N-CSR 1 d127659dncsr.htm N-CSR N-CSR

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-4984

 

 

AMERICAN BEACON FUNDS

(Exact name of registrant as specified in charter)

 

 

220 East Las Colinas Boulevard, Suite 1200

Irving, Texas 75039

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

 

 

GENE L. NEEDLES, JR., PRESIDENT

220 East Las Colinas Boulevard, Suite 1200

Irving, Texas 75039

(Name and address of agent for service)

 

 

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

Date of fiscal year end: December 31, 2015

Date of reporting period: December 31, 2015

 

 

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

ANNUAL REPORT
December 31, 2015
TREASURY INFLATION PROTECTED SECURITIES FUND (CLOSED TO NEW INVESTORS)


About American Beacon Advisors

       

Contents

  

 

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.

       

 

President’s Message

     1   
       

 

Market and Performance Overview

     2   
       

 

Schedule of Investments

     7   
       

 

Financial Statements

  

 

 

 

8

 

  

 

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.

       

 

Notes to the Financial Statements

     11   
       

 

Financial Highlights

     20   
       

 

Additional Information

  

 

 

 

Back Cover

 

  

          

U.S. Treasury securities are guaranteed only as to the timely payment of interest and principal when held to maturity. The market prices for such securities are not guaranteed and will fluctuate. They are also subject to credit and interest rate risks. In a period of sustained deflation, inflation-indexed securities may not pay any income and may suffer a loss. 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 Funds    December 31, 2015


LOGO

Dear Shareholders,

Since 1997, the U.S. Treasury has been issuing Treasury Inflation-Protected Securities (“TIPS”). The principal of these securities, backed by the full faith and credit of the federal government, is tied to the Consumer Price Index. With a rise in the index, or inflation, the principal increases. With a fall in the index, or deflation, the principal decreases. And, at maturity, the U.S. Treasury pays the original or adjusted principal, whichever is greater.

TIPS carry minimal credit risk thanks to their government guarantee. However, like all bonds, they are subject to interest rate risk. On December 16, 2015, the Federal Reserve’s Federal Open Market Committee decided to raise its benchmark lending rate from a range of 0% to 0.25% to a range of 0.25% to 0.5% - the first interest rate hike in nearly a decade.

The American Beacon Treasury Inflation Protected Securities Fund, unlike many other funds in its peer group, seeks to provide inflation protection and income by investing primarily in TIPS. This strategy provides inflation protection without unnecessary exposure to the risks associated with other instruments. By benchmarking against the lower duration Barclays Capital 1-10 Year U.S. TIPS Index, the Fund strives to be less sensitive to changes in real interest rates.

For the 12 months ended December 31, 2015, the American Beacon Treasury Inflation Protected Securities Fund (Investor Class), which is closed to new investors, returned -0.49%.

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

 

Best Regards,
LOGO
Gene L. Needles, Jr.
President
American Beacon Funds

 

1


Market Overview

December 31, 2015 (Unaudited)

 

 

After peaking in the second quarter of 2015 at 3.9% year-over-year growth, the U.S. economy decelerated in the second half of the year with annualized gross domestic product (“GDP”) growth of 2.0% in the third quarter of 2015 and estimated growth of 0.7% in the fourth quarter of 2015. Throughout 2015, the Federal Reserve (the “Fed”) continually debated raising its overnight federal funds rate target for the first time since 2006 from a range of 0% to 0.25%. After the probable date for the move was pushed back a few times, the Federal Open Market Committee (“FOMC”) finally moved off of the 0% lower bound at its December 2015 meeting and suggested a measured, data-dependent pace for further hikes in 2016.

Despite the softening of the aforementioned GDP numbers, nearly 2.7 million nonfarm jobs were created in 2015 and the unemployment rate declined from 5.6% at the end of 2014 to 5.0% at the end of 2015. Inflation as measured by the Consumer Price Index (“CPI”) increased at a 0.7% pace, slower than 2014’s 0.8% pace, and few were concerned about sustainable inflationary pressures. Indeed, unwanted disinflation was more of a concern to policymakers than unwanted inflation. However, the year-over-year core CPI (CPI excluding food and energy) increased at a 2.1% pace in December, a noteworthy increase from the 1.6% rate of one year earlier.

 

 
 

Higher real Treasury interest rates at longer maturities contributed to negative total returns for Treasury Inflation Protected Securities (“TIPS”). The Barclays Capital U.S. TIPS Index returned -1.44% in 2015, while the Barclays Capital 1-10-year U.S. TIPS Index returned -0.52%. The TIPS yield curve steepened in 2015; for example, according to Barclays, the yield on the TIPS 0.125% 4/15/19 fell from 0.35% on December 31, 2014, to 0.29% on December 31, 2015, while the yield on the TIPS 0.125% 1/15/24 rose over that same time frame from 0.55% to 0.75%. At the end of 2015, the total outstanding market value of the Barclays U.S. TIPS Index was approximately $993 billion.

 

 

2


American Beacon Treasury Inflation Protected Securities FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class of the Treasury Inflation Protected Securities Fund (the “Fund”) returned -0.49% for the twelve months ended December 31, 2015, outperforming the Barclays Capital 1-10 Year U.S. TIPS Index (the “Index”) return of -0.52%.

Comparison of Change in Value of a $10,000 Investment

For the Period from 12/31/05 through 12/31/15

 

LOGO

Total Returns for the Period ended 12/31/15

 

     Ticker    1 Year     5 Years     10 Years     Value of
$10,000
12/31/05-
12/31/15
 

Institutional Class (1,7,8)

   ATPIX      (0.10 )%      1.61     3.35   $ 13,899   

Y Class (1,2,7,8)

   ACUYX      (0.39 )%      1.29     3.16     13,647   

Investor Class (1,3,7,8)

   ABTPX      (0.49 )%      1.20     3.06     13,521   

A Class with sales charge (1,4,7,8)

   ATSAX      (5.50 )%      (0.09 )%      2.39     12,663   

A Class without sales charge (1,4,7,8)

   ATSAX      (0.78 )%      0.90     2.89     13,299   

C Class with sales charge (1,5,7,8)

   ATSCX      (2.51 )%      0.13     2.47     12,767   

C Class without sales charge (1,5,7,8)

   ATSCX      (1.51 )%      0.13     2.47     12,767   

Barclays Capital 1-10 Yr. U.S. TIPS Index (6)

        (0.52 )%      1.64     3.51     14,117   

Barclays Capital U.S. TIPS Index (6)

        (1.44 )%      2.55     3.93     14,702   

 

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.
2. Fund performance for the ten-year period represents the total returns achieved by the Institutional Class up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 12/31/05.
3. Fund performance for the ten-year period represents the total returns achieved by the Institutional Class up to 3/2/09, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 12/31/05.
4. Fund performance for the ten-year period represents the total returns achieved by the Institutional Class from 12/31/05 through 3/1/09, and the Investor Class from 3/2/09 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 12/31/05. The maximum sales charge for A Class is 4.75%.

 

3


American Beacon Treasury Inflation Protected Securities FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

5. Fund performance for the ten-year period represents the total returns achieved by the Institutional Class from 12/31/05 through 3/1/09, and the Investor Class from 3/2/09 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 Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/05. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
6. The Barclays Capital 1-10 Yr. U.S. TIPS Index is an unmanaged market index comprising U.S. Treasury inflation-indexed securities with maturities between one and ten years while the Barclays Capital U.S. TIPS Index includes all maturities. One cannot directly invest in an index.
7. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2005. A portion of the fees charged to the Investor Class of the Fund has been waived since inception. A portion of the fees charged to the Y, A, and C Classes has been waived since 2011. Performance prior to waiving fees was lower than the actual returns shown.
8. The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.40%, 0.63%, 0.81%, 0.94%, and 1.69%, 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 produced negative absolute returns for the twelve-month time period, affected by global growth concerns and the first rise in the U.S. overnight federal funds rate in nearly ten years.

From a yield curve positioning standpoint, the Fund’s outperformance relative to the Index stemmed from underweighting the 7-8 year maturity range and from overweighting the 3-4 year maturity range. Security selections within the 2-3 year maturity range also benefited relative performance during the period. Underweighting the 2-3 year and 1-2 year maturity ranges detracted from relative performance during the year.

From a duration perspective, one sub-advisor began the period with a short duration position relative to the Index, which benefited performance. The sub-advisor moved to duration neutral during mid-January, and maintained that positioning until the fourth quarter of 2015. During the fourth quarter, the sub-advisor’s overweight duration position in the long end of the curve, in a rising rate environment, detracted from relative performance.

 

Top Ten Holdings (% Net Assets)

     

Treasury Inflation Index Security, 0.125%, Due 4/15/2017

        8.8   

Treasury Inflation Index Security, 0.125%, Due 4/15/2019

        8.2   

Treasury Inflation Index Security, 0.625%, Due 1/15/2024

        8.0   

Treasury Inflation Index Security, 0.125%, Due 1/15/2022

        8.0   

Treasury Inflation Index Security, 2.375%, Due 1/15/2025

        7.3   

Treasury Inflation Index Security, 0.625%, Due 7/15/2021

        7.3   

Treasury Inflation Index Security, 1.25%, Due 7/15/2020

        7.0   

Treasury Inflation Index Security, 0.125%, Due 1/15/2023

        6.6   

Treasury Inflation Index Security, 0.375%, Due 7/15/2023

        5.7   

Treasury Inflation Index Security, 0.125%, Due 4/15/2018

        5.6   

Total Fund Holdings

     21      

 

Portfolio Statistics

  

Effective Maturity (years)

     4.9   

Effective Duration (years)

     5.3   

3-Year Standard Deviation

     3.8   

 

Security Type (% of Total Investments)

  

Treasury Inflation Index Security

     96.0   

Short-Term Investments

     4.0   

 

4


American Beacon Treasury Inflation Protected Securities FundSM

Fund Expenses

December 31, 2015 (Unaudited)

 

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below 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 and held for the entire period from July 1, 2015 through December 31, 2015.

Actual Expenses

The “Actual” line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders 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” line of the table provides 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 that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. 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” line of the table is 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.

 

     Beginning
Account
Value

7/1/2015
     Ending
Account
Value

12/31/2015
     Expenses
Paid  During
Period

7/1/2015-
12/31/2015*
 

Institutional Class

        

Actual

   $ 1,000.00       $ 988.48       $ 1.40   

Hypothetical**

   $ 1,000.00       $ 1,023.77       $ 1.43   

Y Class

        

Actual

   $ 1,000.00       $ 988.49       $ 3.06   

Hypothetical**

   $ 1,000.00       $ 1,022.13       $ 3.11   

Investor Class

        

Actual

   $ 1,000.00       $ 987.37       $ 3.46   

Hypothetical**

   $ 1,000.00       $ 1,021.74       $ 3.52   

A Class

        

Actual

   $ 1,000.00       $ 985.43       $ 4.50   

Hypothetical**

   $ 1,000.00       $ 1,020.69       $ 4.58   

C Class

        

Actual

   $ 1,000.00       $ 981.91       $ 8.39   

Hypothetical**

   $ 1,000.00       $ 1,016.74       $ 8.54   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.28%, 0.61%, 0.69%, 0.90%, and 1.68% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

5


American Beacon Treasury Inflation Protected Securities FundSM

Report of Independent Registered Public Accounting Firm

 

The Board of Trustees and Shareholders of

American Beacon Treasury Inflation Protected Securities Fund

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of American Beacon Treasury Inflation Protected Securities Fund (one of the funds constituting the American Beacon Funds) (the “Fund”), as of December 31, 2015, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Treasury Inflation Protected Securities Fund at December 31, 2015, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

February 29, 2016

 

 

6


American Beacon Treasury Inflation Protected Securities FundSM

Schedule of Investments

December 31, 2015

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

U.S. TREASURY OBLIGATIONS - 98.70%

     

0.125%, Due 4/15/2017 A

   $ 1,100       $ 1,096   

2.625%, Due 7/15/2017 A

     44         46   

1.625%, Due 1/15/2018 A

     68         70   

0.125%, Due 4/15/2018 A

     693         692   

2.125%, Due 1/15/2019 A

     489         517   

0.125%, Due 4/15/2019 A

     1,025         1,019   

1.875%, Due 7/15/2019 A

     150         159   

1.375%, Due 1/15/2020 A

     489         509   

0.125%, Due 4/15/2020 A

     513         506   

1.25%, Due 7/15/2020 A

     843         877   

0.625%, Due 7/15/2021 A

     899         905   

0.125%, Due 1/15/2022 A

     1,026         994   

0.125%, Due 7/15/2022 A

     524         508   

0.125%, Due 1/15/2023 A

     856         821   

0.375%, Due 7/15/2023 A

     724         707   

0.625%, Due 1/15/2024 A

     1,005         994   

0.125%, Due 7/15/2024 A

     647         615   

0.25%, Due 1/15/2025 A

     126         120   

2.375%, Due 1/15/2025 A

     802         912   

0.375%, Due 7/15/2025 A

     118         115   

2.50%, Due 1/15/2029 A

     112         133   
     

 

 

 

Total U.S. Treasury Obligations (Cost $12,424)

        12,315   
     

 

 

 
     Shares         

SHORT-TERM INVESTMENTS - 4.02% (Cost $502)

     

JPMorgan U.S. Government Money Market Fund, Capital Class

     501,549         502   
     

 

 

 

TOTAL INVESTMENTS - 102.72% (Cost $12,926)

        12,817   

LIABILITIES, NET OF OTHER ASSETS - (2.72%)

        (340
     

 

 

 

TOTAL NET ASSETS - 100.00%

      $ 12,477   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A 

Inflation-Indexed Note.

 

See accompanying notes

7


American Beacon Treasury Inflation Protected Securities FundSM

Statement of Assets and Liabilities

December 31, 2015 (in thousands, except share and per share amounts)

 

 

Assets:

  

Investments in unaffiliated securities, at fair value A

   $ 12,817   

Receivable for investments sold

     381   

Receivable for fund shares sold

     49   

Interest receivable

     35   

Receivable for expense reimbursement (Note 2)

     1   

Prepaid expenses

     19   
  

 

 

 

Total assets

     13,302   
  

 

 

 

Liabilities:

  

Payable for investments purchased

     745   

Payable for fund shares redeemed

     6   

Management and investment advisory fees payable

     11   

Administrative service and service fees payable

     15   

Transfer agent fees payable

     5   

Custody and fund accounting fees payable

     5   

Professional fees payable

     32   

Prospectus and shareholder reports fees payable

     2   

Trustee fees payable

     1   

Other liabilities

     3   
  

 

 

 

Total liabilities

     825   
  

 

 

 

Net assets

   $ 12,477   
  

 

 

 

Analysis of Net Assets:

  

Paid-in-capital

     25,613   

Undistributed (or overdistribution of) net investment income

     —     

Accumulated net realized (loss)

     (13,027

Unrealized (depreciation) of investments

     (109
  

 

 

 

Net assets

   $ 12,477   
  

 

 

 

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

  

Institutional Class

     749,828   
  

 

 

 

Y Class

     49,654   
  

 

 

 

Investor Class

     362,228   
  

 

 

 

A Class

     51,367   
  

 

 

 

C Class

     4,003   
  

 

 

 

Net assets (not in thousands):

  

Institutional Class

   $ 7,719,788   
  

 

 

 

Y Class

   $ 511,751   
  

 

 

 

Investor Class

   $ 3,685,540   
  

 

 

 

A Class

   $ 520,885   
  

 

 

 

C Class

   $ 39,102   
  

 

 

 

Net asset value, offering and redemption price per share:

  

Institutional Class

   $ 10.30   
  

 

 

 

Y Class

   $ 10.31   
  

 

 

 

Investor Class

   $ 10.17   
  

 

 

 

A Class

   $ 10.14   
  

 

 

 

A Class (offering price)

   $ 10.65   
  

 

 

 

C Class

   $ 9.77   
  

 

 

 

A Cost of investments in unaffiliated securities

   $ 12,926   

 

See accompanying notes

8


American Beacon Treasury Inflation Protected Securities FundSM

Statement of Operations

For the year ended December 31, 2015 (in thousands)

 

Investment income:

  

Interest income

   $ 620   
  

 

 

 

Total investment income

     620   
  

 

 

 

Expenses:

  

Management and investment advisory fees (Note 2)

     260   

Administrative service fees (Note 2):

  

Institutional Class

     343   

Y Class

     2   

Investor Class

     8   

A Class

     2   

Transfer agent fees:

  

Institutional Class

     88   

Investor Class

     2   

Custody and fund accounting fees

     40   

Professional fees

     40   

Registration fees and expenses

     76   

Service fees (Note 2):

  

Y Class

     1   

Investor Class

     6   

A Class

     1   

Distribution fees (Note 2):

  

A Class

     1   

C Class

     1   

Prospectus and shareholder report expenses

     12   

Trustee fees

     13   

Other expenses

     15   
  

 

 

 

Total expenses

     911   
  

 

 

 

Net fees waived and expenses reimbursed (Note 2)

     (233
  

 

 

 

Net expenses

     678   
  

 

 

 

Net investment (loss)

     (58 ) 
  

 

 

 

Realized and unrealized gain (loss) from investments:

  

Net realized gain (loss) from:

  

Investments

     (6,827

Change in net unrealized appreciation or (depreciation) of:

  

Investments

     5,752   
  

 

 

 

Net (loss) from investments

     (1,075 ) 
  

 

 

 

Net (decrease) in net assets resulting from operations

   $ (1,133 ) 
  

 

 

 

 

See accompanying notes

9


American Beacon Treasury Inflation Protected Securities FundSM

Statement of Changes in Net Assets (in thousands)

 

     Year Ended
December 31,
2015
    Year Ended
December 31,
2014
 

Increase (Decrease) in Net Assets:

    

Operations:

    

Net investment income (loss)

   $ (58   $ 1,872   

Net realized gain (loss) from investments

     (6,827     (758

Change in net unrealized appreciation or (depreciation) of investments

     5,752        (609
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     (1,133     505   
  

 

 

   

 

 

 
    

Distributions to Shareholders:

    

Net investment income:

    

Institutional Class

     —          (1,861

Y Class

     —          (3

Investor Class

     —          (7

A Class

     —          (1

C Class

     —          —     

Return of capital

    

Institutional Class

     —          (248

Y Class

     —          —     

Investor Class

     —          (1

A Class

     —          —     

C Class

     —          —     
  

 

 

   

 

 

 

Net distributions to shareholders

     —          (2,121 ) 
  

 

 

   

 

 

 

Capital Share Transactions:

    

Proceeds from sales of shares

     51,810        85,648   

Reinvestment of dividends and distributions

     —          2,119   

Cost of shares redeemed

     (286,069     (45,874
  

 

 

   

 

 

 

Net increase (decrease) in net assets from capital share transactions

     (234,259     41,893   
  

 

 

   

 

 

 

Net increase (decrease) in net assets

     (235,392     40,277   
  

 

 

   

 

 

 

Net Assets:

    

Beginning of period

     247,869        207,592   
  

 

 

   

 

 

 

End of Period *

   $ 12,477      $ 247,869   
  

 

 

   

 

 

 

*  Includes undistributed (or overdistribution of) net investment income

   $ —        $ —     
  

 

 

   

 

 

 

 

See accompanying notes

10


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

1. Organization

American Beacon Funds (the “Trust”) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 as amended (the “Act”), as a diversified, open-end management investment company. As of December 31, 2015, the Trust consists of twenty-five active series, one of which is presented in this filing (the “Fund”): American Beacon Treasury Inflation Protected Securities Fund. The remaining twenty-four active series are reported in separate filings.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Astro AB Borrower, 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 Y, A, and C Classes of the Fund were closed to new investors on September 22, 2015. On January 12, 2016, the Institutional and Investor Classes of the Fund were closed to new investors. Existing shareholders may continue to purchase, redeem, or exchange shares of the Fund on any business day the New York Stock Exchange is open for business.

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:

  

Offered to:

Institutional Class    Investors making an initial investment of $250,000
Y Class    Investors making an initial investment of $100,000
Investor Class    General public and investors investing through an intermediary
A Class    General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)
C Class    General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC

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 Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory and fund management. Investment assets of the Fund may be managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager and the Trust. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets. The Fund pays the unaffiliated investment advisors hired to direct investment activities of the Fund. Management fees paid during the year ended December 31, 2015 were as follows (dollars in thousands):

 

Management

Fee Rate

 

Management Fee

 

Amounts paid to

Investment

Sub-Advisors

 

Amount Paid

to Manager

0.11%

  $260   $144   $116

 

 

11


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

 

Administration Agreement

The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.15% of the average daily net assets of the Institutional Class, and 0.30% of the average daily net assets of the Y, Investor, A, and C Classes.

Distribution Plans

The Trust, 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 will be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to separately compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, 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 of the Fund. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expense incurred in a particular month by the Manager for distribution assistance.

Service Plan

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes of the Fund. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.

Interfund Lending Program

Pursuant to an exemptive order by the Securities and Exchange Commission (the “SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended December 31, 2015, the Fund did not utilize the credit facility.

Expense Reimbursement Plan

The Manager contractually agreed to reimburse 0.10% of the Administrative Service fee for the Institutional Class. Additionally, the Manager contractually agreed to waive fees and/or reimburse expenses of the Y, Investor, A, and C classes to the extent that the total annual fund operating expenses exceeded each Funds’ expense cap. Of these amounts, $1,518 was receivable from the Manager at December 31, 2015:

 

   

Expense Cap and Limits

      Expiration of

Class

 

1/1/15 to 12/31/15

 

Reimbursed Expenses

 

Reimbursements

Institutional   0.10%   $229,613   2018
Y   0.61%   51   2018
Investor   0.69%   3,224   2018
A   0.90%   164   2018
C   1.68%   11   2018

 

 

12


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

 

The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’s average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The carryover of excess expenses potentially reimbursable to the Manager is $207,574 and $232,814 which will expire in 2016 and 2017, respectively. Carryover expenses of $246,503 expired in 2015. The Fund did not record a liability for these potential reimbursements due to the current assessment that reimbursements are unlikely.

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. For the year ended December 31, 2015, Foreside collected $124 from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended December 31, 2015, CDSC fees of $5,097 were collected for Class A Shares.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended December 31, 2015, there were no CDSC fees for the Class C Shares.

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business.

Debt securities (other than short-term 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. The prices of debt securities may be determined using quotes obtained from brokers.

Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation.

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

 

 

13


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

 

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 2 securities are fixed-income securities that are valued using observable inputs as stated above.
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, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Fixed income securities including corporate, U.S. government agencies, and U.S. treasury obligations, 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 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.

The Fund’s investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all significant transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfer between levels of the Fund’s assets and liabilities. During the year ended December 31, 2015, there were no transfers between levels. As of December 31, 2015, the investments were classified as described below (in thousands):

 

     Level 1      Level 2      Level 3      Total  

U.S. Treasury Obligations

   $ —         $ 12,315       $ —         $ 12,315   

Short-term Investments - Money Market Funds

     502         —           —           502   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 502       $ 12,315       $ —         $ 12,817   
  

 

 

    

 

 

    

 

 

    

 

 

 

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

 

 

14


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

 

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based up on the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Other

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

4. Securities and Other Investments

U.S. Treasury Inflation Protected Securities

Treasury Inflation Protected securities (“TIPs”) are inflation-indexed bonds issued by the U.S. Treasury. The principal amount is adjusted daily to the rate of inflation. Interest is accrued based on the adjusted principal amount. The adjustments to the principal due to inflation are reflected as increases or decreases to interest income in the accompanying Statement of Operations, even though principal is not received until maturity. Such adjustments may have a significant impact on the Fund’s distributions.

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, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Principal Risks

In the normal course of business the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces

 

 

15


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

 

the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

6. Federal Income and Excise Taxes

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

The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2015 remains 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.

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

The tax character of distributions paid was as follows (in thousands):

 

     Year Ended
December 31,
2015
     Year Ended
December 31,
2014
 

Distributions paid from:

     

Ordinary income*

     

Institutional Class

   $ —         $ 1,861   

Y Class

     —           3   

Investor Class

     —           7   

A Class

     —           1   

C Class

     —           —     

Return of capital

     

Institutional Class

     —           248   

Y Class

     —           —     

Investor Class

     —           1   

A Class

     —           —     

C Class

     —           —     
  

 

 

    

 

 

 

Total distributions paid

   $ —         $ 2,121   
  

 

 

    

 

 

 

 

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

As of December 31, 2015, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):

 

Cost basis of investments for federal income tax purposes

   $ 13,151   

Unrealized appreciation

     —     

Unrealized depreciation

     (334
  

 

 

 

Net unrealized appreciation or (depreciation)

     (334

Undistributed ordinary income

     —     

Accumulated capital and other losses

     (12,802

Undistributed long-term capital gain

     —     
  

 

 

 

Distributable earnings or (deficits)

   $ (13,136
  

 

 

 

 

 

16


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales.

Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences derived from the non-utilization of net operating loss as of December 31, 2015 (in thousands):

 

Paid-in-capital

   $ (59

Undistributed net investment income

     58   

Accumulated net realized gain (loss)

     1   

Unrealized appreciation or (depreciation) of investments

     —     

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

As of December 31, 2015, the Fund has $5,802 of short-term and $7,000 of long-term post enactment capital loss carryforwards (in thousands).

7. Investment Transactions

Purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2015 were $287,920,393 and $519,168,347, respectively. These amounts also represent purchases and sales of U.S. Government securities.

8. Capital Share Transactions

The tables below summarize the activity in capital shares (dollars and shares in thousands):

For the Year Ended December 31, 2015

 

     Institutional Class     Y Class     Investor Class  
     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     4,630      $ 48,195        15      $ 156        186      $ 1,893   

Reinvestment of dividends

     —          —          —          —          —          —     

Shares redeemed

     (27,558     (283,555     (23     (236     (50     (510
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (22,928   $ (235,360     (8   $ (80     136      $ 1,383   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  
     Shares      Amount      Shares      Amount  

Shares sold

     153       $ 1,566         —         $ —     

Reinvestment of dividends

     —           —           —           —     

Shares redeemed

     (166      (1,700      (7      (68
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (decrease) in shares outstanding

     (13    $ (134      (7    $ (68
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

17


American Beacon Treasury Inflation Protected Securities FundSM

Notes to Financial Statements

December 31, 2015

 

 

For the Year Ended December 31, 2014

 

     Institutional Class     Y Class     Investor Class  
     Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     8,046      $ 84,971        22      $ 229        17      $ 176   

Reinvestment of dividends

     204        2,108        —          3        1        8   

Shares redeemed

     (4,045     (42,621     (25     (264     (221     (2,294
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     4,205      $ 44,458        (3   $ (32     (203   $ (2,110
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  
     Shares      Amount      Shares      Amount  

Shares sold

     14       $ 142         13       $ 130   

Reinvestment of dividends

     —           —           —           —     

Shares redeemed

     (27      (276      (42      (419
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (decrease) in shares outstanding

     (13    $ (134      (29    $ (289
  

 

 

    

 

 

    

 

 

    

 

 

 

9. Subsequent Event

On September 22, 2015, the Manager announced the Board’s approval of a plan to liquidate and terminate the Y, A, and C Classes of the Fund. The Y, A, and C Classes were closed on January 15, 2016. On January 11, 2016, the Manager announced the Board’s approval of a plan to liquidate and terminate the Fund on or about March 31, 2016.

 

 

18


  

 

 

 

 

 

 

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19


American Beacon Treasury Inflation Protected Securities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
     Year Ended December 31,  
     2015     2014     2013     2012     2011  

Net asset value, beginning of period

   $ 10.31      $ 10.34      $ 10.97      $ 11.16      $ 10.51   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     (2.34     0.09        (0.02     0.04        0.28   

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

     2.33        (0.03     (0.61     0.49        0.67   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.01     0.06        (0.63     0.53        0.95   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     —          (0.08     —          (0.07     (0.29

Distributions from net realized gains

     —          —          —          (0.49     —     

Return of capital

     —          (0.01 )A      —          (0.16 )A      (0.01 )A 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     —          (0.09     —          (0.72     (0.30
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 10.30      $ 10.31      $ 10.34      $ 10.97      $ 11.16   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (0.10 )%      0.58     (5.74 )%      4.80     9.14
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 7,720      $ 244,192      $ 201,381      $ 202,274      $ 206,864   

Ratios to average net assets (annualized):

          

Expenses, before reimbursements

     0.38     0.40     0.39     0.37     0.36

Expenses, net of reimbursements

     0.28     0.30     0.30     0.27     0.26

Net investment income (loss), before reimbursements

     (0.11 )%      0.71     (0.31 )%      0.64     2.24

Net investment income (loss), net of reimbursements

     (0.01 )%      0.81     (0.21 )%      0.74     2.34

Portfolio turnover rate

     131     102     252     286     381

 

A 

The return of capital is calculated based on outstanding shares at the time of distribution.

B 

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

C 

Amount represents less than $0.01 per share.

 

 

20


American Beacon Treasury Inflation Protected Securities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class     A Class  
Year Ended December 31,     Year Ended December 31,     Year Ended December 31,  
2015     2014     2013     2012     2011     2015     2014     2013     2012     2011     2015     2014     2013     2012     2011  
$ 10.35      $ 10.37      $ 11.03      $ 11.24      $ 10.60      $ 10.22      $ 10.24      $ 10.90      $ 11.12      $ 10.48      $ 10.22      $ 10.23      $ 10.93      $ 11.15      $ 10.54   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                           
  (0.06     0.05        (0.07     0.09        0.26        0.02        (0.05     (0.13     0.06        0.24        (0.16     (0.01     (0.07     0.00C        0.10   
  0.02        (0.02     (0.59     0.41        0.65        (0.07     0.06        (0.53     0.42        0.66        0.08        0.01        (0.63     0.45        0.76   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.04     0.03        (0.66     0.50        0.91        (0.05     0.01        (0.66     0.48        0.90        (0.08     0.00        (0.70     0.45        0.86   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                           
  —          (0.04     —          (0.06     (0.26     —          (0.03     —          (0.05     (0.25     —          (0.01     —          (0.02     (0.24
  —          —          —          (0.49     —          —          —          —          (0.49     —          —          —          —          (0.49     —     
  —          (0.01 )A      —          (0.16 )A      (0.01 )A      —          (0.00 )AC      —          (0.16 )A      (0.01 )A      —          (0.00 )AC      —          (0.16 )A      (0.01 )A 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —          (0.05     —          (0.71     (0.27     —          (0.03     —          (0.70     (0.26     —          (0.01     —          (0.67     (0.25

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 10.31      $ 10.35      $ 10.37      $ 11.03      $ 11.24      $ 10.17      $ 10.22      $ 10.24      $ 10.90      $ 11.12      $ 10.14      $ 10.22      $ 10.23      $ 10.93      $ 11.15   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.39 )%      0.32     (5.98 )%      4.42     8.66     (0.49 )%      0.14     (6.06 )%      4.32     8.67     (0.78 )%      0.03     (6.40 )%      4.07     8.17

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                           
$ 512      $ 593      $ 627      $ 1,051      $ 501      $ 3,685      $ 2,315      $ 4,395      $ 19,438      $ 19,920      $ 521      $ 662      $ 793      $ 741      $ 855   
                           
  0.62     0.63     0.63     0.62     1.04     0.82     0.81     0.79     0.77     0.77     0.93     0.99     1.06     1.07     1.32
  0.61     0.61     0.61     0.61     0.63     0.69     0.69     0.69     0.69     0.68     0.90     0.95     1.00     1.01     1.03
  (0.50 )%      0.46     (0.59 )%      0.81     1.80     (0.89 )%      0.25     (0.66 )%      0.44     2.24     (0.84 )%      0.25     (0.93 )%      0.07     0.88
  (0.49 )%      0.47     (0.57 )%      0.82     2.21     (0.77 )%      0.37     (0.56 )%      0.53     2.32     (0.81 )%      0.29     (0.86 )%      0.13     1.17
  131     102     252     286     381     131     102     252     286     381     131     102     252     286     381

 

 

21


American Beacon Treasury Inflation Protected Securities FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     C Class  
     Year Ended December 31,  
     2015     2014     2013     2012     2011  

Net asset value, beginning of period

   $ 9.92      $ 10.00      $ 10.77      $ 11.06      $ 10.46   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     (2.05     (0.76     (0.15     (0.05     0.13   

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

     1.90        0.68        (0.62     0.41        0.65   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.15     (0.08     (0.77     0.36        0.78   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     —          —          —          —          (0.17

Distributions from net realized gains

     —          —          —          (0.49     —     

Return of capital

     —          —          —          (0.16 )A      (0.01 )A 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     —          —          —          (0.65     (0.18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 9.77      $ 9.92      $ 10.00      $ 10.77      $ 11.06   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (1.51 )%      (0.80 )%      (7.15 )%      3.26     7.47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 39      $ 107      $ 396      $ 307      $ 266   

Ratios to average net assets (annualized):

          

Expenses, before reimbursements

     1.70     1.74     1.79     1.79     2.62

Expenses, net of reimbursements

     1.68     1.74     1.78     1.77     1.79

Net investment income (loss), before reimbursements

     (1.82 )%      (0.43 )%      (1.71 )%      (0.61 )%      0.25

Net investment income (loss), net of reimbursements

     (1.80 )%      (0.42 )%      (1.69 )%      (0.59 )%      1.08

Portfolio turnover rate

     131     102     252     286     381

 

A 

The return of capital is calculated based on outstanding shares at the time of distribution.

B 

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

 

 

22


American Beacon Treasury Inflation Protected Securities FundSM

Privacy Policy and Federal Tax Information

December 31, 2015 (Unaudited)

 

Privacy Policy

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

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

 

   

information we receive from you on applications or other forms;

 

   

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

 

   

information we receive from third parties.

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

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

Federal Tax Information

Certain tax information regarding the Fund is required to be provided to shareholders relating to the Fund’s income and distributions for the taxable year ended December 31, 2015. The information and distributions reported herein may differ from information and distributions taxable to the shareholder for the calendar year ended December 31, 2015.

No dividends were paid to shareholders during the tax year ended December 31, 2015.

 

 

23


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES

   Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  

Alan D. Feld** (79)

   Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).

NON-INTERESTED

   Term   

TRUSTEES

  

Lifetime of Trust

until removal,

resignation or

retirement*

  

Gilbert G. Alvarado (46)

   Trustee since 2015    Director, Kura MD, Inc. (local telehealth organization) (2015-Present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present) Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-Present); Director, Sacramento Regional Technology Alliance (2011-Present); Director, Women’s Empowerment (2009-2014); Trustee, American Beacon Select Funds (2015-Present).

Joseph B. Armes (53)

   Trustee since 2015    Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2013-Present); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Chief Operating Officer, Hicks Holdings, LLC (Hicks Family assets and investments) (2005-2010); Trustee, Baylor University Board of Regents (2001-2010); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present).

Gerard J. Arpey (57)

   Trustee since 2012    Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).

W. Humphrey Bogart (71)

   Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).

Brenda A. Cline (55)

   Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc.(public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).

Eugene J. Duffy (61)

   Trustee since 2008    Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).

 

 

24


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

NON-INTERESTED

   Term   

TRUSTEES

  

Lifetime of Trust

until removal,

resignation or

retirement*

  

Thomas M. Dunning (73)

   Trustee since 2008    Chairman Emeritus (2008-Present); Lockton Dunning Benefits (consulting firm in employee benefits); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present) (software consulting); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).

Richard A. Massman (72)

  

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).

Barbara J. McKenna, CFA (52)

   Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).

R. Gerald Turner (70)

225 Perkins Admin. Bldg.

Southern Methodist Univ.

Dallas, Texas75275

   Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012).

OFFICERS

   Term   
   One Year   

Gene L. Needles, Jr. (61)

  

President since 2009

Executive Vice President

since 2009

   President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Astro AB Borrower, Inc. (2015-Present); President, CEO and Director, Astro AB Acquisition, Inc.(2015-Present); President, CEO and Director, Astro AB Topco, Inc. (2015-Present), President, CEO and Director, Astro AB Holdings, LLC. (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc.; (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, L.L.C. (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).

Rosemary K. Behan (56)

  

VP, Secretary and

Chief Legal

Officer since 2006

   Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Astro AB Borrower, Inc. (2015-Present); Secretary, Astro AB Acquisition, Inc. (2015-Present); Secretary, Astro AB Topco, Inc. (2015-Present); Secretary, Astro AB Holdings, LLC. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, L.L.C. (2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).

Brian E. Brett (55)

   VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).

Erica Duncan (45)

   VP Since 2011    Vice President, Marketing and Client Services, American Beacon Advisors, Inc. (2011-Present); Supervisor, Brand Marketing, Invesco (2010-2011).

Michael W. Fields (61)

   VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).

 

 

25


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

OFFICERS

   Term   
   One Year   

Melinda G. Heika (54)

  

Treasurer since

2010

   Treasurer, American Beacon Advisors, Inc. (2010-Present); Treasurer, Astro AB Borrower, Inc. (2015-Present); Treasurer, Astro AB Acquisition, Inc. (2015-Present); Treasurer, Astro AB Topco, Inc. (2015-Presnt); Treasurer, Astro AB Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, L.L.C. (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).

Terri L. McKinney (52)

   VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc .

Jeffrey K. Ringdahl (40)

   VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Manager and Senior Vice President, American Private Equity Management, L.L.C. (2012-Present); Senior Vice President and Director, Astro AB Borrower, Inc. (2015-Present); Senior Vice President and Director, Astro AB Acquisition, Inc. (2015-Present); Senior Vice President and Director, Astro AB Topco, Inc. (2015-Present), Senior Vice President and Director, Astro AB Holdings, LLC.(2015-Present); Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010).

Samuel J. Silver (52)

   VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.

Christina E. Sears (44)

  

Chief Compliance

Officer since 2004

and Asst. Secretary since 1999

   Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, L.L.C. (2012-Present).

Sonia L. Bates (59)

   Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011-Present), Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer, Astro AB Borrower, Inc. (2015-Present); Asst. Treasurer, Astro AB Acquisition, Inc.(2015-Present); Asst. Treasurer, Astro AB Topco, Inc. (2015-Present); Asst. Treasurer, Astro AB Holdings, LLC.; Asst. Treasurer, Lighthouse Holdings, Inc. (2011-2015); Asst. Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Asst. Treasurer, American Private Equity Management, L.L.C. (2012-Present).

 

* As of 11/12/2014, the Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in they reach the age of 75.
** Mr. Feld is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors.

 

 

26


 

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Delivery of Documents

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

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

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the 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:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

         
  
LOGO    LOGO

By Telephone:

Institutional, Y and Investor Classes

Call (800) 658-5811

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

         
  

Availability of Quarterly Portfolio Schedules

 

In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, DC 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Fund’s portfolio holdings is also available on www.americanbeaconfunds.com approximately twenty days after the end of each month.

  

Availability of Proxy Voting Policy and Records

 

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

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

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

 

American Beacon Funds and the American Beacon Treasury Inflation Protected Securities Fund are service marks of American Beacon Advisors, Inc.

AR 12/15


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.

Contents

 

 

Message from American Beacon

     1   
Market and Performance Overviews      2   
Schedules of Investments      20   
Financial Statements      31   
Notes to Financial Statements      36   
Financial Highlights      56   
Additional Information      Back Cover   

 

 

 

BAHL & GAYNOR SMALL CAP GROWTH FUND Investing in small-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met. BRIDGEWAY LARGE CAP VALUE FUND Investing in value stocks may limit downside risk over time; however, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. While the Fund is managed pursuant to a tax management strategy, the Fund’s investments could create capital gains. The use of futures contracts for cash management may subject the Fund to losing more money than invested. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met. HOLLAND LARGE CAP GROWTH FUND Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. The use of futures contracts for cash management may subject the Fund to losing more money than invested. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met. STEPHENS SMALL CAP GROWTH FUND Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in small-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met. STEPHENS MID-CAP GROWTH FUND Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. Investing in medium-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. The use of futures contracts for cash management may subject the Fund to losing more money than invested. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.

 

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

 

American Beacon Funds   December 31, 2015


LOGO   

Dear Shareholders,

 

2015 was a lackluster year for domestic equity investors. The Dow Jones Industrial Average, a price-weighted average of 30 significant stocks that trade on the New York Stock Exchange and The NASDAQ Stock Market, returned 0.21% for the 12-month period. The S&P 500 Index, a U.S. large-cap stock bellwether, returned 1.38%. However, of the 10 industry sectors in which the S&P 500 Index is divided, half lost ground during the year. The Russell Midcap Index, a barometer of mid-cap stocks, declined -2.44%. And the Russell 2000 Index, which generally represents the small-cap segment, declined -4.41%.

The weakening of many currencies against the U.S. dollar also took a toll on total returns for dollar-based investors in many international markets. For the period under review, international market benchmarks posted declines. The MSCI EAFE Index, which measures the world’s developed market, declined -0.81%; the MSCI Emerging Markets Index declined -14.92%; and the MSCI All Country World Index, which includes the equity market performance of developed and emerging markets, declined -2.36%.

At American Beacon Advisors, we are proud to offer a broad range of equity funds that are capable of navigating economic storms and market downturns in the U.S. and abroad. We are fortunate to have several asset managers who have stayed the course for many years and through a variety of economic and market conditions.

For the 12 months ended December 31, 2015:

 

    American Beacon Bahl & Gaynor Small Cap Growth Fund (Investor Class) returned -3.25%.

 

    American Beacon Bridgeway Large Cap Value Fund (Investor Class) returned -1.51%.

 

    American Beacon Holland Large Cap Growth Fund (Investor Class) returned 6.35%.

 

    American Beacon Stephens Small Cap Growth Fund (Investor Class) returned -5.08%.

 

    American Beacon Stephens Mid-Cap Growth Fund (Investor Class) returned -1.63%.

Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit www.americanbeaconfunds.com.

 

Best Regards,
LOGO
Gene L. Needles, Jr.

President

American Beacon Funds

 

1


Domestic Equity Market Overview

December 31, 2015 (Unaudited)

 

 

In the U.S. markets, the momentum of the prior six years seemed to lose steam in 2015. The broad markets were at once volatile and only modestly positive for the year; the broad-market proxy, S&P 500 Index, was up only 1.38%, and the Russell 1000 Index, which represents large-cap stocks, was up only 0.92%. Among the Russell-style indexes, large- and mid-cap stocks outpaced small-cap stocks, and growth stocks far outpaced value stocks. Throughout the year, the markets continued to demonstrate that macroeconomic events – such as China’s transitioning economy and rumors of Federal Reserve (the “Fed”) action – can affect short-term performance.

Most domestic equity markets posted gains in the first quarter of 2015, despite a weak January and March. The year started with U.S. stocks retreating in January, as investors pushed down the large-cap S&P 500 Index, blue-chip Dow Jones Industrial Average, small-cap Russell 2000 Index, and technology-focused NASDAQ Composite Index during the last week to declines that ranged around 2% to 3.5%. The Russell 1000 Index had strong gains in February. Investors were encouraged by positive corporate earnings growth rates, stabilizing oil prices and the Fed’s signals that it might begin to raise interest rates, albeit slowly in 2015. Investors began selling off in March on concerns that the Fed would begin a more rapid pace of interest rate increases. These concerns were supported by the release of February’s employment data, which showed the unemployment rate moving down to the Fed’s target of 5.5%.

Notwithstanding weak June performance, returns for the second quarter of 2015 were slightly positive for large- and small-cap stocks, although mid-cap stocks declined modestly. The S&P 500 Index and NASDAQ Composite Index achieved new record intraday highs in April on expectations the Fed would delay raising interest rates in light of weaker than expected U.S. economic growth. U.S. stocks advanced during May despite mixed economic signals headlined by weakness in the first quarter gross domestic product, solid employment figures, sudden surge in housing data, and the Fed’s comments indicating that some of the recent weakness may be considered “statistical noise,” which members of the Fed’s Board of Governors discounted in their assessment of the economy. Most U.S. large- and mid-cap equity benchmarks turned negative in June, largely due to the

economic crisis in Greece and lack of progress in negotiations intended to prevent the country’s exit from the European Union and the euro.

The third quarter of 2015 began with potential signs of strength as most broad domestic equity markets posted positive returns for the month of July, hoping to continue the positive, although volatile, momentum of the first two quarters. However, this was not meant to be as the month of August brought more volatility with the spotlight on China. Signs of cracks in that country’s growth have been appearing since at least early 2014; however, the debt crisis in Europe and U.S. economic growth dominated the headlines. All of that changed dramatically when China allowed the yuan to drop more than 4% over two days in mid-August and global markets turned negative. Broad U.S. markets also reacted negatively to Fed Chair Janet Yellen and the Federal Open Market Committee (“FOMC”) decision to not raise interest rates due to continued instability in economic and financial markets abroad. There also were concerns that a rise in interest rates could have negative effects on the broad U.S. market and possibly lead to suppressed growth and increased pressure on inflation. The quarter ended with broad U.S. equity markets in negative territory.

The fourth quarter of 2015 was buoyed by an early rally in the equities market despite relatively weak domestic payroll figures reported in October and the looming prospect of the Fed raising interest rates. Anticipation continued to build in November, as belief strengthened that the FOMC’s December meeting would yield an increase in interest rates due to improving economic indicators, including a drop in the unemployment rate to 5.0%. This belief was realized when the FOMC formally decided to raise rates in mid-December. However, given how long it had been anticipated, it was largely unsurprising. Outside of the U.S., China continued to struggle throughout this time period, facing the continued strength of the dollar. As a result, China marked the end of the quarter with its 10th consecutive month of decelerating manufacturing activity. Despite a very strong fourth quarter, the S&P 500 Index and Russell 1000 Index only managed modest positive returns for the entire year, while the Russell Midcap and Russell 2000 Indexes both declined for the year.

 

 

2


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class of the Bahl & Gaynor Small Cap Growth Fund (the “Fund”) returned -3.25% for the twelve months ended December 31, 2015. The Fund underperformed the Russell 2000 Growth Index (the “Index”) return of -1.38% for the same period.

Comparison of Change in Value of a $10,000 Investment for the Period from 7/15/14* through 12/31/15

 

LOGO

 

* Inception of Fund.

Total Returns for the Period ended 12/31/15

 

     Ticker      1 Year     Since incep.
(7/15/14)
    Value of $10,000
7/15/14-12/31/15
 

Institutional Class (1,5)

     GBSIX         (2.96 )%      2.79   $ 10,410   

Y Class (1,5)

     GBSYX         (3.05 )%      2.72     10,400   

Investor Class (1,5)

     GBSPX         (3.25 )%      2.45     10,360   

A Class with sales charge (1,2,5)

     GBSAX         (8.88 )%      (1.68 )%      9,755   

A Class without sales charge (1,2,5)

     GBSAX         (3.34 )%      2.38     10,350   

C Class with sales charge (1,3,5)

     GBSCX         (5.01 )%      1.63     10,240   

C Class without sales charge (1,3,5)

     GBSCX         (4.01 )%      1.63     10,240   

Russell 2000 Growth Index (4)

        (1.38 )%      4.07     10,601   

S&P 500 Index (4)

        1.38     4.60     10,673   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to each Class of the Fund has been waived since Fund inception. Performance prior to waiving fees was lower than actual returns shown.
2. A Class shares have a maximum sales charge of 5.75%.
3. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.
4. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the United States. The Russell 2000 Growth Index and the Russell 2000 Index are registered trademarks of Frank Russell Company. The Russell 2000 Growth Index is an unmanaged index of those stocks in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index of approximately 2000 smaller-capitalization stocks from various industrial sectors. One cannot directly invest in an index.
5. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 1.62%, 1.72%, 2.00%, 2.02%, and 2.77%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund underperformed the Index as both stock selection and sector allocation detracted value relative to the Index. From a stock selection standpoint, the Fund’s holdings in the Health Care, Energy, and Consumer Staples sectors subtracted the most from relative performance. In the Health Care sector, positions

 

3


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

in Computer Programs + Systems (down 32.9%) and Trinity Biotech (down 32.8%) were the largest detractors. Within the Energy sector, holdings in Gaslog (down 59.4%), Bristow Group (down 63.9%), and Semgroup Corp Class A (down 56.4%) were the most detrimental to performance. Companies in the Consumer Staples sector detracted from returns led by United Natural Foods (down 45.4%) and Inter Parfums (down 13.0%).

The above-mentioned negative performance was partially offset by good stock selection in the Industrials and Information Technology sectors. In the Industrials sector, an out of Index holding Rollins Inc. (up 18.7%) and a position in Watsco Inc. (up 10.7%) contributed positively to relative returns. Within the Information Technology sector, positions in Marketaxess Holdings Inc. (up 55.0%) and Blackbaud Inc. (up 50.9%) added the most to performance.

From a sector allocation standpoint, the Fund’s underweight to the Health Care sector, the best performing sector in the Index, detracted approximately 81 basis points (-0.81%) to performance. Additionally, an overweight to the Energy sector, the worst performing sector in the Index, subtracted approximately 61 basis points (-0.61%) from performance. In contrast, an overweight to the Information Technology sector added approximately 38 basis points (0.38%) to performance.

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

 

Top Ten Holdings (% Net Assets)              

MarketAxess Holdings, Inc.

        3.8   

j2 Global, Inc.

        3.1   

Texas Roadhouse, Inc.

        3.0   

Cantel Medical Corp.

        2.7   

Blackbaud, Inc.

        2.6   

STERIS PLC

        2.6   

Evercore Partners, Inc.

        2.5   

Monolithic Power Systems, Inc.

        2.4   

Watsco, Inc.

        2.3   

Methode Electronics, Inc.

        2.3   

Total Fund Holdings

     67      

 

Sector Allocation (% Equities)       

Information Technology

     29.0   

Consumer Discretionary

     17.7   

Financials

     15.0   

Health Care

     14.8   

Industrials

     13.1   

Consumer Staples

     4.6   

Materials

     3.9   

Energy

     1.9   

 

4


American Beacon Bridgeway Large Cap Value FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class of the American Beacon Bridgeway Large Cap Value Fund (the “Fund”) returned -1.51% for the twelve months ended December 31, 2015. The Fund outperformed the Russell 1000® Value Index (the “Index”) return of -3.83% for the same period.

Comparison of Change in Value of a $10,000 Investment for the Period from 12/31/05 through 12/31/15

 

LOGO

Total Returns for the Period ended 12/31/15

     Ticker      1 Year     5 Years     10 Years     Value of
$10,000
12/31/05-
12/31/15
 

Institutional Class (1,7)

     BRLVX         (1.23 )%      13.42     7.70   $ 21,002   

Y Class (1,2,7)

     BWLYX         (1.26 )%      13.36     7.67     20,946   

Investor Class (1,3,7)

     BWLIX         (1.51 )%      13.15     7.57     20,751   

A Class with sales charge (1,4,7)

     BWLAX         (7.21 )%      11.70     6.88     19,458   

A Class without sales charge (1,4,7)

     BWLAX         (1.56 )%      13.03     7.52     20,649   

C Class with sales charge (1,5,7)

     BWLCX         (3.27 )%      12.42     7.23     20,095   

C Class without sales charge (1,5,7)

     BWLCX         (2.27 )%      12.42     7.23     20,095   

Russell 1000 Value Index (6)

        (3.83 )%      11.27     6.16     18,175   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Institutional Class was waived from 2008 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown from 2008 through 2013.
2. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/05 up to 2/3/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 12/31/05. A portion of the fees charged to the Y Class was waived in 2012 and fully recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012.
3. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/05 up to 2/3/12, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Investor Class been in existence since 12/31/05. A portion of the fees charged to the Investor Class was waived in 2012 and fully recovered in 2013. Performance prior to waiving fees was lower than the actual returns shown in 2012.
4.

Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/05 through 2/3/12, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the A

 

5


American Beacon Bridgeway Large Cap Value FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

  Class been in existence since 12/31/05. A portion of the fees charged to the A Class was waived in 2012 and 2013 and fully recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012 and 2013. A Class shares have a maximum sales charge of 5.75%.

 

5. Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 12/31/05 through 2/3/12, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/05. A portion of the fees charged to the C Class was waived in 2012 and 2013 and fully recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012 and 2013. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.
6. The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 1000 Value Index and Russell 1000 Index are registered trademarks of the Frank Russell Company. One cannot directly invest in an index.
7. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.80%, 0.85%, 1.12%, 1.15%, and 1.88%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund outperformed the Index entirely through stock selection as sector allocation detracted value relative to the Index.

From a stock selection standpoint, the Fund’s Energy and Information Technology sectors added approximately 205 (2.05%) and 105 (1.05%) basis points, respectively, to performance. In the Energy sector, Tesoro (up 44.5%) and Valero Energy (up 47.0%) contributed to returns. The Fund’s allocation in Kinder Morgan (down 7.9%) also added value in the sector. Companies in the Information Technology sector contributing to performance included Skyworks Solutions (up 38.7%) and Electronic Arts (up 53.1%). The Fund’s absence from SanDisk, which was down 21.4% in the Index, also positively impacted performance. The aforementioned good performance was somewhat offset by poor stock selection in the Materials sector. Freeport McMoRan (down 70.6%), Newmont Mining (down 26.4%) and CF Industries (down 23.4%) were the largest detractors in the Materials sector.

The Fund’s overweight position in Information Technology, Materials and Consumer Discretionary, three of the poorer performing sectors in the Index, detracted more than 30 (0.30%), 25 (0.25%) and 20 (0.20%) basis points, respectively, from performance through sector allocation. An underweight in Health Care, the best performing sector in the Index, also detracted from performance. The Fund’s underweight in Energy, the worst performing sector in the Index, added relative value.

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

 

6


American Beacon Bridgeway Large Cap Value FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

Top Ten Holdings (% Net Assets)              

Cigna Corp.

        1.6   

Tesoro Corp.

        1.5   

SanDisk Corp.

        1.5   

JPMorgan Chase & Co.

        1.4   

Northrop Grumman Corp.

        1.3   

Activision Blizzard, Inc.

        1.3   

Valero Energy Corp.

        1.3   

Kellogg Co.

        1.2   

Xerox Corp.

        1.2   

HCA Holdings, Inc.

        1.2   

Total Fund Holdings

     106      

 

Sector Allocation (% Equities)       

Financials

     25.7   

Health Care

     12.6   

Information Technology

     11.6   

Industrials

     10.8   

Consumer Discretionary

     9.5   

Consumer Staples

     9.1   

Energy

     9.1   

Utilities

     5.7   

Materials

     4.1   

Telecommunication Services

     1.8   

 

7


American Beacon Holland Large Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class of the American Beacon Holland Large Cap Growth Fund (the “Fund”) returned 6.35% for the twelve months ended December 31, 2015. The Fund outperformed the Russell 1000® Growth Index (the “Index”) return of 5.67%.

Comparison of Change in Value of a $10,000 Investment for the Period from 12/31/05 through 12/31/15

 

LOGO

Total Returns for the Period ended 12/31/15

     Ticker      1 Year     5 Years     10 Years     Value of
$10,000
12/31/05-
12/31/15
 

Institutional Class (1,2,7)

     LHGIX         6.74     12.11     7.75   $ 21,101   

Y Class (1,3,7)

     LHGYX         6.53     11.97     7.69     20,971   

Investor Class (1,7)

     LHGFX         6.35     11.76     7.57     20,747   

A Class with sales charge (1,4,7)

     LHGAX         0.17     10.35     6.88     19,461   

A Class without sales charge (1,4,7)

     LHGAX         6.28     11.67     7.52     20,651   

C Class with sales charge (1,5,7)

     LHGCX         4.51     11.03     7.21     20,069   

C Class without sales charge (1,5,7)

     LHGCX         5.51     11.03     7.21     20,069   

Russell 1000 Growth Index (6)

        5.67     13.53     8.53     22,681   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Investor Class was waived from 2002 through 2012 and fully recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns shown from 2002 through 2012.
2. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/05 up to 3/1/10, the inception date of the Institutional Class, and the returns of the Institutional Class since its inception. Expenses of the Institutional Class are lower than those of the Investor Class. As a result, total returns shown may be lower than they would have been had the Institutional Class been in existence since 12/31/05. A portion of the fees charged to the Institutional Class was waived from 2010 through 2012 and partially recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns shown from 2010 through 2012.
3. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 12/31/05 up to 3/1/10, the Institutional Class from 3/1/10 to 3/23/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. As a result, total returns shown may be lower than they would have been had the Y Class been in existence since 12/31/05. A portion of the fees charged to the Y Class was waived in 2012, partially recovered in 2013 and waived in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012 and 2014.
4.

Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/05 through 2/1/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence

 

8


American Beacon Holland Large Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

  since 12/31/05. A portion of the fees charged to the A Class has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. A Class shares have a maximum sales charge of 5.75%.
5. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 12/31/05 through 3/23/12, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/05. A portion of the fees charged to the C Class has been waived since 2012. Performance prior to waiving fees was lower than the actual returns shown since 2012. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.
6. The Russell 1000 Growth Index is an unmanaged index of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Russell 1000 Growth Index and Russell 1000 Index are registered trademarks of the Frank Russell Company. One cannot directly invest in an index.
7. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.90%, 1.12%, 1.16%, 1.31%, and 2.06% respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund outperformed the Index primarily due to good stock selection and, to a lesser extent, through sector allocation.

From a stock selection standpoint, holdings in the Industrials and Information Technology sectors contributed approximately 175 (1.75%) and 105 (1.05%) basis points, respectively, to performance. In the Industrials sector, the Fund’s general overweight position in Southwest Airlines (down 0.2%) added value relative to the Index. The Fund’s allocation in Roper Technologies (up 22.1%) also contributed to returns. Adobe Systems (up 29.3%), Visa (up 19.2%) and Citrix Systems (up 18.6%) were the largest contributors in the Information Technology sector. Companies within the Consumer Discretionary sector also added relative value. In the Consumer Discretionary sector, Amazon.com (up 117.4%) and Nike (up 32.0%) contributed most to performance. The aforementioned excess performance was somewhat offset by poor stock selection in the Consumer Staples and Health Care sectors. Mead Johnson Nutrition (down 19.8%) and Whole Foods Market (down 32.7%) were the largest detractors from performance in the Consumer Staples sector. In the Health Care sector, Envision Healthcare (down 35.3%) and Davita Healthcare Partners (down 8.1%) hurt performance.

The Fund’s slight underweight in the Health Care sector added value relative to the Index through sector allocation. Underweight positions in Materials and Financials, two of the poorer performing sectors in the Index, also contributed to the Fund’s returns. An overweight in Energy, the worst performing sector in the Index, detracted from performance.

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

 

9


American Beacon Holland Large Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

Top Ten Holdings (% Net Assets)              

Alphabet, Inc.

        4.7   

Visa, Inc.

        4.7   

Amazon.com, Inc.

        4.6   

Adobe Systems, Inc.

        4.0   

Priceline.com, Inc.

        3.7   

Apple, Inc.

        3.6   

Citrix Systems, Inc.

        3.6   

Southwest Airlines Co.

        3.1   

Gilead Sciences, Inc.

        2.9   

Medtronic PLC

        2.9   

Total Fund Holdings

     50      

 

Sector Allocation (% Equities)  

Information Technology

     32.1   

Consumer Discretionary

     24.0   

Health Care

     15.2   

Industrials

     12.4   

Consumer Staples

     10.9   

Financials

     4.1   

Materials

     1.3   

 

10


American Beacon Stephens Small Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class of the American Beacon Stephens Small Cap Growth Fund (the “Fund”) returned -5.08% for the twelve months ended December 31, 2015, trailing the Russell 2000® Growth Index (the “Index”) return of -1.38% for the same period.

Comparison of Change in Value of a $10,000 Investment for the Period from 12/31/05 through 12/31/15

 

LOGO

Total Returns for the Period ended 12/31/15

     Ticker      1 Year     5 Years     10 Years /
Since incep.
    Value of
$10,000
12/31/05-
12/31/15
 

Institutional Class (1,2,7)

     STSIX         (4.75 )%      15.74     7.71   $ 20,004   

Y Class (1,3,7)

     SPWYX         (4.94 )%      9.18     6.92     19,526   

Investor Class (1,7)

     STSGX         (5.08 )%      9.01     6.84     19,375   

A Class with sales charge (1,4,7)

     SPWAX         (10.55 )%      7.59     6.14     18,149   

A Class without sales charge (1,4,7)

     SPWAX         (5.11 )%      8.88     6.77     19,255   

C Class with sales charge (1,5,7)

     SPWCX         (6.89 )%      8.25     6.46     18,707   

C Class without sales charge (1,5,7)

     SPWCX         (5.89 )%      8.25     6.46     18,707   

S&P 500 Index (6)

        1.38     12.57     7.31     20,239   

Russell 2000 Growth Index (6)

        (1.38 )%      10.67     7.95     21,496   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Investor Class was waived from 2005 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown from 2005 through 2013.
2. Fund performance for the since inception period represents the returns achieved by the Institutional Class since its inception of 8/31/06. A portion of the fees charged to the Institutional Class was waived from 2006 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown from 2006 through 2013.
3. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 12/31/05 up to 2/24/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. Therefore, total returns shown may be lower than they would have been had the Y Class been in existence since 12/31/05.A portion of the fees charged to the Y Class was waived in 2012 and 2013 and fully recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2012 and 2013.
4. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 12/31/05 up to 2/24/12, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 12/31/05. A portion of the fees charged to the A Class was waived in 2012 and partially recovered in 2013 and 2014. Performance prior to waiving fees was lower than actual returns shown in 2012. A Class has a maximum sales charge of 5.75%.

 

11


American Beacon Stephens Small Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

5. Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 12/31/05 up to 2/24/12, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/31/05. A portion of the fees charged to the C Class was waived in 2012 and partially recovered in 2013 and 2014. Performance prior to waiving fees was lower than actual returns shown in 2012. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
6. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the United States. The Russell 2000 Growth Index and the Russell 2000 Index are registered trademarks of Frank Russell Company. The Russell 2000 Growth Index is an unmanaged index of those stocks in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an unmanaged index of approximately 2000 smaller-capitalization stocks from various industrial sectors. One cannot directly invest in an index.
7. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 1.10%, 1.18%, 1.33%, 1.48%, and 2.23% respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund underperformed the Index primarily due to stock selection and, to a lesser extent, through sector allocation.

From a stock selection standpoint, the Fund’s Information Technology and Consumer Staples sectors detracted approximately 120 basis points (1.20%) each from performance. Companies detracting the most relative value in the Information Technology sector included Stratasys (down 52.3%), ChannelAdvisor (down 67.6%) and Envestnet (down 38.4%). In the Consumer Staples sector, United Natural Foods (down 48.9%) and Inventure Foods (down 44.7%) were the largest detractors. The Fund’s absence from Casey’s General Stores, which was up 34.5% in the Index, also negatively impacted performance in the sector. The Fund’s Financials and Industrials sectors also detracted value relative to the Index. Encore Capital Group (down 38.9%) and PRA Group (down 44.5%) detracted from performance in the Financials sector. Not owning Heartland Payment Systems, which was up 77.0% in the Index, also detracted value in the sector. In the Industrials sector, HMS Holdings (down 41.3%) and Power Solutions International (down 61.7%) hurt performance.

The aforementioned poor performance was somewhat offset by good stock selection in the Consumer Discretionary and Health Care sectors. Sportsman’s Warehouse (up 82.2%) and IMAX (up 16.1%) contributed most to the Fund’s returns in the Consumer Discretionary sector. In the Health Care sector, ICON (up 53.0%) and Ligand Pharmaceuticals (up 103.3%) were the largest contributors to performance.

The Fund’s significant overweight position in Energy, the worst performing sector in the Index, detracted more than 155 basis points (1.55%) from performance through sector allocation. This was largely offset by underweight positions in the Materials and Consumer Discretionary sectors, which contributed to the Fund’s returns. An overweight in the Information Technology sector also added relative value.

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

 

12


American Beacon Stephens Small Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

Top Ten Holdings (% Net Assets)              

ICON PLC

        2.0   

PAREXEL International Corp.

        1.8   

National CineMedia, Inc.

        1.8   

Neogen Corp.

        1.7   

Tyler Technologies, Inc.

        1.6   

Ligand Pharmaceuticals, Inc.

        1.6   

Euronet Worldwide, Inc.

        1.6   

Proofpoint, Inc.

        1.6   

Pacira Pharmaceuticals, Inc.

        1.6   

CoStar Group, Inc.

        1.6   

Total Fund Holdings

     109      

 

Sector Allocation (% Equities)  

Information Technology

     27.7   

Health Care

     26.6   

Consumer Discretionary

     15.6   

Industrials

     11.3   

Financials

     9.3   

Energy

     4.6   

Consumer Staples

     3.2   

Materials

     1.7   

 

13


American Beacon Stephens Mid-Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class of the American Beacon Stephens Mid-Cap Growth Fund (the “Fund”) returned -1.63% for the twelve months ended December 31, 2015. The Fund trailed the Russell Midcap® Growth Index (the “Index”) return of -0.20%.

Comparison of Change in Value of a $10,000 Investment for the Period from 2/1/06* through 12/31/15

 

LOGO

 

* Inception of Fund.

Total Returns for the Period ended 12/31/15

     Ticker      1
Year
    5
Years
    Since
Incep.
(2/1/06)
    Value of
$10,000
2/1/06-
12/31/15
 

Institutional Class (1,2,7)

     SFMIX         (1.28 )%      9.96     8.28   $ 21,010   

Y Class (1,3,7)

     SMFYX         (1.39 )%      9.85     6.65     18,923   

Investor Class (1,7)

     STMGX         (1.63 )%      9.58     6.52     18,695   

A Class with sales charge (1,4,7)

     SMFAX         (7.27 )%      8.26     5.86     17,591   

A Class without sales charge (1,4,7)

     SMFAX         (1.63 )%      9.55     6.50     18,664   

C Class with sales charge (1,5,7)

     SMFCX         (3.46 )%      8.92     6.19     18,134   

C Class without sales charge (1,5,7)

     SMFCX         (2.46 )%      8.92     6.19     18,134   

S&P 500 Index (6)

        1.38     12.57     7.07     19,717   

Russell Midcap Growth Index (6)

        (0.20 )%      11.54     7.59     20,677   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Investor Class was waived from 2006 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than actual returns shown from 2006 through 2013.
2. Fund performance for the since inception period represents the returns achieved by the Institutional Class since its inception of 8/31/06. A portion of fees charged to the Institutional Class has been waived since 2006. Performance prior to waiving fees was lower than actual returns shown since 2006.
3. Fund performance for the five-year and since inception periods represent the returns achieved by the Investor Class from 2/1/06 up to 2/24/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. Therefore, total returns shown may be lower than they would have been had the Y Class been in existence since 2/1/06. A portion of the fees charged to the Y Class has been waived since 2012 and partially recovered in 2014. Performance prior to waiving fees was lower than actual returns shown since 2012.
4. Fund performance for the five-year and since inception periods represent the returns achieved by the Investor Class from 2/1/06 up to 2/24/12, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the A Class been in existence since 2/1/06. A portion of the fees charged to the A Class has been waived since 2012. Performance prior to waiving fees was lower than the actual returns shown since 2012. A Class has a maximum sales charge of 5.75%.
5.

Fund performance for the five-year and since inception periods represent the returns achieved by the Investor Class from 2/1/06 up to 2/24/12, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are

 

14


American Beacon Stephens Mid-Cap Growth FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

  higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the C Class been in existence since 2/1/06. A portion of fees charged to the C Class has been waived since 2012. Performance prior to waiving fees was lower than actual returns shown since 2012. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.
6. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the United States. The Russell Midcap Growth Index is an unmanaged index of those stocks in the Russell Midcap Index with higher price-to-book ratios and higher forecasted growth values. Russell Midcap Index and Russell Midcap Growth Index are registered trademarks of Frank Russell Company. One cannot directly invest in an index.
7. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 1.06%, 1.11%, 1.28%, 1.41%, and 2.18%, 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 poor performance was entirely attributed to stock selection as sector allocation added value relative to the Index.

From a stock selection standpoint, holdings in the Information Technology sector detracted more than 105 basis points (1.05%) from performance. In the Information Technology sector, Stratasys (down 52.4%) and SanDisk (down 34.8%) detracted value relative to the Index. The Fund’s absence from Avago Technologies also negatively impacted performance. The Fund’s Consumer Staples and Health Care sectors detracted more than 60 basis points (0.60%) each from performance. United Natural Foods (down 49.2%) was the largest detractor from performance in the Consumer Staples sector. Not owning Constellation Brands or Dr. Pepper Snapple Group, which were up 46.2% and 33.2%, respectively, in the Index, also hurt performance in the sector. In the Health Care sector, Cepheid (down 31.7%) detracted the most from returns. Good stock selection in the Consumer Discretionary sector added relative value. Netflix (up 140.1%) and Ulta Salon Cosmetics & Fragrances (up 49.4%) contributed most to performance in the Consumer Discretionary sector.

The Fund’s overweight positions in the Health Care and Information Technology sectors added value relative to the Index through sector allocation. Not having an allocation to Utilities, the worst performing sector in the Index, and underweighting the Materials sector also contributed to the Fund’s returns. An overweight in Energy, the second worst performing sector in the Index, detracted relative value.

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

 

Top Ten Holdings (% Net Assets)  

Monster Beverage Corp.

        2.1   

Illumina, Inc.

        1.9   

Ross Stores, Inc.

        1.9   

Netflix, Inc.

        1.8   

CoStar Group, Inc.

        1.7   

Cerner Corp.

        1.6   

Palo Alto Networks, Inc.

        1.6   

Brown-Forman Corp.

        1.6   

SVB Financial Group

        1.5   

Athenahealth, Inc.

        1.5   

Total Fund Holdings

     104      

 

Sector Allocation (% Equities)  

Information Technology

     26.2   

Health Care

     22.1   

Consumer Discretionary

     21.6   

Industrials

     12.8   

Financials

     6.5   

Consumer Staples

     5.2   

Energy

     4.2   

Materials

     1.4   

 

15


American Beacon FundsSM

Fund Expenses

December 31, 2015 (Unaudited)

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from July 1, 2015 through December 31, 2015.

Actual Expenses

The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and Investor Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as sales charges (loads). Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.

 

16


American Beacon FundsSM

Fund Expenses

December 31, 2015 (Unaudited)

 

 

Bahl & Gaynor Small Cap Growth Fund

 

     Beginning
Account
Value
7/1/15
     Ending
Account
Value
12/31/15
     Expenses Paid
During Period*
7/1/15 - 12/31/15
 

Institutional Class

        

Actual

   $ 1,000.00       $ 949.13       $ 4.81   

Hypothetical **

   $ 1,000.00       $ 1,020.27       $ 4.99   

Y Class

        

Actual

   $ 1,000.00       $ 949.09       $ 5.31   

Hypothetical **

   $ 1,000.00       $ 1,019.76       $ 5.50   

Investor Class

        

Actual

   $ 1,000.00       $ 948.03       $ 6.68   

Hypothetical **

   $ 1,000.00       $ 1,018.35       $ 6.92   

A Class

        

Actual

   $ 1,000.00       $ 947.98       $ 6.78   

Hypothetical **

   $ 1,000.00       $ 1,018.25       $ 7.02   

C Class

        

Actual

   $ 1,000.00       $ 943.95       $ 10.44   

Hypothetical **

   $ 1,000.00       $ 1,014.47       $ 10.82   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.98%, 1.08%, 1.36%, 1.38%, and 2.13% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Bridgeway Large Cap Value Fund

 

     Beginning
Account
Value
7/1/15
     Ending
Account
Value
12/31/15
     Expenses Paid
During Period*
7/1/15 - 12/31/15
 

Institutional Class

        

Actual

   $ 1,000.00       $ 967.81       $ 3.72   

Hypothetical **

   $ 1,000.00       $ 1,021.42       $ 3.82   

Y Class

        

Actual

   $ 1,000.00       $ 967.14       $ 4.02   

Hypothetical **

   $ 1,000.00       $ 1,021.12       $ 4.13   

Investor Class

        

Actual

   $ 1,000.00       $ 966.23       $ 5.40   

Hypothetical **

   $ 1,000.00       $ 1,019.71       $ 5.55   

A Class

        

Actual

   $ 1,000.00       $ 966.04       $ 5.55   

Hypothetical **

   $ 1,000.00       $ 1,019.56       $ 5.70   

C Class

        

Actual

   $ 1,000.00       $ 962.40       $ 9.25   

Hypothetical **

   $ 1,000.00       $ 1,015.78       $ 9.50   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.75%, 0.81%, 1.09%, 1.12%, and 1.87% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Holland Large Cap Growth Fund

 

     Beginning
Account
Value
7/1/15
     Ending
Account
Value
12/31/15
     Expenses Paid
During Period*
7/1/15 - 12/31/15
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,023.54       $ 4.54   

Hypothetical **

   $ 1,000.00       $ 1,020.72       $ 4.53   

Y Class

        

Actual

   $ 1,000.00       $ 1,022.85       $ 5.00   

Hypothetical **

   $ 1,000.00       $ 1,020.27       $ 4.99   

Investor Class

        

Actual

   $ 1,000.00       $ 1,021.57       $ 6.37   

Hypothetical **

   $ 1,000.00       $ 1,018.90       $ 6.36   

A Class

        

Actual

   $ 1,000.00       $ 1,021.35       $ 6.57   

Hypothetical **

   $ 1,000.00       $ 1,018.70       $ 6.56   

C Class

        

Actual

   $ 1,000.00       $ 1,017.70       $ 10.37   

Hypothetical **

   $ 1,000.00       $ 1,014.92       $ 10.36   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.89%, 0.98%, 1.25%, 1.29%, and 2.04% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.

Stephens Small Cap Growth Fund

 

   
     Beginning
Account
Value
7/1/15
     Ending
Account
Value
12/31/15
     Expenses Paid
During Period*
7/1/15 - 12/31/15
 

Institutional Class

        

Actual

   $ 1,000.00       $ 905.03       $ 5.19   

Hypothetical **

   $ 1,000.00       $ 1,019.76       $ 5.50   

Y Class

        

Actual

   $ 1,000.00       $ 903.63       $ 5.42   

Hypothetical **

   $ 1,000.00       $ 1,019.51       $ 5.75   

Investor Class

        

Actual

   $ 1,000.00       $ 903.22       $ 6.72   

Hypothetical **

   $ 1,000.00       $ 1,018.15       $ 7.12   

A Class

        

Actual

   $ 1,000.00       $ 902.64       $ 7.00   

Hypothetical **

   $ 1,000.00       $ 1,017.85       $ 7.43   

C Class

        

Actual

   $ 1,000.00       $ 899.29       $ 10.77   

Hypothetical **

   $ 1,000.00       $ 1,013.86       $ 11.42   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.08%, 1.13%, 1.40%, 1.46%, and 2.25% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

17


American Beacon FundsSM

Fund Expenses

December 31, 2015 (Unaudited)

 

 

Stephens Mid-Cap Growth Fund

 

     Beginning
Account
Value
7/1/15
     Ending
Account
Value
12/31/15
     Expenses Paid
During Period*
7/1/15 - 12/31/15
 

Institutional Class

        

Actual

   $ 1,000.00       $ 925.59       $ 4.81   

Hypothetical **

   $ 1,000.00       $ 1,020.21       $ 5.04   

Y Class

        

Actual

   $ 1,000.00       $ 925.43       $ 5.29   

Hypothetical **

   $ 1,000.00       $ 1,019.71       $ 5.55   

Investor Class

        

Actual

   $ 1,000.00       $ 923.79       $ 6.45   

Hypothetical **

   $ 1,000.00       $ 1,018.50       $ 6.77   

A Class

        

Actual

   $ 1,000.00       $ 924.19       $ 6.74   

Hypothetical **

   $ 1,000.00       $ 1,018.20       $ 7.07   

C Class

        

Actual

   $ 1,000.00       $ 919.90       $ 10.36   

Hypothetical **

   $ 1,000.00       $ 1,014.42       $ 10.87   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.99%, 1.09%, 1.33%, 1.39%, and 2.14% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

18


American Beacon FundsSM

Report of Independent Registered Public Accounting Firm

 

The Board of Trustees and Shareholders of

American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Small Cap Growth Fund and American Beacon Stephens Mid-Cap Growth Fund

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Small Cap Growth Fund and American Beacon Stephens Mid-Cap Growth Fund (five of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of December 31, 2015, and the related statements of operations for the year then ended and the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Small Cap Growth Fund and American Beacon Stephens Mid-Cap Growth Fund at December 31, 2015, the results of their operations for the year then ended and the changes in their net assets and the financial highlights for each of the periods indicated therein in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

February 29, 2016

 

19


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK—97.43%

  

CONSUMER DISCRETIONARY—17.24%

  

Auto Components—1.44%

  

Strattec Security Corp.

     1,840       $ 104   
     

 

 

 

Automobiles—2.92%

     

Hyster-Yale Materials Handling, Inc.

     1,105         58   

Thor Industries, Inc.

     2,705         152   
     

 

 

 
     210   
     

 

 

 

Hotels, Restaurants & Leisure—4.54%

  

  

Brinker International, Inc.

     2,290         110   

Texas Roadhouse, Inc.

     6,090         217   
     

 

 

 
        327   
     

 

 

 

Household Durables—3.12%

     

Flexsteel Industries, Inc.

     3,270         145   

Matthews International Corp., Class A

     1,500         80   
     

 

 

 
        225   
     

 

 

 

Multiline Retail—1.69%

     

Pricesmart, Inc.

     1,465         122   
     

 

 

 

Specialty Retail—1.89%

     

Monro Muffler Brake, Inc.

     2,060         136   
     

 

 

 

Textiles & Apparel—1.64%

     

Movado Group, Inc.

     2,030         52   

Wolverine World Wide, Inc.

     3,925         66   
     

 

 

 
        118   
     

 

 

 

Total Consumer Discretionary

  

     1,242   
     

 

 

 

CONSUMER STAPLES—4.50%

  

  

Food & Drug Retailing—1.04%

  

  

B&G Foods, Inc.

     1,390         49   

United Natural Foods, Inc.A

     665         26   
     

 

 

 
        75   
     

 

 

 

Food Products—2.13%

     

J&J Snack Foods Corp.

     1,315         153   
     

 

 

 

Personal Products—1.33%

     

Inter Parfums, Inc.

     4,010         96   
     

 

 

 

Total Consumer Staples

  

     324   
     

 

 

 

ENERGY—1.83%

     

Energy Equipment & Services—0.67%

  

  

Bristow Group, Inc.

     1,840         48   
     

 

 

 

Oil & Gas—1.16%

     

GasLog Ltd.

     5,870         48   

SemGroup Corp., Class A

     1,240         36   
     

 

 

 
        84   
     

 

 

 

Total Energy

  

     132   
     

 

 

 

FINANCIALS—14.59%

     

Banks—9.16%

     

Bank of the Ozarks, Inc.

     1,570         78   

Evercore Partners, Inc., Class A

     3,380         183   

Glacier Bancorp, Inc.

     1,695         45   

PacWest Bancorp

     3,870         167   

S&T Bancorp, Inc.

     2,635         81   

Virtu Financial, Inc., Class A

     4,695         106   
     

 

 

 
        660   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Diversified Financials—3.79%

     

MarketAxess Holdings, Inc.

     2,445       $ 273   
     

 

 

 

Insurance—1.64%

     

Horace Mann Educators Corp.

     3,565         118   
     

 

 

 

Total Financials

  

     1,051   
     

 

 

 

HEALTH CARE—14.42%

     

Biotechnology—1.85%

     

Neogen Corp.A

     1,160         66   

Trinity Biotech PLC, Sponsored ADRB C

     5,770         67   
     

 

 

 
        133   
     

 

 

 

Health Care Equipment & Supplies—8.71%

  

  

Abaxis, Inc.

     2,815         157   

Atrion Corp.

     150         57   

Bio-Techne Corp.

     710         64   

STERIS PLCB

     2,515         189   

West Pharmaceutical Services, Inc.

     2,670         161   
     

 

 

 
        628   
     

 

 

 

Health Care Providers & Services—3.86%

  

Cantel Medical Corp.

     3,120         194   

HealthSouth Corp.

     2,410         84   
     

 

 

 
        278   
     

 

 

 

Total Health Care

  

     1,039   
     

 

 

 

INDUSTRIALS—12.72%

     

Building Products—2.32%

     

Watsco, Inc.

     1,430         167   
     

 

 

 

Commercial Services & Supplies—6.23%

  

G&K Services, Inc., Class A

     1,265         80   

Healthcare Services Group, Inc.

     3,735         129   

Monotype Imaging Holdings, Inc.

     4,960         117   

MSA Safety, Inc.

     1,950         85   

Rollins, Inc.

     1,450         38   
     

 

 

 
        449   
     

 

 

 

Electrical Equipment—0.75%

  

II-VI, Inc.

     2,895         54   
     

 

 

 

Industrial Conglomerates—0.56%

  

Raven Industries, Inc.

     2,555         40   
     

 

 

 

Machinery—2.86%

  

Applied Industrial Technologies, Inc.

     2,630         107   

Valmont Industries, Inc.

     935         99   
     

 

 

 
        206   
     

 

 

 

Total Industrials

  

     916   
     

 

 

 

INFORMATION TECHNOLOGY—28.37%

  

Communications Equipment—1.24%

  

Plantronics, Inc.

     1,880         89   
     

 

 

 

Electronic Equipment & Instruments—4.86%

  

Analogic Corp.

     935         77   

Intersil Corp., Class A

     5,125         65   

Methode Electronics, Inc.

     5,260         168   

NVE Corp.

     710         40   
     

 

 

 
        350   
     

 

 

 

Internet Software & Services—6.11%

  

  

GrubHub, Inc.A

     1,695         41   

j2 Global, Inc.

     2,745         226   
 

 

 

See accompanying notes

 

20


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

NIC, Inc.

     6,090       $ 120   

Reis, Inc.

     2,235         53   
     

 

 

 
        440   
     

 

 

 

IT Consulting & Services—3.68%

  

  

Hackett Group, Inc.

     7,965         128   

Ritchie Bros Auctioneers, Inc.

     5,675         137   
     

 

 

 
        265   
     

 

 

 

Semiconductor Equipment & Products—6.04%

  

  

FEI Co.

     1,355         108   

Monolithic Power Systems, Inc.

     2,670         170   

Power Integrations, Inc.

     1,725         84   

Silicon Motion Technology Corp., ADRC

     2,335         73   
     

 

 

 
        435   
     

 

 

 

Software—6.44%

     

Blackbaud, Inc.

     2,815         185   

Mentor Graphics Corp.

     5,185         96   

National Instruments Corp.

     3,380         97   

Pegasystems, Inc.

     3,155         87   
     

 

 

 
        465   
     

 

 

 

Total Information Technology

  

     2,044   
     

 

 

 

MATERIALS—3.76%

     

Chemicals—3.76%

     

Balchem Corp.

     1,765         107   

PolyOne Corp.

     3,905         125   

Stepan Co.

     790         39   
     

 

 

 

Total Materials

  

     271   
     

 

 

 

Total Common Stock (Cost $7,021)

  

     7,019   
     

 

 

 

SHORT-TERM INVESTMENTS—2.58% (Cost $186)

   

  

JPMorgan U.S. Government Money Market Fund, Capital Class

     186,464         186   
     

 

 

 

TOTAL INVESTMENTS —100.01% (Cost $7,207)

   

     7,205   

LIABILITIES, NET OF OTHER ASSETS—(0.01%)

   

     (1
     

 

 

 

TOTAL NET ASSETS—100.00%

  

   $ 7,204   
     

 

 

 
 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  PLC - Public Limited Company.
C  ADR - American Depositary Receipt.

Futures Contracts Open on December 31, 2015:

 

Description

   Type      Number of
Contracts
     Expiration
Date
   Contract
Value
     Unrealized
Appreciation
(Depreciation)
 

Russell 2000 Mini Index March Futures

     Long         1       March 2016    $ 113,150       $ 958   
           

 

 

    

 

 

 
            $ 113,150       $ 958   
           

 

 

    

 

 

 

 

See accompanying notes

 

21


American Beacon Bridgeway Large Cap Value FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK—97.08%

  

CONSUMER DISCRETIONARY—9.25%

  

Auto Components—1.09%

  

Goodyear Tire & Rubber Co.

     769,000       $ 25,123   
     

 

 

 

Automobiles—1.92%

     

Ford Motor Co.

     1,253,940         17,668   

General Motors Co.

     786,180         26,739   
     

 

 

 
        44,407   
     

 

 

 

Home Builders—0.97%

     

D.R. Horton, Inc.

     701,700         22,475   
     

 

 

 

Household Durables—2.02%

  

  

Garmin Ltd.

     617,500         22,952   

Mohawk Industries, Inc.A

     1,900         360   

Stanley Black & Decker, Inc.

     218,000         23,268   
     

 

 

 
        46,580   
     

 

 

 

Media—1.19%

     

Comcast Corp., Class A

     273,600         15,439   

Time Warner, Inc.

     185,900         12,022   
     

 

 

 
        27,461   
     

 

 

 

Multiline Retail—1.00%

     

Target Corp.

     317,300         23,039   
     

 

 

 

Specialty Retail—1.06%

     

Foot Locker, Inc.

     374,500         24,376   
     

 

 

 

Total Consumer Discretionary

  

     213,461   
     

 

 

 

CONSUMER STAPLES—8.81%

  

  

Food & Drug Retailing—3.04%

  

  

CVS Caremark Corp.

     219,600         21,470   

Rite Aid Corp.A

     2,812,500         22,050   

Sysco Corp.

     646,500         26,507   
     

 

 

 
        70,027   
     

 

 

 

Food Products—3.85%

     

Archer Daniels Midland Co.

     506,700         18,586   

JM Smucker Co.

     212,000         26,148   

Kellogg Co.

     390,500         28,221   

Pilgrim’s Pride Corp.

     719,400         15,892   
     

 

 

 
        88,847   
     

 

 

 

Household Products—1.92%

  

  

Clorox Co.

     188,700         23,933   

Colgate-Palmolive Co.

     305,200         20,332   
     

 

 

 
        44,265   
     

 

 

 

Total Consumer Staples

  

     203,139   
     

 

 

 

ENERGY—8.82%

     

Energy Equipment & Services—1.20%

  

  

National Oilwell Varco, Inc.

     823,200         27,569   
     

 

 

 

Oil & Gas—7.62%

     

Apache Corp.

     206,700         9,192   

Exxon Mobil Corp.

     221,570         17,271   

Hess Corp.

     236,900         11,485   

Marathon Petroleum Corp.

     299,740         15,539   

Murphy Oil Corp.

     674,300         15,138   

Noble Energy, Inc.

     468,800         15,438   

Phillips 66

     323,100         26,430   

Tesoro Corp.

     338,000         35,614   
     Shares      Fair Value  
            (000’s)  

Valero Energy Corp.

     420,400       $ 29,726   
     

 

 

 
        175,833   
     

 

 

 

Total Energy

  

     203,402   
     

 

 

 

FINANCIALS—24.98%

     

Banks—3.04%

     

CIT Group, Inc.

     668,800         26,552   

M&T Bank Corp.

     119,520         14,483   

New York Community Bancorp, Inc.

     990,100         16,159   

U.S. Bancorp

     305,800         13,048   
     

 

 

 
        70,242   
     

 

 

 

Diversified Financials—4.63%

  

Ally Financial, Inc.A

     1,284,400         23,941   

Capital One Financial Corp.

     193,500         13,967   

Citigroup, Inc.

     319,700         16,544   

JPMorgan Chase & Co.

     504,600         33,319   

Wells Fargo & Co.

     351,000         19,080   
     

 

 

 
        106,851   
     

 

 

 

Insurance—16.18%

     

ACE Ltd.

     204,600         23,908   

Aflac, Inc.

     399,500         23,930   

Allstate Corp.

     388,300         24,110   

American International Group, Inc.

     399,300         24,745   

Arch Capital Group Ltd.A

     258,700         18,044   

Berkshire Hathaway, Inc., Class BA

     201,900         26,659   

Chubb Corp.

     105,200         13,954   

Everest Re Group Ltd.

     121,700         22,282   

Hartford Financial Services Group, Inc.

     454,400         19,748   

Lincoln National Corp.

     409,100         20,561   

MetLife, Inc.

     557,700         26,886   

Progressive Corp.

     608,700         19,357   

Torchmark Corp.

     227,400         12,998   

Travelers Cos., Inc.

     227,900         25,721   

Voya Financial, Inc.

     643,600         23,755   

WR Berkley Corp.

     424,900         23,263   

XL Group PLCB

     591,100         23,159   
     

 

 

 
        373,080   
     

 

 

 

Real Estate—1.13%

     

Plum Creek Timber Co., Inc.C

     547,700         26,136   
     

 

 

 

Total Financials

  

     576,309   
     

 

 

 

HEALTH CARE—12.22%

     

Health Care Equipment & Supplies—1.08%

  

Baxter International, Inc.

     655,500         25,007   
     

 

 

 

Health Care Providers & Services—8.04%

  

Anthem, Inc.

     139,410         19,439   

Cardinal Health, Inc.

     209,100         18,666   

Cigna Corp.

     249,800         36,554   

HCA Holdings, Inc.

     409,600         27,702   

Humana, Inc.

     118,000         21,064   

Mednax, Inc.A

     227,900         16,331   

Quest Diagnostics, Inc.

     257,100         18,290   

Universal Health Services, Inc., Class B

     230,000         27,483   
     

 

 

 
        185,529   
     

 

 

 

Pharmaceuticals—3.10%

     

Abbott Laboratories

     514,200         23,093   

Eli Lilly & Co.

     259,200         21,840   

Johnson & Johnson

     258,100         26,512   
     

 

 

 
        71,445   
     

 

 

 

Total Health Care

  

     281,981   
     

 

 

 
 

 

 

See accompanying notes

 

22


American Beacon Bridgeway Large Cap Value FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

INDUSTRIALS—10.46%

  

Aerospace & Defense—2.31%

  

General Dynamics Corp.

     161,300       $ 22,156   

Northrop Grumman Corp.

     164,900         31,135   
     

 

 

 
        53,291   
     

 

 

 

Airlines—3.56%

     

Alaska Air Group, Inc.

     230,400         18,550   

Delta Air Lines, Inc.

     318,500         16,145   

JetBlue Airways Corp.A

     1,022,300         23,155   

Southwest Airlines Co.

     558,900         24,066   
     

 

 

 
        81,916   
     

 

 

 

Commercial Services & Supplies—1.69%

  

Republic Services, Inc.

     549,700         24,181   

Waste Management, Inc.

     279,400         14,912   
     

 

 

 
        39,093   
     

 

 

 

Electrical Equipment—0.89%

  

Emerson Electric Co.

     429,600         20,548   
     

 

 

 

Machinery—2.01%

     

Deere & Co.

     346,400         26,419   

PACCAR, Inc.

     422,500         20,027   
     

 

 

 
        46,446   
     

 

 

 

Total Industrials

  

     241,294   
     

 

 

 

INFORMATION TECHNOLOGY—11.30%

  

Communications Equipment—1.82%

  

Cisco Systems, Inc.

     648,600         17,613   

Corning, Inc.

     1,337,500         24,449   
     

 

 

 
        42,062   
     

 

 

 

Computers & Peripherals—3.28%

  

HP, Inc.

     1,557,400         18,440   

NVIDIA Corp.

     687,700         22,667   

SanDisk Corp.

     455,600         34,621   
     

 

 

 
        75,728   
     

 

 

 

Electronic Equipment & Instruments—0.56%

  

The ADT Corp.

     389,700         12,852   
     

 

 

 

IT Consulting & Services—0.24%

  

CSRA, Inc.

     181,900         5,457   
     

 

 

 

Office Electronics—1.21%

     

Xerox Corp.

     2,623,000         27,882   
     

 

 

 

Semiconductor Equipment & Products—1.54%

  

Lam Research Corp.

     288,700         22,928   

Micron Technology, Inc.A

     896,800         12,699   
     

 

 

 
        35,627   
     

 

 

 

Software—2.65%

     

Activision Blizzard, Inc.

     791,300         30,632   

Microsoft Corp.

     321,700         17,848   

Navient Corp.

     1,100,900         12,605   
     

 

 

 
        61,085   
     

 

 

 

Total Information Technology

  

     260,693   
     

 

 

 

MATERIALS—4.02%

     

Chemicals—2.09%

     

Ashland, Inc.

     133,500         13,710   

CF Industries Holdings, Inc.

     320,500         13,080   

Dow Chemical Co.

     419,400         21,590   
     

 

 

 
        48,380   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Construction Materials—0.94%

  

Vulcan Materials Co.

     227,300       $ 21,587   
     

 

 

 

Metals & Mining—0.99%

     

Newmont Mining Corp.

     1,267,900         22,810   
     

 

 

 

Total Materials

  

     92,777   
     

 

 

 

TELECOMMUNICATION SERVICES—1.74%

  

Diversified Telecommunication Services—0.85%

  

AT&T, Inc.

     571,449         19,664   
     

 

 

 

Wireless Telecommunication Services—0.89%

  

T-Mobile US, Inc.

     521,000         20,381   
     

 

 

 

Total Telecommunication Services

  

     40,045   
     

 

 

 

UTILITIES—5.48%

     

Electric—5.48%

     

Consolidated Edison, Inc.

     295,100         18,966   

Edison International

     315,300         18,669   

Exelon Corp.

     937,800         26,043   

PPL Corp.

     501,100         17,103   

Public Service Enterprise Group, Inc.

     533,300         20,633   

Southern Co.

     534,300         25,000   
     

 

 

 

Total Utilities

  

     126,414   
     

 

 

 

Total Common Stock (Cost $2,203,984)

  

     2,239,515   
     

 

 

 

SHORT-TERM INVESTMENTS—1.77%
(Cost $40,875)

   

JPMorgan U.S. Government Money Market Fund, Capital Class

     40,874,872         40,875   
     

 

 

 

TOTAL INVESTMENTS —98.85%
(Cost $2,244,859)

   

     2,280,390   

OTHER ASSETS, NET OF LIABILITIES—1.15%

   

     26,569   
     

 

 

 

TOTAL NET ASSETS—100.00%

  

   $ 2,306,959   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  PLC - Public Limited Company.
C  REIT - Real Estate Investment Trust.
 

 

 

 

See accompanying notes

 

23


American Beacon Bridgeway Large Cap Value FundSM

Schedule of Investments

December 31, 2015

 

 

Futures Contracts Open on December 31, 2015:

 

Description

   Type      Number of
Contracts
     Expiration Date    Contract Value      Unrealized
Appreciation
(Depreciation)
 

S&P 500 Mini E Index March Futures

     Long         488       March 2016    $  49,663,760       $  (5,818
           

 

 

    

 

 

 
            $ 49,663,760       $  (5,818
           

 

 

    

 

 

 

 

See accompanying notes

 

24


American Beacon Holland Large Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK—95.50%

  

CONSUMER DISCRETIONARY—22.95%

  

Auto Components—1.39%

  

Delphi Automotive PLCA

     16,254       $ 1,393   
     

 

 

 

Hotels, Restaurants & Leisure—0.97%

  

  

Yum! Brands, Inc.

     13,218         966   
     

 

 

 

Internet & Catalog Retail—8.26%

  

Amazon.com, Inc.B

     6,757         4,566   

priceline.com, Inc.B

     2,893         3,688   
     

 

 

 
        8,254   
     

 

 

 

Media—1.66%

     

Twenty-First Century Fox, Inc., Class A

     61,174         1,661   
     

 

 

 

Multiline Retail—1.04%

     

Dollar General Corp.

     14,428         1,037   
     

 

 

 

Specialty Retail—6.18%

     

Advance Auto Parts, Inc.

     12,045         1,813   

GNC Holdings, Inc., Class A

     36,354         1,128   

Lowe’s Cos., Inc.

     28,361         2,156   

Restoration Hardware Holdings, Inc.B

     13,537         1,076   
     

 

 

 
        6,173   
     

 

 

 

Textiles & Apparel—3.45%

     

NIKE, Inc., Class B

     29,428         1,840   

Under Armour, Inc., Class AB

     19,952         1,608   
     

 

 

 
        3,448   
     

 

 

 

Total Consumer Discretionary

  

     22,932   
     

 

 

 

CONSUMER STAPLES—10.40%

  

Beverages—3.08%

     

Monster Beverage Corp.B

     14,382         2,142   

PepsiCo, Inc.

     9,344         934   
     

 

 

 
        3,076   
     

 

 

 

Food & Drug Retailing—7.32%

  

Costco Wholesale Corp.

     13,099         2,115   

CVS Caremark Corp.

     25,507         2,495   

Mead Johnson Nutrition Co., Class A

     13,627         1,076   

Whole Foods Market, Inc.

     48,488         1,624   
     

 

 

 
        7,310   
     

 

 

 

Total Consumer Staples

  

     10,386   
     

 

 

 

FINANCIALS—3.93%

     

Diversified Financials—3.93%

     

BlackRock, Inc., Class A

     5,364         1,827   

Greenhill & Co., Inc.

     17,937         513   

TD Ameritrade Holding Corp.

     45,605         1,583   
     

 

 

 

Total Financials

  

     3,923   
     

 

 

 

HEALTH CARE—14.51%

     

Biotechnology—6.02%

     

Biogen Idec, Inc.B

     2,280         698   

Gilead Sciences, Inc.

     28,595         2,894   

Medivation, Inc.

     18,349         887   

Quintiles Transnational Holdings, Inc.B

     10,827         743   

Vertex Pharmaceuticals, Inc.B

     6,221         783   
     

 

 

 
        6,005   
     

 

 

 

Health Care Equipment & Supplies—2.89%

  

Medtronic PLCA

     37,529         2,887   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Health Care Providers & Services—4.12%

  

  

Cerner Corp.B

     30,736       $ 1,849   

DaVita HealthCare Partners, Inc.B

     25,730         1,794   

Envision Healthcare Holdings, Inc.B

     18,283         475   
     

 

 

 
        4,118   
     

 

 

 

Pharmaceuticals—1.48%

     

Bristol-Myers Squibb Co.

     21,498         1,479   
     

 

 

 

Total Health Care

  

     14,489   
     

 

 

 

INDUSTRIALS—11.80%

     

Aerospace & Defense—3.32%

  

Boeing Co.

     11,380         1,645   

Precision Castparts Corp.

     7,186         1,668   
     

 

 

 
        3,313   
     

 

 

 

Air Freight & Couriers—0.96%

  

United Parcel Service, Inc., Class B

     9,957         958   
     

 

 

 

Airlines—3.09%

     

Southwest Airlines Co.

     71,638         3,085   
     

 

 

 

Electrical Equipment—2.00%

  

Roper Industries, Inc.

     10,546         2,002   
     

 

 

 

Industrial Conglomerates—2.43%

  

  

Honeywell International, Inc.

     23,409         2,424   
     

 

 

 

Total Industrials

  

     11,782   
     

 

 

 

INFORMATION TECHNOLOGY—30.64%

  

Communications—1.76%

     

Facebook, Inc., Class AB

     16,763         1,754   
     

 

 

 

Communications Equipment—2.82%

  

  

Cisco Systems, Inc.

     103,867         2,821   
     

 

 

 

Computers & Peripherals—4.31%

  

  

Apple, Inc.

     34,627         3,645   

International Business Machines Corp.

     4,788         659   
     

 

 

 
        4,304   
     

 

 

 

Internet Software & Services—4.73%

  

  

Alphabet, Inc., Class CB

     6,227         4,726   
     

 

 

 

IT Consulting & Services—6.66%

  

  

Automatic Data Processing, Inc.

     10,859         920   

IHS, Inc., Class AB

     8,695         1,030   

Visa, Inc., Class A

     60,671         4,704   
     

 

 

 
        6,654   
     

 

 

 

Software—10.36%

     

Adobe Systems, Inc.B

     42,561         3,997   

Citrix Systems, Inc.B

     47,580         3,599   

Intuit, Inc.

     11,664         1,126   

Microsoft Corp.

     29,451         1,634   
     

 

 

 
        10,356   
     

 

 

 

Total Information Technology

  

     30,615   
     

 

 

 

MATERIALS—1.27%

     

Chemicals—1.27%

     

Ecolab, Inc.

     11,076         1,267   
     

 

 

 

Total Common Stock (Cost $68,476)

  

     95,394   
     

 

 

 
 

 

See accompanying notes

 

25


American Beacon Holland Large Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

SHORT-TERM INVESTMENTS—4.57%
(Cost $4,564)

   

JPMorgan U.S. Government Money Market Fund, Capital Class

     4,563,615       $ 4,564   
     

 

 

 

TOTAL INVESTMENTS —100.07% (Cost $73,040)

   

     99,958   

LIABILITIES, NET OF OTHER
ASSETS—(0.07%)

   

     (73
     

 

 

 

TOTAL NET ASSETS—100.00%

  

   $ 99,885   
     

 

 

 
 

 

Percentages are stated as a percent of net assets.

 

A  PLC - Public Limited Company.
B  Non-income producing security.

Futures Contracts Open on December 31, 2015:

Description

   Type      Number of
Contracts
     Expiration Date    Contract Value      Unrealized
Appreciation
(Depreciation)
 

S&P 500 Mini E Index March Futures

     Long         41       March 2016    $ 4,172,570       $ 20,633   
           

 

 

    

 

 

 
            $ 4,172,570       $ 20,633   
           

 

 

    

 

 

 

 

See accompanying notes

 

26


American Beacon Stephens Small Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK—99.51%

  

CONSUMER DISCRETIONARY—15.53%

  

Auto Components—0.95%

  

Motorcar Parts of America, Inc.A

     143,330       $ 4,846   
     

 

 

 

Commercial Services—0.92%

     

CEB, Inc.

     76,600         4,702   
     

 

 

 

Hotels, Restaurants & Leisure—6.80%

  

  

Buffalo Wild Wings, Inc.A

     42,224         6,741   

Chuy’s Holdings, Inc.A

     156,991         4,920   

Krispy Kreme Doughnuts, Inc.A

     372,022         5,606   

National CineMedia, Inc.B

     578,855         9,094   

Papa John’s International, Inc.

     70,800         3,956   

Potbelly Corp.A B C

     374,800         4,389   
     

 

 

 
        34,706   
     

 

 

 

Leisure Equipment & Products—1.99%

  

Callaway Golf Co.

     611,816         5,763   

Sportsman’s Warehouse Holdings, Inc.A

     341,829         4,410   
     

 

 

 
        10,173   
     

 

 

 

Media—2.12%

     

IMAX Corp.A

     217,778         7,740   

TiVo, Inc.A

     358,800         3,096   
     

 

 

 
        10,836   
     

 

 

 

Specialty Retail—2.75%

     

Aaron’s, Inc.

     143,200         3,206   

Bright Horizons Family Solutions, Inc.A

     28,000         1,870   

Cabela’s, Inc.A C

     57,800         2,701   

Monro Muffler Brake, Inc.

     94,140         6,235   
     

 

 

 
        14,012   
     

 

 

 

Total Consumer Discretionary

  

     79,275   
     

 

 

 

CONSUMER STAPLES—3.18%

  

Food & Drug Retailing—0.99%

  

United Natural Foods, Inc.A

     127,740         5,028   
     

 

 

 

Food Products—2.19%

     

Calavo Growers, Inc.

     98,542         4,829   

Inventure Foods, Inc.A B C

     324,566         2,304   

TreeHouse Foods, Inc.A

     51,800         4,064   
     

 

 

 
        11,197   
     

 

 

 

Total Consumer Staples

  

     16,225   
     

 

 

 

ENERGY—4.55%

     

Energy Equipment & Services—3.28%

  

  

Core Laboratories N.V.C

     25,600         2,784   

Flotek Industries, Inc.A C

     259,914         2,973   

Forum Energy Technologies, Inc.A

     166,500         2,075   

PDC Energy, Inc.A

     72,100         3,849   

RigNet, Inc.A

     146,706         3,035   

RPC, Inc.C

     167,300         1,999   
     

 

 

 
        16,715   
     

 

 

 

Oil & Gas—1.27%

     

Carrizo Oil & Gas, Inc.A

     95,600         2,828   

Rice Energy, Inc.A

     262,400         2,860   

Whiting Petroleum Corp.A

     86,688         818   
     

 

 

 
        6,506   
     

 

 

 

Total Energy

  

     23,221   
     

 

 

 

FINANCIALS—9.28%

     

Banks—1.34%

     

East West Bancorp, Inc.

     81,000         3,366   
     Shares      Fair Value  
            (000’s)  

SVB Financial GroupA

     29,000       $ 3,448   
     

 

 

 
        6,814   
     

 

 

 

Diversified Financials—6.18%

  

Cardtronics, Inc.A

     182,753         6,150   

Demandware, Inc.A

     108,300         5,845   

Encore Capital Group, Inc.A C

     79,832         2,322   

Euronet Worldwide, Inc.A

     112,200         8,127   

MarketAxess Holdings, Inc.

     34,700         3,872   

PRA Group, Inc.C

     68,580         2,379   

WisdomTree Investments, Inc.

     182,100         2,855   
     

 

 

 
        31,550   
     

 

 

 

Insurance—1.76%

     

Hilltop Holdings, Inc.A

     257,200         4,943   

WEX, Inc.A

     45,600         4,031   
     

 

 

 
        8,974   
     

 

 

 

Total Financials

  

     47,338   
     

 

 

 

HEALTH CARE—26.47%

     

Biotechnology—4.94%

     

Cepheid, Inc.A

     175,200         6,400   

MiMedx Group, Inc.A C

     373,680         3,501   

Myriad Genetics, Inc.A C

     96,429         4,162   

Neogen Corp.A

     149,650         8,458   

Repligen Corp.A

     95,779         2,710   
     

 

 

 
        25,231   
     

 

 

 

Health Care Equipment & Supplies—5.47%

  

Abaxis, Inc.

     87,281         4,860   

ABIOMED, Inc.A

     46,600         4,207   

Bio-Techne Corp.

     38,800         3,492   

DexCom, Inc.A

     26,600         2,179   

Medidata Solutions, Inc.A

     146,942         7,242   

NuVasive, Inc.A

     109,280         5,913   
     

 

 

 
        27,893   
     

 

 

 

Health Care Providers & Services—8.49%

  

AAC Holdings, Inc.A C

     82,200         1,567   

Acadia Healthcare Co., Inc.A

     122,700         7,664   

Advisory Board Co.A

     155,825         7,730   

HealthEquity, Inc.A

     163,272         4,093   

MAXIMUS, Inc.

     64,200         3,611   

Omnicell, Inc.A

     93,300         2,900   

PAREXEL International Corp.A

     136,600         9,306   

VCA Antech, Inc.A

     117,555         6,466   
     

 

 

 
        43,337   
     

 

 

 

Pharmaceuticals—7.57%

     

Akorn, Inc.A

     159,300         5,943   

ICON PLCA D

     128,500         9,985   

Ligand Pharmaceuticals, Inc.

     76,250         8,267   

Pacira Pharmaceuticals, Inc.A

     103,228         7,927   

Proto Labs, Inc.A

     102,405         6,522   
     

 

 

 
        38,644   
     

 

 

 

Total Health Care

  

     135,105   
     

 

 

 

INDUSTRIALS—11.32%

     

Aerospace & Defense—2.04%

  

Aerovironment, Inc.A

     104,400         3,077   

Astronics Corp.

     110,895         4,514   

Orbital ATK, Inc.

     31,400         2,805   
     

 

 

 
        10,396   
     

 

 

 

Air Freight & Couriers—1.13%

  

Echo Global Logistics, Inc.A

     164,900         3,363   

HUB Group, Inc., Class AA

     72,300         2,382   
     

 

 

 
        5,745   
     

 

 

 
 

 

See accompanying notes

 

27


American Beacon Stephens Small Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

Building Products—0.88%

  

Trex Co., Inc.A

     118,300       $ 4,500   
     

 

 

 

Commercial Services & Supplies—4.07%

  

CoStar Group, Inc.A

     38,301         7,917   

HMS Holdings Corp.A

     422,969         5,219   

WageWorks, Inc.A

     168,042         7,624   
     

 

 

 
        20,760   
     

 

 

 

Diversified Manufacturing—0.67%

  

  

Acuity Brands, Inc.

     14,600         3,413   
     

 

 

 

Electrical Equipment—1.28%

  

Cognex Corp.

     171,000         5,775   

Power Solutions International, Inc.A C

     39,843         762   
     

 

 

 
        6,537   
     

 

 

 

Machinery—0.81%

     

RBC Bearings, Inc.

     64,300         4,153   
     

 

 

 

Trading Companies & Distributors—0.44%

  

MSC Industrial Direct Co., Inc., Class A

     39,945         2,248   
     

 

 

 

Total Industrials

  

     57,752   
     

 

 

 

INFORMATION TECHNOLOGY—27.44%

  

Communications Equipment—0.85%

  

  

CalAmp Corp.A

     218,659         4,358   
     

 

 

 

Electronic Equipment & Instruments—1.17%

  

FLIR Systems, Inc.

     94,400         2,650   

Taser International, Inc.A C

     192,100         3,321   
     

 

 

 
        5,971   
     

 

 

 

Internet Software & Services—4.83%

  

  

Athenahealth, Inc.A C

     37,602         6,053   

Fortinet, Inc.A

     106,500         3,320   

Global Eagle Entertainment, Inc.A

     315,270         3,112   

HealthStream, Inc.A B

     192,514         4,235   

Proofpoint, Inc.A

     122,026         7,932   
     

 

 

 
        24,652   
     

 

 

 

IT Consulting & Services—1.63%

  

  

Tyler Technologies, Inc.

     47,684         8,312   
     

 

 

 

Semiconductor Equipment & Products—6.50%

  

8x8, Inc.A

     535,000         6,127   

Cavium, Inc.A

     85,200         5,598   

Integrated Device Technology, Inc.A

     140,900         3,713   

Microsemi Corp.

     185,230         6,037   

Power Integrations, Inc.

     112,300         5,461   

Rudolph Technologies, Inc.A

     229,000         3,256   

Semtech Corp.A

     158,786         3,004   
     

 

 

 
        33,196   
     

 

 

 

Software—12.46%

     

Aspen Technology, Inc.A

     141,348         5,337   

CyberArk Software Ltd.A C

     76,000         3,431   

Envestnet, Inc.A

     171,809         5,128   

Guidewire Software, Inc.A

     123,700         7,442   

Imperva, Inc.A

     39,100         2,475   

inContact, Inc.A

     399,300         3,809   

Manhattan Associates, Inc.A

     118,717         7,857   

National Instruments Corp.

     107,167         3,075   

PROS Holdings, Inc.A

     240,200         5,534   

Qualys, Inc.A

     152,100         5,033   

SPS Commerce, Inc.A

     60,918         4,277   

Ultimate Software Group, Inc.A

     39,500         7,723   
     Shares      Fair Value  
            (000’s)  

VASCO Data Security International, Inc.A C

     147,700       $ 2,471   
     

 

 

 
        63,592   
     

 

 

 

Total Information Technology

  

     140,081   
     

 

 

 

MATERIALS—1.74%

     

Chemicals—0.81%

     

Balchem Corp.

     67,766         4,120   
     

 

 

 

Metals & Mining—0.93%

     

Mueller Water Products, Inc., Class A

     552,100         4,748   
     

 

 

 

Total Materials

  

     8,868   
     

 

 

 

Total Common Stock (Cost $474,129)

  

     507,865   
     

 

 

 

SHORT-TERM INVESTMENTS—0.30%
(Cost $1,539)

   

JPMorgan U.S. Government Money Market Fund, Capital Class

     1,539,227         1,539   
     

 

 

 

SECURITIES LENDING COLLATERAL—8.63%

  

DWS Government and Agency Securities Portfolio, Institutional Class

     11,008,560         11,008   

American Beacon U.S. Government Money Market Select Fund, Select Class E

     33,025,680         33,026   
     

 

 

 

Total Securities Lending Collateral (Cost $44,034)

        44,034   
     

 

 

 

TOTAL INVESTMENTS —108.44% (Cost $519,702)

   

     553,438   

LIABILITIES, NET OF OTHER ASSETS—(8.44%)

   

     (43,071
     

 

 

 

TOTAL NET ASSETS—100.00%

  

   $ 510,367   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  Illiquid Security. At period end, the amount of illiquid securities was $20,022 or 3.9% of net assets.
C  All or a portion of this security is on loan at December 31, 2015.
D  PLC - Public Limited Company.
E  The Fund is affiliated by having the same investment advisor.
 

 

 

See accompanying notes

 

28


American Beacon Stephens Mid-Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

COMMON STOCK—100.31%

  

CONSUMER DISCRETIONARY—21.66%

  

Auto Components—1.68%

  

LKQ Corp.A

     44,850       $ 1,329   

Mobileye N.V.A

     12,400         524   
     

 

 

 
        1,853   
     

 

 

 

Automobiles—0.76%

     

Tesla Motors, Inc.A B

     3,500         840   
     

 

 

 

Hotels, Restaurants & Leisure—3.27%

  

  

Buffalo Wild Wings, Inc.A

     8,750         1,397   

National CineMedia, Inc.C

     85,000         1,335   

Papa John’s International, Inc.

     15,550         869   
     

 

 

 
        3,601   
     

 

 

 

Household Durables—0.89%

  

Harman International Industries, Inc.

     10,350         975   
     

 

 

 

Internet & Catalog Retail—1.56%

  

Expedia, Inc.

     5,268         655   

TripAdvisor, Inc.A

     12,450         1,061   
     

 

 

 
        1,716   
     

 

 

 

Media—4.29%

     

Cinemark Holdings, Inc.

     32,300         1,080   

IMAX Corp.A

     45,662         1,623   

Netflix, Inc.A

     17,600         2,013   
     

 

 

 
        4,716   
     

 

 

 

Specialty Retail—8.20%

     

Aaron’s, Inc.

     27,650         619   

Bright Horizons Family Solutions, Inc.A

     6,300         421   

Cabela’s, Inc.A

     13,800         645   

CarMax, Inc.A

     25,300         1,365   

Copart, Inc.A

     25,650         975   

Ross Stores, Inc.

     37,950         2,043   

Tractor Supply Co.

     14,850         1,270   

Ulta Salon Cosmetics & Fragrance, Inc.

     9,050         1,674   
     

 

 

 
        9,012   
     

 

 

 

Textiles & Apparel—1.01%

     

Under Armour, Inc., Class AA

     13,800         1,112   
     

 

 

 

Total Consumer Discretionary

  

     23,825   
     

 

 

 

CONSUMER STAPLES—5.18%

  

Beverages—3.67%

     

Brown-Forman Corp., Class B

     17,230         1,711   

Monster Beverage Corp.A

     15,650         2,331   
     

 

 

 
        4,042   
     

 

 

 

Food & Drug Retailing—0.91%

  

United Natural Foods, Inc.A

     25,350         998   
     

 

 

 

Food Products—0.60%

     

White Waves Food Co.A

     17,050         663   
     

 

 

 

Total Consumer Staples

  

     5,703   
     

 

 

 

ENERGY—4.23%

     

Energy Equipment & Services—2.52%

  

  

Core Laboratories N.V.B

     10,100         1,097   

FMC Technologies, Inc.A

     19,880         577   

Oceaneering International, Inc.

     17,100         642   

RPC, Inc.B

     38,300         458   
     

 

 

 
        2,774   
     

 

 

 
     Shares      Fair Value  
            (000’s)  

Oil & Gas—1.71%

     

Pioneer Natural Resources Co.

     6,900       $ 866   

Range Resources Corp.

     22,150         545   

Southwestern Energy Co.A B

     40,660         289   

Whiting Petroleum Corp.A

     19,300         182   
     

 

 

 
        1,882   
     

 

 

 

Total Energy

  

     4,656   
     

 

 

 

FINANCIALS—6.48%

     

Banks—2.87%

     

East West Bancorp, Inc.

     34,950         1,453   

SVB Financial GroupA

     14,300         1,699   
     

 

 

 
        3,152   
     

 

 

 

Diversified Financials—2.65%

  

Affiliated Managers Group, Inc.A

     5,780         924   

MarketAxess Holdings, Inc.

     7,350         820   

PRA Group, Inc.B

     17,783         617   

WisdomTree Investments, Inc.

     35,600         558   
     

 

 

 
        2,919   
     

 

 

 

Insurance—0.96%

     

WEX, Inc.A

     11,900         1,052   
     

 

 

 

Total Financials

  

     7,123   
     

 

 

 

HEALTH CARE—22.21%

     

Biotechnology—3.80%

     

Alexion Pharmaceuticals, Inc.A

     4,600         877   

Cepheid, Inc.A

     36,350         1,328   

Medivation, Inc.

     17,000         822   

QIAGEN N.V.A

     41,750         1,154   
     

 

 

 
        4,181   
     

 

 

 

Health Care Equipment & Supplies—9.28%

  

DexCom, Inc.A

     5,200         426   

Hologic, Inc.A

     29,650         1,147   

Idexx Laboratories, Inc.A

     19,750         1,441   

Illumina, Inc.A

     11,000         2,112   

Intuitive Surgical, Inc.A

     1,450         792   

Medidata Solutions, Inc.A

     23,099         1,139   

ResMed, Inc.

     22,500         1,208   

Sirona Dental Systems, Inc.

     10,050         1,101   

Varian Medical Systems, Inc.A

     10,500         848   
     

 

 

 
        10,214   
     

 

 

 

Health Care Providers & Services—6.24%

  

Acadia Healthcare Co., Inc.A

     13,800         862   

Cerner Corp.A

     29,980         1,804   

Henry Schein, Inc.A

     9,545         1,510   

PAREXEL International Corp.A

     19,000         1,294   

VCA Antech, Inc.A

     25,280         1,390   
     

 

 

 
        6,860   
     

 

 

 

Pharmaceuticals—2.89%

     

Akorn, Inc.A

     23,750         886   

ICON PLCA D

     12,450         967   

Pacira Pharmaceuticals, Inc.A

     17,250         1,325   
     

 

 

 
        3,178   
     

 

 

 

Total Health Care

  

     24,433   
     

 

 

 

INDUSTRIALS—12.83%

     

Aerospace & Defense—1.14%

  

Orbital ATK, Inc.

     14,000         1,251   
     

 

 

 

Commercial Services & Supplies—5.28%

  

CoStar Group, Inc.A

     9,220         1,905   
 

 

See accompanying notes

 

29


American Beacon Stephens Mid-Cap Growth FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

HMS Holdings Corp.A

     70,562       $ 871   

Stericycle, Inc.A

     13,750         1,658   

Verisk Analytics, Inc.A

     18,050         1,388   
     

 

 

 
        5,822   
     

 

 

 

Diversified Manufacturing—1.29%

  

  

Acuity Brands, Inc.

     6,050         1,414   
     

 

 

 

Electrical Equipment—2.85%

  

Cognex Corp.

     34,100         1,151   

IPG Photonics Corp.

     8,950         798   

Roper Industries, Inc.

     4,050         769   

Sensata Technologies Holding N.V.A

     8,950         412   
     

 

 

 
        3,130   
     

 

 

 

Road & Rail—0.79%

     

J.B. Hunt Transport Services, Inc.

     11,800         866   
     

 

 

 

Trading Companies & Distributors—1.48%

  

Fastenal Co.B

     22,760         929   

MSC Industrial Direct Co., Inc., Class A

     12,380         697   
     

 

 

 
        1,626   
     

 

 

 

Total Industrials

  

     14,109   
     

 

 

 

INFORMATION TECHNOLOGY—26.27%

  

Communications Equipment—1.63%

  

Palo Alto Networks, Inc.A

     10,150         1,788   
     

 

 

 

Electronic Equipment & Instruments—1.24%

  

FLIR Systems, Inc.

     48,700         1,367   
     

 

 

 

Internet Software & Services—6.28%

  

Akamai Technologies, Inc.A

     16,150         850   

Athenahealth, Inc.A

     10,527         1,694   

Fortinet, Inc.A

     48,400         1,509   

LinkedIn Corp., Class AA

     3,500         788   

MercadoLibre, Inc.B

     13,200         1,509   

Twitter, Inc.A

     24,200         560   
     

 

 

 
        6,910   
     

 

 

 

IT Consulting & Services—1.60%

  

Alliance Data Systems Corp.A

     3,800         1,051   

IHS, Inc., Class AA

     6,000         711   
     

 

 

 
        1,762   
     

 

 

 

Semiconductor Equipment & Products—4.67%

  

Cree, Inc.A

     15,550         415   

FEI Co.

     14,387         1,148   

Lam Research Corp.

     8,368         665   

Microchip Technology, Inc.

     27,530         1,280   

NXP Semiconductors N.V.A

     7,300         615   

Xilinx, Inc.

     21,600         1,015   
     

 

 

 
        5,138   
     

 

 

 

Software—10.85%

     

Ansys, Inc.A

     6,600         611   

Aspen Technology, Inc.A

     30,800         1,163   

Autodesk, Inc.A

     17,000         1,036   

Cadence Design Systems, Inc.A

     46,100         959   

Check Point Software Technologies Ltd.A

     14,400         1,172   

FireEye, Inc.A

     27,069         561   

Inovalon Holdings, Inc., Class AA B

     18,700         318   

National Instruments Corp.

     28,555         819   

Red Hat, Inc.A

     13,790         1,142   

Salesforce.com, Inc.A

     9,770         766   

Splunk, Inc.A

     11,900         700   

Tableau Software, Inc., Class AA

     12,400         1,168   
     Shares      Fair Value  
            (000’s)  

Ultimate Software Group, Inc.A

     7,700       $ 1,505   
     

 

 

 
        11,920   
     

 

 

 

Total Information Technology

  

     28,885   
     

 

 

 

MATERIALS—1.45%

     

Chemicals—1.45%

     

Airgas, Inc.

     11,550         1,598   
     

 

 

 

Total Common Stock (Cost $96,923)

  

     110,332   
     

 

 

 

SECURITIES LENDING COLLATERAL—4.38%

  

American Beacon U.S. Government Money Market Select Fund, Select Class E

     3,611,273         3,611   

DWS Government and Agency Securities Portfolio, Institutional Class

     1,203,758         1,204   
     

 

 

 

Total Securities Lending Collateral (Cost $4,815)

        4,815   
     

 

 

 

TOTAL INVESTMENTS —104.69% (Cost $101,738)

   

     115,147   

LIABILITIES, NET OF OTHER ASSETS—(4.69%)

   

     (5,155
     

 

 

 

TOTAL NET ASSETS—100.00%

  

   $ 109,992   
     

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  All or a portion of this security is on loan at December 31, 2015.
C  Illiquid Security. At period end, the amount of illiquid securities was $1,335 or 1.2% of net assets.
D  PLC - Public Limited Company.
E  The Fund is affiliated by having the same investment advisor.
 

 

 

See accompanying notes

 

30


American Beacon FundsSM

Statements of Assets and Liabilities

December 31, 2015 (in thousands, except share and per share amounts)

 

 

     Bahl &                           
     Gaynor           Holland     Stephens      Stephens  
     Small Cap     Bridgeway     Large Cap     Small Cap      Mid-Cap  
     Growth     Large Cap     Growth     Growth      Growth  
     Fund     Value Fund     Fund     Fund      Fund  

Assets:

           

Investments in unaffiliated securities, at fair value A C

   $ 7,205      $ 2,280,390      $ 99,958      $ 520,412       $ 111,536   

Investments in affiliated securities, at fair value B

     —          —          —          33,026         3,611   

Cash

     —          288        —          —           1   

Deposit with brokers for futures contracts

     3        1,283        112        —           —     

Dividends and interest receivable

     11        2,563        59        26         5   

Receivable for investments sold

     —          28,382        28        2,277         2,454   

Receivable for fund shares sold

     —          19,477        8        839         39   

Receivable for tax reclaims

     —          —          —          1         —     

Receivable for expense reimbursement (Note 2)

     6        —          —          —           —     

Receivable for variation margin on open futures contracts

     1        —          21        —           —     

Prepaid expenses

     18        73        11        28         15   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total assets

     7,244        2,332,456        100,197        556,609         117,661   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Liabilities:

           

Payable for investments purchased

     —          18,486        —          79         —     

Payable for fund shares redeemed

     —          5,146        191        1,036         2,017   

Payable for variation margin from open futures contracts

     —          5        —          —           —     

Cash overdraft

     —          —          —          552         —     

Payable for expense reimbursement (Note 2)

     —          3        —          2         5   

Payable upon return of securities loaned

     —          —          —          44,034         4,815   

Payable for interfund loan

     —          —          —          —           695   

Management and investment advisory fees payable

     3        703        38        296         53   

Administrative service and service fees payable

     3        1,010        44        158         40   

Transfer agent fees payable

     —          38        2        16         6   

Custody and fund accounting fees payable

     2        29        1        12         3   

Professional fees payable

     31        33        29        31         27   

Trustee fees payable

     —          —          —          —           1   

Payable for prospectus and shareholder reports

     1        40        2        23         7   

Other liabilities

     —          4        5        3         —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total liabilities

     40        25,497        312        46,242         7,669   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net Assets

   $ 7,204      $ 2,306,959      $ 99,885      $ 510,367       $ 109,992   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Analysis of Net Assets:

           

Paid-in-capital

     7,431        2,292,396        73,564        475,020         92,371   

Undistributed (or overdistribution of) net investment income

     —          —          —          —           —     

Accumulated net realized gain (loss)

     (226     (20,962     (618     1,611         4,212   

Unrealized appreciation or (depreciation) of investments

     (2     35,531        26,918        33,736         13,409   

Unrealized appreciation or (depreciation) of futures contracts

     1        (6     21        —           —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net assets

   $ 7,204      $ 2,306,959      $ 99,885      $ 510,367       $ 109,992   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

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

           

Institutional Class

     317,649        30,017,996        749,879        19,959,172         4,234,119   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Y Class

     266,833        18,267,764        13,530        9,519,197         137,303   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Investor Class

     49,231        43,187,358        3,237,555        3,938,421         937,364   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

A Class

     44,957        6,541,744        52,605        581,563         882,082   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

C Class

     30,885        3,823,061        32,511        172,062         138,999   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net assets (not in thousands):

           

Institutional Class

   $ 3,231,461      $ 682,849,171      $ 18,600,679      $ 300,919,215       $ 76,666,136   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Y Class

   $ 2,711,465      $ 414,585,125      $ 333,682      $ 142,980,166       $ 2,479,918   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Investor Class

   $ 498,128      $ 977,719,149      $ 78,921,674      $ 55,921,959       $ 14,814,940   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

A Class

   $ 454,614      $ 147,394,607      $ 1,271,340      $ 8,197,136       $ 13,907,563   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

C Class

   $ 308,822      $ 84,411,378      $ 757,411      $ 2,348,424       $ 2,123,334   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

See accompanying notes

 

31


American Beacon FundsSM

Statements of Assets and Liabilities

December 31, 2015 (in thousands, except share and per share amounts)

 

 

     Bahl &                              
     Gaynor             Holland      Stephens      Stephens  
     Small Cap      Bridgeway      Large Cap      Small Cap      Mid-Cap  
     Growth      Large Cap      Growth      Growth      Growth  
     Fund      Value Fund      Fund      Fund      Fund  

Net asset value, offering and redemption price per share:

              

Institutional Class

   $ 10.17       $ 22.75       $ 24.80       $ 15.08       $ 18.11   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Y Class

   $ 10.16       $ 22.69       $ 24.66       $ 15.02       $ 18.06   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Investor Class

   $ 10.12       $ 22.64       $ 24.38       $ 14.20       $ 15.80   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A Class

   $ 10.11       $ 22.53       $ 24.17       $ 14.10       $ 15.77   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A Class (offering price)

   $ 10.73       $ 23.90       $ 25.64       $ 14.96       $ 16.73   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

C Class

   $ 10.00       $ 22.08       $ 23.30       $ 13.65       $ 15.28   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A Cost of investments in unaffiliated securities

   $ 7,207       $ 2,244,859       $ 73,040       $ 486,676       $ 98,127   

B Cost of investments in affiliated securities

   $ —         $ —         $ —         $ 33,026       $ 3,611   

C Fair value of securities on loan

   $ —         $ —         $ —         $ 43,058       $ 4,716   

 

See accompanying notes

 

32


American Beacon FundsSM

Statements of Operations

For the year ended December 31, 2015 (in thousands)

 

 

     Bahl &
Gaynor
Small Cap
Growth
Fund
    Bridgeway
Large Cap
Value Fund
    Holland
Large Cap
Growth
Fund
    Stephens
Small Cap
Growth
Fund
    Stephens
Mid-Cap
Growth
Fund
 

Investment income:

          

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

   $ 111      $ 42,159      $ 1,161      $ 1,620      $ 561   

Income derived from securities lending

     —          —          —          930        45   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

     111        42,159        1,161        2,550        606   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Management and investment advisory fees (Note 2)

     36        6,529        452        4,312        706   

Administrative service fees (Note 2):

          

Institutional Class

     10        1,465        57        1,032        277   

Y Class

     6        759        —          499        8   

Investor Class

     2        2,534        242        330        52   

A Class

     1        394        3        27        48   

C Class

     1        186        2        8        6   

Transfer agent fees:

          

Institutional Class

     1        205        2        155        55   

Y Class

     —          10        —          17        —     

Investor Class

     1        30        8        8        3   

A Class

     —          17        —          1        2   

C Class

     —          7        —          —          —     

Custody and fund accounting fees

     11        142        16        56        17   

Professional fees

     31        73        33        45        32   

Registration fees and expenses

     80        189        64        85        69   

Service fees (Note 2):

          

Y Class

     2        253        —          166        3   

Investor Class

     1        3,170        288        394        61   

A Class

     1        197        2        13        24   

C Class

     —          93        1        4        3   

Distribution fees (Note 2):

          

A Class

     1        328        3        22        40   

C Class

     2        620        7        27        20   

Prospectus and shareholder report expenses

     2        161        4        49        8   

Trustee fees

     —          114        6        38        8   

Other expenses

     6        72        10        31        5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     195        17,548        1,200        7,319        1,447   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     (124     185        —          (3     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net expenses

     71        17,733        1,200        7,316        1,447   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     40        24,426        (39     (4,766     (841
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) from investments:

          

Net realized gain (loss) from:

          

Investments

     (66     25,408        8,254        27,105        8,947   

Commission recapture (Note 3)

     —          —          3        —          —     

Futures contracts

     (57     4,471        37        —          —     

Change in net unrealized appreciation or (depreciation) of:

          

Investments

     (230     (85,791     (1,920     (48,149     (9,578

Futures contracts

     (3     163        (14     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net gain (loss) from investments

     (356     (55,749     6,360        (21,044     (631
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ (316   $ (31,323   $ 6,321      $ (25,810   $ (1,472
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

A Foreign taxes

     —          —          —          2        3   

 

See accompanying notes

 

33


American Beacon FundsSM

Statements of Changes in Net Assets (in thousands)

 

 

     Bahl & Gaynor Small Cap
Growth Fund
    Bridgeway Large Cap
Value Fund
    Holland Large Cap
Growth Fund
 
     Year Ended
December 31,
2015
    From July 15
to December 31,
2014
    Year Ended
December 31,
2015
    Year Ended
December 31,
2014
    Year Ended
December 31,
2015
    Year Ended
December 31,
2014
 

Increase (Decrease) in Net Assets:

            

Operations:

            

Net investment income (loss)

   $ 40      $ 7      $ 24,426      $ 6,232      $ (39   $ (134

Net realized gain (loss) from investments, commission recapture, and futures contracts

     (123     6        29,879        15,953        8,294        10,306   

Change in net unrealized appreciation or (depreciation) of investments and futures contracts

     (233     232        (85,628     82,822        (1,934     (3,617
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     (316     245        (31,323     105,007        6,321        6,555   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

            

Net investment income:

            

Institutional Class

     (18     (5     (8,277     (2,129     —          —     

Y Class

     (15     (1     (5,057     (792     —          —     

Investor Class

     (3     —          (9,027     (2,728     —          —     

A Class

     (3     —          (1,294     (488     —          —     

C Class

     (2     —          (391     (93     —          —     

Net realized gain from investments:

            

Institutional Class

     (48     —          (15,842     (4,669     (1,832     (1,687

Y Class

     (41     —          (9,510     (1,747     (35     (7

Investor Class

     (7     —          (23,035     (10,006     (8,194     (7,647

A Class

     (8     —          (3,478     (1,551     (136     (97

C Class

     (5     —          (2,016     (496     (84     (59

Return of capital:

            

Institutional Class

     (3     —          (76     —          —          —     

Y Class

     (3     —          (47     —          —          —     

Investor Class

     (1     —          (83     —          —          —     

A Class

     (1     —          (12     —          —          —     

C Class

     —          —          (4     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (158     (6     (78,149     (24,699     (10,281     (9,497
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital Share Transactions:

            

Proceeds from sales of shares

     5,716        791        1,721,211        895,125        6,243        12,416   

Reinvestment of dividends and distributions

     158        6        75,997        24,214        10,280        9,472   

Cost of shares redeemed

     (2,232     —          (619,512     (168,475     (13,613     (13,539
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in net assets from capital share transactions

     3,642        797        1,177,696        750,864        2,910        8,349   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets

     3,168        1,036        1,068,224        831,172        (1,050     5,407   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets:

            

Beginning of period

     4,036        3,000        1,238,735        407,563        100,935        95,528   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of Period *

   $ 7,204      $ 4,036      $ 2,306,959      $ 1,238,735      $ 99,885      $ 100,935   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

*Includes undistributed (or overdistribution of) net investment income

   $ —        $ 1      $ —        $ —        $ —        $ —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

 

See accompanying notes

 

34


American Beacon FundsSM

Statements of Changes in Net Assets (in thousands)

 

 

     Stephens Small Cap     Stephens Mid-Cap  
     Growth Fund     Growth Fund  
     Year Ended
December 31,

2015
    Year Ended
December 31,

2014
    Year Ended
December 31,

2015
    Year Ended
December 31,

2014
 

Increase (Decrease) in Net Assets:

        

Operations:

        

Net investment (loss)

   $ (4,766   $ (4,912   $ (841   $ (790

Net realized gain (loss) from investments

     27,105        31,911        8,947        8,718   

Change in net unrealized appreciation or (depreciation) from investments

     (48,149     (54,645     (9,578     (4,843
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     (25,810 )      (27,646 )      (1,472 )      3,085   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

        

Net realized gain from investments:

        

Institutional Class

     (13,632     (14,779     (3,679     (5,108

Y Class

     (6,447     (7,036     (120     (185

Investor Class

     (2,688     (6,460     (795     (1,310

A Class

     (397     (420     (832     (1,127

C Class

     (113     (122     (114     (130
  

 

 

   

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (23,277 )      (28,817 )      (5,540 )      (7,860 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Capital Share Transactions:

        

Proceeds from sales of shares

     96,070        226,308        24,623        54,295   

Reinvestment of dividends and distributions

     22,809        28,166        5,393        7,117   

Cost of shares redeemed

     (250,985     (215,176     (41,701     (44,790
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets from capital share transactions

     (132,106 )      39,298        (11,685 )      16,622   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets

     (181,193 )      (17,165 )      (18,697 )      11,847   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets:

        

Beginning of period

     691,560        708,725        128,689        116,842   
  

 

 

   

 

 

   

 

 

   

 

 

 

End of Period *

   $ 510,367      $ 691,560      $ 109,992      $ 128,689   
  

 

 

   

 

 

   

 

 

   

 

 

 

*Includes undistributed (or overdistribution of) net investment income

   $ —        $ —        $ —        $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

See accompanying notes

 

35


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

1. Organization

American Beacon Funds (the “Trust”), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. As of December 31, 2015, the Trust consists of twenty-five active series, five of which are presented in this filing (collectively, the “Funds” and each individually a “Fund”): American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Small Cap Growth Fund, and American Beacon Stephens Mid-Cap Growth Fund. The remaining twenty active series are reported in separate filings.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Astro AB Borrower, 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:

  

Offered to:

  Institutional Class    Investors making an initial investment of $250,000
  Y Class    Investors making an initial investment of $100,000
  Investor Class    General public and investors investing directly or through an intermediary
  A Class    General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)
  C Class    General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC

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

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Funds an annualized fee equal to 0.05% of the average daily net assets. The Funds pay the unaffiliated investment advisors hired to direct investment activities of the Funds. Management fees paid by the Funds during the year ended December 31, 2015 were as follows (in thousands):

 

Fund

   Management
Fee Rate
    Management
Fee
     Amounts paid
to Investment
Advisors
     Amounts Paid
to Manager
 

Bahl & Gaynor Small Cap Growth

     0.56   $ 36       $ 33       $ 3   

Bridgeway Large Cap Value

     0.37     6,529         5,640         889   

Holland Large Cap Growth

     0.45     452         401         51   

Stephens Small Cap Growth

     0.68     4,312         3,892         420   

Stephens Mid-Cap Growth

     0.54     706         636         70   

 

 

36


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

As compensation for services provided by the Manager in connection with securities lending activities conducted by the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 25% of such loan fees. Currently, the Manager receives 10% of such income. This fee is included in “Management and investment advisory fees” on the Statements of Operations. During the year ended December 31, 2015, securities lending fees paid to the Manager were $97,088 and $3,932 for the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds, respectively.

Administration Agreement

The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to each Fund. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, A, and C Classes of the Funds.

Distribution Plans

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

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

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.

Investment in Affiliated Funds

The Funds may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) or the U.S. Government Money Market Select Fund (the “USG Select Fund”) (collectively, the “Select Funds”). The Select Funds and the Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as the investment advisor to the Select Funds and receives management and administration fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended December 31, 2015, the Manager earned $43,828 and $3,989 from the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds’ securities lending collateral, respectively, invested in the Select Funds.

 

 

37


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Interfund Lending Program

Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the year ended December 31, 2015, the Bahl & Gaynor Small Cap Growth Fund borrowed on average $609,739 for 6 days at 0.85% with interest charges of $75, the Bridgeway Large Cap Value Fund borrowed on average $1,429,773 for 2 days at 0.75% with interest charges of $59, the Stephens Small Cap Growth Fund borrowed on average $2,943,490 for 30 days at 0.78% with interest charges of $1,887 and the Stephens Mid-Cap Growth Fund borrowed on average $1,073,233 for 8 days at 0.91% with interest charges of $197. These amounts are recorded as “Other Expenses” on the Statements of Operations herein. For the year ended December 31, 2015, the Stephens Mid-Cap Growth Fund had “Payable for interfund loan” of $695,343.

Expense Reimbursement Plan

The Manager agreed to reimburse the following Funds to the extent that total annual fund operating expenses exceeded a Fund’s expense cap. For the year ended December 31, 2015, the Manager waived or reimbursed expenses as follows:

 

          Expense Cap              

Fund

   Class    1/1/15
to
4/30/15
    5/1/15
to
12/31/15
    Reimbursed or
(Recovered) Expenses
    Expiration  

Bahl & Gaynor Small Cap Growth

   Institutional      0.98     0.98   $ 69,594        2018   

Bahl & Gaynor Small Cap Growth

   Y      1.08     1.08     33,058        2018   

Bahl & Gaynor Small Cap Growth

   Investor      1.36     1.36     10,864        2018   

Bahl & Gaynor Small Cap Growth

   A      1.38     1.38     5,968        2018   

Bahl & Gaynor Small Cap Growth

   C      2.13     2.13     4,344        2018   

Bridgeway Large Cap Value

   Institutional      0.84     N/A        (184,868     2018   

Holland Large Cap Growth

   Institutional      N/A        N/A        (469     2018   

Holland Large Cap Growth

   Y      N/A        0.99     64        2018   

Holland Large Cap Growth

   A      1.29     1.29     40        2018   

Holland Large Cap Growth

   C      2.04     2.04     66        2018   

Stephens Small Cap Growth

   Institutional      1.09     N/A        (284     2018   

Stephens Small Cap Growth

   Investor      1.35     N/A        9,249        2018   

Stephens Small Cap Growth

   A      1.49     N/A        (3,867     2018   

Stephens Small Cap Growth

   C      2.24     N/A        (1,599     2018   

Stephens Mid-Cap Growth

   Institutional      0.99     0.99     13,444        2018   

Stephens Mid-Cap Growth

   Y      1.09     N/A        (931     2018   

Stephens Mid-Cap Growth

   Investor      1.37     N/A        (6,278     2018   

Stephens Mid-Cap Growth

   A      1.39     1.39     (5,405     2018   

Stephens Mid-Cap Growth

   C      2.14     2.14     (656     2018   

Of these amounts, $2,767, $32, $1,629, and $4,585 were payable to the Manager at December 31, 2015 for the Bridgeway Large Cap Value, Holland Large Cap Growth, Stephens Small Cap Growth, and Stephens Mid-Cap Growth Funds, respectively. $6,611 was receivable from the Manager at December 31, 2015 for the Bahl and Gaynor Small Cap Growth Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The Funds did not record a liability for potential reimbursements due to the current assessment that reimbursements are unlikely.

 

 

38


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

The carryover of excess expenses potentially reimbursable to the Manager are as follows:

 

Fund

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

Bahl & Gaynor Small Cap Growth

   $ —         $ 132,904       $ —           2017   

Bridgeway Large Cap Value

     108,638         —           —           2015   

Bridgeway Large Cap Value

     76,230         —           —           2016   

Holland Large Cap Growth

     469         —           6,532         2015   

Holland Large Cap Growth

     —           104         —           2016   

Holland Large Cap Growth

     —           156         —           2017   

Stephens Small Cap Growth

     5,465         —           4,046         2015   

Stephens Small Cap Growth

     285         55,745         —           2016   

Stephens Mid-Cap Growth

     13,270         —           76,967         2015   

Stephens Mid-Cap Growth

     —           60,289         —           2016   

Stephens Mid-Cap Growth

     —           38,647         —           2017   

The Manager recovered expenses from various classes of the Bridgeway Large Cap Value, Holland Large Cap Growth, Stephens Small Cap Growth, and Stephens Mid-Cap Growth Funds during the year ended December 31, 2015 as follows:

 

Fund

   Class      Excess Expense Carryover      Expiration of
Reimbursed Expenses
 

Bridgeway Large Cap Value

     Institutional       $ 108,638         2015   

Bridgeway Large Cap Value

     Institutional         76,230         2016   

Holland Large Cap Growth

     Institutional         469         2015   

Stephens Small Cap Growth

     Institutional         285         2016   

Stephens Small Cap Growth

     A         3,867         2015   

Stephens Small Cap Growth

     C         1,598         2015   

Stephens Mid-Cap Growth

     Y         931         2015   

Stephens Mid-Cap Growth

     Investor         6,278         2015   

Stephens Mid-Cap Growth

     A         5,405         2015   

Stephens Mid-Cap Growth

     C         656         2015   

Sales Commissions

The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the year ended December 31, 2015, Foreside collected $775, $109,023, $544, $3,886, and $2,917 for Bahl & Gaynor Small Cap Growth, Bridgeway Large Cap Value, Holland Large Cap Growth, Stephens Small Cap Growth, and Stephens Mid-Cap Growth Funds, respectively, from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended December 31, 2015, CDSC fees of $1,000 and $96 were collected for the Bridgeway Large Cap Value and Stephens Small Cap Growth Funds, respectively.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended December 31, 2015, CDSC fees of $101, $19,344, $181, $17, and $5,425 were collected for the Bahl & Gaynor Small Cap Growth, Bridgeway Large Cap Value, Holland Large Cap Growth, Stephens Small Cap Growth, and Stephens Mid-Cap Growth Funds, respectively.

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, 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

 

 

39


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

(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 net asset value (“NAV”) per share of the mutual fund on the day of valuation.

Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the 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 Fund’s Board of Trustees (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, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

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

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

The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended December 31, 2015, there were no transfers between levels.

 

 

40


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

As of December 31, 2015, the investments were classified as described below (in thousands):

 

Bahl & Gaynor Small Cap Growth Fund*

   Level 1     Level 2      Level 3      Total  

Common Stock

   $ 7,019      $ —         $ —         $ 7,019   

Short-Term Investments – Money Market Funds

     186        —           —           186   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 7,205      $ —         $ —         $ 7,205   
  

 

 

   

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

          

Futures Contracts

   $ 1      $ —         $ —         $ 1   

Bridgeway Large Cap Value Fund*

   Level 1     Level 2      Level 3      Total  

Common Stock

   $ 2,239,515      $ —         $ —         $ 2,239,515   

Short-Term Investments – Money Market Funds

     40,875        —           —           40,875   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 2,280,390      $ —         $ —         $ 2,280,390   
  

 

 

   

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

          

Futures Contracts

   $ (6   $ —         $ —         $ (6

Holland Large Cap Growth Fund*

   Level 1     Level 2      Level 3      Total  

Common Stock

   $ 95,394      $ —         $ —         $ 95,394   

Short-Term Investments – Money Market Funds

     4,564        —           —           4,564   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 99,958      $ —         $ —         $ 99,958   
  

 

 

   

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments

          

Futures Contracts

   $ 21      $ —         $ —         $ 21   

Stephens Small Cap Growth Fund*

   Level 1     Level 2      Level 3      Total  

Common Stock

   $ 507,865      $ —         $ —         $ 507,865   

Short-Term Investments – Money Market Funds

     1,539        —           —           1,539   

Securities Lending Collateral invested in Money Market Funds

     44,034        —           —           44,034   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 553,438      $ —         $ —         $ 553,438   
  

 

 

   

 

 

    

 

 

    

 

 

 

Stephens Mid-Cap Growth Fund*

   Level 1     Level 2      Level 3      Total  

Common Stock

   $ 110,332      $ —         $ —         $ 110,332   

Securities Lending Collateral invested in Money Market Funds

     4,815        —           —           4,815   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 115,147      $ —         $ —         $ 115,147   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

* Refer to the Schedule of Investments for industry information.

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

 

 

41


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Commission Recapture

The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If the Funds’ investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Funds. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Funds. This amount is reported with the net realized gain or loss in the Funds’ Statements of Operations, if applicable.

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Other

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

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 addition, the Fund 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 Fund to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.

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

 

 

42


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year. These re-characterizations are not recorded for financial statement purposes, but as an adjustment to the calculation of taxable income.

Other Investment Company Securities and Other Exchange Traded Products

The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, the Funds become a shareholder of that investment company. As a result, the Funds shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Funds shareholders directly bear in connection with the Funds’ own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Financial Derivative Instruments

Futures Contracts

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

Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

During the year ended December 31, 2015, the Funds entered into futures contracts primarily for exposing cash to markets.

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

 

Average Future Contracts Outstanding:

 

Fund

   Year Ended December 31, 2015  

Bahl & Gaynor Small Cap Growth

     3   

Bridgeway Large Cap Value

     335   

Holland Large Cap Growth

     26   

 

 

43


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1):

Fair Values of financial derivative instruments not accounted for as hedging instruments as of December 31, 2015:

 

Statements of Assets and Liabilities:

   Derivative    Bahl &
Gaynor
Small Cap
Growth
     Bridgeway
Large Cap
Value
     Holland
Large

Cap Growth
 

Receivable for variation margin from open futures contracts(2)

   Equity
Contracts
   $ 1       $ —         $ 21   

Payable for variation margin from open futures contracts(2)

   Equity
Contracts
     —           (6      —     

The effect of financial derivative instruments not accounted for as hedging instruments during the year ended December 31, 2015:

 

Statements of Operations:

   Derivative    Bahl &
Gaynor
Small Cap
Growth
     Bridgeway
Large Cap
Value
     Holland
Large

Cap Growth
 

Net realized gain (loss) from futures contracts

   Equity
Contracts
   $ (57    $ 4,471       $ 37   

Change in net unrealized appreciation or (depreciation) of futures contracts

   Equity
Contracts
     (3      163         (15

 

(1)  See Note 3 in the Notes to Financial Statements for additional information.
(2)  Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investment footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

6. Principal Risks

In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Funds’ income. Similar to credit risk, the Funds may be exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Funds’ investments may be illiquid and the Funds may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

Market Risks

The Funds’ investments in financial derivatives and other financial instruments expose the Funds to various risks such as, but not limited to, foreign currency and equity risks.

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.

 

 

44


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

If the Funds invest directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Funds, or, in the case of hedging positions, that the Funds’ base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Funds’ investments in foreign currency denominated securities may reduce the returns of the Fund.

The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, 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 investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.

Counterparty Credit Risk

A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as “Deposits with brokers for futures contracts”. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Funds and additional required collateral is delivered to/pledged by the Funds on the next business day. To the extent amounts due to the Funds from its counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

Offsetting Assets and Liabilities

The Funds are parties to enforceable master netting agreements between brokers and counterparties, such as International Swaps and Derivatives Association (“ISDA”) agreements, Master Repo Agreements and Master Forward Agreements 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

 

 

45


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, December 31, 2015 (in thousands).

Bahl & Gaynor Small Cap Growth Fund

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized Assets
     Gross Amounts
Offset in the
Statements of
Assets and
Liabilities
     Net Amounts of Assets
Presented in the
Statements of Assets
and Liabilities
 

Futures Contracts(1)

   $  1       $  —         $  1   

Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 31, 2015:

 

     Net amount of Assets
Presented in the Statements of
Assets and Liabilities
     Gross Amounts Not Offset in the
Statements of Assets and Liabilities
        

Counterparty

      Financial
Instruments
     Cash Collateral
Received
     Net
Amount
 

Goldman Sachs & Co.(1)

   $  1       $  —         $  —         $  1   

 

(1) The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only.

Bridgeway Large Cap Value Fund

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized
Liabilities
     Gross Amounts
Offset in the
Statements of
Assets and
Liabilities
     Net Amounts of Liabilities
Presented in the
Statements of Assets
and Liabilities
 

Futures Contracts(1)

   $  6       $  —         $  6   

Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty as of December 31, 2015:

 

     Net amount of Liabilities
Presented in the Statements
of Assets and Liabilities
     Gross Amounts Not Offset in the
Statements of Assets and Liabilities
        

Counterparty

      Financial
Instruments
     Cash Collateral
Received
     Net
Amount
 

Goldman Sachs & Co.(1)

   $ 6       $ —         $ —         $ 6   

 

(1)  The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only.

Holland Large Cap Growth Fund

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized Assets
     Gross Amounts
Offset in the
Statements of
Assets and
Liabilities
     Net Amounts of Assets
Presented in the
Statements of Assets
and Liabilities
 

Futures Contracts(1)

   $ 21       $ —         $ 21   

Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 31, 2015:

 

     Net amount of Assets
Presented in the Statements of
Assets and Liabilities
     Gross Amounts Not Offset in the
Statements of Assets and Liabilities
        

Counterparty

      Financial
Instruments
     Cash Collateral
Received
     Net
Amount
 

Goldman Sachs & Co.(1)

   $ 21       $ —         $ —         $ 21   

 

(1)  The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only.

 

 

46


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Stephens Small Cap Growth

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized Assets
     Gross Amounts
Offset in the
Statements of
Assets

and Liabilities
     Net Amounts of Assets
Presented in the
Statements of Assets
and Liabilities
 

Securities on Loan

   $ 43,058       $  —         $ 43,058   

Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 31, 2015:

 

     Net amount of Assets
Presented in the
Statements of Assets and
Liabilities
     Gross Amounts Not Offset in the
Statements of Assets and Liabilities
        

Counterparty

      Financial
Instruments
     Cash Collateral
Received(1)
     Net
Amount
 

Barclays Capital, Inc.

   $ 4,357       $ —         $ (4,357    $ —     

Citigroup Global Markets, Inc.

     218         —           (218      —     

Credit Suisse Securities (USA)

     6,093         —           (6,093      —     

Goldman, Sachs & Co.

     2,383         —           (2,383      —     

JPMorgan Clearing Corp.

     2,375         —           (2,375      —     

MS Securities Services Inc.

     15,480         —           (15,480      —     

National Financial Services Corp. (NFS)

     9,626         —           (9,626      —     

Scotia Capital USA Inc.

     2,355         —           (2,355      —     

UBS Securities LLC

     171         —           (171      —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 43,058       $ —         $ (43,058    $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $44,034 has been received in connection with securities lending transactions.

Stephens Mid-Cap Growth

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized Assets
     Gross Amounts
Offset in the
Statements of
Assets

and Liabilities
     Net Amounts of Assets
Presented in the
Statements of Assets
and Liabilities
 

Securities on Loan

   $ 4,716       $ —         $ 4,716   

Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 31, 2015:

 

     Net amount of Assets
Presented in the
Statements of Assets and
Liabilities
     Gross Amounts Not Offset in the
Statements of Assets and Liabilities
        

Counterparty

      Financial
Instruments
     Cash Collateral
Received(1)
     Net
Amount
 

Goldman Sachs & Co

   $ 1,081       $ —         $ (1,081    $ —     

JP Morgan Clearing Corp

     405         —           (405      —     

MS Securities Services Inc.

     429         —           (429      —     

National Financial Services Corp (NFS)

     2,545         —           (2,545      —     

SG Americas Securities, LLC

     256         —           (256      —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 4,716       $ —         $ (4,716    $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $4,815 has been received in connection with securities lending transactions.

7. Federal Income and Excise Taxes

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

 

 

47


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2015 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.

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.

A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.

The tax character of distributions paid were as follows (in thousands):

 

     Bahl & Gaynor Small Cap Growth      Bridgeway Large Cap Value      Holland Large Cap Growth  
     Year Ended
December 31,
2015
     Year Ended
December 31,
2014
     Year Ended
December 31,
2015
     Year Ended
December 31,
2014
     Year Ended
December 31,
2015
     Year Ended
December 31,
2014
 

Distributions paid from:

                 

Ordinary income*

                 

Institutional Class

   $ 21       $ 5       $ 8,277       $ 4,256       $ —         $ 4   

Y Class

     18         1         5,057         1,588         —           —     

Investor Class

     4         —           9,027         7,289         —           18   

A Class

     4         —           1,294         1,195         —           1   

C Class

     2         —           391         319         —           —     

Long-term capital gain

                 

Institutional Class

     45         —           15,842         2,542         1,832         1 683   

Y Class

     38         —           9,510         951         35         7   

Investor Class

     6         —           23,035         5,445         8,194         7 629   

A Class

     7         —           3,478         844         136         96   

C Class

     5         —           2,016         270         84         59   

Return of capital

                 

Institutional Class

     3         —           76         —           —           —     

Y Class

     3         —           47         —           —           —     

Investor Class

     1         —           83         —           —           —     

A Class

     1         —           12         —           —           —     

C Class

     —           —           4         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 158       $ 6       $ 78,149       $ 24,699       $ 10,281       $ 9,497   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Stephens Small Cap Growth      Stephens Mid-Cap Growth  
     Year Ended
December 31,
2015
     Year Ended
December 31,
2014
     Year Ended
December 31,
2015
     Year Ended
December 31,
2014
 

Distributions paid from:

           

Ordinary income*

           

Institutional Class

   $ —         $ —         $ —         $ —     

Y Class

     —           —           —           —     

Investor Class

     —           —           —           —     

A Class

     —           —           —           —     

C Class

     —           —           —           —     

Long-term capital gain

           

Institutional Class

     13,632         14,779         3,679         5,108   

Y Class

     6,447         7,036         120         185   

Investor Class

     2,688         6,460         795         1,310   

A Class

     397         420         832         1,127   

C Class

     113         122         114         130   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 23,277       $ 28,817       $ 5,540       $ 7,860   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

 

 

48


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

As of December 31, 2015 the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):

 

     Bahl &
Gaynor
Small Cap
Growth
    Bridgeway
Large Cap
Value
    Holland
Large Cap
Growth
    Stephens
Small Cap
Growth
    Stephens
Mid-Cap
Growth
 

Cost basis of investments for federal income tax purposes

   $ 7,430      $ 2,244,859      $ 73,155      $ 522,912      $ 102,168   

Unrealized appreciation

     468        154,280        28,918        84,589        22,863   

Unrealized depreciation

     (693     (118,749     (2,115     (54,063     (9,884
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net unrealized appreciation or (depreciation)

     (225     35,531        26,803        30,526        12,979   

Undistributed ordinary income

     —          —          —          —          —     

Accumulated capital and other losses

     (2     (20,968     (482     —          —     

Undistributed long-term capital gain

     —          —          —          4,821        4,642   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributable earnings or (deficits)

   $ (227   $ 14,563      $ 26,321      $ 35,347      $ 17,621   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or (depreciation) are attributable primarily to the tax deferral of losses from wash sales and the realization for tax purposes of unrealized gains or (losses) on certain derivative instruments.

Due to inherent differences in the recognition of income, expenses and realized gains or (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences derived from the reclassifications of income from real estate investment securities, net operating losses used to offset short-term capital gains, non-utilization of net operating losses, return of capital, and dividends that have been reclassed as of December 31, 2015 (in thousands):

 

     Bahl &
Gaynor
Small Cap
Growth
     Bridgeway
Large Cap
Value
    Holland Large
Cap Growth
    Stephens
Small Cap
Growth
    Stephens
Mid-Cap
Growth
 

Paid-in-capital

   $ —         $ —        $ (39   $ (4,765   $ (841

Undistributed (or overdistribution of) net investment income

     —           (380     39        4,766        841   

Accumulated net realized gain (loss)

     —           380        —          (1     —     

Unrealized appreciation or (depreciation) of investments and futures contracts

     —           —          —          —          —     

For the fiscal year ended December 31, 2015, the Funds did not have capital loss carryforwards.

Net capital losses (in thousands) incurred after October 31, 2015 and within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended December 31, 2015, the Bahl & Gaynor Small Cap Growth Fund deferred $23 of short-term capital loss and $21 of long-term capital gain, the Bridgeway Large Cap Value Fund deferred $9,888 of short-term capital loss and $11,080 of long-term capital loss, and the Holland Large Cap Growth Fund deferred $135 of short-term capital loss and $347 of long-term capital loss to January 1, 2016.

 

 

49


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

8. Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2015 were as follows (in thousands):

 

     Bahl &
Gaynor Small
Cap Growth
     Bridgeway
Large Cap
Value
     Holland
Large Cap
Growth
     Stephens
Small Cap
Growth
     Stephens
Mid-Cap
Growth
 

Purchases (excluding U.S. government securities)

   $ 6,788       $ 1,833,479       $ 23,611       $ 156,310       $ 23,462   

Sales and maturities (excluding U.S. government securities)

     3,267         741,742         31,566         319,695         36,118   

A summary of the Funds’ security lending collateral transactions in the Select Funds for the year ended December 31, 2015 is set forth below ( in thousands):

 

Fund

   Affiliate      December 31, 2014
Shares/Fair Value
     Purchases      Sales      December 31, 2015
Shares/Fair Value
     Dividend
Income
 

Stephens Small Cap Growth

     USG Select Fund       $ 43,153       $ 254,513       $ 264,641       $ 33,025       $ 3   

Stephens Mid-Cap Growth

     USG Select Fund         5,242         57,456         59,087         3,611         —     

9. Securities Lending

The Stephens Small Cap Growth and Stephens Mid-Cap Growth 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 as designated by the Manager.

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

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

Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The

 

 

50


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.

As of December 31, 2015, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):

 

Fund

   Fair Value of Securities on Loan      Non-Cash
Collateral
     Cash Collateral
Posted by Borrower
 

Stephens Small Cap Growth

   $ 43,058       $ —         $ 44,034   

Stephens Mid-Cap Growth

     4,716         —           4,815   

Cash collateral is listed on the Stephens Small Cap Growth and Stephens Mid-Cap Growth Funds’ Schedules of Investments and is shown on the Statements of Assets and Liabilities. Income earned on these investments, grossed up by the securities lending fees paid to the Manager, is included in “Income derived from securities lending” on the Statements of Operations.

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

10. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds (dollars and shares (in thousands):

For the Year Ended December 31, 2015

 

     Institutional Class     Y Class     Investor Class  

Bahl & Gaynor Small Cap Growth Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     27      $ 291        255      $ 2,733        176      $ 1,814   

Reinvestment of dividends

     7        69        6        58        1        11   

Shares redeemed

     (6     (59     (30     (314     (150     (1,482
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     28      $ 301        231      $ 2,477        27      $ 343   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     64       $ 686         18       $ 192   

Reinvestment of dividends

     1         13         1         7   

Shares redeemed

     (35      (365      (1      (12
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     30       $ 334         18       $ 187   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Bridgeway Large Cap Value Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     20,824      $ 493,978        16,261      $ 385,881        28,445      $ 676,887   

Reinvestment of dividends

     1,050        23,860        608        13,790        1,418        32,070   

Shares redeemed

     (4,986     (118,434     (3,599     (85,147     (14,804     (351,506
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     16,888      $ 399,404        13,270      $ 314,524        15,059      $ 357,451   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Bridgeway Large Cap Value Fund

   Shares      Amount      Shares      Amount  

Shares sold

     4,373       $ 103,916         2,607       $ 60,549   

Reinvestment of dividends

     193         4,339         88         1,938   

Shares redeemed

     (2,408      (57,244      (313      (7,181
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     2,158       $ 51,011         2,382       $ 55,306   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

51


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

     Institutional Class     Y Class     Investor Class  

Holland Large Cap Growth Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     41      $ 1,045        10      $ 282        157      $ 4,211   

Reinvestment of dividends

     74        1,832        2        35        336        8,193   

Shares redeemed

     (64     (1,774     (1     (24     (429     (11,433
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     51      $ 1,103        11      $ 293        64      $ 971   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Holland Large Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     17       $ 455         10       $ 250   

Reinvestment of dividends

     6         136         4         84   

Shares redeemed

     (10      (261      (5      (121
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     13       $ 330         9       $ 213   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Stephens Small Cap Growth Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     3,369      $ 56,084        1,841      $ 30,029        530      $ 8,403   

Reinvestment of dividends

     887        13,334        420        6,299        189        2,679   

Shares redeemed

     (6,014     (100,387     (3,132     (51,053     (6,153     (96,717
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) in shares outstanding

     (1,758   $ (30,969     (871   $ (14,725     (5,434   $ (85,635
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Stephens Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     87       $ 1,393         11       $ 161   

Reinvestment of dividends

     27         388         8         109   

Shares redeemed

     (154      (2,402      (29      (426
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (decrease) in shares outstanding

     (40    $ (621      (10    $ (156
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Stephens Mid-Cap Growth Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     919      $ 18,187        32      $ 653        29      $ 512   

Reinvestment of dividends

     203        3,650        6        114        49        777   

Shares redeemed

     (1,441     (28,147     (63     (1,225     (293     (5,071
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) in shares outstanding

     (319   $ (6,310     (25   $ (458     (215   $ (3,782
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Stephens Mid-Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     267       $ 4,587         40       $ 684   

Reinvestment of dividends

     48         745         7         107   

Shares redeemed

     (407      (6,870      (23      (388
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (92    $ (1,538      24       $ 403   
  

 

 

    

 

 

    

 

 

    

 

 

 

For the year ended December 31, 2014

 

     Institutional Class      Y Class      Investor Class  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount      Shares      Amount  

Shares sold

     29       $ 295         26       $ 276         12       $ 130   

Reinvestment of dividends

     1         5         —           1         —           —     

Shares redeemed

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     30       $ 300         26       $ 277         12       $ 130   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

      

 

52


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

     A Class      C Class  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     5       $ 55         4       $ 35   

Reinvestment of dividends

     —           —           —           —     

Shares redeemed

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     5       $ 55         4       $ 35   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Bridgeway Large Cap Value Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     10,620      $ 243,491        4,580      $ 105,825        19,278      $ 435,281   

Reinvestment of dividends

     282        6,758        100        2,387        532        12,696   

Shares redeemed

     (1,508     (34,472     (615     (14,093     (4,560     (103,940
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     9,394      $ 215,777        4,065      $ 94,119        15,250      $ 344,037   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Bridgeway Large Cap Value Fund

   Shares      Amount      Shares      Amount  

Shares sold

     3,516       $ 80,273         1,342       $ 30,255   

Reinvestment of dividends

     78         1,862         22         511   

Shares redeemed

     (685      (15,181      (35      (789
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     2,909       $ 66,954         1,329       $ 29,977   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Holland Large Cap Growth Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     30      $ 790        1      $ 20        406      $ 11,224   

Reinvestment of dividends

     64        1,687        —          7        296        7,645   

Shares redeemed

     (8     (226     (1     (30     (466     (12,671
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     86      $ 2,251        —        $ (3     236      $ 6,198   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Holland Large Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     11       $ 290         4       $ 92   

Reinvestment of dividends

     4         92         2         41   

Shares redeemed

     (14      (373      (9      (239
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     1       $ 9         (3    $ (106
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Stephens Small Cap Growth Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     7,803      $ 133,916        3,053      $ 52,340        2,277      $ 36,690   

Reinvestment of dividends

     865        14,382        412        6,840        408        6,431   

Shares redeemed

     (4,750     (80,142     (4,766     (78,398     (3,312     (52,961
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     3,918      $ 68,156        (1,301   $ (19,218     (627   $ (9,840
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Stephens Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     149       $ 2,425         59       $ 937   

Reinvestment of dividends

     25         401         7         112   

Shares redeemed

     (200      (3,184      (31      (491
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (26    $ (358      35       $ 558   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

      

 

53


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

     Institutional Class     Y Class     Investor Class  

Stephens Mid-Cap Growth Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     2,114      $ 42,235        146      $ 2,898        200      $ 3,555   

Reinvestment of dividends

     258        4,995        8        155        71        1,224   

Shares redeemed

     (1,018     (20,206     (77     (1,500     (929     (15,848
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     1,354      $ 27,024        77      $ 1,553        (658   $ (11,069
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class     C Class  

Stephens Mid-Cap Growth Fund

   Shares     Amount     Shares     Amount  

Shares sold

     269      $ 4,753        49      $ 854   

Reinvestment of dividends

     38        643        6        100   

Shares redeemed

     (377     (6,640     (34     (596
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (70   $ (1,244     21      $ 358   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

54


 

 

 

 

 

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55


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

 

     Institutional Class     Y Class     Investor Class  
     Year
Ended
Dec. 31,
2015
    July 15A
to
Dec. 31,
2014
    Year
Ended
Dec. 31,

2015
    July 15A
to
Dec. 31,
2014
    Year
Ended
Dec. 31,
2015
    July 15A
to
Dec. 31,
2014
 

Net asset value, beginning of period

   $ 10.71      $ 10.00      $ 10.71      $ 10.00      $ 10.69      $ 10.00   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

            

Net investment income (loss)

     0.08        0.02        0.06        0.01        0.05        0.01   

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

     (0.39     0.71        (0.38     0.72        (0.39     0.70   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.31     0.73        (0.32     0.73        (0.34     0.71   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

            

Dividends from net investment income

     (0.06     (0.02     (0.06     (0.02     (0.06     (0.02

Distributions from net realized gains

     (0.16     —          (0.16     —          (0.16     —     

Return of capital

     (0.01 )F      —          (0.01 )F      —          (0.01 )F      —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.23     (0.02     (0.23     (0.02     (0.23     (0.02
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 10.17      $ 10.71      $ 10.16      $ 10.71      $ 10.12      $ 10.69   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (2.96 )%      7.28 %C      (3.05 )%      7.28 %C      (3.25 )%      7.08 %C 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

            

Net assets, end of period (in thousands)

   $ 3,231      $ 3,103      $ 2,711      $ 388      $ 498      $ 239   

Ratios to average net assets:

            

Expenses, before reimbursements

     3.04     8.98 %D      2.76     11.71 %D      3.19     12.62 %D 

Expenses, net of reimbursements

     0.98     0.98 %D      1.08     1.08 %D      1.36     1.36 %D 

Net investment (loss), before expense reimbursements

     (1.33 )%      (7.51 )%D      (0.98 )%      (10.06 )%D      (1.47 )%      (11.12 )%D 

Net investment income (loss), net of reimbursements

     0.72     0.49 %D      0.70     0.57 %D      0.35     0.14 %D 

Portfolio turnover rate

     54     12 %E      54     12 %E      54     12 %E 

 

A Commencement of operations.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Not annualized.
D Annualized.
E Portfolio turnover rate is for the period from July 15, 2014 to December 31, 2014, and is not annualized.
F  The return of capital is calculated based on outstanding shares at the time of distribution.

 

      

 

56


American Beacon Bahl & Gaynor Small Cap GrowthSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

A Class     C Class  
Year
Ended
Dec. 31,
2015
    July 15A
to
Dec. 31,
2014
    Year
Ended
Dec. 31,
2015
    July 15 A
to
Dec. 31,
2014
 
$ 10.69      $ 10.00      $ 10.65      $ 10.00   

 

 

   

 

 

   

 

 

   

 

 

 
  0.03        0.00        (0.01     (0.02
  (0.38     0.71        (0.41     0.69   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.35     0.71        (0.42     0.67   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.06     (0.02     (0.06     (0.02
  (0.16     —          (0.16     —     
  (0.01 )F      —          (0.01 )F      —     

 

 

   

 

 

   

 

 

   

 

 

 
  (0.23     (0.02     (0.23     (0.02

 

 

   

 

 

   

 

 

   

 

 

 
$ 10.11      $ 10.69      $ 10.00      $ 10.65   

 

 

   

 

 

   

 

 

   

 

 

 
  (3.34 )%      7.08 %C      (4.01 )%      6.68 %C 

 

 

   

 

 

   

 

 

   

 

 

 
$ 455      $ 164      $ 309      $ 142   
  2.88     13.84 %D      3.84     13.72 %D 
  1.38     1.38 %D      2.13     2.13 %D 
  (1.08 )%      (12.35 )%D      (2.09 )%      (12.23 )%D 
  0.41     0.10 %D      (0.38 )%      (0.64 )%D 
  54     12 %E      54     12 %E 

 

      

 

57


American Beacon Bridgeway Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
    

 

Year Ended December 31,

    Six
Months
Ended
Dec. 31,
2012
   

 

Year Ended June 30,

 
   2015     2014     2013       2012     2011  

Net asset value, beginning of period

   $ 23.89      $ 21.39      $ 15.85      $ 14.80      $ 14.62      $ 11.44   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

            

Net investment income

     0.28        0.10        0.11        0.20        0.24        0.20 A 

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

     (0.58     2.94        5.87        1.14        0.12        3.21   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.30     3.04        5.98        1.34        0.36        3.41   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

            

Dividends from net investment income

     (0.29     (0.17     (0.11     (0.29     (0.18     (0.23

Distributions from net realized gains

     (0.55     (0.37     (0.33     —          —          —     

Return of capital

     (0.00 )G      —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.84     (0.54     (0.44     (0.29     (0.18     (0.23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 22.75      $ 23.89      $ 21.39      $ 15.85      $ 14.80      $ 14.62   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (1.23 )%      14.18     37.77     9.04 %C      2.60     30.02
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

            

Net assets, end of period (in thousands)

   $ 682,849      $ 313,661      $ 79,889      $ 26,669      $ 26,950      $ 29,647   

Ratios to average net assets:

            

Expenses, before reimbursements or recoupments

     0.75     0.79     1.01     1.73 %D      1.30     1.17

Expenses, net of reimbursements or recoupments

     0.79     0.84     0.84     0.84 %D      0.82     0.84

Net investment income (loss), before reimbursements or recoupments

     1.61     1.08     0.98     1.38 %D      1.17     1.17

Net investment income (loss), net of reimbursements or recoupments

     1.57     1.04     1.16     2.27 %D      1.66     1.50

Portfolio turnover rate

     43     31     38     21 %C      36     43

 

A Per share amounts calculated based on average daily shares outstanding during the period.
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 Commencement of operations.
F Portfolio turnover rate is for the period from July 1, 2011 to June 30, 2012.
G The return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

 

      

 

58


American Beacon Bridgeway Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class     A Class  

 

Year Ended December 31,

    Six
Months
Ended
Dec. 31,
2012
    Feb. 3E
to
June 30,
2012
   

 

Year Ended December 31,

    Six
Months
Ended
Dec. 31,
2012
    Feb. 3E
to
June 30,
2012
   

 

Year Ended December 31,

    Six
Months
Ended
Dec. 31,
2012
    Feb. 3E
to
June 30,
2012
 
2015     2014     2013         2015     2014     2013         2015     2014     2013      
$ 23.84      $ 21.35      $ 15.84      $ 14.80      $ 14.46      $ 23.77      $ 21.28      $ 15.81      $ 14.78      $ 14.46      $ 23.66      $ 21.22      $ 15.78      $ 14.77      $ 14.46   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  0.27        0.13        0.22        0.07        0.09        0.25        0.14        0.21        0.12        0.03        0.27        0.09        0.19        0.15        0.01   
  (0.57     2.90        5.72        1.26        0.25        (0.61     2.82        5.68        1.19        0.29        (0.64     2.84        5.64        1.15        0.30   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.30     3.03        5.94        1.33        0.34        (0.36     2.96        5.89        1.31        0.32        (0.37     2.93        5.83        1.30        0.31   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.30     (0.17     (0.10     (0.29     —          (0.22     (0.10     (0.09     (0.28     —          (0.21     (0.12     (0.06     (0.29     —     
  (0.55     (0.37     (0.33     —          —          (0.55     (0.37     (0.33     —          —          (0.55     (0.37     (0.33     —          —     
  (0.00 )G      —          —          —          —          (0.00 )G      —          —          —          —          (0.00 )G      —          —          —          —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.85     (0.54     (0.43     (0.29     —          (0.77     (0.47     (0.42     (0.28     —          (0.76     (0.49     (0.39     (0.29     —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 22.69      $ 23.84      $ 21.35      $ 15.84      $ 14.80      $ 22.64      $ 23.77      $ 21.28      $ 15.81      $ 14.78      $ 22.53      $ 23.66      $ 21.22      $ 15.78      $ 14.77   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (1.26 )%      14.15     37.55     8.98 %C      2.35 %C      (1.51 )%      13.89     37.28     8.84 %C      2.21 %C      (1.56 )%      13.76     37.01     8.78 %C      2.14 %C 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 414,585      $ 119,162      $ 19,914      $ 36      $ 5      $ 977,719      $ 668,659      $ 274,114      $ 489      $ 215      $ 147,395      $ 103,717      $ 31,300      $ 311      $ 276   
  0.81     0.84     0.93     3.75 %D      144.38 %D      1.09     1.11     1.08     2.26 %D      18.30 %D      1.12     1.19     1.38     2.21 %D      15.39 %D 
  0.81     0.85     0.94     0.93 %D      0.94 %D      1.09     1.11     1.09     1.21 %D      1.22 %D      1.12     1.21     1.34     1.33 %D      1.34 %D 
  1.55     1.03     1.07     (0.51 )%D      (141.90 )%D      1.28     0.76     0.95     1.00 %D      (15.48 )%D      1.25     0.69     0.61     0.90 %D      (13.13 )%D 
  1.55     1.03     1.06     2.31 %D      1.54 %D      1.28     0.76     0.94     2.05 %D      1.59 %D      1.25     0.67     0.66     1.78 %D      0.92 %D 
  43     31     38     21 %C      36 %F      43     31     38     21 %C      36 %F      43     31     38     21 %C      36 %F 

 

      

 

59


American Beacon Bridgeway Large Cap Value FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     C Class  
    

 

Year Ended December 31,

    Six
Months
Ended
Dec. 31,
2012
    Feb. 3E
to
June 30,
2012
 
   2015     2014     2013      

Net asset value, beginning of period

   $ 23.27      $ 21.00      $ 15.70      $ 14.73      $ 14.46   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.13        0.02        0.18        0.09        0.02   

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

     (0.66     2.69        5.47        1.17        0.25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.53     2.71        5.65        1.26        0.27   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.11     (0.07     (0.02     (0.29     —     

Distributions from net realized gains

     (0.55     (0.37     (0.33     —          —     

Return of capital

     (0.00 )G      —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.66     (0.44     (0.35     (0.29     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 22.08      $ 23.27      $ 21.00      $ 15.70      $ 14.73   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (2.27 )%      12.88     36.02     8.54 %C      1.87 %C 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 84,411      $ 33,536      $ 2,346      $ 20      $ 14   

Ratios to average net assets:

          

Expenses, before reimbursements or recoupments

     1.87     1.92     2.13     6.81 %D      64.88 %D 

Expenses, net of reimbursements or recoupments

     1.87     1.94     2.09     1.77 %D      2.09 %D 

Net investment income (loss), before reimbursements or recoupments

     0.48     (0.05 )%      (0.13 )%      (3.55 )%D      (62.47 )%D 

Net investment income (loss), net of reimbursements or recoupments

     0.48     (0.08 )%      (0.08 )%      1.49 %D      0.32 %D 

Portfolio turnover rate

     43     31     38     21 %C      36 %F 

 

A  Per share amounts calculated based on average daily shares outstanding during the period.
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  Commencement of operations.
F  Portfolio turnover rate is for the period from July 1, 2011 to June 30, 2012.
G The return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

 

      

 

60


 

 

 

 

 

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61


American Beacon Holland Large Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
     Year Ended December 31,  
   2015     2014     2013     2012     2011  

Net asset value, beginning of period

   $ 25.88      $ 26.57      $ 21.60      $ 20.30      $ 20.00   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     0.06        0.03        0.02        0.09        (0.02

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

     1.67        1.94        7.02        2.47        0.71   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     1.73        1.97        7.04        2.56        0.69   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     —          —          (0.01     (0.08     —     

Distributions from net realized gains

     (2.81     (2.66     (2.06     (1.18     (0.39
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (2.81     (2.66     (2.07     (1.26     (0.39
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 24.80      $ 25.88      $ 26.57      $ 21.60      $ 20.30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     6.70     7.31     32.73     12.57     3.47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 18,601      $ 18,103      $ 16,292      $ 1,619      $ 1,193   

Ratios to average net assets:

          

Expenses, before reimbursements or recoupments

     0.88     0.89     0.86     1.32     1.49

Expenses, net of reimbursements or recoupments

     0.89     0.89     0.89     0.96     1.20

Net investment income (loss), before expense reimbursements or recoupments

     0.26     0.14     0.24     0.07     (0.38 )% 

Net investment income (loss), net of reimbursements or recoupments

     0.25     0.13     0.21     0.43     (0.09 )% 

Portfolio turnover rate

     24     27     29     18     12

 

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 Commencement of operations.
C Not annualized.
D Annualized.
E Portfolio turnover rate is for the period from March 23, 2012 to December 31, 2012.

 

 

62


American Beacon Holland Large Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class     A Class  

 

Year Ended
December 31,

    March 23B
to
Dec. 31,
2012
   

 

Year Ended December 31,

   

 

Year Ended December 31,

 
2015      2014     2013       2015     2014     2013     2012     2011     2015     2014     2013     2012     2011  
$ 25.79       $ 26.53      $ 21.59      $ 23.00      $ 25.57      $ 26.36      $ 21.52      $ 20.24      $ 19.97      $ 25.39      $ 26.22      $ 21.43      $ 20.23      $ 19.96   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.02)         (0.02     0.02        0.09        (0.02     (0.04     (0.05     0.02        (0.05     0.00        (0.08     (0.03     0.03        (0.05
  1.70         1.94        6.98        (0.26     1.64        1.91        6.95        2.45        0.71        1.59        1.91        6.88        2.41        0.71   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  1.68         1.92        7.00        (0.17     1.62        1.87        6.90        2.47        0.66        1.59        1.83        6.85        2.44        0.66   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —           —          0.00        (0.06     —          —          0.00        (0.01     —          —          —          0.00        (0.06     —     
  (2.81)         (2.66     (2.06     (1.18     (2.81     (2.66     (2.06     (1.18     (0.39     (2.81     (2.66     (2.06     (1.18     (0.39

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (2.81)         (2.66     (2.06     (1.24     (2.81     (2.66     (2.06     (1.19     (0.39     (2.81     (2.66     (2.06     (1.24     (0.39
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 24.66       $ 25.79      $ 26.53      $ 21.59      $ 24.38      $ 25.57      $ 26.36      $ 21.52      $ 20.24      $ 24.17      $ 25.39      $ 26.22      $ 21.43      $ 20.23   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  6.53%         7.13     32.59     (0.79 )%C      6.35     6.99     32.21     12.18     3.33     6.28     6.88     32.11     11.99     3.33

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 334       $ 74      $ 79      $ 23      $ 78,922      $ 81,154      $ 77,426      $ 66,568      $ 58,682      $ 1,271      $ 1,012      $ 1,028      $ 467      $ 13   
  1.08%         1.11     0.97     10.18 %D      1.24     1.15     1.26     1.44     1.64     1.29     1.35     1.40     2.73     10.06
  1.02%         1.08     0.99     0.98 %D      1.24     1.21     1.27     1.29     1.35     1.29     1.34     1.39     1.38     1.40
  0.00%         (0.10 )%      0.15     (8.77 )%D      (0.10 )%      (0.13 )%      (0.17 )%      (0.08 )%      (0.53 )%      (0.15 )%      (0.32 )%      (0.28 )%      (0.97 )%      (8.94 )% 
  0.06%         (0.06 )%      0.12     0.43 %D      (0.10 )%      (0.19 )%      (0.18 )%      0.07     (0.24 )%      (0.15 )%      (0.31 )%      (0.27 )%      0.37     (0.28 )% 
  24%         27     29     18 %E      24     27     29     18     12     24     27     29     18     12   

 

 

63


American Beacon Holland Large Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     C Class  
    

 

Year Ended December 31,

    March 23A
to
Dec. 31,
2012
 
   2015     2014     2013    

Net asset value, beginning of period

   $ 24.75      $ 25.82      $ 21.29      $ 22.90   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

        

Net investment income (loss)

     (0.04     (0.36     (0.17     0.01   

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

     1.40        1.95        6.76        (0.38
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     1.36        1.59        6.59        (0.37
  

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

        

Dividends from net investment income

     —          —          0.00        (0.06

Distributions from net realized gains

     (2.81     (2.66     (2.06     (1.18
  

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (2.81     (2.66     (2.06     (1.24
  

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 23.30      $ 24.75      $ 25.82      $ 21.29   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     5.51     6.05     31.10     (1.65 )%C 
  

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

        

Net assets, end of period (in thousands)

   $ 757      $ 592      $ 703      $ 281   

Ratios to average net assets:

        

Expenses, before reimbursements or recoupments

     2.05     2.10     2.15     6.17 %D 

Expenses, net of reimbursements or recoupments

     2.04     2.09     2.14     2.12 %D 

Net investment income (loss), before expense reimbursements or recoupments

     (0.91 )%      (1.07 )%      (1.04 )%      (3.85 )%D 

Net investment income (loss), net of reimbursements or recoupments

     (0.90 )%      (1.07 )%      (1.03 )%      0.20 %D 

Portfolio turnover rate

     24     27     29     18 %E 

 

A Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
B Commencement of operations.
C Not annualized.
D Annualized.
E Portfolio turnover rate is for the period from March 23, 2012 to December 31, 2012.

 

 

64


 

 

 

 

 

 

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65


American Beacon Stephens Small Cap GrowthSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
    

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
   

 

Year Ended

November 30,

 
   2015     2014     2013       2012I     2011I  

Net asset value, beginning of period

   $ 16.57      $ 17.83      $ 12.99      $ 13.54      $ 13.14      $ 12.03   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

            

Net investment income (loss)

     (0.13     (0.07     (0.05     0.06        (0.04 )J      (0.11 )A 

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

     (0.65     (0.49     5.60        0.23        1.43        1.37   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.78     (0.56     5.55        0.29        1.39        1.26   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

            

Dividends from net investment income

     —          —          0.00        —          —          —     

Distributions from net realized gains

     (0.71     (0.70     (0.67     (0.84     (0.99     (0.15

Return of capital K

     —          —          (0.04     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.71     (0.70     (0.71     (0.84     (0.99     (0.15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interests

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 15.08      $ 16.57      $ 17.83      $ 12.99      $ 13.54      $ 13.14   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (4.69 )%      (3.14 )%      42.93     2.15 %F      11.74     10.49
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

            

Net assets, end of period (in thousands)

   $ 300,919      $ 359,959      $ 317,341      $ 130,342      $ 88,815      $ 52,336   

Ratios to average net assets:

            

Expenses, before reimbursements or recoupments C

     1.08     1.08     1.11     1.20 %G      1.20     1.15

Expenses, net of reimbursements or recoupments C

     1.08     1.10     1.09     1.06 %G      1.10     1.10

Net investment income (loss), before reimbursements or recoupments

     (0.67 )%      (0.59 )%      (0.73 )%      0.54 %G      (0.84 )%      (0.91 )% 

Net investment income (loss), net of reimbursements or recoupments

     (0.67 )%      (0.61 )%      (0.71 )%      0.68 %G      (0.74 )%      (0.86 )% 

Portfolio turnover rate

     25     46     39     6 %F      45     36

 

A The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Expense ratios may exceed stated expense caps in Note 2 due in part to security lending expenses.
D Commencement of operations.
E Amount represents less than $0.01 per share.
F Not annualized.
G Annualized.
H Portfolio turnover rate is for the period from December 1, 2011 through November 30, 2012.
I Prior to the reorganization on February 24, 2012, the Institutional and Investor Classes were known as Class I and Class A, respectively.
J For purposes of this calculation, the change in undistributed net investment income was derived by dividing the change in undistributed net investment income by shares outstanding at November 30, 2012.
K The return of capital is calculated based on outstanding shares at the time of distribution.

 

 

66


American Beacon Stephens Small Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class  

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
    Feb. 24D
to
Nov. 30,
2012
   

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
   

 

Year Ended
November 30,

 
2015     2014     2013         2015     2014     2013       2012I     2011I  
$ 16.54      $ 17.81      $ 12.98      $ 13.54      $ 13.59      $ 15.71      $ 16.98      $ 12.42      $ 12.99      $ 12.67      $ 11.64   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.14     (0.12     (0.04     0.01        (0.02     (0.82     (0.16     (0.04     0.02        (0.06 )J      (0.14 )A 
  (0.67     (0.45     5.58        0.27        (0.03     0.02        (0.41     5.31        0.25        1.37        1.32   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.81     (0.57     5.54        0.28        (0.05     (0.80     (0.57     5.27        0.27        1.31        1.18   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —          —          0.00        —          —          —          —          0.00        —          —          —     
  (0.71     (0.70     (0.68     (0.84     —          (0.71     (0.70     (0.69     (0.84     (0.99     (0.15
  —          —          (0.03     —          —          —          —          (0.02     —          —          —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.71     (0.70     (0.71     (0.84     —          (0.71     (0.70     (0.71     (0.84     (0.99     (0.15

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —          —          —          —          —          —          —          —          —          —          (0.00 )E 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 15.02      $ 16.54      $ 17.81      $ 12.98      $ 13.54      $ 14.20      $ 15.71      $ 16.98      $ 12.42      $ 12.99      $ 12.67   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (4.88 )%      (3.20 )%      42.88     2.07 %F      (0.37 )%F      (5.08 )%      (3.35 )%      42.62     2.08 %F      11.44     10.15

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 142,980      $ 171,901      $ 208,196      $ 4,563      $ 2,699      $ 55,922      $ 147,227      $ 169,799      $ 69,786      $ 67,506      $ 47,101   
  1.14     1.16     1.19     1.36 %G      2.05 %G      1.40     1.31     1.39     1.62 %G      1.56     1.40
  1.14     1.16     1.19     1.16 %G      1.21 %G      1.39     1.37     1.35     1.34 %G      1.36     1.35
  (0.74 )%      (0.67 )%      (0.79 )%      0.19 %G      (1.57 )%G      (1.01 )%      (0.81 )%      (1.01 )%      0.23 %G      (1.20 )%      (1.16 )% 
  (0.74 )%      (0.686 )%      (0.78 )%      0.38 %G      (0.73 )%G      (1.00 )%      (0.88 )%      (0.96 )%      0.50 %G      (1.00 )%      (1.11 )% 
  25     46     39     6 %F      45 %H      25     46     39     6 %F      45     36

 

 

67


American Beacon Stephens Small Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     A Class     C Class  
    

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
    Feb. 24D
to
Nov. 30,
2012
   

 

Year Ended
December 31,

    One
Month
Ended
Dec. 31,
2012
    Feb. 24D
to
Nov. 30,
2012
 
   2015     2014     2013         2015     2014     2013      

Net asset value, beginning of period

   $ 15.61      $ 16.91      $ 12.40      $ 12.98      $ 13.07      $ 15.26      $ 16.66      $ 12.32      $ 12.91      $ 13.07   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                    

Net investment income (loss)

     (0.19     (0.18     (0.10     0.01        (0.07     (0.31     (0.24     (0.13     0.00        (0.06

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

     (0.61     (0.42     5.32        0.25        (0.02     (0.59     (0.46     5.18        0.25        (0.10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.80     (0.60     5.22        0.26        (0.09     (0.90     (0.70     5.05        0.25        (0.16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                    

Dividends from net investment income

     —          —          0.00        —          —          —          —          0.00        —          —     

Distributions from net realized gains

     (0.71     (0.70     (0.71     (0.84     —          (0.71     (0.70     (0.71     (0.84     —     

Return of capital K

     —          —          (0.00 )E      —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.71     (0.70     (0.71     (0.84     —          (0.71     (0.70     (0.71     (0.84     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Redemption fees added to beneficial interests

     —          —          —          —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 14.10      $ 15.61      $ 16.91      $ 12.40      $ 12.98      $ 13.65      $ 15.26      $ 16.66      $ 12.32      $ 12.91   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (5.11 )%      (3.54 )%      42.28     2.01 %F      (0.69 )%F      (5.89 )%      (4.20 )%      41.17     1.94 %F      (1.22 )%F 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                    

Net assets, end of period (in thousands)

   $ 8,197      $ 9,702      $ 10,942      $ 3,131      $ 2,941      $ 2,349      $ 2,771      $ 2,447      $ 349      $ 343   

Ratios to average net assets:

                    

Expenses, before reimbursements or recoupments C

     1.44     1.51     1.57     1.79 %G      2.08 %G      2.19     2.26     2.33     3.21 %G      6.15 %G 

Expenses, net of reimbursements or recoupments C

     1.48     1.52     1.59     1.58 %G      1.61 %G      2.26     2.27     2.34     2.33 %G      2.35 %G 

Net investment income (loss), before reimbursements or recoupments

     (1.03 )%      (1.02 )%      (1.18 )%      0.04 %G      (1.68 )%G      (1.79 )%      (1.76 )%      (1.93 )%      (1.36 )%G      (5.71 )%G 

Net investment income (loss), net of reimbursements or recoupments

     (1.08 )%      (1.03 )%      (1.20 )%      0.25 %G      (1.21 )%G      (1.85 )%      (1.77 )%      (1.94 )%      (0.48 )%G      (1.91 )%G 

Portfolio turnover rate

     25     46     39     6 %F      45 %H      25     46     39     6 %F      45 %H 

 

A The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Expense ratios may exceed stated expense caps in Note 2 due in part to security lending expenses.
D Commencement of operations.
E Amount represents less than $0.01 per share.
F Not annualized.
G Annualized.
H Portfolio turnover rate is for the period from December 1, 2011 through November 30, 2012.
I Prior to the reorganization on February 24, 2012, the Institutional and Investor Classes were known as Class I and Class A, respectively.
J For purposes of this calculation, the change in undistributed net investment income was derived by dividing the change in undistributed net investment income by shares outstanding at November 30, 2012.
K The return of capital is calculated based on outstanding shares at the time of distribution.

 

 

68


 

 

This page intentionally left blank.

 

 

 

 

69


American Beacon Stephens Mid-Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
    

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
   

 

Year Ended
November 30,

 
   2015     2014     2013       2012A     2011A  

Net asset value, beginning of period

   $ 19.24      $ 19.76      $ 15.38      $ 15.24      $ 13.69      $ 12.44   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

            

Net investment income (loss)

     (0.13     (0.04     (0.05     0.02        —   B      (0.10 )C 

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

     (0.11     0.72        5.12        0.20        1.55        1.35   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.24     0.68        5.07        0.22        1.55        1.25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

            

Dividends from net investment income

     —          —          (0.01     —          —          —     

Distributions from net realized gains

     (0.89     (1.20     (0.66     (0.08     —          —     

Return of capital K

     —          —          (0.02     —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.89     (1.20     (0.69     (0.08     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 18.11      $ 19.24      $ 19.76      $ 15.38      $ 15.24      $ 13.69   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return D

     (1.23 )%      3.41     33.14     1.43 %H      11.32     10.05
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

            

Net assets, end of period (in thousands)

   $ 76,666      $ 87,620      $ 63,236      $ 31,005      $ 30,503      $ 13,208   

Ratios to average net assets:

            

Expenses, before reimbursements or recoupments E

     1.01     1.05     1.12     1.31 %F      1.28     1.65

Expenses, net of reimbursements or recoupments E

     0.99     1.00     0.99     0.99 %F      1.03     1.25

Net investment income (loss), before reimbursements or recoupments

     (0.54 )%      (0.53 )%      (0.70 )%      1.37 %F      (0.62 )%      (1.12 )% 

Net investment income (loss), net of reimbursements or recoupments

     (0.53 )%      (0.48 )%      (0.58 )%      1.69 %F      (0.37 )%      (0.72 )% 

Portfolio turnover rate

     19     37     25     1 %H      27     30

 

A Prior to the reorganization on February 24, 2012, the Institutional Class and Investor Classes were known as Class I and Class A, respectively.
B For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period.
C The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period.
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 Expense ratios may exceed stated expense caps in Note 2 due in part to security lending expenses.
F Annualized.
G Commencement of operations.
H Not annualized.
I Portfolio turnover rate is for the period from December 1, 2011 through November 30, 2012.
J Amount represents less than $0.01 per share.
K The return of capital is calculated based on outstanding shares at the time of distribution.

 

 

70


American Beacon Stephens Mid-Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

Y Class     Investor Class  

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
    Feb. 24G
to
Nov. 30,
2012
   

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
    Year Ended
November 30,
 
2015     2014     2013         2015     2014     2013       2012A     2011A  
$ 19.22      $ 19.76      $ 15.38      $ 15.23      $ 15.09      $ 16.97      $ 17.64      $ 13.83      $ 13.72      $ 12.36      $ 11.26   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.15     (0.06     (0.08     0.02        (0.03     (0.32     (0.36     (0.08     0.02        (0.14 )B      (0.11 )C 
  (0.12     0.72        5.15        0.21        0.17        0.04        0.89        4.58        0.17        1.50        1.21   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.27     0.66        5.07        0.23        0.14        (0.28     0.53        4.50        0.19        1.36        1.10   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  —          —          (0.01     —          —          —          —          (0.01     —          —          —     
  (0.89     (1.20     (0.68     (0.08     —          (0.89     (1.20     (0.68     (0.08     —          —     
  —          —          (0.00 )J      —          —          —          —          (0.00 )J      —          —          —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (0.89     (1.20     (0.69     (0.08     —          (0.89     (1.20     (0.69     (0.08     —          —     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 18.06      $ 19.22      $ 19.76      $ 15.38      $ 15.23      $ 15.80      $ 16.97      $ 17.64      $ 13.83      $ 13.72      $ 12.36   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  (1.39 )%      3.31     33.14     1.50 %H      0.93 %H      (1.63 )%      2.97     32.71     1.37 %H      11.00     9.77

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 2,480      $ 3,109      $ 1,672      $ 374      $ 222      $ 14,815      $ 19,552      $ 31,912      $ 18,585      $ 18,092      $ 20,034   
  1.06     1.10     1.14     1.53 %F      3.85 %F      1.32     1.27     1.38     1.68 %F      1.67     1.91
  1.09     1.10     1.09     1.09 %F      1.09 %F      1.35     1.38     1.37     1.37 %F      1.40     1.50
  (0.60 )%      (0.57 )%      (0.73 )%      0.69 %F      (3.09 )%F      (0.85 )%      (0.77 )%      (0.98 )%      0.94 %F      (1.04 )%      (1.35 )% 
  (0.63 )%      (0.58 )%      (0.68 )%      1.13 %F      (0.33 )%F      (0.89 )%      (0.88 )%      (0.97 )%      1.26 %F      (0.76 )%      (0.94 )% 
  19     37     25     1 %H      27 %I      19     37     25     1 %H      27     30

 

 

71


American Beacon Stephens Mid-Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     A Class     C Class  
    

 

Year Ended December 31,

    One
Month
Ended
Dec. 31,
2012
    Feb. 24G
to
Nov. 30,
2012
   

 

Year Ended
December 31,

    One
Month
Ended
Dec. 31,
2012
    Feb. 24G
to
Nov. 30,
2012
 
   2015     2014     2013         2015     2014     2013      

Net asset value, beginning of period

   $ 16.94      $ 17.61      $ 13.83      $ 13.72      $ 13.62      $ 16.57      $ 17.38      $ 13.75      $ 13.63      $ 13.62   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

                    

Net investment income (loss)

     (0.20     (0.19     (0.10     0.02        (0.05     (0.17     (0.27     (0.16     0.02        (0.04

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

     (0.08     0.72        4.57        0.17        0.15        (0.23     0.66        4.47        0.18        0.05   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.28     0.53        4.47        0.19        0.10        (0.40     0.39        4.31        0.20        0.01   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

                    

Dividends from net investment income

     —          —          (0.01     —          —          —          —          0.00        —          —     

Distributions from net realized gains

     (0.89     (1.20     (0.68     (0.08     —          (0.89     (1.20     (0.68     (0.08     —     

Return of capital K

     —          —          (0.00 )J      —          —          —          —          (0.00 )J      —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.89     (1.20     (0.69     (0.08     —          (0.89     (1.20     (0.68     (0.08     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 15.77      $ 16.94      $ 17.61      $ 13.83      $ 13.72      $ 15.28      $ 16.57      $ 17.38      $ 13.75      $ 13.63   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return D

     (1.63 )%      2.97     32.49     1.37 %H      0.73 %H      (2.39 )%      2.21     31.35     1.45 %H      0.07 %H 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

                    

Net assets, end of period (in thousands)

   $ 13,908      $ 16,506      $ 18,396      $ 7,302      $ 7,063      $ 2,123      $ 1,902      $ 1,626      $ 302      $ 147   

Ratios to average net assets:

                    

Expenses, before reimbursements or recoupments E

     1.36     1.45     1.57     1.81 %F      1.83 %F      2.11     2.22     2.28     2.68 %F      14.54 %F 

Expenses, net of reimbursements or recoupments E

     1.39     1.45     1.49     1.49 %F      1.49 %F      2.14     2.20     2.24     2.24 %F      2.24 %F 

Net investment income (loss), before reimbursements or recoupments

     (0.90 )%      (0.94 )%      (1.16 )%      0.86 %F      (1.04 )%F      (1.65 )%      (1.69 )%      (1.87 )%      0.15 %F      (13.65 )%F 

Net investment income (loss), net of reimbursements or recoupments

     (0.93 )%      (0.94 )%      (1.09 )%      1.18 %F      (0.70 )%F      (1.68 )%      (1.68 )%      (1.84 )%      0.59 %F      (1.36 )%F 

Portfolio turnover rate

     19     37     25     1 %H      27 %I      19     37     25     1 %H      27 %I 

 

A Prior to the reorganization on February 24, 2012, the Institutional Class and Investor Classes were known as Class I and Class A, respectively.
B For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period.
C The Predecessor Fund calculated the change in undistributed net investment income per share by dividing the change in undistributed net investment income by average shares outstanding for the period.
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 Expense ratios may exceed stated expense caps in Note 2 due in part to security lending expenses.
F Annualized.
G Commencement of operations.
H Not annualized.
I Portfolio turnover rate is for the period from December 1, 2011 through November 30, 2012.
J Amount represents less than $0.01 per share.
K The return of capital is calculated based on outstanding shares at the time of distribution.

 

 

72


American Beacon FundsSM

Privacy Policy and Federal Tax Information

December 31, 2015 (Unaudited)

 

 

Privacy Policy

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

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

 

    information we receive from you on applications or other forms;

 

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

 

    information we receive from third parties.

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

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

Federal Tax Information

Certain tax information regarding the Funds is required to be provided to shareholders based upon the Funds’ income and distribution for the taxable year ended December 31, 2015. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2015.

The Funds designated the following items with regard to distributions paid during the fiscal year ended December 31, 2015. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

 

     Bahl &
Gaynor
Small Cap
Growth
    Bridgeway
Large Cap
Value
    Holland
Large Cap
Growth
    Stephens
Small Cap
Growth
    Stephens
Mid-Cap
Growth
 

Corporate Dividends Received Deduction

     93.9     93.6     0.0     0.0     0.0

Qualified Dividend Income

     100.0     100.0     0.0     0.0     0.0

The Funds designated the following as short-term capital gain distributions for the year ended December 31, 2015:

 

Bahl & Gaynor Small Cap Growth Fund

   $ 8,002   

The Funds designated the following as long-term capital gain distributions for the year ended December 31, 2015:

 

Bahl & Gaynor Small Cap Growth Fund

   $ 109,466   

Bridgeway Large Cap Value Fund

     53,880,448   

Holland Large Cap Growth Fund

     10,280,979   

Stephens Small Cap Growth Fund

     23,276,880   

Stephens Mid-Cap Growth Fund

     5,540,175   

Shareholders will receive notification in January 2016 of the appropriate tax information necessary to prepare their 2015 income tax returns.

 

 

73


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 Las Colinas Boulevard East, Suite 1200, Irving, Texas 75039. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES

   Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
Alan D. Feld** (79)    Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).
NON-INTERESTED    Term   
TRUSTEES   

Lifetime of Trust

until removal,

resignation or

retirement*

  
Gilbert G. Alvarado (46)    Trustee since 2015    Director, Kura MD, Inc. (local telehealth organization) (2015-Present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present) Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-Present); Director, Sacramento Regional Technology Alliance (2011-Present); Director, Women’s Empowerment (2009-2014); Trustee, American Beacon Select Funds (2015-Present).
Joseph B. Armes (53)    Trustee since 2015    Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2013-Present); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Chief Operating Officer, Hicks Holdings, LLC (Hicks Family assets and investments) (2005-2010); Trustee, Baylor University Board of Regents (2001-2010); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present).
Gerard J. Arpey (57)    Trustee since 2012    Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).
W. Humphrey Bogart (71)    Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Brenda A. Cline (55)    Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc.(public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Eugene J. Duffy (61)    Trustee since 2008    Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).

 

 

74


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

NON-INTERESTED

   Term   
TRUSTEES   

Lifetime of Trust

until removal,

resignation or

retirement*

  
Thomas M. Dunning (73)    Trustee since 2008    Chairman Emeritus (2008-Present); Lockton Dunning Benefits (consulting firm in employee benefits); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present) (software consulting); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Richard A. Massman (72)   

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Barbara J. McKenna, CFA (52)    Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).

R. Gerald Turner (70)

225 Perkins Admin. Bldg.

Southern Methodist Univ.

Dallas, Texas75275

   Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012).
OFFICERS    Term   
   One Year   
Gene L. Needles, Jr. (61)   

President since 2009

Executive Vice President

since 2009

   President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Astro AB Borrower, Inc. (2015-Present); President, CEO and Director, Astro AB Acquisition, Inc.(2015-Present); President, CEO and Director, Astro AB Topco, Inc. (2015-Present), President, CEO and Director, Astro AB Holdings, LLC. (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc.; (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, L.L.C. (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).
Rosemary K. Behan (56)   

VP, Secretary and

Chief Legal

Officer since 2006

   Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Astro AB Borrower, Inc. (2015-Present); Secretary, Astro AB Acquisition, Inc. (2015-Present); Secretary, Astro AB Topco, Inc. (2015-Present); Secretary, Astro AB Holdings, LLC. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, L.L.C.(2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).
Brian E. Brett (55)    VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).
Erica Duncan (45)    VP Since 2011    Vice President, Marketing and Client Services, American Beacon Advisors, Inc. (2011-Present); Supervisor, Brand Marketing, Invesco (2010-2011).
Michael W. Fields (61)    VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).

 

 

75


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

OFFICERS

   Term   
   One Year   
Melinda G. Heika (54)   

Treasurer since

2010

   Treasurer, American Beacon Advisors, Inc. (2010-Present); Treasurer, Astro AB Borrower, Inc. (2015-Present); Treasurer, Astro AB Acquisition, Inc. (2015-Present); Treasurer, Astro AB Topco, Inc. (2015-Presnt); Treasurer, Astro AB Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, L.L.C. (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).
Terri L. McKinney (52)    VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.
Jeffrey K. Ringdahl (40)    VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Manager and Senior Vice President, American Private Equity Management, L.L.C. (2012-Present); Senior Vice President and Director, Astro AB Borrower, Inc. (2015-Present); Senior Vice President and Director, Astro AB Acquisition, Inc. (2015-Present); Senior Vice President and Director, Astro AB Topco, Inc. (2015-Present), Senior Vice President and Director, Astro AB Holdings, LLC.(2015-Present); Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010).
Samuel J. Silver (52)    VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.
Christina E. Sears (44)   

Chief Compliance

Officer since 2004

and Asst. Secretary since 1999

   Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, L.L.C. (2012-Present).
Sonia L. Bates (59)    Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011-Present), Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer, Astro AB Borrower, Inc. (2015-Present); Asst. Treasurer, Astro AB Acquisition, Inc.(2015-Present); Asst. Treasurer, Astro AB Topco, Inc. (2015-Present); Asst. Treasurer, Astro AB Holdings, LLC.; Asst. Treasurer, Lighthouse Holdings, Inc. (2011-2015); Asst. Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Asst. Treasurer, American Private Equity Management, L.L.C. (2012-Present).

 

* The Board adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 75.
** Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to one or more of the Trust’s sub-advisors.

 

 

76


      

 

 

 

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77


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:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

      
  
 
LOGO    LOGO

By Telephone:

Institutional, Y and Investor

Call (800) 658-5811

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

      
  
 

Availability of Quarterly Portfolio Schedules

 

In addition to the Schedule of Investments provided in each
semi-annual and annual report, the Fund files a complete schedule
of its portfolio holdings with the Securities and Exchange
Commission (“SEC”) on Form N-Q as of the first and third fiscal
quarters. The Fund’s Forms N-Q are available on the SEC’s
website at www.sec.gov. The Forms N-Q may also be reviewed
and copied at the SEC’s Public Reference Section, 100 F Street,
NE, Washington, D.C. 20549-1520. Information regarding the
operation of the SEC’s Public Reference Room may be obtained
by calling (202) 551-8090. A complete schedule of the Fund’s
portfolio holdings is also available on
www.americanbeaconfunds.com, approximately twenty days after
the end of each month.

  

Availability of Proxy Voting Policy and Records

 

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

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

    

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

    

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

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

 

 

American Beacon Funds, American Beacon Bahl & Gaynor Small Cap Growth Fund, American Beacon Bridgeway Large Cap Value Fund, American Beacon Holland Large Cap Growth Fund, American Beacon Stephens Small Cap Growth Fund, and American Beacon Stephens Mid-Cap Growth Fund are service marks of American Beacon Advisors, Inc.

AR 12/15


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.

 

Contents

 

 

President’s Message

     1   

Performance Overview

     3   

Schedule of Investments

     19   

Financial Statements

     34   

Notes to the Financial Statements

     38   

Financial Highlights

     58   

Additional Information

     Back Cover   

 

 

AHL MANAGED FUTURES STRATEGY FUND Investing in derivative instruments involves liquidity, credit, interest rate and market risks. The use of quantitative models may lead to high levels of trading and concentration among certain investments, resulting in higher trading costs and return volatility. Investing in foreign and emerging market securities may involve heightened risk due to currency fluctuations and economic and political risks. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. IONIC STRATEGIC ARBITRAGE FUND The Fund’s strategy of investing in a variety of arbitrage strategies entails certain risks including that the sub-advisor’s judgments about allocation between such strategies, as well as individual arbitrage opportunities, may not perform to expectations, resulting in the Fund’s underperformance or even losses versus other similar funds. Arbitrage is the simultaneous purchase and sale of an asset or assets to take advantage of a perceived pricing anomaly. Because the Fund may invest in fewer issuers than a more diversified portfolio, the fluctuating value of a single holding may have a greater effect on the value of the Fund. The Fund may have high portfolio turnover, which could increase the Fund’s transaction costs and possibly have a negative impact on performance. Small- or mid-capitalization stocks may involve greater volatility and lower liquidity than larger company stocks. The use of fixed-income securities, including convertible securities, entails interest rate and credit risks. In addition, the value of a convertible security could fluctuate based on the value of the underlying stock. Investing in foreign securities may involve heightened risk due to currency fluctuations and economic and political risks. Investing in derivative instruments involves liquidity, credit, interest rate and market risks. Short sales involve special risks, including greater reliance on the sub-advisor’s ability to accurately anticipate the future value of a security or instrument; the Fund’s losses are potentially unlimited in a short sale. Please see the prospectus for a complete discussion of the Funds’ risks. There can be no assurances that the investment objectives of these Funds will be met.

 

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

 

American Beacon Funds    December 31, 2015


LOGO

Dear Shareholders,

Liquid alternative mutual funds provide investors with access to nontraditional assets and strategies. Such mutual funds allow investors to potentially benefit from alternative investment’s traditional strengths – including reduced portfolio volatility, greater portfolio diversity and the strong potential for risk-adjusted returns.

Liquid alternative mutual funds have certain distinguishing features. They typically seek to generate returns independent of market direction and are often used to help diversify investment portfolios so as to potentially reduce risk. They may also help protect against traditional capital market downturns, using investments outside those markets and/or tactically moving within and across markets.

 

 

We are proud to offer multiple liquid alternative products to help investors navigate the economic storms and market downturns. Our years of experience in evaluating sub-advisors has led us to identify and partner with several asset managers who have adhered to their disciplined processes for many years and through a variety of economic and market conditions.

For the 12 months ended December 31, 2015:

 

    American Beacon AHL Managed Futures Strategy Fund (Investor Class) returned -1.54%.

 

    American Beacon Ionic Strategic Arbitrage Fund (Investor Class) returned 4.50%.

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

 

Best Regards,

LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

 

1


American Beacon AHL Managed Futures Strategy FundSM

Market Overview

December 31, 2015 (Unaudited)

 

 

Stock market returns were mixed in 2015. The S&P 500 Index was modestly down, although the S&P 500 Total Return Index, which reinvests dividends, was up slightly. In Europe, core eurozone markets were up, although Spain was down, and the United Kingdom’s Financial Times Stock Exchange (“FTSE”) 100 Index was negatively impacted by its exposure to stocks in the Energy and Materials sectors. In Asia, China ended a very volatile year with a marginal increase, although most other Asian and emerging market (“EM”) stock markets were down.

In foreign exchange (“FX”) markets, 2015 was another year of U.S. dollar strength against both G10* and EM currencies. The euro lost around 10%, and commodity currencies were hit harder (the Canadian dollar was down -19%). The year was difficult for EM – the Brazilian real lost nearly half its value, the Malaysian ringgit was down -19% and the Chilean peso was off -14%. Perhaps the most notable event was the Swiss National Bank’s removal of the euro peg that, in addition to outsized moves on the day, negatively affected liquidity in FX markets early in the year.

In fixed-income markets, 2015 was a year of divergence in policy between Europe and the U.S. – with Europe providing renewed stimulus (albeit not enough to assuage market expectations in December) – and the Federal Reserve finally raising U.S. rates at year end. Despite some sharp moves over the course of the year, the G10 benchmark 10-year yields ended the year little changed.

The commodities market was probably the biggest story in 2015, with the downtrend from 2014 coming back with a vengeance in the second half of 2015. West Texas Intermediate crude oil and Brent crude, the leading global price benchmark for Atlantic basin crude oils, were both down more than 40% in the second half of 2015. Petroleum products, natural gas and industrial metals followed oil’s decline as weakness in China weighed on sentiment. Grains and precious metals were also down, selling off in response to the strong U.S. dollar.

* The G10 currencies are the euro, Japanese yen, British pound, Swiss franc, Australian dollar, New Zealand dollar, Canadian dollar, Swedish krona, Norwegian krone and U.S. dollar. They are considered the world’s most liquid currencies.

 

 

2


American Beacon AHL Managed Futures Strategy FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class of the American Beacon AHL Managed Futures Strategy Fund (the “Fund”) returned -1.54% for the twelve months ended December 31, 2015.

Comparison of Change in Value of a $10,000 Investment for the period from 8/19/14 through 12/31/15

 

LOGO

Total Returns for the Period ended 12/31/15

 

     Ticker    1 Year     Since incep.
(8/19/14)
    Value of
$10,000
8/19/14-
12/31/15
 

Institutional Class (1,5)

   AHLIX      (1.15 )%      8.73   $ 11,213   

Y Class (1,5)

   AHLYX      (1.24 )%      8.59     11,192   

Investor Class (1,5)

   AHLPX      (1.54 )%      8.28     11,149   

A Class with sales load (1,2,5)

   AHLAX      (7.23 )%      3.69     10,507   

A Class without sales load (1,2,5)

   AHLAX      (1.55 )%      8.28     11,148   

C Class with sales load (1,3,5)

   AHLCX      (3.30 )%      7.46     11,034   

C Class without sales load (1,3,5)

   AHLCX      (2.30 )%      7.46     11,034   

BofA Merrill Lynch 3-Month Treasury Bill Index (4)

        0.05     0.05     10,006   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to each Class of the Fund has been waived since Fund inception. Performance prior to waiving fees was lower than actual returns shown.
2. A Class shares have a maximum sales charge of 5.75%.
3. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.
4. The BofA Merrill Lynch 3-Month Treasury Bill Index is designed to measure the total return on cash, including price and interest income, based on short-term government Treasury Bills of about 90-day maturity.
5. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 2.29%, 2.39%, 2.67%, 2.69%, and 3.44%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

For the period, Energies was the best performing sector returning approximately 3.0%. The best markets were short positions in Crude Oil – Brent and Crude Oil – West Texas Intermediate.

Currencies also contributed positively to performance over the period, as holdings returned approximately 0.8%. Within Currencies, the largest contributor was a short position in the Malaysian ringgit versus the U.S. dollar. Additionally, a short position in the Brazilian real versus the U.S. dollar contributed to the Fund’s performance.

 

3


American Beacon AHL Managed Futures Strategy FundSM

Performance Overview

December 31, 2015 (Unaudited)

  

 

 

Positions in Metals aided performance during the period returning approximately 0.8%. In particular, short positions in both Copper and Aluminum contributed the most within Metals.

Interest Rates were slightly positive for the period, adding approximately 0.1%. A long position in Euribor and a short position in Eurodollar added to most to returns.

On the negative side, Bonds lost the most over the course of the period and were down approximately -1.6%. Short positions in the Australian three- and ten-year Bonds detracted the most from performance.

Positions in Stocks returned approximately -1.5%, detracting from Fund performance. Losses were led by long positions in the Standard and Poor’s 500 and the NASDAQ 100.

Lastly, the Agricultural sector weakened Fund performance as holdings fell approximately 1.0%. The poor performance was driven by long positions in Cocoa and short positions in Corn.

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

 

ASSET CLASS EXPOSURE

   % of VaR*  

Currencies

     36.7   

Commodities

     29.9   

Equities

     24.1   

Fixed Income

     9.3   

HOLDINGS SUMMARY

 

Number of Long Holdings

     16   

Number of Short Holdings

     39   

Number of Currency Pairs

     18   

TOP ACTIVE EXPOSURES BY ASSET CLASS

 

Commodities         % of VaR*  

Gold Futures

   Short      4.93   

Crude Oil Futures

   Short      4.64   

Corn Futures

   Short      2.32   
     

 

 

 
Currencies         % of VaR*  

AUD/USD

   Cross-currency      4.93   

BRL/USD

   Cross-currency      3.77   

MXN/USD

   Cross-currency      3.77   
     

 

 

 
Equities         % of VaR*  

NASDAQ 100 Index Futures

   Long      3.19   

H-Shares Index Futures

   Short      2.61   

Hang Seng Index Futures

   Short      2.32   
     

 

 

 
Fixed Income         % of VaR*  

Japanese Bonds Futures

   Long      1.74   

Australian Bonds Futures

   Long      1.45   

UK Gilts Futures

   Long      1.45   

 

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

 

4


American Beacon AHL Managed Futures Strategy FundSM

Fund Expenses

December 31, 2015 (Unaudited)

 

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below 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 and held for the entire period from July 1, 2015 through December 31, 2015.

Actual Expenses

The “Actual” line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders 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” line of the table provides 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 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 cost 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. 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” line of the table is 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.

 

     Beginning
Account
Value
7/1/15
     Ending
Account
Value
12/31/15
     Expenses Paid
During Period*
7/1/15 - 12/31/15
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,003.13       $ 7.78   

Hypothetical **

   $ 1,000.00       $ 1,017.44       $ 7.83   

Y Class

        

Actual

   $ 1,000.00       $ 1,002.22       $ 8.28   

Hypothetical **

   $ 1,000.00       $ 1,016.94       $ 8.34   

Investor Class

        

Actual

   $ 1,000.00       $ 1,000.14       $ 9.68   

Hypothetical **

   $ 1,000.00       $ 1,015.53       $ 9.75   

A Class

        

Actual

   $ 1,000.00       $ 1,000.08       $ 9.78   

Hypothetical **

   $ 1,000.00       $ 1,015.43       $ 9.86   

C Class

        

Actual

   $ 1,000.00       $ 996.20       $ 13.53   

Hypothetical **

   $ 1,000.00       $ 1,011.64       $ 13.64   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.54%, 1.64%, 1.92%, 1.94%, and 2.69% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

5


American Beacon Ionic Strategic Arbitrage FundSM

Market Overview

December 31, 2015 (Unaudited)

 

 

Market participants spent most of 2015 wondering whether the Federal Reserve (“the Fed”) would embark on a tightening cycle. As investors pondered both the implications and timing of any potential liftoff, uncertainty caused investor sentiment to vacillate between complacency and fear. Over the first six months of the year, the equity and credit markets shrugged off these concerns, but weakening commodity markets in July – plus growing fears regarding global growth prospects and divergent quantitative easing (“QE”) paths – led to a violent shift in sentiment. The strongest change in sentiment resulted from the steps taken by the People’s Bank of China to devalue its currency in early August. After the yuan devaluation, markets that had been characterized by narrow breadth and muted volatility fell sharply in a highly correlated fashion (the S&P 500 Index declined by 10% intra month in August).

The CBOE Volatility Index (“the VIX”) was emblematic of the shifting views during the second half of 2015. Years of QE around the world had suppressed volatility and pushed asset prices higher. After positive news from Greece in June, the VIX continued its downward trend and experienced the largest five-day price decrease in its history through July 16. After experiencing this historic decrease, however, the VIX then experienced its largest five-day increase less than a month later on August 21. This drastic change in the VIX over the summer was evidenced by growing investor angst toward any potential reversal of governmental QE policies.

Though large-cap equities seemingly recovered from the August sell off (at year end, the S&P 500 Index was +1.4% and was back at pre-sell off levels in early November), other markets did not. The Russell 2000 Index, which represents small-cap stocks, declined by -4.4% for the year and, after a momentary respite in September, U.S. high-yield bond prices continued to fall due to continuing weakness in the Energy and Mineral/Mining sectors. While higher-grade credits performed better, with the Barclays Capital U.S. Aggregate Bond Index generating a gain of 0.55% on the year, liquidity-driven fears surrounding a number of credit-oriented funds led to near contagion in the global high-yield bond market during the month of December. While numerous portions of the equity and credit markets had negative years in 2015, commodity prices virtually collapsed (the Bloomberg Commodity Index fell -27%), led primarily by oil and other constituents of the Energy sector.

In contrast to the level of movement in bond prices, interest rates ultimately held fairly steady over the course of the year and the yield curve flattened slightly. The Barclays Intermediate Term Bond Index gained 1.2% in 2015 and the Barclays Long Treasury Bond Index fell -1.2%.

Hedge-fund performance overall was disappointing in 2015. Many strategies were hurt by a lack of dispersion and sharp declines in small- and mid-cap stocks in the U.S. and emerging markets. A lack of sustainable trends negatively affected other strategies and pronounced weakness in the Energy sector caused losses for credit-focused funds in general.

 

 

6


American Beacon Ionic Strategic Arbitrage FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

The Investor Class (inception date June 30, 2015) of the American Beacon Ionic Strategic Arbitrage Fund (the “Fund”) returned 1.36% for the six months ended December 31, 2015.

Comparison of Change in Value of a $10,000 Investment for the period from 9/1/13 through 12/31/15

 

LOGO

Total Returns for the Period ended 12/31/15

 

     Ticker    1 Year     Since incep.
(9/1/13)
    Value of
$10,000
9/1/13-
12/31/15
 

Institutional Class (1,7)

   IONIX      4.60     3.90   $ 10,934   

Y Class (1,2,7)

   IONYX      4.71     3.95     10,944   

Investor Class (1,3,7)

   IONPX      4.50     3.86     10,923   

A Class with sales load (1,4,7)

   IONAX      (0.43 )%      1.73     10,407   

A Class without sales load (1,4,7)

   IONAX      4.50     3.86     10,923   

C Class with sales load (1,5,7)

   IONCX      3.13     3.70     10,884   

C Class without sales load (1,5,7)

   IONCX      4.13     3.70     10,884   

Barclays Capital U.S. Aggregate Index (6)

        0.55     3.11     10,742   

BofA Merrill Lynch 3-Month LIBOR Index (6)

        0.23     0.24     10,055   

 

1. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is calculated based on the published end of day net asset values as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. Simultaneous with the commencement of the Fund’s investment operations on June 30, 2015, the Ionic Absolute Return Fund LLC (“Private Fund”), a privately offered investment fund managed by the Fund’s sub-advisor transferred its assets to the Institutional Class shares of the Fund. A portion of the fees charged to each Class of the Fund has been waived since 6/30/15. Performance prior to waiving fees was lower than actual returns shown.
2. Fund performance for the one-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the Y Class. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 9/1/13.
3. Fund performance for the one-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the Investor Class. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 9/1/13.
4. Fund performance for the one-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the A Class. Expenses of the A Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 9/1/13. A Class shares have a maximum sales charge of 5.75%.
5. Fund performance for the one-year and since inception periods represents the total returns achieved by the Institutional Class from 9/1/13 up to 6/30/15, the inception date of the C Class. Expenses of the C Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 9/1/13. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.

 

7


American Beacon Ionic Strategic Arbitrage FundSM

Performance Overview

December 31, 2015 (Unaudited)

 

 

6. The BofA Merrill Lynch U.S. Dollar 3-Month LIBOR Index represents the London interbank offered rate (LIBOR) with a constant 3-month average maturity. LIBOR is a composite of the rates of interest at which banks borrow from one another in the London market, and it is a widely used benchmark for short-term interest rates. The Barclays Capital U.S. Aggregate Index is a market weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. One cannot directly invest in an index.
7. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 4.21%, 4.31%, 4.59%, 4.61%, and 5.36%, 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 tumultuous third and fourth quarters of 2015, the Fund performed strongly on an absolute basis, resulting from efforts to limit exposure to corporate credit and energy in the Fund overall as well as the maintenance of a neutral duration stance within the Credit/Rates Relative Value Arbitrage strategy. Throughout the time period, the decision to limit exposure to merger and other event-driven opportunities in the Equity Arbitrage strategy helped the Fund stay positive. This decision also highlights the ability of our portfolio managers to find diversified arbitrage opportunities in the equity space.

Over the course of the year, the Credit/Rates Relative Value Arbitrage strategy (primarily mortgage derivatives) was the largest contributor to overall returns. The team continues to see pre-payment oriented valuation inefficiencies in the seasoned agency space that offer both attractive yields overall and the opportunity to isolate structural diversity at the security level. Collectively, these factors have enabled the Fund to build a portfolio of mortgage derivatives with a unique profile.

Equity Arbitrage was the second largest contributor to returns during the year, led by warrant and share class arbitrage. We increased exposure to closed-end funds in December due to widening net asset value discounts and relative value inefficiencies in a number of funds focusing on specific industry sectors. The Fund also began to selectively increase its merger arbitrage exposure due to a widening of spreads.

Convertible Arbitrage was the next largest contributor, with gains attributable to positions that benefited from a variety of corporate actions, including company specific mergers and earnings-driven equity price moves. The decision to focus on higher delta convertible bond and mandatory positions during the third quarter enabled the Fund to avoid weakness in the broader U.S. convertible markets, where returns were negative for the year.

The Volatility Arbitrage strategy was also positive on the year, highlighted by significant gains in August. The primary objective of the strategy is to provide insurance for residual risk exposures aggregated across the Fund.

Looking forward, the Fund’s sub-advisor will continue to implement its strategy by allocating the Fund’s assets among strategies: Convertible Arbitrage, Credit/Rates Relative Value Arbitrage, Equity Arbitrage, Volatility Arbitrage, seeking capital appreciation with low volatility and reduced correlation to equities and interest rates.

 

POSITIONS BY INVESTMENT STRATEGY

             

Convertible Arbitrage

        37   

Credit/Rates Relative Value Arbitrage

        7   

Equity Arbitrage

        89   

Volatility Arbitrage

        27   

Total Fund Holdings

     160      

 

INVESTMENT STRATEGY EXPOSURE

   (% Long Market Value)      (% Short Market Value)  

Convertible Arbitrage

     31.0         (22.0

Credit/Rates Relative Value Arbitrage

     14.0         (2.0

Equity Arbitrage

     19.0         (18.0

Volatility Arbitrage

     4.0         (5.0

 

8


American Beacon Ionic Strategic Arbitrage FundSM

Fund Expenses

December 31, 2015 (Unaudited)

 

 

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below 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 and held for the entire period from July 1, 2015 through December 31, 2015.

Actual Expenses

The “Actual” line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders 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” line of the table provides 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 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 cost 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. 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” line of the table is 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.

 

     Beginning
Account
Value
7/1/15
     Ending
Account
Value
12/31/15
     Expenses Paid
During Period*
7/1/15 -
12/31/15
 

Institutional Class

        

Actual

   $ 1,000.00       $ 1,014.63       $ 14.42   

Hypothetical **

   $ 1,000.00       $ 1,010.89       $ 14.39   

Y Class

        

Actual

   $ 1,000.00       $ 1,015.64       $ 16.61   

Hypothetical **

   $ 1,000.00       $ 1,008.72       $ 16.56   

Investor Class

        

Actual

   $ 1,000.00       $ 1,013.61       $ 16.39   

Hypothetical **

   $ 1,000.00       $ 1,008.92       $ 16.36   

A Class

        

Actual

   $ 1,000.00       $ 1,013.65       $ 17.10   

Hypothetical **

   $ 1,000.00       $ 1,008.22       $ 17.06   

C Class

        

Actual

   $ 1,000.00       $ 1,010.03       $ 20.82   

Hypothetical **

   $ 1,000.00       $ 1,004.49       $ 20.77   

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 2.84%, 3.27%, 3.23%, 3.37%, and 4.11% for the Institutional, Y, Investor, A, and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period.
** 5% return before expenses.
 

 

9


American Beacon Funds SM

Report of Independent Registered Public Accounting Firm

 

The Board of Trustees and Shareholders of

American Beacon AHL Managed Futures Strategy Fund and American Beacon Ionic Strategic Arbitrage Fund

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of American Beacon AHL Managed Futures Strategy Fund and American Beacon Ionic Strategic Arbitrage Fund (two of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of December 31, 2015, and the related statements of operations, statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon AHL Managed Futures Strategy Fund and American Beacon Ionic Strategic Arbitrage Fund at December 31, 2015, the results of their operations, the changes in their net assets and the financial highlights for each of the periods indicated therein in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

February 29, 2016

 

 

10


American Beacon AHL Managed Futures Strategy Fund SM

Consolidated Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

SHORT-TERM INVESTMENTS – 94.52%

     

Money Market Funds – 2.97%

     

JPMorgan U.S. Government Money Market Fund, Capital Class A

     3,090       $ 3,090   
     

 

 

 
     Par Amount         
     (000’s)         

U.S. Treasury Bills – 91.55%

     

0.009%, Due 2/4/2016 A

   $ 5,800         5,799   

0.102%, Due 1/14/2016 A

     71,200         71,198   

0.142%, Due 1/21/2016 A

     2,500         2,500   

0.066%, Due 1/28/2016 A

     5,200         5,200   

0.092%, Due 2/11/2016 A

     5,300         5,299   

0.101%, Due 2/18/2016 A

     1,500         1,500   

0.121%, Due 2/25/2016 A

     3,700         3,699   
     

 

 

 
        95,195   
     

 

 

 

Total Short-Term Investments (Cost $98,285)

        98,285   
     

 

 

 

TOTAL INVESTMENTS —95.52% (Cost $98,285)

        98,285   

OTHER ASSETS, NET OF LIABILITIES – 5.48%

  

     5,692   
     

 

 

 

TOTAL NET ASSETS—100.00%

      $ 103,977   
     

 

 

 

Percentages are stated as a percent of net assets.

     

 

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

 

See accompanying notes

 

11


American Beacon AHL Managed Futures Strategy Fund SM

Consolidated Schedule of Investments

December 31, 2015

 

 

Purchased Futures Contracts Open on December 31, 2015:

Commodity Futures Contracts

 

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

Cocoa Futures A

     17         March 2016       $ 545,870       $ (16,717

Cocoa Futures A

     21         May 2016         673,470         (25,425

LME Lead Futures A

     1         February 2016         44,937         (62

LME Lead Futures A

     8         January 2016         359,350         11,115   

LME Nickel Futures A

     1         January 2016         52,728         (1,538

LME Primary Aluminum Futures A

     10         February 2016         377,187         (5,452

LME Primary Aluminum Futures A

     2         January 2016         75,275         (748

LME Zinc Futures A

     2         January 2016         80,000         (766

Sugar #11 (World Markets) Futures A

     65         February 2016         1,109,472         24,870   
        

 

 

    

 

 

 
   $ 3,318,289       $ (14,723
        

 

 

    

 

 

 

Currency Futures Contracts

 

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

90-Day Eurodollar Futures

     1         December 2017       $ 245,562       $ (327

90-Day Eurodollar Futures

     3         September 2018         734,775         (606

90-Day Sterling Futures

     48         December 2017         8,711,638         (17,721

90-Day Sterling Futures

     132         March 2017         24,042,139         (30,891

Austrailian Dollar Currency Futures

     165         March 2016         11,988,900         51,971   
        

 

 

    

 

 

 
         $ 45,723,014       $ 2,426   
        

 

 

    

 

 

 

Equity Futures Contracts

 

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

U.S. Dollar Index Futures

     27         March 2016       $ 2,666,115       $ (1,391

FTSE/JSE Top 40 Index Futures

     9         March 2016         269,284         2,774   

NASDAQ 100 E-Mini Futures

     45         March 2016         4,128,975         (43,271

S&P 500 E-mini Futures

     33         March 2016         3,358,410         (46,334
        

 

 

    

 

 

 
         $ 10,422,784       $ (88,222
        

 

 

    

 

 

 

Interest Rate Futures Contracts

 

   

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

3-Month Euro Euribor Futures

     38         December 2017       $ 10,324,639       $ (8,362

3-Month Euro Euribor Futures

     222         March 2017         60,408,102         (5,491

3-Month Euro Euribor Futures

     91         September 2018         24,666,694         (25,685

Austrailia 10-Year Bond Futures

     21         March 2016         1,941,795         (13,067

Euro-Buxl 30-Year Bond Futures

     1         March 2016         164,534         (3,956

Euro-Bobl Futures

     11         March 2016         1,562,062         2,622   

Euro-Bund Futures

     18         March 2016         3,089,152         4,737   

10-Year Japanese Government Bond (OSE) Futures

     41         March 2016         50,839,386         100,583   

Long GILT Futures

     40         March 2016         6,885,693         (63,914

U.S. 10-Year Treasury Note Futures

     20         March 2016         2,518,125         (15,126

U.S. Long Bond (CBT) Futures

     10         March 2016         1,537,500         (25,633

U.S. Ultra Bond (CBT) Futures

     18         March 2016         2,856,375         (48,389
        

 

 

    

 

 

 
         $ 166,794,057       $ (101,681
        

 

 

    

 

 

 

 

See accompanying notes

 

12


American Beacon AHL Managed Futures Strategy Fund SM

Consolidated Schedule of Investments

December 31, 2015

 

 

Sold Futures Contracts Open on December 31, 2015:

Commodity Futures Contracts

 

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

Brent Crude Futures A

     1         February 2016       $ (38,530    $ (591

Brent Crude Futures A

     36         January 2016         (1,342,080      165,205   

Coffee ‘C’ Futures A

     17         March 2016         (807,713      (42,449

Copper Futures A

     29         March 2016         (1,547,875      (40,076

Corn Futures A

     140         March 2016         (2,511,250      86,057   

Gasoline RBOB Futures A

     11         January 2016         (587,202      (33,337

Gold 100oz Futures A

     77         February 2016         (8,163,540      124,357   

LME Copper Futures A

     3         February 2016         (353,344      (4,317

LME Copper Futures A

     3         January 2016         (353,437      20,166   

LME Lead Futures A

     7         February 2016         (314,563      (35,220

LME Lead Futures A

     8         January 2016         (359,350      (29,434

LME Nickel Futures A

     4         February 2016         (211,236      2,745   

LME Nickel Futures A

     8         January 2016         (421,824      47,604   

LME Nickel Futures A

     1         March 2016         (52,884      (608

LME Primary Aluminum Futures A

     58         February 2016         (2,187,688      (24,391

LME Primary Aluminum Futures A

     2         January 2016         (75,275      (102

LME Primary Aluminum Futures A

     1         March 2016         (37,694      248   

LME Zinc Futures A

     12         February 2016         (481,275      (19,054

LME Zinc Futures A

     5         January 2016         (200,000      7,760   

LME Zinc Futures A

     1         March 2016         (40,225      (2,990

Low Sulphur Gasoil Futures A

     1         February 2016         (33,425      799   

Low Sulphur Gasoil Futures A

     25         January 2016         (815,625      180,626   

Natural Gas Futures A

     30         January 2016         (701,100      (143,248

Natural Gas Swap Futures A

     12         March 2016         (71,610      16,117   

Natural Gas Swap Futures A

     12         July 2016         (75,690      12,037   

Natural Gas Swap Futures A

     16         November 2016         (110,640      8,923   

Natural Gas Swap Futures A

     16         January 2017         (114,560      5,003   

Natural Gas Swap Futures A

     16         December 2016         (114,880      4,683   

Natural Gas Swap Futures A

     12         June 2016         (75,270      12,457   

Natural Gas Swap Futures A

     12         May 2016         (74,040      13,687   

Natural Gas Swap Futures A

     16         February 2017         (113,120      6,443   

Natural Gas Swap Futures A

     12         April 2016         (72,720      15,007   

Natural Gas Swap Futures A

     16         October 2016         (104,640      14,923   

Natural Gas Swap Futures A

     12         September 2016         (76,350      11,377   

Natural Gas Swap Futures A

     12         August 2016         (75,630      12,097   

NY Harbor ULSD Futures A

     18         January 2016         (849,668      19,110   

Silver Futures A

     28         March 2016         (1,932,420      48,760   

Soybean Futures A

     73         March 2016         (3,154,512      56,791   

Soybean Futures A

     1         May 2016         (43,475      248   

Wheat (CBT) Futures A

     46         March 2016         (1,081,000      40,690   

WTI Crude Futures A

     38         January 2016         (1,407,520      20,649   
        

 

 

    

 

 

 
   $ (31,184,880    $ 578,752   
        

 

 

    

 

 

 

Currency Futures Contracts

 

   

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

90-Day Eurodollar Futures

     44         December 2017       $ (10,804,750    $ (1,587

90-Day Eurodollar Futures

     61         March 2017         (15,039,550      2,652   

90-Day Eurodollar Futures

     21         September 2018         (5,143,425      (2,092

Pound Sterling Currency Futures

     152         March 2016         (13,997,300      249,860   

Canadian Dollar Currency Futures

     101         March 2016         (7,305,330      161,503   

Swiss Franc Currency Futures

     28         March 2016         (3,511,200      7,886   

Euro FX Currency Futures

     30         March 2016         (4,082,250      (5,041

Japanese Yen Currency Futures

     12         March 2016         (1,249,875      (29,855

Mexican Peso Futures

     300         March 2016         (8,670,000      (8,058
        

 

 

    

 

 

 
         $ (69,803,680    $ 375,268   
        

 

 

    

 

 

 

 

See accompanying notes

 

13


American Beacon AHL Managed Futures Strategy Fund SM

Consolidated Schedule of Investments

December 31, 2015

 

 

Equity Futures Contracts

 

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

Amsterdam Index Futures

     4         January 2016       $ (384,144    $ (8,873

CAC40 Index Futures

     2         January 2016         (100,818      (240

DAX Index Futures

     1         March 2016         (292,662      (7,730

Euro Stoxx 50 Index Futures

     9         March 2016         (321,004      (5,581

FTSE 100 Index Futures

     27         March 2016         (2,467,015      (80,420

FTSE/MIB Index Futures

     4         March 2016         (466,042      (7,792

Hang Seng Index Futures

     18         January 2016         (2,544,371      (3,271

H-SHARES Index Futures

     35         January 2016         (2,191,437      23,935   

IBEX 35 Index Futures

     9         January 2016         (931,743      10,471   

KOSPI 200 Index Futures

     25         March 2016         (2,563,324      (26,609

Mini MSCI EAFE Index Futures

     6         March 2016         (509,460      (8,891

Mini MSCI Emerging Markets Index Futures

     28         March 2016         (1,102,500      (23,430

MSCI Taiwan Stock Index Futures

     62         January 2016         (1,887,280      24,757   

Nikkei 225 (SGX) Futures

     18         March 2016         (1,412,954      6,639   

OMXS30 Index Futures

     66         January 2016         (1,132,128      (26,660

E-Mini Russell 2000 Futures

     9         March 2016         (1,018,350      (12,433

S&P/TSX 60 Index Futures

     23         March 2016         (2,529,551      (34,490

TOPIX Index Futures

     4         March 2016         (514,996      (2,793
        

 

 

    

 

 

 
         $ (22,369,779    $ (183,411
        

 

 

    

 

 

 

Interest Rate Futures Contracts

 

Description

   Number of
Contracts
     Expiration Date      Contract Value      Unrealized
Appreciation
(Depreciation)
 

Austrailia 3-Year Bond Futures

     333         March 2016       $ (27,048,295    $ (119,611

U.S. 2-Year Treasury Note Futures

     104         March 2016         (22,592,375      11,531   

U.S. 5-Year Treasury Note Futures

     23         March 2016         (2,721,367      (4,003
        

 

 

    

 

 

 
         $ (52,362,037    $ (112,083
        

 

 

    

 

 

 

Forward Currency Contracts Open on December 31, 2015:

 

Type

   Currency      Principal Amount
Covered by Contract
     Settlement
Date
     Counterparty      Unrealized
Appreciation
     Unrealized
(Depreciation)
    Net
Unrealized
Appreciation

(Depreciation)
 

Sell

     MYR         58,218         1/7/2016         DUB       $ —         $ (587   $ (587

Sell

     MYR         174,655         1/7/2016         DUB         60         —          60   

Sell

     MYR         523,966         1/7/2016         DUB         2,966         —          2,966   

Sell

     MYR         58,218         1/7/2016         DUB         24         —          24   

Sell

     MYR         116,437         1/7/2016         DUB         —           (1,176     (1,176

Sell

     MYR         58,218         1/7/2016         DUB         —           (256     (256

Sell

     MYR         58,218         1/7/2016         DUB         —           (308     (308

Sell

     MYR         58,218         1/7/2016         DUB         —           (301     (301

Sell

     MYR         116,437         1/7/2016         DUB         —           (672     (672

Sell

     MYR         58,219         1/7/2016         DUB         —           (478     (478

Sell

     MYR         58,218         1/7/2016         DUB         —           (294     (294

Sell

     MYR         58,218         1/7/2016         DUB         91         —          91   

Sell

     MYR         116,437         1/7/2016         DUB         —           (830     (830

Sell

     MYR         58,218         1/7/2016         DUB         —           (480     (480

Sell

     MYR         465,748         1/7/2016         DUB         —           (4,387     (4,387

Sell

     MYR         349,311         1/7/2016         DUB         3,963         —          3,963   

Sell

     MYR         58,218         1/7/2016         DUB         —           (480     (480

Sell

     MYR         116,437         1/7/2016         DUB         —           (798     (798

Sell

     MYR         116,437         1/7/2016         DUB         —           (104     (104

Sell

     MYR         58,219         1/7/2016         DUB         —           (574     (574

Buy

     INR         642,107         1/8/2016         DUB         1,786         —          1,786   

Buy

     INR         302,168         1/8/2016         DUB         781         —          781   

 

See accompanying notes

 

14


American Beacon AHL Managed Futures Strategy Fund SM

Consolidated Schedule of Investments

December 31, 2015

 

 

Type

   Currency    Principal Amount
Covered by Contract
     Settlement
Date
   Counterparty    Unrealized
Appreciation
     Unrealized
(Depreciation)
    Net
Unrealized
Appreciation

(Depreciation)
 

Buy

   INR      1,368,216       1/8/2016    DUB    $ 7,843       $ —        $ 7,843   

Buy

   INR      4,146,346       1/8/2016    DUB      22,220         —          22,220   

Buy

   INR      3,059,449       1/8/2016    DUB      16,167         —          16,167   

Buy

   INR      365,170       1/8/2016    DUB      1,397         —          1,397   

Buy

   INR      365,019       1/8/2016    DUB      1,451         —          1,451   

Buy

   INR      377,710       1/8/2016    DUB      1,351         —          1,351   

Buy

   INR      365,170       1/8/2016    DUB      1,328         —          1,328   

Buy

   INR      377,710       1/8/2016    DUB      1,260         —          1,260   

Buy

   INR      339,939       1/8/2016    DUB      726         —          726   

Buy

   INR      302,168       1/8/2016    DUB      673         —          673   

Buy

   PHP      53,083       1/19/2016    DUB      448         —          448   

Buy

   PHP      106,166       1/19/2016    DUB      436         —          436   

Buy

   PHP      106,166       1/19/2016    DUB      346         —          346   

Buy

   PHP      690,082       1/19/2016    DUB      2,543         —          2,543   

Buy

   PHP      743,166       1/19/2016    DUB      2,346         —          2,346   

Buy

   PHP      53,083       1/19/2016    DUB      307         —          307   

Buy

   PHP      53,083       1/19/2016    DUB      331         —          331   

Buy

   PHP      53,083       1/19/2016    DUB      380         —          380   

Buy

   INR      377,034       1/19/2016    DUB      1,940         —          1,940   

Buy

   INR      565,550       1/19/2016    DUB      5,473         —          5,473   

Buy

   INR      414,737       1/19/2016    DUB      4,044         —          4,044   

Buy

   INR      3,129,379       1/19/2016    DUB      22,580         —          22,580   

Buy

   PHP      265,416       1/19/2016    DUB      1,853         —          1,853   

Buy

   PHP      106,167       1/19/2016    DUB      302         —          302   

Buy

   PHP      106,167       1/19/2016    DUB      369         —          369   

Buy

   PHP      106,166       1/19/2016    DUB      391         —          391   

Buy

   PHP      159,250       1/19/2016    DUB      486         —          486   

Sell

   PHP      106,167       1/19/2016    DUB      —           (1,014     (1,014

Sell

   MYR      2,791,991       1/19/2016    DUB      —           (23,186     (23,186

Sell

   INR      4,486,700       1/19/2016    DUB      —           (72,098     (72,098

Sell

   PHP      7,537,822       1/19/2016    DUB      —           (97,034     (97,034

Buy

   TWD      76,116       1/21/2016    DUB      121         —          121   

Buy

   TWD      76,116       1/21/2016    DUB      47         —          47   

Buy

   KRW      596,725       1/21/2016    DUB      —           (4,649     (4,649

Buy

   TWD      76,115       1/21/2016    DUB      —           (132     (132

Buy

   TWD      152,231       1/21/2016    DUB      —           (138     (138

Buy

   TWD      76,115       1/21/2016    DUB      —           (46     (46

Buy

   KRW      511,479       1/21/2016    DUB      —           (2,444     (2,444

Buy

   KRW      511,479       1/21/2016    DUB      —           (3,449     (3,449

Buy

   TWD      76,115       1/21/2016    DUB      —           (160     (160

Buy

   KRW      255,739       1/21/2016    DUB      —           (565     (565

Buy

   TWD      152,231       1/21/2016    DUB      —           (69     (69

Buy

   KRW      255,739       1/21/2016    DUB      —           (596     (596

Buy

   TWD      152,231       1/21/2016    DUB      —           (138     (138

Buy

   TWD      152,231       1/21/2016    DUB      —           (64     (64

Buy

   TWD      76,116       1/21/2016    DUB      —           (11     (11

Buy

   KRW      255,739       1/21/2016    DUB      679         —          679   

Buy

   TWD      152,231       1/21/2016    DUB      47         —          47   

Buy

   TWD      152,231       1/21/2016    DUB      163         —          163   

Buy

   KRW      170,493       1/21/2016    DUB      410         —          410   

Buy

   KRW      85,247       1/21/2016    DUB      223         —          223   

Buy

   TWD      76,115       1/21/2016    DUB      44         —          44   

Buy

   TWD      380,578       1/21/2016    DUB      60         —          60   

Buy

   KRW      852,465       1/21/2016    DUB      —           (1,193     (1,193

Buy

   TWD      76,115       1/21/2016    DUB      12         —          12   

Buy

   KRW      170,493       1/21/2016    DUB      —           (755     (755

Buy

   KRW      170,493       1/21/2016    DUB      —           (747     (747

Buy

   TWD      76,116       1/21/2016    DUB      —           (11     (11

Buy

   KRW      85,246       1/21/2016    DUB      —           (374     (374

Buy

   TWD      76,115       1/21/2016    DUB      58         —          58   

Buy

   KRW      170,493       1/21/2016    DUB      —           (109     (109

Buy

   KRW      85,246       1/21/2016    DUB      —           (83     (83

Buy

   KRW      85,246       1/21/2016    DUB      —           (76     (76

 

See accompanying notes

 

15


American Beacon AHL Managed Futures Strategy Fund SM

Consolidated Schedule of Investments

December 31, 2015

 

 

Type

   Currency    Principal Amount
Covered by Contract
     Settlement
Date
   Counterparty    Unrealized
Appreciation
     Unrealized
(Depreciation)
    Net
Unrealized
Appreciation

(Depreciation)
 

Buy

   KRW      85,246       1/21/2016    DUB    $ —         $ (66   $ (66

Buy

   TWD      152,231       1/21/2016    DUB      33         —          33   

Buy

   KRW      426,232       1/21/2016    DUB      —           (90     (90

Buy

   TWD      76,115       1/21/2016    DUB      51         —          51   

Buy

   TWD      76,115       1/21/2016    DUB      139         —          139   

Sell

   KRW      14,065,672       1/21/2016    DUB      —           (133,979     (133,979

Sell

   TWD      9,971,133       1/21/2016    DUB      —           (29,116     (29,116

Sell

   TWD      152,231       1/21/2016    DUB      —           (977     (977

Buy

   JPY      179,191       1/22/2016    DUB      1,661         —          1,661   

Buy

   EUR      83,079       1/22/2016    DUB      36         —          36   

Buy

   ZAR      43,024       1/22/2016    DUB      —           (1,184     (1,184

Buy

   EUR      40,170       1/22/2016    DUB      8         —          8   

Buy

   EUR      7,480       1/22/2016    DUB      —           (82     (82

Buy

   JPY      5,823       1/22/2016    DUB      10         —          10   

Sell

   SEK      32,882       1/22/2016    DUB      —           (368     (368

Sell

   JPY      24,290       1/22/2016    DUB      —           (226     (226

Sell

   EUR      8,612       1/22/2016    DUB      96         —          96   

Sell

   JPY      27,759       1/22/2016    DUB      —           (46     (46

Sell

   SEK      2,945       1/22/2016    DUB      36         —          36   

Buy

   INR      376,419       1/29/2016    DUB      1,100         —          1,100   

Buy

   INR      263,493       1/29/2016    DUB      185         —          185   

Buy

   INR      263,493       1/29/2016    DUB      —           (29     (29

Buy

   INR      301,135       1/29/2016    DUB      —           (6     (6

Buy

   INR      263,493       1/29/2016    DUB      —           (81     (81

Buy

   INR      225,851       1/29/2016    DUB      —           (164     (164

Buy

   INR      301,135       1/29/2016    DUB      —           (763     (763

Buy

   INR      301,135       1/29/2016    DUB      157         —          157   

Buy

   INR      301,135       1/29/2016    DUB      —           (143     (143

Buy

   INR      188,209       1/29/2016    DUB      437         —          437   

Buy

   BRL      4,398,104       1/5/2016    HUS      —           (52,024     (52,024

Buy

   BRL      1,011,058       1/5/2016    HUS      —           (47,647     (47,647

Buy

   BRL      859,400       1/5/2016    HUS      —           (42,577     (42,577

Buy

   BRL      151,659       1/5/2016    HUS      —           (7,417     (7,417

Buy

   BRL      1,086,888       1/5/2016    HUS      —           (55,969     (55,969

Buy

   BRL      2,249,605       1/5/2016    HUS      —           (37,607     (37,607

Sell

   BRL      151,659       1/5/2016    HUS      3,700         —          3,700   

Sell

   BRL      1,011,058       1/5/2016    HUS      13,217         —          13,217   

Sell

   BRL      1,086,888       1/5/2016    HUS      16,327         —          16,327   

Sell

   BRL      1,086,888       1/5/2016    HUS      17,092         —          17,092   

Sell

   BRL      227,488       1/5/2016    HUS      2,373         —          2,373   

Sell

   BRL      151,659       1/5/2016    HUS      1,134         —          1,134   

Sell

   BRL      75,829       1/5/2016    HUS      143         —          143   

Sell

   BRL      50,553       1/5/2016    HUS      89         —          89   

Sell

   BRL      50,553       1/5/2016    HUS      66         —          66   

Sell

   BRL      682,464       1/5/2016    HUS      —           (3,082     (3,082

Sell

   BRL      808,847       1/5/2016    HUS      —           (2,432     (2,432

Sell

   BRL      50,553       1/5/2016    HUS      763         —          763   

Sell

   BRL      25,277       1/5/2016    HUS      375         —          375   

Sell

   BRL      101,106       1/5/2016    HUS      1,503         —          1,503   

Sell

   BRL      834,123       1/5/2016    HUS      13,835         —          13,835   

Sell

   BRL      960,506       1/5/2016    HUS      8,190         —          8,190   

Sell

   BRL      985,782       1/5/2016    HUS      1,472         —          1,472   

Sell

   BRL      151,659       1/5/2016    HUS      2,500         —          2,500   

Sell

   BRL      25,277       1/5/2016    HUS      373         —          373   

Sell

   BRL      25,276       1/5/2016    HUS      317         —          317   

Sell

   BRL      25,276       1/5/2016    HUS      362         —          362   

Sell

   BRL      126,382       1/5/2016    HUS      854         —          854   

Sell

   BRL      25,276       1/5/2016    HUS      302         —          302   

Sell

   BRL      25,277       1/5/2016    HUS      308         —          308   

Sell

   BRL      126,382       1/5/2016    HUS      2,869         —          2,869   

Sell

   BRL      25,277       1/5/2016    HUS      338         —          338   

Sell

   BRL      50,553       1/5/2016    HUS      627         —          627   

Sell

   BRL      25,276       1/5/2016    HUS      341         —          341   

 

See accompanying notes

 

16


American Beacon AHL Managed Futures Strategy FundSM

Consolidated Schedule of Investments

December 31, 2015

 

 

Type

   Currency    Principal
Amount
Covered by
Contract
     Settlement
Date
   Counterparty    Unrealized
Appreciation
     Unrealized
(Depreciation)
    Net
Unrealized
Appreciation

(Depreciation)
 

Sell

   BRL      50,553       1/5/2016    HUS    $ 922       $ —        $ 922   

Sell

   BRL      25,277       1/5/2016    HUS      448         —          448   

Sell

   BRL      50,553       1/5/2016    HUS      901         —          901   

Sell

   BRL      25,277       1/5/2016    HUS      438         —          438   

Sell

   BRL      176,935       1/5/2016    HUS      3,273         —          3,273   

Sell

   BRL      176,935       1/5/2016    HUS      2,976         —          2,976   

Sell

   BRL      25,276       1/5/2016    HUS      452         —          452   

Sell

   BRL      75,829       1/5/2016    HUS      3,155         —          3,155   

Sell

   BRL      50,553       1/5/2016    HUS      2,101         —          2,101   

Sell

   BRL      126,382       1/5/2016    HUS      4,934         —          4,934   

Buy

   CLP      70,341       2/1/2016    HUS      —           (1,440     (1,440

Buy

   CLP      70,341       2/1/2016    HUS      —           (1,144     (1,144

Buy

   CLP      140,682       2/1/2016    HUS      —           (3,178     (3,178

Buy

   CLP      140,682       2/1/2016    HUS      —           (2,501     (2,501

Buy

   CLP      211,022       2/1/2016    HUS      —           (4,487     (4,487

Buy

   CLP      492,386       2/1/2016    HUS      —           (3,155     (3,155

Buy

   COP      62,830       2/1/2016    HUS      2,292         —          2,292   

Buy

   COP      62,830       2/1/2016    HUS      2,482         —          2,482   

Buy

   CLP      70,341       2/1/2016    HUS      —           (484     (484

Buy

   CLP      422,045       2/1/2016    HUS      —           (9,451     (9,451

Buy

   CLP      70,341       2/1/2016    HUS      7         —          7   

Buy

   CLP      70,341       2/1/2016    HUS      —           (406     (406

Buy

   CLP      703,408       2/1/2016    HUS      —           (12,094     (12,094

Buy

   CLP      422,045       2/1/2016    HUS      —           (9,480     (9,480

Buy

   COP      62,830       2/1/2016    HUS      2,476         —          2,476   

Buy

   CLP      140,682       2/1/2016    HUS      —           (3,234     (3,234

Buy

   CLP      70,341       2/1/2016    HUS      —           (149     (149

Buy

   COP      125,659       2/1/2016    HUS      —           (1,401     (1,401

Buy

   CLP      70,341       2/1/2016    HUS      —           (84     (84

Buy

   COP      62,830       2/1/2016    HUS      —           (611     (611

Sell

   CLP      4,994,197       2/1/2016    HUS      —           (1,931     (1,931

Sell

   COP      1,382,253       2/1/2016    HUS      —           (36,893     (36,893

Sell

   CLP      633,067       2/1/2016    HUS      —           (2,851     (2,851

Buy

   BRL      275,307       2/2/2016    HUS      —           (4,620     (4,620

Buy

   BRL      175,195       2/2/2016    HUS      1,988         —          1,988   

Buy

   BRL      275,307       2/2/2016    HUS      —           (7,917     (7,917

Buy

   BRL      125,140       2/2/2016    HUS      —           (3,339     (3,339

Buy

   BRL      150,168       2/2/2016    HUS      —           (3,706     (3,706

Buy

   BRL      150,168       2/2/2016    HUS      1,255         —          1,255   

Sell

   BRL      800,894       2/2/2016    HUS      —           (4,973     (4,973

Sell

   BRL      675,754       2/2/2016    HUS      —           (15,446     (15,446

Sell

   BRL      4,354,858       2/2/2016    HUS      50,763         —          50,763   

Buy

   EUR      15,499       1/22/2016    RBS      —           (173     (173

Buy

   GBP      103,761       1/22/2016    RBS      —           (1,150     (1,150

Buy

   AUD      48,560       1/22/2016    RBS      105         —          105   

Sell

   KRW      1,052,571       1/22/2016    RBS      —           (12,018     (12,018

Sell

   HKD      4,605       1/22/2016    RBS      —           (1     (1

Sell

   AUD      250,637       1/22/2016    RBS      —           (4,529     (4,529

Sell

   EUR      767,572       1/22/2016    RBS      4,446         —          4,446   

Sell

   AUD      805,677       1/22/2016    RBS      23         —          23   

Sell

   GBP      1,046,410       1/22/2016    RBS      30,595         —          30,595   

Sell

   CAD      87,571       1/22/2016    RBS      —           (489     (489

Sell

   CAD      59,641       1/22/2016    RBS      —           (274     (274

Sell

   EUR      82,677       1/22/2016    RBS      —           (16     (16

Sell

   GBP      147,871       1/22/2016    RBS      1,454         —          1,454   

Sell

   HKD      37,711       1/22/2016    RBS      —           (1     (1

Sell

   PEN      801,708       2/1/2016    RBS      6,283         —          6,283   
              

 

 

    

 

 

   

 

 

 
               $ 327,714       $ (790,567   $ (462,853
              

 

 

    

 

 

   

 

 

 

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

 

See accompanying notes

 

17


American Beacon AHL Managed Futures Strategy FundSM

Consolidated Schedule of Investments

December 31, 2015

 

 

Glossary

 

Counterparty Abbreviations:

DUB    Deutsche Bank AG    RBS    Royal Bank Of Scotland      
HUS    HSBC Bank Plc            

Currency Abbreviations:

AUD

   Australian Dollar    GBP    Pound Sterling    PEN    Peruvian Nuevo Sol

BRL

   Brazilian Real    HKD    Hong Kong Dollar    PHP    Philippine Peso

CAD

   Canadian Dollar    INR    Indian Rupee    SEK    Swedish Krona

CLP

   Chilean Peso    JPY    Japanese Yen    TWD    New Taiwan Dollar

COP

   Columbian Peso    KRW    South Korean Won    ZAR    South African Rand

EUR

   Euro    MYR    Malaysian Ringgit      

 

See accompanying notes

 

18


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares     Fair Value  
           (000’s)  

LONG SECURITIES

    

COMMON STOCKS—10.78%

    

CONSUMER DISCRETIONARY—2.10%

    

Automobiles—0.01%

    

General Motors Co.

     162      $ 6   
    

 

 

 

Hotels, Restaurants & Leisure—1.35%

    

Carnival Corp.

     22,811        1,243   
    

 

 

 

Internet & Catalog Retail—0.33%

    

Liberty Tripadvisor Holdings, Inc.A

     9,924        301   
    

 

 

 

Media—0.41%

    

Liberty Media Corp.A

     9,935        378   
    

 

 

 

Total Consumer Discretionary

       1,928   
    

 

 

 

CONSUMER STAPLES—0.28%

    

Food Products—0.26%

    

Nomad Foods Ltd.A

     19,938        239   
    

 

 

 

Household Products—0.02%

    

Central Garden and Pet Co.A

     1,105        15   
    

 

 

 

Total Consumer Staples

       254   
    

 

 

 

ENERGY—0.02%

    

Oil & Gas—0.02%

    

Kinder Morgan, Inc.

     1,091        16   
    

 

 

 

FINANCIALS—4.08%

    

Diversified Financials—3.84%

    

AR Capital Acquisition Corp.A C

     34,054 B      331   

Arowana, Inc.A C

     2,500 B      25   

Bank of America Corp.

     1,509        25   

Barington/Hilco Acquisition Corp.A C

     1,209 B      12   

Boulevard Acquisition Corp. IIA C

     41,510        411   

Boulevard Acquisition Corp. IIA C

     9,464 B      92   

Capitol Acquisition Corp. IIIA C

     9,300 B      93   

Double Eagle Acquisition Corp.A C

     8,011 B      80   

DT Asia Investments Ltd.A

     6,165        62   

Electrum Special Acquisition Corp.A C

     68,228 B      658   

Garnero Group Acquisition Co.A C

     1,345 B      13   

Gores Holdings, Inc.A C

     9,000 B      90   

GP Investments Acquisition Corp.A C

     2,660 B      26   

Harmony Merger Corp.A

     846        8   

Hennessy Capital Acquisition Corp. IIA C

     56,686 B      556   

Hydra Industries Acquisition Corp.A C

     1,566 B      15   

Pace Holdings Corp.A C

     8,011 B      81   

Quinpario Acquisition Corp. 2A C

     10,901 B      106   

Terrapin 3 Acquisition Corp.A C

     17,359 B      171   

WL Holding Corp.A

     67,825        675   
    

 

 

 
       3,530   
    

 

 

 

Insurance—0.24%

    

PartnerRe Ltd.

     1,550        217   
    

 

 

 

Total Financials

       3,747   
    

 

 

 

HEALTH CARE—0.21%

    

Biotechnology—0.00%

    

Oncocyte Corp.A

     220        1   
    

 

 

 

 

See accompanying notes

 

19


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

Health Care Providers & Services—0.01%

     

Kindred Healthcare, Inc.

     780       $ 9   
     

 

 

 

Pharmaceuticals—0.20%

     

Sanofi, ADRD

     4,383         187   
     

 

 

 

Total Health Care

        197   
     

 

 

 

INDUSTRIALS—0.64%

     

Aerospace & Defense—0.64%

     

HEICO Corp.

     6,924         376   

Precision Castparts Corp.

     935         217   
     

 

 

 

Total Industrials

        593   
     

 

 

 

INFORMATION TECHNOLOGY—1.77%

     

Internet Software & Services—1.28%

     

Alphabet, Inc., Class CA

     88         67   

Global Eagle Entertainment, Inc.A

     8,090         80   

Qihoo 360 Technology Co., Ltd., ADRA D

     3,022         220   

Yahoo! Inc.A

     24,203         805   
     

 

 

 
        1,172   
     

 

 

 

Semiconductor Equipment & Products—0.25%

     

Fairchild Semiconductor International, Inc.A

     10,897         226   
     

 

 

 

Software—0.24%

     

Solera Holdings, Inc.

     4,088         224   
     

 

 

 

Total Information Technology

        1,622   
     

 

 

 

MATERIALS—0.03%

     

Chemicals—0.03%

     

Delta Technology Holdings Ltd., A

     17,778         26   
     

 

 

 

Total COMMON STOCKS (Cost $8,374)

        8,383   
     

 

 

 

WARRANTS—4.87%

     

CONSUMER DISCRETIONARY—0.96%

     

Automobiles—0.06%

     

Blue Bird Corp., 2/24/2020, Strike Price $5.75

     60,432         54   
     

 

 

 

Hotels, Restaurants & Leisure—0.73%

     

Chanticleer Holdings, Inc., 6/21/2017, Strike Price $5.00

     13,325         2   

Del Taco Restaurants, Inc., 6/30/2020, Strike Price $11.50

     134,828         391   

Lindblad Expeditions Holdings, Inc., 7/8/2020, Strike Price $11.50

     90,386         276   
     

 

 

 
        669   
     

 

 

 

Media—0.17%

     

Hemisphere Media Group, Inc., 4/4/2018, Strike Price $12.00

     103,668         156   
     

 

 

 

Retail—0.00%

     

KBS Fashion Group Ltd., 1/22/2018, Strike Price $11.50

     40,000         1   
     

 

 

 

Total Consumer Discretionary

        880   
     

 

 

 

ENERGY—0.01%

     

Energy—0.00%

     

FieldPoint Petroleum Corp., 3/23/2018, Strike Price $4.00

     42,260         1   
     

 

 

 

 

See accompanying notes

 

20


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

Oil & Gas—0.01%

  

Kinder Morgan, Inc., 5/25/2017, Strike Price $40.00

     61,086       $ 4   
     

 

 

 

Total Energy

  

     5   
     

 

 

 

FINANCIALS—2.36%

     

Banks—2.35%

     

Associated Banc-Corp., 11/21/2018, Strike Price $19.77

     47,050         136   

Comerica, Inc., 11/14/2018, Strike Price $29.40

     1,283         18   

PNC Financial Services Group, Inc., 12/31/2018, Strike Price $67.33

     19,684         565   

SunTrust Banks, Inc., 11/14/2018, Strike Price $44.15

     50,849         280   

TCF Financial Corp., 11/14/2018, Strike Price $16.93

     94,608         193   

Valley National Bancorp, 11/14/2018, Strike Price $16.11

     42,943         6   

Washington Federal, Inc., 11/14/2018, Strike Price $17.57

     22,741         146   

Zions Bancorporation, 5/22/2020, Strike Price $36.1976

     238,561         809   

Zions Bancorporation, 11/14/2018, Strike Price $36.27

     7,947         16   
     

 

 

 
        2,169   
     

 

 

 

Diversified Financials—0.01%

     

Arowana, Inc., 5/1/2020, Strike Price $12.50C

     117,141         10   
     

 

 

 

Total Financials

  

     2,179   
     

 

 

 

HEALTH CARE—0.33%

     

Biotechnology—0.24%

     

Biondvax Pharmaceuticals Ltd., 5/15/2020, Strike Price $6.25D

     4,686         3   

BioTime, Inc., 10/1/2018, Strike Price $5.00

     176,935         188   

ContraFect Corp., 1/31/2017, Strike Price $4.80

     20,200         29   

OpGen, Inc., 5/5/2020, Strike Price $6.60

     199         0   
     

 

 

 
        220   
     

 

 

 

Pharmaceuticals—0.09%

     

Capnia, Inc., 11/13/2019, Strike Price $6.50

     1,875         1   

CEL-SCI Corp., 10/11/2018, Strike Price $1.25

     20,000         4   

EyeGate Pharmaceuticals, Inc., 7/31/2020, Strike Price $10.62

     24,172         13   

Kitov Pharmaceuticals Holdings Ltd., 11/20/2020, Strike Price $4.13

     77,514         37   

Medgenics, Inc., 4/12/2016, Strike Price $6.00

     6,225         8   

Oculus Innovative Sciences, Inc., 1/21/2020, Strike Price $1.30

     78,295         24   
     

 

 

 
        87   
     

 

 

 

Total Health Care

  

     307   
     

 

 

 

INDUSTRIALS—0.10%

     

Chemicals—0.03%

     

AgroFresh Solutions, Inc., 2/19/2019, Strike Price $11.50

     25,623         24   
     

 

 

 

Commercial Services & Supplies—0.07%

     

Solar3D, Inc., 3/9/2020, Strike Price $4.15

     68,850         62   

Tempus Applied Solutions Holdings, Inc., 7/31/2020, Strike Price $11.50

     37,152         7   
     

 

 

 
        69   
     

 

 

 

Total Industrials

  

     93   
     

 

 

 

INFORMATION TECHNOLOGY—0.24%

     

Computers & Peripherals—0.22%

     

Applied DNA Sciences, Inc., 11/14/2019, Strike Price $3.50

     113,326         188   

Eastman Kodak Co., 9/3/2018, Strike Price $14.93

     2,835         8   

Eastman Kodak Co., 9/3/2018, Strike Price $16.12

     5,514         8   
     

 

 

 
        204   
     

 

 

 

Information / Data Technology—0.00%

     

DragonWave, Inc., 8/1/2016, Strike Price $2.25L

     10,000         —     
     

 

 

 

Software & Services—0.02%

     

Ability, Inc., 12/17/2018, Strike Price $11.50

     10,998         15   

 

See accompanying notes

 

21


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares      Fair Value  
            (000’s)  

RMG Networks Holding Corp., 4/8/2018, Strike Price $11.50L

     6,250       $ —     
     

 

 

 
        15   
     

 

 

 

Total Information Technology

  

     219   
     

 

 

 

MATERIALS—0.87%

     

Construction Materials—0.86%

     

Tecnoglass, Inc., 12/16/2016, Strike Price $8.00

     29,989         178   

US Concrete, Inc., 8/31/2017, Strike Price $22.69

     760         24   

US Concrete, Inc., 8/31/2017, Strike Price $26.68

     20,955         587   
     

 

 

 
        789   
     

 

 

 

Metals & Mining—0.01%

     

Franco-Nevada Corp., 6/16/2017, Strike Price $75.00

     465         3   

New Gold, Inc., 6/28/2017, Strike Price $15.00

     62,717         3   
     

 

 

 
        6   
     

 

 

 

Total Materials

  

     795   
     

 

 

 

Total WARRANTS (Cost $4,356)

  

     4,478   
     

 

 

 

CONVERTIBLE PREFERRED STOCKS—12.69%

     

CONSUMER—2.66%

     

Consumer Products—1.14%

     

Tyson Foods, Inc., 4.75%, Due 7/15/2017

     17,320         1,051   
     

 

 

 

Food Processors—1.52%

     

Bunge Ltd., 4.875%, Due 12/31/2049

     15,000         1,396   
     

 

 

 

Total Consumer

  

     2,447   
     

 

 

 

ENERGY—1.35%

     

Oil & Gas—1.19%

     

Southwestern Energy Co., 6.25%, Due 1/15/2018

     58,605         1,087   
     

 

 

 

Power—0.16%

     

SunEdison, Inc., 6.75%, Due 12/31/2029

     500         151   
     

 

 

 

Total Energy

  

     1,238   
     

 

 

 

FINANCE—3.26%

     

HMO—1.02%

     

Anthem, Inc., 5.25%, Due 5/1/2018

     20,284         934   
     

 

 

 

Insurance—0.47%

     

Maiden Holdings Ltd., 7.25%, Due 9/15/2016

     8,208         430   
     

 

 

 

Real Estate Investment Trusts—1.77%

     

Crown Castle International Corp., 4.50%, Due 11/1/2016

     7,003         747   

Forestar Group, Inc., 6.00%, Due 12/15/2016

     45,000         692   

Invesco Mortgage Capital, Inc., 7.75%, Due 12/31/2049

     9,187         197   
     

 

 

 
        1,636   
     

 

 

 

Total Finance

  

     3,000   
     

 

 

 

MANUFACTURING—0.86%

     

Home Builders – 0.86%

     

William Lyon Homes, Inc., 6.50%, Due 12/01/2017

     9,000         795   
     

 

 

 

MATERIALS—0.80%

     

Metals and Mining– 0.80%

     

ArcelorMittal, 6.00%, Due 1/15/2016

     112,677         734   
     

 

 

 

 

See accompanying notes

 

22


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

     Shares     Fair Value  
           (000’s)  

SERVICE—2.21%

    

Other Service—1.31%

    

Amsurg Corp., 5.25%, Due 7/1/2017

     851      $ 122   

Stericycle, Inc., 5.25%, Due 9/15/2018

     11,801        1,081   
    

 

 

 
       1,203   
    

 

 

 

Pharmaceuticals—0.90%

    

Allergan PLC, 5.50%, Due 3/1/2018F

     800        824   
    

 

 

 

Total Service

       2,027   
    

 

 

 

TELECOMMUNICATIONS—0.70%

    

Telecom—0.70%

    

Intelsat S.A., 5.75%, Due 5/1/2016

     9,200        115   

T-Mobile US, Inc., 5.50%, Due 12/15/2017

     7,786        527   
    

 

 

 

Total Telecommunications

       642   
    

 

 

 

UTILITIES – 2.50%

    

Electric – 2.50%

    

Black Hills Corp., 7.75%, Due 11/1/2018

     27,400 E      1,518   

NextEra Energy, Inc., 6.371%, Due 9/01/2018

     14,730        778   
    

 

 

 

Total Utilities

       2,296   
    

 

 

 

Total CONVERTIBLE PREFERRED STOCKS (Cost $12,968)

       13,179   
    

 

 

 

PREFERRED STOCKS—0.77% (Cost $700)

    

SERVICE—0.77%

    

Pharmaceuticals—0.77%

    

Teva Pharmaceutical Industries Ltd., 7.00%, Due 12/15/2018A

     700        712   
    

 

 

 
     Par Amount        
     (000’s)        

CONVERTIBLE OBLIGATIONS—16.08%

    

Auto Manufacturing—0.86%

    

Tesla Motors, Inc.,

    

1.50%, Due 6/1/2018

   $ 400        788   
    

 

 

 

Electronics—4.35%

    

Intel Corp.,

    

3.25%, Due 8/1/2039

     550        915   

NVIDIA Corp.,

    

1.00%, Due 12/1/2018

     1,250        2,081   

SunPower Corp.,

    

4.00%, Due 1/15/2023G

     833        999   
    

 

 

 
       3,995   
    

 

 

 

Information / Data Technology—0.72%

    

Take-Two Interactive Software, Inc.,

    

1.00%, Due 7/1/2018

     400        665   
    

 

 

 

Internet Tech—3.70%

    

Ctrip.com International Ltd.,

    

1.25%, Due 10/15/2018

     1,575        2,087   

j2 Global, Inc.,

    

3.25%, Due 6/15/2029

     1,000        1,311   
    

 

 

 
       3,398   
    

 

 

 

Other Service—1.97%

    

HealthSouth Corp.,

    

2.00%, Due 12/1/2043

     500        539   

Monster Worldwide, Inc.,

    

3.50%, Due 10/15/2019

     1,000        1,270   
    

 

 

 
       1,809   
    

 

 

 

Other Transportation—0.22%

    

Ship Finance International Ltd.,

    

3.75%, Due 2/10/2016

     200        204   
    

 

 

 

 

See accompanying notes

 

23


American Beacon Ionic Strategic Arbitrage Fund SM

Schedule of Investments

December 31, 2015

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

Pharmaceuticals—2.29%

     

Depomed, Inc.,

     

2.50%, Due 9/1/2021

   $ 1,500       $ 1,707   

Horizon Pharma Investment Ltd.,

     

2.50%, Due 3/15/2022G

     400         399   
     

 

 

 
        2,106   
     

 

 

 

Retail—1.11%

     

Restoration Hardware Holdings, Inc.,

     

0.00%, Due 7/15/2020 G

     1,150         1,020   
     

 

 

 

Telecom—0.86%

     

America Movil S.A.B. de C.V.,

     

5.50%, Due 9/17/2018

     700         793   
     

 

 

 

Total CONVERTIBLE OBLIGATIONS (Cost $14,616)

        14,778   
     

 

 

 

CORPORATE OBLIGATIONS—0.23% (Cost $281)

     

Oil & Gas—0.23%

     

Cobalt International Energy, Inc.,

     

3.125%, Due 5/15/2024

     400         209   
     

 

 

 

COLLATERALIZED MORTGAGE OBLIGATIONS—11.64%

     

Fannie Mae Interest Strip,

     

8.50%, Due 3/25/2023, 211 2

     349         72   

5.00%, Due 4/25/2034, 351 5

     371         80   

5.50%, Due 8/25/2035, 359 14

     1,469         301   

5.50%, Due 10/25/2035, 359 12

     1,453         294   

Fannie Mae REMICS,

     

7.328%, Due 3/25/2032, 2002 8 SCH

     191         39   

6.578%, Due 9/25/2032, 2002 90 DSH

     1,141         232   

7.578%, Due 12/25/2032, 2002 86 USH

     753         182   

4.50%, Due 12/25/2033, 2003 119 GI

     159         31   

6.178%, Due 2/25/2035, 2005 2 SH

     244         44   

6.148%, Due 6/25/2036, 2006 44 SFH

     2,638         469   

5.628%, Due 11/25/2036, 2008 50 SAH

     242         41   

6.218%, Due 12/25/2036, 2006 117 SAH

     1,903         373   

7.00%, Due 2/25/2037, 381 17

     1,256         313   

5.00%, Due 2/25/2040, 2010 16 PI

     216         40   

6.058%, Due 7/25/2040, 2010 68 SCH

     1,623         328   

5.50%, Due 12/25/2043, 2014 38 QI

     1,819         374   

5.50%, Due 5/25/2045, 2015 30 IO

     2,332         529   

5.00%, Due 10/25/2045, 2015 70 JI

     1,877         385   

1.941%, Due 6/25/2055, 42 AI

     1,961         135   

1.705%, Due 9/25/2055, 64 SK

     8,034         546   

Freddie Mac REMICS,

     

7.770%, Due 2/15/2028, 2526 SWH

     145         34   

8.50%, Due 1/15/2030, 2206 IO

     166         44   

7.00%, Due 4/15/2032, 2525 IK

     132         48   

7.470%, Due 6/15/2032, 3489 SDH

     153         31   

6.370%, Due 10/15/2036, 3232 STH

     221         37   

1.894%, Due 10/15/2041, 4413 WI

     1,270         83   

0.953%, Due 4/15/2043, 4517 KIH

     8,334         246   

6.00%, Due 11/15/2043, 4472 IJ

     1,645         398   

Ginnie Mae REMIC Trust,

     

4.00%, Due 12/20/2025, 2013 88 IM

     368         23   

6.650%, Due 2/17/2029, 1999 40 TWH

     261         54   

7.256%, Due 5/16/2029, 1999 18 SDH

     410         97   

7.156%, Due 5/16/2031, 2001 22 SDH

     452         106   

7.156%, Due 6/16/2032, 2002 41 SYH

     148         26   

 

See accompanying notes

 

24


American Beacon Ionic Strategic Arbitrage Fund SM

Schedule of Investments

December 31, 2015

 

 

     Par Amount      Fair Value  
     (000’s)      (000’s)  

7.356%, Due 2/16/2033, 2003 11 SKH

   $ 336       $ 58   

7.248%, Due 6/20/2033, 2004 56 SH

     490         105   

6.086%, Due 10/16/2033, 2003 92 SNH

     212         33   

6.24%, Due 11/20/2033, 2003 98 SCH

     1,383         282   

6.748%, Due 11/20/2033, 2004 37 SMH

     1,897         172   

6.698%, Due 6/20/2034, 2004 46 S

     1,814         376   

5.698%, Due 9/20/2034, 2004 86 SPH

     209         25   

5.50%, Due 1/20/2035, 2015 179 IV

     2,520         190   

5.698%, Due 1/20/2035, 2009 25 SBH

     5,228         279   

5.00%, Due 6/20/2035, 2014 183 IM

     1,800         456   

5.50%, Due 7/20/2035, 2005 56 IC

     135         31   

6.456%, Due 8/16/2036, 2006 47 SAH

     148         32   

6.216%, Due 11/16/2036, 2008 83 SDH

     126         26   

6.248%, Due 12/20/2037, 2007 81 SPH

     3,119         560   

6.056%, Due 5/16/2038, 2008 40 SAH

     341         61   

5.50%, Due 5/16/2039, 2009 776 GI

     1,451         244   

4.50%, Due 9/20/2039, 2013 88 WI

     538         79   

5.00%, Due 5/16/2042, 2013 44 IB

     524         125   

5.00%, Due 6/20/2043, 2013 86 IA

     412         89   

6.356%, Due 8/16/2043, 2013 113 SDH

     2,314         455   

7.00%, Due 8/20/2043, 2013 114 IW

     166         33   

5.748%, Due 11/20/2043, 2013 165 STH

     241         45   

10.00%, Due 12/20/2043, 2013 190 IC

     102         15   

0.998%, Due 1/16/2044, 2015 80 HI

     3,896         153   

5.50%, Due 1/20/2044, 2014 2 TI

     604         119   

8.00%, Due 5/20/2044, 2014 68 NI

     130         44   

6.556%, Due 11/20/2044, 2014 161 SLH

     226         50   

7.00%, Due 8/20/2045, 2015 111 YI

     511         108   

5.00%, Due 12/16/2045, 2015 180 CII

     1,620         423   
     

 

 

 

Total COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $10,746)

        10,703   
     

 

 

 
     Shares         

INVESTMENT COMPANIES—5.85%

     

CLOSED END FUNDS—5.85%

     

Aberdeen Australia Equity Fund, Inc.

     48,000         262   

Advent Claymore Convertible Securities and Income Fund

     7,596         103   

Advent Claymore Convertible Securities and Income Fund II

     47,146         262   

AllianzGI Convertible & Income Fund

     76,939         426   

AllianzGI Convertible & Income Fund II

     32,466         164   

AllianzGI NFJ Dividend Interest & Premium Strategy Fund

     28,900         358   

Alpine Global Premier Properties Fund

     45,400         262   

ASA Gold and Precious Metals Fund

     8,415         60   

BlackRock Credit Allocation Income Trust

     21,467         265   

BlackRock Resources & Commodities Strategy Trust

     44,693         318   

Calamos Dynamic Convertible & Income Fund

     2,757         50   

Cohen & Steers MLP Income and Energy Opportunity Fund, Inc. E K

     7,190         75   

Cohen & Steers REIT and Preferred Income Fund, Inc.

     22,106         408   

Fiduciary/Claymore MLP Opportunity Fund E K

     9,129         119   

First Trust Energy Infrastructure Fund

     4,751         69   

Invesco Dynamic Credit Opportunities Fund

     39,185         413   

Kayne Anderson MLP Investment Co. E K

     6,150         106   

LMP Capital and Income Fund, Inc.

     18,569         230   

New America High Income Fund, Inc.

     32,020         245   

Nuveen Energy MLP Total Return Fund E K

     12,847         143   

Royce Micro-Cap Trust, Inc.

     27,652         201   

Swiss Helvetia Fund, Inc.

     11,047         117   

Tortoise Pipeline & Energy Fund, Inc.

     4,789         70   

Wells Fargo Global Dividend Opportunity Fund

     56,144         332   

 

See accompanying notes

 

25


American Beacon Ionic Strategic Arbitrage Fund SM

Schedule of Investments

December 31, 2015

 

 

     Shares     Fair Value  
           (000’s)  

Western Asset/Claymore Inflation-Linked Opportunities & Income Fund

     17,509      $ 180   

Western Asset/Claymore Inflation-Linked Securities & Income Fund

     13,130        139   
    

 

 

 

Total Closed End Funds

  

    5,377   
    

 

 

 

Total INVESTMENT COMPANIES (Cost $5,366)

  

    5,377   
    

 

 

 

EXCHANGE TRADED INSTRUMENTS—2.91%

    

EXCHANGE TRADED FUNDS—1.96%

    

iShares 3-7 Year Treasury Bond ETF

     989        121   

iShares China Large-Cap Fund

     10,124        357   

iShares MSCI Brazil Capped Fund

     594        12   

iShares MSCI USA Momentum Factor ETF

     4,229        310   

iShares Russell 2000 Index Fund

     5,944        669   

Vanguard Total Bond Market ETF

     4,154        335   
    

 

 

 

Total Exchange Traded Funds

  

    1,804   
    

 

 

 

EXCHANGE TRADED NOTES—0.95%

    

ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN

     19,735        303   

iPATH S&P 500 VIX Short-Term Futures ETN

     9,406        189   

VelocityShares Daily Inverse VIX Short Term ETN

     14,716        380   
    

 

 

 

Total Exchange Traded Notes

  

    872   
    

 

 

 

Total EXCHANGE TRADED INSTRUMENTS (Cost $2,766)

  

    2,676   
    

 

 

 

SHORT-TERM INVESTMENTS—33.80% (Cost $31,071)

    

JPMorgan U.S. Government Money Market Fund, Capital Class

     31,071,426        31,071   
    

 

 

 

TOTAL SECURITIES HELD LONG (Cost: $91,246)

       91,566   
    

 

 

 

SECURITIES SOLD SHORT

    

COMMON STOCKS—(36.94%)

    

CONSUMER DISCRETIONARY—(6.87%)

    

Automobiles—(0.89%)

    

Blue Bird Corp.A

     (8,386     (85

Tesla Motors, Inc.A

     (3,032     (728
    

 

 

 
       (813 ) 
    

 

 

 

Homebuilders—(0.66%)

    

William Lyon Homes, Inc., Class AA

     (36,520     (603 ) 
    

 

 

 

Hotels, Restaurants & Leisure—(2.72%)

    

Carnival PLC, ADRD

     (23,831     (1,357

Del Taco Restaurants, Inc.A

     (58,723     (625

Lindblad Expeditions Holdings, Inc.A

     (46,531     (517
    

 

 

 
       (2,499 ) 
    

 

 

 

Internet & Catalog Retail—(2.01%)

    

Ctrip.com International Ltd., ADRD

     (32,584     (1,509

TripAdvisor, Inc.A

     (4,090     (349
    

 

 

 
       (1,858
    

 

 

 

Media—(0.42%)

    

Liberty Media Corp.A

     (9,935     (390
    

 

 

 

Specialty Retail—(0.17%)

    

Restoration Hardware Holdings, Inc.A

     (1,917     (152
    

 

 

 

Total Consumer Discretionary

  

    (6,315 ) 
    

 

 

 

CONSUMER STAPLES—(1.72%)

    

Food Processors—(0.80%)

    

Bunge Ltd.

     (10,700     (731

 

See accompanying notes

 

26


American Beacon Ionic Strategic Arbitrage Fund SM

Schedule of Investments

December 31, 2015

 

 

     Shares     Fair Value  
           (000’s)  

Food Products—(0.92%)

    

Tyson Foods, Inc., Class A

     (15,918   $ (848
    

 

 

 

Total Consumer Staples

  

    (1,579 ) 
    

 

 

 

ENERGY—(1.01%)

    

Oil & Gas—(1.01%)

    

Southwestern Energy Co. A

     (130,830     (930 ) 
    

 

 

 

FINANCIALS—(9.04%)

    

Banks—(7.48%)

    

Associated Banc-Corp.

     (27,389     (514

Comerica, Inc.

     (1,108     (46

PNC Financial Services Group, Inc.

     (17,735     (1,690

SunTrust Banks, Inc.

     (26,171     (1,121

TCF Financial Corp.

     (41,722     (589

Washington Federal, Inc.

     (16,468     (392

Zions Bancorporation

     (92,287     (2,520
    

 

 

 
       (6,872 ) 
    

 

 

 

Diversified Financials—(0.15%)

    

Citigroup, Inc.

     (2,729     (141 ) 
    

 

 

 

Insurance—(0.32%)

    

Maiden Capital Financing Trust

     (19,409     (290
    

 

 

 

Real Estate—(1.09%)

    

Crown Castle International Corp.J

     (4,763     (412

Forestar Group, Inc.A

     (54,100     (592
    

 

 

 
       (1,004 ) 
    

 

 

 

Total Financials

  

    (8,307 ) 
    

 

 

 

HEALTH CARE—(3.69%)

    

Biotechnology—(0.17%)

    

BioTime, Inc.A

     (36,458     (150

ContraFect Corp.A

     (2,036     (10
    

 

 

 
       (160 ) 
    

 

 

 

Health Care Providers & Services—(1.08%)

    

Amsurg Corp.A

     (1,498     (114

Anthem, Inc.

     (4,058     (566

HealthSouth Corp.

     (8,890     (309
    

 

 

 
       (989 ) 
    

 

 

 

Pharmaceuticals—(2.44%)

    

Allergan PLCA F

     (1,773     (554

Depomed, Inc.A

     (58,450     (1,059

EyeGate Pharmaceuticals, Inc.A L

     (50     —     

Horizon Pharma PLCA F

     (10,000     (217

OpGen, Inc.A

     (460     (1

Teva Pharmaceutical Industries Ltd., Sponsored, ADRD

     (6,400     (420
    

 

 

 
       (2,251 ) 
    

 

 

 

Total Health Care

  

    (3,400 ) 
    

 

 

 

INDUSTRIALS—(2.96%)

    

Aerospace & Defense—(0.37%)

    

HEICO Corp.

     (6,996     (344 ) 
    

 

 

 

Airlines—(0.30%)

    

Delta Air Lines, Inc.

     (5,469     (277 ) 
    

 

 

 

Chemicals—(0.12%)

    

AgroFresh Solutions, Inc.A

     (15,199     (96

Central Garden and Pet Co.A

     (1,103     (15
    

 

 

 
       (111 ) 
    

 

 

 

 

See accompanying notes

 

27


American Beacon Ionic Strategic Arbitrage Fund SM

Schedule of Investments

December 31, 2015

 

 

     Shares     Fair Value  
           (000’s)  

Commercial Services & Supplies—(1.80%)

  

Monster Worldwide, Inc.A

     (160,773   $ (922

Stericycle, Inc.A

     (6,080     (733
    

 

 

 
       (1,655
    

 

 

 

Industrial Conglomerates—(0.25%)

    

General Electric Co.

     (7,494     (233 ) 
    

 

 

 

Marine—(0.12%)

    

Ship Finance International Ltd.

     (6,620     (110
    

 

 

 

Total Industrials

  

    (2,730 ) 
    

 

 

 

INFORMATION TECHNOLOGY—(6.36%)

    

Computers & Peripherals—(2.20%)

    

Applied DNA Sciences, Inc.A

     (69,214     (224

Eastman Kodak Co.A

     (1,821     (23

NVIDIA Corp.

     (53,917     (1,777
    

 

 

 
       (2,024 ) 
    

 

 

 

Electronic Equipment & Instruments—(0.01%)

    

Daktronics, Inc.

     (1,375     (12 ) 
    

 

 

 

Internet Software & Services—(1.85%)

    

Alibaba Group Holding Ltd., ADRA D

     (8,646     (703

Alphabet, Inc., Class AA

     (88     (69

j2 Global, Inc.

     (11,245     (926
    

 

 

 
       (1,698 ) 
    

 

 

 

Semiconductor Equipment & Products—(1.68%)

    

Intel Corp.

     (20,662     (712

SunEdison, Inc.A

     (32,544     (166

SunPower Corp.A

     (22,093     (663
    

 

 

 
       (1,541 ) 
    

 

 

 

Software—(0.62%)

    

Take-Two Interactive Software, Inc.

     (16,400     (571
    

 

 

 

Total Information Technology

  

    (5,846 ) 
    

 

 

 

MATERIALS—(2.25%)

    

Construction Materials—(1.43%)

    

Tecnoglass, Inc.A

     (25,471     (350

US Concrete, Inc.A

     (18,246     (961
    

 

 

 
       (1,311 ) 
    

 

 

 

Metals & Mining—(0.82%)

    

ArcelorMittal

     (175,663     (741

Franco-Nevada Corp.

     (265     (12
    

 

 

 
       (753 ) 
    

 

 

 

Total Materials

  

    (2,064 ) 
    

 

 

 

TELECOMMUNICATION SERVICES—(1.20%)

    

Diversified Telecommunication Services—(0.70%)

    

Intelsat S.A.A

     (25,593     (107

Koninklijke KPN N.V.I

     (141,900     (536
    

 

 

 
       (643 ) 
    

 

 

 

Wireless Telecommunication Services—(0.50%)

    

T-Mobile US, Inc.

     (11,683     (457 ) 
    

 

 

 

Total Telecommunication Services

  

    (1,100 ) 
    

 

 

 

UTILITIES—(1.84%)

    

Electric—(1.25%)

    

Black Hills Corp.

     (24,757     (1,149 ) 
    

 

 

 

 

See accompanying notes

 

28


American Beacon Ionic Strategic Arbitrage Fund SM

Schedule of Investments

December 31, 2015

 

 

     Shares     Fair Value  
           (000’s)  

Utilities—(0.59%)

  

NextEra Energy, Inc.

     (5,215   $ (541 ) 
    

 

 

 

Total Utilities

  

    (1,690 ) 
    

 

 

 

Total COMMON STOCKS (Proceeds $(33,434))

  

    (33,961 ) 
    

 

 

 

WARRANTS—(0.05%)

    

FINANCIALS—(0.05%)

    

Diversified Financials—(0.05%)

    

Bank of America Corp., 1/16/2019, Strike Price 13.137

     (3,600     (21

Bank of America Corp., 10/28/2018, Strike Price 30.79

     (20,000     (6

Citigroup, Inc., 1/4/2019, Strike Price 106.10

     (100,000     (18
    

 

 

 

Total Financials

  

    (45 ) 
    

 

 

 

Total WARRANTS (Proceeds $(106))

  

    (45 ) 
    

 

 

 
     Par Amount        
     (000’s)        

CONVERTIBLE OBLIGATIONS – (0.24%) (Proceeds $(303))

    

Oil & Gas – (0.24%)

    

Cobalt International Energy, Inc.,

    

2.625%, Due 12/1/2019

   $ (400     (224 ) 
    

 

 

 
     Shares        

INVESTMENT COMPANIES – (0.50%) (Proceeds $(398))

    

CLOSED END FUNDS – (0.50%)

    

Alerian MLP ETF E K

     (37,660     (454 ) 
    

 

 

 

EXCHANGE TRADED INSTRUMENTS – (8.65%)

    

EXCHANGE TRADED FUNDS – (8.65%)

    

CurrencyShares Euro Trust

     (2,703     (288

Direxion Daily Emerging Markets Bear 3X Shares

     (3,977     (187

Direxion Daily Financial Bear 3X Shares

     (3,977     (164

Direxion Daily Financial Bull 3X Shares

     (7,958     (231

Direxion Daily Gold Miners Index Bull 3X Shares

     (10,133     (246

Direxion Daily Small Cap Bear 3X Shares

     (6,832     (307

iShares Global Healthcare ETF

     (1,277     (131

iShares iBoxx $ High Yield Corporate Bond ETF

     (5,460     (440

iShares iBoxx $ Investment Grade Corporate Bond ETF

     (980     (112

iShares MSCI Australia Fund

     (13,837     (262

iShares MSCI Switzerland Capped ETF

     (3,802     (118

iShares Select Dividend ETF

     (4,450     (334

iShares TIPS Bond ETF

     (2,979     (327

iShares US Preferred Stock ETF

     (5,991     (233

iShares US Real Estate ETF

     (1,569     (118

Market Vectors Gold Miners ETF

     (4,143     (57

PIMCO Total Return Active Exchange-Traded Fund

     (3,664     (382

PowerShares DB US Dollar Index Bullish Fund

     (29,674     (760

SPDR Barclays Convertible Securities ETF

     (11,562     (500

SPDR S&P 500 ETF Trust

     (8,385     (1,709

Vanguard FTSE Emerging Markets Fund

     (18,399     (602

Vanguard REIT Fund

     (5,515     (440
    

 

 

 

Total EXCHANGE TRADED INSTRUMENTS (Proceeds $(8,015))

  

    (7,948 ) 
    

 

 

 

TOTAL SECURITIES SOLD SHORT (Proceeds $(42,256))

       (42,632
    

 

 

 

TOTAL INVESTMENTS IN SECURITIES (excludes securities sold short) - 99.62% (Cost $91,246)

  

    91,566   

TOTAL SECURITIES SOLD SHORT— (46.38)% (Proceeds $(42,256))

 

    (42,632
    

 

 

 

 

See accompanying notes

 

29


American Beacon Ionic Strategic Arbitrage Fund SM

Schedule of Investments

December 31, 2015

 

 

     Fair Value  
     (000’s)  

OTHER ASSETS, NET OF LIABILITIES—46.76%

   $ 42,981   
  

 

 

 

TOTAL NET ASSETS—100.00%

   $ 91,915   
  

 

 

 

Percentages are stated as a percent of net assets.

 

A  Non-income producing security.
B  Unit - Usually consists of one common stock and/or rights and warrants.
C  SPAC - Special Purpose Acquisition Company.
D  ADR - American Depositary Receipt.
E  Unit – Consists of one common stock and a portion of a re-marketable Junior Subordinated Note (“RSN”).
F  PLC - Public Limited Company.
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 $2,418 or 2.63% of net assets. The Fund has no right to demand registration of these securities.
H  The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date.
I  Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $(113) or (0.00)% of net assets.
J  REIT - Real Estate Investment Trust.
K  MLP - Master Limited Partnership.
L  Amount is less than $500.

 

See accompanying notes

 

30


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

Futures Contracts Open on December 31, 2015:

 

Description

   Type    Number of
Contracts
   Expiration Date    Contract Value     Unrealized
Appreciation
(Depreciation)
 

U.S. Treasury 5-Year Note Futures

   Long    6    March 2016    $ 708,615      $ (2,110

E-Mini Russell 2000 Futures

   Short    8    March 2016      (905,200     (5,080
           

 

 

   

 

 

 
            $ (196,585   $ (7,190
           

 

 

   

 

 

 

Purchased Options Outstanding on December 31, 2015:

Equity Options

 

Description

   Exercise
Price
     Expiration Date      Number of
Contracts
     Premiums
Paid
     Fair Value      Net Unrealized
Appreciation

(Depreciation)
 

Call - Arcelormittal NA

   $ 15.00         1/15/2016         12       $ 48       $ 6       $ (42

Call - Arcelormittal NA

     12.00         1/15/2016         50         1,077         75         (1,002

Call - Bank of America Corp.

     25.00         1/15/2016         50         126         25         (101

Call - Bank of America Corp.

     22.00         1/15/2016         150         977         150         (827

Call - Carnival Corp.

     55.00         1/15/2016         10         1,150         850         (300

Call - Citigroup Inc.

     57.50         1/15/2016         15         3,810         30         (3,780

Call - Citigroup Inc.

     85.00         1/15/2016         57         56         85         29   

Call - Citigroup Inc.

     52.50         1/15/2016         77         47,012         5,775         (41,237

Call - Daktronics Inc.

     10.00         1/15/2016         66         4,151         825         (3,326

Call - General Motors Co.

     42.00         1/15/2016         150         3,000         150         (2,850

Call - Wal-Mart Stores Inc.

     65.00         1/15/2016         500         47,503         1,500         (46,003

Put - Crown Castle International Corp.

     70.00         1/15/2016         5         321         75         (246

Put - Ctrip.Com International Ltd.

     40.00         1/15/2016         80         4,818         720         (4,098

Put - SolarCity Corp.

     20.00         1/15/2016         50         500         200         (300

Put - Southwestern Energy Co.

     4.00         1/15/2016         60         1,203         450         (753

Put - Southwestern Energy Co.

     5.00         1/15/2016         150         2,631         750         (1,881

Put - Stericycle Inc.

     105.00         1/15/2016         12         787         150         (637

Call - Forestar Group Inc.

     17.50         2/19/2016         29         651         218         (433

Call - Kindred Healthcare Inc.

     17.50         2/19/2016         6         363         90         (273

Call - Omega Protein Corp.

     22.50         2/19/2016         60         14,132         8,700         (5,432

Put - Maiden Holdings Ltd.

     12.50         2/19/2016         6         243         75         (168

Call - Biotime Inc.

     5.00         3/18/2016         1         51         35         (16

Call - Intelsat SA

     12.50         3/18/2016         50         1,526         250         (1,276

Call - Southwestern Energy Co.

     18.00         3/18/2016         13         501         162         (339

Put - Biotime Inc.

     5.00         3/18/2016         610         87,330         73,200         (14,130

Put - Dycom Industries Inc.

     50.00         3/18/2016         27         5,480         2,497         (2,983

Put - Intelsat SA

     5.00         3/18/2016         10         652         1,175         523   

Put - Kinder Morgan Inc.

     17.50         3/18/2016         15         3,098         4,575         1,477   

Put - Southwestern Energy Co.

     8.00         3/18/2016         25         1,104         4,750         3,646   

Put - Southwestern Energy Co.

     6.00         3/18/2016         50         1,824         3,700         1,876   

Put - Southwestern Energy Co.

     5.00         3/18/2016         55         2,284         2,200         (84

Call - Clovis Oncology Inc.

     30.00         4/15/2016         20         13,235         16,900         3,665   

Call - Daktronics Inc.

     10.00         4/15/2016         14         1,023         455         (568

Call - John Bean Technologies Corp.

     50.00         4/15/2016         15         4,508         5,962         1,454   

Put - Clovis Oncology Inc.

     30.00         4/15/2016         20         16,667         7,100         (9,567

Put - Crown Castle International Corp.

     60.00         4/15/2016         7         673         123         (550

Put - Tyson Foods Inc.

     30.00         4/15/2016         5         275         38         (237

Call - Forestar Group Inc.

     17.50         5/20/2016         55         2,670         688         (1,982

Put - Black Hills Corp.

     35.00         5/20/2016         2         221         75         (146

Put - Kindred Healthcare Inc.

     10.00         5/20/2016         10         605         925         320   

Put - Kindred Healthcare Inc.

     12.50         5/20/2016         15         683         3,150         2,467   

Put - Restoration Hardware Holdings

     80.00         5/20/2016         105         38,570         82,950         44,380   

Put - William Lyon Homes

     15.00         5/20/2016         7         945         963         18   

Put - Biotime Inc.

     5.00         6/17/2016         89         14,505         12,682         (1,823

Put - Biotime Inc.

     2.50         6/17/2016         395         13,005         9,875         (3,130

Put - Southwestern Energy Co.

     7.00         6/17/2016         40         2,398         7,020         4,622   

 

See accompanying notes

 

31


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

Description

   Exercise
Price
     Expiration Date      Number of
Contracts
     Premiums
Paid
     Fair Value      Net Unrealized
Appreciation

(Depreciation)
 

Put - Crown Castle International Corp.

     60.00         7/15/2016         14       $ 708       $ 420       $ (288

Call - Global Eagle Entertainment Inc.

     12.50         8/19/2016         12         787         750         (37

Call - Global Eagle Entertainment Inc.

     10.00         8/19/2016         24         3,733         3,300         (433

Put - Global Eagle Entertainment Inc.

     7.50         8/19/2016         49         2,926         3,063         137   

Put - Global Eagle Entertainment Inc.

     10.00         8/19/2016         220         38,619         30,800         (7,819

Put - Bunge Ltd.

     35.00         1/20/2017         125         6,943         6,250         (693

Call - Delta Air Lines Inc.

     60.00         1/19/2018         125         82,263         76,125         (6,138

Call - General Electric Co.

     32.00         1/19/2018         163         41,364         43,032         1,668   
           

 

 

    

 

 

    

 

 

 
            $ 525,735       $ 426,089       $ (99,646
           

 

 

    

 

 

    

 

 

 

ETF and ETN Options

 

Description

   Exercise
Price
     Expiration
Date
     Number of
Contracts
     Premiums
Paid
     Fair Value      Net Unrealized
Appreciation

(Depreciation)
 

Call - CurrencyShares Euro Trust ETF

   $ 107.00         1/15/2016         34       $ 5,910       $ 1,768       $ (4,142

Call - CurrencyShares Euro Trust ETF

     111.00         1/15/2016         107         11,351         321         (11,030

Call - CurrencyShares Euro Trust ETF

     100.00         1/15/2016         120         65,406         77,400         11,994   

Call - iShares 3-7 Year Treasury Bond ETF

     124.00         1/15/2016         13         1,176         162         (1,014

Call - iShares China Large-Cap ETF

     36.00         1/15/2016         24         9,133         960         (8,173

Call - iShares Core US Credit Bond ETF

     110.00         1/15/2016         4         297         160         (137

Call - iShares MSCI Brazil Capped ETF

     30.00         1/15/2016         100         23,417         100         (23,317

Call - iShares MSCI Brazil Capped ETF

     35.00         1/15/2016         100         16,500         200         (16,300

Call - Market Vectors Gold Miners ETF

     11.50         1/15/2016         493         143,523         108,214         (35,309

Call - ProShares Ultrashort 20+ Year ETF

     60.00         1/15/2016         50         1,877         25         (1,852

Call - SPDR S&P Midcap 400 ETF Trust

     290.00         1/15/2016         50         21,000         250         (20,750

Call - Vanguard Intermediate-Term Bond ETF

     85.00         1/15/2016         2         135         10         (125

Put - CurrencyShares Euro Trust ETF

     109.00         1/15/2016         67         28,546         17,889         (10,657

Put - CurrencyShares Euro Trust ETF

     111.00         1/15/2016         107         62,053         50,183         (11,870

Put - iShares 3-7 Year Treasury Bond ETF

     123.00         1/15/2016         37         5,385         2,220         (3,165

Put - iShares China Large-Cap ETF

     40.00         1/15/2016         115         13,915         53,705         39,790   

Put - iShares Core US Credit Bond ETF

     107.00         1/15/2016         9         1,616         697         (919

Put - iShares US Preferred Stock ETF

     38.00         1/15/2016         214         13,940         1,712         (12,228

Put - Vanguard Intermediate-Term Bond ETF

     83.00         1/15/2016         2         241         85         (156

Call - iShares Russell 2000 ETF

     116.00         2/19/2016         270         73,365         37,800         (35,565

Call - iShares Russell Mid-Cap Value ETF

     75.00         2/19/2016         691         52,136         19,002         (33,134

Call - PIMCO Total Return Active ETF

     107.00         2/19/2016         57         5,279         998         (4,281

Call - SPDR S&P 500 ETF Trust

     211.00         2/19/2016         307         76,358         42,366         (33,992

Call - Vanguard Intermediate-Term Corp. ETF

     85.00         2/19/2016         7         606         3,500         2,894   

Put - iShares Global Healthcare ETF

     105.88         2/19/2016         19         7,800         7,790         (10

Put - Vanguard Intermediate-Term Corp. ETF

     83.00         2/19/2016         7         865         3,500         2,635   

Call - Market Vectors Gold Miners ETF

     10.50         3/18/2016         172         59,668         57,190         (2,478

Put - iPath S&P 500 VIX Short-Term Futures ETN

     14.00         3/18/2016         820         66,864         18,040         (48,824

Put - Vanguard Total Bond Market ETF

     81.00         3/18/2016         4         362         460         98   

Put - SPDR S&P 500 ETF Trust

     155.00         3/31/2016         430         58,475         18,920         (39,555

Put - iShares 3-7 Year Treasury Bond ETF

     122.00         4/15/2016         3         242         300         58   

Put - iShares 3-7 Year Treasury Bond ETF

     123.00         4/15/2016         7         774         1,068         294   
           

 

 

    

 

 

    

 

 

 
            $ 828,215       $ 526,995       $ (301,220
           

 

 

    

 

 

    

 

 

 

Index Options

 

Description

   Exercise
Price
     Expiration
Date
     Number of
Contracts
     Premiums
Paid
     Fair Value      Net Unrealized
Appreciation

(Depreciation)
 

Put - PowerShares DB US Dollar Index

   $ 27.00         1/15/2016         170       $ 19,186       $ 23,205       $ 4,019   

Put - PowerShares DB US Dollar Index

     26.00         1/15/2016         407         20,456         17,908         (2,548

Call - CBOE SPX Volatility Index

     30.00         1/20/2016         186         19,098         7,254         (11,844

Call - CBOE SPX Volatility Index

     27.00         1/20/2016         631         42,882         34,705         (8,177

Call - PowerShares DB US Dollar Index

     25.00         3/18/2016         1,130         92,064         85,880         (6,184

Call - PowerShares DB US Dollar Index

     26.00         3/18/2016         1,633         69,584         39,192         (30,392

 

See accompanying notes

 

32


American Beacon Ionic Strategic Arbitrage FundSM

Schedule of Investments

December 31, 2015

 

 

Description

   Exercise
Price
     Expiration
Date
     Number of
Contracts
     Premiums
Paid
     Fair Value      Net Unrealized
Appreciation

(Depreciation)
 

Put - PowerShares DB US Dollar Index

     24.00         3/18/2016         1,130       $ 14,595       $ 2,260       $ 12,335

Put - PowerShares DB US Dollar Index

     25.00         3/18/2016         1,633         51,036         22,862         (28,174

Call - PowerShares DB US Dollar Index

     26.00         6/17/2016         364         16,279         16,380         101   

Put - PowerShares DB US Dollar Index

     25.00         6/17/2016         364         17,371         10,920         (6,451
           

 

 

    

 

 

    

 

 

 
            $ 362,551       $ 260,566       $ (101,985
           

 

 

    

 

 

    

 

 

 

Glossary

 

Other Abbreviations:

 

ETF   Exchange Traded Fund   MSCI   Morgan Stanley Composite Index   SPDR   Standard & Poors Depositary Receipt
ETN   Exchange Traded Note   REIT   Regulated Investment Trust   VIX   Volatility Index
FTSE   Financial Times Stock Exchange   REMIC   Real Estate Mortgage Investment Conduit    

 

See accompanying notes

 

33


American Beacon FundsSM

Statements of Assets and Liabilities

December 31, 2015 (in thousands, except share and per share amounts)

 

 

 

     AHL
Managed
Futures
Strategy
Fund**
    Ionic
Strategic
Arbitrage
Fund
 

Assets:

    

Investments in unaffiliated securities, at fair value A

   $ 98,285      $ 91,566   

Purchased options outstanding (Premiums paid $1,717) E

     –          1,214   

Foreign currency held at broker for futures contracts, at fair value D

     –          2   

Cash

     5,523        41,193   

Deposit with brokers for futures contracts

     1,865        64   

Deposit with brokers for securities sold short

     –          1,129   

Dividends and interest receivable

     –          359   

Receivable for investments sold

     –          7,194   

Receivable for fund shares sold

     1,019        118   

Receivable for expense reimbursement (Note 2)

     132        15   

Unrealized appreciation from foreign currency contracts

     328        –     

Prepaid expenses

     27        44   
  

 

 

   

 

 

 

Total assets

     107,179        142,898   
  

 

 

   

 

 

 

Liabilities:

    

Payable for securities sold short, at fair value B

     –          42,632   

Payable for investments purchased

     –          8,145   

Payable for fund shares redeemed

     2,094        8   

Payable for foreign currency, at fair value C

     –          6   

Payable for variation margin from open futures contracts

     42        7   

Dividends expense payable

     –          35   

Interest expense payable

     –          1   

Management and investment advisory fees payable

     89        62   

Administrative service and service fees payable

     40        20   

Transfer agent fees payable

     1        –     

Custody and fund accounting fees payable

     75        1   

Professional fees payable

     57        60   

Payable for prospectus and shareholder reports

     13        6   

Unrealized depreciation from foreign currency contracts

     791        –     
  

 

 

   

 

 

 

Total liabilities

     3,202        50,983   
  

 

 

   

 

 

 

Net Assets

   $ 103,977      $ 91,915   
  

 

 

   

 

 

 

Analysis of Net Assets:

    

Paid-in-capital

     108,313        93,420   

Undistributed (or overdistribution of) net investment income

     (126     118   

Accumulated net realized (loss)

     (4,160     (1,052

Unrealized appreciation of investments

     –          324   

Unrealized (depreciation) of currency transactions

     (466     (9

Unrealized appreciation or (depreciation) of futures contracts

     416        (7

Unrealized (depreciation) of purchased options

     –          (503

Unrealized (depreciation) of short sales

     –          (376
  

 

 

   

 

 

 

Net assets

   $ 103,977      $ 91,915   
  

 

 

   

 

 

 

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

    

Institutional Class

     2,000,688        6,413,066   
  

 

 

   

 

 

 

Y Class

     3,237,658        2,632,183   
  

 

 

   

 

 

 

Investor Class

     3,570,644        221,272   
  

 

 

   

 

 

 

A Class

     947,183        11,665   
  

 

 

   

 

 

 

C Class

     208,024        13,341   
  

 

 

   

 

 

 

Net assets (not in thousands):

    

Institutional Class

   $ 20,932,502      $ 63,421,998   
  

 

 

   

 

 

 

Y Class

   $ 33,817,374      $ 26,059,687   
  

 

 

   

 

 

 

Investor Class

   $ 37,185,001      $ 2,186,943   
  

 

 

   

 

 

 

A Class

   $ 9,890,720      $ 115,261   
  

 

 

   

 

 

 

C Class

   $ 2,151,492      $ 131,408   
  

 

 

   

 

 

 

 

See accompanying notes

 

34


American Beacon FundsSM

Statements of Assets and Liabilities

December 31, 2015 (in thousands, except share and per share amounts)

 

 

     AHL
Managed
Futures
Strategy
Fund**
     Ionic
Strategic
Arbitrage
Fund
 

Net asset value, offering and redemption price per share:

     

Institutional Class

   $ 10.46       $ 9.89   
  

 

 

    

 

 

 

Y Class

   $ 10.45       $ 9.90   
  

 

 

    

 

 

 

Investor Class

   $ 10.41       $ 9.88   
  

 

 

    

 

 

 

A Class

   $ 10.44       $ 9.88   
  

 

 

    

 

 

 

A Class (offering price)

   $ 11.08       $ 10.37   
  

 

 

    

 

 

 

C Class

   $ 10.34       $ 9.85   
  

 

 

    

 

 

 

A Cost of investments in unaffiliated securities

   $ 98,285       $ 91,246   

B Proceeds of securities sold short

   $ —         $ 42,256   

C Cost of foreign currency

   $ —         $ (2

D Cost of foreign currency held at broker for futures contracts

   $ —         $ 2   

E Cost of purchased options outstanding

   $ —         $ 1,717   

 

** Consolidated financial statement. See Note 2 in the Notes to Financial Statements for additional information.

 

See accompanying notes

 

35


American Beacon FundsSM

Statements of Operations

For the Year ended December 31, 2015 (in thousands)

 

 

     AHL
Managed
Futures
Strategy
Fund**
    Ionic
Strategic
Arbitrage
Fund*
 

Investment income:

    

Dividend income from unaffiliated securities

   $ —        $ 391   

Interest income

     17        95   
  

 

 

   

 

 

 

Total investment income

     17        486   
  

 

 

   

 

 

 

Expenses:

    

Management and investment advisory fees (Note 2)

     739        152   

Administrative service fees (Note 2):

    

Institutional Class

     35        41   

Y Class

     55        2   

Investor Class

     68        1   

A Class

     48        –     

C Class

     3        –     

Transfer agent fees:

    

Institutional Class

     2        2   

Y Class

     1        2   

Investor Class

     3        2   

A Class

     1        2   

C Class

     –          2   

Custody and fund accounting fees

     338        4   

Professional fees

     95        62   

Registration fees and expenses

     102        39   

Service fees (Note 2):

    

Y Class

     19        1   

Investor Class

     56        1   

A Class

     24        –     

C Class

     2        –     

Distribution fees (Note 2):

    

A Class

     40        –     

C Class

     12        1   

Prospectus and shareholder report expenses

     30        21   

Trustee fees

     5        1   

Prime broker fees

     –          54   

Dividends on securities sold short

     –          139   

Other expenses

     6        4   
  

 

 

   

 

 

 

Total expenses

     1,684        533   
  

 

 

   

 

 

 

Net fees waived and expenses reimbursed (Note 2)

     (416     (109
  

 

 

   

 

 

 

Net expenses

     1,268        424   
  

 

 

   

 

 

 

Net investment income(loss)

     (1,251     62   
  

 

 

   

 

 

 

Realized and unrealized gain (loss) from investments:

    

Net realized gain (loss) from:

    

Investments

     (1     410   

Foreign currency transactions

     1,392        9   

Futures contracts

     (1,071     189   

Options contracts

     –          56   

Change in net unrealized appreciation or (depreciation) of:

    

Investments

     –          324   

Foreign currency transactions

     (541     (9

Futures contracts

     (1,198     (7

Options contracts

     –          (503

Short sales

     –          (376
  

 

 

   

 

 

 

Net (loss) from investments

     (1,419     93   
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

   $ (2,670   $ 155   
  

 

 

   

 

 

 

 

* For the period June 30, 2015 (commencement of operations) through December 31, 2015.
** Consolidated financial statement. See Note 2 in the Notes to Financial Statements for additional information.

 

See accompanying notes

 

36


American Beacon FundsSM

Statements of Changes in Net Assets (in thousands)

 

 

 

     AHL Managed Futures
Strategy Fund**
    Ionic
Strategic
Arbitrage
Fund
 
     Year Ended
December 31,
2015
    From August
19 to
December
31, 2014
    From June
30 to
December 31,
2015
 

Increase (Decrease) in Net Assets:

      

Operations:

      

Net investment income

   $ (1,251   $ 902      $ 62   

Net realized gain (loss) from investments, foreign currency transactions, futures contracts, and options contracts

     320        1,239        664   

Change in net unrealized appreciation or (depreciation) from investments, foreign currency transactions, futures contracts, options contracts, and short sales

     (1,739     1,689        (571
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     (2,670     3,830        155   
  

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

      

Net investment income:

      

Institutional Class

     (314     (774     (343

Y Class

     (665     (12     (3

Investor Class

     (702     (35     (10

A Class

     (182     (243     (1

C Class

     (31     (9     (1

Net realized gain from investments:

      

Institutional Class

     (230     (210     (1,252

Y Class

     (489     (3     (9

Investor Class

     (549     (9     (36

A Class

     (159     (66     (2

C Class

     (31     (3     (3

Return of Capital:

      

Institutional Class

     (2     –          –     

Y Class

     (4     –          –     

Investor Class

     (4     –          –     

A Class

     (1     –          –     

C Class

     –          –          –     
  

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (3,363     (1,364     (1,660
  

 

 

   

 

 

   

 

 

 

Capital Share Transactions:

      

Proceeds from sales of shares

     134,235        38,129        93,244   

Reinvestment of dividends and distributions

     3,333        1,364        1,660   

Cost of shares redeemed

     (69,232     (285     (1,484
  

 

 

   

 

 

   

 

 

 

Net increase in net assets from capital share transactions

     68,336        39,208        93,420   
  

 

 

   

 

 

   

 

 

 

Net increase in net assets

     62,303        41,674        91,915   
  

 

 

   

 

 

   

 

 

 

Net Assets:

      

Beginning of period

     41,674        –          –     
  

 

 

   

 

 

   

 

 

 

End of Period *

   $ 103,977      $ 41,674      $ 91,915   
  

 

 

   

 

 

   

 

 

 

*Includes undistributed (or overdistribution of) net investment income

   $ (126   $ 212      $ 118   
  

 

 

   

 

 

   

 

 

 

 

** Consolidated financial statement. See Note 2 in the Notes to Financial Statements for additional information.

 

See accompanying notes

 

37


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

1. Organization

American Beacon Funds (the “Trust”) is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”) as a diversified, open-end management investment company. As of December 31, 2015, the Trust consists of twenty-five active series, two of which are presented in this filing (collectively, the “Funds” and each individually a “Fund”): American Beacon AHL Managed Futures Strategy Fund (“AHL Managed Futures”) and American Beacon Ionic Strategic Arbitrage Fund (“Ionic Strategic Arbitrage”). The remaining twenty-three active series are reported in separate filings.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Astro AB Borrower, 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

June 30, 2015 was the inception date of all classes of the Ionic Strategic Arbitrage Fund.

The Funds have 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:

  

Offered to:

  Institutional Class    Investors making an initial investment of $250,000
  Y Class    Investors making an initial investment of $100,000
  Investor Class    General public and investors investing through an intermediary
  A Class    General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”)
  C Class    General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC

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

2. Transactions with Affiliates

Management Agreement

The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory and portfolio management services. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Funds an annualized fee equal to 0.05% of the average daily net assets. The Funds pay the unaffiliated investment advisors hired to direct investment activities of the Funds. Management fees paid by the Funds during the periods ended December 31, 2015 were as follows (in thousands):

 

Fund

   Management
Fee Rate
    Management
Fee
     Amounts Paid to
Investment Sub-
Advisors
     Amounts Paid
to Manager
 

AHL Managed Futures

     1.05   $ 739       $ 705       $ 34   

Ionic Strategic Arbitrage

     1.03     152         145         7   

 

 

38


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Administration Agreement

The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to each Fund. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, A, and C Classes of the Funds.

Distribution Plans

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

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

Service Plans

The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.

Interfund Lending Program

Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. For the period ended December 31, 2015, the Funds did not utilize the credit facility.

Expense Reimbursement Plan

The Manager contractually agreed to reimburse the classes of the Funds to the extent that total annual fund operating expenses exceeded each Fund’s expense cap. Of these amounts $131,984 and $15,411 was receivable from the Manager at December 31, 2015 for the AHL Managed Futures and Ionic Strategic Arbitrage Funds, respectively. For the periods ended December 31, 2015, the Manager reimbursed expenses as follows:

 

          Expense Cap and Limits               

Fund

   Class    1/1/15 to
6/30/15
    6/30/15 to
12/31/15
    Reimbursed
Expenses
     Expiration of
Reimbursements
 

AHL Managed Futures

   Institutional      1.54     1.54   $ 83,713         2018   

AHL Managed Futures

   Y      1.64     1.64     119,112         2018   

AHL Managed Futures

   Investor      1.92     1.92     108,544         2018   

AHL Managed Futures

   A      1.94     1.94     97,360         2018   

AHL Managed Futures

   C      2.69     2.69     7,403         2018   

 

 

39


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

          Expense Cap and Limits               

Fund

   Class    1/1/15 to
6/30/15
   6/30/15 to
12/31/15
    Reimbursed
Expenses
     Expiration of
Reimbursements
 

Ionic Strategic Arbitrage

   Institutional    N/A      1.54   $ 97,443         2018   

Ionic Strategic Arbitrage

   Y    N/A      1.64     3,540         2018   

Ionic Strategic Arbitrage

   Investor    N/A      1.92     3,637         2018   

Ionic Strategic Arbitrage

   A    N/A      1.94     2,089         2018   

Ionic Strategic Arbitrage

   C    N/A      2.69     2,077         2018   

The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’s average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The carryover of excess expenses potentially reimbursable to the Manager, is $371,247 for the AHL Managed Futures Fund which will expire in 2017. The Fund has not recorded a liability for these potential reimbursements due to the current assessment that reimbursements are unlikely.

Sales Commissions

The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”) may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the period ended December 31, 2015, Foreside collected $13,621 and $18 from the AHL Managed Futures and Ionic Strategic Arbitrage Funds, respectively from the sale of Class A Shares.

A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the period ended December 31, 2015, there were no CDSC fees collected for Class A Shares.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the period ended December 31, 2015, CDSC fees of $329 were collected from the AHL Managed Futures Fund for Class C Shares.

Consolidation of Subsidiaries

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

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

The CFC Fund may invest up to 25% of its total assets in the Subsidiary, which acts as an investment vehicle in order to effect certain investments consistent with the CFC Fund’s investment objectives and policies. The CFC Fund expects to achieve a significant portion of its exposure to commodities and

 

 

40


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

commodities-related investments through investment in the Subsidiary. Unlike the CFC Fund, the Subsidiary may invest without limitation in commodities and commodities-related investments.

 

Fund

   Inception Date of
Subsidiary
   Subsidiary Net
Assets at
December 31, 2015
     % of Total Net
Assets of the Fund at

December 31, 2015
    Net Realized
Gain (Loss)
from Investments
Held in
Subsidiary
 

American Beacon Cayman Managed Futures Strategy Fund, Ltd.

   August 19, 2014    $ 23,831,176         22.9   $ 2,373,453   

CFTC Regulation

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

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

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, 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.

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.

Debt securities (other than short-term 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. The prices of debt securities may be determined using quotes obtained from brokers.

Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation.

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

For valuation purposes, the last quoted price of non U.S. equity securities may be adjusted under the circumstances described below. If the Fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its

 

 

41


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

portfolio securities, the Fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A Fund may also fair value securities in other situations, such as when a particular foreign market is closed but the Fund is open. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service.

Valuation Inputs

Various inputs may be used to determine the 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 2 securities are fixed-income securities that are valued using observable inputs as stated above.
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, and would be based on the best information available.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

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

Fixed income securities including corporate, U.S. government agencies, and U.S. treasury obligations 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.

The Fund’s investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all significant transfers between any levels to be disclosed. During the periods ended December 31, 2015, there were no transfers between levels.

 

 

42


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

As of December 31, 2015, the investments were classified as described below (in thousands):

 

AHL Managed Futures Strategy Fund1

   Level 1      Level 2      Level 3      Total  

Money Market Funds

   $ 3,090       $ —         $ —         $ 3,090   

U.S. Treasury Bills

     —           95,195         —           95,195   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 3,090       $ 95,195       $ —         $ 98,285   
  

 

 

    

 

 

    

 

 

    

 

 

 

AHL Managed Futures Strategy Fund1

   Level 1      Level 2      Level 3      Total  

Financial Derivative Instruments—Assets

           

Futures Contracts

   $ 1,652       $ —         $ —         $ 1,652   

Forward Currency Contracts

     —           328         —           328   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,652       $ 328       $ —         $ 1,980   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments—Liabilities

           

Futures Contracts

   $ (1,196    $ —         $ —         $ (1,196

Forward Currency Contracts

     —           (791      —           (791
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (1,196    $ (791    $ —         $ (1,987
  

 

 

    

 

 

    

 

 

    

 

 

 

Ionic Strategic Arbitrage Fund1

   Level 1      Level 2      Level 3      Total  

Assets

           

Common Stocks

   $ 8,383       $ —         $ —         $ 8,383   

Warrants

     4,478         —           —           4,478   

Convertible Preferred Stocks C

     13,179         —           —           13,179   

Preferred Stocks C

     —           712         —           712   

Convertible Obligations C

     —           14,778         —           14,778   

Corporate Obligations C

     —           209         —           209   

Collateralized Mortgage Obligations

     —           10,703         —           10,703   

Investment Companies

     5,377         —           —           5,377   

Exchange Traded Instruments

     2,676         —           —           2,676   

Short-Term Investments – Money Market Funds

     31,071         —           —           31,071   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities—Assets

   $ 65,164       $ 26,402       $ —         $ 91,566   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Common Stocks (Sold Short)

   $ (33,425    $ (536    $ —         $ (33,961

Warrants (Sold Short)

     (45      —           —           (45

Convertible Obligations (Sold Short)

     —           (224      —           (224

Investment Companies (Sold Short)

     (454      —           —           (454

Exchange Traded Instruments (Sold Short)

     (7,948      —           —           (7,948
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities—Liabilities

     (41,872      (760      —           (42,632
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 23,292       $ 25,642       $ —         $ 48,934   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments—Assets

           

Purchased Options

   $ 1,214       $ —         $ —         $ 1,214   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments—Liabilities

           

Futures Contracts

   $ (7    $ —         $ —         $ (7
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1  Refer to Schedules of Investments for Industry Information.

Security Transactions and Investment Income

Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.

 

 

43


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Dividend income is recorded on the ex-dividend date. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.

Other

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

4. Securities and Other Investments

Other Investment Company Securities and Other Exchange Traded Products

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

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

 

 

44


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

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.

Illiquid and Restricted Securities

Certain 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 year ended December 31, 2015 are disclosed in the Notes to the Schedules of Investments.

Rights and Warrants

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

Special Purpose Acquisition Company

A special purpose acquisition company (“SPAC”) is a collective investment structure that allows public stock market investors to invest in private equity type transactions, particularly leveraged buyouts. SPACs are shell or blank-check companies, governed by the SEC, that have no operations but go public with the intention of merging with or acquiring a company with the proceeds of the SPAC’s initial public offering (“IPO”). SPACs outstanding at the year ended December 31, 2015 are disclosed in the Notes to the Schedules of Investments.

 

 

45


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Mortgage-Related and Other Asset-Backed Securities

The Fund may invest in mortgage or other asset-backed securities (“ABS”). These securities may include mortgage instruments issued by U.S. government agencies (“agency mortgages”) or those issued by private entities (“non-agency mortgages”). Specific types of instruments may include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities and other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real property. The value of the Fund’s mortgage-backed securities (“MBS”) may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The mortgages underlying the securities may default or decline in quality or value. Through its investments in MBS, a Fund has exposure to subprime loans, Alt-A loans and non-conforming loans as well as to the mortgage and credit markets generally. Underlying collateral related to subprime, Alt-A and non-conforming mortgage loans has become increasingly susceptible to defaults and declines in quality or value, especially in a declining residential real estate market. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole.

Mortgage-Backed Securities

MBS often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of the Fund’s portfolio at the time resulting in reinvestment risk.

Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS, making them more volatile and more sensitive to changes in interest rates. This is known as extension risk.

MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of increased prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a price above par. In such an environment, this risk limits the potential price appreciation of these securities.

Agency Mortgage-Backed Securities

Certain MBS may be issued or guaranteed by the U.S. government or a government sponsored entity, such as Fannie Mae (the Federal National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). 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.

Short Sales

The Funds may enter into short sale transactions. A short sale is a transaction in which a Fund sells a security it does not own in anticipation of a decline in the market price of the security. Securities sold in short sale transactions and the dividends and interest payable on such securities, if any, are reflected as a liability on the Statements of Assets and Liabilities. A Fund is obligated to deliver the security at the market price at the time the short position is closed. The risk of loss on a short sale transaction is theoretically unlimited, because there is no limit to the cost of replacing the security sold short, whereas losses from purchase transactions cannot exceed the total amount invested. As of December 31, 2015, short positions were held by the Ionic Strategic Arbitrage Fund.

 

 

46


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Master Agreements

Each Fund is a party to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties that govern transactions in over-the-counter derivative and foreign exchange contracts entered into by the Fund and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial derivative transactions have different mechanics and are sometimes traded out of different legal entities of particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.

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

5. Financial Derivative Instruments

Options Contracts

The Funds may write (1) call and put options on futures, swaps (“swaptions”), securities, commodities or currencies they own or in which they may invest and (2) inflation-capped options. Writing put options tends to increase the Fund’s exposure to unfavorable movements of the underlying instrument in exchange for an upfront premium. Writing call options tends to decrease the Fund’s exposure to favorable movements of the underlying instrument in exchange for an upfront premium. When the Fund writes a call, put, or inflation-capped option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. The purpose of inflation-capped options is to protect the buyer from inflation erosion above a certain rate on a given notional exposure. A floor can be used to give downside protection to investments in inflation-linked products. These liabilities are reflected as written options 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 Funds 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

 

 

47


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss when the underlying transaction is sold.

Options

For the periods ended December 31, 2015, the Ionic Strategic Arbitrage Fund purchased/sold options primarily for return enhancement, hedging and exposing cash to markets.

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

 

   

Average Purchased Option Notional Amounts Outstanding

    
   

Fund

  

Period ended December 31, 2015

    
 

Ionic Strategic Arbitrage

   $1,052,300   
   

Average Written Option Notional Amounts Outstanding

    
   

Fund

  

Period ended December 31, 2015

    
 

Ionic Strategic Arbitrage

   $ 22,750   

Straddle Options

The Funds may enter into differing forms of straddle options. A straddle is an investment strategy that uses combinations of options that allow a Fund to profit based on the future price movements of the underlying security, regardless of the direction of those movements. A written straddle involves simultaneously writing a call option and a put option on the same security with the same strike price and expiration date. The written straddle increases in value when the underlying security price has little volatility before the expiration date. A purchased straddle involves simultaneously purchasing a call option and a put option on the same security with the same strike price and expiration date. The purchased straddle increases in value when the underlying security price has high volatility, regardless of direction, before the expiration date.

Forward Foreign Currency Contracts

The Funds 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 Funds may also use foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. The Fund bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Fund also bears the credit risk if the counterparty fails to perform under the contract.

For the period ended December 31, 2015, the AHL Managed Futures Fund entered into foreign currency exchange contracts primarily for speculative purposes.

The Funds’ 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 foreign currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD (in thousands).

 

     Average Forward Foreign Currency
Notional Amount Outstanding during
the period ended December 31, 2015
 

Fund

   Purchased Contracts      Sold Contracts  

AHL Managed Futures Strategy

   $ 40,947       $ 56,896   

 

 

48


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

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 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 December 31, 2015, the Funds entered into future contracts primarily for speculative purposes.

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

 

Average Futures Contracts Outstanding

Fund

   Period ended December 31, 2015

AHL Managed Futures Strategy

   2,903

Ionic Strategic Arbitrage

   4

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1):

AHL Managed Futures Strategy

Fair values of financial instruments on the Statement of Assets and Liabilities as of December 31, 2015 (in thousands):

 

     Derivatives not accounted for as hedging instruments  
     Foreign
Exchange
Contracts
    Commodity
Contracts
    Currency
Contracts
    Equity
Contracts
    Interest
Rate
Contracts
    Total  

Assets:

            

Unrealized appreciation of foreign currency contracts

   $ 328      $ —        $ —        $ —        $ —        $ 328   

Receivable for variation margin from open futures contracts(2)

     —          991        474        69        119        1,653   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 328      $ 991      $ 474      $ 69      $ 119      $ 1,981   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

            

Unrealized depreciation of foreign currency contracts

   $ (791   $ —        $ —        $ —        $ —        $ (791

Payable for variation margin from open futures contracts(2)

     —          (427     (96     (340     (333     (1,196
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ (791   $ (427   $ (96   $ (340   $ (333   $ (1,987
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

49


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

The effect of financial derivative instruments on the Statement of Operations for the year ended December 31, 2015 (in thousands):

 

     Derivatives not accounted for as hedging instruments  
     Foreign
Exchange
Contracts
    Commodity
Contracts
    Currency
Contracts
    Equity
Contracts
    Interest
Rate
Contracts
    Total  

Realized gain (loss) of derivatives recognized as a result from operations:

            

Net realized gain (loss) from foreign currency transactions

   $ 1,392      $ —        $ —        $ —        $ —        $ 1,392   

Net realized gain (loss) from futures contracts

     —          2,373        (1,494     (1,462     (488     (1,071
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 1,392      $ 2,373      $ (1,494   $ (1,462   $ (488   $ 321   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation or (depreciation) of derivatives recognized as a result from operations:

          

Change in net unrealized appreciation or (depreciation) from foreign currency contracts

   $ (538   $ —        $ —        $ —        $ —        $ (538

Change in net unrealized appreciation or (depreciation) from futures contracts

     —          (65     100        (362     (871     (1,198
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ (538   $ (65   $ 100      $ (362   $ (871   $ (1,736
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ionic Strategic Arbitrage

Fair values of financial instruments on the Statement of Assets and Liabilities as of December 31, 2015 (in thousands):

 

     Derivatives not accounted for as hedging instruments  
     Exchange
Traded
Contracts
    Interest Rate
Contracts
     Total  

Assets:

       

Purchased options outstanding

   $ 1,214      $ —         $ 1,214   
  

 

 

   

 

 

    

 

 

 

Liabilities:

       

Payable for variation margin from open futures
contracts(2)

   $ (5   $ (2)       $ (7

The effect of financial derivative instruments on the Statement of Operations for the period ended December 31, 2015 (in thousands):

 

     Derivatives not accounted for as hedging instruments  
     Exchange
Traded
Contracts
     Interest Rate
Contracts
     Total  

Realized gain (loss) of derivatives recognized as a result from operations:

        

Net realized gain (loss) from options contracts

   $ 56       $ —         $ 56   

Net realized gain (loss) from futures contracts

     190         (1      189   
  

 

 

    

 

 

    

 

 

 
   $ 246       $ (1    $ 245   
  

 

 

    

 

 

    

 

 

 

Net change in unrealized appreciation or (depreciation) of derivatives recognized as a result from operations:

        

Change in net unrealized appreciation or (depreciation) from options contracts

   $ (503    $ —         $ (503

Change in net unrealized appreciation or (depreciation) from futures contracts

     (5      (2      (7
  

 

 

    

 

 

    

 

 

 
   $ (508    $ (2    $ (510
  

 

 

    

 

 

    

 

 

 

 

(1) See Note 3 in the Notes to Financial Statements for additional information.
(2)  Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investment footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

 

 

50


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

6. Principal Risks

In the normal course of business the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.

Market Risks

The Funds’ investments in financial derivatives and other financial instruments expose the Funds to various risks such as, but not limited to, interest rate, foreign currency and equity risks.

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.

If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.

The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, 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 investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.

Counterparty Credit Risk

A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

 

 

51


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as deposits with brokers for futures contracts and payable to brokers for futures contracts, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Fund and additional required collateral is delivered to/pledged by the Fund on the next business day. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

Offsetting Assets and Liabilities

The Funds are parties to enforceable master netting agreements between brokers and counterparties, such as ISDA, Master Repo Agreements and Master Forward Agreements which provide for the right to offset under certain circumstances. The Fund employs multiple money managers and counterparties and has elected not to offset qualifying financial and derivative instruments on the Statement of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements such as repurchase agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, December 31, 2015 (in thousands).

AHL Managed Futures

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized Assets
     Gross Amounts
Offset in the
Statements of
Assets and
Liabilities
     Net Amounts of Assets
Presented in the
Statements of Assets
and Liabilities
 

Futures Contracts(1)

   $ 1,653       $  —         $ 1,653   

Forward Currency Contracts

     328         —           328   
  

 

 

    

 

 

    

 

 

 
   $ 1,981       $ —         $ 1,981   
  

 

 

    

 

 

    

 

 

 

 

 

52


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized
Liabilities
     Gross Amounts
Offset in the
Statements of
Assets and
Liabilities
     Net Amounts of
Liabilities

Presented in the
Statements of Assets
and Liabilities
 

Futures Contracts (1)

   $ (1,196    $  —         $  (1,196

Forward Currency Contracts

     (791      —           (791
  

 

 

    

 

 

    

 

 

 
   $ (1,987    $ —         $ (1,987
  

 

 

    

 

 

    

 

 

 

Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 31, 2015:

 

     Net Amount of Liabilities
Presented in the
Statements of Assets and
Liabilities
     Gross Amounts Not Offset in the
Statements of Assets and Liabilities
        

Counterparty

      Financial
Instruments
     Cash
Collateral
Received
     Net
Amount
 

BofA Merrill Lynch(1)

   $ 312       $ —         $ —         $ 312   

JP Morgan(1)

     246         —           —           246   

Credit Suisse(1)

     (101      —           —           (101

Deutsche Bank AG

     (274      —           —           (274

HSBC Bank PLC

     (213      —           —           (213

Royal Bank of Scotland PLC

     24         —           —           24   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (6    $ —         $ —         $ (6
  

 

 

    

 

 

    

 

 

    

 

 

 

Ionic Strategic Arbitrage

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized
Assets
     Gross Amounts
Offset in the
Statements of
Assets and
Liabilities
     Net Amounts of Assets
Presented in the
Statements of Assets
and Liabilities
 

Purchased options outstanding

   $ 1,214         —         $ 1,214   
  

 

 

    

 

 

    

 

 

 

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2015:

 

Description

   Gross Amounts of
Recognized
Liabilities
     Gross Amounts
Offset in the
Statements of
Assets and
Liabilities
     Net Amounts of Liabilities
Presented in the
Statements of Assets
and Liabilities
 

Futures Contracts (1)

   $ (7      —         $ (7

Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of December 31, 2015:

 

     Net Amount of Assets
Presented in the
Statements of Assets
and Liabilities
     Gross Amounts Not Offset in the
Statements of Assets and Liabilities
        

Counterparty

      Financial
Instruments
     Cash
Collateral
Received
     Net
Amount
 

Deutsche Bank AG

   $ 1,207         —           —         $ 1,207   

 

(1) The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only.

7. Federal Income and Excise Taxes

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

 

 

53


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2015 remains 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.

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

The tax character of distributions paid were as follows (in thousands):

 

     AHL Managed Futures      Ionic Strategic
Arbitrage
 
     Year Ended
Dec. 31,
2015
     Period Ended
Dec. 31,
2014
     Period Ended
Dec. 31,
2015
 

Distributions paid from:

        

Ordinary income*

        

Institutional Class

   $ 422       $ 863       $ 1,498   

Y Class

     895         13         11   

Investor Class

     960         39         44   

A Class

     257         271         3   

C Class

     45         11         3   

Long-term capital gain

        

Institutional Class

     123         121         98   

Y Class

     259         2         1   

Investor Class

     291         5         2   

A Class

     84         38         —     

C Class

     16         1         —     

Return of capital

        

Institutional Class

     2         —           —     

Y Class

     4         —           —     

Investor Class

     4         —           —     

A Class

     1         —           —     

C Class

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 3,363       $ 1,364       $ 1,660   
  

 

 

    

 

 

    

 

 

 

 

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

As of December 31, 2015, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):

 

     AHL
Managed
Futures
     Ionic
Strategic
Arbitrage
 

Cost basis of investments for federal income tax purposes

   $ 98,365       $ 93,420   

Unrealized appreciation

     —           1,689   

Unrealized depreciation

     (1      (3,543
  

 

 

    

 

 

 

Net unrealized appreciation or (depreciation)

     (1      (1,854

Undistributed ordinary income

     —           1,364   

Undistributed long-term gain or (loss)

     —           —     

Accumulated capital and other losses

     (4,897      (30

Other temporary differences

     562         (985
  

 

 

    

 

 

 

Distributable earnings or (deficits)

   $ (4,336    $ (1,505
  

 

 

    

 

 

 

Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial

 

 

54


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

reporting and tax-basis reporting of unrealized appreciation or (depreciation) are attributable primarily to the realization of unrealized gains or (losses) from certain derivative instruments, the tax deferral of losses from wash sales, and the realization for tax purposes of unrealized gain/(loss) on investments in passive foreign investment companies.

Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences derived from paydown reclasses, foreign currency reclasses, reclassifications of income from closed end fund, fund distribution, reclassification and income recognition from investment subsidiary, and dividends that have been reclassified as of December 31, 2015 (in thousands):

 

     AHL Managed
Futures
     Ionic Strategic
Arbitrage
 

Paid-in-capital

   $ 959       $ —     

Undistributed net investment income

     2,807         414   

Accumulated net realized gain (loss)

     (3,766      (414

Unrealized appreciation or (depreciation) of investments

     —           —     

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

As of December 31, 2015, the AHL Managed Futures Fund has $2,134 of short-term and $2,313 of long-term post enactment capital loss carryforwards (in thousands).

The Funds are permitted for tax purposes to defer into their next fiscal year qualified late year losses. Qualified late year losses are any capital losses incurred after October 31 through the Funds’ fiscal year December 31, 2015. For the period ended December 31, 2015, AHL Managed Futures Strategy Fund deferred $450 of qualified late year specified ordinary losses and Ionic Strategic Arbitrage Fund deferred $30 of long-term capital loss (in thousands).

8. Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments other than short-term obligations for the year ended December 31, 2015 were (in thousands):

 

Fund

   Purchases      Sales  

AHL Managed Futures

   $ —         $ —     

Ionic Strategic Arbitrage

     181,532         68,326   

 

 

55


American Beacon FundsSM

Notes to Financial Statements

December 31, 2015

 

 

9. Capital Share Transactions

The tables below summarize the activity in capital shares (dollars and shares in thousands):

For the Periods Ended December 31, 2015

 

     Institutional Class     Y Class     Investor Class  

AHL Managed Futures Strategy Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     2,166      $ 23,691        4,162      $ 46,683        3,881      $ 43,556   

Reinvestment of dividends

     52        544        110        1,157        120        1,255   

Shares redeemed

     (2,845     (32,558     (1,077     (11,830     (707     (7,798
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (627   $ (8,323     3,195      $ 36,010        3,294      $ 37,013   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

AHL Managed Futures Strategy Fund

   Shares      Amount      Shares      Amount  

Shares sold

     1,638       $ 18,288         181       $ 2,017   

Reinvestment of dividends

     30         316         6         61   

Shares redeemed

     (1,546      (16,862      (16      (184
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     122       $ 1,742         171       $ 1,894   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Institutional Class     Y Class     Investor Class  

Ionic Strategic Arbitrage Fund

   Shares     Amount     Shares     Amount     Shares     Amount  

Shares sold

     6,369      $ 64,480        2,646      $ 26,181        231      $ 2,339   

Reinvestment of dividends

     162        1,595        1        12        5        47   

Shares redeemed

     (118     (1,187     (15     (150     (15     (146
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     6,413      $ 64,888        2,632      $ 26,043        221      $ 2,240   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

Ionic Strategic Arbitrage Fund

   Shares      Amount      Shares      Amount  

Shares sold

     12       $ 114         13       $ 130   

Reinvestment of dividends

     —           3         —           3   

Shares redeemed

     —           (1      —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     12       $ 116         13       $ 133   
  

 

 

    

 

 

    

 

 

    

 

 

 

For the Year Ended December 31, 2014

 

     Institutional Class     Y Class     Investor Class  

AHL Managed Futures Strategy Fund

   Shares     Amount     Shares      Amount     Shares     Amount  

Shares sold

     2,078      $ 20,819        31       $ 342        269      $ 2,889   

Reinvestment of dividends

     91        984        1         15        4        44   

Shares redeemed

     (1     (6     —           (3     (7     (73
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     2,168      $ 21,797        32       $ 354        266      $ 2,860   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

     A Class      C Class  

AHL Managed Futures Strategy Fund

   Shares      Amount      Shares      Amount  

Shares sold

     805       $ 8,803         26       $ 276   

Reinvestment of dividends

     29         309         1         12   

Shares redeemed

     (18      (203      —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     816       $ 8,909         27       $ 288   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

56


 

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57


American Beacon AHL Managed Futures Strategy Fund SM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class     Y Class     Investor Class  
     Year
Ended
Dec. 31,
2015
    Aug. 19
to
Dec. 31,
2014A
    Year
Ended
Dec. 31,
2015
    Aug. 19
to
Dec. 31,
2014A
    Year
Ended
Dec. 31,
2015
    Aug. 19
to
Dec. 31,
2014A
 

Net asset value, beginning of period

   $ 10.95      $ 10.00      $ 10.94      $ 10.00      $ 10.93      $ 10.00   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

            

Net investment income

     (0.06     0.24        (0.05     0.30        (0.09     0.30   

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

     (0.07     1.10        (0.08     1.03        (0.08     1.02   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     (0.13     1.34        (0.13     1.33        (0.17     1.32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

            

Dividends from net investment income

     (0.21     (0.31     (0.21     (0.31     (0.20     (0.31

Distributions from net realized gains

     (0.15     (0.08     (0.15     (0.08     (0.15     (0.08

Return of capital

     (0.00 )F      —          (0.00 )F      —          (0.00 )F      —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.36     (0.39     (0.36     (0.39     (0.35     (0.39
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 10.46      $ 10.95      $ 10.45      $ 10.94      $ 10.41      $ 10.93   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     (1.15 )%      13.43 %C      (1.15 )%      13.33 %C      (1.54 )%      13.23 %C 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

            

Net assets, end of period (in thousands)

   $ 20,933      $ 28,765      $ 33,817      $ 465      $ 37,185      $ 3,024   

Ratios to average net assets:

            

Expenses, before reimbursements

     2.25     4.97 %D      2.28     7.71 %D      2.40     5.98 %D 

Expenses, net of reimbursements

     1.54     1.54 %D      1.64     1.64 %D      1.92     1.92 %D 

Net investment income (loss), before expense reimbursements

     (2.29 )%      2.73 %D      (1.70 )%      12.50 %D      (2.07 )%      10.41 %D 

Net investment income, net of reimbursements

     (1.57 )%      6.17 %D      (1.06 )%      18.58 %D      (1.59 )%      14.47 %D 

Portfolio turnover rate

     —   %E      —   %E      —   %E      —   %E      —   %E      —   %E 

 

A August 19, 2014 is the inception date of the AHL Managed Futures Strategy Fund.
B Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C Not annualized.
D Annualized.
E Portfolio turnover rate is based on the lesser of long-term purchases or sales divided by the average long-term fair value during the period. The Fund did not invest in any long-term securities during the reporting period.
F The return of capital is calculated based on outstanding shares at the time of distribution. Amounts are less than $0.01 per share.

 

 

58


American Beacon AHL Managed Futures Strategy Fund SM

Financial Highlights

(For a share outstanding throughout the period)

 

 

A Class     C Class      
Year
Ended
Dec. 31,
2015
    Aug. 19
to
Dec. 31,
2014A
    Year
Ended
Dec. 31,
2015
    Aug. 19
to
Dec. 31,
2014A
     
$  10.93      $ 10.00      $ 10.90      $ 10.00     

 

 

   

 

 

   

 

 

   

 

 

   
  (0.52     0.32        (0.09     0.27     
  0.36        1.00        (0.16     1.02     

 

 

   

 

 

   

 

 

   

 

 

   
  (0.16     1.32        (0.25     1.29     

 

 

   

 

 

   

 

 

   

 

 

   
  (0.18     (0.31     (0.16     (0.31  
  (0.15     (0.08     (0.15     (0.08  
  (0.00 )F      —          (0.00 )F      —       

 

 

   

 

 

   

 

 

   

 

 

   
  (0.33     (0.39     (0.31     (0.39  

 

 

   

 

 

   

 

 

   

 

 

   
$ 10.44      $ 10.93      $ 10.34      $ 10.90     

 

 

   

 

 

   

 

 

   

 

 

   
  (1.45 )%      13.23 %C      (2.30 )%      12.93 %C   

 

 

   

 

 

   

 

 

   

 

 

   
$ 9,891      $ 9,019      $ 2,151      $ 401     
  2.55     5.31 %D      3.32     8.75 %D   
  1.94     1.94 %D      2.69     2.68 %D   
  (3.59 )%      32.48 %D      (2.88 )%      7.02 %D   
  (2.98 )%      35.85 %D      (2.25 )%      13.09 %D   
  —   %E      —   %E      —   %E      —   %E   

 

 

59


American Beacon Ionic Strategic Arbitrage Fund SM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class     Y Class     Investor Class     A Class     C Class  
     June 30D
to
Dec. 31,
2015
    June 30D
to
Dec. 31,
2015
    June 30D
to
Dec. 31,
2015
    June 30D
to
Dec. 31,
2015
    June 30D
to
Dec. 31,
2015
 

Net asset value, beginning of period

   $ 10.00      $ 10.00      $ 10.00      $ 10.00      $ 10.00   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.04        0.06        0.02        0.08        0.05   

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

     0.11        0.10        0.12        0.06        0.05   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income from investment operations

     0.15        0.16        0.14        0.14        0.10   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     (0.06     (0.06     (0.06     (0.06     (0.05

Distributions from net realized gains

     (0.20     (0.20     (0.20     (0.20     (0.20
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.26     (0.26     (0.26     (0.26     (0.25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 9.89      $ 9.90      $ 9.88      $ 9.88      $ 9.85   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     1.46 %C      1.56 %C      1.36 %C      1.36 %C      1.00 %C 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period (in thousands)

   $ 63,422      $ 26,060      $ 2,187      $ 115      $ 131   

Ratios to average net assets:

          

Expenses, before reimbursements

     3.55 %B      3.83 %B      4.23 %B      7.35 %B      8.14 %B 

Expenses, before reimbursements, excluding non-operating expenses

     2.25 %B      2.21 %B      2.92 %B      5.93 %B      6.72 %B 

Expenses, net of reimbursements

     2.84 %B      3.27 %B      3.23 %B      3.37 %B      4.11 %B 

Expenses, net of reimbursements and non-operating expenses

     1.54 %B      1.64 %B      1.92 %B      1.94 %B      2.69 %B 

Net investment income (loss), before expense reimbursements

     (0.31 )%B      0.83 %B      (1.52 )%B      (3.54 )%B      (4.30 )%B 

Net investment income, net of reimbursements

     0.40 %B      1.40 %B      (0.53 )%B      0.44 %B      (0.28 )%B 

Portfolio turnover rate

     159 %C      159 %C      159 %C      159 %C      159 %C 

 

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

 

 

60


American Beacon FundsSM

Affirmation of the Commodity Pool Operator

December 31, 2015

 

 

To the best of my knowledge and belief, the information contained in the attached financial statements for the American Beacon AHL Managed Futures Strategy Fund for the period from January 1, 2015 to December 31, 2015, is accurate and complete.

 

LOGO

Melinda G. Heika, Treasurer

American Beacon Advisors, Inc.

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

 

 

61


American Beacon FundsSM

Privacy Policy and Federal Tax Information

December 31, 2015 (Unaudited)

 

 

Privacy Policy

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

 

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

 

    information we receive from you on applications or other forms;

 

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

 

    information we receive from third parties.

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

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

Federal Tax Information

Certain tax information regarding the Funds is required to be provided to shareholders based upon the Funds’ income and distributions for the taxable year ended December 31, 2015. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2015.

The Funds designated the following items with regard to distributions paid during the fiscal year ended December 31, 2015. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Funds to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.

 

Corporate Dividends-Received Deduction:

  

AHL Managed Futures Strategy Fund

     0.00

Ionic Strategic Arbitrage Fund

     22.65

Qualified Dividend Income:

  

AHL Managed Futures Strategy Fund

     74.79

Ionic Strategic Arbitrage Fund

     44.38

Long-Term Capital Gain Distributions:

  

AHL Managed Futures Strategy Fund

   $ 773,163   

Ionic Strategic Arbitrage Fund

     101,843   

Short-Term Capital Gain Distributions:

  

AHL Managed Futures Strategy Fund

   $ 685,458   

Ionic Strategic Arbitrage Fund

     1,200,710   

Shareholders will receive notification in January 2016 of the applicable tax information necessary to prepare their 2015 income tax returns.

 

 

62


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

At its November 12-13, 2014 meetings, the Board of Trustees (“Board”) considered: (1) the approval of the Management Agreement among American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Trust”) on behalf of American Beacon Ionic Strategic Arbitrage Fund, a new series of the Trust (“Fund”); and (2) the approval of a new investment advisory agreement among the Manager, Ionic Capital Management LLC (“Ionic”) and the Trust with respect to the Fund (“Advisory Agreement”).

Approval of Management Agreement on Behalf of the Ionic Fund

In advance of the meeting, the Board requested and reviewed information provided by the Manager in connection with its consideration of the Management Agreement for the Fund, and the Investment Committee of the Board met with representatives of the Manager. The Board considered, among other materials, responses by the Manager to inquiries requesting:

 

    a description of the advisory and related services proposed to be provided to the Fund;

 

    identification of the professional personnel who are proposed to be assigned primary responsibility for managing the Fund;

 

    an analysis of the proposed advisory fee, and fee waivers, a comparison to the fees charged to other comparable clients and an explanation of any differences between the fee schedules; and

 

    any other information the Manager believed would be material to the Board’s consideration of the Management Agreement.

The Board also considered information that had been provided by the Manager to the Board at the May 2014 meeting in connection with the renewal of the Management Agreement between the Manager and the Trust as it related to other existing series of the Trust (“Existing Funds”).

Provided below is an overview of the primary factors the Board considered at its November 12-13, 2014 meetings at which the Board considered the approval of the Management Agreement. In determining whether to approve the Management Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services to be provided; (2) the estimated costs to be incurred by the Manager in rendering its services and the resulting profits or losses; (3) the extent to which economies of scale, if any, have been taken into account in setting the fee schedule; (4) whether fee levels reflect economies of scale, if any, for the benefit of investors; (5) comparisons of services and fees with contracts entered into by the Manager with the Existing Funds; and (6) any other benefits derived or anticipated to be derived by the Manager from its relationship with the Fund.

The Board did not identify any particular information that was most relevant to its consideration of the Management Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the approval. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Management Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Management Agreement were reasonable and fair and that the approval of the Management Agreement was in the best interests of the Fund.

Nature, Extent and Quality of Services. The Board noted that it had considered the renewal of the Management Agreement between the Manager and the Trust as it relates to the Existing Funds at its May 2014 meeting. At that meeting, the Board received detailed information regarding the Manager, including information with respect to the scope of services provided by the Manager to the Existing Funds and the background and experience of the Manager’s key investment personnel. At the May meeting, the Board also considered the Manager’s disciplined investment approach and goal to provide consistent above average long-term performance at a low cost on behalf of the Existing Funds and the Manager’s culture of compliance and support for compliance operations that reduces risks to the Existing Funds. The Board noted the Manager’s representation that the advisory and related services proposed to be provided to the Fund will be consistent with the services provided to the Existing Funds, except that the Fund is a single-manager fund and, therefore, the Manager will not allocate assets among multiple investment advisors, which it does for many of the Existing Funds. The Board considered the background and experience of key investment personnel who will have primary responsibility for the day-to-day oversight of the Fund. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management to be provided by the Manager were appropriate for the Fund.

Investment Performance. The Board noted that the Fund is new and, therefore, had no historical performance for the Board to review. The Board also noted that the Trustees would review the performance of Ionic in connection with their consideration of the Advisory Agreement.

Costs of the Services Provided to the Fund and the Profits Realized by the Manager from its Relationship with the Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the estimated revenues to be earned and the expenses to be incurred by the Manager. The Board also considered that the Manager will receive service and administrative fees to compensate the Manager for providing administrative services to the Fund. The Board noted the Manager’s representation that its accounting system does not provide for cost allocation. Accordingly, the Manager created an allocation of expenses based upon the estimated percentage of time spent by its employees on non-distribution related business. Based on the foregoing information, the Board concluded that the estimated profitability at projected asset levels were reasonable in light of the services to be performed by the Manager.

Comparisons of the amounts to be paid to the Manager under the Management Agreement and other funds in the relevant Morningstar category. In evaluating the Management Agreement, the Board reviewed the Manager’s proposed management fee schedule. The Board considered a comparison of the management fee rate to be charged by the Manager under the Management Agreement versus

 

 

63


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

the fee rates charged by comparable funds. The Board noted the Manager’s representation that the management fee rate proposed by the Manager for the Fund is lower than the average fee rate of Morningstar, Inc. (“Morningstar”) peer group funds. The Board also noted that the management fee rate proposed by the Manager is consistent with the fee rates paid by comparable Existing Funds. In addition, the Board considered that the Manager has agreed to contractually limit the expenses of the Fund for at least one year following the inception date of the Fund at competitive market levels. This information assisted the Board in concluding that the management fee rate appeared to be within a reasonable range for the services to be provided to the Fund, in light of all the factors considered.

Economies of Scale. The Board considered that the fee to be paid to Ionic will be paid directly by the Fund and that the Manager would not benefit economically from the proposed fee arrangement.

Benefits Derived from the Relationship with the Funds. The Board considered the Manager’s representation that it does not anticipate any material “fall-out” benefits resulting from its proposed relationship with the Fund. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Funds appear to be fair and reasonable.

Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Fund or the Manager, as that term is defined in the 1940 Act: (1) concluded that the proposed management fee is fair and reasonable; (2) determined that the Fund and its shareholders would benefit from the Manager’s management of the Fund; and (3) approved the Management Agreement.

Approval of Ionic Capital Management LLC

Prior to the meeting, the Board requested and reviewed information provided by Ionic in connection with its consideration of the Advisory Agreement, and the Investment Committee of the Board met with representatives of Ionic. The Board considered, among other materials, responses by Ionic to inquiries requesting:

 

    a description of the advisory and related services proposed to be provided to the Fund;

 

    identification of the professional personnel to perform services for the Fund and their education, experience and responsibilities;

 

    a comparison of investment performance of the Fund’s predecessor, the Ionic Absolute Return Fund LLC (“Prior Fund”), with the performance of applicable peer groups, as well as a registered investment company considered by Ionic to have investment objectives and strategies similar to those of the Fund;

 

    an analysis of the proposed advisory fee;

 

    a description of the portfolio managers’ compensation, including any incentive arrangement and, if compensation is tied to performance, a description of the oversight mechanism to prevent a manager with lagging performance from taking undue risks;

 

    a description of Ionic’s compliance program and any material compliance matters, as well as its trading activities;

 

    a discussion of Ionic’s financial condition and confirmation that Ionic’s financial condition would not impair its ability to provide high-quality services to the Fund; and

 

    any other information that Ionic believed would be material to the Board’s consideration of the Advisory Agreement.

Provided below is an overview of the primary factors the Board considered at its November 12-13, 2014 meetings at which the Board considered the approval of the Advisory Agreement. In determining whether to approve the Advisory Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services to be provided; (2) the investment performance of Ionic; (3) the costs to be incurred by Ionic in rendering its services and the resulting profits or losses; (4) the extent to which economies of scale, if any, have been taken into account in setting the fee schedule; (5) whether fee levels reflect these economies of scale, if any, for the benefit of investors; (6) comparisons of services and fees with contracts entered into by Ionic with other clients; and (7) any other benefits anticipated to be derived by Ionic from its relationship with the Fund.

The Board did not identify any particular information that was most relevant to its consideration of the Advisory Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of Ionic regarding certain key aspects of the materials submitted in support of the approval. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Advisory Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of investment advisory contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Advisory Agreement were reasonable and fair and that the approval of the Advisory Agreement was in the best interests of the Fund.

Nature, extent and quality of the services to be provided by Ionic. The Board considered information regarding Ionic’s principal business activities, its reputation, financial condition and overall capabilities to perform the services under the Advisory Agreement. In addition, the Board considered the background and experience of the personnel who will be assigned responsibility for managing the Fund. The Board also considered Ionic’s investment resources, infrastructure and the adequacy of its compliance program. In addition, the Board took into consideration the Manager’s recommendation of Ionic. The Board considered Ionic’s representation that its financial condition is adequate to provide high quality advisory services to the Fund and that its current staffing levels were adequate to service the Fund. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by Ionic were appropriate for the Fund in light of its investment objective, and, thus, supported a decision to approve the Advisory Agreement.

Performance of Ionic. The Board evaluated the performance information provided by Ionic and the Manager regarding the performance of the Prior Fund as compared to the Morningstar Multi-Alternative and Morningstar Market Neutral categories (together, the

 

 

64


Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreement and Investment Advisory Agreements of the Fund (Unaudited)

 

 

“Morningstar Categories”), as well as the AQR Diversified Arbitrage Fund, a registered investment company considered by Ionic to have investment objectives and strategies similar to those of the Fund (the “AQR Fund”). The Board considered that, as of September 30, 2014, the Prior Fund outperformed the Morningstar Categories and the AQR Fund for the year-to-date period, and outperformed the Morningstar Market Neutral category and the AQR Fund and underperformed the Morningstar Multi-Alternative category since its inception in September 2013. Based on the foregoing information, the Board concluded that the historical investment performance record of Ionic supported approval of the Advisory Agreement.

Comparisons of the amounts to be paid under the Advisory Agreement with those under contracts between Ionic and its other clients. In evaluating the Advisory Agreement, the Board reviewed the proposed advisory fee rate for services to be performed by Ionic on behalf of the Fund. The Board noted that Ionic’s investment advisory fee rate under the Advisory Agreement would be paid to Ionic by the Fund. The Board considered the favorable nature of the advisory fee rate proposed for the Fund relative to the fee rates charged to other comparable clients of Ionic. The Board also noted the Manager’s representation that the combined management and advisory fee rate to be paid to the Manager and Ionic was lower than industry averages for actively managed mutual funds in both the Morningstar Market Neutral and Multialternative categories. After evaluating this information, the Board concluded that Ionic’s advisory fee rate under the Advisory Agreement was reasonable in light of the services to be provided to the Fund.

Costs of the services to be provided and profits to be realized by Ionic and its affiliates from its relationship with the Fund. The Board did not consider the costs of the services to be provided and profits to be realized by Ionic from its relationship with the Fund, noting instead the arm’s-length nature of the relationship between the Manager and Ionic with respect to the negotiation of the advisory fee rate on behalf of the Fund.

Economies of Scale. The Board considered Ionic’s representation that it was not currently able to determine the potential economies of scale for the benefit of the Fund’s investors.

Benefits to be derived by Ionic from the relationship with the Fund. The Board considered the “fall-out” or ancillary benefits that might accrue to Ionic as a result of its relationship with the Fund, including greater exposure in the marketplace with respect to Ionic’s investment process and expanding the level of assets under management by Ionic. The Board also noted Ionic’s representation that it intends to receive soft dollar benefits in connection with Fund transactions. Based on the foregoing information, the Board concluded that the potential benefits accruing to Ionic by virtue of its relationship with the Fund appear to be fair and reasonable.

Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Fund, the Manager or Ionic, as that term is defined in the 1940 Act, concluded that the proposed investment advisory fee rate is fair and reasonable and that the approval of the Advisory Agreement is in the best interests of the Fund and approved the Advisory Agreement.

 

 

65


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 220 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

INTERESTED TRUSTEES   

Term

Lifetime of Trust until removal, resignation or retirement*

  
Alan D. Feld** (79)    Trustee since 1996    Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012).
   Term   
NON-INTERESTED TRUSTEES   

Lifetime of Trust

until removal,

resignation or

retirement*

  
Gilbert G. Alvarado (46)    Trustee since 2015    Director, Kura MD, Inc. (local telehealth organization) (2015-Present); Vice President & CFO, Sierra Health Foundation (health conversion private foundation) (2006-Present) Vice President & CFO, Sierra Health Foundation: Center for Health Program Management (California public benefit corporation) (2012-Present); Director, Innovative North State (2012-Present); Director, Sacramento Regional Technology Alliance (2011-Present); Director, Women’s Empowerment (2009-2014); Trustee, American Beacon Select Funds (2015-Present).
Joseph B. Armes (53)    Trustee since 2015    Chairman & CEO, CSW Industrials f/k/a Capital Southwest Corporation (investment company) (2013-Present); President & CEO, JBA Investment Partners (family investment vehicle) (2010-Present); Chief Operating Officer, Hicks Holdings, LLC (Hicks Family assets and investments) (2005-2010); Trustee, Baylor University Board of Regents (2001-2010); Director and Chair of Audit Committee, RSP Permian (oil and gas producer) (2013-Present); Trustee, American Beacon Select Funds (2015-Present).
Gerard J. Arpey (57)    Trustee since 2012    Director, The Home Depot, Inc. (2015-Present); Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present).
W. Humphrey Bogart (71)    Trustee since 2004    Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Brenda A. Cline (55)    Trustee since 2004    Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Director, Range Resources Corporation (oil and natural gas company) (2015-Present); Director, Tyler Technologies, Inc.(public sector software solutions company) (2014-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Eugene J. Duffy (61)    Trustee since 2008    Managing Director, Institutional Services, Intercontinental Real Estate Corporation (2014-Present); Principal and Executive Vice President, Paradigm Asset Management (1994-2014); Director, Sunrise Bank of Atlanta (2008-2013); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).

 

 

66


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

OFFICERS    Term   
  

Lifetime of Trust

until removal,

resignation or

retirement*

  
Thomas M. Dunning (73)    Trustee since 2008    Chairman Emeritus (2008-Present); Lockton Dunning Benefits (consulting firm in employee benefits); Board Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present) (software consulting); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012).
Richard A. Massman (72)   

Trustee since 2004

Chairman since 2008

   Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012).
Barbara J. McKenna, CFA (52)    Trustee since 2012    Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present).

R. Gerald Turner (70)

225 Perkins Admin. Bldg.

Southern Methodist Univ.

Dallas, Texas75275

   Trustee since 2001    President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012).
OFFICERS    Term   
   One Year   
Gene L. Needles, Jr. (61)   

President since 2009

Executive Vice President

since 2009

   President, CEO and Director, American Beacon Advisors, Inc. (2009-Present); President, CEO and Director, Astro AB Borrower, Inc. (2015-Present); President, CEO and Director, Astro AB Acquisition, Inc.(2015-Present); President, CEO and Director, Astro AB Topco, Inc. (2015-Present), President, CEO and Director, Astro AB Holdings, LLC. (2015-Present); President, CEO and Director, Lighthouse Holdings, Inc.; (2009-2015); President and CEO, Lighthouse Holdings Parent, Inc. (2009-2015); Manager, President and CEO, American Private Equity Management, L.L.C. (2012-Present); President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).
Rosemary K. Behan (56)   

VP, Secretary and

Chief Legal

Officer since 2006

   Secretary, American Beacon Advisors, Inc. (2006-Present); Secretary, Astro AB Borrower, Inc. (2015-Present); Secretary, Astro AB Acquisition, Inc. (2015-Present); Secretary, Astro AB Topco, Inc. (2015-Present); Secretary, Astro AB Holdings, LLC. (2015-Present); Secretary, Lighthouse Holdings, Inc. (2008-2015); Secretary, Lighthouse Holdings Parent, Inc. (2008-2015); Secretary, American Private Equity Management, L.L.C.(2008-Present); Secretary, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).
Brian E. Brett (55)    VP since 2004    Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).
Erica Duncan (45)    VP Since 2011    Vice President, Marketing and Client Services, American Beacon Advisors, Inc. (2011-Present); Supervisor, Brand Marketing, Invesco (2010-2011).
Michael W. Fields (61)    VP since 1989    Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).

 

 

67


Trustees and Officers of the American Beacon FundsSM

(Unaudited)

 

 

Name, Age and Address

  

Position, Term of

Office and Length

of Time Served

with the Trust

  

Principal Occupation(s) During Past 5 Years

and Current Directorships

OFFICERS    Term   
   One Year   
Melinda G. Heika (54)   

Treasurer since

2010

   Treasurer, American Beacon Advisors, Inc. (2010-Present); Treasurer, Astro AB Borrower, Inc. (2015-Present); Treasurer, Astro AB Acquisition, Inc. (2015-Present); Treasurer, Astro AB Topco, Inc. (2015-Presnt); Treasurer, Astro AB Holdings, LLC. (2015-Present); Treasurer, Lighthouse Holdings, Inc. (2010-2015); Treasurer, Lighthouse Holdings Parent Inc., (2010-2015); Treasurer, American Private Equity Management, L.L.C. (2012-Present); Director and Treasurer, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present).
Terri L. McKinney (52)    VP since 2010    Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc.
Jeffrey K. Ringdahl (40)    VP since 2010    Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Manager and Senior Vice President, American Private Equity Management, L.L.C. (2012-Present); Senior Vice President and Director, Astro AB Borrower, Inc. (2015-Present); Senior Vice President and Director, Astro AB Acquisition, Inc. (2015-Present); Senior Vice President and Director, Astro AB Topco, Inc. (2015-Present), Senior Vice President and Director, Astro AB Holdings, LLC.(2015-Present); Senior Vice President, Lighthouse Holdings, Inc. (2013-2015); Senior Vice President, Lighthouse Holdings Parent, Inc. (2013-2015); Director and Vice President, American Beacon Cayman Managed Futures Strategy Fund, Ltd. (2014-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010).
Samuel J. Silver (52)    VP Since 2011    Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.
Christina E. Sears (44)   

Chief Compliance

Officer since 2004

and Asst. Secretary since 1999

   Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Chief Compliance Officer, American Private Equity Management, L.L.C. (2012-Present).
Sonia L. Bates (59)    Asst. Treasurer since 2011    Director, Tax and Financial Reporting (2011-Present), Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer, Astro AB Borrower, Inc. (2015-Present); Asst. Treasurer, Astro AB Acquisition, Inc.(2015-Present); Asst. Treasurer, Astro AB Topco, Inc. (2015-Present); Asst. Treasurer, Astro AB Holdings, LLC.; Asst. Treasurer, Lighthouse Holdings, Inc. (2011-2015); Asst. Treasurer, Lighthouse Holdings Parent Inc. (2011-2015); Asst. Treasurer, American Private Equity Management, L.L.C. (2012-Present).

 

* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the board may determine to grant one or more annual exemptions to this requirement.
** Mr. Feld is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust’s sub-advisors.

 

 

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69


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:

american_beacon.funds@ambeacon.com

  

On the Internet:

Visit our website at www.americanbeaconfunds.com

      
  
LOGO    LOGO

By Telephone:

Institutional, Y and Investor Classes

Call (800) 658-5811

  

By Mail:

American Beacon Funds

P.O. Box 219643

Kansas City, MO 64121-9643

      
  
 
Availability of Quarterly Portfolio Schedules    Availability of Proxy Voting Policy and Records
 
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com, approximately twenty days after the end of each month.    A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

 

CUSTODIAN

State Street Bank and Trust

Boston, Massachusetts

    

TRANSFER AGENT

Boston Financial Data Services

Kansas City, Missouri

     

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP

Dallas, Texas

     

DISTRIBUTOR

Foreside Fund Services, LLC

Portland, Maine

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

 

American Beacon Funds, American Beacon AHL Managed Futures Strategy Fund, and American Beacon Ionic Strategic Arbitrage Fund are service marks of American Beacon Advisors, Inc.

AR 12/15


ITEM 2. CODE OF ETHICS.

The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the “Code”). The trust amended its code November 12, 2013 to disclose the removal of terminated Investment Companies. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE.ETH.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The Trust’s Board of Trustees has determined that Ms. Brenda A. Cline, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Ms. Brenda Cline is “independent” as defined in Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a)

 

Audit Fees

   Fiscal Year Ended  

$236,768

     12/31/2014   

$262,494

     12/31/2015   

(b)

 

Audit-Related Fees

   Fiscal Year Ended  

$0

     12/31/2014   

$0

     12/31/2015   

(c)

 

Tax Fees

   Fiscal Year Ended  

$37,000

     12/31/2014   

$35,500

     12/31/2015   

(d)

 

All Other Fees

   Fiscal Year Ended  

$0

     12/31/2014   

$0

     12/31/2015   

e)(1) Pursuant to its charter, the Trust’s Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust’s principal accountant:

 

    to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts’ financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors;


    to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser (“adviser affiliate”) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts;

 

    to consider whether the non-audit services provided by a Trust’s auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor’s independence;

 

    to review the arrangements for and scope of the annual audit and any special audits; and

 

    to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service.

The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting.

(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not applicable.

 

(g)

Aggregate Non-Audit Fees for Services Rendered to the:

 

Registrant      Adviser     

Adviser’s Affiliates Providing

Ongoing Services to Registrant

  

Fiscal Year Ended

$ 37,000       $ 34,905       N/A    12/31/2014
$ 35,500       $ 46,065       N/A    12/31/2015

(h) Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

The schedules of investments for each series of the Trust are included in the shareholder reports presented in Item 1.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.


ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.

ITEM 11. CONTROLS AND PROCEDURES.

(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.

(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Filed herewith as EX-99.CODE ETH.

(a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.

(a)(3) Not applicable.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant): American Beacon Funds
By  

/s/ Gene L. Needles, Jr.

Gene L. Needles, Jr.
President
American Beacon Funds
Date: March 10, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By  

/s/ Gene L. Needles, Jr.

Gene L. Needles, Jr.
President
American Beacon Funds
Date: March 10, 2016

 

By  

/s/ Melinda G. Heika

Melinda G. Heika
Treasurer
American Beacon Funds
Date: March 10, 2016