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, 2008
Date of reporting period: December 31, 2008
ITEM 1. REPORT TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON MILEAGE FUNDS(SM) LOGO)
Annual Report
(GRAPHIC)
December 31, 2008
MONEY MARKET 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 you.
CONTENTS
PRESIDENT'S MESSAGE 1
FINANCIAL HIGHLIGHTS
MONEY MARKET MILEAGE FUND 13
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO 15
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 December 31, 2008
Fellow Shareholders,
Enclosed is the Annual Report for the American Beacon Money Market Mileage Fund
for the twelve months ended December 31, 2008.
Growing unemployment, low consumer confidence, rising foreclosures and bank
failures all contributed to a growing uncertainty that permeated every aspect of
the economy in 2008. The Federal Reserve Board ("Fed") lowered the Fed Funds
rate on December 16th to a record low target range of 0.00-0.25% and noted that
"weak economic conditions are likely to warrant exceptionally low levels of the
Fed Funds rate for some time."
Even with the government bailouts and liquidity programs, short-term credit
markets were under great strain as banks continued to report substantial losses.
A weak economic environment limited the Fed's ability to raise interest rates
resulting in lower yields for fixed income investments. These conditions
prompted the most extreme "flight to quality" seen in decades.
Even with portfolio holdings of the highest quality, on September 19th, the
impact of those events in the securities markets and concerns regarding limited
marketability of securities held by many money market funds caused the American
Beacon Money Market Mileage Fund to temporarily suspend the practice of
providing payments for redemption of shares entirely in cash. This procedure was
implemented to prevent redemptions from forcing the sale of securities in an
unfavorable market that may have had an adverse impact on the Fund and its
shareholders. This redemption-in-kind policy was successful in protecting the
Fund and was lifted on December 12th. Since that time all redemptions have been
made in cash.
Despite this unprecedented environment, the American Beacon Money Market
Mileage Fund reported a total return of 2.21% for the period outperforming the
Lipper Money Market Instrument Average of 2.04%.
Please review the enclosed market overview, portfolio listings, and
detailed financial data. As always, we welcome the opportunity to serve your
financial needs. To obtain further details about the American Beacon Funds
family or to access your account information, please visit our website at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American Beacon Mileage Funds
1
ECONOMIC OVERVIEW
DECEMBER 31, 2008 (UNAUDITED)
2008 was a year marked by highs and lows, none of which were good. The year
ended with the highest unemployment rate in sixteen years and the lowest
consumer confidence levels since records began in 1967. The supply of homes for
sale hit a two-decade high during the year even as home prices fell to the
lowest levels they've been in four years. Flight to quality resulted in record
lows for short-term Treasuries, while corporate spreads widened to Depression
era highs. The U.S. economy is in the midst of the longest recession in a
quarter-century, and further contraction is expected as tight credit conditions,
declining home prices and cutbacks in consumer and business spending continue
unabated.
2008 was also a year marked by unprecedented government bailouts and
liquidity programs. Under the Troubled Asset Relief Program alone, the U.S.
Treasury has already channeled $350 billion in funds to recapitalize banks and
rescue companies like AIG and Citigroup. Despite these actions, short-term
funding markets remained strained and banks continued to report massive write
downs. As a result, Bernanke stated, "More capital injections and guarantees may
become necessary to ensure stability and the normalization of credit markets."
With the pace of economic deterioration accelerating, the Federal Reserve
Board ("Fed") pulled out all stops and adopted a Zero Interest Rate Policy at
the December 16th meeting. In an unprecedented move, the Federal Open Market
Committee ("FOMC") cut rates to the lowest levels ever, announcing a target
range for the Federal Funds rate of 0.00-0.25%. The Fed noted that "weak
economic conditions are likely to warrant exceptionally low levels of the
Federal Funds rate for some time." In addition, the FOMC announced that it would
purchase Government Sponsored Enterprises debt and agency-guaranteed
Mortgage-Backed Securities to provide support to the mortgage and housing
markets. The Fed declared that it will "employ all available tools to promote
the resumption of sustainable economic growth and to preserve price stability."
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET MILEAGE FUNDSM
DECEMBER 31, 2008 (UNAUDITED)
As the economy showed signs of weakness during the year, the Federal
Reserve Board ("Fed") continued its series of easing monetary policy that
started in September 2007. The Fed reduced the Fed Funds target by 400 basis
points (4.00%) during 2008, resulting in a 0% to 0.25% Fed Funds target by year
end. With credit quality a priority, the American Beacon Money Market Mileage
Fund's primary strategy for the year was to buy high-quality, short-dated
commercial paper, certificates of deposit and overnight investments. This
strategy was implemented in an effort to improve liquidity as well as credit
quality. The strategies implemented during the year enabled the Fund to
outperform its Lipper peer group.
For the twelve months ended December 31, 2008, the total return of the
Mileage Class was 2.21%. The Fund outperformed the Lipper Money Market Average
return of 2.04% by 17 basis points (0.17%). Based on annualized total returns,
Lipper, Inc. ranked the Mileage Class of the Fund 141 among 328, 71 among 286,
and 52 among 199 Money Market Funds for the one-year, five-year, and ten-year
periods ended December 31, 2008, respectively.
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
DECEMBER 31, 2008
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2008
-----------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) 2.21% 3.03% 3.17%
(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
prospectus for the Fund was 0.76%. 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 DECEMBER 31, 2008
MILEAGE CLASS
-------------
7-day Current Yield* 0.25%
7-day Effective Yield* 0.25%
30-day Yield* 0.27%
Weighted Avg. Maturity 25 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 DECEMBER 31, 2008
% OF
NET ASSETS**
------------
Societe Generale N.Y 5.2%
Bank of Nova Scotia N.Y 4.7%
Variable Funding Capital Co. LLC 4.7%
Dexia Credit Local S.A 4.2%
Commonwealth Bank of Australia N.Y 3.1%
DNB NOR Bank ASA N.Y 3.1%
Lloyds Bank N.Y 3.1%
Surrey Funding Corp 3.1%
Svenska Handelsbanken AB N.Y 3.1%
Toyota Motor Credit Corp 3.1%
** Percent of net assets of American Beacon Master Money Market Portfolio.
ASSET ALLOCATION AS OF DECEMBER 31, 2008
NET ASSETS**
------------
Commercial Paper 38.91%
Repurchase Agreements 29.27%
Bank CDs, TDs and Notes 21.83%
Short-Term Investments 9.97%
Other Assets, Net of Liabilities 0.02%
** Percent of net assets ofAmerican Beacon Master Money Market Portfolio.
3
FUND EXPENSES
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
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 July 1, 2008 through December 31,
2008.
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 7/1/08-
7/1/2008 12/31/08 12/31/08
--------- --------- -------------
MILEAGE CLASS
Actual.................. $1,000.00 $1,008.31 $2.88
Hypothetical (5% return
before expenses)..... $1,000.00 $1,022.27 $2.90
* Expenses are equal to the Fund's annualized expense ratio for the six-month
period of 0.57%, multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (366) to reflect the
half-year period.
4
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Mileage Funds:
We have audited the accompanying statement of assets and liabilities of American
Beacon Mileage Funds, comprised of American Beacon Money Market Mileage Fund
(the "Fund") as of December 31, 2008, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Mileage Funds at December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 25, 2009
5
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investment in Portfolio, at value .................... $ 40,950
Receivable for fund share sold ....................... 21
Receivable from Managers for expense reimbursement
(Note 2) .......................................... 1
Prepaid expenses ..................................... 10
-----------
TOTAL ASSETS ...................................... 40,982
-----------
LIABILITIES:
Payable for fund shares redeemed ..................... 270
Distribution fees payable (Note 2) ................... 9
Administrative service and service fees payable
(Note 2) .......................................... 4
Other liabilities .................................... 17
-----------
TOTAL LIABILITIES ................................. 300
-----------
NET ASSETS ........................................... $ 40,682
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ................................... 40,682
-----------
NET ASSETS .............................................. $ 40,682
===========
SHARES OUTSTANDING (NO PAR VALUE):
Mileage Class ........................................ 40,681,556
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Mileage Class ........................................ $ 1.00
===========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolio
6
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2008 (IN THOUSANDS)
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Dividend income ...................................... $ 123
Interest income ...................................... 1,193
Portfolio expenses ................................... (51)
------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO .... 1,265
------
FUND EXPENSES:
Administrative service fees (Note 2) ................. 46
Transfer agent fees .................................. 17
Professional fees .................................... 12
Registration fees and expenses ....................... 39
Distribution fees .................................... 116
Prospectus and shareholder reports ................... 12
Treasury Guaranty Program Insurance .................. 3
------
TOTAL FUND EXPENSES ............................... 245
------
Less reimbursement of fund expense (Note 2) .......... (2)
------
NET FUND EXPENSES ................................. 243
------
NET INVESTMENT INCOME ................................... 1,022
------
REALIZED GAIN ALLOCATED FROM PORTFOLIO
Net realized gain on investments ..................... 2
------
NET GAIN ON INVESTMENTS ........................... 2
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... $1,024
======
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolio
7
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Year Ended
December 31,
--------------------
2008 2007
-------- ---------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 1,022 $ 7,579
Net realized gain on investments ..................... 2 3
-------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ..................................... 1,024 7,582
-------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Mileage class ..................................... (1,022) (2,276)
Platinum class .................................... -- (5,303)
Net realized gain on investments:
Mileage class ..................................... (2) --
Platinum class .................................... -- (3)
-------- ---------
DISTRIBUTIONS TO SHAREHOLDERS ..................... (1,024) (7,582)
-------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ........................ 7,454 102,145
Reinvestment of dividends and distributions .......... 1,012 7,133
Cost of shares redeemed .............................. (15,601) (448,000)
-------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ............. (7,135) (338,722)
-------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ................... (7,135) (338,722)
-------- ---------
NET ASSETS:
Beginning of period .................................. 47,817 386,539
-------- ---------
END OF PERIOD ........................................ $ 40,682 $ 47,817
======== =========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolio
8
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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 as amended (the "Act"), 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 (4.26% at December 31, 2008). The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc.,
which is indirectly owned by investment funds affiliated with Pharos Capital
Group, LLC and TPG Capital, L.P., two private equity firms. Prior to September
12, the Manager was a wholly-owned subsidiary of AMR Corporation, the parent
company of American Airlines, Inc. which retained a minority interest in the
parent company of Lighthouse Holdings, Inc.
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.
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.
The Portfolio adopted the provisions of Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the
beginning of the Portfolio's fiscal year. 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. The three levels of the hierarchy under FAS 157 are described
below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3- Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Portfolio's own assumptions about the
factors market participants would use in pricing an investment, and would
be based on the best information available.
9
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
The summary of inputs used to value the Portfolio's net assets as of
December 31, 2008 is discussed in the Portfolio's Notes to Financial Statements,
which are included elsewhere in this report.
Redemption in Kind
Beginning September 19, 2008, proceeds from redemption requests exceeding
$250,000 were made in pro rata payments of cash and in-kind distributions of
securities held by the Money Market Portfolio. The Money Market Portfolio, and
the Mileage Funds implemented this procedure to prevent redemptions from forcing
the sale of securities below their economic value, which would have resulted in
a material adverse impact on the Money Market Portfolio and the remaining
shareholders. The policy was lifted on December 12, 2008. During this time,
there were no redemptions from this Fund.
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 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.
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 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
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services 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 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
10
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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.
Reimbursement and Waiver of Expenses
The Manager voluntarily waived distribution and other expenses totaling
$1,756 for the year ended December 31, 2008.
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 year ended December 31, 2008, 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 or excise tax provision is required.
For FASB Interpretation No. 48, "Accounting for Uncertainties in Income
Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, remains subject to
examination by the Internal Revenue Service. If applicable, the Fund recognizes
interest accrued related to unrecognized tax benefits in interest expense and
penalties in "Other expenses" on the Statement of Operations. For the year
ended December 31, 2008, the Fund recognized $0 in interest and penalties.
Dividends are categorized in accordance with 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 years ended December 31,
2008 and December 31, 2007 were as follows (in thousands):
MONEY MARKET MILEAGE
---------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2008 2007
------------ ------------
DISTRIBUTIONS PAID FROM ORDINARY INCOME:
Mileage Class ....................... $1,024 $2,276
Platinum Class ...................... N/A 5,306
------ ------
TOTAL DISTRIBUTIONS .................... $1,024 $7,582
====== ======
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 2008, 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 did not have capital loss carryforwards as of December 31, 2008.
11
AMERICAN BEACON MONEY MARKET MILEAGE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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:
Year Ended December 31, 2008
Money Market
Mileage Fund
------------
Mileage
Class
------------
Shares sold ........................... 7,454
Reinvestment of dividends ............. 1,012
Shares redeemed ....................... (15,601)
------
Net (decrease) in shares outstanding .. (7,135)
======
Year Ended December 31, 2007
Money Market
Mileage Fund
------------------
Mileage Platinum
Class Class
------- --------
Shares sold ........................... 48,438 53,707
Reinvestment of dividends ............. 2,220 4,913
Shares redeemed ....................... (50,801) (397,199)
------- --------
Net (decrease) in shares outstanding .. (143) (338,579)
======= ========
12
AMERICAN BEACON MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Mileage Class
---------------------------------------------------
Year Ended December 31,
---------------------------------------------------
2008 2007 2006 2005 2004
------- ------- ------- ------- -------
Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1 .00 $ 1.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (A) ............................ 0.02 0.05 0.05 0.03 0.01
Net realized gain on investments ..................... --(B) --(B) --(B) --(B) --(B)
------- ------- ------- ------- -------
Total income from investment operations ................. 0.02 0.05 0.05 0.03 0.01
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ................. (0.02) (0.05) (0.05) (0.03) (0.01)
Distributions from net realized gains on securities .. --(B) --(B) --(B) --(B) --(B)
------- ------- ------- ------- -------
Total distributions ..................................... (0.02) (0.05) (0.05) (0.03) (0.01)
------- ------- ------- ------- -------
Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1 .00 $ 1.00
======== ======= ======== ======= =======
Total return ............................................ 2.21% 4.68% 4.61% 2.75% 0.93%
======== ======= ======== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ............. $40,682 $47,817 $47,960 $50,684 $45,475
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .......................... 0.64% 0.72% 0.57% 0.58% 0.51%
Expenses before waivers ........................... 0.64% 0.75% 0.57% 0.58% 0.51%
Net investment income, net of waivers ............. 2.21% 4.59% 4.52% 2.73% 0.91%
Net investment income (loss), before waivers ...... 2.21% 4.56% 4.52% 2.73% 0.91%
- ----------
(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.
13
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Master Trust:
We have audited the accompanying statement of assets and liabilities of American
Beacon Master Trust, comprised of the American Beacon Money Market Portfolio
(the "Portfolio"), including the schedule of investments, as of December 31,
2008, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolio's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolio's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2008, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Master Trust as of December 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 25, 2009
14
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
---------- ----------
(DOLLARS IN THOUSANDS)
CERTIFICATES OF DEPOSIT AND BANK NOTES - 17.67%
Commonwealth Bank of Australia N.Y., 0.90%, Due 2/18/2009 $ 30,000 $ 30,000
DNB NOR Bank ASA N.Y., 0.73%, Due 2/20/2009 30,000 30,000
Lloyds TSB Bank N.Y., 1.60%, Due 2/10/2009 30,000 30,000
Societe Generale N.Y., 0.85%, Due 3/12/2009 ++ 50,000 50,000
Svenska Handelsbanken AB N.Y., 1.50%, Due 2/9/2009 30,000 30,000
----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES 170,000
----------
COMMERCIAL PAPER - 38.91%
Alpine Securitization Corp., 0.95%, Due 1/28/2009 # 30,000 29,979
Bank of Nova Scotia N.Y., 0.50%, Due 2/12/2009 45,000 44,960
BNP Paribas Finance Inc., 1.25%, Due 2/17/2009 30,000 29,951
Danske Corp., 1.49%, Due 2/17/2009 # 30,000 29,942
Gemini Securitization Corp. LLC, 1.25%, Due 3/11/2009 # 30,000 29,928
National Australia Funding (Del) Inc., 1.25%, Due 2/13/2009 # 30,000 29,955
Nordea North America, Inc., 1.10%, Due 3/9/2009 30,000 29,938
Surrey Funding Corp., 1.50%, Due 1/12/2009 # 30,000 29,986
Toyota Motor Credit Corp.,
0.55%, Due 1/14/2009 15,000 14,997
0.95%, Due 1/15/2009 30,000 29,989
Variable Funding Capital Co. LLC, 1.60%, Due 3/26/2009 # 45,000 44,832
Windmill Funding Corp., 1.20%, Due 3/9/2009 # 30,000 29,933
----------
TOTAL COMMERCIAL PAPER 374,390
----------
TIME DEPOSITS - 4.16%
Dexia Credit Local S.A., 0.35%, Due 1/2/2009 40,000 40,000
----------
SHARES
----------
SHORT TERM INVESTMENTS - 9.97%
OTHER SHORT-TERM INVESTMENTS - 9.97%
Goldman Sachs Financial Square Government Fund 48,000,000 48,000
JP Morgan U.S. Government Money Market Fund 48,000,000 48,000
----------
TOTAL SHORT TERM INVESTMENTS 96,000
----------
PAR
AMOUNT
----------
REPURCHASE AGREEMENTS - 29.27%
Bank of America, NA, 0.24%, Due 1/2/2009 (Held at Bank
of New York Mellon, Collateralized by Mortgage Obligations
valued at $51,360, 2/23/2036) $ 48,000 48,000
Barclays Capital, Inc., 0.29%, Due 1/2/2009 (Held at Bank
of New York Mellon, Collateralized by Equity Securities
valued at $50,400) 48,000 48,000
Credit Suisse Securities (USA) LLC, 0.29%, Due 1/2/2009
(Held at JPMorgan Chase, Collateralized by Equity Securities
valued at $49,500) 45,000 45,000
Deutsche Bank Securities, Inc., 0.24%, Due 1/2/2009 (Held at
Bank of New York Mellon, Collateralized by Equity Securities
valued at $52,800) 48,000 48,000
See accompanying notes
15
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
-----------------------
(DOLLARS IN THOUSANDS)
Goldman Sachs & Co., 0.04%, Due 1/2/2009 (Held at Bank of
New York Mellon, Collateralized by U.S. Government Agency
Obligations valued at $2,711, 4.0% - 10.5%,
3/1/2010 - 11/1/2036) $ 2,658 $ 2,658
JP Morgan Chase & Co., 0.29%, Due 1/2/2009 (Held at
JPMorgan Chase, Collateralized by Equity Securities
valued at $47,249) 45,000 45,000
Morgan Stanley & Co., 0.39%, Due 1/2/2009 (Held at
JPMorgan Chase, Collateralized by Equity Securities
valued at $49,500) 45,000 45,000
----------
TOTAL REPURCHASE AGREEMENTS 281,658
----------
TOTAL INVESTMENTS - 99.98% (COST $962,048) $ 962,048
OTHER ASSETS, NET OF LIABILITIES - 0.02% 240
----------
TOTAL NET ASSETS - 100.00% $ 962,288
==========
Percentages are stated as a percent of net assets.
++ Obligation is subject to an unconditional put back to the issuer with one
business day notice.
# 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 $224,555 or 23.34% of net
assets. The Fund has no right to demand registration of these securities.
See accompanying notes
16
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS)
ASSETS:
Investment in securities at value (cost - $680,390) ........ $680,390
Repurchase agreements (cost - $281,658) .................... 281,658
Dividends and interest receivable .......................... 432
Prepaid expenses ........................................... 160
--------
TOTAL ASSETS ............................................ 962,640
--------
LIABILITIES:
Management and investment advisory fees payable (Note 2) ... 230
Other liabilities .......................................... 122
--------
TOTAL LIABILITIES ....................................... 352
--------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ...... $962,288
========
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2008 (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income .................................... $ 31,989
Interest income .................................... 310,930
--------
TOTAL INVESTMENT INCOME ......................... 342,919
--------
EXPENSES:
Management and investment advisory fees (Note 2) ... 11,068
Custodian fees ..................................... 383
Professional fees .................................. 100
Other expenses ..................................... 534
--------
TOTAL EXPENSES .................................. 12,085
--------
NET EXPENSES .................................... 12,085
--------
NET INVESTMENT INCOME ................................. 330,834
--------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................... 197
--------
NET GAIN ON INVESTMENTS ......................... 197
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $331,031
========
See accompanying notes
17
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Year Ended December 31,
------------------------------
2008 2007
-------------- -------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ...................... $ 330,834 $ 824,823
Net realized gain on investments ........... 197 127
------------- -------------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................... 331,031 824,950
------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions .............................. 125,022,264 202,886,002
Withdrawals ................................ (137,575,006) (203,255,122)
------------- -------------
NET DECREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS ............................ (12,552,742) (369,120)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS ... (12,221,711) 455,830
------------- -------------
NET ASSETS:
Beginning of period ........................ 13,183,999 12,728,169
------------- -------------
END OF PERIOD .............................. $ 962,288 $ 13,183,999
============= =============
FINANCIAL HIGHLIGHTS
Year Ended December 31,
--------------------------------
2008 2007 2006 2005 2004
---- ---- ---- ---- ----
Total return ................................ 2.75% 5.33% 5.09% 3.25% 1.34%
Ratios to average net assets (annualized):
Expenses ................................. 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income .................... 2.94% 5.19% 5.03% 3.20% 1.30%
See accompanying notes
18
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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 the Portfolio, and the liabilities of the Portfolio are
borne solely by the Portfolio and no other.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc., which
is indirectly owned by investment funds affiliated with Pharos Capital Group,
LLC and TPG Capital, L.P., two private equity firms. Prior to September 12, the
Manager was a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. which retained a minority interest in the parent company
of Lighthouse Holdings, Inc.
The following is a summary of the significant accounting policies
followed by the Portfolio.
Valuation of Investments
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.
The Portfolio adopted the provisions of Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective
with the beginning of the Portfolio's fiscal year. 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. The three levels of the hierarchy under FAS 157 are
described below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3- Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Portfolio's own assumptions about the
factors market participants would use in pricing an investment, and would
be based on the best information available.
A summary of the inputs used to value the Portfolio's total assets as
of December 31, 2008 is as follows (in thousands):
Investments in
Valuation Inputs Securities
- ---------------- --------------
Level 1 - Quoted Prices ........................ $ 96,000
Level 2 - Other significant observable inputs .. 866,048
Level 3 - Significant unobservable inputs ...... --
--------
Total .......................................... $962,048
19
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO NOTES TO
FINANCIAL STATEMENTS
DECEMBER 31, 2008
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing in those
securities. For example, money market securities are valued using amortized
cost, in accordance with rules under the Investment Company Act of 1940.
Generally, amortized cost approximates the current fair value of a security, but
since the value is not obtained from a quoted price in an active market, such
securities are reflected as Level 2.
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.
Redemption in Kind
Beginning September 19, 2008, proceeds from redemption requests
exceeding $250,000 were made in pro rata payments of cash and in-kind
distributions of securities held by the Money Market Portfolio. The Money Market
Portfolio and feeder funds of the Money Market Portfolio implemented this
procedure to prevent redemptions from forcing the sale of securities below their
economic value, which would have resulted in a material adverse impact on the
Money Market Portfolio and the remaining shareholders. The policy was lifted on
December 12, 2008. During this time, beneficial interests of the Portfolio
totaling 938,602 (in thousands) were redeemed.
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.
For FASB Interpretation No. 48, "Accounting for Uncertainties in
Income Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, remains subject to
examination by the Internal Revenue Service. If applicable, the Portfolio
recognizes interest accrued related to unrecognized tax benefits in interest
expense and penalties in "Other expenses" on the Statement of Operations. For
the year ended December 31, 2008, the Portfolio recognized $0 in interest and
penalties.
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 government or
non-government securities. All collateral is valued at cost, which approximates
market value and 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.
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. Certain
prior year amounts have been reclassed in order to be consistent with current
year presentation.
20
AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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 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 received from the Portfolio
0.10% of the average daily net assets of the Portfolio through September 11,
2008. From September 12, 2008 the Manager receives 0.09% of the average daily
net asset of the Portfolio.
Administrative Services Agreement
Beginning September 12, 2008, the Manager and the Trust entered into
an Administrative Services Agreement that obligates the Manager to provide or
oversee administrative and management services to the Portfolio. As compensation
for performing the duties required under the Administrative Services Agreement,
the Manager receives an annualized fee of 0.01% of the average daily net assets
of the Portfolio.
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 Portfolio to lend money to other participating series managed by the
Manager. For the year ended December 31, 2008, the credit facility was not
utilized.
21
AMERICAN BEACON MILEAGE FUNDS
PRIVACY POLICY AND FEDERAL TAX INFORMATION
(UNAUDITED)
PRIVACY POLICY
The American Beacon Mileage Funds recognizes and respects the privacy
of our shareholders. We are providing this notice to you so you will understand
how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or
more of the following sources:
- information we receive from you on applications or other
forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our
customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
We are providing this information as required by the Internal Revenue
Code. The amounts shown may differ from those in other areas of this report
because of differences between tax and financial reporting requirements.
The distributions to shareholders during the tax year ended December
31, 2008 include short-term capital gains of $2,046 for the Money Market Mileage
Fund.
We are required by Internal Revenue Code to advise you within 60 days
of the Funds' fiscal year end as to the federal tax status of dividends paid by
the Funds during its fiscal year ended December 31, 2008. For purposes of
preparing your annual federal income tax returns, you should report the amounts
reflected on your Form 1099-DIV, Box 1a.
22
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON MILEAGE FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Mileage Funds (the
"Trust") and the American Beacon Master Trust are listed below, together with
their principal occupations during the past five years. Unless otherwise
indicated, the address of each person listed below is 4151 Amon Carter
Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-three
funds in the fund complex that includes the Trust, the American Beacon Master
Trust, the American Beacon Funds, and the American Beacon Select Funds. The
Trust's Statement of Additional Information contains additional information
about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- ----------------------- ------------------ -------------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which is a
Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld,
LLP (1960-Present); Director, Clear Channel Communications
(1984-2008); Trustee, CenterPoint Properties (1994- 2006);
Member, Board of Trustees, Southern Methodist University;
Member, Board of Visitors, M.D. Anderson Hospital; Board of
Visitors, Zale/Lipshy Hospital; Trustee, American Beacon
Funds (1996-Present); Trustee, American Beacon Select Funds
(1999-Present); Trustee, American Beacon Master Trust (1996-
Present)
NON-INTERESTED TRUSTEES Term
W. Humphrey Bogart (64) Trustee since 2004 Board Member, Baylor University Medical Center Foundation
(1992-2004); Consultant, New River Canada Ltd. (mutual fund
servicing company) (1998-2003); President and CEO, Allmerica
Trust Company, NA (1996-1997); President and CEO, Fidelity
Investments Southwest Company (1983-1995); Senior Vice
President of Regional Centers, Fidelity Investments
(1988-1995); Trustee, American Beacon Funds (2004-Present);
Trustee, American Beacon Select Funds (2004-Present);
Trustee, American Beacon Master Trust (2004-Present)
Brenda A. Cline (48) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer
and Secretary, Kimbell Art Foundation (1993-Present);
Trustee, Texas Christian University (1998- Present); Trustee,
W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health
Foundation) (2001-2006); Director, Christian Church
Foundation (1999-2007); Trustee, American Beacon Funds
(2004-Present); Trustee, American Beacon Select Funds
(2004-Present); Trustee, American Beacon Master Trust (2004-
Present)
Eugene J. Duffy (54) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset
Management (1994- Present); Director, Sunrise Bank of Atlanta
(2008-Present); Chairman, Special Contributions Fund Board of
Trustees, National Association for the Advancement of Colored
People (2007-Present); Trustee, National Association for the
Advancement of Colored People (2000-Present); Board of
Visitors, Emory University (2006-Present); Trustee, Atlanta
Botanical Garden (2006-Present); Board Member, Willie L.
Brown Jr. Institute on Politics and Public Service (2001-
Present); Chair, National Association of Securities
Professionals (2000-2002); Deputy Chief Administrative
Officer, City of Atlanta (1985-1990); Trustee, American
Beacon Funds, (2008-Present); Trustee, American Beacon Select
Funds (2008-Present); Trustee, American Beacon Master Trust
(2008-Present)
Thomas M. Dunning (65) Trustee since 2008 Consultant, (2008-Present); Chairman (2003-2008) and Chief
Executive Officer (2003-2007), Lockton Dunning Benefits
(consulting firm in employee benefits); Director, Oncor
Electric Delivery Company LLC; Advisory Director, Comerica
Texas; Immediate Past Chairman and Board Member, Dallas
Citizens Council; Director, Baylor Health Care System
Foundation; State Vice Chair, State Fair of Texas; Board
Member, Southwestern Medical Foundation; Trustee, American
Beacon Funds, (2008-Present); Trustee, American Beacon Select
Funds (2008- Present); Trustee, American Beacon Master Trust
(2008-Present)
23
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON MILEAGE FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- ----------------------- ------------------ -------------------------------------------------------------
NON-INTERESTED
TRUSTEES (CONT.)
Richard A. Massman (65) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated,
Chairman since Inc. (holding company engaged in oil and gas exploration and
2008 production, refining, real estate, farming, ranching and
venture capital activities) (1994-Present); Chairman (2007-
Present) and Director (2005-Present), The Dallas Opera
Foundation; Chairman (2006-Present) and Director
(2005-Present), Temple Emanu-El Foundation; Trustee,
Presbyterian Healthcare Foundation (2006-Present); Trustee,
American Beacon Funds (2004-Present); Trustee, American
Beacon Select Funds (2004- Present); Trustee, American Beacon
Master Trust (2004-Present)
R. Gerald Turner (63) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Director, ChemFirst (1986-2002); Director, J.C. Penney
Bldg. Southern Company, Inc. (1996-Present); Director, California Federal
Methodist Univ. Preferred Capital Corp. (2001-2003); Director, Kronus
Dallas, Texas 75275 Worldwide Inc. (chemical manufacturing) (2003-Present);
Director, First Broadcasting Investment Partners, LLC
(2003-2007); Member, Salvation Army of Dallas Board of
Directors; Member, Methodist Hospital Advisory Board;
Co-Chair, Knight Commission on Intercollegiate Athletics;
Trustee, American Beacon Funds (2001-Present); Trustee,
American Beacon Select Funds (2001-Present); Trustee,
American Beacon Master Trust (2001-Present)
Paul J. Zucconi, CPA Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of
(67) nonstandard automobile insurance) (2004-present); Director,
Titanium Metals Corporation (producer of titanium melted and
mill products and sponge) (2002-Present); Director, Torchmark
Corporation (life and health insurance products) (2002-
Present); Director, National Kidney Foundation serving North
Texas (2003- Present); Director, Dallas Chapter of National
Association of Corporate Directors (2004-Present); Partner,
KPMG (1976-2001); Trustee, American Beacon Funds,
(2008-Present); Trustee, American Beacon Select Funds
(2008-Present); Trustee, American Beacon Master Trust
(2008-Present)
OFFICERS Term
One Year
William F. Quinn (60) President from Chairman (2006-Present) and CEO (2006-2007 and 2008-Present),
1987 to 2007 and President (1986-2006) and Director (2003-Present), American
2008 to Present Beacon Advisors, Inc.; Chairman (1989-2003) and Director
Executive Vice (1979-1989, 2003-Present), American Airlines Federal Credit
President from Union; Director, Crescent Real Estate Equities,
2007 to 2008 Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC
Trustee from 1995 (investment advisor) (2001-2006); Director of Investment
to 2008 Committee, Southern Methodist University Endowment Fund
(1996-Present); Member, Southern Methodist University Cox
School of Business Advisory Board (1999-2002); Member, New
York Stock Exchange Pension Manager Committee (1997-1998,
2000-2002, 2006-Present); Chairman (2007- Present) and Vice
Chairman (2004-2007), Committee for the Investment of
Employee Benefits; Director, United Way of Metropolitan
Tarrant County (1988- 2000, 2004-Present); Trustee, American
Beacon Funds (1987-2008); Trustee, American Beacon Select
Funds (1999-2008); Trustee, American Beacon Master Trust
(1995-2008)
Rosemary K. Behan (49) VP, Secretary and Vice President, Legal and Compliance, American Beacon
Chief Legal Advisors, Inc. (2006- Present); Assistant General Counsel,
Officer since 2006 First Command Financial Planning, Inc. (2004-2006);
Enforcement Attorney (2002-2004) and Branch Chief
(2000-2002), Securities and Exchange Commission
Brian E. Brett (48) VP since 2004 Vice President, Director of Sales and Marketing, American
Beacon Advisors, Inc. (2004-Present); Regional Vice
President, Neuberger Berman, LLC (investment advisor)
(1996-2004)
Wyatt Crumpler (42) VP since 2007 Vice President, Trust Investments, American Beacon Advisors,
Inc. (2007- Present); Managing Director of Corporate
Accounting (2004-2007), Director of IT Strategy and Finance
(2002-2004), American Airlines, Inc.
24
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON MILEAGE FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- ----------------------- ------------------ -------------------------------------------------------------
Michael W. Fields (54) VP since 1989 Vice President, Fixed Income Investments, American Beacon
Advisors, Inc. (1988-Present)
Rebecca L. Harris (42) Treasurer since Vice President, Finance and Accounting, American Beacon
1995 Advisors, Inc. (1995- Present)
Christina E. Sears (37) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American Beacon
and Asst. Advisors, Inc. (1998-2004)
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trust and Master
Trust, as defined by the 1940 Act. Mr. Feld's law firm of Akin, Gump,
Strauss, Hauer & Feld LLP has provided legal services within the past two
fiscal years to the Manager.
25
RESULTS OF SHAREHOLDER MEETING
(UNAUDITED)
A special meeting of shareholders of each of the portfolios of the American
Beacon Funds (the "Beacon Trust"), the American Beacon Select Funds (the "Select
Trust"), and the American Beacon Mileage Funds (the "Mileage Trust") was held on
August 22, 2008. The shareholders of the Money Market and the U.S. Government
Money Market Funds (the "Funds") approved a new investment management agreement
between American Beacon Advisors, Inc. and the Funds. This proposal required a
majority of shareholders of each Fund to achieve a quorum. The following are the
results of the shareholder votes for this proposal:
FUND FOR AGAINST ABSTAIN NON-VOTING
- ---------------------------- ----------------- ------------- ------------- ---------------
Money Market Fund 1,476,635,057.525 3,700.000 3,828,338.210 759,108,024.320
U.S. Govt. Money Market Fund 30,926,226.210 -0- -0- -0-
Money Market Select fund 4,647,553,318.330 -0- 301,904.000 990,879,183.230
U.S. Govt. Select Fund 376,578,304.880 86,995.210 -0- -0-
Money Market Mileage Fund 31,003,631.310 6,775,050.300 456,806.870 -0-
The shareholders of the Beacon Trust, Select Trust, and Mileage Trust
(collectively, the "Trusts") also approved the re-election of five of the
current Trustees to the Board of the Trusts and the election of three additional
Trustees to the Board. This proposal required a majority of the shareholders of
the Trusts to vote to achieve a quorum. The following are the results of the
election of each Trustee:
BEACON TRUST SELECT TRUST MILEAGE TRUST
----------------- ---------------- -------------
ALAN D. FELD
Affirmative ................ 12,634,553,751.62 5,579,522,662.80 30,648,100.70
Withhold ................... 519,818,259.90 435,877,042.85 7,587,387.78
W. HUMPHREY BOGART
Affirmative ................ 12,999,746,162.82 6,013,838,886.28 30,717,064.11
Withhold ................... 154,625,848.70 1,560,819.37 7,518,424.37
BRENDA A. CLINE
Affirmative ................ 13,009,050,779.42 6,015,104,773.65 31,044,304.34
Withhold ................... 145,321,232.10 294,932.00 7,191,184.14
RICHARD A. MASSMAN
Affirmative ................ 13,004,756,096.42 5,971,204,773.65 30,618,827.22
Withhold ................... 149,615,915.10 44,194,932.00 7,616,661.26
R. GERALD TURNER
Affirmative ................ 13,004,259,224.92 6,015,104,773.65 30,262,464.39
Withhold ................... 150,112,786.60 294,932.00 7,973,024.09
THOMAS M. DUNNING
Affirmative ................ 13,003,350,236.48 6,013,838,886.28 30,548,724.44
Withhold ................... 151,021,775.04 1,560,819.37 7,686,764.04
EUGENE J. DUFFY
Affirmative ................ 12,985,296,316.39 6,013,838,886.28 30,573,632.38
Withhold ................... 169,075,695.13 1,560,819.37 7,661,856.10
PAUL J. ZUCCONI
Affirmative ................ 12,983,378,136.76 6,013,838,886.28 32,956,909.20
Withhold ................... 170,993,874.76 1,560,819.37 5,278,579.28
26
[This page intentionally left blank]
27
[This page intentionally left blank]
28
[This page intentionally left blank]
29
(GRAPHIC)
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:
(GRAPHIC)
BY E-MAIL:
american_beacon.funds@ambeacon.com
(GRAPHIC)
ON THE INTERNET:
Visit our website at www.americanbeaconfunds.com
(GRAPHIC)
BY TELEPHONE:
Mileage Class(R)
Call (800) 388-3344
(GRAPHIC)
BY MAIL:
American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
In addition to the Schedule of Investments provided in each semi-annual and
annual report, the Fund files a complete schedule of its portfolio holdings with
the Securities and Exchange Commission ("SEC") on Form N-Q as of the first and
third fiscal quarters. The Fund's Forms N-Q are available on the SEC's website
at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC's
Public Reference 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 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.
AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
A description of the policies and procedures the Fund uses to determine how to
vote proxies relating to portfolio securities is available in the Fund's
Statement of Additional Information, is available free of charge on the Fund's
website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by
accessing the SEC's website at www.sec.gov. The Fund's proxy voting record for
the most recent year ended June 30 is filed annually with the SEC on Form N-PX.
The Fund's Forms N-PX are available on the SEC's website at www.sec.gov. The
Fund's proxy voting record may also be obtained by calling 1-800-967-9009.
FUND SERVICE PROVIDERS:
INDEPENDENT REGISTERED
CUSTODIAN TRANSFER AGENT PUBLIC ACCOUNTING FIRM DISTRIBUTOR
- --------- --------------------- ---------------------- ----------------------
STATE STREET BANK AND BOSTON FINANCIAL DATA ERNST & YOUNG LLP FORESIDE FUND SERVICES
TRUST SERVICES
Boston, Massachusetts Kansas City, Missouri Dallas, Texas Portland, Maine
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, Mileage Class, and American
Beacon Money Market Mileage Fund are service marks of American Beacon Advisors,
Inc.
AR 12/08
00065973
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.
The Trust's Board of Trustees has determined that Mr. Paul J. Zucconi, CPA, a
member of the Trust's Audit and Compliance Committee, is an "audit committee
financial expert" as defined in Form N-CSR. Mr. Paul J. Zucconi is
"independent" as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$10,370 12/31/2007
$10,763 12/31/2008
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$0 12/31/2007
$0 12/31/2008
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$2,885 12/31/2007
$2,031 12/31/2008
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 12/31/2007
$0 12/31/2008
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee
shall have the following duties and powers pertaining to pre-approval
of audit and non-audit services provided by the Trust's principal
accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trusts' financial
statements, and, in connection therewith, reviewing and evaluating
matters potentially affecting the independence and capabilities of
the auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trusts, an investment adviser to
any series of the Trusts or any entity controlling, controlled by,
or under common control with an investment adviser ("adviser
affiliate") that provides ongoing services to the Trusts, if the
engagement relates directly to the operations and financial
reporting of the Trusts;
- to consider whether the non-audit services provided by a Trust's
auditor to an investment adviser or any adviser affiliate that
provides ongoing services to a series of the Trusts, which services
were not pre-approved by the Committee, are compatible with
maintaining the auditor's independence;
- to review the arrangements for and scope of the annual audit and
any special audits; and
- to review and approving the fees proposed to be charged to the
Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority,
including the authority to grant pre-approvals of audit and permitted
non-audit services, to a subcommittee of one or more members. Any decisions
of the subcommittee to grant pre-approvals shall be presented to the full
committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$2,885 $0 N/A 12/31/2007
$2,032 $0 N/A 12/31/2008
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder reports presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached
hereto as EX-99.CERT.
(a)(3) Not Applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Mileage Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: March 6, 2009
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: March 6, 2009
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: March 6, 2009