N-CSR/A 1 d330036dncsra.htm N-CSR/A N-CSR/A

 

 

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, 2016

Date of reporting period: December 31, 2016

 

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 

 


ITEM 1. REPORTS TO STOCKHOLDERS.


LOGO


About American Beacon Advisors

 

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

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

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.

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

 

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

 

American Beacon Funds   December 31, 2016


Contents

 

 

 

President’s Message

     1  

Market and Performance Overviews

     2  

Expense Examples

     7  

Report of Independent Registered Public Accounting Firm

     9  

Schedules of Investments:

  

American Beacon Bahl & Gaynor Small Cap Growth Fund

     10  

American Beacon Holland Large Cap Growth Fund

     13  

Financial Statements

     16  

Notes to Financial Statements

     19  

Financial Highlights:

  

American Beacon Bahl & Gaynor Small Cap Growth Fund

     35  

American Beacon Holland Large Cap Growth Fund

     38  

Federal Tax Information

     41  

Additional Shareholder Information

     42  

Trustees and Officers of the American Beacon Funds

     43  

Privacy Policy

     46  

Additional Fund Information

     Back Cover  


President’s Message

 

 

LOGO    Dear Shareholders,
   During the 12-month period ended December 31, 2016, China’s slowing growth escalated concerns for global markets, and many of the world’s central banks – the Federal Reserve (the “Fed”) included – responded by either continuing or expanding their economic stimulation policies. In the first half of 2016, international stocks declined while U.S. and emerging-market stocks made modest gains. Falling global interest rates supported bond returns during the period.
   On June 24, 2016, the U.K. announced that the Brexit referendum to leave the European Union passed with a 52% majority vote, further shaking up global markets. By the end of that month, however, the U.S. stock market and some global markets had rebounded to near pre-Brexit levels as investors took opportunistic risks following the historic vote. After Theresa May’s succession as the U.K.’s prime minister on July 13, 2016, many central banks put their Brexit concerns on hold and turned their attention to their own economies.

In the weeks ahead of the U.S. presidential election on November 8, 2016, uncertainty about the outcome caused many investors to stay on the sidelines. Some investors questioned whether the election’s result would have negative consequences for their portfolios, but elections rarely have a lasting effect on the market. Historically speaking, from August 1 to October 31 during 19 of the last 22 election years - or approximately 86% of the time - the S&P 500 rallied for an average gain of approximately 6%.

On December 14, 2016, the Fed announced that it increased short-term interest rates by 0.25% to a range of 0.50% and 0.75%, signifying the Federal Open Market Committee’s confidence in an improving economy. It was the second rate increase in a decade; the first rate increase occurred in December 2015.

Although U.S. bonds and international investments largely declined in fourth quarter, domestic stocks reached new highs by the end of 2016. Markets responded positively to aspects of the incoming administration’s proposed plans for economic growth; i.e., repatriating jobs from overseas, relaxing regulations, lowering taxes and increasing infrastructure spending. For the year, the Dow Jones Industrial Average gained 16.50%, the S&P 500 Index gained 11.96%, the Nasdaq Composite gained 7.5% and the Russell 2000 gained 21.31%.

For the 12 months ended December 31, 2016:

 

    American Beacon Bahl & Gaynor Small Cap Growth Fund (Investor Class) returned 25.31%.

 

    American Beacon Holland Large Cap Growth Fund (Investor Class) returned 1.87%.

American Beacon Advisors identifies and partners with experienced asset managers from across all asset classes to help protect our shareholders’ portfolios over the long term. We are proud to offer a variety of funds that allow investors to invest in the asset classes best aligned with their long-term goals.

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, 2016 (Unaudited)

 

 

Domestic equity markets came back with a roar from 2015’s modestly positive performance and continued the long-running, eight-year bull market. The S&P 500 Index, a broad measure of stock performance, was up 11.96%. The Russell 1000 Index, another largely followed market index, was up 12.05% for the year. Looking at the various Russell-style indexes for the year, small-cap stocks outpaced large- and mid-cap stocks and value stocks far outpaced growth stocks. In 2016, the markets continued to demonstrate that macroeconomic events such as the Brexit vote and uncertainty around the U.S. election can influence performance in the short term.

The first quarter of 2016 was marked by significant domestic equity market volatility with negative performance in January nearly matching positive performance in March (with flat performance in between). The month of January was highlighted by a broad market sell-off because of continued weakness in China’s economy despite a rebound by stocks at the end of the month. Healthier economic indicators in February kept the markets from entering correction territory, with most broad domestic equity markets ending the month close to flat. March was characterized by strong market performance led by job gains, a strengthening labor market, and some stability to oil prices. The Federal Reserve (the “Fed”) took a cautious tone following the Federal Open Market Committee (“FOMC”) meeting in March and held the federal funds rate steady. “Global economic and financial developments” were cited as reasons to keep the rate steady. To wit, the surprise move by the European Central Bank for further quantitative easing underscored weakness in Europe’s economy. The quarter ended with most domestic markets in modestly positive territory - the exceptions being the small-cap core/growth space.

The second quarter’s hot topics - Brexit and the lackluster May jobs report - did little to dampen the period’s positive momentum. The first two months of the quarter had positive returns that initially seemed to be threatened by the underwhelming May jobs report released in the first week of June. The weak report put the prospect of the Fed raising interest rates at the June meeting in doubt, which was later realized. Later in the month came the unexpected vote in the United Kingdom to leave the European Union, or Brexit. However, the domestic equity markets’ short-lived reaction to the Brexit vote was followed by a quick rebound and the month of June was relatively flat across most U.S. indexes. The second quarter ended with U.S. equity markets posting positive numbers across the board.

The third quarter was buoyed initially by lessening fear surrounding the Brexit vote and a significant positive revision to the June jobs report, but the Fed’s discussion of whether (and when) they should raise interest rates remained a key theme. This carried into August as U.S. markets were lifted by continued signs of job creation, wage growth and a lower unemployment rate. Gross domestic product (“GDP”) metrics for the period registered +3.5% annualized - the highest observation in two years. Meanwhile, international markets were mixed, particularly as growth in China continued to slow. Weaker markets in September recovered toward the end of month thanks in part to oil prices rising in the wake of OPEC’s announcement of a tentative agreement on production cutbacks. Despite that and concerns about inflation remaining below its target of 2%, the Fed indicated that the case for raising interest rates before the end of the year had strengthened, though they noted they would wait before doing so and continue monitoring the environment. Once again, U.S. equity markets had a positive quarter across the board and particularly in the small-cap space.

The fourth quarter began weakly in October due to the uncertainty of the fast-approaching U.S. presidential election and despite goods and services indicating an increase to real GDP during the same time period. In November, despite predictions of a sharp, negative response to the election results, the U.S. markets went on to achieve new highs later in the month. Notwithstanding generally positive market conditions, the Fed made no interest rate changes in November given the proximity of the FOMC’s meeting to the election. At that time, Federal Reserve Board Chair Janet Yellen foreshadowed a potential rate increase, saying the timing could be appropriate “relatively soon.” On December 14, the Fed met and voted to increase interest rates by 0.25% - the first time in 2016 and only the second time in the past 12 months. As another positive note, consumer confidence rose during the month of December to its highest level in more than 15 years. The fourth quarter was a good period for the U.S. equity markets - especially small-cap stocks and value stocks, which significantly outpaced their large and growth counterparts - and wrapped a big bow around the end of a year that seemed surprising (i.e., U.S. markets leading globally).

 

 

2


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Performance Overview

December 31, 2016 (Unaudited)

 

 

The Investor Class of the Bahl & Gaynor Small Cap Growth Fund (the “Fund”) returned 25.31% for the twelve months ended December 31, 2016. The Fund outperformed the Russell 2000 Growth Index (the “Index”) return of 11.32% for the same period.

Comparison of Change in Value of a $10,000 Investment for the period from 7/15/2014 through 12/31/2016

 

LOGO

Total Returns for the Period Ended December 31, 2016

 

                        Value of $10,000  
                  Since Inception     7/15/2014-  
     Ticker      1 Year     (7/15/2014)     12/31/2016  

Institutional Class (1,5)

     GBSIX        25.88     11.60   $ 13,104  

Y Class (1,5)

     GBSYX        25.80     11.53   $ 13,084  

Investor Class (1,5)

     GBSPX        25.31     11.18   $ 12,983  

A without Sales Charge (1,2,5)

     GBSAX        25.44     11.18   $ 12,983  

A with Sales Charge (1,2,5)

     GBSAX        18.19     8.54   $ 12,237  

C without Sales Charge (1,3,5)

     GBSCX        24.35     10.31   $ 12,734  

C with Sales Charge (1,3,5)

     GBSCX        23.35     10.31   $ 12,734  

Russell 2000 Growth Index (4)

        11.32     6.95   $ 11,801  

S&P 500 Index (4)

        11.96     7.52   $ 11,950  

 

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

 

 

3


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Performance Overview

December 31, 2016 (Unaudited)

 

 

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 3.05%, 2.77%, 3.20%, 2.89%, and 3.85%, 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 superior stock selection relative to the Index. From a stock selection standpoint, the Fund’s holdings in the Health Care, Information Technology and Consumer Discretionary sectors contributed the most to relative performance. In the Health Care sector, positions in West Pharmaceutical Services (up 42.1%), LeMaitre Vascular (up 71.9%) and Cantel Medical Corp (up 25.8%) were the largest contributors. Within the Information Technology sector, holdings in Monolithic Power (up 44.2%), FEI Company (up 36.7%), Synnex Corp (up 50.7%) and Silicon Motion Technol ADR (up 38.8%) were favorable to performance. Companies in the Consumer Discretionary sector that contributed to relative performance were Thor Industries (up 80.7%), Texas Roadhouse (up 38.1%) and Flexsteel (up 40.2%).

Sector allocation also added to relative returns during the period, as the Fund was underweight to Health Care and held an overweight to Financials relative to the benchmark.

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)

  

Evercore Partners, Inc.

     3.1  

Thor Industries, Inc.

     3.0  

Monolithic Power Systems, Inc.

     2.8  

Cantel Medical Corp.

     2.7  

Texas Roadhouse, Inc.

     2.7  

West Pharmaceutical Services, Inc.

     2.5  

Methode Electronics, Inc.

     2.4  

Watsco, Inc.

     2.3  

Flexsteel Industries, Inc.

     2.2  

Pegasystems, Inc.

     2.2  

Total Fund Holdings                                                                                                               68

 

Sector Allocation (% Equities)

  

Information Technology

     26.4  

Consumer Discretionary

     17.0  

Industrials

     16.9  

Health Care

     15.3  

Financials

     12.7  

Materials

     4.3  

Consumer Staples

     4.2  

Real Estate

     2.1  

Energy

     1.1  

 

 

4


American Beacon Holland Large Cap Growth FundSM

Performance Overview

December 31, 2016 (Unaudited)

 

 

The Investor Class of the American Beacon Holland Large Cap Growth Fund (the “Fund”) returned 1.87% for the twelve months ended December 31, 2016. The Fund underperformed the Russell 1000® Growth Index (the “Index”) return of 7.08%.

Comparison of Change in Value of a $10,000 Investment for the period from 12/31/2006 through 12/31/2016

 

LOGO

Total Returns for the Period Ended December 31, 2016

 

                                    Value of $10,000  
                                    12/31/2006-  
     Ticker      1 Year     3 Years     5 Years     10 Years     12/31/2016  

Institutional Class (1,2,7)

     LHGIX        2.25     5.41     11.84     7.44   $ 20,502  

Y Class (1,3,7)

     LHGYX        2.22     5.27     11.70     7.37   $ 20,371  

Investor Class (1,7)

     LHGFX        1.87     5.05     11.45     7.22   $ 20,085  

A without Sales Charge (1,4,7)

     LHGAX        1.85     4.98     11.35     7.17   $ 18,836  

A with Sales Charge (1,4,7)

     LHGAX        -3.99     2.93     10.04     6.54   $ 18,836  

C without Sales Charge (1,5,7)

     LHGCX        1.10     4.20     10.55     6.79   $ 19,281  

C with Sales Charge (1,5,7)

     LHGCX        0.10     4.20     10.55     6.79   $ 19,281  

Russell 1000 Growth Index (6)

        7.08     8.55     14.50     8.33   $ 22,266  

 

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 the Investor Class was waived from 2002 through 2012, partially recovered in 2013, and fully recovered in 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 12/31/06 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 12/31/06. A portion of the fees charged to the Institutional Class was waived from 2010 through 2012 and partially recovered in 2013 and 2015. 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 12/31/06 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 12/31/06. A portion of the fees charged to the Y Class was waived in 2012, partially recovered in 2013 and waived in 2014 and 2015. Performance prior to waiving fees was lower than the actual returns shown in 2012, 2014, and 2015.
4. Fund performance for the ten-year period represents the returns achieved by the Investor Class from 12/31/06 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 since 12/31/06. A portion of the fees charged to the A Class was waived from

 

 

5


American Beacon Holland Large Cap Growth FundSM

Performance Overview

December 31, 2016 (Unaudited)

 

 

  2010 through 2014. Performance prior to waiving fees was lower than the actual returns shown from 2010 through 2014. 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 12/31/06 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 12/31/06. 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 0.89%, 1.09%, 1.25%, 1.30%, 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 lagged the Index primarily due to poor stock selection as sector allocation added minimal value relative to the Index.

From a stock selection perspective, holdings in the Consumer Discretionary, Consumer Staples and Information Technology sectors detracted most from performance. Companies in the Consumer Discretionary sector detracting from the Fund’s return included Under Armour (down 28.9%), Restoration Hardware (down 47.1%) and Nike (down 17.1%). In the Consumer Staples sector, CVS Health (down 18.0%), Monster Beverage (down 11.3%) and Mead Johnson Nutrition (down 9.6%) detracted from performance. Not owning NVIDIA detracted relative value in the Information Technology sector. The Fund’s allocation in Tyler Technologies (down 7.3%) also detracted from performance in the Information Technology sector.

The Fund’s underweight position in Health Care, the worst performing sector in the Index, added relative value through sector allocation. An overweight in the Industrials sector also contributed to performance. The aforementioned good performance was mostly negated by the Fund’s absence from the Telecommunication Services sector and an average overweight in the Consumer Staples sector, which detracted relative value.

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.

 

Top Ten Holdings (% Net Assets)   

Alphabet, Inc.

     4.6  

Apple, Inc.

     4.5  

Visa, Inc.

     4.4  

Amazon.com, Inc.

     4.3  

Microsoft Corp.

     3.7  

Adobe Systems, Inc.

     3.5  

Priceline.com, Inc.

     3.4  

Honeywell International, Inc.

     2.9  

Southwest Airlines Co.

     2.8  

United Parcel Service Inc.

     2.8  

Total Fund Holdings                                                                                                          51

 

Sector Allocation (% Equities)   

Information Technology

     34.3  

Consumer Discretionary

     22.8  

Health Care

     14.9  

Industrials

     12.4  

Consumer Staples

     10.3  

Financials

     4.1  

Materials

     1.3  

 

 

6


American Beacon FundsSM

Expense Examples

December 31, 2016 (Unaudited)

 

 

Fund Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The Examples are intended to help you understand the ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from July 1, 2016 through December 31, 2016.

Actual Expenses

The “Actual” lines of the tables provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = $8.60), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in the Funds through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Hypothetical Example for Comparison Purposes

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

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

 

 

7


American Beacon FundsSM

Expense Examples

December 31, 2016 (Unaudited)

 

Bahl & Gaynor Small Cap Growth Fund

 

                   Expenses Paid During  
     Beginning Account Value      Ending Account Value      Period  
     7/1/2016      12/31/2016      7/1/2016-12/31/2016*  

Institutional Class

        

Actual

   $ 1,000.00      $ 1,176.64      $ 5.36  

Hypothetical**

   $ 1,000.00      $ 1,020.21      $ 4.98  

Y Class

        

Actual

   $ 1,000.00      $ 1,176.95      $ 5.91  

Hypothetical**

   $ 1,000.00      $ 1,019.71      $ 5.48  

Investor Class

        

Actual

   $ 1,000.00      $ 1,174.25      $ 7.43  

Hypothetical**

   $ 1,000.00      $ 1,018.30      $ 6.90  

A Class

        

Actual

   $ 1,000.00      $ 1,175.32      $ 7.55  

Hypothetical**

   $ 1,000.00      $ 1,018.19      $ 7.00  

C Class

        

Actual

   $ 1,000.00      $ 1,169.83      $ 11.62  

Hypothetical**

   $ 1,000.00      $ 1,014.41      $ 10.79  

 

* 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 (366) to reflect the half-year period.
** 5% return before expenses.

Holland Large Cap Growth Fund

 

                   Expenses Paid During  
     Beginning Account Value      Ending Account Value      Period  
     7/1/2016      12/31/2016      7/1/2016-12/31/2016*  

Institutional Class

        

Actual

   $ 1,000.00      $ 1,032.00      $ 4.49  

Hypothetical**

   $ 1,000.00      $ 1,020.69      $ 4.47  

Y Class

        

Actual

   $ 1,000.00      $ 1,032.24      $ 5.01  

Hypothetical**

   $ 1,000.00      $ 1,020.22      $ 4.98  

Investor Class

        

Actual

   $ 1,000.00      $ 1,030.16      $ 6.43  

Hypothetical**

   $ 1,000.00      $ 1,018.82      $ 6.39  

A Class

        

Actual

   $ 1,000.00      $ 1,030.01      $ 6.63  

Hypothetical**

   $ 1,000.00      $ 1,018.60      $ 6.60  

C Class

        

Actual

   $ 1,000.00      $ 1,026.46      $ 10.39  

Hypothetical**

   $ 1,000.00      $ 1,014.86      $ 10.33  

 

* Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.88%, 0.98%, 1.26%, 1.30% 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 (366) to reflect the half-year period.
** 5% return before expenses.

 

 

 

8


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 and American Beacon Holland Large 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 and American Beacon Holland Large Cap Growth Fund (two of the funds constituting the American Beacon Funds) (collectively, the Funds), as of December 31, 2016, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the 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 the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2016, 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 and American Beacon Holland Large Cap Growth Fund at December 31, 2016, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated therein in conformity with U.S. generally accepted accounting principles.

 

LOGO

Dallas, Texas

February 28, 2017

 

 

 

9


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Schedule of Investments

December 31, 2016

 

 

     Shares      Fair Value  

COMMON STOCK - 98.02%

     

CONSUMER DISCRETIONARY - 16.63%

     

Auto Components - 2.15%

     

Gentex Corp.

     22,700      $ 446,963  
     

 

 

 

Automobiles - 3.75%

     

Hyster-Yale Materials Handling, Inc.

     2,520        160,700  

Thor Industries, Inc.

     6,150        615,308  
     

 

 

 
        776,008  
     

 

 

 

Hotels, Restaurants & Leisure - 4.97%

     

Brinker International, Inc.

     2,050        101,537  

Marriott Vacations Worldwide Corp.

     4,265        361,885  

Texas Roadhouse, Inc.

     11,735        566,095  
     

 

 

 
        1,029,517  
     

 

 

 

Household Durables - 3.54%

     

Flexsteel Industries, Inc.

     7,565        466,534  

Matthews International Corp., Class A

     3,485        267,822  
     

 

 

 
        734,356  
     

 

 

 

Multiline Retail -1.36%

     

Pricesmart, Inc.

     3,395        283,483  
     

 

 

 

Specialty Retail - 0.86%

     

Monro Muffler Brake, Inc.

     3,130        179,036  
     

 

 

 

Total Consumer Discretionary

        3,449,363  
     

 

 

 

CONSUMER STAPLES - 4.08%

     

Food & Drug Retailing -0.68%

     

B&G Foods, Inc.

     3,220        141,036  
     

 

 

 

Food Products - 1.96%

     

J&J Snack Foods Corp.

     3,045        406,294  
     

 

 

 

Personal Products - 1.44%

     

Inter Parfums, Inc.

     9,135        299,171  
     

 

 

 

Total Consumer Staples

        846,501  
     

 

 

 

ENERGY - 1.07%

     

Oil & Gas - 1.07%

     

GasLog Ltd.

     13,830        222,663  
     

 

 

 

FINANCIALS - 12.47%

     

Banks - 8.98%

     

Bank of the Ozarks, Inc.

     3,505        184,327  

Evercore Partners, Inc., Class A

     9,220        633,414  

Glacier Bancorp, Inc.

     3,920        142,022  

MainSource Financial Group, Inc.

     4,940        169,936  

PacWest Bancorp.

     5,095        277,372  

S&T Bancorp, Inc.

     6,000        234,240  

Virtu Financial, Inc., Class A

     13,920        222,024  
     

 

 

 
        1,863,335  
     

 

 

 

Diversified Financials - 1.78%

     

MarketAxess Holdings, Inc.

     2,520        370,238  
     

 

 

 

Insurance - 1.71%

     

Horace Mann Educators Corp.

     8,270        353,956  
     

 

 

 

Total Financials

        2,587,529  
     

 

 

 

See accompanying notes

 

 

10


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Schedule of Investments

December 31, 2016

 

 

     Shares      Fair Value  

HEALTH CARE - 14.99%

     

Health Care Equipment & Supplies - 9.70%

     

Abaxis, Inc.

     6,520      $ 344,060  

Atrion Corp.

     345        174,984  

Bio-Techne Corp.

     1,650        169,670  

LeMaitre Vascular, Inc.

     9,920        251,373  

Mesa Laboratories, Inc.

     2,000        245,500  

Patterson Cos., Inc.

     7,435        305,058  

West Pharmaceutical Services, Inc.

     6,175        523,825  
     

 

 

 
        2,014,470  
     

 

 

 

Health Care Providers & Services - 5.29%

     

Cantel Medical Corp.

     7,215        568,181  

Omnicell, Inc.A

     10,175        344,933  

U.S. Physical Therapy, Inc.

     2,615        183,573  
     

 

 

 
        1,096,687  
     

 

 

 

Total Health Care

        3,111,157  
     

 

 

 

INDUSTRIALS - 16.54%

     

Aerospace & Defense - 0.51%

     

HEICO Corp.

     1,365        105,310  
     

 

 

 

Building Products - 6.02%

     

Apogee Enterprises, Inc.

     6,605        353,764  

Simpson Manufacturing Co., Inc.

     4,870        213,063  

Universal Forest Products, Inc.

     2,000        204,360  

Watsco, Inc.

     3,245        480,649  
     

 

 

 
        1,251,836  
     

 

 

 

Commercial Services & Supplies - 4.60%

     

CSG Systems International, Inc.

     3,220        155,848  

Healthcare Services Group, Inc.

     6,695        262,243  

Monotype Imaging Holdings, Inc.

     11,480        227,878  

MSA Safety, Inc.

     4,440        307,825  
     

 

 

 
        953,794  
     

 

 

 

Electrical Equipment - 0.96%

     

II-VI, Inc.

     6,695        198,507  
     

 

 

 

Machinery - 4.45%

     

Applied Industrial Technologies, Inc.

     6,085        361,449  

Raven Industries, Inc.

     10,175        256,410  

Valmont Industries, Inc.

     2,170        305,753  
     

 

 

 
        923,612  
     

 

 

 

Total Industrials

        3,433,059  
     

 

 

 

INFORMATION TECHNOLOGY - 25.98%

     

Electronic Equipment & Instruments - 4.68%

     

Analogic Corp.

     2,170        180,002  

Littelfuse, Inc.

     1,130        171,500  

Methode Electronics, Inc.

     12,175        503,436  

NVE Corp.

     1,625        116,074  
     

 

 

 
        971,012  
     

 

 

 

Internet Software & Services - 2.88%

     

GrubHub, Inc.A

     3,850        144,837  

NIC, Inc.

     14,090        336,751  

Reis, Inc.

     5,165        114,921  
     

 

 

 
        596,509  
     

 

 

 

See accompanying notes

 

 

11


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Schedule of Investments

December 31, 2016

 

 

     Shares      Fair Value  

INFORMATION TECHNOLOGY - 25.98% (continued)

     

IT Consulting & Services - 5.81%

     

Forrester Research, Inc.

     2,480      $ 106,516  

Hackett Group, Inc.

     18,445        325,739  

Ritchie Bros Auctioneers, Inc.

     13,135        446,590  

SYNNEX Corp.

     2,700        326,754  
     

 

 

 
        1,205,599  
     

 

 

 

Semiconductor Equipment & Products - 7.73%

     

Cirrus Logic, Inc.A

     7,300        412,742  

Monolithic Power Systems, Inc.

     7,045        577,197  

Power Integrations, Inc.

     4,005        271,739  

Silicon Motion Technology Corp. ADRB

     8,090        343,663  
     

 

 

 
        1,605,341  
     

 

 

 

Software - 4.88%

     

Blackbaud, Inc.

     4,955        317,120  

National Instruments Corp.

     7,835        241,475  

Pegasystems, Inc.

     12,610        453,960  
     

 

 

 
        1,012,555  
     

 

 

 

Total Information Technology

        5,391,016  
     

 

 

 

MATERIALS - 4.17%

     

Chemicals - 4.17%

     

Balchem Corp.

     4,090        343,233  

PolyOne Corp.

     11,650        373,266  

Stepan Co.

     1,825        148,701  
     

 

 

 

Total Materials

        865,200  
     

 

 

 

REAL ESTATE - 2.09%

     

Real Estate Management & Development - 2.09%

     

RE/MAX Holdings, Inc., Class A

     7,745        433,720  
     

 

 

 

Total Common Stock (Cost $17,406,037)

        20,340,208  
     

 

 

 

SHORT TERM INVESTMENTS - 3.03% (Cost $628,203)

     

American Beacon U.S. Government Money Market Select Fund, Select ClassC

     628,203        628,203  
     

 

 

 

TOTAL INVESTMENTS - 101.05% (Cost $18,034,240)

        20,968,411  

LIABILITIES, NET OF OTHER ASSETS - (1.05%)

        (218,394
     

 

 

 

TOTAL NET ASSETS - 100.00%

      $ 20,750,017  
     

 

 

 

Percentages are stated as a percent of net assets.

     

 

 

A  Non-income producing security.
B  ADR - American Depositary Receipt.
C  The Fund is affiliated by having the same investment advisor.

Futures Contracts Open on December 31, 2016:

 

Description

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

Russell 2000 Mini Index Futures

     Long        4        March 2017      $ 271,380      $ (2,785
           

 

 

    

 

 

 
            $ 271,380      $ (2,785
           

 

 

    

 

 

 

See accompanying notes

 

 

12


American Beacon Holland Large Cap Growth FundSM

Schedule of Investments

December 31, 2016

 

 

     Shares      Fair Value  

COMMON STOCK - 97.25%

     

CONSUMER DISCRETIONARY - 22.13%

     

Auto Components - 1.08%

     

Delphi Automotive PLCA

     15,482      $ 1,042,713  
     

 

 

 

Home Builders - 0.98%

     

D.R. Horton, Inc.

     34,676        947,695  
     

 

 

 

Hotels, Restaurants &Leisure - 1.69%

     

Starbucks Corp.

     29,522        1,639,061  
     

 

 

 

Internet & Catalog Retail - 7.74%

     

Amazon.com, Inc.B

     5,568        4,175,276  

priceline.com, Inc.B

     2,268        3,325,024  
     

 

 

 
        7,500,300  
     

 

 

 

Media - 1.69%

     

Twenty-First Century Fox, Inc., Class A

     58,273        1,633,975  
     

 

 

 

Multiline Retail - 1.40%

     

Dollar General Corp.

     18,253        1,352,000  
     

 

 

 

Specialty Retail - 4.38%

     

Advance Auto Parts, Inc.

     11,475        1,940,652  

Lowe’s Cos., Inc.

     32,274        2,295,327  
     

 

 

 
        4,235,979  
     

 

 

 

Textiles & Apparel - 3.17%

     

NIKE, Inc., Class B

     38,696        1,966,918  

Under Armour, Inc., Class A

     37,948        1,102,389  
     

 

 

 
        3,069,307  
     

 

 

 

Total Consumer Discretionary

        21,421,030  
     

 

 

 

CONSUMER STAPLES - 10.03%

     

Beverages - 2.91%

     

Monster Beverage Corp.B

     42,405        1,880,238  

PepsiCo, Inc.

     8,979        939,472  
     

 

 

 
        2,819,710  
     

 

 

 

Food & Drug Retailing - 7.12%

     

Costco Wholesale Corp.

     11,551        1,849,431  

CVS Caremark Corp.

     29,684        2,342,364  

Mead Johnson Nutrition Co., Class A

     16,204        1,146,595  

Whole Foods Market, Inc.

     50,552        1,554,980  
     

 

 

 
        6,893,370  
     

 

 

 

Total Consumer Staples

        9,713,080  
     

 

 

 

FINANCIALS - 3.96%

     

Diversified Financials - 3.96%

     

BlackRock, Inc., Class A

     5,109        1,944,179  

TD Ameritrade Holding Corp.

     43,443        1,894,115  
     

 

 

 

Total Financials

        3,838,294  
     

 

 

 

HEALTH CARE - 14.46%

     

Biotechnology - 4.65%

     

Biogen Idec, Inc.B

     2,173        616,219  

Gilead Sciences, Inc.

     27,238        1,950,513  

Quintiles IMS Holdings, Inc.B

     14,792        1,124,932  

Vertex Pharmaceuticals, Inc.B

     11,000        810,370  
     

 

 

 
        4,502,034  
     

 

 

 

See accompanying notes

 

 

13


American Beacon Holland Large Cap Growth FundSM

Schedule of Investments

December 31, 2016

 

 

     Shares      Fair Value  

HEALTH CARE - 14.46% (continued)

     

Health Care Equipment & Supplies - 2.54%

     

Hologic, Inc.B

     25,007      $ 1,003,281  

Medtronic PLCA

     20,470        1,458,078  
     

 

 

 
        2,461,359  
     

 

 

 

Health Care Providers & Services - 4.55%

     

Cerner Corp.B

     25,496        1,207,746  

DaVita HealthCare Partners, Inc.B

     15,234        978,023  

Envision Healthcare Corp.B

     9,951        629,799  

UnitedHealth Group, Inc.

     9,915        1,586,796  
     

 

 

 
        4,402,364  
     

 

 

 

Pharmaceuticals - 2.72%

     

Bristol-Myers Squibb Co.

     22,596        1,320,510  

Zoetis, Inc.

     24,466        1,309,665  
     

 

 

 
        2,630,175  
     

 

 

 

Total Health Care

        13,995,932  
     

 

 

 

INDUSTRIALS - 12.02%

     

Aerospace &Defense - 1.74%

     

Boeing Co.

     10,840        1,687,571  
     

 

 

 

Air Freight & Couriers - 2.80%

     

United Parcel Service, Inc., Class B

     23,676        2,714,217  
     

 

 

 

Airlines - 2.78%

     

Southwest Airlines Co.

     53,920        2,687,373  
     

 

 

 

Electrical Equipment - 1.78%

     

Roper Industries, Inc.

     9,427        1,725,895  
     

 

 

 

Industrial Conglomerates - 2.92%

     

Honeywell International, Inc.

     24,335        2,819,210  
     

 

 

 

Total Industrials

        11,634,266  
     

 

 

 

INFORMATION TECHNOLOGY - 33.37%

     

Communications - 1.90%

     

Facebook, Inc., Class AB

     15,969        1,837,233  
     

 

 

 

Communications Equipment - 1.42%

     

Cisco Systems, Inc.

     45,625        1,378,788  
     

 

 

 

Computers & Peripherals - 5.68%

     

Apple, Inc.

     37,782        4,375,911  

International Business Machines Corp.

     6,752        1,120,764  
     

 

 

 
        5,496,675  
     

 

 

 

Internet Software & Services - 4.59%

     

Alphabet, Inc., Class CB

     5,760        4,445,683  
     

 

 

 

IT Consulting & Services - 7.18%

     

Automatic Data Processing, Inc.

     15,667        1,610,254  

Tyler Technologies, Inc.

     7,341        1,048,075  

Visa, Inc., Class A

     55,023        4,292,894  
     

 

 

 
        6,951,223  
     

 

 

 

Semiconductor Equipment & Products - 1.83%

     

NXP Semiconductors N.V.B

     18,074        1,771,433  
     

 

 

 

Software - 10.77%

     

Adobe Systems, Inc.B

     32,586        3,354,729  

Check Point Software Technologies Ltd.B

     14,574        1,230,920  

See accompanying notes

 

 

14


American Beacon Holland Large Cap Growth FundSM

Schedule of Investments

December 31, 2016

 

 

     Shares      Fair Value  

INFORMATION TECHNOLOGY - 33.37% (continued)

     

Software - 10.77% (continued)

     

Citrix Systems, Inc.B

     10,843      $ 968,388  

Intuit, Inc.

     11,111        1,273,432  

Microsoft Corp.

     57,885        3,596,974  
     

 

 

 
        10,424,443  
     

 

 

 

Total Information Technology

        32,305,478  
     

 

 

 

MATERIALS - 1.28%

     

Chemicals - 1.28%

     

Ecolab, Inc.

     10,551        1,236,788  
     

 

 

 

Total Common Stock (Cost $68,968,529)

        94,144,868  
     

 

 

 

SHORT-TERM INVESTMENTS - 2.69% (Cost $2,600,481)

     

American Beacon U.S. Government Money Market Select Fund, Select ClassC

     2,600,481        2,600,481  
     

 

 

 

TOTAL INVESTMENTS - 99.94% (Cost $71,569,010)

        96,745,349  

OTHER ASSETS, NET OF LIABILITIES - 0.06%

        54,475  
     

 

 

 

TOTAL NET ASSETS - 100.00%

      $ 96,799,824  
     

 

 

 

Percentages are stated as a percent of net assets.

 

 

A  PLC - Public Limited Company.
B  Non-income producing security.
C  The Fund is affiliated by having the same investment advisor.

Futures Contracts Open on December 31, 2016:

 

Description

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

S&P 500 E-Mini Index Futures

     Long        22        March 2017      $ 2,459,820      $ (16,479
           

 

 

    

 

 

 
            $ 2,459,820      $ (16,479
           

 

 

    

 

 

 

See accompanying notes

 

 

15


American Beacon FundsSM

Statements of Assets and Liabilities

December 31, 2016

 

 

     Bahl & Gaynor Small     Holland Large Cap  
     Cap Growth Fund     Growth Fund  

Assets:

    

Investments in unaffiliated securities, at fair value A

   $ 20,340,208     $ 94,144,868  

Investments in affiliated securities, at fair value B

     628,203       2,600,481  

Deposit with brokers for futures contracts

     26,565       111,138  

Dividends and interest receivable

     18,453       54,996  

Receivable for fund shares sold

     87,007       18,527  

Receivable for expense reimbursement (Note 2)

     12,182       28  

Prepaid expenses

     16,885       12,199  
  

 

 

   

 

 

 

Total assets

     21,129,503       96,942,237  
  

 

 

   

 

 

 

Liabilities:

    

Payable for investments purchased

     322,592       —    

Payable for fund shares redeemed

     2,387       363  

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

     2,780       16,430  

Management and investment advisory fees payable

     15,251       69,185  

Administrative service and service fees payable

     2,344       15,958  

Transfer agent fees payable

     412       1,660  

Custody and fund accounting fees payable

     2,019       2,740  

Professional fees payable

     29,397       29,960  

Trustee fees payable

     1       11  

Payable for prospectus and shareholder reports

     1,538       1,719  

Other liabilities

     765       4,387  
  

 

 

   

 

 

 

Total liabilities

     379,486       142,413  
  

 

 

   

 

 

 

Net Assets

   $ 20,750,017     $ 96,799,824  
  

 

 

   

 

 

 

Analysis of Net Assets:

    

Paid-in-capital

   $ 17,952,792     $ 71,200,795  

Undistributed net investment income

     —         5,036  

Accumulated net realized gain (loss)

     (134,162     434,133  

Unrealized appreciation of investments

     2,934,172       25,176,339  

Unrealized (depreciation) of futures contracts

     (2,785     (16,479
  

 

 

   

 

 

 

Net assets

   $ 20,750,017     $ 96,799,824  
  

 

 

   

 

 

 

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

    

Institutional Class

     592,267       1,043,477  
  

 

 

   

 

 

 

Y Class

     538,005       16,497  
  

 

 

   

 

 

 

Investor Class

     284,154       2,845,775  
  

 

 

   

 

 

 

A Class

     183,587       55,348  
  

 

 

   

 

 

 

C Class

     33,193       14,909  
  

 

 

   

 

 

 

Net assets:

    

Institutional Class

   $ 7,563,970     $ 25,818,864  
  

 

 

   

 

 

 

Y Class

   $ 6,856,954     $ 405,410  
  

 

 

   

 

 

 

Investor Class

   $ 3,595,277     $ 68,905,910  
  

 

 

   

 

 

 

A Class

   $ 2,321,426     $ 1,327,798  
  

 

 

   

 

 

 

C Class

   $ 412,390     $ 341,842  
  

 

 

   

 

 

 

Net asset value, offering and redemption price per share:

    

Institutional Class

   $ 12.77     $ 24.74  
  

 

 

   

 

 

 

Y Class

   $ 12.75     $ 24.57  
  

 

 

   

 

 

 

Investor Class

   $ 12.65     $ 24.21  
  

 

 

   

 

 

 

A Class

   $ 12.64     $ 23.99  
  

 

 

   

 

 

 

A Class (offering price)

   $ 13.41     $ 25.45  
  

 

 

   

 

 

 

C Class

   $ 12.42     $ 22.93  
  

 

 

   

 

 

 

A Cost of investments in unaffiliated securities

   $ 17,406,037     $ 68,968,529  

B Cost of investments in affiliated securities

   $ 628,203     $ 2,600,481  

See accompanying notes

 

 

16


American Beacon FundsSM

Statements of Operations

For the year ended December 31, 2016

 

 

     Bahl & Gaynor        
     Small Cap     Holland Large  
     Growth Fund     Cap Growth Fund  

Investment income:

    

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

   $ 178,586     $ 1,069,273  

Dividend income from affiliated securities

     933       8,894  
  

 

 

   

 

 

 

Total investment income

     179,519       1,078,167  
  

 

 

   

 

 

 

Expenses:

    

Management and investment advisory fees (Note 2)

     86,130       605,211  

Administrative service fees (Note 2):

    

Institutional Class

     5,866       21,055  

Y Class

     5,190       385  

Investor Class

     1,550       90,164  

A Class

     1,323       1,980  

C Class

     394       741  

Transfer agent fees:

    

Institutional Class

     542       1,607  

Y Class

     200       18  

Investor Class

     1,322       8,282  

A Class

     147       216  

C Class

     30       46  

Custody and fund accounting fees

     11,563       17,850  

Professional fees

     26,170       29,985  

Registration fees and expenses

     63,387       65,852  

Service fees (Note 2):

    

Y Class

     4,183       389  

Investor Class

     3,112       255,414  

A Class

     1,593       2,497  

C Class

     477       760  

Distribution fees (Note 2):

    

A Class

     2,655       4,161  

C Class

     3,182       5,064  

Prospectus and shareholder report expenses

     5,336       6,328  

Trustee fees

     672       6,444  

Other expenses

     4,668       8,132  
  

 

 

   

 

 

 

Total expenses

     229,692       1,132,581  
  

 

 

   

 

 

 

Net fees waived and expenses reimbursed (Note 2)

     (99,554     (143
  

 

 

   

 

 

 

Net expenses

     130,138       1,132,438  
  

 

 

   

 

 

 

Net investment income (loss)

     49,381       (54,271
  

 

 

   

 

 

 

Realized and unrealized gain (loss) from investments:

    

Net realized gain from:

    

Investments

     73,137       3,087,628  

Commission recapture (Note 1)

     —         3,092  

Futures contracts

     19,965       424,669  

Change in net unrealized appreciation (depreciation) of:

    

Investments

     2,936,525       (1,741,977

Futures contracts

     (3,753     (37,112
  

 

 

   

 

 

 

Net gain from investments

     3,025,874       1,736,300  
  

 

 

   

 

 

 

Net increase in net assets resulting from operations

   $ 3,075,255     $ 1,682,029  
  

 

 

   

 

 

 

A Foreign taxes

   $ 852     $ —    

See accompanying notes

 

 

17


American Beacon FundsSM

Statements of Changes in Net Assets

 

 

     Bahl & Gaynor Small Cap Growth              
     Fund     Holland Large Cap Growth Fund  
     Year Ended     Year Ended     Year Ended     Year Ended  
     December 31,     December 31,     December 31,     December 31,  
     2016     2015     2016     2015  

Increase (Decrease) in Net Assets:

        

Operations:

        

Net investment income (loss)

   $ 49,381     $ 39,587     $ (54,271   $ (38,964

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

     93,102       (122,070     3,515,389       8,294,079  

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

     2,932,772       (233,970     (1,779,089     (1,934,166
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     3,075,255       (316,453     1,682,029       6,320,949  
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributions to Shareholders:

        

Net investment income:

        

Institutional Class

     (18,862     (17,671     —         —    

Y Class

     (16,961     (14,934     —         —    

Investor Class

     (8,783     (2,743     —         —    

A Class

     (5,812     (3,164     —         —    

C Class

     (497     (1,728     —         —    

Net realized gain from investments:

        

Institutional Class

     —         (51,523     (646,655     (1,831,892

Y Class

     —         (43,542     (10,980     (34,744

Investor Class

     —         (7,997     (1,766,034     (8,194,511

A Class

     —         (9,223     (34,342     (136,161

C Class

     —         (5,037     (9,316     (83,671
  

 

 

   

 

 

   

 

 

   

 

 

 

Net distributions to shareholders

     (50,915     (157,562     (2,467,327     (10,280,979
  

 

 

   

 

 

   

 

 

   

 

 

 

Capital Share Transactions:

        

Proceeds from sales of shares

     11,394,900       5,715,997       13,225,448       6,242,514  

Reinvestment of dividends and distributions

     49,550       157,455       2,467,141       10,280,143  

Cost of shares redeemed

     (923,263     (2,230,601     (17,992,253     (13,612,879
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     10,521,187       3,642,851       (2,299,664     2,909,778  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net assets

     13,545,527       3,168,836       (3,084,962     (1,050,252
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets:

        

Beginning of period

     7,204,490       4,035,654       99,884,786       100,935,038  
  

 

 

   

 

 

   

 

 

   

 

 

 

End of Period*

   $ 20,750,017     $ 7,204,490     $ 96,799,824     $ 99,884,786  
  

 

 

   

 

 

   

 

 

   

 

 

 

*Includes undistributed net investment income

   $ —       $ —       $ 5,036     $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes

 

 

18


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

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, 2016, the Trust consists of twenty-six active series, two of which are presented in this filing (collectively, the “Funds” and each individually a “Fund”): the American Beacon Bahl & Gaynor Small Cap Growth Fund and American Beacon Holland Large Cap Growth 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.

Class Disclosure

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

 

Eligible Investors

   Minimum Initial
Investments
 

Institutional

  Large institutional investors - sold directly or through intermediary channels.    $ 250,000  

Y Class

  Large institutional retirement plan investors - sold directly or through intermediary channels.    $ 100,000  

Investor

  All investors using intermediary organizations such as broker-dealers or retirement plan sponsors - sold directly through intermediary channels.    $ 2,500  

A Class

  All investors who invest through intermediary organizations, such as broker-dealers or third party administrator. Retail investors who invest directly through a financial intermediary such as a broker, bank, or registered investment advisor, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”).    $ 2,500  

C Class

  Retail investors who invest directly through a financial intermediary such as a broker or employee directed benefit plans with applicable sales charges, which may include CDSC.    $ 1,000  

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

The following is a summary of significant accounting policies, consistently followed by the Funds in preparation of the financial statements. The Funds are considered investment companies and accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standard Codification Topic 946, Financial Services - Investment Companies, which is part of U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).

Security Transactions and Investment Income

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

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

 

 

19


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

Dividends to Shareholders

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

Commission Recapture

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

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.

2. Transactions with Affiliates

Management Agreement

From January 1, 2016 to May 29, 2016, the Trust and the Manager were parties to a Management Agreement that obligated the Manager to provide or oversee the provision of all investment advisory, Funds management, and securities lending services. As compensation for performing the duties required under the Management Agreement, the Manager received from the Funds an annualized fee equal to 0.05% of the average daily net assets. Effective May 29, 2016, the Funds and the Manager entered a Management Agreement that obligates the Manager to provide investment advisory, Funds management, and administrative services to the Funds. As compensation for performing the duties under the Management Agreement, the Manager receives from the Funds an annualized fee at the following annual rates as a percentage of average daily net assets: 0.35% of the first $5 billion, 0.325% of the next $5 billion, 0.30% of the next $10 billion, and 0.275% over $20 billion. The Funds also pay the unaffiliated investment advisors hired to direct investment activities of the Funds an annualized investment advisory fee based on a percentage of the Funds’ average daily assets. Management fees paid by the Funds during the year ended December 31, 2016 were as follows:

 

 

20


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

Fund

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

Bahl & Gaynor Small Cap Growth

     0.86   $ 86,130      $ 60,124      $ 26,006  

Holland Large Cap Growth..

     0.75     605,211        382,841        222,370  

Administration Agreement

From January 1, 2016 to May 29, 2016, the Manager and the Trust were parties to an Administrative Agreement which obligated the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Agreement, the Manager received 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 Investor, advisor, A and C Classes of the Funds. As compensation for performing the duties required under the Service Plans, the Manager receives 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, 0.25% of the average daily net assets of the Advisor Class, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.

Sub-Transfer Agent Fees

The Manager has entered into agreements, which include servicing agreements, with financial intermediaries that provide recordkeeping, processing, shareholder communications and other services to customers of the intermediaries that hold positions in the Institutional Class of the Funds and has agreed to compensate the intermediaries for providing these services. Intermediaries transact with the Funds primarily through the use of omnibus accounts on behalf of its customers who hold positions in the Funds. Certain services would have been provided by the Funds’ transfer agent and other service providers if the shareholders’ accounts were maintained directly by the Funds’ transfer agent. Accordingly, the Funds, pursuant to the Trust’s Board of Trustees (the “Board”) approval, have agreed to reimburse the Manager for all or a portion of the servicing fees paid to these intermediaries for the Institutional Class. The reimbursement amounts (sub-transfer agent fees) paid to the Manager are subject to a fee limit of up to 0.10% of an intermediaries average net assets in the Institutional Class on an annual basis.

 

 

21


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

For the year ended December 31, 2016, the sub-transfer agent fees, as included in “Transfer agent fees” in the Statements of Operations, were as follows:

 

Fund

   Sub-Transfer
Agent Fees
 

Bahl & Gaynor Small Cap Growth

   $ 338  

Holland Large Cap Growth

     324  

As of December 31, 2016, the Funds owe the Manager the following reimbursement of sub-transfer agent fees, as included in “Transfer agent fees payable” in the Statements of Assets and Liabilities.

 

     Reimbursement of  

Fund

   Sub-Transfer Agent Fees  

Bahl & Gaynor Small Cap Growth

   $ 106  

Holland Large Cap Growth

     129  

Investment in Affiliated Funds

The Funds may invest in the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”). The Funds and the USG Select Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the USG Select Fund and receives management and administration fees totaling 0.10% of its average daily net assets of the USG Select Fund. During the year ended December 31, 2016, the Manager earned $385 and $3,865, respectively, from the Bahl & Gaynor Small Cap Growth and Holland Large Cap Growth Funds’ direct investment in the USG Select Funds.

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, 2016, the Funds did not utilize the credit facility.

Expense Reimbursement Plan

The Manager contractually agreed to reimburse the Funds to the extent that total annual fund operating expenses exceeded the Funds’ expense caps. For the year ended December 31, 2016, the Manager waived or reimbursed expenses as follows:

 

          Expense Cap                      

Fund

   Class    1/1/16 -
4/30/16
    5/1/16 -
12/31/16
    Reimbursed
Expenses
     (Recovered)
Expenses
     Expiration  

Bahl & Gaynor Small Cap Growth

   Institutional      0.98     0.98   $ 41,080      $ —          2019  

Bahl & Gaynor Small Cap Growth

   Y      1.08     1.08     37,716        —          2019  

Bahl & Gaynor Small Cap Growth

   Investor      1.36     1.36     9,224        —          2019  

Bahl & Gaynor Small Cap Growth

   A      1.38     1.38     8,494        —          2019  

Bahl & Gaynor Small Cap Growth

   C      2.13     2.13     3,040        —          2019  

Holland Large Cap Growth

   C      2.04     2.04     143        —          2019  

Of these amounts, $12,182 and $28 are disclosed as a receivable from the Manager at December 31, 2016 for the Bahl & Gaynor Small Cap Growth Fund and Holland Large Cap Growth Fund, respectively. 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 reimburseable expenses listed above will expire in 2019. The Funds did not record a liability for potential reimbursements due to the current assessment that reimbursements are unlikely.

 

 

22


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

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  

Bahl & Gaynor Small Cap Growth

     —          123,829        —          2018  

Holland Large Cap Growth

     —          156        —          2017  

Holland Large Cap Growth

     299        —          —          2018  

Sales Commissions

The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. During the year ended December 31, 2016, Foreside collected $5,805 and $331, for Bahl & Gaynor Small Cap Growth and Holland Large 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 Funds’ Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended December 31, 2016, no CDSC fees were collected for the Class A Shares of the Funds.

A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Funds’ Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended December 31, 2016, CDSC fees of $205 were collected for the Class C Class Shares of the Bahl & Gaynor Small Cap Growth Fund.

Trustee Fees and Expenses

As compensation for their service to the Trust and the American Beacon Select Funds Trust, each Trustee receives an annual retainer of $120,000, plus $5,000 for each Board meeting attended in person or via teleconference, $2,500 for attendance by Committee members at meetings of the Audit Committee and the Investment Committee, and $1,500 for attendance by Committee members at meetings of the Nominating and Governance Committee, plus reimbursement of reasonable expenses incurred in attending Board meetings, Committee meetings, and relevant educational seminars. The Trustees also may be compensated for attendance at special Board and/or Committee meetings from time to time. The Board Chairman receives an additional annual retainer of $50,000 as well as a single $5,000 fee each quarter for his attendance at the committee meetings. The chairpersons of the Audit Committee and the Investment Committee each receive an additional annual retainer of $25,000 and the Chairman of the Nominating and Governance Committee receives an additional annual retainer of $10,000. These expenses are allocated on a prorated basis to each Fund of the Trust according to its respective net assets.

3. Security Valuation and Fair Value Measurements

Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally at 4:00 p.m. Eastern Time, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

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

 

 

23


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

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

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to deposit with 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 Valuation Committee, established by the Board.

Valuation Inputs

Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

  Level 1 - Quoted prices in active markets for identical securities.

 

  Level 2 - Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Fixed-income securities are considered Level 2 as they are valued using observable inputs.

 

  Level 3 - Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment.

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

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. As of December 31, 2016, the investments were classified as described below:

 

Bahl & Gaynor Small Cap Growth Fund(1)

   Level 1      Level 2      Level 3      Total  

Common Stock

   $ 20,340,208      $ —        $ —        $ 20,340,208  

Short-Term Investments - Money Market Funds

     628,203        —          —          628,203  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 20,968,411      $ —        $ —        $ 20,968,411  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments - Liabilities

           

Futures Contracts

   $ (2,785    $ —          —        $ (2,785
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Other Financial Instruments

   $ (2,785    $ —        $ —        $ (2,785
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

24


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

Holland Large Cap Growth Fund(1)

   Level 1      Level 2      Level 3      Total  

Common Stock

   $ 94,144,868      $ —        $ —        $ 94,144,868  

Short-Term Investments - Money Market Funds

     2,600,481        —          —          2,600,481  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

   $ 96,745,349      $ —        $ —        $ 96,745,349  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Derivative Instruments - Liabilities

           

Futures Contracts

   $ (16,479    $ —          —        $ (16,479
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Other Financial Instruments

   $ (16,479    $ —        $ —        $ (16,479
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Refer to the Schedule of Investments for industry information.

U.S. GAAP requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels the Funds’ assets and liabilities. During the year ended December 31, 2016, there were no transfers between levels.

4. Securities and Other Investments

American Depositary Receipts (“ADRs”)

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

Real Estate Investment Trusts

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

Other Investment Company Securities and Other Exchange-traded Products

The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, exchange-traded Funds, 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 s Fees and Expenses and are included in the Fees and Expenses Table for the Funds in

 

 

25


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.

5. Financial Derivative Instruments

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

Futures Contracts

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

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

For the year ended December 31, 2016, 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 Futures Contracts Outstanding

 

Fund

   Year ended December 31, 2016  

Bahl & Gaynor Small Cap Growth

     3  

Holland Large Cap Growth

     30  

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure(1)(2):

Fair Values of financial derivative instruments not accounted for as hedging instruments as of December 31, 2016:

 

Statement of Assets and Liabilities:

   Derivatives      Bahl & Gaynor
Small Cap
Growth Fund
     Holland Large
Cap Growth
Fund
 

Payable for variation margin from open futures contracts (2)

     Equity Contracts      $ (2,785    $ (16,479

 

 

 

26


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

The effect financial derivative instruments not accounted for as hedging instruments during the year ended December 31, 2016:

 

Statement of Operations:

   Derivatives      Bahl & Gaynor
Small Cap
Growth Fund
     Holland Large
Cap Growth
Fund
 

Net realized gain (loss) from futures contracts

     Equity Contracts      $ 19,965      $ 424,669  

Change in net unrealized appreciation (depreciation) of futures contracts

     Equity Contracts        (3,753      (37,112

 

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

6. Principal Risks

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

Equity Investment Risk

Equity securities are subject to market risk. The Funds’ investments in equity securities may include common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, REITs, depositary receipts, and U.S. dollar-denominated foreign stocks traded on U.S. exchanges. Such investments may expose the Funds to additional risk. The value of a company’s common stock may fall as a result of factors affecting the company, companies in the same industry or sector, or the financial markets overall. Common stock generally is subordinate to preferred stock upon the liquidation or bankruptcy of the issuing company. Preferred stocks and convertible securities are sensitive to movements in interest rates. Preferred stocks may be less liquid than common stocks and, unlike common stocks, participation in the growth of an issuer may be limited. Distributions on preferred stocks generally are payable at the discretion of an issuer and after required payments to bond holders. Convertible securities are subject to the risk that the credit standing of the issuer may have an effect on the convertible securities’ investment value. Investments in REITs are subject to the risks associated with investing in the real estate industry such as adverse developments affecting the real estate industry and real property values. Depositary receipts and U.S. dollar-denominated foreign stocks traded on U.S. exchanges are subject to certain of the risks associated with investing directly in foreign securities, including, but not limited to, currency fluctuations and political and financial instability in the home country of a particular depositary receipt or foreign stock.

Dividend Risk

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

Foreign Investing Risk

Non U.S. investments carry potential risks not associated with U.S. investments. Such risks include, but are not limited to: (1) currency exchange rate fluctuations,(2) political and financial instability, (3) less liquidity and greater volatility, (4) lack of uniform accounting, auditing and financial reporting standards; (5) increased price volatility; (6) less government regulation and supervision of foreign stock exchanges, brokers and listed companies; and (7) delays in transaction settlement in some foreign markets.

Futures Contract Risk

Futures contracts are derivative investments pursuant to a contract with a counterparty to pay a fixed price for an agreed amount of securities or other underlying assets at an agreed date. The use of such derivative

 

 

 

27


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

instruments may expose the Funds to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. Futures contracts may experience dramatic price changes (losses) and imperfect correlation between the price of the contract and the underlying security or index which will increase the volatility of the Funds and may involve a small investment of cash (the amount of initial and variation margin) relative to the magnitude of the risk assumed (the potential increase or decrease in the price of the futures contract).

Growth Companies Risk

Growth companies are expected to increase their earnings at a certain rate. When these expectations are not met, the prices of these stocks may go down, even if earnings showed an absolute increase. Growth company stocks may lack the dividend yield that can cushion stock prices in market downturns.

Investment Risk

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

Issuer Risk

The value of, and/or the return generated by, a security may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services, as well as the historical and prospective earnings of the issuer and the value of its assets.

Large Capitalization Companies Risk

The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.

Small Capitalization Companies Risk

Investing in the securities of small capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. Since smaller companies may have limited operating history, product lines, and financial resources, the securities of these companies may lack sufficient market liquidity, and they can be particularly sensitive to expected changes in interest rates, borrowing costs and earnings.

Market Risk

Since the financial crisis that started in 2008, the U.S. and many foreign economies continue to experience its after-effects, which have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact issuers in a different country or region. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations. In addition, political events within the U.S. and abroad may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. High public debt in the U.S. and other countries creates ongoing systemic and market risks and policymaking uncertainty. Because the impact on the markets has been widespread, it may be difficult to identify both risks and opportunities using past models of the interplay of market forces, or to predict the duration of these market conditions. Interest rates have been unusually low in recent years in the U.S. and abroad. Because there is little precedent for this situation, it

 

 

28


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

is difficult to predict the impact of a rate increase on various markets. In addition, there is a risk that the prices of goods and services in the U.S. and many foreign economies may decline over time, known as deflation (the opposite of inflation). Deflation may have an adverse effect on stock prices and creditworthiness and may make defaults on debt more likely.

Model and Data Risk

Models and data are used to screen potential investments for the Funds. When models or data prove to be incorrect or incomplete, any decisions made in reliance thereon expose the Funds to potential risks. Some of the models used by the sub-advisor are predictive in nature. The use of predictive models has inherent risks. Because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may depend heavily on the accuracy and reliability of the supplied historical data.

Other Investment Companies Risk

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

Offsetting Assets and Liabilities

The Funds are parties to enforceable master netting agreements between brokers and counterparties, which provides for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements 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 December 31, 2016.

Bahl & Gaynor Small Cap Growth Fund

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2016:

 

Description

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

Futures contracts(1)

   $ (2,785    $ —        $ (2,785

Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty as of December 31, 2016:

 

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

Counterparty

      Financial
Instruments
     Cash Collateral
Received
     Net Amount  

Deutsche Bank AG(1)

   $ (2,785    $ —        $ —        $ (2,785

 

 

 

29


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

Holland Large Cap Growth Fund

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2016:

 

Description

   Gross Amounts
of Recognized
Liabilities
     Gross Amounts
Offset in the

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

Futures contracts(1)

   $ (16,479    $ —        $ (16,479

Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty as of December 31, 2016:

 

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

Counterparty

      Financial
Instruments
     Cash Collateral
Received
     Net Amount  

Goldman Sachs & Co.(1)

   $ (16,479    $ —        $ —        $ (16,479

 

(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.

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, 2016 remain subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.

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

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

 

 

30


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

The tax character of distributions paid are as follows:

 

     Bahl & Gaynor Small Cap Growth Fund      Holland Large Cap Growth Fund  
     Year Ended
December 31,
2016
     Year Ended
December 31,
2015
     Year Ended
December 31,
2016
     Year Ended
December 31,
2015
 

Distributions paid from:

           

Ordinary Income*

           

Institutional Class

   $ 18,188      $ 21,120      $ —        $ —    

Y Class

     16,392        17,850        —          —    

Investor Class

     8,679        3,279        —          —    

A Class

     5,691        3,780        —          —    

C Class

     431        2,065        —          —    

Long-term capital gains

           —          —    

Institutional Class

     674        44,502        646,655        1,831,892  

Y Class

     569        37,608        10,980        34,744  

Investor Class

     104        6,907        1,766,034        8,194,511  

A Class

     121        7,966        34,342        136,161  

C Class

     66        4,351        9,316        83,671  

Return of capital

           —          —    

Institutional Class

     —          3,572        —          —    

Y Class

     —          3,019        —          —    

Investor Class

     —          554        —          —    

A Class

     —          640        —          —    

C Class

     —          349        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions paid

   $ 50,915      $ 157,562      $ 2,467,327      $ 10,280,979  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

As of December 31, 2016, the components of distributable earnings (deficits) on a tax basis are as follows:

 

     Bahl & Gaynor
Small Cap Growth Fund
     Holland
Large Cap Growth Fund
 

Cost basis of investments for federal income tax purposes

   $ 18,178,399      $ 71,832,449  

Unrealized appreciation

     2,989,707        27,056,711  

Unrealized depreciation

     (199,695      (2,143,811
  

 

 

    

 

 

 

Net unrealized appreciation (depreciation)

     2,790,012        24,912,900  

Undistributed ordinary income

     —          —    

Undistributed long-term capital gains

     7,213        686,129  

Accumulated capital and other losses

     —          —    

Other temporary differences

     —          —    
  

 

 

    

 

 

 

Distributable earnings (deficits)

   $ 2,797,225      $ 25,599,029  
  

 

 

    

 

 

 

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

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

Accordingly, the following amounts represent current year permanent differences derived from non-utilization of net operating losses as of December 31, 2016:

 

 

31


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

 

     Bahl & Gaynor
Small Cap Growth Fund
     Holland Large Cap
Growth Fund
 

Paid-in-capital

   $ —        $ (63,299

Undistributed (overdistribution of) net investment income

     1,534        59,307  

Accumulated net realized gain (loss)

     (1,535      3,993  

Unrealized appreciation (depreciation) of investments in futures contracts

     1        (1

Under the Regulated Investment Company Modernization Act of 2010 (the “RICMOD”), net capital losses recognized by the Fund in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses. For the year ended December 31, 2016, the Funds did not have capital loss carryforwards.

8. Investment Transactions

The aggregate cost of purchases and proceeds from sales and maturities of long-term investments, excluding short-term obligations, for the year ended December 31, 2016 were as follows:

 

     Bahl & Gaynor
Small Cap Growth Fund
    Holland
Large Cap Growth Fund
 

Purchases (excluding U.S. government securities)

   $ 12,892,557     $ 31,694,220  

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

     2,571,674       34,288,962  

A summary of the Funds’ direct transactions in the USG Select Fund for the year ended December 31, 2016 are as follows:

 

Fund

   December31,
2015
Shares/Fair
Value
     Purchases      Sales      December 31,
2016

Shares/Fair
Value
     Dividend
Income
 

Bahl & Gaynor Small Cap Growth

   $ —        $ 13,628,249      $ 13,000,046      $ 628,203      $ 993  

Holland Large Cap Growth

     —          40,569,376        37,968,895        2,600,481        8,894  

9. Capital Share Transactions

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

 

     Institutional Class  
     Year Ended December 31,  
     2016      2015  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     279,042      $ 3,182,952        26,744      $ 291,372  

Reinvestment of dividends

     1,466        18,862        6,810        69,193  

Shares redeemed

     (5,890      (66,509      (5,570      (59,399
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     274,618      $ 3,135,305        27,984      $ 301,166  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Y Class  
     Year Ended December 31,  
     2016      2015  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     290,672      $ 3,267,497        254,524      $ 2,732,833  

Reinvestment of dividends

     1,225        15,718        5,761        58,476  

Shares redeemed

     (20,725      (219,124      (29,466      (313,981
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     271,172      $ 3,064,091        230,819      $ 2,477,328  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

 

32


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

     Investor Class  
     Year Ended December 31,  
     2016      2015  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     251,437      $ 2,931,223        175,925      $ 1,814,132  

Reinvestment of dividends

     686        8,739        1,052        10,635  

Shares redeemed

     (17,200      (202,363      (150,111      (1,481,869
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     234,923      $ 2,737,599        26,866      $ 342,898  
  

 

 

    

 

 

    

 

 

    

 

 

 
     A Class  
     Year Ended December 31,  
     2016      2015  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     169,878      $ 1,935,789        63,916      $ 685,792  

Reinvestment of dividends

     454        5,785        1,226        12,386  

Shares redeemed

     (31,702      (391,741      (35,498      (363,673
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     138,630      $ 1,549,833        29,644      $ 334,505  
  

 

 

    

 

 

    

 

 

    

 

 

 
     C Class  
     Year Ended December 31,  
     2016      2015  

Bahl & Gaynor Small Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     6,362      $ 77,439        18,009      $ 191,868  

Reinvestment of dividends

     36        446        677        6,765  

Shares redeemed

     (4,090      (43,526      (1,173      (11,679
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     2,308      $ 34,359        17,513      $ 186,954  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Institutional Class  
     Year Ended December 31,  
     2016      2015  

Holland Large Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     375,247      $ 9,486,080        40,504      $ 1,045,131  

Reinvestment of dividends

     25,815        646,655        73,956        1,831,892  

Shares redeemed

     (107,464      (2,632,755      (63,945      (1,773,828
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     293,598      $ 7,499,980        50,515      $ 1,103,195  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Y Class  
     Year Ended December 31,  
     2016      2015  

Holland Large Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     7,193      $ 178,500        10,179      $ 281,495  

Reinvestment of dividends

     441        10,980        1,411        34,744  

Shares redeemed

     (4,667      (112,646      (942      (24,074
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase in shares outstanding

     2,967      $ 76,834        10,648      $ 292,165  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Investor Class  
     Year Ended December 31,  
     2016      2015  

Holland Large Cap Growth Fund

   Shares      Amount      Shares      Amount  

Shares sold

     114,264      $ 2,666,451        157,069      $ 4,211,087  

Reinvestment of dividends

     72,016        1,765,848        336,496        8,193,675  

Shares redeemed

     (578,060      (13,930,498      (429,291      (11,433,171
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in shares outstanding

     (391,780    $ (9,498,199      64,274      $ 971,591  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

 

33


American Beacon FundsSM

Notes to Financial Statements

December 31, 2016

 

 

     A Class  
     Year Ended December 31,  
     2016     2015  

Holland Large Cap Growth Fund

   Shares     Amount     Shares     Amount  

Shares sold

     38,168     $ 869,417       16,926     $ 454,849  

Reinvestment of dividends

     1,414       34,342       5,640       136,161  

Shares redeemed

     (36,839     (885,200     (9,823     (260,924
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in shares outstanding

     2,743     $ 18,559       12,743     $ 330,086  
  

 

 

   

 

 

   

 

 

   

 

 

 
     C Class  
     Year Ended December 31,  
     2016     2015  

Holland Large Cap Growth Fund

   Shares     Amount     Shares     Amount  

Shares sold

     1,090     $ 25,000       9,760     $ 249,952  

Reinvestment of dividends

     401       9,316       3,596       83,671  

Shares redeemed

     (19,093     (431,154     (4,767     (120,882
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in shares outstanding

     (17,602   $ (396,838     8,589     $ 212,741  
  

 

 

   

 

 

   

 

 

   

 

 

 

10. Subsequent Events

Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Funds financial statements through this date.

 

 

34


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
     Year Ended December 31,     July 15A to
December 31,
2014
 
     2016     2015    

Net asset value, beginning of period

   $ 10.17     $ 10.71     $ 10.00  
  

 

 

   

 

 

   

 

 

 

Income from investment operations:

      

Net investment income

     0.03       0.08       0.02  

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

     2.60       (0.39     0.71  
  

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     2.63       (0.31     0.73  
  

 

 

   

 

 

   

 

 

 

Less distributions:

      

Dividends from net investment income

     (0.03     (0.06     (0.02

Distributions from net realized gains

     —         (0.16     —    

Distributions from return of capital

     —         (0.01 )F      —    
  

 

 

   

 

 

   

 

 

 

Total distributions

     (0.03     (0.23     (0.02
  

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 12.77     $ 10.17     $ 10.71  
  

 

 

   

 

 

   

 

 

 

Total return B

     25.88     (2.96 )%      7.28 %C 
  

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

      

Net assets, end of period

   $ 7,563,970     $ 3,231,461     $ 3,102,721  

Ratios to average net assets:

      

Expenses, before reimbursements

     1.85     3.04     8.98 %D 

Expenses, net of reimbursements

     0.98     0.98     0.98 %D 

Net investment (loss), before expense reimbursements

     (0.30 )%      (1.33 )%      (7.51 )%D 

Net investment income, net of reimbursements

     0.57     0.72     0.49 %D 

Portfolio turnover rate

     23     54     12 % E 
     Y Class  
     Year Ended December 31,     July 15A to
December 31,
2014
 
     2016     2015    

Net asset value, beginning of period

   $ 10.16     $ 10.71     $ 10.00  
  

 

 

   

 

 

   

 

 

 

Income from investment operations:

      

Net investment income

     0.04       0.06       0.01  

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

     2.58       (0.38     0.72  
  

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     2.62       (0.32     0.73  
  

 

 

   

 

 

   

 

 

 

Less distributions:

      

Dividends from net investment income

     (0.03     (0.06     (0.02

Distributions from net realized gains

     —         (0.16     —    

Distributions from return of capital

     —         (0.01 )F      —    
  

 

 

   

 

 

   

 

 

 

Total distributions

     (0.03     (0.23     (0.02
  

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 12.75     $ 10.16     $ 10.71  
  

 

 

   

 

 

   

 

 

 

Total return B

     25.80     (3.05 )%      7.28 %C 
  

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

      

Net assets, end of period

   $ 6,856,954     $ 2,711,465     $ 387,622  

Ratios to average net assets:

      

Expenses, before reimbursements

     1.98     2.76     11.71 %D 

Expenses, net of reimbursements

     1.08     1.08     1.08 %D 

Net investment (loss), before expense reimbursements

     (0.43 )%      (0.98 )%      (10.06 )%D 

Net investment income, net of reimbursements

     0.47     0.70     0.57 %D 

Portfolio turnover rate

     23     54     12 %E 

 

A  Commencement of operations.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Not annualized.
D  Annualized.
E  Portfolio turnover rate is for the period from July 15, 2014 to December 31, 2014, and is not annualized.
F  Amount represents less than $0.01 per share.

 

 

35


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Investor Class  
     Year Ended December 31,     July 15A to
December 31,
2014
 
     2016     2015    

Net asset value, beginning of period

   $ 10.12     $ 10.69     $ 10.00  
  

 

 

   

 

 

   

 

 

 

Income from investment operations:

      

Net investment income

     0.03       0.05       0.01  

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

     2.53       (0.39     0.70  
  

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     2.56       (0.34     0.71  
  

 

 

   

 

 

   

 

 

 

Less distributions:

      

Dividends from net investment income

     (0.03     (0.06     (0.02

Distributions from net realized gains

     —         (0.16     —    

Distributions from return of capital

     —         (0.01 )F      —    
  

 

 

   

 

 

   

 

 

 

Total distributions

     (0.03     (0.23     (0.02
  

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 12.65     $ 10.12     $ 10.69  
  

 

 

   

 

 

   

 

 

 

Total return B

     25.31     (3.25 )%      7.08 %C 
  

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

      

Net assets, end of period

   $ 3,595,277     $ 498,128     $ 239,138  

Ratios to average net assets:

      

Expenses, before reimbursements

     2.09     3.19     12.62 %D 

Expenses, net of reimbursements

     1.36     1.36     1.36 %D 

Net investment (loss), before expense reimbursements

     (0.51 )%      (1.47 )%      (11.12 )%D 

Net investment income, net of reimbursements

     0.23     0.35     0.14 %D 

Portfolio turnover rate

     23     54     12 %E 
     A Class  
     Year Ended December 31,     July 15A to
December 31,
2014
 
     2016     2015    

Net asset value, beginning of period

   $ 10.11     $ 10.69     $ 10.00  
  

 

 

   

 

 

   

 

 

 

Income from investment operations:

      

Net investment income

     0.04       0.03       0.00  

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

     2.52       (0.38     0.71  
  

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     2.56       (0.35     0.71  
  

 

 

   

 

 

   

 

 

 

Less distributions:

      

Dividends from net investment income

     (0.03     (0.06     (0.02

Distributions from net realized gains

     —         (0.16     —    

Distributions from return of capital

     —         (0.01 )F      —    
  

 

 

   

 

 

   

 

 

 

Total distributions

     (0.03     (0.23     (0.02
  

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 12.64     $ 10.11     $ 10.69  
  

 

 

   

 

 

   

 

 

 

Total return B

     25.34     (3.34 )%      7.08 %C 
  

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

      

Net assets, end of period

   $ 2,321,426     $ 454,614     $ 163,704  

Ratios to average net assets:

      

Expenses, before reimbursements

     2.18     2.88     13.84 %D 

Expenses, net of reimbursements

     1.38     1.38     1.38 %D 

Net investment (loss), before expense reimbursements

     (0.61 )%      (1.08 )%      (12.35 )%D 

Net investment income, net of reimbursements

     0.18     0.41     0.10 %D 

Portfolio turnover rate

     23     54     12 %E 

 

A  Commencement of operations.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Not annualized.
D  Annualized.
E  Portfolio turnover rate is for the period from July 15, 2014 to December 31, 2014, and is not annualized.
F  Amount represents less than $0.01 per share.

 

 

36


American Beacon Bahl & Gaynor Small Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     C Class  
     Year Ended December 31,     July 15A to
December 31,
2014
 
     2016     2015    

Net asset value, beginning of period

   $ 10.00     $ 10.65     $ 10.00  
  

 

 

   

 

 

   

 

 

 

Income from investment operations:

      

Net investment (loss)

     (0.05     (0.01     (0.02

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

     2.49       (0.41     0.69  
  

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     2.44       (0.42     0.67  
  

 

 

   

 

 

   

 

 

 

Less distributions:

      

Dividends from net investment income

     (0.02     (0.06     (0.02

Distributions from net realized gains

     —         (0.16     —    

Distributions from return of capital

     —         (0.01 )F      —    
  

 

 

   

 

 

   

 

 

 

Total distributions

     (0.02     (0.23     (0.02
  

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 12.42     $ 10.00     $ 10.65  
  

 

 

   

 

 

   

 

 

 

Total return B

     24.35     (4.01 )%      6.68 %C 
  

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

      

Net assets, end of period

   $ 412,390     $ 308,822     $ 142,469  

Ratios to average net assets:

      

Expenses, before reimbursements

     3.09     3.84     13.72 %D 

Expenses, net of reimbursements

     2.13     2.13     2.13 %D 

Net investment (loss), before expense reimbursements

     (1.56 )%      (2.09 )%      (12.23 )%D 

Net investment (loss), net of reimbursements

     (0.60 )%      (0.38 )%      (0.64 )%D 

Portfolio turnover rate

     23     54     12 %E 

 

A  Commencement of operations.
B  Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with U.S. GAAP and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.
C  Not annualized.
D  Annualized.
E  Portfolio turnover rate is for the period from July 15, 2014 to December 31, 2014, and is not annualized.
F  Amount represents less than $0.01 per share.

 

 

37


American Beacon Holland Large Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Institutional Class  
     Year Ended December 31,  
     2016     2015     2014     2013     2012  

Net asset value, beginning of period

   $ 24.80     $ 25.88     $ 26.57     $ 21.60     $ 20.30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income

     0.02       0.06       0.03       0.02       0.09  

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

     0.56       1.67       1.94       7.02       2.47  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     0.58       1.73       1.97       7.04       2.56  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     —         —         —         (0.01     (0.08

Distributions from net realized gains

     (0.64     (2.81     (2.66     (2.06     (1.18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.64     (2.81     (2.66     (2.07     (1.26
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 24.74     $ 24.80     $ 25.88     $ 26.57     $ 21.60  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     2.29     6.70     7.31     32.73     12.57
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period

   $ 25,818,864     $ 18,600,679     $ 18,102,557     $ 16,292,016     $ 1,619,305  

Ratios to average net assets:

          

Expenses, before reimbursements or recoupments

     0.88     0.88     0.89     0.86     1.32

Expenses, net of reimbursements or recoupments

     0.88     0.89     0.89     0.89     0.96

Net investment income, before expense reimbursements or recoupments

     0.25     0.26     0.14     0.24     0.07

Net investment income, net of reimbursements or recoupments

     0.25     0.25     0.13     0.21     0.43

Portfolio turnover rate

                 34                 24                 27                 29                 18

 

    Y Class  
    Year Ended December 31,     March 23B to  
                            December 31,  
    2016     2015     2014     2013     2012  

Net asset value, beginning of period

  $ 24.66     $ 25.79     $ 26.53     $ 21.59     $ 23.00  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

         

Net investment income (loss)

    0.03       (0.02     (0.02     0.02       0.09  

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

    0.52       1.70       1.94       6.98       (0.26
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

    0.55       1.68       1.92       7.00       (0.17
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

         

Dividends from net investment income

    —         —         —         0.00       (0.06

Distributions from net realized gains

    (0.64     (2.81     (2.66     (2.06     (1.18
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

    (0.64     (2.81     (2.66     (2.06     (1.24
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

  $ 24.57     $ 24.66     $ 25.79     $ 26.53     $ 21.59  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

    2.18     6.53     7.13     32.59     (0.79 )%C 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

         

Net assets, end of period

  $ 405,410     $ 333,682     $ 74,361     $ 78,575     $ 23,113  

Ratios to average net assets:

         

Expenses, before reimbursements or recoupments

    0.98     1.08     1.11     0.97     10.18 %D 

Expenses, net of reimbursements or recoupments

    0.98     1.02     1.08     0.99     0.98 %D 

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

    0.14     0.00     (0.10 )%      0.15     (8.77 )%D 

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

    0.14     0.06     (0.06 )%      0.12     0.43 %D 

Portfolio turnover rate

                34                 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, and is not annualized.

 

 

38


American Beacon Holland Large Cap Growth FundSM

Financial Highlights

(For a share outstanding throughout the period)

 

 

     Investor Class  
     Year Ended December 31,  
     2016     2015     2014     2013     2012  

Net asset value, beginning of period

   $ 24.38     $ 25.57     $ 26.36     $ 21.52     $ 20.24  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     (0.05     (0.02     (0.04     (0.05     0.02  

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

     0.52       1.64       1.91       6.95       2.45  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     0.47       1.62       1.87       6.90       2.47  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     —         —         —         0.00       (0.01

Distributions from net realized gains

     (0.64     (2.81     (2.66     (2.06     (1.18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.64     (2.81     (2.66     (2.06     (1.19
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 24.21     $ 24.38     $ 25.57     $ 26.36     $ 21.52  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     1.87     6.35     6.99     32.21     12.18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period

   $ 68,905,910     $ 78,921,674     $ 81,153,971     $ 77,426,294     $ 66,567,656  

Ratios to average net assets:

          

Expenses, before reimbursements or recoupments

     1.26     1.24     1.15     1.26     1.44

Expenses, net of reimbursements or recoupments

     1.26     1.24     1.21     1.27     1.29

Net investment (loss), before expense reimbursements or recoupments

     (0.14 )%      (0.10 )%      (0.13 )%      (0.17 )%      (0.08 )% 

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

     (0.14 )%      (0.10 )%      (0.19 )%      (0.18 )%      0.07

Portfolio turnover rate

                     34                     24                     27                     29                     18

 

     A Class  
     Year Ended December 31,  
     2016     2015     2014     2013     2012  

Net asset value, beginning of period

   $ 24.17     $ 25.39     $ 26.22     $ 21.43     $ 20.23  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     (0.04     0.00       (0.08     (0.03     0.03  

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

     0.50       1.59       1.91       6.88       2.41  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     0.46       1.59       1.83       6.85       2.44  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     —         —         —         0.00       (0.06

Distributions from net realized gains

     (0.64     (2.81     (2.66     (2.06     (1.18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.64     (2.81     (2.66     (2.06     (1.24
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 23.99     $ 24.17     $ 25.39     $ 26.22     $ 21.43  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return A

     1.85     6.28     6.88     32.11     11.99
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period

   $ 1,327,798     $ 1,271,340     $ 1,011,971     $ 1,028,434     $ 466,796  

Ratios to average net assets:

          

Expenses, before reimbursements or recoupments

     1.30     1.29     1.35     1.40     2.73

Expenses, net of reimbursements or recoupments

     1.30     1.29     1.34     1.39     1.38

Net investment (loss), before expense reimbursements or recoupments

     (0.16 )%      (0.15 )%      (0.32 )%      (0.28 )%      (0.97 )% 

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

     (0.16 )%      (0.15 )%      (0.31 )%      (0.27 )%      0.37

Portfolio turnover rate

                     34                     24                     27                     29                     18

 

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.

 

 

39


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
December 31,
 
     2016     2015     2014     2013     2012  

Net asset value, beginning of period

   $ 23.30     $ 24.75     $ 25.82     $ 21.29     $ 22.90  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from investment operations:

          

Net investment income (loss)

     (1.04     (0.04     (0.36     (0.17     0.01  

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

     1.31       1.40       1.95       6.76       (0.38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) from investment operations

     0.27       1.36       1.59       6.59       (0.37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less distributions:

          

Dividends from net investment income

     —         —         —         0.00       (0.06

Distributions from net realized gains

     (0.64     (2.81     (2.66     (2.06     (1.18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total distributions

     (0.64     (2.81     (2.66     (2.06     (1.24
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

   $ 22.93     $ 23.30     $ 24.75     $ 25.82     $ 21.29  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total return B

     1.10     5.51     6.05     31.10     (1.65 )%C 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios and supplemental data:

          

Net assets, end of period

   $ 341,842     $ 757,411     $ 592,178     $ 702,642     $ 281,415  

Ratios to average net assets:

          

Expenses, before reimbursements or recoupments

     2.07     2.05     2.10     2.15     6.17 %D 

Expenses, net of reimbursements or recoupments

     2.04     2.04     2.09     2.14     2.12 %D 

Net investment (loss), before expense reimbursements or recoupments

     (0.95 )%      (0.91 )%      (1.07 )%      (1.04 )%      (3.85 )%D 

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

     (0.92 )%      (0.90 )%      (1.07 )%      (1.03 )%      0.20 %D 

Portfolio turnover rate

                 34                 24                 27                 29                 18 %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 March 23, 2012 to December 31, 2012, and is not annualized.

 

 

40


American Beacon FundsSM

Federal Tax Information

December 31, 2016 (Unaudited)

 

 

Certain tax information regarding the Funds are required to be provided to shareholders based upon the Funds’ income and distribution for the taxable year ended December 31, 2016. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2016.

The Funds designated the following items with regard to distributions paid during the year ended December 31, 2016. 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 Fund
    Holland Large
Cap Growth Fund
 

Corporate Dividends Received Deduction

     91.98     93.53

Qualified Dividend Income

     100.00     0.00

The Bahl & Gaynor Small Cap Growth Fund designated $1,534 as long-term capital gains distributions and the Holland Large Cap Growth Fund designated $2,467,327 as long-term capital gains distributions for the year ended December 31, 2016.

Shareholders received notification in January 2017 of the appropriate tax information necessary to prepare their 2016 income tax return.

 

 

41


American Beacon FundsSM

Additional Fund Information

December 31, 2016 (Unaudited)

 

 

American Beacon Advisors, Inc. (“American Beacon”) is a wholly-owned subsidiary of Astro AB Borrower, Inc. (“Borrower”). On January 31, 2017, the Board of Borrower and its sole shareholder, Astro AB Acquisition (“Acquisition”), approved an amendment to Borrower’s Certificate of Incorporation to change the name of Borrower to Resolute Investment Managers, Inc. Simultaneously with the name change of Borrowe