based on the Fund’s Net Asset Value (“NAV”). The NAV of the Fund, or each of its share classes, as applicable, is determined by dividing the total value of portfolio investments and other assets, less any liabilities attributable to the Fund or class, by the total number of shares outstanding of the Fund or class.

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. Certain fixed-income securities purchased on a delayed-delivery basis are marked-to-market daily until settlement at the forward settlement date.

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.

Exchange-traded options, except equity options and options on futures are valued at the settlement price determined by the relevant exchange. Swap agreements are valued on the basis of bid quotes obtained from brokers and dealers or market-based prices supplied by Pricing Services or other pricing sources.

Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value, as determined in good faith by the Manager’s Valuation Committee, pursuant to procedures established by the Board.

Valuation Inputs

Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1   -   Quoted prices in active markets for identical securities.
Level 2   -   Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Level 3   -   Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment.

 

 

33

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Fixed-income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. Treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates, and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy. Fixed-income securities purchased on a delayed-delivery basis are marked-to-market daily until settlement at the forward settlement date and are categorized as Level 2 of the fair value hierarchy.

Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker-dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows, and market-based yield spreads for each tranche, and incorporates deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Common stocks, ETFs, and financial derivative instruments, such as futures contracts or options that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using 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 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.

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.

 

 

34

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of the Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.

The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued, pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.

When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of 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.

Asset-Backed Securities (“ABS”)

ABS may include MBS, loans, receivables or other assets. The value of the Fund’s ABS may be affected by, among other things, actual or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the receivables, the market’s assessment of the quality of underlying assets or actual or perceived changes in the credit worthiness of the individual borrowers, the originator, the servicing agent or the financial institution providing the credit support.

Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities.

Rising or high interest rates tend to extend the duration of ABS, making them more volatile and more sensitive to changes in interest rates. The underlying assets are sometimes subject to prepayments which can shorten the security’s weighted average life and may lower its return. Defaults on loans underlying ABS have become an increasing risk for ABS that are secured by home equity loans related to sub-prime, Alt-A or non conforming mortgage loans, especially in a declining residential real estate market.

 

 

35

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

ABS (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. ABS are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets.

Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. The availability of ABS may be affected by legislative or regulatory developments. It is possible that such developments may require the Fund to dispose of any then existing holdings of such securities.

Bank Loans and Senior Loans

Loans are typically administered by a bank, insurance company, finance company or other financial institution (the “agent”) for a lending syndicate of financial institutions. In a typical loan, the agent administers the terms of the loan agreement and is responsible for the collection of principal and interest and fee payments from the borrower and the apportionment of these payments to all lenders that are parties to the loan agreement. In addition, an institution (which may be the agent) may hold collateral on behalf of the lenders. Typically, under loan agreements, the agent is given broad authority in monitoring the borrower’s performance and is obligated to use the same care it would use in the management of its own property. In asserting rights against a borrower, the Fund normally will be dependent on the willingness of the lead bank to assert these rights, or upon a vote of all the lenders to authorize the action. If an agent becomes insolvent, or has a receiver, conservator, or similar official appointed for it by the appropriate regulatory authority, or becomes a debtor in a bankruptcy proceeding, the agent’s appointment may be terminated and a successor agent would be appointed. If an appropriate regulator or court determines that assets held by the agent for the benefit of purchasers of loans are subject to the claims of the agent’s general or secured creditors, the Fund might incur certain costs and delays in realizing payment on a loan or suffer a loss of principal and/or interest. The Fund may be subject to similar risks when it buys a participation interest or an assignment from an intermediary.

Bank loans can be fixed and floating rate loans arranged through private negotiations between a company or a non-U.S. government and one or more financial institutions (lenders). The Fund may invest in senior loans, which are floating rate loans that hold a senior position in the capital structure of U.S. and foreign corporations, partnerships or other business entities that, under normal circumstances, allow them to have priority of claim ahead of other obligations of a borrower in the event of liquidation. Bank loans and senior loans may be collateralized or uncollateralized. They pay interest at rates that float above, or are adjusted periodically based on, a benchmark that reflects current interest rates. The Fund may invest in such loans in the form of participations in loans and assignments of all or a portion of loans from third parties. In connection with purchasing participations in such instruments, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation. When the Fund purchases assignments from lenders, the Fund will acquire direct rights against the borrower on the loan.

 

 

36

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

The Fund earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in “Interest income” on the Statement of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included on the Statement of Assets and Liabilities and Statement of Operations.

Certificates of Deposits (“CDs”)

CDs are issued against funds deposited in an eligible bank (including its domestic and foreign branches, subsidiaries and agencies), are for a definite period of time, earn a specified rate of return and are normally negotiable. U.S. dollar denominated CDs issued by banks abroad are known as Eurodollar CDs. CDs issued by foreign branches of U.S. banks are known as Yankee CDs.

Foreign Debt Securities

The Fund may invest in foreign fixed and floating rate income securities (including emerging market securities) all or a portion of which may be non-U.S. dollar denominated and which include: (a) debt obligations issued or guaranteed by foreign national, provincial, state, municipal or other governments with taxing authority or by their agencies or instrumentalities, including Brady Bonds; (b) debt obligations of supranational entities; (c) debt obligations of the U.S. Government issued in non-dollar securities; (d) debt obligations and other fixed income securities of foreign corporate issuers (both dollar and non-dollar denominated); and (e) U.S. corporate issuers (both Eurodollar and non-dollar denominated). There is no minimum rating criteria for the Fund’s investments in such securities. Investing in the securities of foreign issuers involves special considerations that are not typically associated with investing in the securities of U.S. issuers. In addition, emerging markets are markets that have risks that are different and higher than those in more developed markets.

High-Yield Securities

Non-investment-grade securities are rated below the four highest credit grades by at least one of the public rating agencies (or are unrated if not publicly rated). Participation in high-yielding securities transactions generally involves greater returns in the form of higher average yields. However, participation in such transactions involves greater risks, including sensitivity to economic changes, solvency, and relative liquidity in the secondary trading market. Lower ratings may reflect a greater possibility that the financial condition of the issuer, or adverse changes in general economic conditions, or both, may impair the ability of the issuer to make payments of interest and principal. The prices and yields of lower-rated securities generally fluctuate more than higher-quality securities, and such prices may decline significantly in periods of general economic difficulty or rising interest rates.

Illiquid and Restricted Securities

The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933 (the “Securities Act”). Illiquid securities have included securities that have not been registered under the Securities Act, securities that are otherwise not readily marketable, and repurchase agreements having a remaining maturity of longer than seven calendar days. Disposal of both illiquid and restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding during the period ended February 28, 2018 are disclosed in the Notes to the Schedule of Investments.

Regulation S under the Securities Act permits the sale abroad of securities that are not registered for sale in the United States and includes a provision for U.S. investors, such as the Fund, to purchase such unregistered securities if certain conditions are met.

 

 

37

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Inflation-Indexed Bonds

The Fund may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted based on the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on principal value, which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statement of Operations, even though investors do not receive their principal until maturity.

Mortgage-Backed Securities

MBS often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of the Fund’s portfolio at the time resulting in reinvestment risk.

Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS, making them more volatile and more sensitive to changes in interest rates. This is known as extension risk.

MBS may have less potential for capital appreciation than comparable fixed-income securities due to the likelihood of increased prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a price above par. In such an environment, this risk limits the potential price appreciation of these securities.

Mortgage-Related and Other Asset-Backed Securities

The Fund may invest in mortgage or other ABS. These securities may include mortgage instruments issued by U.S. government agencies (“agency mortgages”) or those issued by private entities (“non-agency mortgages”). Specific types of instruments may include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities and other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real property. The value of the Fund’s 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.

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

 

 

38

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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.

Payment-In-Kind Securities

The Fund may invest in payment-in-kind securities (“PIKs”). PIKs give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the “Unrealized appreciation (depreciation) of investments” to “Dividend and interest receivable” in the Statement of Assets and Liabilities.

Privately Issued Mortgage-Backed Securities

MBS held by a Fund may be issued by private issuers including commercial banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles (“SPV”)) and other entities that acquire and package mortgage loans for resale as MBS. These privately issued non-agency MBS may offer higher yields than those issued by government agencies, but also may be subject to greater price changes than governmental issues. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. Alt-A loans refer to loans extended to borrowers who have incomplete documentation of income, assets, or other variables that are important to the credit underwriting processes. Non-conforming mortgages are loans that do not meet the standards that allow purchase by government-sponsored enterprises. MBS with exposure to subprime loans, Alt-A loans or non-conforming loans have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of non-payment is greater for MBS that are backed by mortgage pools that contain subprime, Alt-A and non-conforming loans, but a level of risk exists for all loans.

Unlike agency MBS issued or guaranteed by the U.S. government or a government-sponsored entity (e.g., Fannie Mae and Freddie Mac), MBS issued by private issuers do not have a government or government-sponsored entity guarantee, but may have credit enhancements provided by external entities such as banks or financial institutions or achieved through the structuring of the transaction itself. Examples of such credit support arising out of the structure of the transaction include the issue of senior and subordinated securities (e.g., the issuance of securities by an SPV in multiple classes or “tranches,” with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and “overcollateralization” (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment on the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored MBS and have wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans.

Privately issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active

 

 

39

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

trading market, MBS held in the Fund’s portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.

Repurchase Agreements

A repurchase agreement is a fixed-income security in the form of an agreement between a Fund as purchaser and an approved counterparty as seller. The agreement is backed by collateral in the form of securities and/or cash transferred by the seller to the buyer to be held by an eligible third-party custodian. Under the agreement, a Fund acquires securities from the seller and the seller simultaneously commits to repurchase the securities at an agreed upon price and date, normally within a week. The price for the seller to repurchase the securities is greater than a Fund’s purchase price, reflecting an agreed upon “interest rate” that is effective for the period of time the purchaser’s money is invested in the security. During the term of the repurchase agreement, a Fund monitors on a daily basis the market value of the collateral subject to the agreement and, if the market value of the securities falls below the seller’s repurchase amount provided under the repurchase agreement, the seller is required to transfer additional securities or cash collateral equal to the amount by which the market value of the securities falls below the repurchase amount. Repurchase agreements may exhibit the economic characteristics of loans by a Fund.

The obligation of the seller under the repurchase agreement is not guaranteed, and there is a risk that the seller may fail to repurchase the underlying securities, whether because of the seller’s bankruptcy or otherwise. In such event, a Fund would attempt to exercise its rights with respect to the underlying collateral, including possible sale of the securities. A Fund may incur various expenses in connection with the exercise of its rights and may be subject to various delays and risks of loss, including (a) possible declines in the securities value of the underlying collateral, (b) possible reduction in levels of income and (c) lack of access to the securities collateral (if they are held through a third-party custodian) and possible inability to enforce the Fund’s rights. The Board has established procedures pursuant to which the sub-advisor(s) monitors the creditworthiness of the counterparties with which the Fund enters into repurchase agreement transactions.

The Fund may enter into repurchase agreements with member banks of the Federal Reserve System or registered broker-dealers who, in the opinion of the sub-advisor, present a minimal risk of default during the term of the agreement. The underlying securities which serve as collateral for repurchase agreements typically include U.S. Government and agency securities, municipal obligations, asset-backed securities, mortgage-backed securities, common and preferred stock, depositary receipts, ETFs, corporate obligations and convertible securities. There is no percentage restriction on the Fund’s ability to enter into repurchase agreements with terms of seven days or less.

Reverse Repurchase Agreements

The Fund may borrow funds by entering into reverse repurchase agreements. Pursuant to such agreements, the Fund would sell portfolio securities to financial institutions such as banks and broker/dealers and agree to repurchase them at a mutually agreed-upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will place in a segregated custodial account assets such as liquid high quality debt securities having a value not less than 100% of the repurchase price (including accrued interest), and will subsequently monitor the account to ensure that such required value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price at which the Fund is obligated to repurchase the securities. Reverse repurchase agreements are considered to be borrowings by an investment company under the Act.

Short Sales

The Fund may enter into short sale transactions. A short sale is a transaction in which a Fund sells a security it does not own in anticipation of a decline in the market price of the security. Securities sold in short sale transactions and the dividends and interest payable on such securities, if any, are reflected as a liability on the

 

 

40

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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 February 28, 2018, there were no short positions held by the Fund.

5.  Financial Derivative Instruments

The Fund may utilize derivative instruments to enhance return, hedge risk, gain efficient exposure to an asset class or to manage liquidity. When considering the Fund’s use of derivatives, it is important to note that the Fund does not use derivatives for the purpose of creating financial leverage.

Forward Foreign Currency Contracts

The 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 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 period ended February 28, 2018, the Flexible Bond Fund entered into forward foreign currency contracts primarily for return enhancement and hedging.

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 foreign 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 Amounts Outstanding
Period Ended February 28, 2018

  

Fund

   Purchased Contracts           Sold Contracts  

Flexible Bond

   $ 29,893,584       $ 39,813,139  

Futures Contracts

Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities or that the counterparty will fail to perform its obligations.

Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

During the period ended February 28, 2018, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.

 

 

41

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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

 

Average Futures Contracts Outstanding

  

Fund

             Period Ended February 28, 2018      

Flexible Bond

       281  

Options Contracts

The Fund may write (1) call and put options on futures, swaps (“swaptions”), securities, commodities or currencies it owns or in which it may invest and (2) inflation-capped options. Writing put options tends to increase the Fund’s exposure to unfavorable movements of the underlying instrument in exchange for an upfront premium. Writing call options tends to decrease the Fund’s exposure to favorable movements of the underlying instrument in exchange for an upfront premium. When the Fund writes a call, put, or inflation-capped option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. The purpose of inflation-capped options is to protect the buyer from inflation erosion above a certain rate on a given notional exposure. A floor can be used to give downside protection to investments in inflation-linked products. These liabilities are reflected as written options outstanding on the Statement of Assets and Liabilities. Certain options may be written with premiums to be determined on a future date. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying futures, swap, security or currency transaction to determine the realized gain or loss when the underlying transaction is sold. The Fund, as a writer of an option has no control over whether the underlying instrument may be sold (call) 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 period ended February 28, 2018, the Flexible Bond Fund purchased/sold options primarily for return enhancement and hedging.

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

 

Average Option and Swaption Notional Amounts* Outstanding
Period Ended February 28, 2018

  

Fund

   Purchased Contracts           Written Contracts  

Flexible Bond

     19,588,575         41,937,750  

* Notional amounts are denominated in local currency

 

 

42

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Straddle Options

The Fund may enter into differing forms of straddle options. A straddle is an investment strategy that uses combinations of options that allow a Fund to profit based on the future price movements of the underlying security, regardless of the direction of those movements. A written straddle involves simultaneously writing a call option and a put option on the same security with the same strike price and expiration date. The written straddle increases in value when the underlying security price has little volatility before the expiration date. A purchased straddle involves simultaneously purchasing a call option and a put option on the same security with the same strike price and expiration date. The purchased straddle increases in value when the underlying security price has high volatility, regardless of direction, before the expiration date.

Swap Agreements

The Fund may invest in swap agreements. Swap agreements are negotiated between the Fund and a counterparty to exchange or swap investment cash flows, assets, foreign currencies, or market-linked returns at specified, future intervals. Swap agreements are either privately negotiated in the over-the-counter market (“OTC Swaps”) or cleared in a central clearing house (“Centrally Cleared Swaps”). The Fund may enter into credit default, cross-currency, interest rate and other forms of swap agreements to manage its exposure to credit, currency, interest rate, and inflation risk. In connection with these agreements, securities or cash may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.

Swaps are marked to market daily based upon values from third party vendors or quotations from market makers to the extent available and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of Assets and Liabilities. In the event that market quotes are not readily available and the swap cannot be valued pursuant to one of the valuation methods, the value of the swap will be determined in good faith by the Valuation Committee pursuant to procedures approved by the Board.

Payments received or made at the beginning of the measurement period are reflected as such on the Statement of Assets and Liabilities and represent payments made or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gains or losses on the Statement of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss on the Statement of Operations. Net periodic payments received or paid by the Fund are included as part of realized gains or losses on the Statement of Operations.

Entering into these agreements involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements and that there may be unfavorable changes in interest rates.

The Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. The risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral to the Fund to cover the Fund’s exposure to the counterparty.

Credit Default Swap Agreements

Credit default swap agreements involve one party making a stream of payments (referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the

 

 

43

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

event of a default or other credit event for the referenced entity, obligation or index. As a seller of protection on credit default swap agreements, the Fund will generally receive from the buyer of protection a fixed rate of periodic premiums throughout the term of the swap provided that there is no credit event. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure up to the notional amount of the swap.

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are estimated by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value.

Credit default swap agreements on corporate issues, sovereign issues of an emerging country or U.S. municipal issues involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection’s right to choose the deliverable obligation with the lowest value following a credit event). The Fund may use credit default swaps on corporate issues, sovereign issues of an emerging country or U.S. municipal issues to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer’s default.

Credit default swap agreements on asset-backed securities involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. Unlike credit default swaps on corporate issues, sovereign issues of an emerging country or U.S. municipal issues, deliverable obligations in most instances would be limited to the specific referenced obligation as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedown or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap agreement will be adjusted by corresponding amounts. The Fund may use credit default swaps on asset-backed securities to provide a measure of protection against defaults of the referenced obligation that the Fund owns or to take an active long or short position with respect to the likelihood of a particular referenced obligation’s default that the Fund does not own.

Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities,

 

 

44

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index. The Fund may use credit default swaps on credit indices to hedge a portfolio of credit default swaps or bonds, which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. Credit default swaps on indices are benchmarks for protecting investors owning bonds against default, and traders use them to speculate on changes in credit quality.

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues, sovereign issues of an emerging country or U.S. municipal issues as of period end are disclosed in the Notes to the Schedule of Investments and serve as an indicator of the current status of the payment/performance risk and represent a market participant view of the likelihood or risk of default for the underlying referenced security to credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

The maximum potential amount of future payments (undiscounted) that the Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of each individual credit default swap agreement outstanding as of February 28, 2018, for which the Fund is the seller of protection is disclosed in the Notes to the Schedule of Investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.

During the period ended February 28, 2018, the Flexible Bond Fund entered into credit default swaps primarily for return enhancement, hedging, and exposing cash to markets.

The Fund’s credit default swap contract notional amounts outstanding fluctuate throughout the operating year as required to meet the strategic requirements. The following table illustrates the average quarterly volume of credit default swap contracts. For the purpose of this disclosure, the volume is measure by the notional amounts outstanding at each quarter end.

 

Average Credit Default Swap Notional Amounts* Outstanding

  

Fund

         Period Ended February 28, 2018  

Flexible Bond

       5,315,000  

* Notional amounts are denominated in local currency

Interest Rate Swap Agreements

The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swap agreements. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest with respect to the notional amount of principal.

During the period ended February 28, 2018, the Flexible Bond Fund entered into interest rate swaps primarily for return enhancement and hedging.

 

 

45

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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

 

Average Interest Rate Swap Notional Amounts* Outstanding

  

Fund

         Period Ended February 28, 2018  

Flexible Bond

       212,402,500  

* Notional amounts are denominated in local currency

Total Return Swap Agreements

The Flexible Bond Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.

The 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

         Period Ended February 28, 2018  

Flexible Bond

       200,000  

* Notional amounts are denominated in local currency

Inflation Swap Agreements

An inflation swap involves the use of inflation derivatives (or inflation-indexed derivatives) to transfer inflation risk from one party to another. The derivatives used may be over-the-counter or exchange-traded derivatives. Inflation swaps frequently include real rate swaps, such as asset swaps of inflation-indexed bonds. Inflation swaps are simply a linear form of such derivatives. Real rate swaps consist of the nominal interest swap rate minus the corresponding inflation swap.

In an inflation swap, one party pays a fixed rate on a notional principal amount, while the other party pays a floating rate linked to an inflation index, such as the Consumer Price Index (CPI). The party paying the floating rate pays the inflation-adjusted rate multiplied by the notional principal amount.

There are three main types of inflation swap. In a standard interbank inflation-linked swap, or zero-coupon inflation-linked swap, cash flow is exchanged on the maturity date. This swap pays out the exact value of the cumulative inflation for a fixed capital sum over a determined period.

In a year-on-year inflation-linked swap, inflation is used on an annual basis rather than a cumulative one. Typically, an inflation swap is priced on a zero-coupon basis, with payment exchanged upon maturity. One party pays the compound fixed rate, while the other pays the actual inflation rate for the term of the swap. In Europe, inflation swaps are typically paid on a year-on-year basis where the year-on-year rate of change of the price index is paid. In the United States, payment is more typically on a month-on-month basis, although the inflation rate used is still the year-on-year rate.

 

 

46

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

In an inflation-linked income swap two cash flows are exchanged, each of which follows the inflation index. One party pays a fixed inflation increase annually over the period of the contract. The other party pays the actual inflation over the period of the contract. The swap itself consists of a series of zero-coupon swaps. Other traded inflation derivatives include caps, floors, and straddles, which are usually priced against year-on-year swaps.

During the period ended February 28, 2018, the Flexible Bond Fund did not hold any inflation swap agreements outstanding.

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 February 28, 2018:    
    Derivatives not accounted for as hedging instruments                              

Assets:

   Credit contracts           Foreign exchange
contracts		           Commodity
contracts		           Interest rate
contracts		           Equity contracts           Total  
Purchased options and swaptions contracts outstanding   $ –     $       –     $       –       $ 92,496       $ 5,700       $ 98,196  
Unrealized appreciation of forward foreign currency contracts     –         562,629         –         –         –         562,629  
Receivable for variation margin from open futures contracts(2)     –         –         –         290,005         –         290,005  
Unrealized appreciation from swap agreements     36,200         –         –         1,057,743         6,952         1,100,895  

Liabilities:

   Credit contracts           Foreign exchange
contracts		           Commodity
contracts		           Interest rate
contracts		           Equity contracts           Total  
Written options and swaptions contracts outstanding   $ –       $ (414 )    $       –       $ (199,000 )    $       –       $ (199,414 ) 
Unrealized depreciation of forward foreign currency contracts     –         (501,178 )        –         –         –         (501,178 ) 
Payable for variation margin from open futures contracts(2)     –         –         –         (61,423 )        –         (61,423 ) 
Unrealized depreciation from swap agreements     (8,967 )        –         –         (46,489 )        –         (55,456 ) 

 

The effect of financial derivative instruments on the Statement of Operations as of February 28, 2018:    
    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 and swaptions contracts   $ –       $ 98,489       $ –       $ (105,759 )      $ 70,044       $ 62,774  
Forward foreign currency contracts     –         (396,400 )        –         –         –         (396,400 ) 
Futures contracts     –         –         –         270,518         -         270,518  
Swap agreements     (148,795 )        –         –         (103,999 )        -         (252,794 ) 
Written options and swaptions contracts     –         (26,566 )        –         36,047         -         9,481  

 

 

47

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Derivatives not accounted for as hedging instruments

  

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 and swaptions contracts   $ –       $ 7,463       $ –       $ 81,624       $ 8,913       $ 98,000  
Forward foreign currency contracts     –         (263,728 )        –         –         –         (263,728 ) 
Futures contracts     –         –         –         253,220         –         253,220  
Swap agreements     108,188         –         –         904,182         –         1,012,370  
Written options and swaptions contracts     –         (164 )        –         (140,848 )        -         (141,012 ) 

(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.

Master Agreements

International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties govern transactions in over-the-counter (“OTC”) derivative and foreign exchange contracts entered into by the Fund and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.

Master Repurchase Agreements (“Master Repo Agreements”) govern transactions between a Fund and select counterparties. The Master Repo Agreements maintain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for Repurchase and Reverse Repurchase Agreements.

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

6.  Principal Risks

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

Counterparty Risk

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

 

 

48

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Currency Risk

The Fund may have exposure to foreign currencies by making direct investments in non-U.S. currencies or in securities denominated in non-U.S. currencies, purchasing or selling forward foreign currency exchange contracts in non-U.S. currencies, non-U.S. currency futures contracts and swaps for cross-currency investments. Foreign currencies will fluctuate, and may decline, in value relative to the U.S. dollar and other currencies and thereby affect the Fund’s investments in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, or in derivatives that provide exposure to, foreign (non-U.S.) currencies.

Derivatives Risk

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

Foreign Investing Risk

Non-U.S. investments carry potential risks not associated with U.S. investments. Such risks include, but are not limited to: (1) currency exchange rate fluctuations, (2) political and financial instability, (3) less liquidity and greater volatility, (4) lack of uniform accounting, auditing and financial reporting standards, (5) increased price volatility, (6) less government regulation and supervision of foreign stock exchanges, brokers and listed companies, and (7) delays in transaction settlement in some foreign markets.

Forward Foreign Currency Contracts Risk

Forward foreign currency contracts, including non-deliverable forwards, are derivative instruments pursuant to a contract with a counterparty to pay a fixed price for an agreed amount of securities or other underlying assets at an agreed date or to buy or sell a specific currency at a future date at a price set at the time of the contract. The use of forward foreign currency contracts may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities or currencies underlying the forward foreign currency contract.

Futures Contracts Risk

Futures contracts are derivative instruments where one party pays a fixed price for an agreed amount of securities or other underlying assets at an agreed date. The use of such derivative instruments may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. Futures contracts may experience potentially dramatic price changes (losses) and imperfect correlation between the price of the contract and the underlying security or index, which will increase the volatility of the Fund and may involve a small investment of cash (the amount of initial and variation margin) relative to the magnitude of the risk assumed (the potential increase or decrease in the price of the futures contract).

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

 

 

49

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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).

Interest Rate Risk

The Fund is 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 several times since December 2015 and has signaled additional increases in the near future. Interest rates may rise, perhaps significantly and/or rapidly, potentially resulting in substantial losses to the Fund. 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 Fund’s 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 Fund will have the potential for greater losses than if the Fund does not use the derivative instruments that have a leveraging effect. Leverage may result in losses that exceed the amount originally invested and may accelerate the rate of losses. Leverage tends to magnify, sometimes significantly, the effect of an increase or decrease in the Fund’s exposure to an asset or class of assets and may cause the Fund’s NAV to be volatile.

Liquidity Risk

The Fund is 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 Fund could lose money if it is unable to dispose of an investment at a time that is most beneficial to the Fund. The Fund may be required to dispose of investments at unfavorable times or prices to satisfy obligations, which may result in losses or may be costly to the Fund. For example, the Fund may be forced to sell certain investments at unfavorable prices to meet redemption requests or other cash needs. Judgment plays a greater role in pricing illiquid investments than in investments with more active markets.

Market Risk

The Fund is subject to the risk that the securities markets will move down, sometimes rapidly and unpredictably based on overall economic conditions and other factors. The value of a security may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investment sentiment generally. Changes in the financial condition of a single issuer can impact a market as a whole.

Multiple Sub-Advisor Risk

The Manager may allocate the Fund’s assets among multiple sub-advisors, each of which is responsible for investing its allocated portion of the Fund’s assets. To a significant extent, the Fund’s performance will depend on the success of the Manager in allocating the Fund’s assets to sub-advisors and its selection and oversight of the

 

 

50

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

sub-advisors. Because each sub-advisor manages its allocated portion of the Fund independently from another sub-adviser, the same security may be held in different portions of the Fund, or may be acquired for one portion of the Fund at a time when a sub-adviser to another portion deems it appropriate to dispose of the security from that other portion, resulting in higher expenses without accomplishing any net result in the Fund’s holdings. Similarly, under some market conditions, one sub-adviser may believe that temporary, defensive investments in short-term instruments or cash are appropriate when another sub-adviser believes continued exposure to the equity or debt markets is appropriate for its allocated portion of the Fund. Because each sub-adviser directs the trading for its own portion of the Fund, and does not aggregate its transactions with those of the other sub-advisors, the Fund may incur higher brokerage costs than would be the case if a single sub-adviser were managing the entire Fund. In addition, while the Manager seeks to allocate the Fund’s assets among the Fund’s sub-advisors in a manner that it believes is consistent with achieving the Fund’s investment objective(s), the Manager may be subject to potential conflicts of interest in allocating the Fund’s assets among sub-advisors.

Other Investment Companies Risk

The Fund may invest in shares of other registered investment companies, including ETFs and money market funds. To the extent that the Fund invest in shares of other registered investment companies, the Fund will indirectly bear the fees and expenses charged by the underlying funds in addition to the Fund’s direct fees and expenses and will be subject to the risks associated with investments in those funds. For example, ETF shares may trade at a premium or discount to their net asset value. An ETF that tracks an index may not precisely replicate the returns of its benchmark index.

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 Fund may have to invest at a lower rate, may not benefit from an increase in value that may result from declining interest rates, and may lose any premium it paid to acquire the security. Variable and floating rate securities may be less sensitive to prepayment risk. Extension risk is the risk that a decrease in prepayments may, as a result of higher interest rates or other factors, result in the extension of a security’s effective maturity, heighten interest rate risk and increase the potential for a decline in its price.

Restricted Securities Risk

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

Short Position Risk

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

 

 

51

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Valuation Risk

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

Offsetting Assets and Liabilities

The Fund is a party to enforceable master netting agreements between brokers and counterparties which provide for the right to offset under certain circumstances. The Fund employs multiple money managers and 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, February 28, 2018.

Flexible Bond Fund

 

Offsetting of Financial and Derivative Assets as of February 28, 2018:      
    Assets           Liabilities  
Futures Contracts   $ 290,005       $ 61,423  
Swap Agreement - Centrally cleared     1,074,108         55,456  
Swap Agreement - OTC     26,787         -  
Purchased Options and Swaptions Contracts     98,196         -  
Written Options and Swaptions Contracts     -         199,414  
Forward Foreign Currency Contracts     562,629         501,178  
 

 

 

      

 

 

  
Total derivative assets and liabilities in the Statement of Assets and Liabilities   $ 2,051,725       $ 817,471  
 

 

 

      

 

 

  
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)   $ (1,364,113 )      $ (116,879 ) 
 

 

 

      

 

 

  
Total derivative assets and liabilities subject to an MNA   $ 687,612       $ 700,592  
 

 

 

      

 

 

  

 

Financial Assets, Derivatives, and Collateral Received/(Pledged) by Counterparty as of February 28, 2018:  
                            Gross Amounts Not Offset in the
Statement of Assets and Liabilities		              

Counterparty

   Gross Amounts of Assets
Presented in the Statement
of Assets and Liabilities		           Derivatives
Available for
Offset		           Non-Cash Collateral
Pledged		           Cash Collateral
Pledged		           Net Amount  
BNP Paribas, N.A.   $ 7,686       $ (7,686 )      $ -       $ -       $ -  
Bank of America, N.A.     18,933         (8,866 )        -         -         10,067  
Barclays Bank PLC     44,966         (44,966 )        -         -         -  
Citibank, N.A.     169,639         (114,854 )        20,000         -         34,785  
Credit Suisse International     1,554         (1,554 )        -         -         -  
Deutsche Bank AG     21,718         (18 )        -         -         21,700  
Goldman Sachs Capital Markets     49,614         (32,201 )        -         -         17,413  
Goldman Sachs International     53,933         (53,933 )        -         -         -  
HSBC Bank (USA)     112,543         (112,543 )        -         -         -  
JPMorgan Chase Bank, N.A.     131,547         (35,417 )        -         -         96,130  
Morgan Stanley & Co. Inc.     29,022         (29,022 )        -         -         -  
Standard Chartered Bank     12,131         (2,819 )        -         -         9,312  
State Street Bank & Trust Co.     34,326         (23,859 )        -         -         10,467  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
Total   $ 687,612       $ (467,738 )      $ 20,000       $ -       $ 199,874  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

 

 

52

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

 

                            Gross Amounts Not Offset in the
Statement of Assets and Liabilities		              

Counterparty

   Gross Amounts of Liabilities
Presented in the Statement
of Assets and  Liabilities		           Derivatives
Available for
Offset		           Non-Cash Collateral
Received		           Cash Collateral
Received		           Net Amount  
BNP Paribas, N.A.   $ 12,921       $ (7,686 )      $ -       $ -       $ 5,235  
Bank of America, N.A.     8,866         (8,866 )        -         -         -  
Barclays Bank PLC     148,561         (44,966 )        -         -         103,595  
Citibank, N.A.     114,854         (114,854 )        -         -         -  
Credit Suisse International     15,934         (1,554 )        -         -         14,380  
Deutsche Bank AG     18         (18 )        -         -         -  
Goldman Sachs Capital Markets     32,201         (32,201 )        -         -         -  
Goldman Sachs International     93,184         (53,933 )        -         -         39,251  
HSBC Bank (USA)     164,482         (112,543 )        -         -         51,939  
JPMorgan Chase Bank, N.A.     35,417         (35,417 )        -         -         -  
Morgan Stanley & Co. Inc.     47,293         (29,022 )        -         18,271         -  
Royal Bank of Scotland PLC     183         -         -         -         183  
Standard Chartered Bank     2,819         (2,819 )        -         -         -  
State Street Bank & Trust Co.     23,859         (23,859 )        -         -         -  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  
Total   $ 700,592       $ (467,738 )      $ -       $ 18,271       $ 214,583  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

7.  Federal Income and Excise Taxes

It is the policy of the Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.

The Fund does not have any unrecorded tax liabilities in the accompanying financial statements. The tax years for the four year period ended August 31, 2017 remain subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.

The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation (depreciation), as applicable, as the income is earned or capital gains are recorded.

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

 

 

53

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

As of February 28, 2018 the tax cost for the Fund and respective gross unrealized appreciation (depreciation) were as follows:

 

Fund

   Tax Cost           Unrealized
Appreciation		           Unrealized
(Depreciation)		           Net
Unrealized
Appreciation
(Depreciation)		  
Flexible Bond   $ 133,949,406       $ 7,472,443       $ (8,220,940 )      $ (748,497 ) 

Under the Regulated Investment Company Modernization Act of 2010 (“RIC MOD”), net capital losses recognized by the Fund in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.

As of August 31, 2017, the Fund had $6,899,148 of short-term and $9,065,201 long-term post RIC MOD

capital loss carryforwards.

8.  Investment Transactions

The aggregate cost of purchases and proceeds from sales and maturities of investments, other than short-term obligations, for the period ended February 28, 2018 were as follows:

 

Fund

   Purchases (non-U.S.
Government
Securities)		           Purchases of U.S.
Government
Securities		           Sales (non-U.S.
Government
Securities)		           Sales of U.S.
Government
Securities		  
Flexible Bond   $ 26,931,993       $ 142,091,783       $ 26,902,337       $ 143,542,220  

A summary of the Fund’s transactions in the USG Select Fund for the period ended February 28, 2018 were as follows:

 

Fund

   Type of
Transaction		           August 31,
2017
Shares/Fair
Value		           Purchases           Sales           February 28,
2018
Shares/Fair
Value		           Dividend
Income		  
Flexible Bond     Direct       $ 6,688,878       $ 44,300,540       $ 44,386,049       $ 6,603,369       $ 30,625  

9.  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 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

 

 

54

American Beacon Flexible Bond FundSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

allocated among the Participating Funds based on average daily net assets. During the period ended February 28, 2018, the Fund did not utilize this facility.

10.  Capital Share Transactions

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

 

    Institutional Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Flexible Bond Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     331,082       $ 3,249,111         1,663,568       $ 15,914,446  
Reinvestment of dividends     95,407         934,747         204,294         1,960,244  
Shares redeemed     (1,034,594 )        (10,116,492 )        (2,775,374 )        (26,484,011 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net (decrease) in shares outstanding     (608,105 )      $ (5,932,634 )        (907,512 )      $ (8,609,321 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    Y Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Flexible Bond Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     626,605       $ 6,148,571         476,861       $ 4,608,525  
Reinvestment of dividends     35,529         347,644         65,961         632,595  
Shares redeemed     (309,217 )        (3,027,418 )        (900,592 )        (8,584,774 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     352,917       $ 3,468,797         (357,770 )      $ (3,343,654 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    Investor Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Flexible Bond Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     132,450       $ 1,295,641         285,136       $ 2,744,151  
Reinvestment of dividends     4,868         47,571         7,001         67,241  
Shares redeemed     (41,637 )        (407,055 )        (159,261 )        (1,522,338 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     95,681       $ 936,157         132,876       $ 1,289,054  
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    A Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Flexible Bond Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     45,456       $ 442,823         215,757       $ 2,069,773  
Reinvestment of dividends     3,441         33,487         11,930         113,722  
Shares redeemed     (344,094 )        (3,348,075 )        (592,971 )        (5,665,080 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net (decrease) in shares outstanding     (295,197 )      $ (2,871,765 )        (365,284 )      $ (3,481,585 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    C Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Flexible Bond Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     14,404       $ 140,221         33,578       $ 321,184  
Reinvestment of dividends     1,422         13,822         3,241         30,929  
Shares redeemed     (32,334 )        (314,152 )        (202,704 )        (1,926,771 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net (decrease) in shares outstanding     (16,508 )      $ (160,109 )        (165,885 )      $ (1,574,658 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  

11.  Subsequent Events

Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.

 

 

55

American Beacon Flexible Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Institutional Class  
    Six Months
Ended
February 28,
2018		     Year Ended
August 31,
2017		           Year EndedA
August 31,
2016		           Year Ended
August 31,
2015		           Year Ended
August 31,
2014		           Year Ended
August 31,
2013		  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.83       $ 9.50       $ 9.77       $ 10.33       $ 10.21       $ 10.48  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.12         0.24         0.22         0.29         0.21         0.34  

Net gains (losses) on investments (both realized and unrealized)

     (0.00 )F        0.30         (0.04 )        (0.57 )        0.16         (0.24 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.12         0.54         0.18         (0.28 )        0.37         0.10  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.11 )        (0.20 )        (0.37 )        (0.28 )        (0.18 )        (0.23 ) 

Distributions from net realized gains

     -         -         -         -         (0.07 )        (0.14 ) 

Tax return of capital

     -         (0.01 )B        (0.08 )B        -         -         -  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.11 )        (0.21 )        (0.45 )        (0.28 )        (0.25 )        (0.37 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.84       $ 9.83       $ 9.50       $ 9.77       $ 10.33       $ 10.21  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnC

     1.22 %D        5.77 %        1.94 %        (2.79 )%        3.70 %        0.83 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

 

              

Net assets, end of period

   $ 82,410,236       $ 88,277,101       $ 93,936,262       $ 164,119,296       $ 177,201,454       $ 127,322,158  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.15 %E        1.11 %        1.13 %        1.27 %        1.24 %        1.22 % 

Expenses, net of reimbursements

     0.90 %E        0.90 %        0.90 %        0.90 %        0.90 %        0.90 % 

Net investment income, before expense reimbursements

     2.43 %E        2.49 %        2.70 %        2.37 %        1.61 %        0.84 % 

Net investment income, net of reimbursements

     2.68 %E        2.70 %        2.93 %        2.74 %        1.94 %        1.15 % 

Portfolio turnover rate

     149 %D        258 %        162 %        492 %        387 %        112 % 

 

A  On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund.
B  The tax return of capital is calculated based on shares outstanding at the time of distribution.
C  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
D  Not annualized.
E  Annualized.
F  Amount represents less than $0.01 per share.

 

See accompanying notes

 

56

American Beacon Flexible Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Y Class  
    Six Months
Ended
February 28,
2018		     Year Ended
August 31,
2017		           Year EndedA
August 31,
2016		           Year Ended
August 31,
2015		           Year Ended
August 31,
2014		           Year Ended
August 31,
2013		  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.82       $ 9.50       $ 9.77       $ 10.33       $ 10.22       $ 10.51  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.16         0.22         0.21         0.29         0.18         0.22  

Net gains (losses) on investments (both realized and unrealized)

     (0.05 )        0.31         (0.04 )        (0.58 )        0.17         (0.15 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.11         0.53         0.17         (0.29 )        0.35         0.07  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.11 )        (0.20 )        (0.37 )        (0.27 )        (0.17 )        (0.22 ) 

Distributions from net realized gains

     -         -         -         -         (0.07 )        (0.14 ) 

Tax return of capital

     -         (0.01 )B        (0.07 )B        -         -         -  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.11 )        (0.21 )        (0.44 )        (0.27 )        (0.24 )        (0.36 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.82       $ 9.82       $ 9.50       $ 9.77       $ 10.33       $ 10.22  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnD

     1.11 %E        5.67 %        1.83 %        (2.87 )%        3.51 %        0.58 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

 

              

Net assets, end of period

   $ 33,256,258       $ 29,763,479       $ 32,193,869       $ 44,284,677       $ 38,033,706       $ 39,897,599  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.23 %C        1.19 %        1.19 %        1.34 %        1.29 %        1.26 % 

Expenses, net of reimbursements

     0.99 %C        0.99 %        0.99 %        0.99 %        0.99 %        0.99 % 

Net investment income, before expense reimbursements

     2.37 %C        2.40 %        2.67 %        2.33 %        1.51 %        0.91 % 

Net investment income, net of reimbursements

     2.61 %C        2.60 %        2.86 %        2.68 %        1.81 %        1.19 % 

Portfolio turnover rate

     149 %E        258 %        162 %        492 %        387 %        112 % 

 

A  On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund.
B  The tax return of capital is calculated based on shares outstanding at the time of distribution.
C  Annualized.
D  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
E  Not annualized.

 

See accompanying notes

 

57

American Beacon Flexible Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Investor Class  
    Six Months
Ended
February 28,
2018		     Year Ended
August 31,
2017		           Year EndedA
August 31,
2016		           Year Ended
August 31,
2015		           Year Ended
August 31,
2014		           Year Ended
August 31,
2013		  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.81       $ 9.50       $ 9.76       $ 10.31       $ 10.21       $ 10.51  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income (loss)

     0.42         0.98         (1.27 )        (0.33 )        0.02         0.18  

Net gains (losses) on investments (both realized and unrealized)

     (0.32 )        (0.48 )        1.41         0.01         0.30         (0.13 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.10         0.50         0.14         (0.32 )        0.32         0.05  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.10 )        (0.18 )        (0.33 )        (0.23 )        (0.15 )        (0.21 ) 

Distributions from net realized gains

     -         -         -         -         (0.07 )        (0.14 ) 

Tax return of capital

     -         (0.01 )B        (0.07 )B        -         -         -  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.10 )        (0.19 )        (0.40 )        (0.23 )        (0.22 )        (0.35 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.81       $ 9.81       $ 9.50       $ 9.76       $ 10.31       $ 10.21  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnD

     1.04 %E        5.36 %        1.57 %        (3.11 )%        3.13 %        0.38 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

 

              

Net assets, end of period

   $ 5,181,187       $ 4,242,206       $ 2,846,444       $ 7,560,586       $ 24,410,567       $ 56,015,406  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.41 %C        1.38 %        1.42 %        1.51 %        1.43 %        1.54 % 

Expenses, net of reimbursements

     1.27 %C        1.27 %        1.27 %        1.27 %        1.27 %        1.27 % 

Net investment income, before expense reimbursements

     2.20 %C        2.22 %        2.39 %        2.15 %        1.34 %        0.65 % 

Net investment income, net of reimbursements

     2.34 %C        2.33 %        2.53 %        2.38 %        1.50 %        0.92 % 

Portfolio turnover rate

     149 %E        258 %        162 %        492 %        387 %        112 % 

 

A  On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund.
B  The tax return of capital is calculated based on shares outstanding at the time of distribution.
C  Annualized.
D  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
E  Not annualized.

 

See accompanying notes

 

58

American Beacon Flexible Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    A Class  
    Six Months
Ended
February 28,
2018		     Year Ended
August 31,
2017		           Year EndedA
August 31,
2016		           Year Ended
August 31,
2015		           Year Ended
August 31,
2014		           Year Ended
August 31,
2013		  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.76       $ 9.45       $ 9.72       $ 10.27       $ 10.16       $ 10.49  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income (loss)

     0.11 B        (0.17 )        0.02         0.12         0.10         0.21  

Net gains (losses) on investments (both realized and unrealized)

     (0.01 )        0.67         0.11         (0.44 )        0.21         (0.18 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.10         0.50         0.13         (0.32 )        0.31         0.03  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.10 )        (0.18 )        (0.33 )        (0.23 )        (0.13 )        (0.22 ) 

Distributions from net realized gains

     -         -         -         -         (0.07 )        (0.14 ) 

Tax return of capital

     -         (0.01 )C        (0.07 )C        -         -         -  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.10 )        (0.19 )        (0.40 )        (0.23 )        (0.20 )        (0.36 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.76       $ 9.76       $ 9.45       $ 9.72       $ 10.27       $ 10.16  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnE

     1.03 %F        5.33 %        1.49 %        (3.14 )%        3.12 %        0.16 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

 

              

Net assets, end of period

   $ 2,599,358       $ 5,480,382       $ 8,757,769       $ 15,190,886       $ 27,146,489       $ 41,376,389  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.56 %D        1.50 %        1.52 %        1.66 %        1.68 %        1.67 % 

Expenses, net of reimbursements

     1.29 %D        1.29 %        1.29 %        1.29 %        1.38 %        1.39 % 

Net investment income, before expense reimbursements

     1.96 %D        2.08 %        2.31 %        1.95 %        1.10 %        0.50 % 

Net investment income, net of reimbursements

     2.23 %D        2.29 %        2.53 %        2.32 %        1.40 %        0.79 % 

Portfolio turnover rate

     149 %F        258 %        162 %        492 %        387 %        112 % 

 

A  On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund.
B  Per share amounts have been calculated using the average share method.
C  The tax return of capital is calculated based on shares outstanding at the time of distribution.
D  Annualized.
E  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
F  Not annualized.

 

See accompanying notes

 

59

American Beacon Flexible Bond FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    C Class  
    Six Months
Ended
February 28,
2018		     Year Ended
August 31,
2017		           Year EndedA
August 31,
2016		           Year Ended
August 31,
2015		           Year Ended
August 31,
2014		           Year Ended
August 31,
2013		  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 9.75       $ 9.44       $ 9.69       $ 10.22       $ 10.11       $ 10.49  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income (loss)

     0.07 B        (0.31 )        (0.08 )        0.07         0.02         0.14  

Net gains (losses) on investments (both realized and unrealized)

     (0.01 )        0.73         0.14         (0.46 )        0.22         (0.19 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.06         0.42         0.06         (0.39 )        0.24         (0.05 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.06 )        (0.11 )        (0.26 )        (0.14 )        (0.06 )        (0.19 ) 

Distributions from net realized gains

     -         -         -         -         (0.07 )        (0.14 ) 

Tax return of capital

     -         (0.00 )D        (0.05 )C        -         -         -  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.06 )        (0.11 )        (0.31 )        (0.14 )        (0.13 )        (0.33 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 9.75       $ 9.75       $ 9.44       $ 9.69       $ 10.22       $ 10.11  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnE

     0.65 %F        4.53 %        0.68 %        (3.81 )%        2.37 %        (0.54 )% 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

 

              

Net assets, end of period

   $ 2,057,827       $ 2,218,460       $ 3,713,433       $ 7,133,191       $ 11,126,819       $ 15,291,798  

Ratios to average net assets:

                      

Expenses, before reimbursements

     2.27 %G        2.24 %        2.26 %        2.40 %        2.43 %        2.43 % 

Expenses, net of reimbursements

     2.04 %G        2.04 %        2.04 %        2.04 %        2.13 %        2.14 % 

Net investment income (loss), before expense reimbursements

     1.32 %G        1.34 %        1.55 %        1.21 %        0.35 %        (0.24 )% 

Net investment income, net of reimbursements

     1.55 %G        1.54 %        1.77 %        1.57 %        0.66 %        0.04 % 

Portfolio turnover rate

     149 %F        258 %        162 %        492 %        387 %        112 % 

 

A  On September 30, 2015, GAM International Management, Ltd. was terminated and ceased managing assets of the Flexible Bond Fund. On August 28, 2015, Payden & Rygel began managing assets of the Flexible Bond Fund.
B  Per share amounts have been calculated using the average share method.
C  The tax return of capital is calculated based on shares outstanding at the time of distribution.
D  Amount represents less than $0.01 per share.
E  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
F  Not annualized.
G  Annualized.

 

See accompanying notes

 

60

American Beacon FundsSM

Affirmation of Commodity Pool

February 28, 2018 (Unaudited)

 

 

To the best of my knowledge and belief, the information contained in the attached financial statements for the period from September 1, 2017 to February 28, 2018, is accurate and complete.

 

LOGO

Melinda G. Heika, Treasurer American Beacon Advisors, Inc.

Commodity Pool Operator for the American Beacon Flexible Bond Fund

 

 

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62

  

 

 

 

 

 

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63

LOGO

 

 

 

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 Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.

To obtain more information about the Fund:

 

LOGO   LOGO
 
By E-mail:   On the Internet:
american_beacon.funds@ambeacon.com   Visit our website at www.americanbeaconfunds.com
   
     
 

LOGO

By Telephone:

Call (800) 658-5811

  

LOGO

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 made available on www.americanbeaconfunds.com approximately sixty days after the end of each quarter.   A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, which is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended August 31 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

DST Asset Manager Solutions, Inc.

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Resolute Investment Distributors, Inc.

Irving, Texas

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.

 

American Beacon Funds and American Beacon Flexible Bond Fund are service marks of American Beacon Advisors, Inc.

SAR 2/18

LOGO

About American Beacon Advisors

 

Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.

Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.

 

THE LONDON COMPANY INCOME EQUITY FUND

Investing in small- and medium-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in dividend-paying stocks may result in less earnings growth or capital appreciation than investing in non-dividend paying stocks. The use of fixed-income securities entails interest rate and credit risks. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund participates in a securities lending program.

ZEBRA SMALL CAP EQUITY FUND

Investing in small-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. At times, certain securities may have limited marketability and may be difficult to sell. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund participates in a securities lending program.

Please see the prospectus for a complete discussion of the Funds’ risks. There can be no assurances that the investment objectives of these Funds will be met.

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

 

American Beacon Funds

February 28, 2018

Contents

 

 

President’s Message

    1  

Performance Overviews

    2  

Expense Examples

    6  

Schedules of Investments:

 

American Beacon The London Company Income Equity Fund

    8  

American Beacon Zebra Small Cap Equity Fund

    11  

Financial Statements

    21  

Notes to Financial Statements

    24  

Financial Highlights:

 

American Beacon The London Company Income Equity Fund

    41  

American Beacon Zebra Small Cap Equity Fund

    44  

 

Additional Fund Information

    Back Cover  

 

President’s Message

 

 

LOGO  

Dear Shareholders,

 

Since 1986, American Beacon has endeavored to provide investors with a disciplined approach to realizing long-term investment goals: Institutional wisdom + earned alpha = enduring value.

 

u   We believe institutional wisdom comes from having more than 30 years of experience as manager of one of the country’s largest pension plans. As a fiduciary, we have built an investment due-diligence and oversight infrastructure, which we leverage across all our investment products. When selecting our investment managers, we focus on their people, processes and performance. We perform due-diligence reviews with each investment manager on a quarterly basis.

 

u   We believe earned alpha – that is, the returns of an actively managed fund beyond a benchmark – comes from employing and engaging

   investment managers we believe are best-in-class and who have defined, repeatable and proven processes. Our experience has shown us that, while it’s important to be mindful of short-term considerations, having a long-term focus helps manage expectations, mitigate risks and realize goals. Thus, we seek relationships with leading investment managers who display a willingness to undertake time-intensive research strategies. The resulting investment portfolios are differentiated from their peers and allow incremental changes to help address periods of market volatility and economic uncertainty.

 

u We believe enduring value comes from “putting a portfolio in place and sticking with the plan.” Our mutual funds provide you with access to institutional-quality, research-intensive investment managers with diverse processes and styles. In the long run, having such access and spending time in the market – rather than trying to time the market – may better position you to reach your long-term investment goals.

The markets and U.S. economy were robust during calendar year 2017. However, during periods of market volatility and economic uncertainty – such as what we’ve seen thus far in 2018 – investing for the long term requires conviction. It isn’t about identifying and anticipating the next big market move. It’s about identifying the right investment products for riding out those moves. It’s about developing an approach based on long-term participation, while seeking some measure of protection against ongoing volatility.

As a manager of managers, we strive to provide investment products that may enable investors to participate during market upswings while potentially insulating against market downswings. Many of the sub-advisors to our mutual funds pursue upside capture and/or downside protection using proprietary strategies. The investment teams behind our mutual funds seek to produce consistent, long-term results rather than focus only on short-term movements in the markets. In managing our investment products, we emphasize identifying opportunities that offer the potential for high quality and lower risk.

At American Beacon, our approach is more than a concept. It’s the cornerstone of our culture. And we strive to apply it at every turn as we seek to provide a well-diversified line of investment products for your portfolio.

Thank you for your continued interest in American Beacon. For additional information about our investment products or to access your account information, please visit our website at www.americanbeaconfunds.com.

Best Regards,

 

LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

 

1

American Beacon The London Company Income Equity FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

The Investor Class of the American Beacon The London Company Income Equity Fund (the “Fund”) returned 6.99% for the six months ended February 28, 2018. The Fund underperformed the Russell 1000 Value Index (the “Index”) return of 7.26% for the same period.

 

Total Returns for the Period ended February 28, 2018  
      

Ticker

     

6 Months*

     

1 Year

     

3 Years

     

5 Years

   

Since Inception

(5/29/2012)

Institutional Class (1,2,4)

      ABCIX          7.13 %          8.56 %          6.69 %          11.73 %        12.65 %

Y Class (1,2,4)

      ABCYX          7.07 %          8.48 %          6.62 %          11.64 %        12.56 %

Investor Class (1,2,4)

      ABCVX          6.99 %          8.20 %          6.36 %          11.37 %        12.28 %

A without Sales Charge (1,2,4)

      ABCAX          6.95 %          8.20 %          6.30 %          11.27 %        12.18 %

A with Sales Charge (1,2,4)

      ABCAX          0.83 %          1.99 %          4.23 %          9.96 %        11.03 %

C without Sales Charge (1,2,4)

      ABECX          6.52 %          7.30 %          5.51 %          10.46 %        11.34 %

C with Sales Charge (1,2,4)

      ABECX          5.52 %          6.30 %          5.51 %          10.46 %        11.34 %
                                       

Russell 1000 Value Index (3)

               7.26 %          7.75 %          8.02 %          12.04 %        14.06 %

 

* Not annualized.

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of the date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A Class shares have a maximum sales charge of 5.75%. The maximum contingent deferred sales charge for the C Class is 1.00% for shares redeemed within one year of the date of purchase.

 

2. A portion of the fees charged to the Y, A, and C Classes of the Fund was waived from 2012 through 2014 and partially recovered in 2015. Performance prior to waiving fees was lower than the actual returns shown from 2012 through 2014. A portion of the fees charged to the Investor Class of the Fund was waived in 2012 and 2013 and partially recovered in 2014 and 2015. Performance prior to waiving fees was lower than actual returns shown in 2012 and 2013. A portion of the fees charged to the Institutional Class of the Fund was waived from 2012 through 2014 and partially recovered in 2015 and 2016. Performance prior to waiving fees was lower than actual returns shown from 2012 through 2014.

 

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

 

4. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares were 0.75%, 0.82%, 1.06%, 1.13%, and 1.87%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund’s underperformance relative to the Index was mostly attributable to security selection among the various economic sectors.

From a security selection standpoint, the Fund’s holdings in the Health Care, Energy and Industrials sectors detracted from performance. In the Health Care sector, companies detracting from the Fund’s performance included Merck down 13.6% and Eli Lilly down 1.8%. In the Energy sector, Kinder Morgan down 14.9% was the largest detractor. The Fund’s absence from ConocoPhillips and Valero Energy, which were up 25.8% and 35.1%, respectively, in the Index, also negatively impacted performance. General Electric down 36.8% and United Parcel Service down 14.5% hurt performance in the Industrials sector. The aforementioned poor performance was somewhat offset by good security selection in the Consumer Discretionary and Information Technology sectors. In the Consumer Discretionary sector, Target up 40.9% and Lowes up 22.2% added the most value relative to the Index. Microsoft up 26.4%, Cisco Systems up 41.2% and Intel up 41.4% were the largest contributors in the Information Technology sector.

From a sector allocation perspective, the Fund’s significant underweight in Financials, the second best performing sector, detracted from performance. An overweight position in Consumer Staples also detracted from the Fund’s return. An overweight in Information Technology, the best performing sector, added relative value.

 

 

2

American Beacon The London Company Income Equity FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

The sub-advisor’s investment process continues to focus on downside protection, current income and capital appreciation.

 

Top Ten Holdings (% Net Assets)        
General Dynamics Corp.           5.8  
Wells Fargo & Co.           5.0  
Norfolk Southern Corp.           4.9  
Carnival Corp.           4.8  
Apple, Inc.           4.7  
BlackRock, Inc.           4.7  
Microsoft Corp.           4.3  
Cisco Systems, Inc.           4.0  
Target Corp.           3.9  
Intel Corp.           3.7  
Total Fund Holdings      32       
       
Sector Allocation (% Equities)        
Information Technology           22.8  
Industrials           17.3  
Financials           15.8  
Consumer Discretionary           12.0  
Consumer Staples           11.4  
Health Care           5.9  
Energy           3.9  
Real Estate           3.1  
Utilities           3.0  
Telecommunication Services           2.6  
Materials           2.2  

 

 

3

American Beacon Zebra Small Cap Equity FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

The Investor Class of the American Beacon Zebra Small Cap Equity Fund (the “Fund”) returned 5.46% for the six-month period ended February 28, 2018. The Fund underperformed the Russell 2000® Index (the “Index”) return of 8.30% for the same period. For further comparison, the Russell 2000® Value Index returned 5.09%.

 

Total Returns for the Period ended February 28, 2018  
      

Ticker

     

6 Months*

     

1 Year

     

3 Years

     

5 Years

   

Since Inception

(6/1/2010)

Institutional Class (1,3,5)

      AZSIX          5.73 %          6.93 %          8.95 %          12.44 %        13.41 %

Y Class (1,3,5)

      AZSYX          5.62 %          6.81 %          8.84 %          12.34 %        13.30 %

Investor Class (1,3,5)

      AZSPX          5.46 %          6.46 %          8.53 %          12.00 %        12.97 %

A without Sales Charge (1,3,5)

      AZSAX          5.50 %          6.50 %          8.53 %          11.96 %        12.91 %

A with Sales Charge (1,3,5)

      AZSAX          -0.54 %          0.40 %          6.42 %          10.65 %        12.05 %

C without Sales Charge (1,2,3,5)

      AZSCX          5.07 %          5.69 %          7.70 %          11.13 %        12.08 %

C with Sales Charge (1,2,3,5)

      AZSCX          4.07 %          4.69 %          7.70 %          11.13 %        12.08 %
                                       

Russell 2000 Index (4)

               8.30 %          10.51 %          8.55 %          12.19 %        13.25 %

 

* Not annualized.

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights. A Class shares have a maximum sales charge of 5.75%.

 

2. Fund performance represents the total returns achieved by the Investor Class from 6/1/10 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 6/1/10. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase.

 

3. A portion of the fees charged to each Class of the Fund has been waived since Fund inception. Performance prior to waiving fees was lower than the actual returns shown since inception.

 

4. The Russell 2000 Index is an unmanaged index comprised of approximately 2,000 smaller-capitalization stocks from various industrial sectors. Russell 2000 Index is a registered trademark of the Frank Russell Company. One cannot directly invest in an index.

 

5. The Total Annual Fund Operating Expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A and C Class shares were 1.36%, 1.41%, 1.58%, 1.73%, and 2.47%, 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.

During the period, the growth segment of the small-cap market significantly outperformed value. The Russell 2000 Index returned 8.30%, with the Russell 2000 Value Index returning 5.09%, and the Russell 2000 Growth Index returning 11.32%. The outperformance in the broader equity markets was primarily due to Financials and Information Technology, the leading beneficiaries of recent tax reform, deregulation and improved economic growth.

The Fund’s focus on fundamentally attractive companies tends to result in holdings with more value-like characteristics than growth, which detracted from performance for the period. The Fund’s allocation across sectors was generally in line with the Russell 2000 Index at +/-2% weights. Slight overweights in the Financial and Industrials sectors, which were two of the best performing sectors for the Index, added modest value for the period. However, the strategy is not based on active sector allocation. The majority of performance is attributed to security selection – identifying fundamentally attractive companies with relatively low trading volumes.

For the period, security selection in the Real Estate and Materials sectors added the most value relative to the Index. The Fund avoided popular Index positions that underperformed for the period (such as Gramercy Property Trust and QTS Realty Trust), while maintaining positions in Valhi Inc, which was up 159%. Detracting from performance were positions in Kronos Worldwide and Sanmina Corp. after announcing lay-offs and plant closures near the end of the period.

 

 

4

American Beacon Zebra Small Cap Equity FundSM

Performance Overview

February 28, 2018 (Unaudited)

 

 

Market capitalization did not play a significant role during the period. The Fund’s weighted-average market capitalization of $1.5 billion was smaller than that of the Russell 2000 Index, at $2.5 billion, but the market cap effect on returns was not as significant as the value/growth effect.

The sub-advisor continues to focus on uncovering opportunities by investing in a portfolio of securities that are generally less popular with investors but nevertheless have strong fundamental characteristics. At the same time, the portfolio will be underweight stocks that are heavily followed but have weak fundamentals. The sub-advisor believes that when these quality companies are recognized by investors, trading volumes are likely to increase and stock prices are likely to rise.

 

Top Ten Holdings (% Net Assets)  
Columbia Sportswear Co.           1.8  
Enstar Group Ltd.           1.6  
Deluxe Corp.           1.4  
Syntel, Inc.           1.2  
Sanmina Corp.           1.2  
International Bancshares Corp.           1.2  
j2 Global, Inc.           1.2  
AVX Corp.           1.2  
Amkor Technology, Inc.           1.1  
Kronos Worldwide, Inc.           1.1  
Total Fund Holdings      296       
Sector Allocation (% Equities)  
Financials           20.7  
Information Technology           19.0  
Industrials           16.0  
Health Care           13.5  
Consumer Discretionary           11.2  
Real Estate           8.0  
Materials           5.4  
Consumer Staples           2.6  
Utilities           2.2  
Energy           0.8  
Telecommunication Services           0.6  

 

 

5

American Beacon FundsSM

Expense Examples

February 28, 2018 (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 September 1, 2017 through February 28, 2018.

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.

 

 

6

American Beacon FundsSM

Expense Examples

February 28, 2018 (Unaudited)

 

 

American Beacon The London Company Income Equity Fund  
    Beginning Account Value
9/1/2017		   Ending Account Value
2/28/2018		   Expenses Paid  During
Period
9/1/2017-2/28/2018*
Institutional Class            
Actual       $1,000.00       $1,071.30       $3.75
Hypothetical**       $1,000.00       $1,021.20       $3.66
Y Class            
Actual       $1,000.00       $1,070.70       $4.06
Hypothetical**       $1,000.00       $1,020.90       $3.96
Investor Class            
Actual       $1,000.00       $1,069.90       $5.39
Hypothetical**       $1,000.00       $1,019.60       $5.26
A Class            
Actual       $1,000.00       $1,069.50       $5.44
Hypothetical**       $1,000.00       $1,019.50       $5.31
C Class            
Actual       $1,000.00       $1,065.20       $9.42
Hypothetical**       $1,000.00       $1,015.70       $9.20

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.73%, 0.79%, 1.05%, 1.06%, and 1.84% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

 

American Beacon Zebra Small Cap Equity Fund  
    Beginning Account Value
9/1/2017		   Ending Account Value
2/28/2018		   Expenses Paid  During
Period
9/1/2017-2/28/2018*
Institutional Class            
Actual       $1,000.00       $1,057.30       $4.59
Hypothetical**       $1,000.00       $1,020.30       $4.51
Y Class            
Actual       $1,000.00       $1,056.20       $5.10
Hypothetical**       $1,000.00       $1,019.80       $5.01
Investor Class            
Actual       $1,000.00       $1,054.60       $6.52
Hypothetical**       $1,000.00       $1,018.40       $6.41
A Class            
Actual       $1,000.00       $1,055.00       $6.62
Hypothetical**       $1,000.00       $1,018.30       $6.51
C Class            
Actual       $1,000.00       $1,050.70       $10.42
Hypothetical**       $1,000.00       $1,014.60       $10.24

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.89%, 1.00%, 1.28%, 1.30%, and 2.05% for the Institutional, Y, Investor, A, and C Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

 

 

7

American Beacon The London Company Income Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 98.10%            
Consumer Discretionary - 11.76%            
Hotels, Restaurants & Leisure - 4.76%            
Carnival Corp.       784,440         $ 52,486,880
           

 

 

  
           
Leisure Products - 0.90%            
Hasbro, Inc.       103,147           9,857,759
           

 

 

  
           
Multiline Retail - 3.86%            
Target Corp.       564,540           42,571,961
           

 

 

  
           
Specialty Retail - 2.24%            
Lowe’s Cos, Inc.       276,088           24,734,724
           

 

 

  
           

Total Consumer Discretionary

               129,651,324
           

 

 

  
           
Consumer Staples - 11.20%            
Beverages - 5.05%            
Coca-Cola Co.       443,397           19,163,618
Diageo PLC, Sponsored ADR       268,860           36,468,171
           

 

 

  
              55,631,789
           

 

 

  
           
Food Products - 0.89%            
General Mills, Inc.       193,660           9,789,513
           

 

 

  
           
Tobacco - 5.26%            
Altria Group, Inc.       490,821           30,897,182
Philip Morris International, Inc.       261,680           27,096,964
           

 

 

  
              57,994,146
           

 

 

  
           

Total Consumer Staples

               123,415,448
           

 

 

  
           
Energy - 3.83%            
Oil, Gas & Consumable Fuels - 3.83%            
Chevron Corp.       231,924           25,956,934
Kinder Morgan, Inc.       1,007,525           16,321,905
           

 

 

  
              42,278,839
           

 

 

  
           

Total Energy

               42,278,839
           

 

 

  
           
Financials - 15.52%            
Banks - 4.99%            
Wells Fargo & Co.       941,903           55,016,554
           

 

 

  
           
Capital Markets - 4.66%            
BlackRock, Inc.       93,532           51,389,287
           

 

 

  
           
Diversified Financial Services - 2.55%            
Berkshire Hathaway, Inc., Class BA       135,840           28,146,048
           

 

 

  
           
Insurance - 3.32%            
Cincinnati Financial Corp.       489,671           36,524,560
           

 

 

  
           

Total Financials

               171,076,449
           

 

 

  
           

 

See accompanying notes

 

8

American Beacon The London Company Income Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 98.10% (continued)            
Health Care - 5.83%            
Pharmaceuticals - 5.83%            
Merck & Co., Inc.       578,103         $ 31,344,745
Pfizer, Inc.       906,133           32,901,689
           

 

 

  
              64,246,434
           

 

 

  
           

Total Health Care

               64,246,434
           

 

 

  
           
Industrials - 17.00%            
Aerospace & Defense - 5.80%            
General Dynamics Corp.       287,155           63,877,630
           

 

 

  
           
Air Freight & Logistics - 3.15%            
United Parcel Service, Inc., Class B       332,721           34,739,400
           

 

 

  
           
Machinery - 3.11%            
PACCAR, Inc.       479,153           34,302,563
           

 

 

  
           
Road & Rail - 4.94%            
Norfolk Southern Corp.       391,880           54,502,670
           

 

 

  
           

Total Industrials

               187,422,263
           

 

 

  
           
Information Technology - 22.34%            
Communications Equipment - 3.98%            
Cisco Systems, Inc.       979,140           43,845,889
           

 

 

  
           
IT Services - 2.55%            
Paychex, Inc.       432,001           28,136,225
           

 

 

  
           
Semiconductors & Semiconductor Equipment - 3.67%            
Intel Corp.       820,391           40,437,072
           

 

 

  
           
Software - 7.41%            
CA, Inc.       975,660           34,245,666
Microsoft Corp.       505,418           47,393,046
           

 

 

  
              81,638,712
           

 

 

  
           
Technology Hardware, Storage & Peripherals - 4.73%            
Apple, Inc.       292,963           52,182,570
           

 

 

  
           

Total Information Technology

               246,240,468
           

 

 

  
           
Materials - 2.14%            
Chemicals - 2.14%            
NewMarket Corp.       56,571           23,641,587
           

 

 

  
           
Real Estate - 3.02%            
Equity Real Estate Investment Trusts (REITs) - 3.02%            
Crown Castle International Corp.       302,330           33,274,440
           

 

 

  
           
Telecommunication Services - 2.52%            
Diversified Telecommunication Services - 2.52%            
Verizon Communications, Inc.       581,049           27,739,279
           

 

 

  
           
Utilities - 2.94%            
Electric Utilities - 1.68%            
Duke Energy Corp.       245,421           18,490,018
           

 

 

  

 

See accompanying notes

 

9

American Beacon The London Company Income Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 98.10% (continued)            
Utilities - 2.94% (continued)            
Multi-Utilities - 1.26%            
Dominion Energy, Inc.       187,338         $ 13,876,126
           

 

 

  

Total Utilities

               32,366,144
           

 

 

  
           

Total Common Stocks (Cost $845,789,186)

               1,081,352,675
           

 

 

  
           
SHORT-TERM INVESTMENTS - 1.59% (Cost $17,452,582)            
Investment Companies - 1.59%            
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.31%B C       17,452,582           17,452,582
           

 

 

  
           

TOTAL INVESTMENTS - 99.69% (Cost $863,241,768)

               1,098,805,257

OTHER ASSETS, NET OF LIABILITIES - 0.31%

               3,460,400
           

 

 

  

TOTAL NET ASSETS - 100.00%

             $ 1,102,265,657
           

 

 

  
           
Percentages are stated as a percent of net assets.                  

A Non-income producing security.

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

C 7-day yield.

ADR - American Depositary Receipt.

PLC - Public Limited Company.

 

Futures Contracts Open on February 28, 2018:  

Long Futures Contracts

 

Equity Futures Contracts

  
Description      Number of
Contracts		      Expiration
Date		      Notional
Amount		      Contract
Value		        Unrealized
Appreciation
(Depreciation)		  
S&P 500 E-Mini Index Futures      119      March 2018      $  16,275,310      $ 16,150,680        $ (124,630 ) 
              

 

     

 

 

       

 

 

  
     $  16,275,310      $ 16,150,680        $ (124,630 ) 
              

 

     

 

 

       

 

 

  

 

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 February 28, 2018, the investments were classified as described below:

 

The London Company Income Equity Fund

   Level 1           Level 2            Level 3           Total  

Assets

  

Common Stocks

   $ 1,081,352,675       $ -        $ -       $ 1,081,352,675  

Short-Term Investments

     17,452,582         -          -         17,452,582  
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Investments in Securities - Assets

   $ 1,098,805,257       $ -        $ -       $ 1,098,805,257  
 

 

 

      

 

 

       

 

 

      

 

 

  

Financial Derivative Instruments - Liabilities

               

Futures Contracts

   $ (124,630 )      $ -        $ -       $ (124,630 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Financial Derivative Instruments - Liabilities

   $ (124,630 )      $ -        $ -       $ (124,630 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

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 February 28, 2018, there were no transfers between levels.

 

See accompanying notes

 

10

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41%            
Consumer Discretionary - 10.91%            
Auto Components - 1.89%            
Dorman Products, Inc.A       6,940         $ 478,860
Gentherm, Inc.A       9,339           287,641
Standard Motor Products, Inc.       5,763           268,902
Stoneridge, Inc.A       6,290           136,870
           

 

 

  
              1,172,273
           

 

 

  
           
Distributors - 0.13%            
Weyco Group, Inc.       2,662           81,005
           

 

 

  
           
Diversified Consumer Services - 0.35%            
American Public Education, Inc.A       4,112           126,444
Cambium Learning Group, Inc.A       12,566           93,114
           

 

 

  
              219,558
           

 

 

  
           
Hotels, Restaurants & Leisure - 0.86%            
Denny’s Corp.A       11,664           175,427
Ruth’s Hospitality Group, Inc.       6,206           152,357
Speedway Motorsports, Inc.       10,415           204,446
           

 

 

  
              532,230
           

 

 

  
           
Household Durables - 2.60%            
AV Homes, Inc.A       6,825           114,660
Bassett Furniture Industries, Inc.       2,396           77,151
CSS Industries, Inc.       2,934           54,015
Flexsteel Industries, Inc.       2,667           103,640
Green Brick Partners, Inc.A       15,579           157,348
Helen of Troy Ltd.A       6,722           605,316
Hooker Furniture Corp.       3,334           124,525
NACCO Industries, Inc., Class A       7,291           300,389
New Home Co., Inc.A       6,874           77,264
           

 

 

  
              1,614,308
           

 

 

  
           
Internet & Direct Marketing Retail - 0.24%            
1-800-Flowers.com, Inc., Class AA       12,597           146,755
           

 

 

  
           
Leisure Products - 0.67%            
Escalade, Inc.       4,367           53,059
Johnson Outdoors, Inc., Class A       2,157           132,958
Marine Products Corp.       7,987           114,054
MCBC Holdings, Inc.A       4,873           119,437
           

 

 

  
              419,508
           

 

 

  
           
Media - 0.72%            
Beasley Broadcast Group, Inc., Class A       9,322           97,881
Saga Communications, Inc., Class A       1,563           60,957
Salem Media Group, Inc.       12,931           53,664
Scholastic Corp.       6,486           236,155
           

 

 

  
              448,657
           

 

 

  
           
Specialty Retail - 1.14%            
America’s Car-Mart, Inc.A       1,714           83,472
Caleres, Inc.       9,477           265,451
Citi Trends, Inc.       2,958           65,549
Haverty Furniture Companies, Inc.       4,514           91,860
Shoe Carnival, Inc.       3,318           77,508
Winmark Corp.       1,005           127,334
           

 

 

  
              711,174
           

 

 

  

 

See accompanying notes

 

11

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Consumer Discretionary - 10.91% (continued)            
Textiles, Apparel & Luxury Goods - 2.31%            
Columbia Sportswear Co.       14,753         $ 1,115,032
Culp, Inc.       2,993           83,205
Perry Ellis International, Inc.A       4,989           133,057
Superior Uniform Group, Inc.       4,072           102,207
           

 

 

  
              1,433,501
           

 

 

  
           

Total Consumer Discretionary

               6,778,969
           

 

 

  
           
Consumer Staples - 2.58%            
Food & Staples Retailing - 1.27%            
Ingles Markets, Inc., Class A       5,917           190,527
SpartanNash Co.       13,287           222,823
Village Super Market, Inc., Class A       4,237           100,417
Weis Markets, Inc.       7,417           276,432
           

 

 

  
              790,199
           

 

 

  
           
Food Products - 0.23%            
Farmer Brothers Co.A       4,706           146,827
           

 

 

  
           
Household Products - 0.69%            
Central Garden & Pet Co., Class AA       10,368           375,736
Oil-Dri Corp. of America       1,467           52,900
           

 

 

  
              428,636
           

 

 

  
           
Personal Products - 0.39%            
Inter Parfums, Inc.       5,680           240,832
           

 

 

  
           

Total Consumer Staples

               1,606,494
           

 

 

  
           
Energy - 0.74%            
Energy Equipment & Services - 0.06%            
RigNet, Inc.A       2,906           38,940
           

 

 

  
           
Oil, Gas & Consumable Fuels - 0.68%            
Adams Resources & Energy, Inc.       1,595           63,003
Evolution Petroleum Corp.       10,786           86,827
Hallador Energy Co.       10,881           71,815
Panhandle Oil and Gas, Inc., Class A       3,461           61,779
Renewable Energy Group, Inc.A       12,393           137,562
           

 

 

  
              420,986
           

 

 

  
           

Total Energy

               459,926
           

 

 

  
           
Financials - 20.18%            
Banks - 9.71%            
Access National Corp.       5,914           165,296
ACNB Corp.       2,349           65,772
American National Bankshares, Inc.       2,394           86,423
Ames National Corp.       2,765           73,411
Arrow Financial Corp.       4,311           139,030
Bar Harbor Bankshares       3,709           100,514
C&F Financial Corp.       1,237           57,335
Central Valley Community Bancorp       3,919           76,421
Century Bancorp, Inc., Class A       1,519           116,659
Citizens & Northern Corp.       3,523           78,880
Civista Bancshares, Inc.       3,275           73,786
CNB Financial Corp.       4,301           115,611
Community Trust Bancorp, Inc.       4,282           186,267

 

See accompanying notes

 

12

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Financials - 20.18% (continued)            
Banks - 9.71% (continued)            
County Bancorp, Inc.       2,022         $ 54,068
Enterprise Bancorp, Inc.       3,496           109,040
Farmers National Banc Corp.       8,252           111,402
Fidelity Southern Corp.       7,277           163,805
First Bancorp, Inc.       3,133           84,466
First Busey Corp.       12,816           379,994
First Business Financial Services, Inc.       2,783           66,931
First Financial Corp.       3,459           148,391
First Mid-Illinois Bancshares, Inc.       3,020           103,103
Great Southern Bancorp, Inc.       4,425           214,170
Heartland Financial USA, Inc.       8,596           458,597
Horizon Bancorp       6,723           190,261
Independent Bank Corp.       5,897           134,746
International Bancshares Corp.       18,921           731,297
LCNB Corp.       3,162           58,497
MidWestOne Financial Group, Inc.       3,214           102,269
Nicolet Bankshares, Inc.A       2,053           111,006
Northrim BanCorp, Inc.       2,172           72,219
Parke Bancorp, Inc.       3,029           62,852
Penns Woods Bancorp, Inc.       1,410           57,260
Peoples Bancorp, Inc.       4,982           171,829
Premier Financial Bancorp, Inc.       3,499           61,652
QCR Holdings, Inc.       3,955           172,438
Republic Bancorp, Inc., Class A       6,440           239,890
Sandy Spring Bancorp, Inc.       8,352           323,724
Sierra Bancorp       4,000           104,080
Summit Financial Group, Inc.       4,185           100,231
West Bancorp, Inc.       4,466           108,524
           

 

 

  
              6,032,147
           

 

 

  
           
Capital Markets - 3.32%            
B. Riley Financial, Inc.       11,536           213,416
Cohen & Steers, Inc.       12,209           488,360
Diamond Hill Investment Group, Inc.       1,129           231,479
GAMCO Investors, Inc., Class A       13,101           351,107
OM Asset Management PLC       39,174           600,537
Pzena Investment Management, Inc., Class A       4,911           53,432
Westwood Holdings Group, Inc.       2,316           125,851
           

 

 

  
              2,064,182
           

 

 

  
           
Consumer Finance - 0.35%            
Enova International, Inc.A       9,851           216,722
           

 

 

  
           
Diversified Financial Services - 0.28%            
Marlin Business Services Corp.       3,909           100,852
Tiptree, Inc.       12,364           71,093
           

 

 

  
              171,945
           

 

 

  
           
Insurance - 4.20%            
Crawford & Co., Class B       10,906           97,827
EMC Insurance Group, Inc.       6,844           178,628
Enstar Group Ltd.A       4,968           983,664
FBL Financial Group, Inc., Class A       7,929           514,592
Global Indemnity Ltd.A       5,792           214,304
Independence Holding Co.       3,525           100,462
Investors Title Co.       443           85,278
Kingstone Companies, Inc.       2,947           56,288
National Western Life Group, Inc., Class A       1,240           378,200
           

 

 

  
              2,609,243
           

 

 

  

 

See accompanying notes

 

13

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Financials - 20.18% (continued)            
Mortgage Real Estate Investment Trusts (REITs) - 0.17%            
Great Ajax Corp.       8,178         $ 106,150
           

 

 

  
           
Thrifts & Mortgage Finance - 2.15%            
Charter Financial Corp.       4,321           85,772
First Defiance Financial Corp.       2,448           130,258
Flagstar Bancorp, Inc.A       18,491           651,993
Home Bancorp, Inc.       2,112           87,648
Southern Missouri Bancorp, Inc.       2,573           87,019
Timberland Bancorp, Inc.       2,390           68,235
United Community Financial Corp.       12,710           117,440
Waterstone Financial, Inc.       6,281           108,033
           

 

 

  
              1,336,398
           

 

 

  
           

Total Financials

               12,536,787
           

 

 

  
           
Health Care - 13.18%            
Biotechnology - 3.32%            
Aimmune Therapeutics, Inc.A       1,620           52,650
BioSpecifics Technologies Corp.A       1,450           58,725
Eagle Pharmaceuticals, Inc.A B       1,045           58,666
Edge Therapeutics, Inc.A       5,836           87,832
Emergent BioSolutions, Inc.A       7,969           396,059
FibroGen, Inc.A       1,477           81,383
Foundation Medicine, Inc.A       920           76,130
Kindred Biosciences, Inc.A       6,096           54,254
Ligand Pharmaceuticals, Inc.A       1,116           169,509
Myriad Genetics, Inc.A       9,306           301,700
PDL BioPharma, Inc.A       114,037           273,689
Repligen Corp.A       2,263           77,598
Retrophin, Inc.A       2,626           65,703
Spectrum Pharmaceuticals, Inc.A       3,361           72,295
Vanda Pharmaceuticals, Inc.A       4,373           82,431
Veracyte, Inc.A       10,184           61,308
Xencor, Inc.A       3,028           92,748
           

 

 

  
              2,062,680
           

 

 

  
           
Health Care Equipment & Supplies - 4.40%            
Abaxis, Inc.       2,355           157,008
Atrion Corp.       360           212,004
AxoGen, Inc.A       2,926           85,439
Cantel Medical Corp.       5,136           597,368
CONMED Corp.       4,369           264,456
Cutera, Inc.A       1,605           72,305
Lantheus Holdings, Inc.A       6,757           103,382
LeMaitre Vascular, Inc.       2,277           79,149
Meridian Bioscience, Inc.       7,279           101,542
Neogen Corp.A       7,153           416,805
Orthofix International N.V.A       2,202           123,334
Oxford Immunotec Global PLCA       5,359           58,413
Quidel Corp.A       4,499           196,246
RTI Surgical, Inc.A       14,089           59,878
STAAR Surgical Co.A       4,097           64,323
Surmodics, Inc.A       2,037           61,314
Utah Medical Products, Inc.       895           79,387
           

 

 

  
              2,732,353
           

 

 

  
Health Care Providers & Services - 3.25%            
Aceto Corp.       10,461           75,005
Addus HomeCare Corp.A       2,626           90,203

 

See accompanying notes

 

14

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Health Care - 13.18% (continued)            
Health Care Providers & Services - 3.25% (continued)            
Amedisys, Inc.A       4,970         $ 294,274
Civitas Solutions, Inc.A       11,508           149,604
CorVel Corp.A       4,010           196,289
Cross Country Healthcare, Inc.A       6,558           84,926
Ensign Group, Inc.       11,409           304,620
LHC Group, Inc.A       3,049           196,295
National HealthCare Corp.       4,098           240,430
National Research Corp., Class A       4,216           119,313
Owens & Minor, Inc.       5,838           95,801
R1 RCM, Inc.A B       13,510           88,626
RadNet, Inc.A       8,348           83,480
           

 

 

  
              2,018,866
           

 

 

  
           
Health Care Technology - 0.32%            
Quality Systems, Inc.A       11,159           140,046
Simulations Plus, Inc.       3,922           60,987
           

 

 

  
              201,033
           

 

 

  
           
Life Sciences Tools & Services - 0.22%            
Luminex Corp.       7,056           138,368
           

 

 

  
           
Pharmaceuticals - 1.67%            
Corcept Therapeutics, Inc.A       15,217           231,146
Innoviva, Inc.A       35,464           550,047
Phibro Animal Health Corp., Class A       6,706           257,846
           

 

 

  
              1,039,039
           

 

 

  
           

Total Health Care

               8,192,339
           

 

 

  
           
Industrials - 15.54%            
Aerospace & Defense - 0.28%            
National Presto Industries, Inc.       1,936           175,789
           

 

 

  
           
Building Products - 1.97%            
AAON, Inc.       10,140           372,645
Apogee Enterprises, Inc.       6,537           282,006
CSW Industrials, Inc.A       3,030           138,925
Universal Forest Products, Inc.       13,155           433,326
           

 

 

  
              1,226,902
           

 

 

  
           
Commercial Services & Supplies - 6.43%            
Brady Corp., Class A       10,260           383,724
Deluxe Corp.       12,484           886,364
Ennis, Inc.       5,948           115,986
Essendant, Inc.       10,138           80,496
Herman Miller, Inc.       15,603           560,148
HNI Corp.       9,587           354,527
InnerWorkings, Inc.A       12,511           115,477
Kimball International, Inc., Class B       10,781           177,132
Knoll, Inc.       10,235           217,698
Matthews International Corp., Class A       8,965           459,456
NL Industries, Inc.A       23,545           189,537
Steelcase, Inc., Class A       22,032           300,737
VSE Corp.       3,155           153,017
           

 

 

  
              3,994,299
           

 

 

  

 

See accompanying notes

 

15

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Industrials - 15.54% (continued)            
Construction & Engineering - 0.67%            
IES Holdings, Inc.A       20,110         $ 308,689
NV5 Global, Inc.A       2,481           107,303
           

 

 

  
              415,992
           

 

 

  
           
Electrical Equipment - 0.27%            
Preformed Line Products Co.       1,416           86,079
Vicor Corp.A       3,086           79,464
           

 

 

  
              165,543
           

 

 

  
           
Machinery - 2.71%            
Blue Bird Corp.A       6,375           147,900
Franklin Electric Co., Inc.       9,937           389,034
Global Brass & Copper Holdings, Inc.       5,847           165,470
Mueller Industries, Inc.       16,918           448,158
Omega Flex, Inc.       1,961           109,463
Park-Ohio Holdings Corp.       4,343           173,069
Standex International Corp.       2,595           249,379
           

 

 

  
              1,682,473
           

 

 

  
           
Professional Services - 2.10%            
BG Staffing, Inc.       1,929           31,732
GP Strategies Corp.A       3,736           82,379
Heidrick & Struggles International, Inc.       3,761           99,290
ICF International, Inc.A       4,446           253,422
Kelly Services, Inc., Class A       11,296           333,119
Kforce, Inc.       6,322           175,120
Resources Connection, Inc.       5,595           87,002
TrueBlue, Inc.A       8,829           240,149
           

 

 

  
              1,302,213
           

 

 

  
           
Road & Rail - 0.22%            
Universal Logistics Holdings, Inc.       6,092           134,633
           

 

 

  
           
Trading Companies & Distributors - 0.89%            
BMC Stock Holdings, Inc.A       15,897           298,069
Huttig Building Products, Inc.A B       8,796           45,299
Veritiv Corp.A       5,567           135,000
Willis Lease Finance Corp.A       2,860           78,078
           

 

 

  
              556,446
           

 

 

  
           

Total Industrials

               9,654,290
           

 

 

  
           
Information Technology - 18.51%            
Communications Equipment - 0.55%            
Plantronics, Inc.       6,347           342,992
           

 

 

  
           
Electronic Equipment, Instruments & Components - 6.53%            
Anixter International, Inc.A       8,051           608,253
AVX Corp.       41,826           723,590
Bel Fuse, Inc., Class B       3,080           53,284
CTS Corp.       7,106           182,624
Daktronics, Inc.       6,817           60,739
ePlus, Inc.A       2,965           226,971
Insight Enterprises, Inc.A       12,832           448,222
Kimball Electronics, Inc.A       8,512           147,683
PC Connection, Inc.       9,916           246,214
PCM, Inc.A       5,728           40,669

 

See accompanying notes

 

16

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Information Technology - 18.51% (continued)            
Electronic Equipment, Instruments & Components - 6.53% (continued)            
Sanmina Corp.A       27,154         $ 748,093
ScanSource, Inc.A       7,874           257,873
Systemax, Inc.       8,140           232,560
Vishay Precision Group, Inc.A       2,625           78,619
           

 

 

  
              4,055,394
           

 

 

  
           
Internet Software & Services - 2.12%            
j2 Global, Inc.       9,829           727,542
NIC, Inc.       15,996           215,946
TechTarget, Inc.A       4,713           81,441
Web.com Group, Inc.A       16,182           291,276
           

 

 

  
              1,316,205
           

 

 

  
           
IT Services - 5.25%            
Cardtronics PLC, Class AA       8,808           197,123
Convergys Corp.       19,683           456,842
CSG Systems International, Inc.       7,285           340,064
EVERTEC, Inc.       20,501           332,116
Forrester Research, Inc.       3,284           133,002
Hackett Group, Inc.       7,248           130,682
Information Services Group, Inc.A       14,124           59,603
Perficient, Inc.A       7,117           138,568
Sykes Enterprises, Inc.A       11,169           324,571
Syntel, Inc.A       28,709           770,837
TTEC Holdings, Inc.       10,582           377,248
           

 

 

  
              3,260,656
           

 

 

  
           
Semiconductors & Semiconductor Equipment - 2.69%            
Advanced Energy Industries, Inc.A       9,455           627,056
Alpha & Omega Semiconductor Ltd.A       5,174           79,524
Amkor Technology, Inc.A       71,004           713,590
Cohu, Inc.       5,953           119,239
Nanometrics, Inc.A       5,071           133,824
           

 

 

  
              1,673,233
           

 

 

  
           
Software - 1.16%            
American Software, Inc., Class A       5,020           62,449
Pegasystems, Inc.       9,129           529,482
QAD, Inc., Class A       1,823           82,035
Zix Corp.A       10,815           43,801
           

 

 

  
              717,767
           

 

 

  
           
Technology Hardware, Storage & Peripherals - 0.21%            
Avid Technology, Inc.A       11,892           56,963
Eastman Kodak Co.A B       14,526           76,261
           

 

 

  
              133,224
           

 

 

  
           

Total Information Technology

               11,499,471
           

 

 

  
           
Materials - 5.28%            
Chemicals - 4.90%            
Chase Corp.       2,074           215,696
FutureFuel Corp.       14,881           178,423
Hawkins, Inc.       3,005           100,668
Innophos Holdings, Inc.       4,600           191,176
Innospec, Inc.       6,432           417,758
Kronos Worldwide, Inc.       32,922           706,177

 

See accompanying notes

 

17

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Materials - 5.28% (continued)            
Chemicals - 4.90% (continued)            
Stepan Co.       5,773         $ 462,417
Tredegar Corp.       11,806           188,306
Valhi, Inc.       102,938           585,717
           

 

 

  
              3,046,338
           

 

 

  
           
Construction Materials - 0.16%            
United States Lime & Minerals, Inc.       1,422           101,261
           

 

 

  
           
Containers & Packaging - 0.22%            
Myers Industries, Inc.       4,205           79,684
UFP Technologies, Inc.A       1,864           53,031
           

 

 

  
              132,715
           

 

 

  
           

Total Materials

               3,280,314
           

 

 

  
           
Real Estate - 7.79%            
Equity Real Estate Investment Trusts (REITs) - 5.94%            
Alexander’s, Inc.       1,193           435,839
InfraREIT, Inc.A       10,303           192,048
LTC Properties, Inc.       7,358           271,878
One Liberty Properties, Inc.       5,267           114,610
Potlatch Corp.       7,346           375,748
Ryman Hospitality Properties, Inc.       9,435           650,638
Sabra Health Care REIT, Inc.       32,518           548,904
Saul Centers, Inc.       4,610           225,567
Select Income REIT       23,908           434,408
Tier REIT, Inc.       13,242           246,036
Universal Health Realty Income Trust       3,500           193,760
           

 

 

  
              3,689,436
           

 

 

  
           
Real Estate Management & Development - 1.85%            
Consolidated-Tomoka Land Co.       1,644           101,813
FRP Holdings, Inc.A       1,846           96,453
HFF, Inc., Class A       8,141           371,718
Marcus & Millichap, Inc.A       8,549           267,584
Maui Land & Pineapple Co., Inc.A       8,866           98,413
RMR Group, Inc., Class A       3,432           215,529
           

 

 

  
              1,151,510
           

 

 

  
           

Total Real Estate

               4,840,946
           

 

 

  
           
Telecommunication Services - 0.58%            
Diversified Telecommunication Services - 0.12%            
IDT Corp., Class BA       6,107           73,773
           

 

 

  
           
Wireless Telecommunication Services - 0.46%            
Shenandoah Telecommunications Co.       6,808           223,302
Spok Holdings, Inc.       4,031           62,682
           

 

 

  
              285,984
           

 

 

  
           

Total Telecommunication Services

               359,757
           

 

 

  
           
Utilities - 2.12%            
Electric Utilities - 1.30%            
MGE Energy, Inc.       8,138           427,245
Otter Tail Corp.       9,509           378,458
           

 

 

  
              805,703
           

 

 

  

 

See accompanying notes

 

18

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

    Shares       Fair Value
           
COMMON STOCKS - 97.41% (continued)            
Utilities - 2.12% (continued)            
Multi-Utilities - 0.21%            
Unitil Corp.       3,086         $ 129,735
           

 

 

  
           
Water Utilities - 0.61%            
Artesian Resources Corp., Class A       1,807           59,794
Connecticut Water Service, Inc.       2,547           131,502
Middlesex Water Co.       3,335           118,192
York Water Co.       2,478           69,632
           

 

 

  
              379,120
           

 

 

  
           

Total Utilities

               1,314,558
           

 

 

  
           

Total Common Stocks (Cost $58,329,850)

               60,523,851
           

 

 

  
           
SHORT-TERM INVESTMENTS - 1.83% (Cost $1,135,662)            
Investment Companies - 1.83%            
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.31%C D       1,135,662           1,135,662
           

 

 

  
           
SECURITIES LENDING COLLATERAL - 0.29% (Cost $181,368)            
Investment Companies - 0.29%            
American Beacon U.S. Government Money Market Select Fund, Select Class, 1.31%C D       181,368           181,368
           

 

 

  
           

TOTAL INVESTMENTS - 99.53% (Cost $59,646,880)

               61,840,881

OTHER ASSETS, NET OF LIABILITIES - 0.47%

               292,459
           

 

 

  

TOTAL NET ASSETS - 100.00%

             $ 62,133,340
           

 

 

  
           
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 February 28, 2018.

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

D 7-day yield.

PLC - Public Limited Company.

 

Futures Contracts Open on February 28, 2018:  
Long Futures Contracts  
Equity Futures Contracts  
Description      Number of
Contracts		      Expiration Date      Notional Amount      Contract Value        Unrealized
Appreciation
(Depreciation)		  
Russell 2000 Mini Index Futures      14      March 2018      $        1,071,889      $ 1,057,840        $ (14,049 ) 
              

 

     

 

 

       

 

 

  
     $        1,071,889      $ 1,057,840        $ (14,049 ) 
              

 

     

 

 

       

 

 

  

The Fund’s investments are summarized by level based on the inputs used to determine their values. As of February 28, 2018, the investments were classified as described below:

 

Zebra Small Cap Equity Fund

   Level 1           Level 2            Level 3           Total  

Assets

               

Common Stocks

   $ 60,523,851       $ -        $ -       $ 60,523,851  

Short-Term Investments

     1,135,662         -          -         1,135,662  

Securities Lending Collateral

     181,368         -          -         181,368  
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Investments in Securities - Assets

   $ 61,840,881       $ -        $ -       $ 61,840,881  
 

 

 

      

 

 

       

 

 

      

 

 

  

Financial Derivative Instruments - Liabilities

               

Futures Contracts

   $ (14,049 )      $ -        $ -       $ (14,049 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

Total Financial Derivative Instruments - Liabilities

   $ (14,049 )      $ -        $ -       $ (14,049 ) 
 

 

 

      

 

 

       

 

 

      

 

 

  

 

See accompanying notes

 

19

American Beacon Zebra Small Cap Equity FundSM

Schedule of Investments

February 28, 2018 (Unaudited)

 

 

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 February 28, 2018, there were no transfers between levels.

 

See accompanying notes

 

20

American Beacon FundsSM

Statements of Assets and Liabilities

February 28, 2018 (Unaudited)

 

 

    The London
Company Income
Equity Fund		           Zebra Small Cap
Equity Fund		  

Assets:

      

Investments in unaffiliated securities, at fair value†

   $ 1,081,352,675       $ 60,523,851  

Investments in affiliated securities, at fair value‡

     17,452,582         1,317,030  

Deposit with brokers for futures contracts

     692,369         49,276  

Dividends and interest receivable

     3,732,758         58,442  

Receivable for fund shares sold

     1,845,750         549,571  

Receivable for expense reimbursement (Note 2)

     -         11,297  

Prepaid expenses

     60,392         29,394  
 

 

 

      

 

 

  

Total assets

     1,105,136,526         62,538,861  
 

 

 

      

 

 

  

Liabilities:

      

Payable for fund shares redeemed

     1,744,574         122,874  

Payable for variation margin from open futures contracts (Note 5)

     124,421         13,978  

Payable upon return of securities loaned (Note 9)§

     -         181,368  

Management and sub-advisory fees payable (Note 2)

     664,069         48,970  

Service fees payable (Note 2)

     148,348         4,380  

Transfer agent fees payable (Note 2)

     57,434         4,397  

Custody and fund accounting fees payable

     79,575         11,954  

Professional fees payable

     17,313         16,182  

Payable for prospectus and shareholder reports

     27,984         503  

Other liabilities

     7,151         915  
 

 

 

      

 

 

  

Total liabilities

     2,870,869         405,521  
 

 

 

      

 

 

  

Net assets

   $ 1,102,265,657       $ 62,133,340  
 

 

 

      

 

 

  

Analysis of net assets:

      

Paid-in-capital

   $ 875,000,971       $ 58,810,688  

Undistributed net investment income

     2,282,594         50,841  

Accumulated net realized gain (loss)

     (10,456,767 )        1,091,859  

Unrealized appreciation of investments in unaffiliated securitiesA

     235,563,489         2,194,001  

Unrealized (depreciation) of futures contracts

     (124,630 )        (14,049 ) 
 

 

 

      

 

 

  

Net assets

   $ 1,102,265,657       $ 62,133,340  
 

 

 

      

 

 

  

Shares outstanding at no par value (unlimited shares authorized):

      

Institutional Class

     13,227,955         552,430  
 

 

 

      

 

 

  

Y Class

     37,619,260         2,548,308  
 

 

 

      

 

 

  

Investor Class

     1,797,846         432,488  
 

 

 

      

 

 

  

A Class

     3,965,539         255,244  
 

 

 

      

 

 

  

C Class

     8,214,715         150,532  
 

 

 

      

 

 

  

Net assets:

      

Institutional Class

   $ 226,206,511       $ 8,698,310  
 

 

 

      

 

 

  

Y Class

   $ 640,054,549       $ 40,440,274  
 

 

 

      

 

 

  

Investor Class

   $ 30,630,847       $ 6,757,372  
 

 

 

      

 

 

  

A Class

   $ 67,173,656       $ 3,991,337  
 

 

 

      

 

 

  

C Class

   $ 138,200,094       $ 2,246,047  
 

 

 

      

 

 

  

Net asset value, offering and redemption price per share:

      

Institutional Class

   $ 17.10       $ 15.75  
 

 

 

      

 

 

  

Y Class

   $ 17.01       $ 15.87  
 

 

 

      

 

 

  

Investor Class

   $ 17.04       $ 15.62  
 

 

 

      

 

 

  

A Class

   $ 16.94       $ 15.64  
 

 

 

      

 

 

  

A Class (offering price)

   $ 17.97       $ 16.59  
 

 

 

      

 

 

  

C Class

   $ 16.82       $ 14.92  
 

 

 

      

 

 

  

† Cost of investments in unaffiliated securities

   $ 845,789,186       $ 58,329,850  

‡ Cost of investments in affiliated securities

   $ 17,452,582       $ 1,317,030  

§ Fair value of securities on loan

   $ -       $ 166,939  
A The Fund’s investments in affiliated securities did not have unrealized appreciation (depreciation) at period end.  

 

See accompanying notes

 

21

American Beacon FundsSM

Statements of Operations

For the period ended February 28, 2018 (Unaudited)

 

 

    The London Company
Income Equity Fund		           Zebra Small Cap
Equity Fund		  

Investment income:

      

Dividend income from unaffiliated securities

   $ 16,043,957       $ 412,983  

Dividend income from affiliated securities

     210,876         7,066  

Interest income

     1,035         -  

Income derived from securities lending (Note 9)

     122         17,423  
 

 

 

      

 

 

  

Total investment income

     16,255,990         437,472  
 

 

 

      

 

 

  

Expenses:

      

Management and sub-advisory fees (Note 2)

     3,824,360         244,720  

Transfer agent fees:

      

Institutional Class (Note 2)

     28,837         2,898  

Y Class (Note 2)

     289,721         15,717  

Investor Class

     1,493         963  

A Class

     3,402         490  

C Class

     3,408         116  

Custody and fund accounting fees

     47,379         7,037  

Professional fees

     41,069         20,645  

Registration fees and expenses

     50,445         35,024  

Service fees (Note 2):

      

Investor Class

     62,631         11,935  

A Class

     38,064         3,577  

C Class

     95,768         1,762  

Distribution fees (Note 2):

      

A Class

     96,125         5,962  

C Class

     720,591         11,744  

Prospectus and shareholder report expenses

     30,607         2,545  

Trustee fees (Note 2)

     31,164         1,249  

Other expenses

     25,698         2,304  
 

 

 

      

 

 

  

Total expenses

     5,390,762         368,688  
 

 

 

      

 

 

  

Net fees waived and expenses (reimbursed) / recouped (Note 2)

     -         (70,118 ) 
 

 

 

      

 

 

  

Net expenses

     5,390,762         298,570  
 

 

 

      

 

 

  

Net investment income

     10,865,228         138,902  
 

 

 

      

 

 

  

Realized and unrealized gain (loss) from investments:

      

Net realized gain (loss) from:

      

Investments in unaffiliated securitiesA

     (3,427,336 )        1,649,714  

Commission recapture (Note 1)

     6,552         14  

Futures contracts

     3,963,211         39,424  

Change in net unrealized appreciation (depreciation) of:

      

Investments in unaffiliated securitiesB

     69,158,648         66,034  

Futures contracts

     (209,558 )        (17,486 ) 
 

 

 

      

 

 

  

Net gain from investments

     69,491,517         1,737,700  
 

 

 

      

 

 

  

Net increase in net assets resulting from operations

   $ 80,356,745       $ 1,876,602  
 

 

 

      

 

 

  
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 period end.  

 

See accompanying notes

 

22

American Beacon FundsSM

Statements of Changes in Net Assets

 

 

    The London Company Income
Equity Fund		           Zebra Small Cap Equity Fund  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		           Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)                       (unaudited)              

Increase (decrease) in net assets:

              

Operations:

              

Net investment income

   $ 10,865,228       $ 21,348,432       $ 138,902       $ 298,506  

Net realized gain (loss) from investments in unaffiliated securities, commission recapture, and futures contracts

     542,427         (11,338,105 )        1,689,152         3,571,105  

Change in net unrealized appreciation of investments in unaffiliated securities and futures contracts

     68,949,090         83,240,737         48,548         415,871  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net increase in net assets resulting from operations

     80,356,745         93,251,064         1,876,602         4,285,482  
 

 

 

      

 

 

      

 

 

      

 

 

  

Distributions to shareholders:

 

Net investment income:

              

Institutional Class

     (2,342,151 )        (4,173,571 )        (15,431 )        (19,221 ) 

Y Class

     (6,948,389 )        (12,650,308 )        (56,016 )        (167,869 ) 

Investor Class

     (334,449 )        (568,820 )        (11,670 )        (101,264 ) 

A Class

     (727,204 )        (1,620,074 )        (4,944 )        (61,098 ) 

C Class

     (743,041 )        (1,671,479 )        -         (13,853 ) 

Net realized gain from investments:

              

Institutional Class

     -         (1,273,581 )        (616,281 )        -  

Y Class

     -         (3,962,754 )        (2,237,225 )        -  

Investor Class

     -         (214,901 )        (597,062 )        -  

A Class

     -         (591,876 )        (300,058 )        -  

C Class

     -         (1,169,919 )        (180,750 )        -  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net distributions to shareholders

     (11,095,234 )        (27,897,283 )        (4,019,437 )        (363,305 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  

Capital share transactions (Note 9):

              

Proceeds from sales of shares

     120,288,692         399,841,050         33,747,992         22,550,139  

Reinvestment of dividends and distributions

     6,048,627         13,775,750         3,987,828         359,354  

Cost of shares redeemed

     (256,603,622 )        (402,583,096 )        (15,989,254 )        (12,266,887 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  

Net increase (decrease) in net assets from capital share transactions

     (130,266,303 )        11,033,704         21,746,566         10,642,606  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net increase (decrease) in net assets

     (61,004,792 )        76,387,485         19,603,731         14,564,783  
 

 

 

      

 

 

      

 

 

      

 

 

  

Net assets:

              

Beginning of period

     1,163,270,449         1,086,882,964         42,529,609         27,964,826  
 

 

 

      

 

 

      

 

 

      

 

 

  

End of period*

   $ 1,102,265,657       $ 1,163,270,449       $ 62,133,340       $ 42,529,609  
 

 

 

      

 

 

      

 

 

      

 

 

  

*Includes undistributed net investment income

   $ 2,282,594       $ 2,512,600       $ 50,841       $ -  
 

 

 

      

 

 

      

 

 

      

 

 

  

 

See accompanying notes

 

23

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

1.  Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust. The Funds, each a series within the Trust, are registered under the Investment Company Act of 1940 (the “Act”), as amended, as diversified, open-end management investment companies. As of February 28, 2018, the Trust consists of thirty-three active series, two of which are presented in this filing: the American Beacon The London Company Income Equity Fund and the American Beacon Zebra Small Cap Equity Fund (collectively, the “Funds” and each individually a “Fund”). The remaining thirty-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, transfer agent fees, and sub-transfer agent fees that vary amongst the classes as described more fully in Note 2.

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 as of the trade date for financial reporting purposes. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled beyond a standard settlement period for the security after the trade date.

 

 

24

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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. Realized gains (losses) from securities sold are determined on the basis of specific lot identification.

Distributions to Shareholders

Distributions, if any, of net investment income are generally paid at least annually and recorded on the ex-dividend date. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Dividends to shareholders are determined in accordance with federal income tax regulations, which may differ in amount and character from net investment income and realized gains recognized for purposes of U.S. GAAP. To the extent necessary to fully distribute capital gains, the Funds may designate earnings and profits distributed to shareholders on the redemption of shares.

Commission Recapture

The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If 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.

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

 

 

25

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

the Management Agreement, the Manager will receive an annualized management fee based on a percentage of each Funds’ average daily net assets that is calculated and accrued daily according to the following schedule:

 

First $5 billion

      0.35 % 

Next $5 billion

      0.325 % 

Next $10 billion

      0.30 % 

Over $20 billion

      0.275 % 

The Trust, on behalf of the Funds, and the Manager have entered into an Investment Advisory Agreement with the following Sub-Advisors pursuant to which each Fund has agreed to pay an annualized sub-advisory fee that is calculated and accrued daily based on the Funds’ average daily net assets according to the following schedules:

The London Company of Virginia, LLC

 

First $25 million

      0.40 % 

Next $225 million

      0.35 % 

Over $250 million

      0.30 % 

Zebra Capital Management, LLC

 

First $350 million

      0.55 % 

Next $400 million

      0.50 % 

Over $750 million

      0.45 % 

The Management and Sub-Advisory Fees paid by the Funds for the period ended February 28, 2018 were as follows:

The London Company Income Equity Fund

 

     Effective Fee Rate    

 

      Amount of Fees Paid  

Management Fees

      0.35 %       $ 2,022,556  

Sub-Advisor Fees

      0.31 %         1,801,804  
  

 

 

       

 

 

  

Total

      0.66 %       $ 3,824,360  
  

 

 

       

 

 

  

Zebra Small Cap Equity Fund

 

     Effective Fee Rate    

 

      Amount of Fees Paid  

Management Fees

      0.35 %       $ 96,344  

Sub-Advisor Fees

      0.55 %         148,376  
  

 

 

       

 

 

  

Total

      0.90 %       $ 244,720  
  

 

 

       

 

 

  

As compensation for services provided by the Manager in connection with securities lending activities conducted by the Funds, the lending Funds pay 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 period ended February 28, 2018, the Manager received securities lending fees of $183 and $2,346 for the securities lending activities of The London Company Income Equity Fund and Zebra Small Cap Equity Fund, respectively.

Distribution Plans

The Funds, except for the A and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fee received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

 

 

26

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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 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 0.25% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.

Sub-Transfer Agent Fees

The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional and Y Classes of the Funds and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of their customers who hold positions in the Funds. Certain services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly by the Funds’ transfer agent. Accordingly, the Funds, pursuant to the 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 period ended February 28, 2018, the sub-transfer agent fees, as reflected in “Transfer agent fees” on the Statements of Operations, were as follows:

 

Fund

    Sub-Transfer Agent Fees  

The London Company Income Equity

    $ 306,275  

Zebra Small Cap Equity

      18,096  

As of February 28, 2018, the Funds owed the Manager the following reimbursement of sub-transfer agent fees, as reflected in “Transfer agent fees payable” on the Statements of Assets and Liabilities:

 

Fund

    Reimbursement Sub-Transfer
Agent Fees		  

The London Company Income Equity

    $ 48,826  

Zebra Small Cap Equity

      3,849  

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 period ended February 28, 2018, 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  

The London Company Income Equity

    $ 19,865      $ 657      $ 20,522  

Zebra Small Cap Equity

      639        286        925  

 

 

27

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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 two 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 period ended February 28, 2018, the Zebra Small Cap Equity Fund borrowed on average $177,924 for 3 days at 2.01% with interest charges of $29. These amounts are recorded within “Other expenses” on the accompanying Statements of Operations. For the period ended February 28, 2018, The London Company Income Equity 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 period ended February 28, 2018, the Manager waived and/or reimbursed expenses as follows:

 

          Expense Cap               

Fund

    Class    9/1/2017 -
2/28/2018		     Reimbursed
Expenses		      (Recouped)
Expenses		      Expiration of
Reimbursed
Expenses		  

Zebra Small Cap Equity

    Institutional      0.89 %    $ 11,587      $ –        2021  

Zebra Small Cap Equity

    Y      0.99 %      41,060        –        2021  

Zebra Small Cap Equity

    Investor      1.27 %      7,425        –        2021  

Zebra Small Cap Equity

    A      1.29 %      6,816        –        2021  

Zebra Small Cap Equity

    C      2.04 %      3,230        –        2021  

Of these amounts, $11,297 was disclosed as a receivable from the Manager on the Statements of Assets and Liabilities at February 28, 2018 for the Zebra Small Cap Equity Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of such fee reductions and expense reimbursements. Under the policy, the Manager can be reimbursed by the Funds for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs within three years after the Manager’s own waiver or reimbursement and (b) does not cause the Funds’ annual operating expenses to exceed the lesser of the contractual percentage limit in effect at the time of the waiver/reimbursement or time of recoupment. The reimbursed expenses listed above will expire in 2021. 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

    Recouped
Expenses		      Excess Expense
Carryover		      Expired Expense
Carryover		      Expiration of
Reimbursed
Expenses		  

Zebra Small Cap Equity

    $ –      $ 105,676      $ –        2018  

Zebra Small Cap Equity

      –        130,345        –        2019  

Zebra Small Cap Equity

      –        144,028        –        2020  

 

 

28

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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 period ended February 28, 2018, Foreside collected $25,764 and $1,466 for The London Company Income Equity Fund and Zebra Small Cap Equity Fund, respectively, from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Funds’ Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the period ended February 28, 2018, fees of $3 were collected for the Class A Shares of The London Company Income Equity Fund. There were no CDSC fees collected for Class A shares of the Zebra Small Cap Equity Fund.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Funds’ Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the period ended February 28, 2018, CDSC fees of $6,333 and $859 were collected for Class C Shares of the The London Company Income Equity Fund and Zebra Small Cap Equity 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 $2,500 fee each quarter for his attendance at the committee meetings. Effective January 1, 2018, the Board Vice Chair receives an additional annual retainer of $10,000. 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

The price of the Fund’s shares is based on the Fund’s Net Asset Value (“NAV”). The NAV of the Fund, or each of its share classes, as applicable, is determined by dividing the total value of portfolio investments and other assets, less any liabilities attributable to the Fund or class, by the total number of shares outstanding of the Fund or class.

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.

 

 

29

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Funds are required to deposit with their futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Funds. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.

Other investments, including restricted securities and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value, as determined in good faith by the Manager’s Valuation Committee, pursuant to procedures established by the Board.

Valuation Inputs

Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1   -   Quoted prices in active markets for identical securities.
Level 2   -   Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Level 3   -   Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Common stocks, preferred securities, and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are 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

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

 

 

30

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

addition, the Funds may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Funds to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.

Common Stock

Common stock generally takes the form of shares in a corporation which represent an ownership interest. It ranks below preferred stock and debt securities in claims for dividends and for assets of the company in a liquidation or bankruptcy. The value of a company’s common stock may fall as a result of factors directly relating to that company, such as decisions made by its management or decreased demand for the company’s products or services. A stock’s value may also decline because of factors affecting not just the company, but also companies in the same industry or sector. The price of a company’s stock may also be affected by changes in financial markets that are relatively unrelated to the company, such as changes in interest rates, currency exchange rates or industry regulation. Companies that elect to pay dividends on their common stock generally only do so after they invest in their own business and make required payments to bondholders and on other debt and preferred stock. Therefore, the value of a company’s common stock will usually be more volatile than its bonds, other debt and preferred stock. Common stock may be exchange-traded or over-the-counter (“OTC”). OTC stock may be less liquid than exchange-traded stock.

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 gain market exposure on cash balances or reduce market exposure in anticipation of liquidity needs. When considering the Funds’ use of derivatives, it is important to note that the Funds do not use derivatives for the purpose of creating financial leverage.

 

 

31

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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.

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

   Period Ended February 28, 2018  

The London Company Income Equity

     227  

Zebra Small Cap Equity

     13  

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

The London Company Income Equity Fund

 

Fair values of financial instruments on the Statements of Assets and Liabilities as of February 28, 2018:    
     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)

    $ –      $ –      $ –      $ –      $ (124,630 )    $ (124,630 ) 
                
The effect of financial derivative instruments on the Statements of Operations as of February 28, 2018:  
     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

    $ –      $ –      $ –      $ –      $ 3,963,211     $ 3,963,211  

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

    $ –      $ –      $ –      $ –      $ (209,558 )    $ (209,558 ) 

 

 

32

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Zebra Small Cap Equity Fund

 

Fair values of financial instruments on the Statements of Assets and Liabilities as of February 28, 2018:  
    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)

   $ –      $ –      $ –      $ –      $ (14,049 )    $ (14,049 ) 

 

The effect of financial derivative instruments on the Statements of Operations as of February 28, 2018:  
     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

    $ –      $ –      $ –      $ –      $ 39,424     $ 39,424  

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

    $ –      $ –      $ –      $ –      $ (17,486 )    $ (17,486 ) 

(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.

6.  Principal Risks

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

Credit Risk

The Funds are subject to the risk that the issuer or guarantor of a debt security, or the counterparty to a derivatives contract or a loan, will fail to make timely payment of interest or principal or otherwise honor its obligations or default completely.

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 Fund’s 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.

Dividend Risk

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

 

 

33

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

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 Funds to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. Futures contracts may experience potentially dramatic price changes (losses) and imperfect correlation between the price of the contract and the underlying security or index, which will increase the volatility of the Funds and may involve a small investment of cash (the amount of initial and variation margin) relative to the magnitude of the risk assumed (the potential increase or decrease in the price of the futures contract).

Liquidity Risk

The Funds are susceptible to the risk that certain small cap equity 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 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.

 

 

34

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

Other Investment Companies Risk

The Funds may invest in shares of other registered investment companies, including money market funds. To the extent that the Funds invest in shares of other registered investment companies, the Funds will indirectly bear the fees and expenses charged by 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 Funds lends its securities, it may be subject to the following risks; i) borrowers of the Funds’ securities typically provide collateral in the form of cash that is reinvested in securities, ii) the securities in which the collateral is invested may not perform sufficiently to cover the return collateral payments owed to borrowers, iii) delays may occur in the recovery of securities from borrowers, which could interfere with the Funds’ ability to vote proxies or to settle transactions, and iv) there is the risk of possible loss of rights in the collateral should the borrower fail financially.

Offsetting Assets and Liabilities

The Funds are parties to enforceable master netting agreements between brokers and counterparties which provide for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements such as repurchase agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, February 28, 2018.

The London Company Income Equity Fund

 

Offsetting of Financial and Derivative Assets as of February 28, 2018:      
    Assets           Liabilities  
Futures Contracts   $ -       $ 124,630  
 

 

 

      

 

 

  
Total derivative assets and liabilities in the Statements of Assets and Liabilities   $ -       $ 124,630  
 

 

 

      

 

 

  
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)   $ -       $ (124,630 ) 
 

 

 

      

 

 

  

Zebra Small Cap Equity Fund

 

Offsetting of Financial and Derivative Assets as of February 28, 2018:      
    Assets           Liabilities  
Futures Contracts   $ -       $ 14,049  
 

 

 

      

 

 

  
Total derivative assets and liabilities in the Statements of Assets and Liabilities   $ -       $ 14,049  
 

 

 

      

 

 

  
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)   $ -       $ (14,049 ) 
 

 

 

      

 

 

  

 

     Remaining Contractual Maturity of the Agreements
As of February 28, 2018		  
     Overnight and
Continuous		             <30 days             Between
30 & 90 days		             >90 days             Total  

Securities Lending Transactions

                           

Common Stocks

    $ 181,368         $     -         $     -         $     -         $   181,368  
  

 

 

        

 

 

        

 

 

        

 

 

        

 

 

  
Total Borrowings    $ 181,368         $ -         $ -         $ -         $ 181,368  
  

 

 

        

 

 

        

 

 

        

 

 

        

 

 

  

Gross amount of recognized liabilities for securities lending transactions

 

       $ 181,368  
                          

 

 

  

 

 

35

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

7.  Federal Income and Excise Taxes

It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.

The Funds do not have any unrecorded tax liabilities in the accompanying financial statements. Each of the tax years in the four year period ended August 31, 2017 remain subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.

The Funds may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation (depreciation), as applicable, as the income is earned or capital gains are recorded.

As of February 28, 2018 the tax cost for each Fund and their respective gross unrealized appreciation (depreciation) were as follows:

 

Fund

   Tax Cost           Unrealized
Appreciation		           Unrealized
(Depreciation)		           Net Unrealized
Appreciation
(Depreciation)		  
The London Company Income Equity   $ 863,508,189       $ 258,929,708       $ (23,842,198 )      $ 235,087,510  
Zebra Small Cap Equity     60,084,827         4,774,230         (3,035,662 )        1,738,568  

Under the Regulated Investment Company Modernization Act of 2010 (“RIC MOD”), net capital losses recognized by the Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses.

As of August 31, 2017, The London Company Income Equity Fund had $1,879,996 short-term and $9,001,062 long-term post RIC MOD capital loss carryforwards. The Zebra Small Cap Equity Fund did not have any capital loss carryforwards.

8.  Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended February 28, 2018 were as follows:

 

Fund

   Purchases (non-U.S.
Government
Securities)		           Purchases of U.S.
Government
Securities		           Sales
(non-U.S. Government
Securities)		           Sales of U.S.
Government
Securities		  
The London Company Income Equity   $ 124,580,468       $ –       $ 222,217,606       $ –  
Zebra Small Cap Equity     31,910,354         –         14,869,825         –  

A summary of the Funds’ transactions in the USG Select Fund for the period ended February 28, 2018 were as follows:

 

Fund

   Type of
Transaction		         August 31,
2017
Shares/Fair
Value		           Purchases           Sales           February 28,
2018
Shares/Fair
Value		           Dividend
Income		  
The London Company Income Equity   Direct     $ 44,690,684       $ 232,031,000       $ 259,269,102       $ 17,452,582       $ 210,876  
Zebra Small Cap Equity   Direct       672,167         34,780,660         34,317,165         1,135,662         7,066  
Zebra Small Cap Equity   Securities Lending       428,665         3,987,057         4,234,354         181,368         N/A  

 

 

36

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

9.  Securities Lending

The Funds may lend their securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked-to-market daily. Daily mark-to-market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark-to-market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.

To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds and other short-term investments, provided the investments meet certain quality and diversification requirements. Securities purchased with cash collateral proceeds are listed in the 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.

As of February 28, 2018, 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		  
Zebra Small Cap Equity   $ 166,939       $ 181,368       $ -       $ 181,368  

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.

 

 

37

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

The London Company Income Equity Fund did not hold any securities lending collateral as of the period ended February 28, 2018.

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.

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 period ended February 28, 2018, 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  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

The London Company Income Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     1,360,543       $ 22,954,559         4,274,282       $ 66,864,871  
Reinvestment of dividends     125,011         2,081,189         294,910         4,594,135  
Shares redeemed     (2,067,539 )        (34,603,786 )        (3,528,768 )        (54,999,838 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     (581,985 )      $ (9,568,038 )        1,040,424       $ 16,459,168  
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    Y Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

The London Company Income Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     4,394,869       $ 73,291,933         16,994,776       $ 263,758,741  
Reinvestment of dividends     174,999         2,894,781         403,309         6,261,848  
Shares redeemed     (8,303,580 )        (140,245,294 )        (14,464,943 )        (226,114,832 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     (3,733,712 )      $ (64,058,580 )        2,933,142       $ 43,905,757  
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    Investor Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

The London Company Income Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     807,216       $ 13,250,582         1,088,611       $ 16,697,410  
Reinvestment of dividends     19,479         322,772         48,652         755,491  
Shares redeemed     (1,013,804 )        (17,202,322 )        (1,074,630 )        (16,707,261 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     (187,109 )      $ (3,628,968 )        62,633       $ 745,640  
 

 

 

      

 

 

      

 

 

      

 

 

  

 

 

38

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

    A Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

The London Company Income Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     362,423       $ 6,003,865         1,642,756       $ 25,547,130  
Reinvestment of dividends     28,456         466,439         88,521         1,367,347  
Shares redeemed     (2,384,593 )        (39,233,710 )        (2,040,648 )        (31,612,110 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net (decrease) in shares outstanding     (1,993,714 )      $ (32,763,406 )        (309,371 )      $ (4,697,633 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    C Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

The London Company Income Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     289,384       $ 4,787,753         1,771,458       $ 26,972,898  
Reinvestment of dividends     17,464         283,446         51,940         796,929  
Shares redeemed     (1,535,530 )        (25,318,510 )        (4,727,915 )        (73,149,055 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net (decrease) in shares outstanding     (1,228,682 )      $ (20,247,311 )        (2,904,517 )      $ (45,379,228 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    Institutional Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Zebra Small Cap Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     315,229       $ 5,487,267         165,603       $ 2,691,437  
Reinvestment of dividends     38,165         630,864         1,201         19,221  
Shares redeemed     (58,005 )        (958,244 )        (73,580 )        (1,063,732 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     295,389       $ 5,159,887         93,224       $ 1,646,926  
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    Y Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Zebra Small Cap Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     1,552,922       $ 26,355,689         658,050       $ 10,271,125  
Reinvestment of dividends     136,185         2,270,208         10,383         167,686  
Shares redeemed     (293,378 )        (4,899,058 )        (289,896 )        (4,614,186 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     1,395,729       $ 23,726,839         378,537       $ 5,824,625  
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    Investor Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Zebra Small Cap Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     50,692       $ 849,419         308,451       $ 4,853,543  
Reinvestment of dividends     36,917         606,174         6,322         100,896  
Shares redeemed     (330,204 )        (5,687,543 )        (182,190 )        (2,832,374 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     (242,595 )      $ (4,231,950 )        132,583       $ 2,122,065  
 

 

 

      

 

 

      

 

 

      

 

 

  
 
    A Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Zebra Small Cap Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     43,334       $ 734,746         247,176       $ 3,889,818  
Reinvestment of dividends     18,307         300,783         3,631         57,984  
Shares redeemed     (232,620 )        (4,048,434 )        (195,350 )        (3,035,436 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase (decrease) in shares outstanding     (170,979 )      $ (3,012,905 )        55,457       $ 912,366  
 

 

 

      

 

 

      

 

 

      

 

 

  
 

 

 

39

American Beacon FundsSM

Notes to Financial Statements

February 28, 2018 (Unaudited)

 

 

    C Class  
    Six Months Ended
February 28, 2018		           Year Ended
August 31, 2017		  
    (unaudited)          

 

  

Zebra Small Cap Equity Fund

  

Shares

          

Amount

          

Shares

          

Amount

  
Shares sold     19,838       $ 320,871         55,416       $ 844,216  
Reinvestment of dividends     11,452         179,799         880         13,567  
Shares redeemed     (24,857 )        (395,975 )        (48,027 )        (721,159 ) 
 

 

 

      

 

 

      

 

 

      

 

 

  
Net increase in shares outstanding     6,433       $ 104,695         8,269       $ 136,624  
 

 

 

      

 

 

      

 

 

      

 

 

  

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.

 

 

40

American Beacon The London Company Income Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Institutional Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 16.13       $ 15.25       $ 13.85       $ 14.12       $ 11.80       $ 10.49  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.18         0.33         0.32         0.31         0.30         0.31  

Net gains (losses) on investments (both realized and unrealized)

     0.96         0.97         1.40         (0.14 )        2.39         1.30  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     1.14         1.30         1.72         0.17         2.69         1.61  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.17 )        (0.32 )        (0.32 )        (0.32 )        (0.28 )        (0.29 ) 

Distributions from net realized gains

     –         (0.10 )        –         (0.12 )        (0.09 )        (0.01 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.17 )        (0.42 )        (0.32 )        (0.44 )        (0.37 )        (0.30 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 17.10       $ 16.13       $ 15.25       $ 13.85       $ 14.12       $ 11.80  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     7.13 %B        8.64 %        12.57 %        1.08 %        23.13 %        15.55 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $   226,206,511       $   222,730,033       $ 194,708,612       $ 137,006,660       $ 58,277,396       $ 44,731,302  

Ratios to average net assets:

                      

Expenses, before reimbursements

     0.73 %C        0.74 %        0.75 %        0.75 %        0.82 %        1.13 % 

Expenses, net of reimbursements

     0.73 %C        0.74 %        0.77 %        0.79 %        0.79 %        0.79 % 

Net investment income, before expense reimbursements

     2.10 %C        2.12 %        2.32 %        2.35 %        2.31 %        2.32 % 

Net investment income, net of reimbursements

     2.10 %C        2.12 %        2.30 %        2.30 %        2.33 %        2.66 % 

Portfolio turnover rate

     11 %B        14 %        20 %        15 %        10 %        15 % 
         
    Y Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 16.05       $ 15.17       $ 13.79       $ 14.06       $ 11.75       $ 10.49  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.17         0.32         0.32         0.31         0.28         0.33  

Net gains (losses) on investments (both realized and unrealized)

     0.96         0.97         1.37         (0.15 )        2.39         1.26  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     1.13         1.29         1.69         0.16         2.67         1.59  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.17 )        (0.31 )        (0.31 )        (0.31 )        (0.27 )        (0.32 ) 

Distributions from net realized gains

     –         (0.10 )        –         (0.12 )        (0.09 )        (0.01 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.17 )        (0.41 )        (0.31 )        (0.43 )        (0.36 )        (0.33 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 17.01       $ 16.05       $ 15.17       $ 13.79       $ 14.06       $ 11.75  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     7.07 %B        8.60 %        12.42 %        1.03 %        23.05 %        15.45 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 640,054,549       $ 663,588,078       $ 582,952,334       $ 364,477,089       $ 122,714,756       $ 28,814,001  

Ratios to average net assets:

                      

Expenses, before reimbursements

     0.79 %C        0.81 %        0.82 %        0.83 %        0.89 %        1.09 % 

Expenses, net of reimbursements

     0.79 %C        0.81 %        0.82 %        0.84 %        0.89 %        0.89 % 

Net investment income, before expense reimbursements

     2.02 %C        2.04 %        2.24 %        2.27 %        2.24 %        2.22 % 

Net investment income, net of reimbursements

     2.02 %C        2.04 %        2.24 %        2.26 %        2.25 %        2.42 % 

Portfolio turnover rate

     11 %B        14 %        20 %        15 %        10 %        15 % 

 

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

 

See accompanying notes

 

41

American Beacon The London Company Income Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Investor Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 16.07       $ 15.19       $ 13.81       $ 14.08       $ 11.76       $ 10.48  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.15         0.28         0.28         0.28         0.26         0.27  

Net gains (losses) on investments (both realized and unrealized)

     0.97         0.97         1.37         (0.17 )        2.39         1.29  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     1.12         1.25         1.65         0.11         2.65         1.56  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.15 )        (0.27 )        (0.27 )        (0.26 )        (0.24 )        (0.27 ) 

Distributions from net realized gains

     –         (0.10 )        –         (0.12 )        (0.09 )        (0.01 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.15 )        (0.37 )        (0.27 )        (0.38 )        (0.33 )        (0.28 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 17.04       $ 16.07       $ 15.19       $ 13.81       $ 14.08       $ 11.76  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     6.99 %B        8.33 %        12.13 %        0.71 %        22.83 %        15.14 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 30,630,847       $ 31,897,528       $ 29,208,149       $ 20,564,814       $ 16,549,654       $ 8,839,661  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.05 %C        1.05 %        1.06 %        1.04 %        1.06 %        1.54 % 

Expenses, net of reimbursements

     1.05 %C        1.05 %        1.06 %        1.16 %        1.10 %        1.17 % 

Net investment income, before expense reimbursements

     1.78 %C        1.79 %        2.01 %        2.04 %        2.06 %        1.86 % 

Net investment income, net of reimbursements

     1.78 %C        1.79 %        2.01 %        1.93 %        2.02 %        2.23 % 

Portfolio turnover rate

     11 %B        14 %        20 %        15 %        10 %        15 % 
         
    A Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 15.98       $ 15.11       $ 13.73       $ 14.00       $ 11.70       $ 10.47  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.15         0.27         0.27         0.27         0.24         0.31  

Net gains (losses) on investments (both realized and unrealized)

     0.96         0.96         1.38         (0.16 )        2.37         1.23  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     1.11         1.23         1.65         0.11         2.61         1.54  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.15 )        (0.26 )        (0.27 )        (0.26 )        (0.22 )        (0.30 ) 

Distributions from net realized gains

     –         (0.10 )        –         (0.12 )        (0.09 )        (0.01 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.15 )        (0.36 )        (0.27 )        (0.38 )        (0.31 )        (0.31 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 16.94       $ 15.98       $ 15.11       $ 13.73       $ 14.00       $ 11.70  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     6.95 %B        8.24 %        12.14 %        0.71 %        22.58 %        14.99 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 67,173,656       $ 95,206,378       $ 94,705,221       $ 72,363,106       $ 31,579,315       $ 12,108,558  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.06 %C        1.12 %        1.13 %        1.13 %        1.28 %        1.59 % 

Expenses, net of reimbursements

     1.06 %C        1.12 %        1.13 %        1.17 %        1.27 %        1.29 % 

Net investment income, before expense reimbursements

     1.73 %C        1.73 %        1.94 %        1.96 %        1.85 %        1.93 % 

Net investment income, net of reimbursements

     1.73 %C        1.73 %        1.94 %        1.92 %        1.86 %        2.23 % 

Portfolio turnover rate

     11 %B        14 %        20 %        15 %        10 %        15 % 

 

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

 

See accompanying notes

 

42

American Beacon The London Company Income Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    C Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 15.87       $ 15.01       $ 13.65       $ 13.93       $ 11.66       $ 10.46  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.08         0.15         0.17         0.18         0.15         0.24  

Net gains (losses) on investments (both realized and unrealized)

     0.95         0.96         1.36         (0.17 )        2.35         1.21  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     1.03         1.11         1.53         0.01         2.50         1.45  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.08 )        (0.15 )        (0.17 )        (0.17 )        (0.14 )        (0.24 ) 

Distributions from net realized gains

     –         (0.10 )        –         (0.12 )        (0.09 )        (0.01 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (0.08 )        (0.25 )        (0.17 )        (0.29 )        (0.23 )        (0.25 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 16.82       $ 15.87       $ 15.01       $ 13.65       $ 13.93       $ 11.66  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     6.52 %B        7.42 %        11.28 %        (0.04 )%        21.69 %        14.05 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 138,200,094       $ 149,848,432       $ 185,308,648       $ 122,804,166       $ 46,638,516       $ 8,015,463  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.84 %C        1.86 %        1.87 %        1.88 %        2.02 %        2.26 % 

Expenses, net of reimbursements

     1.84 %C        1.86 %        1.87 %        1.89 %        2.01 %        2.04 % 

Net investment income, before expense reimbursements

     0.97 %C        0.97 %        1.20 %        1.22 %        1.11 %        1.09 % 

Net investment income, net of reimbursements

     0.97 %C        0.97 %        1.20 %        1.21 %        1.12 %        1.31 % 

Portfolio turnover rate

     11 %B        14 %        20 %        15 %        10 %        15 % 

 

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

 

 

See accompanying notes

 

43

American Beacon Zebra Small Cap Equity FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Institutional Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 16.04       $ 14.07       $ 14.21       $ 14.36       $ 13.66       $ 12.40  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.07         0.24         0.18         0.13         0.14         0.46  

Net gains (losses) on investments (both realized and unrealized)

     0.91         1.90         1.15         (0.03 )        2.12         2.79  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.98         2.14         1.33         0.10         2.26         3.25  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.03 )        (0.17 )        (0.06 )        (0.04 )        –         (1.17 ) 

Distributions from net realized gains

     (1.24 )        –         (1.41 )        (0.21 )        (1.56 )        (0.82 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (1.27 )        (0.17 )        (1.47 )        (0.25 )        (1.56 )        (1.99 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 15.75       $ 16.04       $ 14.07       $ 14.21       $ 14.36       $ 13.66  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     5.73 %B        15.25 %        10.46 %        0.68 %        16.67 %        29.81 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 8,698,310       $ 4,122,461       $ 2,305,284       $ 1,764,526       $ 1,606,024       $ 1,522,235  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.25 %C        1.36 %        1.53 %        1.56 %        1.64 %        2.77 % 

Expenses, net of reimbursementsD

     0.89 %C        0.89 %        0.89 %        1.00 %        0.99 %        0.99 % 

Net investment income (loss), before expense reimbursements

     0.38 %C        0.80 %        0.34 %        0.17 %        0.33 %        (0.28 )% 

Net investment income, net of reimbursements

     0.73 %C        1.26 %        0.97 %        0.73 %        0.99 %        1.50 % 

Portfolio turnover rate

     28 %B        77 %        50 %        97 %        76 %        89 % 
         
    Y Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 16.17       $ 14.20       $ 14.33       $ 14.50       $ 13.79       $ 12.46  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income

     0.04         0.15         0.12         0.10         0.56         0.37  

Net gains (losses) on investments (both realized and unrealized)

     0.93         1.99         1.22         (0.02 )        1.71         2.89  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.97         2.14         1.34         0.08         2.27         3.26  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.03 )        (0.17 )        (0.06 )        (0.04 )        –         (1.11 ) 

Distributions from net realized gains

     (1.24 )        –         (1.41 )        (0.21 )        (1.56 )        (0.82 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (1.27 )        (0.17 )        (1.47 )        (0.25 )        (1.56 )        (1.93 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 15.87       $ 16.17       $ 14.20       $ 14.33       $ 14.50       $ 13.79  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     5.62 %B        15.11 %        10.44 %        0.54 %        16.59 %        29.65 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 40,440,274       $ 18,631,514       $ 10,988,456       $ 9,795,860       $ 8,168,361       $ 1,693,046  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.26 %C        1.41 %        1.58 %        1.61 %        1.65 %        2.79 % 

Expenses, net of reimbursementsD

     1.00 %C        0.99 %        0.99 %        1.10 %        1.09 %        1.09 % 

Net investment income (loss), before expense reimbursements

     0.37 %C        0.54 %        0.28 %        0.12 %        0.19 %        (0.23 )% 

Net investment income, net of reimbursements

     0.64 %C        0.96 %        0.87 %        0.64 %        0.75 %        1.47 % 

Portfolio turnover rate

     28 %B        77 %        50 %        97 %        76 %        89 % 

 

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

Financial Highlights

(For a share outstanding throughout the period)

 

 

    Investor Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 15.95       $ 14.05       $ 14.22       $ 14.39       $ 13.73       $ 12.44  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income (loss)

     (0.03 )        0.14         0.28         0.01         0.10         0.53  

Net gains on investments (both realized and unrealized)

     0.96         1.93         1.00         0.04         2.12         2.68  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.93         2.07         1.28         0.05         2.26         3.21  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.02 )        (0.17 )        (0.04 )        (0.01 )        –         (1.10 ) 

Distributions from net realized gains

     (1.24 )        –         (1.41 )        (0.21 )        (1.56 )        (0.82 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (1.26 )        (0.17 )        (1.45 )        (0.22 )        (1.56 )        (1.92 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 15.62       $ 15.95       $ 14.05       $ 14.22       $ 14.39       $ 13.73  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     5.46 %B        14.77 %        10.07 %        0.29 %        16.27 %        29.30 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 6,757,372       $ 10,766,976       $ 7,620,538       $ 2,573,002       $ 3,003,670       $ 3,301,901  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.43 %C        1.58 %        1.74 %        1.82 %        1.86 %        3.07 % 

Expenses, net of reimbursementsD

     1.28 %C        1.27 %        1.27 %        1.37 %        1.37 %        1.37 % 

Net investment income (loss), before expense reimbursements

     0.16 %C        0.41 %        0.09 %        (0.12 )%        0.15 %        (0.60 )% 

Net investment income, net of reimbursements

     0.31 %C        0.72 %        0.56 %        0.33 %        0.64 %        1.11 % 

Portfolio turnover rate

     28 %B        77 %        50 %        97 %        76 %        89 % 
         
    A Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 15.96       $ 14.06       $ 14.22       $ 14.40       $ 13.75       $ 12.46  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income (loss)

     (0.11 )        0.16         0.10         0.05         0.48         0.18  

Net gains on investments (both realized and unrealized)

     1.05         1.91         1.18         0.00         1.73         3.02  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.94         2.07         1.28         0.05         2.21         3.20  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     (0.02 )        (0.17 )        (0.03 )        (0.02 )        –         (1.09 ) 

Distributions from net realized gains

     (1.24 )        –         (1.41 )        (0.21 )        (1.56 )        (0.82 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (1.26 )        (0.17 )        (1.44 )        (0.23 )        (1.56 )        (1.91 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 15.64       $ 15.96       $ 14.06       $ 14.22       $ 14.40       $ 13.75  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     5.50 %B        14.76 %        10.04 %        0.29 %        16.17 %        29.07 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 3,991,337       $ 6,801,568       $ 5,212,114       $ 4,797,155       $ 4,894,024       $ 2,080,892  

Ratios to average net assets:

                      

Expenses, before reimbursements

     1.58 %C        1.73 %        1.90 %        1.94 %        2.05 %        3.22 % 

Expenses, net of reimbursementsD

     1.30 %C        1.29 %        1.29 %        1.40 %        1.47 %        1.49 % 

Net investment income (loss), before expense reimbursements

     (0.01 )%C        0.28 %        (0.04 )%        (0.21 )%        (0.14 )%        (0.62 )% 

Net investment income, net of reimbursements

     0.27 %C        0.71 %        0.57 %        0.33 %        0.45 %        1.11 % 

Portfolio turnover rate

     28 %B        77 %        50 %        97 %        76 %        89 % 

 

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

Financial Highlights

(For a share outstanding throughout the period)

 

 

    C Class  
    Six Months
Ended
February 28,
2018		           Year Ended August 31,  
            2017           2016           2015           2014           2013  
 

 

 

  
    (unaudited)                                                              

Net asset value, beginning of period

   $ 15.32       $ 13.53       $ 13.81       $ 14.08       $ 13.57       $ 12.28  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Income (loss) from investment operations:

                      

Net investment income (loss)

     (0.02 )        0.03         0.10         (0.07 )        0.33         0.24  

Net gains on investments (both realized and unrealized)

     0.86         1.86         1.03         0.01         1.74         2.84  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total income (loss) from investment operations

     0.84         1.89         1.13         (0.06 )        2.07         3.08  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Less distributions:

                      

Dividends from net investment income

     –         (0.10 )        –         –         –         (0.97 ) 

Distributions from net realized gains

     (1.24 )        –         (1.41 )        (0.21 )        (1.56 )        (0.82 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total distributions

     (1.24 )        (0.10 )        (1.41 )        (0.21 )        (1.56 )        (1.79 ) 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Net asset value, end of period

   $ 14.92       $ 15.32       $ 13.53       $ 13.81       $ 14.08       $ 13.57  
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Total returnA

     5.07 %B        13.97 %        9.17 %        (0.48 )%        15.29 %        28.20 % 
 

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

  

Ratios and supplemental data:

                      

Net assets, end of period

   $ 2,246,047       $ 2,207,090       $ 1,838,434       $ 1,398,217       $ 1,468,876       $ 695,075  

Ratios to average net assets:

                      

Expenses, before reimbursements

     2.32 %C        2.47 %        2.65 %        2.69 %        2.81 %        3.95 % 

Expenses, net of reimbursementsD

     2.05 %C        2.04 %        2.04 %        2.15 %        2.22 %        2.24 % 

Net investment (loss), before expense reimbursements

     (0.72 )%C        (0.42 )%        (0.78 )%        (0.96 )%        (0.89 )%        (1.38 )% 

Net investment income (loss), net of reimbursements

     (0.44 )%C        0.01 %        (0.18 )%        (0.41 )%        (0.30 )%        0.33 % 

Portfolio turnover rate

     28 %B        77 %        50 %        97 %        76 %        89 % 

 

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

  

 

 

 

 

 

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48

LOGO

 

 

 

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:

 

LOGO   LOGO
 
By E-mail:   On the Internet:
american_beacon.funds@ambeacon.com   Visit our website at www.americanbeaconfunds.com
   
     
 

LOGO

By Telephone:

Call (800) 658-5811

  

LOGO

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 for the London Company Income Equity Fund and sixty days after the end of each quarter for the Zebra Small Cap Equity Fund.   A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Resolute Investment Distributors, Inc.

Irving, Texas

This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.

 

American Beacon Funds, American Beacon The London Company Income Equity Fund, and American Beacon Zebra Small Cap Equity Fund are service marks of American Beacon Advisors, Inc.

SAR 2/18

ITEM 2. CODE OF ETHICS.

Not Applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not Applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not Applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not Applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

The schedules of investments for each series of the Trust are included in the shareholder reports presented in Item 1.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END

MANAGEMENT INVESTMENT COMPANIES.

Not Applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not Applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT

COMPANY AND AFFILIATED PURCHASERS.

Not Applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.

ITEM 11. CONTROLS AND PROCEDURES.

(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.

(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Not Applicable.

(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 Act (17 CFR 270.30a-2(a)) is attached hereto as EX-99.CERT.

(a)(3) Not Applicable.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant): American Beacon Funds

 

By /s/ Gene L. Needles, Jr.

  
Gene L. Needles, Jr.  
President  
American Beacon Funds  

Date: May 8, 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: May 8, 2018

 

By /s/ Melinda G. Heika

  
Melinda G. Heika  
Treasurer  
American Beacon Funds  

Date: May 8, 2018