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)
Douglas G. Herring, 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, 2007
Date of reporting period: June 30, 2007
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
(AMERICAN BEACON MILEAGE FUNDS(SM) LOGO)
Semi-Annual Report
June 30, 2007
MONEY MARKET MILEAGE FUND
ABOUT AMERICAN BEACON
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 you.
CONTENTS
PRESIDENT'S MESSAGE................................................ 1
FINANCIAL HIGHLIGHTS
MONEY MARKET MILEAGE FUND....................................... 12
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO.......................................... 13
ADDITIONAL INFORMATION............................................. BACK COVER
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Money Market Mileage Fund June 30, 2007
(PHOTO OF DOUGLAS G. HERRING)
Fellow Shareholders,
I am pleased to present to you the Semi-Annual Report for the American
Beacon Money Market Mileage Fund for the six months ended June 30, 2007.
For this period, the Fund performed well, returning 2.39% versus the Lipper
Money Market Funds Average return of 2.23%.
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 access Fund and account information at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Money Market Mileage Fund.
Sincerely,
/s/ Douglas G. Herring
Douglas G. Herring
President
American Beacon Mileage Funds
1
ECONOMIC OVERVIEW
JUNE 30, 2007 (UNAUDITED)
Annualized Gross Domestic Product ("GDP") growth came in at an anemic 0.7%
during the first quarter of 2007, the lowest rate of growth in four years.
Inventory drawdowns, a widening trade deficit and an ongoing slump in the
housing market were the main contributors to the slowdown. GDP growth in the
second quarter recovered to an estimated 3.4% annualized rate as consumer
spending held strong and business investment rebounded. The labor market
remained a bright spot for the economy. Higher wages enabled consumers to keep
spending despite increasing energy prices and declining home values. Payroll
gains averaged 148,000 per month during the second quarter of 2007 and the
unemployment rate remained near a six-year low at 4.5% in June.
The Federal Open Market Committee ("Fed") left rates unchanged at 5.25% at
both the May and June meetings. This marked eight consecutive meetings with no
movement from the Fed. In its June statement, the Fed acknowledged that the
economy was expected to expand at a moderate pace and that core inflation
measures had improved modestly. However, Fed officials remained concerned about
the high level of resource utilization and stated that "a sustained moderation
in inflation pressures has yet to be convincingly demonstrated." Thus the Fed's
inflation bias remained in place after the June meeting.
Though economic growth recovered in the second quarter and the Fed has been
unremitting in its commitment to contain inflation, the market is fearful that
subprime mortgage difficulties could spill over into the broader economy. As
such, the Fed continues to maintain ample flexibility by stating that "future
policy adjustments will depend on the evolution of the outlook for both
inflation and economic growth."
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
JUNE 30, 2007 (UNAUDITED)
The Money Market Fund will maintain the strategy of purchasing high quality
commercial paper maturing in 3 months or less and 3-month London Interbank
Offered Rate (LIBOR) based variable rate securities until it becomes apparent
that the Fed is on the verge of lowering interest rates. In addition, we remain
conservative on credit risk given the volatile credit spread environment and
effects of the subprime mortgage difficulties.
For the six months ended June 30, 2007, the total return of the American
Beacon Money Market Mileage Fund -- Mileage Class was 2.39%. The Fund
outperformed the Lipper Money Market Average return of 2.23% by 16 basis points
(0.16%). 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, 2007
(PERFORMANCE GRAPH)
1 YEAR 5 YEARS* 10 YEARS*
------ -------- ---------
American Beacon Money Market Mileage Fund 4.93% 2.40% 3.50%
Lipper Money Market Funds Average 4.54% 2.06% 3.24%
* Annualized
ANNUALIZED TOTAL RETURNS
AS OF 06/30/2007
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1, 2) .................... 4.93% 2.40% 3.50%
(1) Performance shown is historical and may not be indicative of future
returns. Investment returns will vary, and shares may be worth more or less
at redemption than at original purchase. 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 the 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 total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Fund was 0.80%. The expense ratio above may vary
from the expense ratio presented in other sections of this report that are
based on expenses incurred during the period covered by this report.
PORTFOLIO STATISTICS AS OF JUNE 30, 2007
MILEAGE CLASS
-------------
7-day Current Yield* 4.44%
7-day Effective Yield* 4.54%
30-day Yield* 4.42%
Weighted Avg. Maturity 35 Days
* Annualized. You may call 1-800-967-9009 to obtain the Fund's current seven
day yields. Yield is a more accurate reflection of the Fund's current
earnings than total returns.
TOP TEN ISSUERS AS OF JUNE 30, 2007
% OF
NET ASSETS**
------------
General Electric Capital Corp. 5.2%
Royal Bank of Scotland plc 5.2%
Bank of America 4.9%
Lehman Brothers 4.8%
Calyon N.Y. 4.7%
Citigroup 4.7%
FCAR Owner Trust, Series I 4.6%
Natixis 4.5%
US Bank, NA 4.0%
Toyota Motor Credit Corp. 3.8%
** Percent of net assets of American Beacon Master Money Market Portfolio.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
JUNE 30, 2007 (UNAUDITED)
ASSET ALLOCATION AS OF JUNE 30, 2007
% OF
NET ASSETS**
------------
Bank CDs, TDs and Notes 36.8%
Corporate Notes 34.8%
Commercial Paper 20.2%
Repurchase Agreements 8.6%
Funding Agreements 0.9%
Liabilities, Net of Other Assets -1.3%
** Percent of net assets 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 and held for the entire period from January 1, 2007 through June 30,
2007.
ACTUAL EXPENSES
The "Actual" line of the table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the "Actual" 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" line of the table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" line of the
table is useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
Expenses
Paid
Beginning Ending During
Account Account Period*
Value Value 1/1/07-
1/1/2007 6/30/07 6/30/07
--------- --------- --------
MILEAGE CLASS
Actual ...................................... $1,000.00 $1,023.90 $3.01
Hypothetical (5% return before expenses) .... $1,000.00 $1,021.82 $3.01
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.60% 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.
4
AMERICAN BEACON MONEY MARKET MILEAGE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investment in Portfolio, at value ............................. $ 48,459
Receivable from Manager for expense reimbursement (Note 2) .... 1
Prepaid expenses .............................................. 67
-----------
TOTAL ASSETS ............................................... 48,527
-----------
LIABILITIES:
Payable for fund shares redeemed .............................. 12
Distribution fees payable (Note 2) ............................ 10
Dividends payable ............................................. 2
Administrative service and service fees payable (Note 2) ...... 3
Other liabilities ............................................. 66
-----------
TOTAL LIABILITIES .......................................... 93
-----------
NET ASSETS .................................................... $ 48,434
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ............................................ 48,434
-----------
NET ASSETS ....................................................... $ 48,434
===========
SHARES OUTSTANDING (NO PAR VALUE):
Mileage Class ................................................. 48,434,355
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Mileage Class ................................................. $ 1.00
===========
See accompanying notes
5
AMERICAN BEACON MONEY MARKET MILEAGE FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income ............................................... $8,016
Portfolio expenses ............................................ (161)
------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ............. 7,855
------
FUND EXPENSES:
Administrative service fees (Note 2) .......................... 149
Administrative service fees - Platinum Class (Note 2) ......... 805
Transfer agent fees - Mileage Class ........................... 9
Transfer agent fees - Platinum Class ......................... 15
Professional fees ............................................. 2
Registration fees and expenses ................................ 8
Distribution fees - Mileage Class (Note 2) .................... 63
Distribution fees - Platinum Class (Note 2) ................... 310
Prospectus and shareholder reports ............................ 4
Other expenses ................................................ (17)
------
TOTAL FUND EXPENSES ........................................ 1,348
------
Less reimbursement of fund expense (Note 2) ................... --
------
NET FUND EXPENSES .......................................... 1,348
------
NET INVESTMENT INCOME ............................................ 6,507
------
REALIZED GAIN ALLOCATED FROM PORTFOLIO
Net realized gain on investments .............................. 3
------
NET GAIN ON INVESTMENTS .................................... 3
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $6,510
======
See accompanying notes
6
AMERICAN BEACON MONEY MARKET MILEAGE FUND
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six Months
ended Year ended
June 30, December 31,
2007 2006
----------- ------------
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................... $ 6,507 $ 15,307
Net realized gain on investments................ 3 --
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ 6,510 15,307
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Mileage class................................ (1,204) (2,227)
Mileage Platinum class....................... (5,303) (13,080)
Net realized gain on investments:
Mileage Platinum Class....................... (3) --
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS................ (6,510) (15,307)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares................... 96,017 160,635
Reinvestment of dividends and distributions..... 6,074 15,219
Cost of shares redeemed......................... (440,196) (189,487)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS........ (338,105) (13,633)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS.............. (338,105) (13,633)
--------- ---------
NET ASSETS:
Beginning of period............................. 386,539 400,172
--------- ---------
END OF PERIOD................................... $ 48,434 $ 386,539
========= =========
See accompanying notes
7
AMERICAN BEACON MONEY MARKET MILEAGE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The American Beacon Money Market Mileage Fund (the "Fund") is organized as
a Massachusetts business trust and is registered under the Investment Company
Act of 1940 (the "Act"), as amended, as a diversified, no load, open-end
management investment company.
The Fund invests all of its investable assets in the Money Market Portfolio
of the American Beacon Master Trust (the "Portfolio"), an open-end diversified
management investment company.
AMERICAN BEACON: (ARROW) invests assets in (ARROW) AMERICAN BEACON MASTER TRUST:
- ---------------- -----------------------------
Money Market Mileage Fund Money Market Portfolio
The Fund has the same investment objectives as the Portfolio, and the value
of such investment reflects the Fund's proportionate interest in the net assets
of the portfolio (0.28% at June 30, 2007). The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation 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 Fund.
Class Disclosure
The Platinum Class was fully liquidated effective May 31, 2007.
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ ----------- --------------------------------
Mileage Class Individuals and certain grantor trusts Distribution Fee- 0.25%
Platinum Class Investors investing through selected Administrative Service Fee- 0.65%
financial institutions (such as banks Distribution Fee- 0.25%
and broker dealers)
Valuation of Investments
The Fund records its investment in the Portfolio at fair value. Valuation
of securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes
to Financial Statements, which are included elsewhere in this report.
Investment Income and Dividends to Shareholders
The 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 the Portfolio are allocated pro rata among the
corresponding Fund and other investors in the Portfolio at the time of such
determination. The Fund generally declares 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.
8
AMERICAN BEACON MONEY MARKET MILEAGE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (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.
Recently Issued Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The Fund
adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken
by the Fund have been deemed to meet the more likely than not threshold, and
therefore, there have been no adjustments to the Fund's net asset value per
share.
In September 2006, the FASB issued Statement on Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about the
use of fair value measurements. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Manager is evaluating the impact of FAS 157;
however, it is not expected to have a material impact on the Fund's net assets
or results of operations.
Other
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Fund. In the normal course of business, the Fund enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Fund's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Fund has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Manager and the Fund entered into a Management Agreement that obligates
the Manager to provide or oversee administrative and management services to the
Fund. 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 the Fund.
Distribution Plan
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Act. Under the Plan, as compensation for distribution
assistance, the Manager receives an annualized fee of 0.25% of the average daily
net assets. 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. In adopting the Plan, the Fund's Board
of Trustees determined that there was a reasonable likelihood that the Plan
would benefit the Fund and the shareholders.
9
AMERICAN BEACON MONEY MARKET MILEAGE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
Expense Reimbursement Plan
The Fund has adopted an Expense Reimbursement Plan whereby the Manager may
seek recoupment of fees waived or expenses reimbursed for a period of up to
three years. However, recoupment will occur only if the Class average net assets
have grown or expenses have declined sufficiently to allow recoupment without
causing its expense ratio to exceed the previously agreed upon contractual
expense limit. For the six months ended June 30, 2007, there are no fees subject
to recoupment.
3. FEDERAL INCOME TAXES
It is the policy of the Fund to comply with the requirements of Subchapter
M of the Internal Revenue Code 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.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes because of temporary or permanent
book-to-tax differences. To the extent these differences are permanent,
reclassifications are made to the appropriate equity accounts in the period that
the differences arise. Temporary differences are not reflected in the financial
records.
Dividends are categorized in accordance with federal income tax regulations
which may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid during the six months ended June 30,
2007 and fiscal year ended December 31, 2006 were as follows (in thousands):
MONEY MARKET MILEAGE
-----------------------------
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
2007 2006
-------------- ------------
(UNAUDITED)
DISTRIBUTIONS PAID FROM ORDINARY INCOME:*
Mileage Class ............................... $1,204 $ 2,226
Platinum Class .............................. 5,306 13,080
------ -------
TOTAL DISTRIBUTIONS ............................ $6,510 $15,306
====== =======
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of June 30, 2007, the components of distributable earnings on a tax
basis were the same as book. The cost basis of investments for federal income
tax purposes was also the same as the book basis.
The Fund does not have capital loss carryforwards as of June 30, 2007.
10
AMERICAN BEACON MONEY MARKET MILEAGE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for the Fund (in
thousands). Each share is valued at $1.00:
Six Months Ended June 30, 2007
Money Market Mileage Fund
-------------------------
Mileage
Mileage Platinum
Class Class
------- --------
Shares sold .................................... 42,311 53,707
Reinvestment of dividends ...................... 1,161 4,913
Shares redeemed ................................ (42,997) (397,199)
------- --------
Net increase (decrease) in shares outstanding .. 475 (338,579)
======= ========
Year Ended December 31, 2006
Money Market Mileage Fund
-------------------------
Mileage
Mileage Platinum
Class Class
------- --------
Shares sold .................................... 31,006 129,629
Reinvestment of dividends ...................... 2,139 13,080
Shares redeemed ................................ (35,869) (153,618)
------- --------
Net (decrease) in shares outstanding ........... (2,724) (10,909)
======= ========
11
AMERICAN BEACON MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Mileage Class
----------------------------------------------------------------
Six Months Year Ended December 31
Ended June ---------------------------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- ------- ------- ------- ------- -------
(unaudited)
Net asset value, beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (A) ................... 0.02 0.05 0.03 0.01 0.01 0.01
Net realized gain on investments ............ --(B) -- --(B) --(B) --(B) --(B)
------- ------- ------- ------- ------- -------
Total income from investment operations ........ 0.02 0.05 0.03 0.01 0.01 0.01
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ........ (0.02) (0.05) (0.03) (0.02) (0.01) (0.01)
Distributions from net realized gains on
securities ............................... --(B) --(B) --(B) --(B) --(B) --(B)
------- ------- ------- ------- ------- -------
Total distributions ............................ (0.02) (0.05) (0.03) (0.01) (0.01) (0.01)
------- ------- ------- ------- ------- -------
Net asset value, end of period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return ................................... 2.39%(C) 4.61% 2.75% 0.93% 0.73% 1.29%
======= ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) .... $48,424 $47,960 $50,684 $45,475 $49,053 $63,884
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .................... 0.64% 0.57% 0.58% 0.51% 0.51% 0.63%
Expenses before waivers ..................... 0.64% 0.57% 0.58% 0.51% 0.51% 0.63%
Net investment income, net of waivers ....... 4.74% 4.52% 2.73% 0.91% 0.74% 1.29%
Net investment income (loss), before
waivers .................................. 4.74% 4.52% 2.73% 0.91% 0.74% 1.29%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of each Fund's proportionate share of income and expenses of the
American Beacon Master Money Market Portfolio.
(B) Amount is less than $.01 per share.
(C) Not annualized.
12
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- -----------
(DOLLARS IN THOUSANDS)
FUNDING AGREEMENTS - 0.89
Metropolitan Life Insurance Co., 5.41%, Due 11/21/2007 ++ ......... $150,000 $ 150,000
-----------
MEDIUM-TERM NOTES - 32.06%
ABN Amro Bank NV, 5.409%, Due 4/18/2008 ++ # ...................... 132,050 132,133
American Honda Finance Corp.,
5.31%, Due 7/10/2007 ++ # ...................................... 33,040 33,040
5.385%, Due 7/23/2007 ++ # ..................................... 10,000 10,000
5.38%, Due 8/23/2007 ++ # ...................................... 20,000 20,002
5.47%, Due 8/23/2007 ++ # ...................................... 5,500 5,501
5.38%, Due 9/19/2007 ++ # ...................................... 25,000 25,003
5.465%, Due 10/22/2007 ++ # .................................... 10,000 10,004
5.39%, Due 11/15/2007 ++ # ..................................... 42,000 42,009
5.375%, Due 1/23/2008 ++ ....................................... 40,000 40,011
5.42%, Due 2/22/2008 ++ # ...................................... 33,200 33,219
5.327%, Due 5/9/2008 ++ # ...................................... 15,000 15,000
ASIF Global Financing XXI, 5.71%, Due 3/14/2008 ++ # .............. 32,650 32,736
ASIF Global Financing XXXII, 5.41%, Due 2/25/2008 ++ # ............ 206,600 206,713
Bank of America Corp.,
5.46%, Due 9/7/2007 ++ # ....................................... 183,180 183,223
5.786%, Due 5/5/2008 ++ ........................................ 32,000 32,125
Berkshire Hathaway Finance Corp.,
5.40%, Due 1/11/2008 ++ # ...................................... 128,085 128,147
5.42%, Due 5/16/2008 ++ # ...................................... 23,750 23,772
Citigroup Global Markets Holdings, Inc., 5.43%, Due 8/16/2007 ++ .. 58,800 58,808
Citigroup, Inc.,
5.416%, Due 11/1/2007 ++ ....................................... 130,115 130,162
5.405%, Due 5/2/2008 ++ ........................................ 199,700 199,838
Commonwealth Bank of Australia, 5.355%, Due 1/31/2008 ++ # ........ 175,000 175,035
Credit Suisse USA, Inc., 5.47%, Due 6/2/2008 ++ ................... 25,053 25,084
General Electric Capital Corp.,
5.445%, Due 10/17/2007 ++ ...................................... 180,000 180,000
5.41%, Due 1/3/2008 ++ ......................................... 211,500 211,608
5.406%, Due 1/15/2008 ++ ....................................... 324,455 324,604
5.40%, Due 3/4/2008 ++ ......................................... 40,886 40,907
5.416%, Due 4/15/2008 ++ ....................................... 65,000 65,050
5.41%, Due 5/19/2008 ++ ........................................ 20,000 20,016
Goldman Sachs Group, Inc.,
5.474%, Due 7/2/2007 ++ ........................................ 64,350 64,350
5.475%, Due 10/5/2007 ++ ....................................... 12,700 12,705
HBOS Treasury Services plc, 5.357%, Due 7/17/2008 ++ # ............ 59,500 59,515
HSBC Finance Corp.,
5.505%, Due 7/27/2007 ++ ....................................... 97,525 97,538
5.39%, Due 10/4/2007 ++ ........................................ 115,000 115,022
5.36%, Due 5/21/2008 ++ ........................................ 162,770 162,803
13
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- -----------
(DOLLARS IN THOUSANDS)
JPMorgan Chase & Co., 5.425%, Due 1/25/2008 ++ .................... $220,000 $ 220,129
Merrill Lynch & Co., Inc.,
5.39%, Due 8/24/2007 ++ ........................................ 39,830 39,833
5.47%, Due 8/27/2007 ++ ........................................ 77,000 77,017
5.485%, Due 10/19/2007 ++ ...................................... 83,000 83,037
5.39%, Due 2/14/2008 ++ ........................................ 61,300 61,324
5.46%, Due 6/16/2008 ++ ........................................ 93,350 93,463
Monumental Global Funding II, 5.39%, Due 9/13/2007 ++ # ........... 21,500 21,502
Morgan Stanley,
5.48%, Due 7/27/2007 ++ ........................................ 58,595 58,602
5.484%, Due 1/18/2008 ++ ....................................... 68,900 68,958
Royal Bank of Scotland plc,
5.36%, Due 12/21/2007 ++ # ..................................... 230,000 230,044
5.36%, Due 4/11/2008 ++ # ...................................... 435,500 435,638
5.365%, Due 4/21/2008 ++ # ..................................... 50,000 50,017
5.33%, Due 7/18/2008 ++ # ...................................... 150,000 150,000
Toyota Motor Credit Corp.,
5.327%, Due 8/10/2007 ++ ....................................... 60,000 60,002
5.33%, Due 9/14/2007 ++ ........................................ 95,000 95,005
5.33%, Due 10/12/2007 ++ ....................................... 4,800 4,800
5.346%, Due 4/15/2008 ++ ....................................... 100,000 100,022
5.33%, Due 6/17/2008 ++ ........................................ 24,000 24,004
Wachovia Corp., 5.435%, Due 7/20/2007 ++ .......................... 179,152 179,163
Wells Fargo & Co.,
5.42%, Due 9/28/2007 ++ ........................................ 269,901 269,971
5.33%, Due 7/14/2008 ++ # ...................................... 150,000 150,000
-----------
TOTAL MEDIUM-TERM NOTES ........................................... 5,388,214
-----------
PROMISSORY NOTES - 2.68%
Goldman Sachs Group, Inc., 5.36%, Due 5/9/2008 ++ ................. 450,000 450,000
-----------
CERTIFICATES OF DEPOSIT AND BANK NOTES - 25.94%
Allied Irish Banks N.Y., 5.336%, Due 8/8/2007 ++ .................. 15,000 15,000
Bank of New York,
5.335%, Due 11/16/2007 ++ ...................................... 77,500 77,505
5.335%, Due 11/19/2007 ++ ...................................... 5,000 5,000
Bank of Nova Scotia N.Y., 5.335%, Due 10/31/2007 ++ ............... 64,860 64,863
Barclays Bank N.Y.,
5.32%, Due 8/24/2007 ........................................... 250,000 250,000
5.35%, Due 10/2/2007 ........................................... 250,000 250,000
BNP Paribas N.Y., 5.29%, Due 10/3/2007 ++ ......................... 100,000 99,994
Branch Banking & Trust,
5.307%, Due 8/10/2007 ++ ....................................... 50,000 49,999
5.36%, Due 11/16/2007 ++ ....................................... 100,000 100,017
Caylon N.Y.,
5.327%, Due 8/10/2007 ++ ....................................... 542,000 541,999
14
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- -----------
(DOLLARS IN THOUSANDS)
Caylon N.Y.,
5.28%, Due 9/13/2007 ++ ........................................ $185,700 $ 185,690
5.29%, Due 10/3/2007 ++ ........................................ 67,500 67,497
Credit Suisse N.Y.,
5.338%, Due 8/13/2007 ++ ....................................... 125,000 125,001
5.33%, Due 2/26/2008 ++ ........................................ 250,000 250,000
Deutsche Bank N.Y., 5.36%, Due 6/19/2008 ++ ....................... 280,000 280,084
HSBC Bank USA, 5.43%, Due 9/21/2007 ++ ............................ 203,550 203,600
M&I Marshall & Ilsley Bank,
5.341%, Due 8/1/2007 ++ ........................................ 50,000 50,000
5.33%, Due 2/15/2008 ++ ........................................ 196,500 196,504
National City Bank,
5.30%, Due 10/4/2007 ++ ........................................ 135,000 134,994
5.40%, Due 1/10/2008 ++ ........................................ 6,925 6,928
Nordea Bank Finland N.Y., 5.298%, Due 5/28/2008 ++ ................ 21,600 21,592
Suntrust Bank, 5.429%, Due 4/2/2008 ++ ............................ 53,020 53,064
US Bank, NA,
5.39%, Due 9/10/2007 ++ ........................................ 250,000 250,037
5.39%, Due 9/28/2007 ++ ........................................ 60,000 60,011
5.379%, Due 10/1/2007 ++ ....................................... 135,450 135,474
5.32%, Due 1/3/2008 ++ ......................................... 221,500 221,503
Wachovia Bank, 5.35%, Due 9/28/2007 ++ ............................ 50,000 50,003
Westpac Bank N.Y., 5.316%, Due 1/15/2008 ++ ....................... 46,000 45,999
World Savings Bank FSB,
5.36%, Due 10/19/2007 ++ ....................................... 400,000 400,050
5.42%, Due 12/7/2007 ++ ........................................ 117,400 117,446
5.41%, Due 6/20/2008 ++ ........................................ 50,000 50,041
-----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ...................... 4,359,895
-----------
COMMERCIAL PAPER - 20.20%
Barton Capital LLC,
5.28%, Due 7/2/2007 ............................................ 50,000 49,993
5.29%, Due 7/13/2007 # ......................................... 37,856 37,789
Beta Finance Corp., 5.26%, Due 9/12/2007 .......................... 40,000 39,573
Citigroup Funding, Inc.,
5.26%, Due 8/23/2007 ........................................... 200,000 198,451
5.26%, Due 8/29/2007 ........................................... 150,000 148,707
Falcon Asset Securitization LLC, 5.26%, Due 9/28/2007 ............. 77,749 76,738
FCAR Owner Trust, Series I,
5.27%, Due 8/15/2007 ........................................... 300,000 298,018
5.285%, Due 9/17/2007 .......................................... 475,000 469,566
Fountain Square Commercial Funding Corp.,
5.26%, Due 8/21/2007 # ......................................... 10,000 9,926
5.275%, Due 9/19/2007 # ........................................ 90,378 89,319
General Electric Capital Corp., 5.04%, Due 11/9/2007 .............. 40,000 39,266
Golden Funding Corp., 5.375%, Due 7/16/2007 ....................... 150,000 149,664
15
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
PAR
AMOUNT VALUE
-------- -----------
(DOLLARS IN THOUSANDS)
K2 USA LLC, 5.26%, Due 9/18/2007 # ................................ $ 36,100 $ 35,683
Kitty Hawk Funding Corp., 5.32%, Due 7/31/2007 .................... 30,000 29,867
Lexington Parker Capital Co. LLC, 5.26%, Due 10/18/2007 ........... 25,000 24,602
Long Lane Master Trust IV,
5.32%, Due 7/23/2007 # ......................................... 24,101 24,023
5.34%, Due 7/26/2007 # ......................................... 414,549 413,414
Park Avenue Receivables Co. LLC,
5.30%, Due 7/20/2007 ........................................... 250,000 249,301
5.265%, Due 8/22/2007 .......................................... 60,000 59,544
Sheffield Receivables Corp., 5.29%, Due 7/23/2007 # ............... 42,850 42,712
Stanfield Victoria Funding LLC,
5.26%, Due 8/21/2007 # ......................................... 45,000 44,665
5.26%, Due 8/28/2007 # ......................................... 25,000 24,788
5.265%, Due 9/4/2007 # ......................................... 25,000 24,762
5.27%, Due 9/6/2007 # .......................................... 115,000 113,873
Three Rivers Funding Corp., 5.28%, Due 7/11/2007 # ................ 87,156 87,028
Toyota Motor Credit Corp.,
5.20%, Due 7/30/2007 ........................................... 100,000 99,581
5.20%, Due 7/31/2007 ........................................... 200,000 199,133
5.20%, Due 8/1/2007 ............................................ 50,000 49,776
UBS Finance Delaware LLC,
5.20%, Due 8/6/2007 ............................................ 140,000 139,272
5.20%, Due 8/10/2007 ........................................... 100,000 99,422
Yorktown Capital LLC, 5.28%, Due 7/5/2007 ......................... 25,249 25,234
-----------
TOTAL COMMERCIAL PAPER ............................................ 3,393,690
-----------
TIME DEPOSITS - 10.92%
ING Bank, NV, 5.344%, Due 7/2/2007 ................................ 620,000 620,000
Natixis, 5.375%, Due 7/2/2007 ..................................... 750,000 750,000
Rabobank Nederland, 5.34%, Due 12/1/2006 .......................... 464,487 464,487
-----------
TOTAL TIME DEPOSITS ............................................... 1,834,487
-----------
REPURCHASE AGREEMENTS - 8.63%
Bank of America, NA, 5.475%, Due 7/2/2007 (Held at Bank of New
York, Collateralized by Whole Loan Mortgages valued at $618,000,
0.00%, 2/23/2036) .............................................. 600,000 600,000
Citigroup, Inc., 5.475%, Due 7/2/2007 (Held at JPMorgan Chase, NYC,
Collateralized by Whole Loan Mortgages valued at $53,028, 0.00%,
4/24/2037 - 6/25/2037) ......................................... 50,000 50,000
Lehman Brothers Holdings, Inc., 5.41%, Due 7/2/2007 (Held at
JPMorgan Chase, NYC, Collateralized by Asset Backed Securities
valued at $662,937, 0.00% - 8.9%, 9/17/2007 - 2/25/2047) ....... 650,000 650,000
5.445%, Due 7/2/2007 (Held at JPMorgan Chase, NYC,
Collateralized by Corporate Obligations valued at $115,908,
0.00% - 8.25%, 9/15/2010 - 8/1/2037; and Medium-Term Notes
valued at $37,081, 5.9%, 12/21/2035) ........................ 150,000 150,000
-----------
TOTAL REPURCHASE AGREEMENTS ....................................... 1,450,000
-----------
TOTAL INVESTMENTS - 101.32% (COST $17,026,286) ....................... $17,026,286
LIABILITIES, NET OF OTHER ASSETS - (1.32%) ........................... (222,280)
-----------
TOTAL NET ASSETS - 100.00% ........................................... $16,804,006
===========
16
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2007 (Unaudited)
Percentages are stated as a percent of net assets.
++ 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.
# 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 $3,120,235 or 18.57% of net
assets. The Fund has no right to demand registration of these securities.
17
AMERICAN BEACON MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
MONEY
MARKET
-----------
ASSETS:
Investment in securities at value
(cost - $15,576,286, respectively) ......................... $15,576,286
Repurchase agreement (cost - $1,450,000, respectively) ........ 1,450,000
Dividends and interest receivable ............................. 75,748
Prepaid expenses .............................................. 164
-----------
TOTAL ASSETS ............................................... 17,102,198
-----------
LIABILITIES:
Management and investment advisory fees payable (Note 2) ...... 1,435
Other Liabilities ............................................. 296,757
-----------
TOTAL LIABILITIES .......................................... 298,192
-----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ......... $16,804,006
===========
See accompanying notes
18
AMERICAN BEACON MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
INVESTMENT INCOME:
Interest income ............................................... $433,809
--------
TOTAL INVESTMENT INCOME .................................... 433,809
--------
EXPENSES:
Management and investment advisory fees (Note 2) .............. 8,087
Custodian fees ................................................ 291
Professional fees ............................................. 66
Other expenses ................................................ 235
--------
TOTAL EXPENSES ............................................. 8,679
--------
NET INVESTMENT INCOME ............................................ 425,130
--------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................. 128
--------
NET GAIN ON INVESTMENTS .................................... 128
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $425,258
========
See accompanying notes
19
AMERICAN BEACON MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six Months
Ended Year Ended
June 30, December 31,
2007 2006
------------ -------------
(unaudited)
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ......................... $ 425,130 $ 530,893
Net realized gain on investments .............. 128 12
------------ -------------
TOTAL INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .............................. 425,258 530,905
------------ -------------
TRANSACTIONS IN INVESTOR'S BENEFICIAL INTERESTS:
Contributions ................................. 18,498,503 131,682,048
Withdrawals ................................... (14,847,924) (126,270,825)
------------ -------------
NET INCREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTOR'S BENEFICIAL
INTERESTS ............................... 3,650,579 5,411,223
------------ -------------
NET INCREASE IN NET ASSETS ................. 4,075,837 5,942,128
------------ -------------
NET ASSETS:
Beginning of period ........................... 12,728,169 6,786,041
------------ -------------
END OF PERIOD ................................. $ 16,804,006 $ 12,728,169
============ =============
See accompanying notes
20
AMERICAN BEACON MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
Six Months Year Ended December 31,
Ended June --------------------------------
30, 2007 2006 2005 2004 2003 2002
----------- ---- ---- ---- ---- ----
(unaudited)
Total return ................. 2.64%(A) 5.09% 3.25% 1.34% 1.13% 1.81%
Ratios to average net assets
(annualized):
Expenses .................. 0.11% 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income ..... 5.26% 5.05% 3.20% 1.30% 1.14% 1.81%
- ----------
(A) Not annualized
21
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Master Trust (the "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. 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 (the
"Portfolio"). The objective of the Portfolio is current income, liquidity and
the maintenance of a stable price of $1.00 per share. The assets of the
Portfolio belong only to that Portfolio, and the liabilities of the Portfolio
are borne solely by that Portfolio and no other.
American Beacon Advisors, Inc. (the "Manager") is a wholly owned subsidiary
of AMR Corporation 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 Portfolio.
Security Valuation
Securities of the Portfolio are valued at amortized cost, which
approximates fair value. In the event that a deviation of 1/2 of 1% or more
exists between the $1.00 per share price of the Portfolio, 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 Taxes
The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
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 the
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 and are valued at cost, which approximates
market value. All collateral is held at the custodian bank. 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.
22
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (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.
Recently Issued Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The Fund
adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken
by the Fund have been deemed to meet the more likely than not threshold, and
therefore, there have been no adjustments to the Fund's net asset value per
share.
In September 2006, the FASB issued Statement on Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about the
use of fair value measurements. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Manager is evaluating the impact of FAS 157;
however, it is not expected to have a material impact on the Fund's net assets
or results of operations.
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 the Portfolio. As compensation for performing the
duties required under the Management Agreement, the Manager receives from the
Portfolio 0.10% of the average daily net assets of the Portfolio.
23
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission,
the Portfolio, 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 Money
Market Portfolio to lend money to other participating series managed by the
Manager. For the six months ended June 30, 2007, the Money Market Portfolio
earned $8,708 under the credit facility. This amount is included in interest
income on the financial statements.
24
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUND AND THE PORTFOLIO
(UNAUDITED)
INTERIM RENEWAL
In prior years, the Board of Trustees ("Board" or "Trustees") typically has
considered the annual renewal of the existing Management Agreements between
American Beacon Advisors, Inc. (the "Manager") and the American Beacon Mileage
Fund (the "Trust"), on behalf of the Money Market Fund (the "Fund"), and between
the Manager and the American Beacon Master Trust, on behalf of the Money Market
Portfolio (the "Portfolio"), at the board meeting held in the first quarter of
each year. (The term "Fund" is used throughout this section to refer to both the
Fund and the Portfolio.) At the November 15, 2006 meeting, the Board decided to
conduct these annual renewals at their second quarter meeting each year to
enable the Trustees to consider more year-end data in their deliberations. At
the March 8, 2007 Board meeting, the Board considered renewal of the Management
Agreements on an interim basis until the Board meeting scheduled for the second
quarter, at which meeting the Board would perform a comprehensive review of
factors relevant to an annual renewal.
In connection with the interim renewal, the Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager. Further, the Board took into consideration information
furnished for the Board's review and consideration throughout the year at
regular Board and Investment Committee meetings. The Board considered several
factors at its March 2007 meeting but did not identify any particular
information that was most relevant to its consideration to renew the Management
Agreement, and each Trustee may have afforded different weight to these factors.
The Board determined that certain factors typically considered in connection
with an annual renewal were not material with respect to an interim renewal.
Cost of Services. With respect to the Management Agreement, the Board noted that
the fee rate schedule for the Manager had not changed since the last contract
renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Trustees considered that the Manager continues to
provide high-quality services to the Fund at a low cost to investors and
provides a comprehensive compliance program for the Fund. Based on this
information, the Board concluded that the nature, extent and quality of the
management and advisory services provided by the Manager were appropriate for
the Fund and, thus, supported a decision to renew the Management Agreement on an
interim basis.
Investment Performance. The Board considered the performance reports and
discussions with management at Board and Committee meetings throughout the year.
In considering the renewal of the Management Agreement with the Manager for the
Fund, the Trustees considered that 1) the Fund outperformed its benchmark index
for the 2006 calendar year, and 2) the fee rate schedule for the Manager had not
changed since the last contract renewal.
Based on these considerations, among others, the Trustees determined that the
Fund and its shareholders would benefit from the Manager's continued management
of the Fund until the next regular Board meeting and approved the renewal of the
Agreement with respect to the Fund on an interim basis until the next regular
Board meeting.
ANNUAL RENEWAL
At its May 25, 2007 meeting, the Board considered the renewal of the Management
Agreements. In preparation for the Board's consideration to renew the
Agreements, the Board and its Investment Committee undertook steps to gather and
consider information furnished by the Manager and Lipper, Inc. ("Lipper"). The
Board, with the assistance of independent legal counsel, requested and received
certain relevant information from the Manager.
25
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUND AND THE PORTFOLIO - CONTINUED
(UNAUDITED)
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Fund. The Investment Committee held a separate meeting on May 4, 2007 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
The Trustees considered, among other materials, responses by the Manager to
inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Fund, or any
other area, including how these changes might affect the Fund;
- a copy of the Manager's SEC Form ADV registration statement;
- 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;
- a comparison of the performance of the Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of the Fund versus the respective peer group average;
- a profit/loss analysis of the Manager and any actual or anticipated
economies of scale in relation to the services it provides to the
Fund;
- 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;
- an evaluation of other benefits to the Manager or Fund as a result of
their relationship, if any;
- confirmation that the Manager's financial condition does not raise
concerns that the Manager would be unable to continue providing the
same scope and quality of services to the Fund;
- a description of the scope of portfolio management services provided
to the Fund and other clients, including other registered investment
companies;
- a description of the personnel who are assigned primary responsibility
for managing the Fund, including any changes during the past year and
a discussion of the adequacy of current and projected staffing levels
to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- 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;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a description of trade allocation procedures among accounts managed by
the Manager;
- a summary of any material changes to the Manager's compliance program
with regard to federal, state, corporate and Fund requirements and a
certification to the reasonable design of the compliance program;
- a discussion of any material compliance problems and remedial actions;
- information regarding the Manager's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
- a description of the Manager's affiliation with any broker-dealer;
- a discussion of any anticipated change in the Manager's controlling
persons;
- verification of the Manager's insurance coverage with regards to the
services provided to the Fund;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of any revenue sharing activities with respect to the
Fund;
26
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUND AND THE PORTFOLIO - CONTINUED
(UNAUDITED)
- a discussion of any rebate arrangements between the Manager and a
service provider to the Fund pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a discussion of whether the Manager receives, with respect to the
Fund, other compensation; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
The Board also obtained an analysis provided by Lipper that compared: (i)
investment performance of the Fund versus comparable investment companies and
appropriate indices; (ii) total Fund expenses of the Fund versus comparable
mutual funds, and (iii) the Fund's investment advisory fees versus comparable
mutual funds. References below to the Fund's Lipper peer group are to the group
of comparable mutual funds included in the analysis provided by Lipper.
The Trustees also received a memorandum from their legal counsel detailing the
Board's 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.
Provided below is an overview of the primary factors the Board considered at its
May 25, 2007 meeting. The Board did not identify any particular information that
was most relevant to its consideration to renew the Management Agreements, and
each Trustee may have afforded different weight to the various factors.
In determining whether to approve the continuance of the Management Agreements,
the Board 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 investment advisor; (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; (5) whether fee levels reflect these economies of scale for the
benefit of Fund investors; (6) comparisons of services and fees with contracts
entered into by the Manager with other clients (such as pension funds and other
institutional funds); and (7) any other benefits derived or anticipated to be
derived by the Manager from its relationship with the Fund. The Trustees posed
questions to various management personnel of the Manager regarding certain key
aspects of the material submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes to enhance the Fund's product line; the Manager's
record in building improved compliance, control and credit functions that reduce
risks to the Fund; the addition of personnel to manage the Fund, promote sales
and improve services, including the addition of a separate new information
technology department at the Manager and the high rankings received by the Fund
in service surveys.
Based on the foregoing information, the Board concluded that the nature, extent
and quality of the management services provided by the Manager were appropriate
for the Fund and, thus, supported a decision to renew the Management Agreement.
27
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUND AND THE PORTFOLIO - CONTINUED
(UNAUDITED)
Investment Performance. The Board evaluated the comparative information provided
by Lipper and the Manager regarding the Fund's investment performance relative
to its benchmark index(es) and peer group. With respect to Lipper data, the
Board considered the information provided by Lipper regarding its independent
peer selection methodology to select all peer groups and universes. The Board
also considered the performance reports and discussions with management at Board
and Committee meetings throughout the year.
The performance of the Fund was compared to the respective Lipper Average, which
includes all comparable funds in the Lipper category, and the Lipper Index,
which includes the 30 largest funds in the Lipper category. References to the
Lipper expense group below are to the group of comparable mutual funds included
in the analysis provided to the Trustees by Lipper, Inc. All performance
comparisons are for periods ended March 31, 2007, unless otherwise noted. The
Board considered that the Fund outperformed both the Lipper Index and Average
for all reported periods.
Based on the foregoing information, the Board concluded that the investment
performance was reasonable.
Cost of Services and Profits Realized. In analyzing the cost of services and
profitability of the Manager, the Board considered the revenues earned and the
expenses incurred by the Manager. The Board also considered that the Management
Agreement for the Trust stipulates that to the extent that the Fund invests all
of its investable assets in another registered investment company, the Fund will
not pay the Manager a management fee. The Fund operates under a master-feeder
structure whereby the Fund invests all of its assets in a corresponding
portfolio of the American Beacon Master Trust. As such, the Manager receives a
management fee from the master portfolio. The Board also considered the
Manager's advisory fees for services provided by the Manager to institutional
separate accounts with similar strategies. Although the Board noted that, in
certain cases, the fee rates paid by other clients is lower that the fee rates
paid by the Fund, the difference reflects the greater level of responsibility
and regulatory requirements associated with managing the Fund.
The Board considered the following factors: (1) the actual management fee
(including administrative fees) and total expense ratio of the Fund was lower
than its Lipper expense group median; (2) the Manager is subject to a risk of
financial responsibility should the Fund be unable to maintain a stable $1.00
per share net asset value; (3) 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.
Based on the foregoing information, the Board concluded that the profitability
levels were reasonable in light of the services performed by the Manager.
Economies of Scale. In considering the reasonableness of the management fees,
the Board considered whether economies of scale will be realized as the Fund
grows and whether fee levels reflect these economies of scale for the benefit of
Fund shareholders. With respect to the Fund, the Board noted that, although the
fee schedule for the Fund does not have breakpoints, the effective advisory fee
rates are low by industry standards and the performance of the Fund has been
competitive.
The Board also considered the Manager's representations that its costs have
increased due primarily to greater service provider and regulatory costs. The
Manager also represented that it anticipates further economies of scale would be
largely offset by higher costs of adding and retaining qualified personnel,
improving technology and increasing demands on its advisory business.
Based on the foregoing information, the Board concluded that the Manager fee
schedule provides for a reasonable sharing of benefits from any economies of
scale with the Fund.
Benefits Derived from the Relationship with the Fund. The Board considered the
"fall-out" or ancillary benefits that accrue to the Manager as a result of the
advisory relationship with the Fund, including greater
28
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENTS OF THE FUND AND THE PORTFOLIO - CONTINUED
(UNAUDITED)
exposure in the marketplace with respect to the Manager's investment process and
expanding the level of assets under management by the Manager. The Board also
considered that the Fund permits institutional investors access to such
investments at a more favorable cost and that the Manager's relationship with
the Fund continues to be a significant factor in attracting separate account
assets for the Manager. In addition, the Board noted that the Manager provides
services to the Trust at a relatively low cost.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager by virtue of its relationship with the Fund
appear to be fair and reasonable.
Based on these considerations, the Trustees (1) concluded that the fees paid to
the Manager under the Management Agreement are fair and reasonable, (2)
determined that the 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 Fund.
29
(AMERICAN BEACON MILEAGE FUNDS(SM) LOGO)
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 Fund through a financial institution, you may be able to receive the Fund's
regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual
Report, by e-mail. If you are interested in this option, please go to
WWW.ICSDELIVERY.COM and search for your financial institution's name or contact
your financial institution directly.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at
www.americanbeaconfunds.com
(TELEPHONE GRAPHIC) (MAIL GRAPHIC)
BY TELEPHONE: BY MAIL:
Mileage Class(R) American Beacon Funds
Call (800) 388-3344 P.O. Box 219643
Kansas City, MO 64121-9643
AVAILABILITY OF AVAILABILITY OF
QUARTERLY PORTFOLIO SCHEDULES PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of A description of the policies and
Investments provided in each procedures the Fund uses to determine
semi-annual and annual report, the how to vote proxies relating to
Fund files a complete schedule of its portfolio securities is available in the
portfolio holdings with the Fund's Statement of Additional
Securities and Exchange Commission Information, is available free of charge
("SEC") on Form N-Q as of the first on the Fund's website
and third fiscal quarters. The Fund's (www.americanbeaconfunds.com) and by
Forms N-Q are available on the SEC's calling 1-800-967-9009 or by accessing
website at www.sec.gov. The Forms N-Q the SEC's website at www.sec.gov. The
may also be reviewed and copied at Fund's proxy voting record for the most
the SEC's Public Reference Room, 450 recent year ended June 30 is filed
Fifth Street, NW, Washington, DC annually with the SEC on Form N-PX. The
20549. Information regarding the Fund's Forms N-PX are available on the
operation of the SEC's Public SEC's website at www.sec.gov. The Fund's
Reference Room may be obtained by proxy voting record may also be obtained
calling 1-800-SEC-0330. A complete by calling 1-800-967-9009.
schedule of the Fund's portfolio
holdings is also available on the
Fund's website
(www.americanbeaconfunds.com)
approximately thirty days after the
end of each month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
BANK AND TRUST SERVICES ERNST & YOUNG LLP Portland, Maine
Boston, Massachusetts Kansas City, Missouri Dallas, Texas
This report is prepared for shareholders of the American Beacon Mileage Fund 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. American Beacon Money Market Mileage Fund is a service mark of
American Beacon Advisors, Inc.
SAR 06/07
540290
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/ Douglas G. Herring
--------------------
Douglas G. Herring
President
Date: September 7, 2007
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/ Douglas G. Herring
--------------------
Douglas G. Herring
President
Date: September 7, 2007
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: September 7, 2007