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: 811-9603
AMERICAN BEACON SELECT FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
DOUGLAS G. HERRING, PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant's telephone number, including area code: (817) 967-3509
Date of fiscal year end: December 31, 2007
Date of reporting period: December 31, 2007
ITEM 1. REPORT TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON SELECT FUNDS(SM) LOGO)
ANNUAL REPORT
(GRAPHIC)
December 31, 2007
MONEY MARKET SELECT FUND
U.S. GOVERNMENT MONEY MARKET SELECT FUND
About American Beacon
Since 1986, American Beacon Advisors has offered a variety of products
and investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
Contents
President's Message............................................... 1
Financial Highlights
Money Market Select Fund....................................... 13
U.S. Government Select Fund.................................... 14
Schedule of Investments........................................... 16
Money Market Portfolio......................................... 16
U.S. Government Money Market Fund.............................. 20
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.
American Beacon Select Funds December 31, 2007
(PHOTO OF DOUGHLAS G. HERRING)
FELLOW SHAREHOLDERS
I am pleased to present to you the American Beacon Select 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, and 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, the American Beacon Money Market
Select Fund's one-year return of 5.32% outperformed the Lipper Institutional
Money Market Average by 34 basis points (0.34%). The American Beacon U.S.
Government Money Market Select Fund also outperformed its benchmark, with a
one-year total return of 5.17% 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 Select Funds.
Sincerely,
/s/ Douglas G. Herring
Douglas G. Herring
President
American Beacon Select Funds
1
ECONOMIC OVERVIEW
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 SELECT FUNDS
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 and 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 Funds 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
Select Class of the American Beacon Money Market Fund was 5.32%. The Fund
outperformed the Lipper Institutional Money Market Average return of 4.98% by 34
basis points (0.34%). Based on annualized total returns, Lipper Inc. ranked the
Select Class of the Fund 16th among 382, 6th among 321 and 4th among 264
Institutional Money Market Funds for the one-year, three-year, and five-year
periods ended December 31, 2007, respectively.
For the twelve months ended December 31, 2007, the total return of the
Select Class of the American Beacon U.S. Government Money Market Fund was 5.17%.
The Fund outperformed the Lipper Institutional U.S. Government Money Market
Average return of 4.86% by 31 basis points (0.31%). Based on annualized total
returns, Lipper Inc. ranked the Select Class of the Fund 1st among 163, 4th
among 137 and 2nd among 111 Institutional U.S. Government Money Market Funds for
the one-year, three-year, and five-year periods ended December 31, 2007,
respectively.
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2007
----------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Money Market (1, 2, 4)................. 5.32% 3.20% 3.93%
U.S. Government (1, 3, 5).............. 5.17% 3.15% 3.83%
(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 these Funds is
neither insured nor guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. Although the Funds seek to preserve the
value of an investment at $1.00 per share it is possible to lose money by
investing in the Funds. Fund performance in the table above does not
reflect the deduction of taxes a shareholder would pay on distributions or
the redemption of shares.
(2) The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by American Beacon
Advisors since its inception on September 1, 1987. Like the Fund, the
Companion Fund invests all of its investable assets in a corresponding
Portfolio of the American Beacon Master Trust. The performance results from
inception through December 31, 1999 are those of the Companion Fund. The
Fund began offering its shares on January 1, 2000. Thus, performance
results shown from that date through December 31, 2007 are for the Fund.
Because the Companion Fund had higher expenses, its performance was worse
than the Fund would have realized in the same period. A portion of the fees
charged to the Fund was waived through 2001. Performance prior to waiving
fees was lower than the actual returns shown for periods through 2001.
(3) The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by American Beacon
Advisors since its inception March 2, 1992. Like the Fund, the Companion
Fund invests all of its investable assets in a corresponding Portfolio of
the American Beacon Master Trust. The performance results from inception
through November 30, 2001 are those of the Companion Fund. The Fund began
offering its shares on December 1, 2001. Thus, performance results from
that date through December 31, 2007 are for the Fund. Because the Companion
Fund had moderately higher expenses, its performance was slightly worse
than the Fund would have realized in the same period. A portion of the fees
charged to the Fund has been waived. Performance prior to waiving fees was
lower than the actual returns shown.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON SELECT FUNDS
DECEMBER 31, 2007 (UNAUDITED)
(4) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Fund was 0.11%. The expense ratio above may vary
from the Expense ratio presented in other sections of this report that are
based on expenses incurred during the period covered by this report.
(5) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Fund was 0.13%. After expense reimbursement, the
net expense ratio set forth in the most recent Fund prospectus was 0.12%.
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
MONEY MARKET U.S. GOVERNMENT
------------ ---------------
7-day Current Yield* 4.82% 4.46%
7-day Effective Yield* 4.94% 4.56%
30-day Yield* 4.82% 4.44%
Weighted Avg. Maturity 26 Days 11 Days
Moody's Rating Aaa Aaa
Standard & Poor's Rating AAAm AAAm
* Annualized. You may call 1-800-231-4252 to obtain the Funds' current seven
day yields. Yield is a more accurate reflection of the Funds' current
earnings than total returns.
MONEY MARKET PORTFOLIO -- 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%
MONEY MARKET PORTFOLIO -- ASSET ALLOCATION AS OF DECEMBER 31, 2007
% OF
NET ASSETS
----------
Bank CDs, TDs and Notes 22.2%
Corporate Notes 30.0%
Commercial Paper 18.4%
Repurchase Agreements 19.4%
S/T Investments 9.6%
Liabilities, Net of Other Assets 0.4%
U.S. GOVERNMENT MONEY MARKET PORTFOLIO-- ASSET ALLOCATION AS OF
DECEMBER 31, 2007
% OF
NET ASSETS
----------
Repurchase Agreements 81.0%
Government Securities 18.9%
Liabilities, Net of Other Assets 0.1%
4
FUND EXPENSES
AMERICAN BEACON SELECT FUNDS
DECEMBER 31, 2007 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of a 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 a
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 Fund to estimate the expenses you paid on your account during
this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on a Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not a
Fund's actual return).
You may compare the ongoing costs of investing in a Fund with other
funds by contrasting this 5% hypothetical example and the 5% hypothetical
examples that appear in the shareholder reports of the other funds. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table
highlight only your ongoing costs and do not reflect any transaction costs
charged by the Funds. 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.
Ending
Beginning Account Expenses paid
Account Value During Period*
Value 7/1/07 12/31/07 7/1/07-12/31/07
------------ -------- ---------------
MONEY MARKET
Actual ........................ $1,000.00 $1,026.14 $0.56
Hypothetical (5% return
before expenses) ........... $1,000.00 $1,024.65 $0.56
U.S. GOVERNMENT MONEY MARKET
Actual ........................ $1,000.00 $1,024.87 $0.56
Hypothetical (5% return
before expenses) ........... $1,000.00 $1,024.65 $0.56
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.11% and 0.11% for the Money Market Select Feeder and
U.S. Government Money Market Select Feeder Funds 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
AMERICAN BEACON SELECT FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Select Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Select Funds, comprised of the American Beacon Money Market
Select Fund and the American Beacon U.S. Government Money Market Select 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 five years in the period then ended. 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 Select 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 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
6
AMERICAN BEACON SELECT 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 ...................... $ 8,629,029 $ 1,363,881
-------------- --------------
TOTAL ASSETS ........................................ 8,629,029 1,363,881
-------------- --------------
LIABILITIES:
Payable for fund shares redeemed ....................... 27,661 --
Dividends payable ...................................... 21,786 2,360
Other liabilities ...................................... 294 62
-------------- --------------
TOTAL LIABILITIES ................................... 49,741 2,422
-------------- --------------
NET ASSETS ................................................ $ 8,579,288 $ 1,361,459
============== ==============
ANALYSIS OF NET ASSETS:
Paid-in-capital ..................................... 8,579,288 1,361,459
-------------- --------------
NET ASSETS ................................................ $ 8,579,288 $ 1,361,459
============== ==============
Shares outstanding (no par value) ......................... 8,579,288,476 1,361,459,011
Net asset value, offering and redemption price per share .. $ 1.00 $ 1.00
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
7
AMERICAN BEACON SELECT 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 ........................................ $558,914 $47,383
Portfolio expenses ..................................... (11,244) (1,029)
-------- -------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ...... 547,670 46,354
-------- -------
FUND EXPENSES:
Transfer agent fees .................................... 137 7
Professional fees ...................................... 67 12
Registration fees and expenses ......................... 113 46
Printing expense ....................................... 6 2
Other expenses ......................................... 127 13
-------- -------
TOTAL FUND EXPENSES ................................. 450 80
-------- -------
Net (fees waived and expenses reimbursed)/recovered by
manager (Note 2) ....................................... -- (32)
-------- -------
NET FUND EXPENSES ................................... 450 48
-------- -------
NET INVESTMENT INCOME ..................................... 547,220 46,306
-------- -------
REALIZED GAIN ALLOCATED FROM PORTFOLIO
Net realized gain on investments ....................... 82 2
-------- -------
NET GAIN ON INVESTMENTS ............................. 82 2
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $547,302 $46,308
======== =======
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
8
AMERICAN BEACON SELECT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
Year Ended December 31, Year Ended December 31,
------------------------------ ----------------------------
2007 2006 2007 2006
------------- ------------- ----------- -----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income .................................. $ 547,220 $ 395,452 $ 46,306 $ 15,718
Net realized gain on investments ....................... 82 9 2 --
------------- ------------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ....................................... 547,302 395,461 46,308 15,718
------------- ------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income .................................. (547,220) (395,452) (46,306) (15,718)
Net realized gain on investments ....................... (82) (9) (2) --
------------- ------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS ....................... (547,302) (395,461) (46,308) (15,718)
------------- ------------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (AT $1.00 PER SHARE):
Proceeds from sales of shares .......................... 161,624,197 112,232,901 8,488,861 2,947,923
Reinvestment of dividends and distributions ............ 262,757 219,523 15,846 4,123
Cost of shares redeemed ................................ (161,781,202) (109,195,815) (7,677,784) (2,614,206)
------------- ------------- ----------- -----------
NET INCREASE IN NET ASSETS .......................... 105,752 3,256,609 826,923 337,840
------------- ------------- ----------- -----------
NET INCREASE IN NET ASSETS ................................ 105,752 3,256,609 826,923 337,840
------------- ------------- ----------- -----------
NET ASSETS:
Beginning of period .................................... 8,473,536 5,216,927 534,536 196,696
------------- ------------- ----------- -----------
END OF PERIOD .......................................... $ 8,579,288 $ 8,473,536 $ 1,361,459 $ 534,536
============= ============= =========== ===========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
9
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Select 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 Select Fund (the "Money Market Fund")
and American Beacon U.S. Government Money Market Select Fund (the "Government
Fund")(each a "Fund" and collectively, the "Funds").
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
Government 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 (65.5% and 98.7% 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.
Valuation of Investments
The Funds record their investment in the Portfolios at fair value.
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements which are included elsewhere in this
report.
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income (loss) and
realized gain (loss) in the Portfolio each day. All net investment income (loss)
and realized gain (loss) of each Portfolio are allocated pro rata among the
corresponding Fund and other investors in each Portfolio at the time of such
determination. The Funds generally declare dividends daily from net investment
income and net short-term capital gain, if any, payable monthly.
Dividends to shareholders are determined in accordance with federal
income tax principles that may treat certain transactions differently than U.S.
generally accepted accounting principles.
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations. Expenses incurred by the Trust with respect to both Funds are
allocated in proportion to the net assets of each Fund, except where allocations
of direct expenses to each Fund can otherwise be made fairly. Each share of each
Fund bears equally those expenses that are allocated to the Fund as a whole.
10
AMERICAN BEACON SELECT FUNDS
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
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
Reimbursement of Expenses
The Manager contractually agreed to reimburse the Government Fund for
other expenses through February 29, 2008 to the extent that total annual Fund
operating expenses exceed 0.12%. For the year ended December 31, 2007, the
Manager reimbursed expenses totaling $32,513 to the Government Fund.
Expense Reimbursement Plan
The Funds have adopted an Expense Reimbursement Plan whereby the
Manager may seek recoupment of expenses reimbursed for a period of up to three
years. However, recoupment will occur only if a Fund's average net assets have
grown or expenses have declined sufficiently to allow recoupment without causing
its expense ratio to exceed the previously agreed upon contractual expense
limit.
Reimbursed expenses subject to potential recovery for the Government
Fund totaling $25,649, $23,524, and $32,513, will expire in 2008, 2009 and 2010
respectively. The Government Fund has not recorded a liability for this
potential reimbursement due to the current assessment that a reimbursement is
unlikely.
At December 31, 2007, there are no prior expense reimbursements of the
Money Market Fund that are subject to recoupment by the Manager.
11
AMERICAN BEACON SELECT 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* ........ $547,297 $395,461 $46,308 $15,718
Long-term capital gain .. 5 -- -- --
-------- -------- ------- -------
Total distributions paid ... $547,302 $395,461 $46,308 $15,718
======== ======== ======= =======
* 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 carryforwards as of December 31,
2007.
12
AMERICAN BEACON MONEY MARKET SELECT FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
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 ....................... 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(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 ......................................... 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(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 .............................................. 5.32% 5.08% 3.23% 1.33% 1.13%
========== ========== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $8,579,288 $8,473,536 $5,216,927 $3,973,103 $3,988,724
Ratios to average net assets (annualized):(A)
Expenses, after expense reimbursements
(recoupments) .................................... 0.11% 0.11% 0.12% 0.12% 0.12%
Expenses, before expense
reimbursements (recoupments) ........................ 0.11% 0.11% 0.12% 0.12% 0.12%
Net investment income, after expense
reimbursements (recoupments) ........................ 5.20% 5.02% 3.20% 1.28% 1.14%
Net investment income, before expense
reimbursements (recoupments) ........................ 5.20% 5.02% 3.20% 1.28% 1.14%
(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 Money Market Master Portfolio.
(B) Amount is less than $0.01 per share.
13
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET SELECT FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
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 ....................... 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(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 ......................................... 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(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 .............................................. 5.17% 5.04% 3.19% 1.29% 1.11%
========== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............... $1,361,459 $534,536 $196,696 $193,287 $162,489
Ratios to average net assets (annualized):(A)
Expenses, after expense reimbursements
(recoupments) .................................... 0.12% 0.12% 0.12% 0.12% 0.12%
Expenses, before expense reimbursements
(recoupments) .................................... 0.12% 0.13% 0.14% 0.12% 0.15%
Net investment income, after expense
reimbursements (recoupments) ........................ 4.99% 4.99% 3.17% 1.31% 1.09%
Net investment income, before expense
reimbursements (recoupments) ........................ 4.98% 4.98% 3.15% 1.31% 1.06%
(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 Money Market Master Portfolio.
(B) Amount is less than $0.01 per share.
See accompanying notes
14
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
See accompanying notes
15
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
16
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
17
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
18
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
19
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
20
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
21
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE 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
22
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
U.S. GOVERNMENT MONEY
MONEY MARKET 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
23
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%
See accompanying notes
24
AMERICAN BEACON MASTER TRUST PORTFOLIOS
FINANCIAL HIGHLIGHTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Master Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no load, open-end management
investment company that was organized as a trust under the laws of the
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of
November 1, 2004. Beneficial interests in the Trust are divided into separate
series, each having distinct investment objectives and policies. These financial
statements relate to the American Beacon Master Money Market Portfolio and the
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.
See accompanying notes
25
AMERICAN BEACON MASTER PORTFOLIO
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 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.
26
AMERICAN BEACON MASTER PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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.
27
AMERICAN BEACON SELECT FUNDS
PRIVACY POLICY AND FEDERAL TAX INFORMATION
(UNAUDITED)
PRIVACY POLICY
The American Beacon Select 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 $77,727 and $2,448 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 $4,785 as long-term capital gain dividends for the taxable year
ended December 31, 2007.
28
TRUSTEES AND OFFICERS
AMERICAN BEACON SELECT FUNDS AND AMERICAN BEACON MASTER TRUST
(UNAUDITED)
The Trustees and officers of the American Beacon Select Funds (the "Trust")
and the American Beacon Master Trust are listed below, together with their
principal occupations during the past five years. Unless otherwise indicated,
the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450,
Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund
complex that includes the Trust, the American Beacon Master Trust, the American
Beacon Mileage Funds, and the American Beacon 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 Beacon
Executive Vice President Advisors, Inc.; Vice President and Controller, American Airlines, Inc.
from 2006 to 2007 (1998-2006); Chairman (2003-Present) and Director (1995-Present),
President since 2007 American Airlines Federal Credit Union; Trustee, American Beacon
Mileage Funds (2006-Present); Trustee, American Beacon Funds
(2006-Present); Trustee, American Beacon Master Trust (2006-Present);
Director, American Beacon Global Funds SPC (2006-Present); Director,
American Beacon Global Funds plc (2007-Present).
William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007), President (1986-2006), and
since 1999 Director (2003-Present), American Beacon Advisors, Inc.; Chairman
President from (1989-2003) and Director (1979-1989, 2003-Present), American Airlines
1999 to 2007 Federal Credit Union; Director, Hicks Acquisition I, Inc.
Executive Vice (2007-Present); Director, Crescent Real Estate Equities,
President Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment
since 2007 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 Funds (1987-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 1999 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 Funds (1996-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 Funds (2004-Present); Trustee,
American Beacon Master Trust (2004-Present).
29
TRUSTEES AND OFFICERS
AMERICAN BEACON SELECT FUNDS AND AMERICAN BEACON MASTER TRUST
(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 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 1999 Consultant (1994-Present); Trustee, American Beacon Mileage Funds
(1995-Present); Trustee, American Beacon Funds (1987-Present); Trustee,
American Beacon Master Trust (1995-Present).
R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University (1995-Present); Director,
225 Perkins Admin. Bldg. ChemFirst (1986-2002); Director, J.C. Penney Company, Inc.
Southern Methodist Univ. (1996-Present); Director, California Federal Preferred Capital Corp.
Dallas, Texas 75275 (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 Funds (2001-Present); Trustee,
American Beacon Master Trust (2001-Present).
Kneeland Youngblood (52) Trustee since 1999 Managing Partner, Pharos Capital Group, LLC (a private equity firm)
100 Crescent Court Chairman since (1998-Present); Director, Energy Future Holdings Corp. (2007-Present);
Suite 1740 2005 Director, Burger King Corporation (2004-Present); Director, Gap, Inc.
Dallas, Texas 75201 (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 Funds (1996-Present);
Trustee, American Beacon Master Trust (1996-Present).
30
TRUSTEES AND OFFICERS
AMERICAN BEACON SELECT FUNDS AND AMERICAN BEACON MASTER TRUST
(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 Advisors, Inc.
Chief Legal (2006-Present); Assistant General Counsel, First Command Financial
Officer since 2006 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 1999 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 Vice President, Finance, American Beacon Advisors, Inc. (1995-Present).
1999
Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American Beacon Advisors,
and Asst. Inc. (1998-2004).
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, 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.
31
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32
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33
(AMERICAN BEACON SELECT FUNDS(SM) LOGO)
DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
Prospectus, Annual Report and Semi-Annual Report to those addresses shared by
two or more accounts. If you wish to receive individual copies of these
documents, please contact your financial institution. Delivery of individual
copies will commence thirty days after receiving your request. If you invest in
the Fund through a financial institution, you may be able to receive the Fund's
regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual
Report, by e-mail. If you are interested in this option, please go to
www.icsdelivery.com and search for your financial institution's name or contact
your financial institution directly.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
(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:
American Beacon Select Funds
Call (800) 658-5811 P.O. Box 219643
Kansas City, MO 64121
AVAILABILITY OF AVAILABILITY OF
QUARTERLY PORTFOLIO SCHEDULES PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of A description of the policies and
Investments provided in each procedures the Fund uses to determine
semi-annual and annual report, the how to vote proxies relating to
Fund files a complete schedule of its portfolio securities is available in
portfolio holdings with the Securities the Fund's Statement of Additional
and Exchange Commission ("SEC") on Information, is available free of
Form N-Q as of the first and third charge on the Fund's website
fiscal quarters. The Fund's Forms N-Q (www.americanbeaconfunds.com) and by
are available on the SEC's website at calling 1-800-967-9009 or by accessing
www.sec.gov. The Forms N-Q may also be the SEC's website at www.sec.gov. The
reviewed and copied at the SEC's Fund's proxy voting record for the most
Public Reference Room, 450 Fifth recent year ended June 30 is filed
Street, NW, Washington, DC 20549. annually with the SEC on Form N-PX. The
Information regarding the operation of Fund's Forms N-PX are available on the
the SEC's Public Reference Room may be SEC's website at www.sec.gov. The
obtained by calling 1-800-SEC-0330. A Fund's proxy voting record may also be
complete schedule of the Fund's obtained by calling 1-800-967-9009.
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 TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
AND TRUST SERVICES
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine
Dallas, Texas
This report is prepared for shareholders of the American Beacon Select Funds and
may be distributed to others only if preceded or accompanied by a current
prospectus.
American Airlines is not responsible for investments made in the American Beacon
Select Funds. American Beacon Select Funds is a service mark of AMR Corporation.
American Beacon Select Fund and American Beacon U.S. Government Money Market
Select Fund are service marks of American Beacon Advisors, Inc.
AR 12/07
541495
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
- ---------- -----------------
$20,041 12/31/2006
$20,740 12/31/2007
</Table>
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$0 12/31/2006
$0 12/31/2007
</Table>
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$0 12/31/2006
$3,809 12/31/2007
</Table>
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 12/31/2006
$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 12/31/2006
$3,809 $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 each series of the Trust are included in the
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 Select Funds
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