UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09018
AMERICAN BEACON MILEAGE FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
WILLIAM F. QUINN, PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant's telephone number, including area code: (817) 967-3509
Date of fiscal year end: December 31, 2005
Date of reporting period: June 30, 2005
ITEM 1. REPORT TO STOCKHOLDERS.
================================================================================
G U I D A N C E | V I S I O N | E X P E R I E N C E
[LOGO OF AMERICAN BEACON MILEAGE FUNDS] AMERICAN BEACON
MILEAGE FUNDS(SM)
SEMI-ANNUAL REPORT
[GRAPHIC OF AMERICAN BEACON MILEAGE FUNDS]
June 30, 2005
MONEY MARKET MILEAGE FUND
U.S. GOVERNMENT MONEY MARKET MILEAGE FUND
MUNICIPAL MONEY MARKET MILEAGE FUND
Formerly known as the
American AAdvantage Mileage Funds
================================================================================
ABOUT AMERICAN BEACON ADVISORS
- --------------------------------------------------------------------------------
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
CONTENTS
- --------------------------------------------------------------------------------
President's Message ......................................... 1
Financial Highlights
Money Market Mileage Fund ................................ 20
U.S. Government Money Market Mileage Fund ................ 22
Municipal Money Market Mileage Fund ..................... 24
Schedule of Investments
Money Market Portfolio ................................... 26
U.S. Government Money Market Portfolio ................... 28
Municipal Money Market Portfolio ......................... 29
Additional Information ...................................... Inside Back Cover
------------------------------------------------------------------------
Any opinions herein, including forecasts, reflect our judgement 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 Mileage Funds June 30, 2005
[GRAPHIC OF AMERICAN BEACON ADVISORS]
FELLOW SHAREHOLDERS:
Enclosed please find the Semi-Annual Report for the American Beacon Mileage
Funds for the six months ended June 30, 2005. During this time, the American
Beacon Mileage Funds outpaced their respective peer groups.
The year started with a short-term interest rate of 2.25%; however, the
Federal Reserve Board subsequently raised the rate four times with increases of
25 basis points each time to end the six-month period at 3.25%. These widely
expected moves were a continuation of the Fed's stated process of removing
monetary policy accommodation at a "measured" pace. The Federal Open Market
Committee ("FOMC") has now boosted the target rate a quarter percentage point at
each of their last nine meetings. The FOMC stated that, even after these
actions, "the stance of monetary policy remains accommodative and, coupled with
robust underlying growth in productivity, is providing ongoing support to
economic activity. Although energy prices have risen further, the expansion
remains firm and labor market conditions continue to improve gradually.
Pressures on inflation have stayed elevated, but longer-term inflation
expectations remain well contained."
The American Beacon Mileage Funds produced strong returns for the period.
The Money Market Mileage Fund-Mileage Class returned 1.11% for the six months,
outperforming the Lipper Money Market Average return of 0.92%. The U.S.
Government Money Market Mileage Fund-Mileage Class outpaced the Lipper U.S.
Government Money Market Average with a return of 0.99% versus 0.94% for the
Average. Additionally, the Municipal Money Market Mileage Fund-Mileage Class
posted a gain of 0.81%, outperforming the Lipper Tax-Exempt Money Market Average
return of 0.73%.
Looking forward, expectations are that the FOMC will vote to hike the
overnight federal funds rate another 25 basis points at their upcoming meetings
in August and September. During this rising rate environment, we will monitor
the duration and quality of the money market portfolios as we evaluate economic
growth, inflation, and the direction of interest rates.
Please review the enclosed portfolio listings and detailed financial data.
As always, we welcome the opportunity to serve your financial needs. Should you
have any questions about the enclosed information, please do not hesitate to
contact us at 800-967-9009. You may also access Fund and account information at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Mileage Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President, American Beacon Mileage Funds
1
ECONOMIC OVERVIEW
(Unaudited)
================================================================================
Much like 2004, the financial markets have been keenly focused on the "Non-Farm
Payroll" numbers in 2005. With employment demonstrating solid growth and
concerns about inflation building, the Federal Reserve has raised overnight
borrowing rates at nine consecutive Federal Open Market Committee (FOMC)
meetings since June 2004. Over the past six months, the economy has shown
significant growth across all sectors, particularly in housing, given single-
family housing starts averaged more than 1.65 million units annually. With the
economy expanding at a moderate pace, housing activity at high levels and
business investment and manufacturing stronger, the Federal Reserve is predicted
to continue raising the Fed Funds rate to at least 4.00% (according to
economists' forecasts and the Fed Funds futures contracts) by December 2005. The
yield curve flattened throughout the first six months of 2005, which led Federal
Reserve Chairman Greenspan to label the flattening and potential inversion a
"conundrum." Credit spreads remained at or near historically tight levels with
little evidence of widening.
Steady growth in the labor market and significant price increases in oil
have changed the focus of the FOMC toward inflation. Higher employment typically
puts pressure on labor costs that lead to higher prices for consumers. Core
prices rose rapidly in the first half of the year, elevated by the indirect
effects of higher energy prices on business costs and increases in non-oil
import prices that reflect past dollar depreciation and the surge in global
prices for primary commodities. The FOMC has consistently reiterated its stance
that the tightening cycle would occur at a "measured" pace, and policymakers
signaled that they will respond to changes in economic conditions in order to
maintain their goal of price stability.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
(Unaudited)
================================================================================
The U.S. economy continued to grow at a solid pace as Gross Domestic Product
(GDP) for the first quarter of 2005 was revised upward to 3.8%. Although nonfarm
payroll growth came in below consensus expectations, the unemployment rate
dropped to 5.0% in June, its lowest point since September 2001. Crude oil prices
remained elevated, approaching $60 per barrel, leading to concerns of reduced
consumer spending and lower corporate profit margins. Still, GDP growth remains
steady as estimates for the full year 2005 are in the 3.5-4% range.
The American Beacon Money Market Mileage Fund continued to maintain the
strategy of purchasing 3-month LIBOR-based variable rate securities in addition
to short-dated commercial paper in this rising interest rate environment. The
FOMC raised overnight rates by 25 basis points at both the May and June
meetings, resulting in a Fed Funds target rate of 3.25%. The FOMC maintained its
"measured" policy adjustment posture at the June meeting, ending speculation
that they were done raising rates. "Although energy prices have risen further,
the expansion remains firm and labor market conditions continue to improve
gradually," the FOMC said in its statement accompanying the decision. Although
the Fed characterized inflation pressures as "elevated," the headline Personal
Consumption Expenditure deflator was a benign 2.2% at its May reading and the
Consumer Price Index (CPI) was unchanged in June.
Currently, with the Eurodollar futures market pricing in a Fed Funds rate of
4.00% by the end of the year, the Money Market Mileage Fund will maintain its
weighted-average maturity relatively short. However, the Fund's investment
advisor will continue to monitor economic trends and adjust the Fund's duration
posture accordingly.
For the six months ended June 30, 2005, the total return of the American
Beacon Money Market Mileage Fund - Mileage Class was 1.11%. The Fund
outperformed the Lipper Money Market Average return of 0.92% by 19 basis points.
The Lipper Money Market Average is calculated by taking an arithmetic average of
the returns of the mutual funds in the Lipper Money Market Funds category.
Lipper is an independent mutual fund research and ranking service that ranks
mutual funds in various categories by making comparative calculations using
total returns.
MILEAGE CLASS TOTAL RETURNS AS OF JUNE 30, 2005
[CHART OF MILEAGE CLASS TOTAL RETURNS]
AMERICAN BEACON LIPPER
MONEY MARKET MONEY MARKET
MILEAGE FUND AVERAGE
1 Year 1.74% 1.36%
3 Years* 1.12% 0.82%
5 Years* 2.19% 1.89%
10 Years* 3.67% 3.43%
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
============================
AS OF 6/30/05
----------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) ............. 1.74% 2.19% 3.67%
Platinum Class (1,3) ............ 1.10% 1.65% 3.19%
1 Past performance is not indicative of future performance. An investment in
this Fund is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share it is
possible to lose money by investing in this Fund. Fund performance in the
table above does not reflect the deduction of taxes a shareholder would pay
on distributions or the redemption of shares.
2 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by American Beacon
Advisors since its inception on September 1, 1987. Like the Fund, the
Companion Fund invests all of its investable assets in a corresponding
Portfolio of the American Beacon Master Trust. The performance results from
inception through October 31, 1995 are those of the Companion Fund's
Mileage Class of shares. The Fund began offering its shares on November 1,
1995. Thus, performance results shown from that date through June 30, 2005
are for the Fund. Because the Companion Fund had lower expenses, its
performance was better than the Fund would have realized in the same period.
3 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included
in this report. The Companion Fund has been managed by American Beacon
Advisors since its inception on September 1, 1987. Like the Fund, the
Companion Fund invests all of its investable assets in a corresponding
Portfolio of the American Beacon Master Trust. The performance results from
inception through October 31, 1995 are those of the Companion Fund's
Mileage Class of shares. The Fund began offering its shares on November 1,
1995. Performance results shown from that date through January 28, 1996 are
for the initial class of Fund shares. The Platinum Class of the Fund began
offering its shares on January 29, 1996. Thus, performance results from
that date
3
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM) - CONTINUED
(Unaudited)
================================================================================
through June 30, 2005 are for the Platinum Class of Fund shares. Because the
Companion Fund and the Fund's initial class had lower expenses, their
performance was better than the Fund would have realized in the same period.
PORTFOLIO STATISTICS AS OF JUNE 30, 2005
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 2.62% 2.07%
7-day Effective Yield* 2.66% 2.09%
30-day Yield* 2.55% 1.99%
Weighted Average Maturity 33 Days 33 Days
*Annualized. You may call 1-800-388-3344 to obtain the Funds' current seven day
yield. Yield is a more accurate reflection of the Funds' current earnings than
total returns.
TOP TEN HOLDINGS AS OF JUNE 30, 2005
% OF
NET ASSETS*
-----------
Wells Fargo and Company 5.3%
General Electric Capital Corporation 4.4%
Goldman Sachs Group 4.2%
Toyota Motor Credit Corporation 4.1%
Morgan Stanley Group, Incorporated 3.9%
Credit Suisse First Boston Corporation 3.9%
Fifth Third Bank 3.8%
Unicredito Italiano 3.7%
SunTrust Bank 2.9%
Household Finance Corporation 2.9%
*Percent of net assets portion of American Beacon Master Money Market Portfolio.
ASSET ALLOCATION AS OF JUNE 30, 2005
% OF
NET ASSETS*
-----------
Bank CDs, TDs, and Notes 42.2%
Corporate Notes 37.9%
Repurchase Agreements 16.8%
Funding Agreements 2.1%
Commercial Paper 0.7%
Net Other Assets 0.3%
*Percent of net assets portion of American Beacon Master Money Market Portfolio.
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1)transaction
costs and (2)ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from January 1, 2005
through June 30, 2005.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed 5% per year rate of return before expenses (not the Fund's
actual return). You may compare the ongoing costs of investing in the Fund with
other funds by contrasting this 5% hypothetical example and the 5% hypothetical
examples that appear in the shareholder reports of the other funds. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table highlight only
your ongoing costs and do not reflect any transaction costs charged by the Fund.
Similarly, the expense examples for other funds do not
4
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM) - CONTINUED
(Unaudited)
================================================================================
reflect any transaction costs charged by those funds, such as sales charges
(loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines
of the table are useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
1/1/05 6/30/05 1/1/05-6/30/05
--------- ------- --------------
MILEAGE CLASS
Actual $1,000.00 $1,011.05 $2.90
Hypothetical (5% return
before expenses) $1,000.00 $1,021.91 $2.91
PLATINUM CLASS
Actual $1,000.00 $1,008.08 $5.85
Hypothetical (5% return
before expenses) $1,000.00 $1,018.97 $5.88
*Expenses are equal to the Fund's annualized expense ratios for the six-month
period of 0.58% and 1.17% for the Mileage and Platinum Classes, respectively,
multiplied by the average account value over the period, multiplied by the
number derived by dividing the number of days in the most recent fiscal
half-year (181) by days in the year (365) to reflect the half-year period.
5
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET MILEAGE FUND(SM)
(Unaudited)
================================================================================
The U.S. economy continued to grow at a solid pace as GDP for the first
quarter of 2005 was revised upward to 3.8%. Although nonfarm payroll growth came
in below consensus expectations, the unemployment rate dropped to 5.0% in June,
its lowest point since September 2001. Crude oil prices remained elevated,
approaching $60 per barrel, leading to concerns of reduced consumer spending and
lower corporate profit margins. Still, GDP growth remains steady as estimates
for the full year 2005 are in the 3.5-4% range.
The American Beacon U.S. Government Money Market Mileage Fund continued to
maintain the strategy of purchasing 3-month LIBOR-based variable rate agencies
in addition to short-dated agency discount notes and coupons in this rising
interest rate environment. The FOMC raised overnight rates by 25 basis points at
both the May and June meetings, resulting in a Fed Funds target rate of 3.25%.
The FOMC maintained its "measured" policy adjustment posture at the June
meeting, ending speculation that they were done raising rates. "Although energy
prices have risen further, the expansion remains firm and labor market
conditions continue to improve gradually," the FOMC said in its statement
accompanying the decision. Although the Fed characterized inflation pressures as
"elevated," the headline Personal Consumption Expenditure deflator was a benign
2.2% at its May reading and the Consumer Price Index (CPI) was unchanged in
June.
Currently, with the Eurodollar futures market pricing in a Fed Funds rate of
4.00% by the end of the year, the U.S. Government Money Market Mileage Fund will
maintain its weighted-average maturity relatively short. However, the Fund's
investment advisor will continue to monitor economic trends and adjust the
Fund's duration posture accordingly.
For the six months ended June 30, 2005, the total return of the American
Beacon U.S. Government Money Market Mileage Fund - Mileage Class was 0.99% as
compared to the Lipper U.S. Government Money Market Average return of 0.94%. The
Lipper U.S. Government Money Market Average is calculated by taking an
arithmetic average of the returns of the mutual funds in the Lipper U.S.
Government Money Market Funds category. Lipper is an independent mutual fund
research and ranking service that ranks mutual funds in various categories by
making comparative calculations using total returns.
MILEAGE CLASS TOTAL RETURNS AS OF JUNE 30, 2005
[CHART OF MILEAGE CLASS TOTAL RETURNS]
AMERICAN BEACON LIPPER
U.S. GOVERNMENT U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
MILEAGE FUND AVERAGE
1 Year 1.53% 1.41%
3 Years* 0.87% 0.86%
5 Years* 2.01% 1.92%
10 Years* 3.50% 3.45%
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
============================
AS OF 6/30/05
----------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) ............. 1.53% 2.01% 3.50%
Platinum Class (1,3) ............ 1.04% 1.58% 3.25%
1 Past performance is not indicative of future performance. An investment in
this Fund is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share, it is
possible to lose money by investing in this Fund. Fund performance in the
table above does not reflect the deduction of taxes a shareholder would pay
on distributions or the redemption of shares.
2 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by American Beacon
Advisors since its inception on March 2, 1992. Like the Fund, the Companion
Fund invests all of its investable assets in a corresponding Portfolio of
the American Beacon Master Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund. The Fund began
offering its shares on November 1, 1995. Thus, performance results shown
from that date through June 30, 2005 are for the Fund. Because the
Companion Fund had lower expenses, its performance was better than the Fund
would have realized in the same period.
3 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included
in this report. The Companion Fund has been managed by American Beacon
Advisors since its inception on March 2, 1992. Like the Fund, the Companion
Fund invests all of its investable assets in a corresponding Portfolio of
the American Beacon Master Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund. The Fund began
offering its shares on November 1, 1995. Performance results shown from
that date through October 31, 1999 are for the initial class of Fund
shares. The Platinum Class of the Fund began offering its shares on
November 1, 1999. Thus, performance results from that date through June 30,
2005 are for the Platinum Class of Fund shares. Because the Companion Fund
and the Fund's initial class had lower expenses, their performance was
better than the Fund would have realized in the same period.
6
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET MILEAGE FUND(SM) - CONTINUED
(Unaudited)
================================================================================
PORTFOLIO STATISTICS AS OF JUNE 30, 2005
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 2.39% 2.00%
7-day Effective Yield* 2.42% 2.02%
30-day Yield* 2.30% 1.90%
Weighted Average Maturity 16 Days 16 Days
*Annualized. You may call 1-800-388-3344 to obtain the Funds' current seven day
yield. Yield is a more accurate reflection of the Funds' current earnings than
total returns.
ASSET ALLOCATION AS OF JUNE 30, 2005
% OF
NET ASSETS*
-----------
Government Securities 51.4%
Repurchase Agreements 48.4%
Net Other Assets 0.2%
*Percent of net assets portion of American Beacon Master U.S. Government Money
Market Portfolio.
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1)transaction
costs and (2)ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from January 1, 2005
through June 30, 2005.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed 5% per year rate of return before expenses (not the Fund's
actual return). You may compare the ongoing costs of investing in the Fund with
other funds by contrasting this 5% hypothetical example and the 5% hypothetical
examples that appear in the shareholder reports of the other funds. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table highlight only
your ongoing costs and do not reflect any transaction costs charged by the Fund.
Similarly, the expense examples for other funds do not reflect any transaction
costs charged by those funds, such as sales charges (loads), redemption fees or
exchange fees. Therefore, the "Hypothetical" lines of the table are useful in
comparing ongoing costs only and will not help you determine the relative total
costs of owning different funds. If you were subject to any transaction costs
during the period, your costs would have been higher.
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
1/1/05 6/30/05 1/1/05-6/30/05
--------- ------- --------------
MILEAGE CLASS
Actual $1,000.00 $1,000.88 $3.85
Hypothetical (5% return
before expenses) $1,000.00 $1,020.96 $3.87
PLATINUM CLASS
Actual $1,000.00 $1,007.75 $5.97
Hypothetical (5% return
before expenses) $1,000.00 $1,018.84 $6.01
*Expenses are equal to the Fund's annualized expense ratios for the six-month
period of 0.77% and 1.20% for the Mileage and Platinum Classes, respectively,
multiplied by the average account value over the period, multiplied by the
number derived by dividing the number of days in the most recent fiscal
half-year (181)by days in the year (365) to reflect the half-year period.
7
PERFORMANCE OVERVIEW
AMERICAN BEACON MUNICIPAL MONEY MARKET MILEAGE FUND(SM)
(Unaudited)
================================================================================
The American Beacon Municipal Money Market Mileage Fund maintained a
relatively short average maturity in the first half of 2005. The variable rate
demand note (VRDN) market provided the most attractive investment option
throughout the period. Rates on these securities remained appealing, as
short-term interest rates were increased at nine consecutive FOMC meetings since
June 2004. In the current interest rate environment, the Fund will continue to
focus on attractively priced VRDNs backed by letters of credit or bond insurance
in anticipation of further "measured" rate hikes by the Federal Reserve.
For the six months ended June 30, 2005, the total return of the American
Beacon Municipal Money Market Mileage Fund - Mileage Class was 0.81%. The Fund
outperformed the Lipper Tax-Exempt Money Market Average return of 0.73% by 8
basis points. The Lipper Tax-Exempt Money Market Average is calculated by taking
an arithmetic average of the returns of the mutual funds in the Lipper
Tax-Exempt Money Market Funds category. Lipper is an independent mutual fund
research and ranking service that ranks mutual funds in various categories by
making comparative calculations using total returns.
MILEAGE CLASS TOTAL RETURNS AS OF JUNE 30, 2005
[CHART OF MILEAGE CLASS TOTAL RETURNS]
AMERICAN BEACON LIPPER
MUNICIPAL TAX-EXEMPT
MONEY MARKET MONEY MARKET
MILEAGE FUND AVERAGE
1 Year 1.26% 1.11%
3 Years* 0.82% 0.72%
5 Years* 1.37% 1.33%
10 Years* 2.25% 2.19%
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
============================
AS OF 6/30/05
----------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) ............. 1.26% 1.37% 2.25%
Platinum Class (1,3) ............ 0.70% 0.89% 1.96%
1 Past performance is not indicative of future performance. An investment in
this Fund is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share, it is
possible to lose money by investing in this Fund. Fund performance in the
table above does not reflect the deduction of taxes a shareholder would pay
on distributions or the redemption of shares.
2 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included
in this report. The Companion Fund has been managed by American Beacon
Advisors since its inception on November 10, 1993. Like the Fund, the
Companion Fund invests all of its investable assets in a corresponding
Portfolio of the American Beacon Master Trust. The performance results from
inception through October 31, 1995 are those of the Companion Fund's
Mileage Class of shares. The Fund began offering its shares on November 1,
1995. Thus, performance results shown from that date through June 30, 2005
are for the Fund. Because the Companion Fund had lower expenses, its
performance was better than the Fund would have realized in the same period.
3 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund")not included in
this report. The Companion Fund has been managed by American Beacon
Advisors since its inception on November 10, 1993. Like the Fund, the
Companion Fund invests all of its investable assets in a corresponding
Portfolio of the American Beacon Master Trust. The performance results from
inception through October 31, 1995 are those of the Companion Fund's
Mileage Class of shares. The Fund began offering its shares on November 1,
1995. Performance results shown from that date through October 31, 1999 are
for the initial class of Fund shares. The Platinum Class of the Fund began
offering its shares on November 1, 1999. Thus, performance results from
that date through June 30, 2005 are for the Platinum Class of Fund shares.
Because the Companion Fund and the Fund's initial class had lower expenses,
their performance was better than the Fund would have realized in the same
period.
PORTFOLIO STATISTICS AS OF JUNE 30, 2005
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 1.86% 1.32%
7-day Effective Yield* 1.88% 1.33%
30-day Yield* 1.78% 1.22%
Weighted Average Maturity 5 Days 5 Days
*Annualized. You may call 1-800-388-3344 to obtain the Funds' current seven day
yield. Yield is a more accurate reflection of the Funds' current earnings than
total returns.
8
PERFORMANCE OVERVIEW
AMERICAN BEACON MUNICIPAL MONEY MARKET MILEAGE FUND(SM) - CONTINUED
(Unaudited)
================================================================================
TOP TEN HOLDINGS AS OF JUNE 30, 2005
% OF
NET ASSETS*
-----------
Moffat County, Colorado Pollution Control 10.5%
County of Breckinridge, Kentucky
Association of Counties Leasing Trust 7.6%
Orange County Health Facilities Authority 6.3%
Alachua County, Florida Housing
Financial Authority 5.8%
Village of Richton Park, Illinois-Industrial
Development Revenue Bonds 5.7%
Michigan State Housing Development Authority 5.6%
Ohio Water Development Authority 5.4%
Montgomery County, Maryland Variable Rate
Housing Revenue Bonds 5.3%
Mansfield Texas Industrial Development
Corporation 5.1%
New York State Housing Finance Agency 5.1%
*Percent of net assets portion of American Beacon Master Municipal Money Market
Portfolio.
% OF
NET ASSETS*
-----------
Municipal Obligations 96.2%
Other Investments 3.5%
Net Other Assets 0.3%
*Percent of net assets portion of American Beacon Master Municipal Money
Market Portfolio.
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1)transaction
costs and (2)ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from January 1, 2005
through June 30, 2005.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed 5% per year rate of return before expenses (not the Fund's
actual return). You may compare the ongoing costs of investing in the Fund with
other funds by contrasting this 5% hypothetical example and the 5% hypothetical
examples that appear in the shareholder reports of the other funds. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table highlight only
your ongoing costs and do not reflect any transaction costs charged by the Fund.
Similarly, the expense examples for other funds do not reflect any transaction
costs charged by those funds, such as sales charges (loads), redemption fees or
exchange fees. Therefore, the "Hypothetical" lines of the table are useful in
comparing ongoing costs only and will not help you determine the relative total
costs of owning different funds. If you were subject to any transaction costs
during the period, your costs would have been higher.
9
PERFORMANCE OVERVIEW
AMERICAN BEACON MUNICIPAL MONEY MARKET MILEAGE FUND(SM) - CONTINUED
(Unaudited)
================================================================================
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
1/1/05 6/30/05 1/1/05-6/30/05
--------- ------- --------------
MILEAGE CLASS
Actual $1,000.00 $1,008.14 $3.18
Hypothetical (5% return
before expenses) $1,000.00 $1,021.63 $3.20
PLATINUM CLASS
Actual $1,000.00 $1,005.34 $5.97
Hypothetical (5% return
before expenses) $1,000.00 $1,018.84 $6.01
*Expenses are equal to the Fund's annualized expense ratios for the six-month
period of 0.64% and 1.20% for the Mileage and Platinum Classes, respectively,
multiplied by the average account value over the period, multiplied by the
number derived by dividing the number of days in the most recent fiscal
half-year (181) by days in the year (365) to reflect the half-year period.
10
AMERICAN BEACON MILEAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2005 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== ============
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investment in Portfolio, at value $ 413,371 $ 15,061 $ 26,728
Receivable for fund shares sold .............. 25 - -
Receivable from Manager for
expense reimbursement (Note 2) ............ 1 1 -
Prepaid expenses ............................. 52 19 17
------------ ---------- -----------
TOTAL ASSETS .............................. 413,449 15,081 26,745
------------ ---------- -----------
LIABILITIES:
Payable for fund shares redeemed ............. 22 6 -
Distribution fees payable (Note 2) ........... 86 3 7
Dividends payable ............................ 5 - -
Administrative services fees
payable (Note 2) .......................... 234 3 5
Other liabilities ............................ 30 6 4
------------ ---------- -----------
TOTAL LIABILITIES ......................... 377 18 16
------------ ---------- -----------
NET ASSETS ...................................... $ 413,072 $ 15,063 $ 26,729
============ ========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital .............................. 413,072 15,063 26,729
------------ ---------- -----------
NET ASSETS ...................................... $ 413,072 $ 15,063 $ 26,729
============ ========== ===========
Shares outstanding (no par value):
Mileage Class: ............................... 46,534,448 9,517,758 22,669,979
============ ========== ===========
Platinum Class: .............................. 366,537,501 5,545,607 4,058,830
============ ========== ===========
Net asset value, offering and redemption
price per share:
Mileage Class: ............................... $ 1.00 $ 1.00 $ 1.00
============ ========== ===========
Platinum Class: .............................. $ 1.00 $ 1.00 $ 1.00
============ ========== ===========
See accompanying notes
- --------------------------------------------------------------------------------
11
AMERICAN BEACON MILEAGE FUNDS
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== ============
(IN THOUSANDS)
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income ............................... $6,045 $201 $362
Portfolio expenses ............................ (241) (8) (18)
NET INVESTMENT INCOME ALLOCATED
------ ---- ----
FROM PORTFOLIO .......................... 5,804 193 344
------ ---- ----
FUND EXPENSES:
Administrative service fees (Note 2) .......... 217 7 16
Administrative service fees - Platinum
Class (Note 2) ............................. 1,256 16 17
Transfer agent fees - Mileage Class ........... 18 5 8
Transfer agent fees - Platinum Class .......... 38 3 2
Professional fees ............................. 16 1 1
Registration fees and expenses ................ 19 13 13
Distribution fees - Mileage Class (Note 2) .... 58 12 33
Distribution fees - Platinum Class (Note 2) ... 483 6 6
Other expenses ................................ 58 2 4
------ ---- ----
TOTAL FUND EXPENSES ........................ 2,163 65 100
------ ---- ----
LESS REIMBURSEMENT OF FUND EXPENSES (NOTE 2) ..... - 6 2
------ ---- ----
NET FUND EXPENSES .......................... 2,163 59 98
------ ---- ----
NET INVESTMENT INCOME ............................ 3,641 134 246
------ ---- ----
REALIZED GAIN ALLOCATED FROM PORTFOLIO
Net realized gain on investments .............. 1 - -
------ ---- ----
NET GAIN ON INVESTMENTS .................... 1 - -
------ ---- ----
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................... $3,642 $134 $246
====== ==== ====
See accompanying notes
- --------------------------------------------------------------------------------
12
(This page intentionally left blank)
AMERICAN BEACON MILEAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
MONEY MARKET
=============================
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004
-------------- ------------
(IN THOUSANDS)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................... $ 3,641 $ 1,707
Net realized gain on investments .......................... 1 17
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,642 1,724
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - Mileage Class ..................... (518) (439)
Net investment income - Platinum Class .................... (3,123) (1,268)
Net realized gain on investments - Mileage Class .......... - (2)
Net realized gain on investments - Platinum Class ......... (1) (15)
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS: ......................... (3,642) (1,724)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ............................. 67,831 183,761
Reinvestment of dividends and distributions ............... 3,617 1,707
Cost of shares redeemed ................................... (101,312) (223,109)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS .................................. (29,864) (37,641)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ........................ (29,864) (37,641)
NET ASSETS:
Beginning of period ....................................... 442,936 480,577
--------- ---------
END OF PERIOD ............................................. $ 413,072 $ 442,936
========= =========
See accompanying notes
- --------------------------------------------------------------------------------
14
=================================================================================================
U.S. GOVERNMENT MONEY MARKET MUNICIPAL MONEY MARKET
======================================== ========================================
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- ------------- ------------ ------------- ------------
(IN THOUSANDS)
$ 134 $ 108 $ 246 $ 187
------- -------- -------- --------
- 1 - -
134 109 246 187
------- -------- -------- --------
(95) (91) (219) (175)
(39) (17) (27) (12)
- (1) - -
- - - -
------- -------- -------- --------
(134) (109) (246) (187)
------- -------- -------- --------
7,398 18,681 32,385 39,935
133 108 246 187
(7,816) (20,248) (36,009) (43,445)
------- -------- -------- --------
(285) (1,459) (3,378) (3,323)
------- -------- -------- --------
(285) (1,459) (3,378) (3,323)
15,348 16,807 30,107 33,430
------- -------- -------- --------
$15,063 $ 15,348 $ 26,729 $ 30,107
======= ======== ======== ========
See accompanying notes
- --------------------------------------------------------------------------------
15
AMERICAN BEACON MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2005 (Unaudited)
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Mileage Funds (the "Trust"), formerly known as the American
AAdvantage Mileage Funds, is organized as a Massachusetts business trust under a
Declaration of Trust dated February 14, 1995 and is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as a no load, open-end
management investment company with separate series. The following series are
included in this report: American Beacon Money Market Mileage Fund, American
Beacon U.S. Government Money Market Mileage Fund and American Beacon Municipal
Money Market Mileage Fund (each a "Fund" and collectively the "Funds"). The
Funds commenced active operations on November 1, 1995. The U.S. Government Money
Market and Municipal Money Market Mileage Funds commenced sales of a second
class of shares designated as "Platinum Class" on November 1, 1999. At the same
time, the existing shares of the U.S. Government Money Market and Municipal
Money Market Mileage Funds were redesignated as "Mileage Class" shares.
Each Fund invests all of its investable assets in the corresponding
portfolio of the American Beacon Master Trust, an open-end diversified
management investment company, as follows:
AMERICAN BEACON: -> INVESTS ASSETS IN -> AMERICAN BEACON MASTER TRUST:
- ------------------- -----------------------------
Money Market Mileage Fund Money Market Portfolio
U.S. Government Money Market Mileage Fund U.S. Government Money Market Portfolio
Municipal Money Market Mileage Fund Municipal Money Market Portfolio
Each American Beacon Master Trust Portfolio has the same investment
objectives as its corresponding Fund. The value of such investment reflects each
Fund's proportionate interest in the net assets of the corresponding portfolio
(5.72%, 7.83% and 84.67% at June 30, 2005 of the American Beacon Master Trust
Money Market, U.S. Government Money Market and Municipal Money Market
Portfolios, respectively) (each a "Portfolio" and collectively the
"Portfolios"). The financial statements of the Portfolios are included elsewhere
in this report and should be read in conjunction with the Funds' financial
statements.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
The following is a summary of the significant accounting policies followed
by the Funds.
Valuation of Investments
The Funds record their investment in the Portfolios at fair value. Valuation
of securities by the Portfolios is discussed in Note 1 of the Portfolios' Notes
to Financial Statements, which are included elsewhere in this report.
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income (loss) and realized
gain (loss) in the Portfolio each day. All net investment income (loss) and
realized gain (loss) of each Portfolio are allocated pro rata among the
corresponding Fund and other investors in each Portfolio at the time of such
determination. The Funds generally declare dividends daily from net investment
income and net short-term capital gain, if any, payable monthly.
Dividends to shareholders are determined in accordance with federal income
tax principles that may treat certain transactions differently than U.S.
generally accepted accounting principles.
- --------------------------------------------------------------------------------
16
AMERICAN BEACON MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2005 (Unaudited)
================================================================================
Federal Income and Excise Taxes
It is the policy of each of the Funds to comply with the requirements of
subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all net investment income as well as
any net realized capital gains on the sale of investments. Therefore, no federal
income tax provision is required.
All dividends paid by the Municipal Money Market Mileage Fund were "exempt -
interest dividends" and therefore are 100% free of any regular federal income
tax. Approximately 22% of interest earned was derived from investments in
certain private activity bonds for purposes of the federal alternative minimum
tax calculation.
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.
Valuation of Shares
The price per share is calculated separately for each class of each Fund on
each day on which shares are offered for sale and orders accepted or upon
receipt of a redemption request. With respect to a class of a Fund, price per
share is computed by dividing the value of the class' pro rata allocation of the
Fund's investments and other assets, less liabilities, by the number of class
shares outstanding.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Manager and the Trust entered into a Management Agreement that obligates
the Manager to provide or oversee administrative and management services to the
Funds. As compensation for performing administrative duties required under the
Management Agreement, the Manager receives an annualized fee of 0.10% of the
average daily net assets of each of the Funds.
- --------------------------------------------------------------------------------
17
AMERICAN BEACON MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2005 (Unaudited)
================================================================================
Administrative Services Plan
The Trust has adopted an Administrative Services Plan with respect to the
Platinum Class of the Funds. As compensation for providing administrative
services, the Manager receives an annualized fee of 0.65% of the average daily
net assets of the Platinum Class of each Fund.
Distribution Plan
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Act. A separate plan has been adopted by the Mileage Class and
Platinum Class of the Funds. Under each Plan, as compensation for distribution
assistance, the Manager receives an annualized fee of 0.25% of the average daily
net assets of each 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.
Reimbursement and Waiver of Expenses
The Manager contractually agreed to reimburse the Platinum Class of the
Municipal Money Market and U.S. Government Money Market Mileage Funds for other
expenses through February 28, 2006 to the extent that total annual fund
operating expenses exceed 1.20%. In addition, the Manager agreed to voluntarily
reimburse additional fees to the extent necessary to preserve a certain minimum
level of returns for Platinum Class Fund shareholders. During the six months
ended June 30, 2005, the Manager waived or reimbursed expenses as follows:
FUND AMOUNT
- ---- ------
U.S. Government Money Market Mileage Fund
Platinum Class ............................................... $5,577
Municipal Money Market Mileage Fund Platinum Class .............. 2,337
Expense Reimbursement Plan
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 following waived fees or reimbursed expenses are subject to
potential recovery expiring in:
U.S. GOVERNMENT MUNICIPAL
YEAR MONEY MARKET MONEY MARKET MONEY MARKET
- ---- ------------ --------------- ------------
2006 ........ $200,654 $ 7,709 $ 9,134
2007 ........ 239,870 11,563 11,600
2008 ........ - 5,577 2,337
- --------------------------------------------------------------------------------
18
AMERICAN BEACON MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2005 (Unaudited)
================================================================================
Other
Certain officers or Trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Mr. Feld and the non-interested Trustees (other than
Mr. O'Sullivan) and their spouses are provided free unlimited air transportation
on American. Retired Trustees and their spouses are provided free transportation
on American, up to a maximum annual value of $40,000. The Trust compensates each
Trustee with payments in an amount equal to the Trustee's income tax on the
value of this free airline travel. Mr. O'Sullivan, as a retiree of American,
already receives flight benefits. This Trustee receives an annual retainer of
$40,000 plus $1,250 for each Board meeting attended.
3. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each class of
the Funds (in thousands). Each share is valued at $1.00:
Six Months Ended June 30, 2005
- ------------------------------
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
MILEAGE FUND MILEAGE FUND MILEAGE FUND
============================== ============================== ==============================
MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS
------------- -------------- ------------- -------------- ------------- --------------
Shares sold ............. 18,625 49,206 2,555 4,843 26,996 5,389
Reinvestment of
dividends ............ 493 3,124 94 39 219 27
Shares redeemed ......... (18,059) (83,253) (4,110) (3,706) (29,705) (6,304)
------- ------- ------ ------ ------- ------
Net increase (decrease)
in capital shares
outstanding .......... 1,059 (30,923) (1,461) 1,176 (2,490) (888)
======= ======= ====== ====== ======= ======
Year Ended December 31, 2004
- ----------------------------
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
MILEAGE FUND MILEAGE FUND MILEAGE FUND
============================== ============================== ==============================
MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS
------------- -------------- ------------- -------------- ------------- --------------
Shares sold ............ 29,988 153,773 5,995 12,686 28,323 11,612
Reinvestment of
dividends ........... 424 1,283 91 17 175 12
Shares redeemed ........ (33,989) (189,120) (7,233) (13,015) (28,870) (14,575)
------- -------- ------ ------- ------- -------
Net decrease in
capital shares
outstanding ......... (3,577) (34,064) (1,147) (312) (372) (2,951)
======= ======== ====== ======= ======= =======
- --------------------------------------------------------------------------------
19
AMERICAN BEACON MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
MILEAGE CLASS
=======================================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ==========================================================
2005 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- -------
(UNAUDITED)
Net asset value, beginning of period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from investment operation:
Net investment income(A) ..................... 0.01 0.01 0.01 0.01 0.04 0.06
Dividends from net investment income ......... (0.01) (0.01) (0.01) (0.01) (0.04) (0.06)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return ....................................... 1.11%(C) 0.93% 0.73% 1.29% 3.76% 6.07%
======= ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ..... $46,534 $45,475 $49,053 $63,884 $86,910 $97,698
Ratios to average net assets (annualized)(A):
Expenses .................................. 0.58% 0.51% 0.51% 0.63% 0.63% 0.61%
Net investment income ..................... 2.22% 0.91% 0.74% 1.29% 3.74% 5.87%
Decrease reflected in above ratio due to
absorption of expenses by the Manager .. - - - - - -
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of each Fund's proportionate share of the income and expenses of
the American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
See accompanying notes
- --------------------------------------------------------------------------------
20
=========================================================================
PLATINUM CLASS
=========================================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ===========================================================
2005 2004 2003 2002 2001 2000
- ----------- -------- -------- -------- -------- --------
(UNAUDITED)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
0.01 -(B) -(B) 0.01 0.03 0.05
(0.01) -(B) -(B) (0.01) (0.03) (0.05)
-------- -------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
0.81%(C) 0.32% 0.12% 0.81% 3.32% 5.57%
======== ======== ======== ======== ======== ========
$366,538 $397,461 $431,524 $554,242 $678,026 $643,693
1.17% 1.12% 1.12% 1.10% 1.06% 1.08%
1.62% 0.30% 0.13% 0.82% 3.26% 5.46%
- 0.06% 0.04% - - -
See accompanying notes
- --------------------------------------------------------------------------------
21
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
MILEAGE CLASS
========================================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ===========================================================
2005 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- --------
(UNAUDITED)
Net asset value, beginning of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------- ------- ------- -------
Income from investment operation:
Net investment income(A)...................... 0.01 0.01 0.01 0.01 0.04 0.06
Dividends from net investment income ......... (0.01) (0.01) (0.01) (0.01) (0.04) (0.06)
------ ------- ------- ------- ------- -------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ======= ======= ======= ======= =======
Total return ....................................... 0.99%(C) 0.76% 0.47% 1.06% 3.72% 5.93%
====== ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ..... $9,518 $10,979 $12,126 $19,636 $17,798 $18,400
Ratios to average net assets (annualized)(A):
Expenses .................................. 0.77% 0.65% 0.77% 0.79% 0.62% 0.62%
Net investment income ..................... 1.97% 0.75% 0.46% 1.06% 3.66% 5.72%
Decrease reflected in above ratio due to
absorption of expenses by the Manager .. - - - 0.01% 0.08% 0.26%
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of each Fund's proportionate share of the income and expenses of
the American Beacon Master U.S. Government Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
See accompanying notes
- --------------------------------------------------------------------------------
22
========================================================================
PLATINUM CLASS
========================================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ===========================================================
2005 2004 2003 2002 2001 2000
- ----------- -------- -------- -------- -------- --------
(UNAUDITED)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------- -------
0.01 -(B) -(B) 0.01 0.03 0.05
(0.01) -(B) -(B) (0.01) (0.03) (0.05)
------ ------ ------ ------ ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======= =======
0.78%(C) 0.29% 0.09% 0.69% 3.22% 5.47%
====== ====== ====== ====== ======= =======
$5,545 $4,369 $4,681 $7,405 $16,903 $12,350
1.20% 1.12% 1.14% 1.15% 1.10% 1.10%
1.58% 0.26% 0.09% 0.74% 3.11% 5.55%
0.23% 0.18% 0.17% 0.06% 0.08% 0.14%
See accompanying notes
- --------------------------------------------------------------------------------
23
AMERICAN BEACON MUNICIPAL MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
MILEAGE CLASS
========================================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ===========================================================
2005 2004 2003 2002 2001 2000
----------- -------- -------- -------- -------- --------
(UNAUDITED)
Net asset value, beginning of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from investment operation:
Net investment income (A) .................... 0.01 0.01 0.01 0.01 0.02 0.04
Dividends from net investment income ......... (0.01) (0.01) (0.01) (0.01) (0.02) (0.04)
------- ------- ------- ------- ------- -------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return ....................................... 0.81%(C) 0.67% 0.57% 0.77% 2.17% 3.63%
======= ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ..... $22,670 $25,161 $25,532 $24,911 $25,792 $28,971
Ratios to average net assets (annualized) (A):
Expenses .................................. 0.64% 0.61% 0.59% 0.74% 0.65% 0.61%
Net investment income ..................... 1.66% 0.65% 0.57% 0.77% 2.15% 3.58%
Decrease reflected in above ratio due to
absorption of expenses by the Manager .. - - - 0.05% 0.15% 0.01%
- --------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of each Fund's proportionate share of the income and expenses of
the American Beacon Master Municipal Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
See accompanying notes
- --------------------------------------------------------------------------------
24
PLATINUM CLASS
========================================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ===========================================================
2005 2004 2003 2002 2001 2000
- ----------- -------- -------- -------- -------- --------
(UNAUDITED)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
0.01 -(B) -(B) -(B) 0.02 0.03
(0.01) -(B) -(B) -(B) (0.02) (0.03)
------ ------ ------ ------ ------ ------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
0.53%(C) 0.19% 0.07% 0.35% 1.72% 3.05%
====== ====== ====== ====== ====== ======
$4,059 $4,946 $7,898 $7,517 $8,464 $7,889
1.20% 1.08% 1.09% 1.16% 1.10% 1.10%
1.04% 0.17% 0.07% 0.34% 1.72% 3.29%
0.09% 0.17% 0.13% 0.07% 0.13% 0.06%
See accompanying notes
- --------------------------------------------------------------------------------
25
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2005 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
--------- ----------
(DOLLARS IN THOUSANDS)
REPURCHASE AGREEMENTS (NOTE B) - 16.81%
Barclays Capital, Incorporated, 3.42%, Due 7/1/2005 ............................................ $450,000 $ 450,000
Goldman Sachs, 3.43%, Due 7/1/2005 ............................................................. 765,000 765,000
----------
TOTAL REPURCHASE AGREEMENTS ................................................................. 1,215,000
----------
EURODOLLAR TIME DEPOSITS - 12.07%
ABN AMRO Bank, 3.36%, Due 7/1/2005 ............................................................. 325,000 325,000
National City Bank, 3.29%, Due 7/1/2005 ........................................................ 272,296 272,296
Societe Generale, 3.344%, Due 7/1/2005 ......................................................... 275,000 275,000
----------
TOTAL EURODOLLAR TIME DEPOSITS .............................................................. 872,296
----------
VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES (NOTE D) - 30.13%
Barclays Bank, 3.38%, Due 9/29/2005 ............................................................ 75,000 49,989
BNP Paribas,
3.204%, Due 8/23/2005 ........................................................................ 72,000 71,994
3.105%, Due 1/30/2006 ........................................................................ 88,000 87,977
Credit Lyonnais, 3.305%, Due 9/12/2005 ......................................................... 97,000 96,987
Credit Suisse First Boston,
3.28%, Due 11/10/2005 ........................................................................ 100,000 100,006
3.50%, Due 12/29/2005 ........................................................................ 20,400 20,404
3.24%, Due 2/6/2006 .......................................................................... 10,000 10,002
3.48%, Due 5/10/2006 ......................................................................... 150,000 150,049
Fifth Third Bank, 3.188%, Due 11/14/2005 ....................................................... 197,000 196,960
ForeningsSparbanken AB, 3.13%, Due 7/29/2005 ................................................... 75,000 74,998
HSBC Bank USA, 3.22%, Due 5/4/2006 ............................................................. 85,000 85,030
JP Morgan Chase Bank, NA,
3.31%, Due 5/1/2006 .......................................................................... 10,000 10,011
3.319%, Due 5/5/2006 ......................................................................... 25,000 25,029
Nordea Bank Finland, PLC, 3.10%, Due 10/27/2005 ................................................ 25,000 24,994
Royal Bank of Scotland, 3.24%, Due 7/21/2006 ................................................... 150,000 150,000
Societe Generale, 3.105%, Due 1/30/2006 ........................................................ 50,000 49,975
SouthTrust Bank,
3.19%, Due 8/12/2005 ......................................................................... 150,000 149,995
3.35%, Due 12/14/2005 ........................................................................ 40,000 39,995
SunTrust Bank,
3.529%, Due 10/3/2005 ........................................................................ 62,230 62,235
3.20%, Due 5/12/2006 ......................................................................... 150,000 150,000
Toronto Dominion Bank, 3.30%, Due 9/12/2005 .................................................... 100,000 99,986
UBS AG, 3.09%, Due 1/30/2006 ................................................................... 50,000 49,975
Unicredito Italiano,
3.07%, Due 10/20/2005 ........................................................................ 100,000 99,985
3.367%, Due 12/19/2005 ....................................................................... 166,000 165,959
US Bank, NA,
3.415%, Due 12/29/2005 ....................................................................... 125,000 124,985
3.335%, Due 3/8/2006 ......................................................................... 30,000 29,999
----------
TOTAL VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES .................................. 2,177,519
----------
VARIABLE RATE PROMISSORY NOTES (NOTE D) - 4.15%
Goldman Sachs Group, 3.288%, Due 5/10/2006 ..................................................... 300,000 300,000
----------
TOTAL VARIABLE RATE PROMISSORY NOTES ........................................................ 300,000
----------
VARIABLE RATE FUNDING AGREEMENTS (NOTES A AND D) - 2.08%
Metropolitan Life Insurance Company, 6.81%, Due 12/1/2005 ...................................... 150,000 150,000
----------
TOTAL VARIABLE RATE FUNDING AGREEMENTS ...................................................... 150,000
----------
ASSET-BACKED COMMERCIAL PAPER, 144A (NOTES C AND E) - 0.67%
Galaxy Funding, Incorporated, 3.45%, Due 9/29/2005 ............................................. 49,000 48,580
----------
TOTAL ASSET-BACKED COMMERCIAL PAPER ......................................................... 48,580
----------
VARIABLE RATE MEDIUM-TERM NOTES (NOTE D) - 33.80%
American Honda Finance Corporation, 144A (Note C)
3.62%, Due 10/7/2005 ......................................................................... 25,000 25,006
3.47%, Due 2/6/2006 .......................................................................... 13,000 13,021
See accompanying notes
- --------------------------------------------------------------------------------
26
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
June 30, 2005 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
--------- ----------
(DOLLARS IN THOUSANDS)
3.22%, Due 2/13/2006 ......................................................................... $ 25,000 $ 25,000
3.334%, Due 2/21/2006 ........................................................................ 35,120 35,138
3.32%, Due 3/7/2006 .......................................................................... 25,000 25,000
Bayerische Landesbank Girozentrale, 3.46%, Due 2/1/2006 ........................................ 24,000 24,042
Caterpillar Financial Services, 3.328%, Due 8/15/2005 .......................................... 71,000 71,008
Citigroup, Incorporated, 3.555%, Due 3/20/2006 ................................................. 37,000 37,045
Citigroup Global Markets Holdings, Incorporated,
3.44%, Due 12/12/2005 ........................................................................ 18,000 18,007
3.424%, Due 3/16/2006 ........................................................................ 50,585 50,600
3.49%, Due 6/6/2006 .......................................................................... 25,000 25,040
Fifth Third Bank, 3.041%, Due 11/1/2005 ........................................................ 75,000 74,989
General Electric Capital Corporation,
3.41%, Due 2/3/2006 .......................................................................... 97,544 97,679
3.42%, Due 2/6/2006 .......................................................................... 30,275 30,320
3.42%, Due 5/12/2006 ......................................................................... 10,983 11,003
3.34%, Due 7/17/2006 ......................................................................... 180,000 180,000
General Electric Company, 3.211%, Due 10/24/2005 ............................................... 43,975 43,985
Halifax Bank of Scotland plc, 144A (Note C)
3.16%, Due 1/12/2006 ......................................................................... 106,000 106,028
3.20%, Due 1/26/2006 ......................................................................... 23,000 23,008
Household Finance Corporation, 3.37%, Due 8/18/2005 ............................................ 211,250 211,284
Merrill Lynch & Company, Incorporated, 3.471%, Due 3/17/2006 ................................... 45,000 45,027
Metropolitan Life Global Funding I, 3.441%, Due 3/17/2006, 144A (Note C) ....................... 22,000 22,009
Monumental Global Funding II, 144A (Note C)
3.70%, Due 7/1/2005 .......................................................................... 102,000 102,000
3.15%, Due 7/6/2005 .......................................................................... 65,700 65,700
JP Morgan Chase & Company, 3.39%, Due 10/31/2005 ............................................... 10,000 10,007
Morgan Stanley Group, Incorporated, 3.75%, Due 3/27/2006 ....................................... 284,100 284,724
Paccar Financial Corporation,
3.07%, Due 7/11/2005 ......................................................................... 50,000 50,000
3.361%, Due 9/16/2005 ........................................................................ 40,000 39,998
Toyota Motor Credit Corporation,
3.53%, Due 10/7/2005 ......................................................................... 70,000 70,003
3.24%, Due 11/18/2005 ........................................................................ 50,000 50,001
3.11%, Due 7/14/2006 ......................................................................... 175,000 175,034
US Bancorp, 3.564%, Due 9/16/2005 .............................................................. 20,095 20,102
Wells Fargo and Company,
3.51%, Due 9/29/2005 ......................................................................... 76,580 76,591
3.45%, Due 3/3/2006 .......................................................................... 86,613 86,694
3.48%, Due 6/12/2006 ......................................................................... 67,500 67,589
3.19%, Due 7/15/2006, 144A (Note C) .......................................................... 150,000 150,000
----------
TOTAL VARIABLE RATE MEDIUM-TERM NOTES ....................................................... 2,442,682
----------
TOTAL INVESTMENTS - 99.71% (Cost $7,206,077) ................................................... 7,206,077
----------
OTHER ASSETS, NET OF LIABILITIES - 0.29% ....................................................... 19,942
----------
TOTAL NET ASSETS - 100% ........................................................................ $7,226,019
==========
- ---------------
Based on the cost of investments of $7,206,077 for federal income tax purposes
at June 30, 2005, there was no unrealized appreciation or depreciation of
investments.
(A) Obligation is subject to an unconditional put back to the issuer with ninety
calendar days notice.
(B) Collateral held at Bank of New York for Barclays, 4.00% - 7.50%, Due
12/1/2008 - 7/1/2035, Total Value - $459,000; and for Goldman Sachs, 3.553%
- 6.50%, Due 6/1/2018 - 12/1/2044 Total Value - $780,300.
(C) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $640,490 or 8.86% of net assets.
(D) The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
(E) Rates associated with money market securities represent discount rate at
time of purchase.
See accompanying notes
- --------------------------------------------------------------------------------
27
AMERICAN BEACON MASTER U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2005 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
--------- --------
(DOLLARS IN THOUSANDS)
REPURCHASE AGREEMENTS (NOTE A) - 48.37%
Banc of America Securities, LLC, 3.42%, Due 7/1/2005 ........................................... $10,000 $ 10,000
Barclays Capital, Incorporated, 3.42%, Due 7/1/2005 ............................................ 40,000 40,000
Goldman Sachs, 3.43%, Due 7/1/2005 ............................................................. 43,046 43,046
--------
TOTAL REPURCHASE AGREEMENTS ................................................................. 93,046
--------
U.S. GOVERNMENT AGENCY INSTRUMENTS - 51.42%
Federal Home Loan Bank,
Variable Rate Note, 3.224%, Due 7/26/2005 (Note C) ........................................... 15,000 15,000
Variable Rate Note, 3.045%, Due 8/2/2005 (Note C) ............................................ 15,000 15,000
Variable Rate Note, 3.003%, Due 10/5/2005 (Note C) ........................................... 5,000 4,999
Federal Home Loan Mortgage Corporation,
Variable Rate Note, 3.34%, Due 12/27/2006 (Note B) ........................................... 10,000 9,991
Variable Rate Note, 7.00%, Due 7/15/2005 (Note B) ............................................ 5,000 5,008
Variable Rate Note, 1.085%, Due 9/9/2005 (Note C) ............................................ 5,000 5,000
Federal National Mortgage Association,
Discount Note, 3.35%, Due 9/14/2005 (Note B) ................................................... 2,662 2,643
Variable Rate Note, 3.314%, Due 12/22/2006 (Note C) .......................................... 10,000 9,991
Variable Rate Note, 3.39%, Due 10/3/2005 (Note C) ............................................ 16,300 16,297
Variable Rate Note, 3.064%, Due 12/9/2005 (Note C) ........................................... 15,000 14,996
--------
TOTAL U.S. GOVERNMENT AGENCY INSTRUMENTS .................................................... 98,625
--------
TOTAL INVESTMENTS - 99.79% (Cost $191,971) ..................................................... 191,971
--------
OTHER ASSETS, NET OF LIABILITIES - 0.21% ....................................................... 406
--------
TOTAL NET ASSETS - 100% ........................................................................ $192,377
========
- ---------------
Based on the cost of investments of $191,971 for federal income tax purposes at
June 30, 2005, there was no unrealized appreciation or depreciation of
investments.
(A) Collateral held at Bank of New York for Banc of America Securities, LLC,
5.50%, Due 7/1/2020, Total Value - $10,200; and Barclays Capital,
Incorporated, 4.13% - 6.50%, Due 6/1/2019 - 6/1/2035, Total Value - $40,800;
and Goldman Sachs, 5.50%, Due 6/1/2035, Total Value - $43,907.
(B) Rates represent discount rate.
(C) The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
See accompanying notes
- --------------------------------------------------------------------------------
28
AMERICAN BEACON MASTER MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2005 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
-------- ---------
(DOLLARS IN THOUSANDS)
MUNICIPAL OBLIGATIONS (NOTE A) - 96.24%
COLORADO - 10.46%
Moffat County, Colorado Pollution Control Revenue Bonds, Series 1984 (Ute Electric
Company Project), Bond Insurance - Ambac Assurance Corporation, 2.65%,
Due 7/1/2010, SPA Societe Generale ........................................................ $3,300 $ 3,300
---------
TOTAL COLORADO ...................................................................... 3,300
---------
FLORIDA - 12.13%
Alachua County, Florida Housing Financial Authority, Multifamily Housing
Revenue Bonds, Series 2001 (University Cove Apartment Project), 2.34%,
Due 6/15/2034, LOC SouthTrust Bank, NA ................................................... 1,830 1,830
Orange County Health Facilities Authority, Variable Rate Demand Revenue
Bonds, Series 1992 (Adventist Health System/Sunbelt, Inc.) 2.32%,
Due 11/15/2014, LOC - Suntrust Bank ..................................................... 2,000 2,000
---------
TOTAL FLORIDA ......................................................................... 3,830
---------
ILLINOIS - 5.70%
Village of Richton Park, Illinois-Industrial Development Revenue Bonds-Series 1997
(Avatar Corporation Project), 2.19%, Due 4/1/2027, LOC Fifth Third Bank .................. 1,800 1,800
---------
TOTAL ILLINOIS ....................................................................... 1,800
---------
INDIANA - 3.17%
Fort Wayne, Indiana Industrial Economic Development Revenue Bonds, Series 1989
(ND-Tech Corporation Project), 2.40%, Due 7/1/2009, LOC Societe Generale .................. 1,000 1,000
---------
TOTAL INDIANA ......................................................................... 1,000
---------
KENTUCKY - 11.10%
Carroll County, Kentucky Solid Waste Disposal Revenue Bonds, Series 2001
(North American Stainless, L.P.) 2.01%, Due 5/1/2031, LOC Fifth Third Bank ............... 1,100 1,100
County of Breckinridge, Kentucky Association of Counties Leasing Trust,
Lease Program Revenue Bonds, Series 2001A, 2.00%, Due 2/1/2031, LOC US Bank ............. 2,405 2,405
---------
TOTAL KENTUCKY ........................................................................ 3,505
---------
MARYLAND - 5.32%
Montgomery County, Maryland Variable Rate Housing Revenue Bonds, Series 1997, Issue I
(The Grand), 2.01%, Due 6/1/2030, LOC Federal National Mortgage Association ............. 1,680 1,680
---------
TOTAL MARYLAND ...................................................................... 1,680
---------
MICHIGAN - 8.81%
Michigan Higher Education Student Loan Authority, Student Loan Revenue Bonds, Series XII-X,
Bond Insurance - Ambac Assurance Corporation, 2.03%, Due 9/1/2031, SPA Lloyds TSB ....... 1,000 1,000
Michigan State Housing Development Authority Variable Rate Limited Obligation Multifamily
Housing Revenue Refunding Bonds, 2.03%, Due 6/1/2018, LOC Bank of New York ................ 1,780 1,780
---------
TOTAL MICHIGAN ....................................................................... 2,780
---------
NEVADA - 3.17%
Nevada Housing Divison-Variable Rate Demand Multi-Unit Housing Revenue Bonds-Series 2004
(Sundance Village Apartments), 2.00%, Due 10/1/2035, LOC Citibank ....................... 1,000 1,000
---------
TOTAL NEVADA ......................................................................... 1,000
---------
NEW YORK - 7.60%
New York City Housing Development Corporation, Multi-Family Mortgage Revenue Bonds,
2002A (First Avenue Development), 2.25%, Due 10/15/2035, LOC Bank of New York Series ..... 800 800
New York State Housing Finance Agency, 66 West 38th Sreet Housing Revenue Bonds,
Series 2000A, 2.29%, Due 5/15/2033, LOC Bank of New York ................................. 1,600 1,600
---------
TOTAL NEW YORK ........................................................................ 2,400
---------
See accompanying notes
- --------------------------------------------------------------------------------
29
AMERICAN BEACON MASTER MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
June 30, 2005 (unaudited)
================================================================================
PAR
AMOUNT VALUE
-------- -------
(DOLLARS IN THOUSANDS)
OHIO - 5.39%
Ohio Water Development Authority, Environmental Improvement Revenue Bonds, Series 2000B
(Waste Management, Incorporated Project), 2.45%, Due 7/1/2020, LOC Fleet National Bank ..... $ 1,700 $ 1,700
-------
TOTAL OHIO ........................................................................... 1,700
-------
PENNSYLVANIA - 6.13%
Berks County Industrial Development Authority Manufacturing Facilities Revenue Bonds,
Series 1995 (Grafika Commerial Printing Inc.), 2.39%, Due 9/1/2010,
LOC First Union National Bank ............................................................. 1,035 1,035
Chartiers Valley, Pennsylvania Industrial and Commercial Development Authority
Commercial Development Bonds (William Penn Plaza Project), 2.75%,
Due 12/1/2016, LOC PNC Bank, NA ............................................................ 900 900
-------
TOTAL PENNSYLVANIA ................................................................... 1,935
-------
TEXAS - 8.87%
City of Midlothian, Texas Industrial Development Corporation, Environmental Facilities
Revenue Bonds, Series 1999 (Holnam Texas Limited Partnership Project) 2.03%,
Due 9/1/2031, LOC Bank One ................................................................. 1,200 1,200
Mansfield Texas Industrial Development Corporation, Variable Rate Demand Revenue Bonds,
Series 1986, 2.30%, Due 11/1/2026, LOC - Bank of New York ................................. 1,600 1,600
-------
TOTAL TEXAS ............................................................................ 2,800
-------
UTAH - 3.64%
Morgan County, Utah Solid Waste Disposal Revenue Bonds, Series 1996
(Holman, Inc. Project), 2.05%, Due 8/1/2031, LOC Wachovia Bank, NA ......................... 1,150 1,150
-------
TOTAL UTAH ........................................................................... 1,150
-------
WYOMING - 4.75%
Sweetwater County, Wyoming Pollution Control Revenue Refunding Bonds,
Series 1990A (Pacificorp Project), 2.28%, Due 7/1/2015, LOC First National Bank ............ 1,500 1,500
-------
TOTAL WYOMING ........................................................................ 1,500
-------
TOTAL MUNICIPAL OBLIGATIONS ........................................................... 30,380
-------
SHARES
------
OTHER INVESTMENTS - 3.47%
Dreyfus Municipal Cash Management Plus, Inc. ................................................... 12 -
Federated Municipal Obligations Fund ........................................................... 932,882 933
BlackRock Provident MuniCash Fund .............................................................. 162,133 162
-------
TOTAL OTHER INVESTMENTS ............................................................... 1,095
-------
TOTAL INVESTMENTS - 99.71% (COST $31,475) ..................................................... 31,475
-------
OTHER ASSETS, NET OF LIABILITIES - 0.29% ..................................................... 92
-------
TOTAL NET ASSETS - 100% ...................................................................... $31,567
=======
- -----------------
Based on the cost of investments of $31,475 for federal income tax purposes at
June 30, 2005, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity or
yield to next reset date.
See accompanying notes
- --------------------------------------------------------------------------------
30
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2005 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== ============
(IN THOUSANDS)
ASSETS:
Investments in securities at value (cost - $5,991,077,
$98,925 and $31,475, respectively) .................. $5,991,077 $ 98,925 $31,475
Repurchase agreements (cost - $1,215,000,
$93,046 and $0 respectively) .......................... 1,215,000 93,046 -
Receivable from interfund lending ...................... 1,964 - -
Dividends and interest receivable ........................ 18,641 421 100
Prepaid expenses ......................................... 136 12 1
---------- -------- -------
TOTAL ASSETS ......................................... 7,226,818 192,404 31,576
---------- -------- -------
LIABILITIES:
Management and investment advisory fees payable (Note 2).. 640 19 4
Other liabilities ...................................... 159 8 5
---------- -------- -------
TOTAL LIABILITIES ................................... 799 27 9
---------- -------- -------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS .... $7,226,019 $192,377 $31,567
========== ======== =======
See accompanying notes
- --------------------------------------------------------------------------------
31
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2005 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== ============
(IN THOUSANDS)
INVESTMENT INCOME:
Interest income .......................................... $91,846 $3,381 $452
------- ------ ----
TOTAL INVESTMENT INCOME ............................... 91,846 3,381 452
------- ------ ----
EXPENSES:
Management and investment advisory fees (Note 2) ......... 3,262 123 20
Custodian fees ........................................... 190 7 1
Professional fees ........................................ 80 4 -
Other expenses ........................................... 91 5 1
------- ------ ----
TOTAL EXPENSES ........................................ 3,623 139 22
------- ------ ----
NET INVESTMENT INCOME ....................................... 88,223 3,242 430
------- ------ ----
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ......................... 13 6 -
------- ------ ----
NET GAIN ON INVESTMENTS ............................... 13 6 -
------- ------ ----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $88,236 $3,248 $430
======= ====== ====
See accompanying notes
- --------------------------------------------------------------------------------
32
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
============================== ==========================
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
2005 DECEMBER 31, 2005 DECEMBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
------------ ------------ ----------- ------------
(IN THOUSANDS)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ...................... $ 88,223 $ 70,915 $ 3,242 $ 3,441
Net realized gain on investments .......... 13 208 6 15
------------ ------------ -------- -----------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................... 88,236 71,123 3,248 3,456
------------ ------------ -------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions .......................... 51,533,535 59,602,193 701,467 1,351,736
Withdrawals .............................. (49,802,173) (59,216,512) (761,857) (1,340,743)
------------ ------------ -------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS .... 1,731,362 385,681 (60,390) 10,993
------------ ------------ -------- -----------
NET INCREASE (DECREASE) IN NET ASSETS . 1,819,598 456,804 (57,142) 14,449
------------ ------------ -------- -----------
NET ASSETS:
Beginning of period ...................... 5,406,421 4,949,617 249,519 235,070
------------ ------------ -------- -----------
END OF PERIOD ........................... $ 7,226,019 $ 5,406,421 $192,377 $ 249,519
============ ============ ======== ===========
MUNICIPAL MONEY MARKET
================================
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
2005 DECEMBER 31,
(UNAUDITED) 2004
------------- --------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ...................... $ 430 $ 464
Net realized gain on investments .......... - -
------- --------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................... 430 464
------- --------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions .......................... 43,164 56,379
Withdrawals .............................. (47,321) (61,336)
------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS .... (4,157) (4,957)
------- --------
NET INCREASE (DECREASE) IN NET ASSETS . (3,727) (4,493)
------- --------
NET ASSETS:
Beginning of period ...................... 35,294 39,787
------- --------
END OF PERIOD ........................... $31,567 $ 35,294
======= ========
See accompanying notes
- --------------------------------------------------------------------------------
33
AMERICAN BEACON MASTER TRUST PORTFOLIOS
FINANCIAL HIGHLIGHTS
================================================================================
MONEY MARKET
===============================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ================================================
2005 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- --------
(UNAUDITED)
Total return ................................ 1.34%(A) 1.34% 1.13% 1.81% 4.30% N/A
Ratios to average net assets (annualized):
Expenses .................................. 0.11% 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income ..................... 2.70% 1.30% 1.14% 1.81% 3.95% 6.40%
- ----------
(A) Not annualized.
- --------------------------------------------------------------------------------
34
===============================================================
U.S. GOVERNMENT MONEY MARKET
===============================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ===============================================
2005 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
(UNAUDITED)
1.33%(A) 1.30% 1.11% 1.74% 4.24% N/A
0.11% 0.11% 0.12% 0.12% 0.11% 0.13%
2.63% 1.30% 1.13% 1.71% 3.99% 6.27%
MUNICIPAL MONEY MARKET
===============================================================
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ===============================================
2005 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
(UNAUDITED)
1.08%(A) 1.18% 1.08% 1.39% 2.71% N/A
0.11% 0.11% 0.12% 0.12% 0.13% 0.13%
2.20% 1.14% 1.05% 1.39% 2.71% 4.05%
- --------------------------------------------------------------------------------
35
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 2005 (Unaudited)
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Master Trust (the "Trust"), formerly known as AMR Investment
Services Trust, is registered under the Investment Company Act of 1940, as
amended, as a no load, open-end management investment company that was organized
as a trust under the laws of the Commonwealth of Massachusetts pursuant to a
Declaration of Trust dated as of November 1, 2004. Prior to November 1, 2004,
the Trust was organized as a trust under the laws of the State of New York.
Beneficial interests in the Trust are divided into separate series, each having
distinct investment objectives and policies. These financial statements relate
to the American Beacon Master Money Market Portfolio, American Beacon Master
U.S. Government Money Market Portfolio and American Beacon Master Municipal
Money Market Portfolio (each a "Portfolio" and collectively the "Portfolios").
The assets of each Portfolio belong only to that Portfolio, and the liabilities
of each Portfolio are borne solely by that Portfolio and no other.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Security Valuation
Securities of the Portfolios are valued at fair value, which approximates
amortized cost. In the event that a deviation of 1/2 of 1% or more exists
between the $1.00 per share price of the Portfolios, calculated at amortized
cost, and the price per share calculated by reference to market quotations, or
if there is any other deviation that the Trust's Board of Trustees (the "Board")
believes would result in a material dilution to shareholders or purchasers, the
Board will promptly consider the appropriate action that should be initiated.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums or
accretion of discounts on investment grade short-term securities and zero coupon
instruments. For financial and tax reporting purposes, realized gains and
losses are determined on the basis of specific lot identification.
Federal Income and Excise Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Portfolio from a securities dealer or a bank that are subject to resale at a
later date. Repurchase agreements are fully collateralized by U.S. Treasury or
U.S. Government agency securities. All collateral is held at the Portfolio's
custodian bank, State Street Bank and Trust Company, or at subcustodian banks.
The collateral is monitored daily by the Manager so that the collateral's market
value exceeds the carrying value of the repurchase agreement plus accrued
interest.
- --------------------------------------------------------------------------------
36
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2005 (Unaudited)
================================================================================
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. The Manager serves as
the sole investment advisor to each of the Portfolios. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Portfolios 0.10% of the average daily net assets of each of
the Portfolios.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission,
the Portfolios, 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
Portfolios to lend money to other participating series managed by the Manager.
For the six months ended June 30, 2005, the Money Market Portfolio earned $703
under the credit facility. This amount is included in interest income on the
financial statements.
Other
Certain officers or Trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Mr. Feld and the non-interested Trustees (other than
Mr. O'Sullivan) and their spouses are provided free unlimited air transportation
on American. Retired Trustees and their spouses are provided free air
transportation on American, up to a maximum annual value of $40,000. The Trust
compensates each Trustee with payments in an amount equal to the Trustee's
income tax on the value of this free airline travel. Mr. O'Sullivan as a retiree
of American, already receives flight benefits. Mr. O'Sullivan receives an annual
retainer of $40,000 plus $1,250 for each Board meeting attended.
- --------------------------------------------------------------------------------
37
RENEWAL OF MANAGEMENT AGREEMENTS
(Unaudited)
================================================================================
At their February 23, 2005 meeting, the Trustees considered the renewal of
the existing Management Agreement between the Manager and the Funds. As part of
the renewal process, legal counsel to the Trusts and the independent Trustees
sent information request letters to the Manager seeking certain relevant
information. The response by the Manager was provided to the Trustees for their
review prior to their meeting, and the Trustees were provided with the
opportunity to request any additional materials.
The Trustees considered, among other materials, response by the Manager to
inquiries requesting:
o a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or any
other area, including how these changes might affect the Funds;
o a copy of the most recent audited or unaudited financial statements as
well as Parts I and II of its Form ADV;
o a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the Manager or its personnel, including
the results of any recent regulatory examination or independent audit;
o a comparison of the performance of each Fund with performance of other
similar accounts managed by the Manager, including a discussion of
relative performance versus a peer group average and any remedial
measures if the Manager's performance was materially below that of the
peer group;
o a cost/profitability analysis of the Manager and any actual or
anticipated economies of scale in relation to the services it provides
to the Funds, if available;
o an analysis of compensation, including a comparison with fees charged to
other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
o an evaluation of any other benefits to the Manager or Funds as a result
of their relationship, if any;
o a description of the scope of portfolio management services provided to
the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies;
o a description of the personnel who are assigned primary responsibility
for managing the Fund, including any changes during the past year;
o a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
o a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
o a discussion regarding the Manager's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with
respect to Fund transactions, including the Manager's methodology for
obtaining the most favorable execution and the use of any affiliated
broker-dealers;
o a description of trade allocation procedures among accounts managed by
the Manager;
o a discussion of the Manager's compliance program with regard to federal,
state, corporate and Fund requirements;
- --------------------------------------------------------------------------------
38
RENEWAL OF MANAGEMENT AGREEMENTS
(Unaudited) - (Continued)
================================================================================
o information regarding the Manager's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
o a description of the Manager's affiliation with any broker-dealer;
o a discussion of any anticipated change in the Manager's controlling
persons;
o verification of the Manager's insurance coverage with regards to the
services provided to the Funds;
o a table comparing the performance of each Fund to appropriate indices,
including comments on each Fund's relative performance;
o a table detailing the Manager's profitability with respect to each Fund;
o an analysis of any material complaints received from Fund shareholders;
o a description of how expenses that are not readily identifiable to a
particular Fund are allocated; and
o any ideas for the future growth and efficient operation of the Funds.
The Trustees were also provided with an analysis provided by Lipper, Inc.,
which compared: (i) investment performance of each Fund versus comparable
investment companies and appropriate indices; (ii) total expenses of each Fund
versus comparable mutual funds, and (iii) each Fund's investment advisory fees
versus comparable mutual funds.
Legal counsel provided the Trustees with a memorandum detailing their
responsibilities pertaining to the renewal of the Management Agreements. This
memorandum explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
- ----------------------------------------
In determining whether to approve the continuance of the Management
Agreement, the Trustees considered the best interests of each Fund separately.
In each instance, the Trustees considered, among other things, the following
factors: (1) the nature and quality of the services provided; (2) the investment
performance of the Fund and the Manager; (3) the Manager's cost for providing
the services and the profitability of the advisory business to the Manager; (4)
the extent to which economies of scale have been taken into account in setting
the fee schedule; and (5) whether fee levels reflect these economies of scale
for the benefit of Fund investors. The Trustees posed questions to various
management personnel of the Manager regarding certain key aspects of the
material submitted in support of the renewal.
With respect to the renewal of the Management Agreement, the Trustees
considered: the Manager's ability to retain key investment personnel and to
provide consistent performance and an active client service program; the
Manager's goal to continue to provide consistent above average long-term
performance at low cost; the continuing efforts by the Manager to add new series
so as to enhance the Trust's product line; the Manager's record in building
improved compliance, control and credit functions that reduce risks to the
Funds; and the addition of personnel to manage the Funds, promote sales and
improve services.
ADDITIONAL CONSIDERATIONS WITH RESPECT TO THE MONEY MARKET MILEAGE FUND
- -----------------------------------------------------------------------
In considering the renewal of the Management Agreement, the Trustees
considered the following additional factors: (1) the Money Market Mileage Fund -
Mileage Class had substantially above-average performance for all reported
periods ended December 31, 2004; (2) the management fees for the Money Market
Mileage Fund were lower than the average of the Fund's peer group and other
comparable funds,
- --------------------------------------------------------------------------------
39
RENEWAL OF MANAGEMENT AGREEMENTS
(Unaudited) - (Continued)
================================================================================
although total expense ratios of the Mileage and Platinum Classes were higher
than their peers; (3) the Trustees deemed the profit made by the Manager on the
services it provided to the Fund to be reasonable in light of the fact that the
Manager provides high-quality services at a low cost to investors, manages the
Fund's assets, is subject to a high degree of risk of financial responsibility
should the Fund be unable to maintain its stable $1.00 per share net asset value
and provides a comprehensive compliance program for the Fund; (4) the Manager's
explanation that fee schedule "breakpoints" were not warranted due to, among
other factors, the low, base management fee charged to the Fund; and (5) the
Manager has contractually agreed to continue to waive fees and/or reimburse Fund
expenses to the extent necessary to maintain a competitive total expense ratio
for the Platinum Class of shares of the Fund.
Based on these considerations and those noted above with respect to all
Funds, the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the Money
Market Mileage Fund and its shareholders would benefit from the Manager's
continued management of the Fund and (3) approved the renewal of the Management
Agreement with respect to the Money Market Mileage Fund.
ADDITIONAL CONSIDERATIONS WITH RESPECT TO THE MUNICIPAL MONEY MARKET MILEAGE
- ----------------------------------------------------------------------------
FUND
- ----
In considering the renewal of the Management Agreement, the Trustees
considered the following additional factors: (1) the Municipal Money Market
Mileage Fund - Mileage Class matched the performance of its peer group for the
one-year period ended December 31, 2004, but underperformed its peer group for
longer periods primarily due to its relatively higher expense ratio; (2) the
management fees for the Municipal Money Market Mileage Fund were lower than the
average of the Fund's peer group and other comparable funds, although the total
expense ratio was higher than its peers; (3) the Manager incurred a loss on the
services it provided to the Fund; (4) the Manager provides high-quality services
at a low cost to investors, manages the Fund's assets, is subject to a high
degree of risk of financial responsibility should the Fund be unable to maintain
its stable $1.00 per share net asset value and provides a comprehensive
compliance program for the Fund; (5) the Manager's explanation that fee schedule
"breakpoints" were not warranted due to, among other factors, the low, base
management fee charged to the Fund; and (6) the Manager has contractually agreed
to continue to waive fees and/or reimburse Fund expenses to the extent necessary
to maintain a competitive total expense ratio for the Platinum Class of shares
of the Fund.
Based on these considerations and those noted above with respect to all
Funds, the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the Municipal
Money Market Mileage Fund and its shareholders would benefit from the Manager's
continued management of the Fund and (3) approved the renewal of the Management
Agreement with respect to the Municipal Money Market Mileage Fund.
ADDITIONAL CONSIDERATIONS WITH RESPECT TO THE U.S. GOVERNMENT MONEY MARKET
- --------------------------------------------------------------------------
MILEAGE FUND
- ------------
In considering the renewal of the Management Agreement, the Trustees
considered the following additional factors: (1) the U.S. Government Money
Market Mileage Fund-Mileage Class outperformed its peer group for the one-year
period ended December 31, 2004, but under performed its peer group for longer
periods primarily due to its relatively higher expense ratio; (2) the management
fees for the U.S. Government Money Market Mileage Fund were lower than the
average of the Fund's peer group and other comparable funds, although total
expense ratios of the Mileage and Platinum Classes were higher than their peers;
(3) the Manager incurred a loss on the services it provided to the Fund; (4) the
Manager provides high-quality services at a low cost to investors, manages the
Fund's assets, is subject to a high
- --------------------------------------------------------------------------------
40
RENEWAL OF MANAGEMENT AGREEMENTS
(Unaudited) - (Continued)
================================================================================
degree of risk of financial responsibility should the Fund be unable to maintain
its stable $1.00 per share net asset value and provides a comprehensive
compliance program for the Fund; (5) the Manager's explanation that fee schedule
"breakpoints" were not warranted due to, among other factors, the low, base
management fee charged to the Fund; and (6) the Manager has contractually agreed
to continue to waive fees and/or reimburse Fund expenses to the extent necessary
to maintain a competitive total expense ratio for the Platinum Class of shares
of the Fund.
Based on these considerations and those noted above with respect to all
Funds, the Trustees (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable, (2) determined that the U.S.
Government Money Market Mileage Fund and its shareholders would benefit from the
Manager's continued management of the Fund and (3) approved the renewal of the
Management Agreement with respect to the U.S. Government Money Market Mileage
Fund.
- --------------------------------------------------------------------------------
41
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[LOGO OF AMERICAN BEACON MILEAGE FUNDS] AMERICAN BEACON
MILEAGE FUNDS(SM)
================================================================================
DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
Prospectus, Annual Report and Semi-Annual Report to those addresses shared by
two or more accounts. If you wish to receive individual copies of these
documents, please contact your financial institution. Delivery of individual
copies will commence thirty days after receiving your request.
If you invest in the Funds through a financial institution, you may be able to
receive the Funds' regulatory mailings, such as the Prospectus, Annual Report
and Semi-Annual Report, by e-mail. If you are interested in this option, please
go to www.icsdelivery.com and search for your financial institution's name or
contact your financial institution directly.
TO OBTAIN MORE INFORMATION ABOUT THE FUNDS:
[LOGO OF KEYBOARD] [LOGO OF MOUSE]
BY E-MAIL: ON THE INTERNET:
American_Beacon.Funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
- -----------------------------------------------------------------------------------------------------------------------------------
[LOGO OF TELEPHONE:] [LOGO OF MAIL]
BY TELEPHONE: BY MAIL:
Mileage Class(R) Platinum Class(SM) Mileage Class(R) Platinum Class(SM)
------------- -------------- ------------- --------------
Call (800) 388-3344 Call (800) 967-9009 American Beacon Funds American Beacon Funds
P.O. Box 219643 4151 Amon Carter Blvd., MD 2450
Kansas City, MO 64121-9643 Fort Worth, TX 76155
- -----------------------------------------------------------------------------------------------------------------------------------
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
In addition to the Schedule of Investments provided in each semiannual and
annual report, each Fund files a complete schedule of its portfolio holdings
with the Securities and Exchange Commission ("SEC") on Form N-Q as of the first
and third fiscal quarters. The Funds' Forms N-Q are available on the SEC's
website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549.
Information regarding the operation of the SEC's Public Reference Room may be
obtained by calling 1-800-SEC-0330. A complete schedule of each Fund's portfolio
holdings is also available on the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each fiscal quarter.
AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available in each Fund's
Statement of Additional Information, which may be obtained free of charge by
calling 1-800-967-9009 or by accessing the SEC's website at www.sec.gov. Each
Fund's proxy voting record for the most recent year ended June 30 is filed
annually with the SEC on Form N-PX. The Funds' Forms N-PX are available on the
SEC's website at www.sec.gov. Each Fund's proxy voting record may also be
obtained by calling 1-800-967-9009.
FUND SERVICE PROVIDERS:
=========================== ============================== ====================== ======================
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine
Chicago, Illinois
This report is prepared for shareholders of the American Beacon Mileage Funds
and may be distributed to others only if preceded or accompanied by a current
prospectus.
================================================================================
American Airlines, Inc. is not responsible for investments made in the American
Beacon Mileage Funds. American Beacon Mileage Funds is a service mark of AMR
Corporation. Mileage Class is a registered service mark of American Beacon
Advisors, Inc. Platinum Class, American Beacon Money Market Mileage Fund,
American Beacon U.S. Government Money Market Mileage Fund, and American Beacon
Municipal Money Market Mileage Fund are service marks of American Beacon
Advisors, Inc.
[LOGO OF AMERICAN BEACON MILEAGE FUNDS] AMERICAN BEACON
MILEAGE FUNDS(SM)
4151 Amon Carter Blvd.
MD 2450
Fort Worth, TX 76155
1.800.388.3344
www.americanbeaconfunds.com 534555
ITEM 2. CODE OF ETHICS.
The Trust did not amend the code of ethics that applies to its principal
executive and financial officers (the "Code") nor did it grant any waivers to
the provisions of the Code during the period covered by the shareholder reports
presented in Item 1.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder reports presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached
hereto as EX-99.CERT.
(a)(3) Not Applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Mileage Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: September 2, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: September 2, 2005
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: September 2, 2005