UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-9098
AMERICAN BEACON MASTER TRUST
(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: December 31, 2007
ITEM 1. REPORT TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Annual Report
December 31, 2007
MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
ABOUT AMERICAN BEACON ADVISORS
Since 1986, American Beacon Advisors has offered a variety of products
and investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
CONTENTS
President's Message............................................... 1
Financial Highlights
Money Market Fund.............................................. 17
U.S. Government Money Market Fund.............................. 21
Schedule of Investments
Money Market Portfolio......................................... 24
U.S. Government Money Market Portfolio......................... 28
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
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
December 31, 2007
American Beacon Funds
(PHOTO OF DOUGLAS G. HERRING)
Fellow Shareholders,
I am pleased to present to you the American Beacon Money Market Funds
Annual Report for the twelve months ended December 31, 2007. Please review the
enclosed material carefully, as it includes important information about the
Funds.
Renewed volatility affected the fixed income markets during the second
half of the year. The change in the investment environment was led by a crisis
in the housing sector, due to several years of lax lending standards, which then
spilled over into the financial sector during the summer months. By design,
American Beacon's conservative credit review process allowed us to avoid many of
the pitfalls of the more toxic asset classes.
Even with this conservative approach, both the Institutional Class and
Cash Management Class of the American Beacon Money Market Fund posted one-year
returns of 5.24% and 5.28%, outperforming the Lipper Institutional Money Market
Average by 26 basis points (0.26%) and 30 basis points (0.30%), respectively.
The American Beacon U.S. Government Money Market Fund - Cash Management Class
also outperformed its benchmark, with a one-year total return of 5.13% versus
the Lipper Institutional U.S. Government Money Market Average of 4.86%.
The turmoil in the U.S. credit markets continued after the close of
the Funds' fiscal year and is likely to continue over the shorter term. However,
we believe the Funds' fundamental investment philosophy, proven credit selection
process and lower than average expense ratio will continue to serve the Funds
well over the longer term.
As always, we appreciate 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 Money Market Funds.
Sincerely,
/s/ Douglas G. Herring
Douglas G. Herring
President
American Beacon Funds
1
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
The year of 2007 began with a slowdown in U.S. growth occurring
following Federal Reserve Board ("Fed") credit tightening, rising oil prices,
and the beginning of concerns around credit and slowing U.S. consumer spending.
Earnings growth remained strong on the back of strong export growth, a declining
dollar and share buybacks. A transition in leadership from small, value and
domestic to large, growth and multinational became evident as the year began.
During the second half of the year, the benign fundamentals of 2003-2006--namely
strong global growth, rising profitability levels and falling risk
premiums--were replaced by credit stress, pressures on the capital position of
the financial system, questions about the sustainability of the business cycle,
and rising energy and food prices. Reflecting these woes, market prices moved
considerably. U.S. Government bond yields plummeted, the dollar fell faster than
in earlier years, credit spreads widened and equities turned volatile. The
financials and consumer discretionary sectors experienced drops of one-quarter
to one-third. Commodity and industrial related multinational companies performed
best.
In 2007, the Fed moved from an attitude of vigilance about inflation
to one of providing liquidity and lowering rates to shore up the functioning of
credit markets and fight economic weakness. During the year, the Fed lowered the
target federal funds rate by 100 basis points (1.00%), bringing the target rate
from 5.25% to 4.25%. In a statement issued following its meeting on December 11,
2007, the Federal Open Market Committee ("FOMC") noted: "Incoming information
suggests that economic growth is slowing, reflecting the intensification of the
housing correction and some softening in business and consumer spending.
Moreover, strains in financial markets have increased in recent weeks." The FOMC
also stated its opinion that the rate reduction "combined with the [monetary]
policy actions taken earlier, should help promote moderate growth over time." In
a cautionary note, however, the FOMC indicated that "[r]eadings on core
inflation have improved modestly this year, but elevated energy and commodity
prices, among other factors, may put upward pressure on inflation. In this
context, the Committee judges that some inflation risks remain, and it will
continue to monitor inflation developments carefully."
The most recent data from the U.S. Department of Labor's Bureau of
Labor Statistics indicated that the U.S. unemployment rate rose to 5.0% in
December after holding steady at 4.7% in each of the previous three months.
Non-farm payroll employment posted a small increase of 18,000 for the month, and
total employment, at 146.2 million, was down following an increase in November.
Job declines in manufacturing and construction largely offset job growth in
several service industries.
The Consumer Price Index ("CPI") increased at a seasonally-adjusted
rate of 0.8% in November 2007, according to the Department of Labor, its largest
advance since a 1.2% rise in September 2005. The index for energy was up 5.7%,
led by a 9.5% rise in petroleum-based energy prices. The index for all items
less food and energy increased 0.3% in November, following advances of 0.2% in
each of the preceding five months. The overall CPI rose at an unadjusted rate of
2.3% over the previous 12 months.
The U.S. gross domestic product ("GDP") grew at an annualized rate of
4.9% in the third quarter of 2007 up significantly from the 3.8% annualized
growth rate for the second quarter of the year. According to the U.S. Department
of Commerce, the increase in real GDP during the quarter resulted from positive
contributions from exports, personal consumption expenditures, private inventory
investment, nonresidential structures, federal government spending, equipment
and software, and state and local government spending. A decrease in residential
fixed investment (purchases of private residential structures and residential
equipment that landlords rent to tenants) had a negative effect on the GDP.
Additionally, there was an increase in imports, which are a subtraction in the
calculation of the GDP.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
As the economy began to show signs of weakening during the year, the
Federal Reserve ("Fed") started its series of easing monetary policy in
September. Since then the Fed has reduced the fed funds rate at each Federal
Open Market Committee ("FOMC") meeting, resulting in a 4.25% fed funds rate by
year end. These were moves of 50 basis points (0.50%) for the September FOMC
meeting followed by 25 basis points (0.25%) at each of the remaining two
meetings of the year. In response to the events that caused the Fed to ease, the
American Beacon Money Market Fund's weighted-average maturity was maintained
around 30 days towards the end of the year. The primary strategy of the Fund for
the year was to buy variable-rate securities, short-dated commercial paper and
overnight investments. The strategies implemented during the year enabled the
Fund to outperform its Lipper peer group.
For the twelve months ended December 31, 2007, the total return of the
Cash Management Class of the American Beacon Money Market Fund was 5.28%. The
Fund outperformed the Lipper Institutional Money Market Average return of 4.98%
by 30 basis points (0.30%). Based on annualized total returns, Lipper Inc.
ranked the Cash Management Class of the Fund 41 among 382, 25 among 321 and 19
among 264 Institutional Money Market Funds for the one-year, three-year, and
five-year periods ended December 31, 2007, respectively.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2007
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Mgmt Class(1, 2, 5)......... 5.28% 3.17% 3.88%
Institutional Class (1, 3, 5).... 5.24% 3.08% 3.83%
PlanAhead Class (1, 5)........... 4.94% 2.80% 3.54%
BBH Comset Class (1, 4, 5)....... 5.28% 3.17% 3.88%
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. Fund performance for the five and ten-year periods represents the total
returns achieved by the Institutional Class from 1/1/98 to 12/1/01, the
inception date of the Cash Management Class, and the returns of the Cash
Management Class thereafter. Expenses of the Cash Management Class are
lower than those of the Institutional Class. Therefore, total returns shown
are lower than they would have been had the Cash Management Class been in
place since 1/1/98. A portion of the fees charged to the Cash Management
Class of the Fund has been waived. Performance prior to waiving fees was
lower than the actual returns shown.
3. A portion of the fees charged to the Institutional Class of the Fund has
been waived since 2006. Performance prior to waiving fees was lower than
the actual returns shown for periods since 2006.
4. Fund performance represents the total returns achieved by the Institutional
Class from 1/1/98 to 12/1/01, the total returns achieved by the Cash
Management Class from 12/1/01 up to 4/2/07, the inception date of the BBH
Comset Class, and the returns of the BBH Comset Class thereafter. Expenses
of the BBH Comset Class are lower than those of the Institutional and Cash
Management Classes through 12/31/03. Therefore, total returns shown through
12/31/03 are lower than they would have been had the BBH Comset Class been
in place during that period. Expenses of the BBH Comset Class have been the
same as those of the Cash Management Class since 1/1/04.
5. The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Cash Management, Institutional, PlanAhead and the
BBH Comset Class shares was 0.20%, 0.23%, 0.49% and 0.19%, respectively.
After expense reimbursement, the net expense ratio set forth in the most
recent Fund prospectus for the Cash Management, Institutional and BBH
Comset Class shares was 0.15%, 0.18% and 0.15%, respectively. The expense
ratios above may vary from the expense ratios presented in other sections
of this report that are based on expenses incurred during the period
covered by this report.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
PORTFOLIO STATISTICS AS OF DECEMBER 31, 2007
CASH BBH
MANAGEMENT INSTITUTIONAL PLANAHEAD COMSET
CLASS CLASS CLASS CLASS
---------- ------------- --------- -------
7-day Current Yield* 4.78% 4.75% 4.47% 4.78%
7-day Effective Yield* 4.89% 4.86% 4.57% 4.89%
30-day Yield* 4.78% 4.75% 4.47% 4.78%
Weighted Avg. Maturity 26 Days 26 Days 26 Days 26 Days
Moody's Rating Aaa N/A N/A Aaa
S&P Rating AAAm N/A N/A AAAm
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven
day yield. Yield is a more accurate reflection of the Fund's current
earnings than total returns.
TOP TEN ISSUERS AS OF DECEMBER 31, 2007
% OF
NET ASSETS**
------------
General Electric Capital Corp. 5.8%
Royal Bank of Scotland plc 4.8%
Bank of America 4.5%
Deutsche Bank 4.5%
Goldman Sachs 4.5%
Lehman Brothers 4.5%
Barclays Capital, Inc. 4.5%
Citigroup 4.5%
Societe Generale NA, Inc. 4.2%
BNP Paribas 3.4%
** Percent of net assets of American Beacon Master Money Market Portfolio.
ASSET ALLOCATION AS OF DECEMBER 31, 2007
% OF
NET ASSETS**
------------
Corporate Notes 30.0%
Bank CDs, TDs and Notes 22.2%
Repurchase Agreements 19.4%
Commercial Paper 18.4%
S/T Investments 9.6%
Liabilities, Net of Other Assets 0.4%
** Percent of net assets of American Beacon Master Money Market Portfolio.
4
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (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, 2007 through
December 31, 2007.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual
account values and actual expenses. You may use the information in these lines,
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" for
the applicable Class to estimate the expenses you paid on your account during
this period. Shareholders of the PlanAhead Class that invest in the Fund through
an IRA may be subject to a custodial IRA fee of $12 that is typically deducted
each December. If your account was subject to a custodial IRA fee during the
period, your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead Class that invest in the Fund through an IRA may be subject to
a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
You should also be aware that the expenses shown in the table
highlight only your ongoing costs and do not reflect any transaction costs
charged by the Fund. Similarly, the expense examples for other funds do not
reflect any transaction costs charged by those funds, such as sales charges
(loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines
of the table are useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
Beginning Ending
Account Account Expenses Paid
Value Value During Period*
7/1/07 12/31/07 7/1/07-12/31/07
--------- --------- ---------------
CASH MANAGEMENT CLASS
Actual..................................... $1,000.00 $1,025.92 $0.77
Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77
INSTITUTIONAL CLASS
Actual..................................... $1,000.00 $1,025.75 $0.87
Hypothetical (5% return before expenses)... $1,000.00 $1,024.35 $0.87
PLANAHEAD CLASS
Actual..................................... $1,000.00 $1,024.18 $2.50
Hypothetical (5% return before expenses)... $1,000.00 $1,022.74 $2.50
BBH COMSET CLASS
Actual..................................... $1,000.00 $1,025.92 $0.77
Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15%, 0.17%, 0.49% and 0.15% for the Cash Management,
Institutional, PlanAhead, and BBHComSet Classes respectively, multiplied by
the average account value over the period, multiplied by the number derived
by dividing the number of days in the most recent fiscal half-year (184) by
days in the year (365) to reflect the half-year period .
5
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
As the economy began to show signs of weakening during the year, the
Federal Reserve ("Fed") started its series of easing monetary policy in
September. Since then the Fed has reduced the fed funds rate at each Federal
Open Market Committee ("FOMC") meeting, resulting in a 4.25% fed funds rate by
year end. These were moves of 50 basis points (0.50%) for the September FOMC
meeting followed by 25 basis points (0.25%) at each of the remaining two
meetings of the year. In response to the events that caused the Fed to ease, the
American Beacon U.S. Government Money Market Fund's weighted-average maturity
was maintained around 10 days towards the end of the year. The primary strategy
of the Fund for the year was to buy variable-rate securities, short-dated
fixed-rate securities and overnight investments. The strategies implemented
during the year enabled the Fund to outperform its Lipper peer group.
For the twelve months ended December 31, 2007, the total return of the
Cash Management Class of the American Beacon U.S. Government Money Market Fund
was 5.13%. The Fund outperformed the Lipper Institutional U.S. Government Money
Market Average return of 4.86% by 27 basis points (0.27%). Based on annualized
total returns, Lipper Inc. ranked the Cash Management Class of the Fund 8 among
163, 7 among 111 and 7 among 76 Institutional U.S. Government Money Market Funds
for the one-year, five-year, and ten-year periods ended December 31, 2007,
respectively.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2007
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Management Class (1, 2, 4).. 5.13% 3.08% 3.79%
PlanAhead Class (1, 3, 4)........ 4.65% 2.65% 3.39%
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 Prior to December 1, 2001, the Cash Management Class of the Fund was known
as the Institutional Class. A portion of the fees charged to the Cash
Management Class of the Fund has been waived since 2002. Performance prior
to waiving fees was lower than actual returns shown for periods since 2002.
3 A portion of the fees charged to the PlanAhead Class of the Fund has been
waived since 2003. Performance prior to waiving fees was lower than the
actual returns shown for periods since 2003.
4 The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Cash Management and the PlanAhead Class shares was
0.64% and 1.02%, respectively. After expense reimbursement, the net expense
ratio set forth in the most recent Fund prospectus for the Cash Management
and PlanAhead shares was 0.15% and 0.63%, respectively. The expense ratios
above may vary from the expense ratios presented in other sections of this
report that are based on expenses incurred during the period covered by
this report.
PORTFOLIO STATISTICS AS OF DECEMBER 31, 2007
CASH MANAGEMENT CLASS PLANAHEAD CLASS
--------------------- ---------------
7-day Current Yield* 4.43% 4.06%
7-day Effective Yield* 4.53% 4.14%
30-day Yield* 4.41% 4.03%
Weighted Avg. Maturity 11 Days 11 Days
Moody's Rating Aaa N/A
S&P Rating AAAm N/A
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven
day yield. Yield is a more accurate reflection of the Fund's current
earnings than total returns.
6
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
ASSET ALLOCATION AS OF DECEMBER 31, 2007
% OF
NET ASSETS**
------------
Repurchase Agreements 81.0%
Government Securities 18.9%
Net Other Assets 0.1%
** Percent of net assets of the American Beacon Master U.S. Government Money
Market Portfolio.
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs and (2) ongoing costs, including management fees,
administrative service fees, and other Fund expenses. The examples below are
intended to help you understand the ongoing cost (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds. The examples are based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from July 1, 2007 through
December 31, 2007.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual
account values and actual expenses. You may use the information in these lines,
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" for
the applicable Class to estimate the expenses you paid on your account during
this period. Shareholders of the PlanAhead Class that invest in the Fund through
an IRA may be subject to a custodial IRA fee of $12 that is typically deducted
each December. If your account was subject to a custodial IRA fee during the
period, your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead Class that invest in the Fund through an IRA may be subject to
a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
You should also be aware that the expenses shown in the table
highlight only your ongoing costs and do not reflect any transaction costs
charged by the Fund. Similarly, the expense examples for other funds do not
reflect any transaction costs charged by those funds, such as sales charges
(loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines
of the table are useful in comparing ongoing costs only and will not help you
determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
Beginning Ending
Account Account Expenses Paid
Value Value During Period*
7/1/07 12/31/07 7/1/07-12/31/07
--------- --------- ---------------
CASH MANAGEMENT CLASS
Actual..................................... $1,000.00 $1,024.73 $0.77
Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77
PLANAHEAD CLASS
Actual..................................... $1,000.00 $1,022.51 $2.96
Hypothetical (5% return before expenses)... $1,000.00 $1,022.28 $2.96
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15% and 0.58% for the Cash Management and PlanAhead
Classes respectively, multiplied by the average account value over the
period, multiplied by the number derived by dividing the number of days in
the most recent fiscal half-year (184) by days in the year (365) to reflect
the half-year period.
7
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds, comprised of the American Beacon Money Market Fund and
the American Beacon U.S. Government Money Market Fund (collectively, the
"Funds") as of December 31, 2007, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. 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 Funds as of December 31, 2007, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 27, 2008
8
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2007 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
-------------- ---------------
ASSETS:
Investment in Portfolio, at value ............................ $ 2,345,276 $ 18,103
Receivable for fund shares sold .............................. 53 --
Receivable from Manager for expense reimbursement (Note 2) ... 117 2
Prepaid expenses ............................................. 23 19
-------------- -----------
TOTAL ASSETS .............................................. 2,345,469 18,124
-------------- -----------
LIABILITIES:
Payable for fund shares redeemed ............................. 7 --
Dividends payable ............................................ 6,458 39
Administrative service and service fees payable (Note 2) ..... 172 1
Other liabilities ............................................ 56 23
-------------- -----------
TOTAL LIABILITIES ......................................... 6,693 63
-------------- -----------
NET ASSETS ................................................... $ 2,338,776 $ 18,061
============== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital .............................................. 2,338,776 18,061
-------------- -----------
NET ASSETS ...................................................... $ 2,338,776 $ 18,061
============== ===========
SHARES OUTSTANDING (NO PAR VALUE):
Cash Management Class ........................................ 349,248,723 16,432,346
============== ===========
Institutional Class .......................................... 450,661,969 N/A
============== ===========
PlanAhead Class .............................................. 112,278,266 1,628,248
============== ===========
BBH ComSet Class ............................................. 1,426,587,073 N/A
============== ===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Cash Management Class ........................................ $ 1.00 $ 1.00
============== ===========
Institutional Class .......................................... $ 1.00 N/A
============== ===========
PlanAhead Class .............................................. $ 1.00 $ 1.00
============== ===========
BBH ComSet Class ............................................. $ 1.00 N/A
============== ===========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
9
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
-------------- ---------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income .............................................. $91,208 $ 533
Portfolio expenses ........................................... (1,839) (12)
------- -----
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ............ 89,369 521
------- -----
FUND EXPENSES:
Administrative service fees (Note 2):
Cash Management Class ..................................... 442 5
Institutional Class ....................................... 264 --
PlanAhead Class ........................................... 128 2
Platinum Class (Note 1) ................................... 80 10
BBH ComSet Class .......................................... 552 --
Transfer agent fees:
Cash Management Class ..................................... 51 1
Institutional Class ....................................... 18 --
PlanAhead Class ........................................... 13 4
Platinum Class (Note 1) ................................... -- 1
BBH ComSet Class .......................................... 5 --
Professional fees ............................................ 29 14
Registration fees and expenses ............................... 114 29
Service fees - PlanAhead Class (Note 2) ...................... 319 5
Distribution fees - Platinum Class (Note 1) .................. 31 4
Prospectus and shareholder reports ........................... 41 --
Other expenses ............................................... 22 5
------- -----
TOTAL FUND EXPENSES ....................................... 2,109 80
------- -----
Less waiver and reimbursement of expenses (Note 2) .............. (776) (53)
------- -----
NET FUND EXPENSES ......................................... 1,333 27
------- -----
NET INVESTMENT INCOME ........................................... 88,036 494
------- -----
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments ............................. 10 --
------- -----
NET GAIN ON INVESTMENTS ................................... 10 --
------- -----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $88,046 $ 494
------- -----
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
10
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
DECEMBER 31, 2007 (IN THOUSANDS)
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
Year Ended December 31, Year Ended December 31,
-------------------------- ----------------------------
2007 2006 2007 2006
------------ ----------- --------- --------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ........................... $ 88,036 $ 36,739 $ 494 $ 607
Net realized gain (loss) on investments ......... 10 1 -- --
------------ ----------- --------- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................ 88,046 36,740 494 607
------------ ----------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Cash Management Class ........................ (32,696) (21,235) (334) (304)
Institutional Class .......................... (13,567) (4,754) -- --
PlanAhead Class .............................. (6,183) (9,290) (94) (114)
Platinum Class (Note 1) ...................... (543) (1,460) (66) (189)
BBH ComSet Class ............................. (35,047) -- -- --
Net realized gain on investments:
Cash Management Class ........................ (6) -- -- --
Institutional Class .......................... (3) -- -- --
PlanAhead Class .............................. (1) (1) -- --
Platinum Class (Note 1) ...................... -- -- -- --
BBH ComSet Class ............................. -- -- -- --
------------ ----------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS ............. (88,046) (36,740) (494) (607)
------------ ----------- --------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ................... 11,962,330 5,755,911 145,717 39,131
Reinvestment of dividends and distributions ..... 44,661 32,640 157 225
Cost of shares redeemed ......................... (10,878,697) (5,091,891) (137,451) (58,084)
------------ ----------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ................ 1,128,294 696,660 8,423 (18,728)
------------ ----------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS .............. 1,128,294 696,660 8,423 (18,728)
------------ ----------- --------- --------
NET ASSETS:
Beginning of period ............................. 1,210,482 513,822 9,638 28,366
------------ ----------- --------- --------
END OF PERIOD ................................... $ 2,338,776 $ 1,210,482 $ 18,061 $ 9,638
============ =========== ========= ========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
11
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") 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 with separate series. The following series are included in this report:
American Beacon Money Market and American Beacon U.S. Government Money Market
Funds (each a "Fund" and collectively, the "Funds").
The BBH Comset Class of the Money Market Fund commenced operations on
April 2, 2007. The Platinum Class of the Funds was fully liquidated effective
May 31, 2007.
Each Fund invests all of its investable assets in the corresponding
portfolio of the American Beacon Master Trust, an open-end diversified
management investment company, as follows:
AMERICAN BEACON: (ARROW) invests assets in (ARROW) AMERICAN BEACON MASTER TRUST:
- ---------------- -----------------------------
Money Market Fund Money Market Portfolio
U.S. Government Money Market Fund U.S. Government Money Market Portfolio
Each Fund has the same investment objectives as its corresponding
American Beacon Master Trust Portfolio. The value of such investment reflects
each Fund's proportionate interest in the net assets of the corresponding
portfolio (17.8% and 1.3% at December 31, 2007 of the American Beacon Master
Trust Money Market and U.S. Government Money Market Portfolios, respectively)
(each a "Portfolio" and collectively the "Portfolios"). The financial statements
of the Portfolios are included elsewhere in this report and should be read in
conjunction with the Funds' financial statements.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned
subsidiary of AMR Corporation and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
The following is a summary of the significant accounting policies
followed by the Funds.
Class Disclosure
Each Fund has multiple classes of shares designed to meet the needs of
different groups of investors. Please note that not all Funds offer all classes.
The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ -------------------------------------------------------------- ----------------------------------
CASH MANAGEMENT CLASS Investors making an initial investment of $10 million for Administrative Service Fee - 0.07%
Money Market and $2 million for U.S. Government Money Market,
or investors investing through an intermediary
INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service Fee - 0.10%
PLANAHEAD CLASS General public and investors investing through an intermediary Administrative Service Fee - 0.10%
Service Fee - 0.25%
BBH COMSET Investors making an initial investment of at least $10 million Administrative Service Fee - 0.08%
in BBH ComSet (SM) who meet the eligibility requirements
established by Brown Brothers Harriman & Co.
Valuation of Investments
The Funds record their investment in the Portfolios at fair value.
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements, which are included elsewhere in this
report.
12
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income (loss) and
realized gain (loss) in the Portfolio each day. All net investment income (loss)
and realized gain (loss) of each Portfolio are allocated pro rata among the
corresponding Fund and other investors in each Portfolio at the time of such
determination. The Funds generally declare dividends daily from net investment
income and net short-term capital gain, if any, payable monthly.
Dividends to shareholders are determined in accordance with federal
income tax principles that may treat certain transactions differently than U.S.
generally accepted accounting principles.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class),
gains and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the operations of
that class.
Use of Estimates
The preparation of financial statements in conformity with U.S.
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
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. As of December 31, 2007, the Manager does not believe
the adoption of FAS 157 will materially impact the amounts represented in the
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of fair value.
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
Administrative Services Agreement
As compensation for providing administrative services to the Funds,
the Manager receives an annualized fee of 0.10% of the average daily net assets
of each of the Institutional and PlanAhead Classes of the Funds, 0.08% of the
average daily net assets of the BBH Class of the Money Market Fund and 0.07% of
the Cash Management Class of the Funds.
13
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
Distribution Plan
The Trust has adopted a "defensive" Distribution Plan (the "Plan") in
accordance with Rule 12b-1 under the Act, pursuant to which no fees may be
charged to the Funds for distribution purposes. However, the Plan authorizes the
fees received by the Manager to be used for distribution purposes. Under this
plan, the Trust does not intend to compensate the Manager or any other party,
either directly or indirectly, for the distribution of Trust shares.
Service Agreement
The Manager and the Trust entered into a Service Agreement which
obligates the Manager to oversee additional shareholder servicing of the
PlanAhead Class. As compensation for performing the duties required under the
Service Agreement, the Manager receives 0.25% based on the daily net assets of
the PlanAhead Class.
Reimbursement and Waiver of Expenses
The Manager contractually agreed to reimburse the following Funds for
distribution and other expenses through February 29, 2008 to the extent total
annual fund operating expenses exceed the following amounts:
FUND CLASS EXPENSE CAP AMOUNT
- ---- ----- ----------- --------
Money Market Fund........................... Institutional 0.18%** $ 97,463
Money Market Fund........................... Cash Management 0.15% 253,808
U.S. Government Money Market Fund........... Cash Management 0.15%* 5,778
U.S. Government Money Market Fund........... PlanAhead 0.65% 1,799
* Prior to March 1, 2007, the expense cap was 0.19%.
** Prior to March 1, 2007, fees were voluntarily waived by the Manager to
arrive at expense cap.
The Manager voluntarily agreed to reimburse the BBH ComSet Class of
the Money Market Fund for other expenses through February 29, 2008 to the extent
total annual fund operating expenses exceeded 0.15%. The Manager reimbursed
expenses totaling $417,784 to the BBH ComSet Class of the Money Market Fund
during the year ended December 31, 2007.
Expense Reimbursement Plan
The Funds have 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 expense
limit. The table below excludes amounts previously reimbursed to the Platinum
Classes of the Funds. The following waived fees or reimbursed expenses are
subject to potential recovery expiring in:
U.S. GOVERNMENT
YEAR MONEY MARKET MONEY MARKET
- ---- ------------ ---------------
2008........................................ 293,487 54,846
2009........................................ 260,591 65,678
2010........................................ 769,055 7,577
The Funds have not recorded a liability for this potential
reimbursement due to the current assessment that a reimbursement is unlikely.
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
3. FEDERAL INCOME TAXES
It is the policy of the Funds 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.
The Funds adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainties in Income Taxes" ("FIN 48"), on January 1, 2007.
FIN 48 sets forth a minimum threshold for financial statement recognition of the
benefit of a tax position taken or expected to be taken in a tax return. The
implementation of FIN 48 did not result in any unrecognized tax benefits in the
accompanying financial statements. Each of the tax years in the three year
period ended December 31, 2007, remains subject to examination by the Internal
Revenue Service. If applicable, the Funds recognize interest accrued related to
unrecognized tax benefits in interest expense and penalties in "Other expenses"
on the Statements of Operations.
Dividends are categorized in accordance with income tax regulations
which may treat certain transactions differently than U.S. 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 for the years ended December
31, 2007 and December 31, 2006 were as follows (in thousands):
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
DISTRIBUTIONS PAID FROM ORDINARY INCOME:*
Cash Management Class.................... $32,702 $21,235 $334 $304
Institutional Class...................... 13,570 4,754 -- --
PlanAhead Class.......................... 6,184 9,291 94 114
Platinum Class........................... 543 1,460 66 189
BBH ComSet Class......................... 35,047 -- -- --
------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID.................... $88,046 $36,740 $494 $607
======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 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 Funds do not have capital loss carry forwards as of December 31,
2007.
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each
class of the Funds (in thousands). Each share is valued at $1.00:
Year Ended December 31, 2007
Cash
Management Institutional PlanAhead Platinum
Class Class Class Class
---------- ------------- --------- --------
Money Market Fund
Shares sold ................................. 4,891,367 1,043,210 631,312 14,014
Reinvestment of dividends ................... 28,101 12,166 3,889 502
Share redeemed .............................. (5,072,125) (1,109,117) (693,440) (48,172)
---------- ---------- -------- -------
Net (decrease) in shares outstanding ........ (152,657) (53,741) (58,239) (33,656)
========== ========== ======== =======
15
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
BBH ComSet Class
----------------
Money Market Fund
Shares sold ...................................... 5,382,427
Reinvestment of dividends ........................ 3
Shares redeemed .................................. (3,955,843)
----------
Net increase in shares outstanding ............... 1,426,587
==========
Cash
Management PlanAhead Platinum
Class Class Class
---------- --------- --------
U.S. Government Money Market Fund
Shares sold ...................................... 132,887 8,531 4,299
Reinvestment of dividends ........................ 81 14 62
Shares redeemed .................................. (120,104) (8,974) (8,373)
---------- -------- -------
Net increase (decrease) in shares outstanding .... 12,864 (429) (4,012)
========== ======== =======
Year Ended December 31, 2006
Cash
Management Institutional PlanAhead Platinum
Class Class Class Class
---------- ------------- --------- --------
Money Market Fund
Shares sold ...................................... 3,868,924 1,325,652 515,550 45,785
Reinvestment of dividends ........................ 19,760 3,586 7,834 1,460
Shares redeemed .................................. (3,586,788) (861,256) (589,770) (54,077)
---------- --------- -------- -------
Net increase (decrease) in shares outstanding .... 301,896 467,982 (66,386) (6,832)
========== ========= ======== =======
Cash
Management PlanAhead Platinum
Class Class Class
---------- --------- --------
U.S. Government Money Market Fund
Shares sold ...................................... 20,647 8,290 10,194
Reinvestment of dividends ........................ 0 36 189
Shares redeemed .................................. (39,597) (8,201) (10,286)
------- ------ -------
Net increase (decrease) in shares outstanding .... (18,950) 125 97
======= ====== =======
16
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
Year Ended December 31,
----------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return ................................................ 5.28% 5.05% 3.19% 1.30% 1.08%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $349,249 $501,905 $200,010 $434,587 $117,395
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15% 0.15% 0.15% 0.15% 0.16%
Expenses, before waivers .............................. 0.19% 0.20% 0.23% 0.23% 0.24%
Net investment income, net of waivers ................. 5.18% 5.04% 3.08% 1.34% 1.03%
Net investment income, before waivers ................. 5.14% 4.99% 3.00% 1.26% 0.95%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
17
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
Year Ended December 31,
--------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- ------- ------- --------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- --------
Income from investment operations:
Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ...................... -- -- -- -- --
-------- -------- ------- ------- --------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
-------- -------- ------- ------- --------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
-------- -------- ------- ------- --------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
-------- -------- ------- ------- --------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= ========
Total return ................................................ 5.24% 4.99% 3.06% 1.20% 0.97%
======== ======== ======= ======= ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $450,662 $504,403 $36,421 $34,146 $159,092
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.18% 0.19% 0.28% 0.24% 0.27%
Expenses, before waivers .............................. 0.22% 0.23% 0.28% 0.24% 0.27%
Net investment income, net of waivers ................. 5.13% 5.06% 3.07% 1.05% 1.00%
Net investment income, before waivers ................. 5.10% 5.02% 3.07% 1.05% 1.00%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
18
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
Year Ended December 31,
----------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
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 .05 0 .05 0 .03 0 .01 0 .01
Net realized gain on investments(B) ...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return ................................................ 4.94% 4.69% 2.82% 0.93% 0.70%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $112,278 $170,518 $236,903 $132,438 $126,972
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.47% 0.49% 0.51% 0.51% 0.54%
Expenses, before waivers .............................. 0.47% 0.49% 0.51% 0.51% 0.54%
Net investment income, net of waivers ................. 4.85% 4.59% 2.83% 0.94% 0.71%
Net investment income, before waivers ................. 4.84% 4.59% 2.83% 0.94% 0.71%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
19
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
BBH
ComSet Class
April 2 to
December
31, 2007
------------
Net asset value, beginning of period ........................ $ 1.00
----------
Income from investment operations:
Net investment income(A) ................................. 0 .04
Net realized gain on investments(B) ...................... --
----------
Total income from investment operations ..................... 0.04
----------
Less distributions:
Dividends from net investment income ..................... (0.04)
Distributions from net realized gains on investments(B) .. --
----------
Total distributions ......................................... (0.04)
----------
Net asset value, end of period .............................. $ 1.00
==========
Total return ................................................ 3.92%(C)
==========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $1,426,587
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15%
Expenses, before waivers .............................. 0.21%
Net investment income, net of waivers ................. 5.10%
Net investment income, before waivers ................. 5.03%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
20
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
Year Ended December 31,
----------------------------------------------
2007 2006 2005 2004 2003
------- ------ ------- ------- -------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------- ------- -------
Income from investment operations:
Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ...................... -- -- -- -- --
------- ------ ------- ------- -------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
------- ------ ------- ------- -------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
------- ------ ------- ------- -------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
------- ------ ------- ------- -------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ======= ======= =======
Total return ................................................ 5.13% 4.97% 3.12% 1.22% 1.04%
======= ====== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $16,433 $3,568 $22,518 $28,591 $22,060
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15% 0.19% 0.19% 0.19% 0.19%
Expenses, before waivers .............................. 0.60% 0.64% 0.38% 0.29% 0.37%
Net investment income, net of waivers ................. 4.87% 4.60% 2.99% 1.21% 1.04%
Net investment income, before waivers ................. 4.42% 4.16% 2.80% 1.11% 0.86%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon U.S. Government Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
21
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
Year Ended December 31,
---------------------------------------------
2007 2006 2005 2004 2003
------ ------ ------ ------ -------
Net asset value, beginning of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ -------
Income from investment operations:
Net investment income(A) .............................. 0.05 0.04 0.03 0.00(B) 0 .01
Net realized gain on investments(B) ...................... -- -- -- -- --
------ ------ ------ ------ -------
Total income from investment operations .................. 0.05 0.04 0.03 -- 0.01
------ ------ ------ ------ -------
Less distributions:
Dividends from net investment income .................. (0.05) (0.04) (0.03) 0.00(B) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
------ ------ ------ ------ -------
Total distributions ...................................... (0.05) (0.04) (0.03) -- (0.01)
------ ------ ------ ------ -------
Net asset value, end of period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== =======
Total return ............................................. 4.65% 4.51% 2.71% 0.85% 0.61%
====== ====== ====== ====== =======
Ratios and supplemental data:
Net assets, end of period (in thousands) .............. $1,628 $2,058 $1,933 $5,370 $26,785
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ........................... 0.61% 0.63% 0.58% 0.56% 0.58%
Expenses, before waivers ........................... 1.20% 1.02% 0.61% 0.57% 0.62%
Net investment income, net of waivers .............. 4.56% 4.39% 2.47% 0.68% 0.72%
Net investment income, before waivers .............. 3.97% 4.00% 2.44% 0.67% 0.68%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon U.S. Government Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
22
AMERICAN BEACON MASTER TRUST
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 statements of assets and liabilities of
American Beacon Master Trust, comprised of the American Beacon Money Market
Portfolio and the American Beacon U.S. Government Money Market Portfolio
(collectively, the "Portfolios"), including the schedules of investments, as of
December 31, 2007, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolios' 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 Portfolios' 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, 2007, 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, 2007, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 27, 2008
23
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
MEDIUM-TERM NOTES - 26.60%
ABN Amro Bank NV, 5.259%, Due 4/18/2008 ++# ................ $ 132,050 $ 132,081
American Honda Finance Corp.,
5.171%, Due 1/23/2008 ++# ............................... 40,000 40,001
5.075%, Due 2/22/2008 ++# ............................... 33,200 33,204
4.866%, Due 5/9/2008 ++# ................................ 15,000 15,000
ASIF Global Financing XXI, 5.408%, Due 3/14/2008 ++ # ...... 32,650 32,674
ASIF Global Financing XXXII, 5.08%, Due 2/25/2008 ++ # ..... 206,600 206,626
Bank of America Corp., 5.308%, Due 5/5/2008 ++ ............. 32,000 32,050
Bank of New York Mellon Corp., 4.966%, Due 6/16/2008 ++ .... 17,645 17,645
Bank of Scotland plc, 5.214%, Due 7/17/2008 ++ # ........... 125,800 125,818
Berkshire Hathaway Finance Corp.,
5.299%, Due 1/11/2008 ++ ................................ 131,885 131,888
4.938%, Due 5/16/2008 ++ ................................ 23,750 23,760
Citigroup, Inc., 4.944%, Due 5/2/2008 ++ ................... 199,700 199,755
Commonwealth Bank of Australia, 4.96%, Due 1/31/2008 ++ # .. 175,000 175,005
Credit Suisse USA, Inc., 5.234%, Due 6/2/2008 ++ ........... 27,303 27,319
General Electric Capital Corp.,
5.29%, Due 1/3/2008 ++ .................................. 211,500 211,501
5.293%, Due 1/15/2008 ++ ................................ 324,455 324,466
5.171%, Due 3/4/2008 ++ ................................. 40,886 40,891
5.303%, Due 4/15/2008 ++ ................................ 65,000 65,018
4.955%, Due 5/19/2008 ++ ................................ 20,000 20,007
HSBC Finance Corp., 4.982%, Due 5/21/2008 ++ ............... 162,770 162,784
JPMorgan Chase & Co., 5.154%, Due 1/25/2008 ++ ............. 295,000 295,016
Merrill Lynch & Co., Inc.,
4.90%, Due 2/14/2008 ++ ................................. 61,300 61,305
5.091%, Due 6/16/2008 ++ ................................ 93,350 93,404
Morgan Stanley, 5.334%, Due 1/18/2008 ++ ................... 68,900 68,905
Royal Bank of Scotland plc,
5.259%, Due 4/11/2008 ++# ............................... 435,500 435,549
5.19%, Due 4/21/2008 ++ # ............................... 50,000 50,006
4.942%, Due 8/20/2008 ++ # .............................. 150,000 150,000
Toyota Motor Credit Corp.,
5.233%, Due 4/15/2008 ++ ................................ 100,000 100,008
4.961%, Due 6/17/2008 ++ ................................ 24,000 24,002
5.213%, Due 7/7/2008 ++ ................................. 60,500 60,504
Wells Fargo & Co., 5.108%, Due 8/20/2008 ++ ................ 150,000 150,000
-----------
TOTAL MEDIUM-TERM NOTES .................................... 3,506,192
-----------
PROMISSORY NOTES - 3.41%
Goldman Sachs Group, Inc., 4.889%, Due 5/9/2008 ++ ......... 450,000 450,000
-----------
CERTIFICATES OF DEPOSIT AND BANK NOTES - 19.14%
Bank of America, NA, 5.084%, Due 7/25/2008 ++ .............. 18,300 18,303
See accompanying notes
24
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Bank of Scotland N.Y., 5.05%, Due 3/14/2008 ................ $ 155,600 $ 155,638
BNP Paribas N.Y.,
5.00%, Due 3/13/2008 .................................... 200,000 200,000
5.11%, Due 3/13/2008 .................................... 50,000 50,011
5.00%, Due 3/17/2008 .................................... 100,000 100,000
4.93%, Due 3/27/2008 .................................... 100,000 100,000
Credit Suisse N.Y., 5.00%, Due 2/26/2008 ++ ................ 250,000 250,000
Deutsche Bank N.Y., 4.941%, Due 6/19/2008 ++ ............... 280,000 280,040
HSBC Bank USA, 5.061%, Due 7/28/2008 ++ .................... 71,000 71,033
M&I Marshall & Ilsley Bank, 4.839%, Due 2/15/2008 ++ ....... 196,500 196,501
Nordea Bank Finland N.Y., 4.991%, Due 5/28/2008 ++ ......... 21,600 21,596
Royal Bank of Canada N.Y., 4.896%, Due 3/20/2008 ++ ........ 10,000 10,000
Societe Generale N.Y.,
5.00%, Due 3/7/2008 ..................................... 250,000 250,000
4.68%, Due 3/28/2008 .................................... 200,000 200,000
Suntrust Bank, 5.309%, Due 4/2/2008 ++ ..................... 53,020 53,035
Toronto Dominion Bank N.Y., 4.66%, Due 3/28/2008 ........... 250,000 249,999
US Bank, NA, 5.20%, Due 1/3/2008 ++ ........................ 221,500 221,500
Wachovia Bank, NA, 4.976%, Due 6/20/2008 ++ ................ 50,000 50,020
Westpac Bank N.Y., 5.203%, Due 1/15/2008 ++ ................ 46,000 46,000
-----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ............... 2,523,676
-----------
COMMERCIAL PAPER - 18.39%
Ciesco LLC, 4.92%, Due 1/28/2008 # ......................... 225,000 224,170
Danske Corp., 4.64%, Due 1/31/2008 # ....................... 100,000 99,613
Edison Asset Securitization LLC, 4.84%, Due 2/20/2008 # .... 150,000 148,992
General Electric Capital Corp., 4.83%, Due 2/15/2008 ....... 100,000 99,396
GOVCO, Inc.,
4.73%, Due 1/22/2008 # .................................. 100,000 99,724
4.73%, Due 1/23/2008 # .................................. 150,000 149,566
ING US Funding LLC,
4.64%, Due 1/23/2008 .................................... 11,950 11,916
4.89%, Due 1/25/2008 .................................... 35,000 34,886
4.83%, Due 1/28/2008 .................................... 150,000 149,455
Jupiter Securitization, LLC,
5.80%, Due 1/18/2008 # .................................. 55,000 54,849
5.20%, Due 1/22/2008 # .................................. 119,615 119,252
Kitty Hawk Funding Corp.,
4.84%, Due 1/18/2008 # .................................. 24,258 24,203
4.78%, Due 1/28/2008 # .................................. 72,628 72,368
Long Lane Master Trust IV,
4.97%, Due 1/22/2008 # .................................. 120,000 119,659
4.78%, Due 1/24/2008 # .................................. 27,000 26,918
5.60%, Due 1/25/2008 # .................................. 110,787 110,402
4.78%, Due 1/28/2008 # .................................. 10,297 10,260
See accompanying notes
25
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Societe Generate NA, Inc., 4.745%, Due 1/29/2008 ........... $ 100,000 $ 99,631
Three Rivers Funding Corp., 5.00%, Due 1/2/2008 # .......... 450,000 449,937
Toyota Motor Credit Corp., 4.76%, Due 2/22/2008 ............ 200,000 198,625
UBS Finance Delaware LLC, 4.77%, Due 1/24/2008 ............. 53,500 53,337
Variable Funding Capital Corp.,
5.35%, Due 1/17/2008 # .................................. 17,606 17,564
5.35%, Due 1/18/2008 # .................................. 50,000 49,874
-----------
TOTAL COMMERCIAL PAPER ..................................... 2,424,597
-----------
TIME DEPOSITS - 3.03%
Danske Bank, 5.00%, Due 1/2/2008 ........................... 400,000 400,000
-----------
SHARES
------------
SHORT TERM INVESTMENTS - 9.64%
BlackRock Temp Fund ........................................ 630,638,084 630,638
Dreyfus Institutional Cash Advantage Fund .................. 640,000,000 640,000
-----------
TOTAL SHORT TERM INVESTMENTS ............................... 1,270,638
-----------
PAR
AMOUNT
------------
REPURCHASE AGREEMENTS - 19.42%
Bank of America, NA, 4.68%, Due 1 /2/2008 (Held at Bank of
New York, Collateralized by Mortgage Loan Obligations
valued at $577,800, 2/23/2036) .......................... $ 540,000 540,000
Barclays Bank plc, 4.65%, Due 1/2/2008 (Held at Bank of
New York, Collateralized by Equity Securities valued at
$619,500, 1/1/2049) ..................................... 590,000 590,000
Citigroup, Inc., 4.68%, Due 1/2/2008 (Held at Chase NYC,
Collateralized by Mortgage Loan Obligations valued at
$433,771, 2/28/2037 - 11/29/2037) ....................... 390,000 390,000
Deutsche Bank Securities, Inc., 4.68%, Due 1/2/2008 (Held at
Bank of New York, Collateralized by Equity Securities
valued at $325,500, 1/1/2049) ........................... 310,000 310,000
Goldman Sachs Group, Inc., 4.75%, Due 1 /2/2008 (Held at
Bank of New York, Collateralized by Mortgage Loan
Obligations valued at $144,200, 1/1/2010 - 1/1/2020) .... 140,000 140,000
Lehman Brothers, Inc., 4.70%, Due 1 /2/2008 (Held at Chase
NYC, Collateralized by Corporate Obligations valued at
$55,611, 5.125% - 6.75%, 9/13/2016 - 7/15/2027 and U.S.
Government Agency Obligations valued at $546,108, 5.5% -
6.5%, 11/1/2036 -9/1/2037) .............................. 590,000 590,000
-----------
TOTAL REPURCHASE AGREEMENTS ................................ 2,560,000
-----------
TOTAL INVESTMENTS - 99.63% (COST $13,135,103) ................. $13,135,103
OTHER ASSETS, NET OF LIABILITIES - 0.37% ...................... 48,896
-----------
TOTAL NET ASSETS - 100.00% .................................... $13,183,999
===========
See accompanying notes
26
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
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 $3,173,315 or 24.07% of net
assets. The Fund has no right to demand registration of these securities.
See accompanying notes
27
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 18.88%
FEDERAL HOME LOAN BANK - 8.84%
4.56%, Due 3/17/2008 .................................... $ 7,500 $ 7,428
4.27%, Due 3/26/2008 .................................... 20,000 19,798
4.775%, Due 8/15/2008 ++ ................................ 35,000 35,014
4.841%, Due 9/17/2008 ++ ................................ 25,000 24,992
5.074%, Due 1/5/2009 ++ ................................. 35,000 34,998
-----------
122,230
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 5.94%
4.25%, Due 1/28/2008 .................................... 29,000 28,907
4.29%, Due 3/24/2008 .................................... 18,382 18,200
4.55%, Due 4/7/2008 ..................................... 10,072 9,948
4.767%, Due 2/11/2009 ++ ................................ 25,000 24,994
-----------
82,049
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.10%
4.45%, Due 2/6/2008 ..................................... 17,736 17,657
4.27%, Due 3/19/2008 .................................... 15,085 14,946
4.28%, Due 3/26/2008 .................................... 20,044 19,842
4.47%, Due 4/9/2008 ..................................... 4,199 4,147
-----------
56,592
-----------
TOTAL U.S. AGENCY OBLIGATIONS .............................. 260,871
-----------
REPURCHASE AGREEMENTS - 81.06%
Banc of America Securities LLC, 4.62%, Due 1/2/2008 (Held at
Bank New York, Collateralized by U.S. Government Agency
Obligations valued at $408,000, 5.0%, 6/1/2035) ......... 400,000 400,000
Barclays Capital, Inc., 4.65%, Due 1/2/2008 (Held at Bank of
New York, Collateralized by U.S. Government Agency
Obligations valued at $306,000, 4.5% - 6.0%, 1/1/2018 -
5/1/2047) ............................................... 300,000 300,000
Goldman Sachs, 4.75%, Due 1/2/2008 (Held at Bank of New
York, Collateralized by U.S. Government Agency
Obligations valued at $428,682, 4.5% - 7.0%, 7/1/2010 -
12/1/2037) .............................................. 420,276 420,276
-----------
TOTAL REPURCHASE AGREEMENTS ................................ 1,120,276
-----------
TOTAL INVESTMENTS - 99.94% (COST $1,381,147) .................. $ 1,381,147
OTHER ASSETS, NET OF LIABILITIES - 0.06% ...................... 837
-----------
TOTAL NET ASSETS - 100.00% .................................... $ 1,381,984
===========
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.
See accompanying notes
28
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investment in securities at value (cost - $10,575,103 and $260,871,
respectively)........................................................... $10,575,103 $ 260,871
Repurchase agreement (cost - $2,560,000 and $1,120,276, respectively)... 2,560,000 1,120,276
Dividends and interest receivable....................................... 50,408 1,008
Prepaid expenses........................................................ 8 --
----------- ----------
TOTAL ASSETS......................................................... 13,185,519 1,382,155
----------- ----------
LIABILITIES:
Management and investment advisory fees payable (Note 2)................ 1,302 107
Other liabilities....................................................... 218 64
----------- ----------
TOTAL LIABILITIES.................................................... 1,520 171
----------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS................... $13,183,999 $1,381,984
=========== ==========
See accompanying notes
29
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
U.S. Government
Money Market Money Market
------------ ---------------
INVESTMENT INCOME:
Interest income..................................... $841,750 $48,251
-------- -------
TOTAL INVESTMENT INCOME.......................... 841,750 48,251
-------- -------
EXPENSES:
Management and investment advisory fees (Note 2).... 15,926 947
Custodian fees...................................... 443 27
Professional fees................................... 177 43
Other expenses...................................... 381 31
-------- -------
TOTAL EXPENSES................................... 16,927 1,048
-------- -------
NET INVESTMENT INCOME.................................. 824,823 47,203
-------- -------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................... 127 3
-------- -------
NET GAIN ON INVESTMENTS.......................... 127 3
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $824,950 $47,206
======== =======
See accompanying notes
30
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
Year Ended December 31, Year Ended December 31,
---------------------------- -------------------------
2007 2006 2007 2006
------------ ------------- ----------- -----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income....................... $ 824,823 $ 530,893 $ 47,203 $ 17,197
Net realized gain on investments............ 127 12 3 1
------------ ------------- ----------- -----------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... 824,950 530,905 47,206 17,198
------------ ------------- ----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions............................... 35,059,358 131,682,048 5,041,893 3,002,184
Withdrawals................................. (35,428,478) (126,270,825) (4,270,511) (2,695,546)
------------ ------------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS....... (369,120) 5,411,223 771,382 306,638
------------ ------------- ----------- -----------
NET INCREASE IN NET ASSETS............... 455,830 5,942,128 818,588 323,836
------------ ------------- ----------- -----------
NET ASSETS:
Beginning of period......................... 12,728,169 6,786,041 563,396 239,560
------------ ------------- ----------- -----------
END OF PERIOD............................... $ 13,183,999 $ 12,728,169 $ 1,381,984 $ 563,396
============ ============= =========== ===========
See accompanying notes
31
AMERICAN BEACON MASTER TRUST PORTFOLIOS
FINANCIAL HIGHLIGHTS
Money Market
Year Ended December 31,
--------------------------------
2007 2006 2005 2004 2003
---- ---- ---- ---- ----
Total return................................. 5.33% 5.09% 3.25% 1.34% 1.13%
Ratios to average net assets (annualized):...
Expenses.................................. 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income..................... 5.19% 5.03% 3.20% 1.30% 1.14%
U.S. Government Money Market
Year Ended December 31,
--------------------------------
2007 2006 2005 2004 2003
---- ---- ---- ---- ----
Total return................................. 5.18% 5.04% 3.19% 1.30% 1.11%
Ratios to average net assets (annualized):...
Expenses.................................. 0.11% 0.12% 0.12% 0.11% 0.12%
Net investment income..................... 4.98% 4.97% 3.15% 1.30% 1.13%
32
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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. Prior to November 1, 2004, the Trust was organized as a trust
under the laws of the State of New York. Beneficial interests in the Trust are
divided into separate series, each having distinct investment objectives and
policies. These financial statements relate to the American Beacon Master Money
Market Portfolio and American Beacon Master U.S. Government Money Market
Portfolio (each a "Portfolio" and collectively the "Portfolios"). The objective
of each Portfolio is current income, liquidity and the maintenance of a stable
price of $1.00 per share. The assets of each Portfolio belong only to that
Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other.
American Beacon Advisors, Inc. (the "Manager") is a wholly owned
subsidiary of AMR Corporation and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services.
The following is a summary of the significant accounting policies
followed by the Portfolios.
Security Valuation
Securities of the Portfolios are valued at 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 Portfolios, calculated at
amortized cost, and the price per share calculated by reference to market
quotations, or if there is any other deviation that the Trust's Board of
Trustees (the "Board") believes would result in a material dilution to
shareholders or purchasers, the Board will promptly consider the appropriate
action that should be initiated.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums or
accretion of discounts on investment grade short-term securities and zero coupon
instruments. For financial and tax reporting purposes, realized gains and losses
are determined on the basis of specific lot identification.
Federal Income Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by
a Portfolio from a securities dealer or a bank that are subject to resale at a
later date. Repurchase agreements are fully collateralized by government
securities for the Portfolios. Additionally, repurchase agreements in the Money
Market Portfolio may be collateralized by 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.
33
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 Portfolios' 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
Portfolios file tax returns with the U.S. Internal Revenue Service. Generally,
the tax authorities can examine all tax returns filed for the last three years.
The Portfolios may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on returns on income earned or gains realized or
repatriated. Taxes are accrued and applied to net investment income, net
realized capital gains and net unrealized appreciation, as applicable, as the
income is earned or capital gains are recorded. If applicable, the Portfolios
recognize interest accrued related to unrecognized tax benefits in interest
expense and penalties in "Other expenses" on the Statements of Operations. The
Portfolios adopted the provisions of FIN 48 effective January 1, 2007. Tax
positions taken by the Portfolios have been deemed to meet the more likely than
not threshold, and therefore there have been no adjustments to the Portfolios'
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. As of December 31, 2007, the Manager does not believe
the adoption of FAS 157 will materially impact the amounts represented in the
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of fair value.
Other
Under the Trust's organizational documents, its officers and directors
are indemnified against certain liability arising out of the performance of
their duties to the Trust. In the normal course of business, the Trust enters
into contracts that provide indemnification to the other party or parties
against potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. The Manager serves as the
sole investment advisor to each of the Portfolios. As compensation for
performing
34
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
the duties required under the Management Agreement, the Manager receives from
the Portfolios 0.10% of the average daily net assets of each of the Portfolios.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange
Commission, the Portfolios, along with other registered investment companies
having management contracts with the Manager, may participate in an interfund
lending program. This program provides an alternative credit facility allowing
the Money Market Portfolio to lend money to other participating series managed
by the Manager. For the year ended December 31, 2007, the Money Market Portfolio
earned $8,708 under the credit facility. This amount is included in interest
income on the financial statements.
35
AMERICAN BEACON FUNDS
PRIVACY POLICY & FEDERAL TAX INFORMATION
DECEMBER 31, 2007 (UNAUDITED)
PRIVACY POLICY
The American Beacon 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, 2007 include short-term capital gains of $9,550 and $24 for the Money Market
Fund and U.S. Government Money Market Fund, respectively.
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, 2007. For purposes of
preparing your annual federal income tax returns, you should report the amounts
reflected on your Form 1099-DIV, Box 1a. Of the ordinary dividends paid, the
percentage of income exempt from federal income taxes is 0% for both the Money
Market Fund and the U.S. Government Money Market Fund.
Of the ordinary dividends paid to shareholders of the U.S. Government
Money Market Fund during the tax year ended December 31, 2007, 8.1% were derived
from U.S. Treasury Obligations.
Pursuant to Section 852 of the Internal Revenue Code, the Money Market
Fund designated $621 as long-term capital gain dividends for the taxable year
ended December 31, 2007.
36
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust")
are listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees twenty-seven funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage 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*
Douglas G. Herring** (50) Trustee since 2006 President (2006-Present) and CEO (2008-Present), American
Executive Vice Beacon Advisors, Inc.; Vice President and Controller,
President from American Airlines, Inc. (1998-2006); Chairman
2006 to 2007 (2003-Present) and Director (1995-Present), American
President since 2007 Airlines Federal Credit Union; Trustee, American Beacon
Mileage Funds (2006-Present); Trustee, American Beacon
Select Funds (2006-Present); Trustee, American Beacon
Master Trust (2006-Present); Director, American Beacon
Global Funds SPC (2007-Present); Director, American
Beacon Global Funds plc (2007-Present).
William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007), President
since 1987 (1986-2006), and Director (2003-Present), American Beacon
President from Advisors, Inc.; Chairman (1989-2003) and Director
1987 to 2007 (1979-1989, 2003-Present), American Airlines Federal
Executive Vice Credit Union; Director, Hicks Acquisition I, Inc.
President (2007-Present); Director, Crescent Real Estate Equities,
since 2007 Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC
(investment advisor) (2001-2006); Director of Investment
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 Mileage Funds
(1995-Present); Trustee, American Beacon Select Funds
(1999-Present); Trustee, American Beacon Master Trust
(1995-Present); Director, American Beacon Global Funds
SPC (2002-Present); Director, American Beacon Global
Funds plc (2007-Present).
Alan D. Feld** (71) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law
firm) (1960-Present); Director, Clear Channel
Communications (1984-Present); Trustee, CenterPoint
Properties (1994-2006); Member Board of Trustees,
Southern Methodist University; Member, Board of Visitors,
The University of Texas M.D. Anderson Cancer Center;
Member, Board of Visitors, Zale Lipshy Hospital; Trustee,
American Beacon Mileage Funds (1996-Present); Trustee,
American Beacon Select Funds (1999-Present); Trustee,
American Beacon Master Trust (1996-Present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (63) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing
company) (1998-2003); Board Member, Baylor University
Medical Center Foundation (1992-2004); 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 Mileage
Funds (2004-Present); Trustee, American Beacon Select
Funds (2004-Present); Trustee, American Beacon Master
Trust (2004-Present).
37
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON 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.)
Brenda A. Cline (47) 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 Mileage Funds (2004-Present);
Trustee, American Beacon Select Funds (2004-Present);
Trustee, American Beacon Master Trust (2004-Present).
Richard A. Massman (64) Trustee since 2004 Senior Vice President and General Counsel, Hunt
Consolidated, Inc. (holding company engaged in oil and
gas exploration and production, refining, real estate,
farming, ranching, and venture capital activities)
(1994-Present); Trustee, American Beacon Mileage Funds
(2004-Present); Trustee, American Beacon Select Funds
(2004-Present); Trustee, American Beacon Master Trust
(2004-Present).
Stephen D. O'Sullivan (72) Trustee since 1987 Consultant (1994-Present); Trustee, American Beacon
Mileage Funds (1995-Present); Trustee, American Beacon
Select Funds (1999-Present); Trustee, American Beacon
Master Trust (1995-Present).
R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney
Southern Methodist Univ. Company, Inc. (1996-Present); Director, California
Dallas, Texas 75275 Federal Preferred Capital Corp. (2001-2003); Director,
Kronus 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
Mileage Funds (2001-Present); Trustee, American Beacon
Select Funds (2001-Present); Trustee, American Beacon
Master Trust (2001-Present).
Kneeland Youngblood (52) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private
100 Crescent Court Chairman since equity firm) (1998-Present); Director, Energy Future
Suite 1740 2005 Holdings Corp. (2007-Present); Director, Burger King
Dallas, Texas 75201 Corporation (2004-Present); Director, Gap, Inc.
(2006-Present); Trustee, City of Dallas, Texas Employee
Retirement Fund (2004-Present); Director, Starwood Hotels
and Resorts (2001-Present); Member, Council on Foreign
Relations (1995-Present); Trustee, St. Mark's School of
Texas (2002-Present); Trustee, American Beacon Mileage
Funds (1996- Present); Trustee, American Beacon Select
Funds (1999-Present); Trustee, American Beacon Master
Trust (1996-Present).
38
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON 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
- --------------------- --------------------- ---------------------------------------------------------
OFFICERS
Term
One Year
Rosemary K. Behan (48) 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 (1995-2004), Securities and Exchange
Commission.
Brian E. Brett (47) 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 (41) 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.
Michael W. Fields (53) VP since 1989 Vice President, Fixed Income Investments, American Beacon
Advisors, Inc. (1988-Present); Director, American Beacon
Global Funds SPC (2002-Present); Director, American
Beacon Global Funds plc (2007-Present).
Rebecca L. Harris (41) Treasurer since 1995 Vice President, Finance, American Beacon Advisors, Inc.
(1995-Present).
Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American
and Asst. Secretary Beacon Advisors, Inc. (1998-2004).
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, with the exception of Messrs. Quinn and O'Sullivan.
** Messrs. Quinn, Feld and Herring are deemed to be "interested persons" of
the Trust, as defined by the 1940 Act. Mr. Quinn is Chairman of the
Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has
provided legal services within the past two years to one or more of the
Trust's Investment advisors. Mr. Herring is President and CEO of the
Manager.
39
(THIS PAGE INTENTIONALLY LEFT BLANK)
40
(THIS PAGE INTENTIONALLY LEFT BLANK)
41
(AMERICAN BEACON FUNDS(SM) LOGO)
DELIVERY OF DOCUMENT
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) (GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at
www.americanbeaconfunds.com
(GRAPHIC) (GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional Class American Beacon Funds
Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450
PlanAhead Class Fort Worth, TX 76155
Call (800) 388-3344
AVAILABILITY OF QUARTERLY PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY AND
SCHEDULES 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
Funds' website
(www.americanbeaconfunds.com)
approximately thirty days after the
end of each month.
FUND SERVICE PROVIDERS:
CUSTODIAN
STATE STREET BANK AND TRUST
Boston, Massachusetts
TRANSFER AGENT
BOSTON FINANCIAL DATA SERVICES
Kansas City, Missouri
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
Dallas, Texas
DISTRIBUTOR
FORESIDE FUND SERVICES
Portland, Maine
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. American Beacon Funds is a service mark of AMR Corporation.
PlanAhead Class is a registered service mark of American Beacon Advisors, Inc.
American Beacon Money Market Fund and American Beacon U.S. Government Money
Market Fund are service marks of American Beacon Advisors, Inc.
AR 12/07
541497
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal executive
and financial officers (the "Code"). The Trust did not amend the Code nor did
it grant any waivers to the provisions of the Code during the period covered by
the shareholder report presented in Item 1. The Code is filed herewith as
Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust's Board of Trustees has determined that Brenda Cline, a member
of the Trust's Audit and Compliance Committee, is an "audit committee financial
expert" as defined in Form N-CSR. Ms. Cline is "independent" as defined
in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$0 10/31/2006
$73,177 12/31/2006
$0 10/31/2007
$58,964 12/31/2007
</Table>
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$0 10/31/2006
$0 12/31/2006
$0 10/31/2007
$0 12/31/2007
</Table>
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$0 10/31/2006
$0 12/31/2006
$0 10/31/2007
$8,500 12/31/2007
</Table>
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 10/31/2006
$0 12/31/2006
$0 10/31/2007
$0 12/31/2007
</Table>
(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
- ---------- ------- ------------------------------ -----------------
$0 $0 N/A 10/31/2006
$0 $0 N/A 12/31/2006
$0 $0 N/A 10/31/2007
$8,500 $0 N/A 12/31/2007
</Table>
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for the Money Market Portfolio, the Municipal
Money Market Portfolio and the U.S. Government Money Market Portfolio of the
American Beacon Master Trust are included in the American Beacon Funds
shareholder report 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 Master Trust
By /s/ Douglas G. Herring
--------------------
Douglas G. Herring
President
Date: March 7, 2008
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: March 7, 2008
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: March 7, 2008