UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09603
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)
William F. Quinn, PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant's telephone number, including area code: (817) 967-3509
Date of fiscal year end: December 31, 2008
Date of reporting period: December 31, 2008
ITEM 1. REPORT TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON SELECT FUNDS(SM) LOGO)
Annual Report
(GRAPHIC)
DECEMBER 31, 2008
MONEY MARKET SELECT FUND
U.S. GOVERNMENT MONEY MARKET SELECT 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 Select Fund ....................................... 13
U.S. Government Select Fund .................................... 14
Schedule of Investments ........................................... 16
Money Market Portfolio ......................................... 16
U.S. Government Money Market Fund .............................. 18
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, 2008
(GRAPHIC)
FELLOW SHAREHOLDERS,
Enclosed is the Annual Report for the American Beacon Money Market Select Fund
and the U.S. Government Money Market Select Fund for the twelve months ended
December 31, 2008.
Growing unemployment, low consumer confidence, rising foreclosures and bank
failures all contributed to a growing uncertainty that permeated every aspect of
the economy in 2008. The Federal Reserve Board ("Fed") lowered the Fed Funds
rate on December 16th to a record low target range of 0.00-0.25% and noted that
"weak economic conditions are likely to warrant exceptionally low levels of the
Fed Funds rate for some time."
Even with the government bailouts and liquidity programs, short-term credit
markets were under great strain as banks continued to report substantial losses.
A weak economic environment limited the Fed's ability to raise interest rates
resulting in lower yields for fixed income investments. These conditions
prompted the most extreme "flight to quality" seen in decades.
Even with portfolio holdings of the highest quality, on September 19th, the
impact of those events in the securities markets and concerns regarding limited
marketability of securities held by many money market funds caused the American
Beacon Select Money Market Fund to temporarily suspend the practice of providing
payments for redemption of shares entirely in cash. This procedure was
implemented to prevent redemptions from forcing the sale of securities in an
unfavorable market that may have had an adverse impact on the Fund and its
shareholders. This redemption-in-kind policy was successful in protecting the
Fund and was lifted on December 12th. Since that time all redemptions have been
made in cash.
Despite this unprecedented environment, both Funds outperformed their
respective indexes in 2008. The American Beacon Money Market Select Fund
returned 2.73% compared to the Lipper Institutional Money Market Average of
2.50%. The American Beacon U.S. Government Money Market Select Fund returned
2.32% compared to the Lipper Institutional U.S. Government Money Market Average
of 2.10%.
The Funds will continue their strategy of investing in high credit quality
securities combined with lower than average expense ratios. As always, we will
strive to serve the interests of our shareholders.
Please review the enclosed market overview, portfolio listings, and
detailed financial data. As always, we welcome the opportunity to serve your
financial needs. To obtain further details about the American Beacon Funds
family or to access your account information, please visit our website at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American Beacon Select Funds
1
ECONOMIC OVERVIEW
DECEMBER 31, 2008 (UNAUDITED)
2008 was a year marked by highs and lows, none of which were good. The year
ended with the highest unemployment rate in sixteen years and the lowest
consumer confidence levels since records began in 1967. The supply of homes for
sale hit a two-decade high during the year even as home prices fell to the
lowest levels they've been in four years. Flight to quality resulted in record
lows for short-term Treasuries, while corporate spreads widened to Depression
era highs. The U.S. economy is in the midst of the longest recession in a
quarter-century, and further contraction is expected as tight credit conditions,
declining home prices and cutbacks in consumer and business spending continue
unabated.
2008 was also a year marked by unprecedented government bailouts and
liquidity programs. Under the Troubled Asset Relief Program program alone, the
U.S. Treasury has already channeled $350 billion in funds to recapitalize banks
and rescue companies like AIG and Citigroup. Despite these actions, short-term
funding markets remained strained and banks continued to report massive write
downs. As a result, Bernanke stated, "More capital injections and guarantees may
become necessary to ensure stability and the normalization of credit markets."
With the pace of economic deterioration accelerating, the Federal Reserve
Board("Fed") pulled out all stops and adopted a Zero Interest Rate Policy at the
December 16th meeting. In an unprecedented move, the Federal Open Market
Committee ("FOMC") cut rates to the lowest levels ever, announcing a target
range for the Federal Funds rate of 0.00-0.25%. The Fed noted that "weak
economic conditions are likely to warrant exceptionally low levels of the
Federal Funds rate for some time." In addition, the FOMC announced that it would
purchase Government Sponsored Enterprises debt and agency-guaranteed
Mortgage-Backed Securities to provide support to the mortgage and housing
markets. The Fed declared that it will "employ all available tools to promote
the resumption of sustainable economic growth and to preserve price stability."
2
AMERICAN BEACON SELECT FUNDS(SM)
PERFORMANCE OVERVIEW
DECEMBER 31, 2008 (UNAUDITED)
As the economy showed signs of weakness during the year, the Federal
Reserve Board ("Fed") continued its series of easing monetary policy that
started in September 2007. The Fed reduced the Fed Funds target by 400 basis
points (4.00%) during 2008, resulting in a 0% to 0.25% Fed Funds target by year
end. With credit quality a priority, the American Beacon Money Market Fund's
primary strategy for the year was to buy high-quality, short-dated commercial
paper, certificates of deposit and overnight investments. This strategy was
implemented in an effort to improve liquidity as well as credit quality. The
strategies implemented during the year enabled the Fund to outperform its Lipper
peer group.
For the twelve months ended December 31, 2008, the total return of the
American Beacon Money Market Select Fund was 2.73%. The Fund outperformed the
Lipper Institutional Money Market Average return of 2.50% by 23 basis points
(0.23%). Based on annualized total returns, Lipper Analytical Services ranked
the Fund 132 among 375, 42 among 338 and 17 among 275 Institutional Money Market
Funds for the one-year, three-year, and five-year periods ended December 31,
2008, respectively.
For the twelve months ended December 31, 2008, the total return of the
American Beacon U.S. Government Money Market Select Fund was 2.32%. The Fund
outperformed the Lipper Institutional U.S. Government Money Market Average
return of 2.10% by 22 basis points (0.22%). Based on annualized total returns,
Lipper Analytical Services ranked the Fund 39 among 171, 3 among 147 and 1 among
121 Institutional U.S. Government Money Market Funds for the one-year,
three-year, and five-year periods ended December 31, 2008, respectively.
The Lipper Institutional Money Market Average and the Lipper U.S.
Government Money Market Average is calculated by taking an arithmetic average of
the returns of the mutual funds in the respective Lipper Institutional Money
Market Funds category and the Lipper U.S. Government Money Market Funds
category. Lipper is an independent mutual fund research and ranking service that
ranks mutual funds in various categories by making comparative calculations
using total returns.
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2008
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Money Market (1,2,4) ............................. 2.73% 3.53% 3.65%
U.S. Government (1,3,5) .......................... 2.32% 3.39% 3.52%
(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 for the ten-year period 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,
2008 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 for the ten-year period is derived from a
combination of the Fund's performance and that of another fund (the
"Companion Fund") not included in this report. The Companion Fund has been
managed by American Beacon Advisors since its inception on March 2, 1992.
Like the Fund, the Companion Fund invests all of its investable assets in a
corresponding Portfolio of the American Beacon Master Trust. The
performance results from inception through 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, 2008 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.
(4) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus was 0.12%. The expense ratio above may vary from the
expense ratio presented in
3
AMERICAN BEACON SELECT FUNDS(SM)
PERFORMANCE OVERVIEW
DECEMBER 31, 2008 (UNAUDITED)
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 was 0.12%. The expense ratio above may vary from the
expense ratio presented in other sections of this report that are based on
expenses incurred during the period covered by this report.
PORTFOLIO STATISTICS AS OF DECEMBER 31, 2008
MONEY MARKET U.S. GOVERNMENT
------------ ---------------
7-day Current Yield* 0.72% 0.70%
7-day Effective Yield* 0.72% 0.70%
30-day Yield* 0.72% 0.89%
Weighted Avg. Maturity 25 Days 38 Days
Moody's Rating N/A 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, 2008
% OF
NET ASSETS
----------
Societe Generale N.Y. ............................................. 5.2%
Bank of Nova Scotia N.Y. .......................................... 4.7%
Variable Funding Capital Co. LLC .................................. 4.7%
Dexia Credit Local S.A. ........................................... 4.2%
Commonwealth Bank of Australia N.Y. ............................... 3.1%
DNB NOR Bank ASA N.Y. ............................................. 3.1%
Lloyds Bank N.Y. .................................................. 3.1%
Surrey Funding Corp. .............................................. 3.1%
Svenska Handelsbanken AB N.Y. ..................................... 3.1%
Toyota Motor Credit Corp. ......................................... 3.1%
MONEY MARKET PORTFOLIO -- ASSET ALLOCATION AS OF DECEMBER 31, 2008
% OF
NET ASSETS
----------
Commercial Paper .................................................. 38.91%
Repurchase Agreements ............................................. 29.27%
Bank CDs, TDs and Notes ........................................... 21.83%
Short-Term Investments ............................................ 9.97%
Other Assets, Net of Liabilities .................................. 0.02%
U.S. GOVERNMENT MONEY MARKET PORTFOLIO -- ASSET ALLOCATION AS OF
DECEMBER 31, 2008
% OF
NET ASSETS
----------
Repurchase Agreements ............................................. 49.47%
U.S. Government Securities......................................... 40.83%
Short-Term Investments............................................. 9.63%
Other Assets, Net of Liabilities................................... 0.07%
4
FUND EXPENSES
AMERICAN BEACON SELECT FUNDS
DECEMBER 31, 2008 (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, 2008 through December 31,
2008.
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.
Beginning Expenses paid
Account Value Ending Account During Period*
7/1/08 Value 12/31/08 7/1/08-12/31/08
------------- -------------- ---------------
MONEY MARKET
Actual..................................... $1,000.00 $1,010.50 $0.66
Hypothetical (5% return before expenses)... $1,000.00 $1,024.48 $0.66
U.S. GOVERNMENT MONEY MARKET
Actual..................................... $1,000.00 $1,008.74 $0.61
Hypothetical (5% return before expenses)... $1,000.00 $1,024.53 $0.61
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.13% and 0.12% for the Money Market Select Fund and
U.S. Government Money Market Select Fund 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 (366) 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, 2008, 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 at December 31, 2008, 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 25, 2009
6
AMERICAN BEACON SELECT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
Assets:
Investment in Portfolio, at value .............................. $ 708,626 $ 374,834
Receivable for fund shares sold ................................ 39 --
Receivable from Manager for expense reimbursement (Note 2) ..... 37 10
Prepaid expenses ............................................... 1 --
------------ ------------
TOTAL ASSETS ................................................ 708,703 374,844
------------ ------------
LIABILITIES:
Dividends payable .............................................. 143 260
Other liabilities .............................................. 194 34
------------ ------------
TOTAL LIABILITIES ........................................... 337 294
------------ ------------
NET ASSETS ........................................................ $ 708,366 $ 374,550
============ ============
ANALYSIS OF NET ASSETS:
Paid-in-capital ............................................. 708,366 374,550
------------ ------------
NET ASSETS ........................................................ $ 708,366 $ 374,550
============ ============
Shares outstanding (no par value) ................................. 708,366,208 374,550,139
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, 2008 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Dividend income .......................................................... $ 20,979 $ 1,428
Interest income .......................................................... 203,911 18,442
Portfolio expenses ....................................................... (7,888) (777)
-------- -------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ........................ 217,002 19,093
-------- -------
FUND EXPENSES:
Transfer agent fees ...................................................... 348 34
Professional fees ........................................................ 45 12
Printing expense ......................................................... 11 2
Treasury Guaranty Program Insurance ...................................... 450 52
Other expenses ........................................................... -- 16
-------- -------
TOTAL FUND EXPENSES ................................................... 854 116
-------- -------
Net (fees waived and expenses reimbursed)/recovered by manager (Note 2) ..... (120) (69)
-------- -------
NET FUND EXPENSES ..................................................... 734 47
-------- -------
NET INVESTMENT INCOME ....................................................... 216,268 19,046
-------- -------
REALIZED GAIN ALLOCATED FROM PORTFOLIO
Net realized gain on investments ......................................... 124 120
-------- -------
NET GAIN ON INVESTMENTS ............................................... 124 120
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ $216,392 $19,166
======== =======
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)
U.S. GOVERNMENT MONEY
MONEY MARKET MARKET
Year Ended December 31, Year Ended December 31,
----------------------------- -------------------------
2008 2007 2008 2007
------------- ------------- ----------- -----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income .............................. $ 216,268 $ 547,220 $ 19,046 $ 46,306
Net realized gain on investments ................... 124 82 120 2
------------- ------------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .................................... 216,392 547,302 19,166 46,308
------------- ------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income .............................. (216,268) (547,220) (19,046) (46,306)
Net realized gain on investments ................... (124) (82) (120) (2)
------------- ------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS .................... (216,392) (547,302) (19,166) (46,308)
------------- ------------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (AT $1.00 PER SHARE):
Proceeds from sales of shares ...................... 102,008,931 161,624,197 6,128,248 8,488,861
Reinvestment of dividends and distributions ........ 65,877 262,757 3,785 15,846
Cost of shares redeemed ............................ (109,945,730) (161,781,202) (7,118,942) (7,677,784)
------------- ------------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ............ (7,870,922) 105,752 (986,909) 826,923
------------- ------------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ................ (7,870,922) 105,752 (986,909) 826,923
------------- ------------- ----------- -----------
NET ASSETS:
Beginning of period ................................ 8,579,288 8,473,536 1,361,459 534,536
------------- ------------- ----------- -----------
END OF PERIOD ...................................... $ 708,366 $ 8,579,288 $ 374,550 $ 1,361,459
============= ============= =========== ===========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
9
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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 (73.6%
and 95.0% at December 31, 2008, 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.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc., which
is indirectly owned by investment funds affiliated with Pharos Capital Group,
LLC and TPG Capital, L.P., two private equity firms. Prior to September 12, the
Manager was a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. which retained a minority interest in the parent company
of Lighthouse Holdings, Inc.
The following is a summary of the significant accounting policies followed
by the 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.
The Portfolios adopted the provisions of Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the
beginning of the Portfolios' fiscal year. This standard clarifies the definition
of fair value for financial reporting, establishes a framework for measuring
fair value, and requires additional disclosures about the use of fair value
measurements. The three levels of the hierarchy under FAS 157 are described
below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3- Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Portfolio's own assumptions about the
factors market participants would use in pricing an investment, and would
be based on the best information available.
10
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
The summary of inputs used to value the Portfolios' net assets as of
December 31, 2008 is discussed in the Portfolios' Notes to Financial Statements,
which are included elsewhere in this report.
Redemption in Kind
Beginning September 19, 2008, proceeds from redemption requests exceeding
$250,000 were made in pro rata payments of cash and in-kind distributions of
securities held by the Money Market Portfolio. The Money Market Portfolio, and
the Select Fund implemented this procedure to prevent redemptions from forcing
the sale of securities below their economic value, which would have resulted in
a material adverse impact on the Money Market Portfolio and the remaining
shareholders. The policy was lifted on December 12, 2008. During this time,
redemptions were as follows (in thousands):
Total Distribution Pro rata securities and cash One time cash distribution
------------------ ---------------------------- --------------------------
Select Fund $ 510,742 $ 506,992 $ 3,750
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.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
11
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
2. TRANSACTIONS WITH AFFILIATES
Reimbursement of Expenses
The Manager voluntarily agreed to reimburse the Money Market and Government
Funds for other expenses. For the year ended December 31, 2008, the Manager
reimbursed expenses totaling $119,783 and $69,000 to the Money Market and
Government Funds, respectively.
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 Money Market Fund
totaling $119,783 will expire in 2011. The Money Market Fund has not recorded a
liability for this potential reimbursement due to the current assessment that a
reimbursement is unlikely. Reimbursed expenses subject to potential recovery for
the Government Fund totaling $23,524, $32,513, and $69,000 will expire in 2009,
2010 and 2011, respectively. The Government Fund has not recorded a liability
for this potential reimbursement due to the current assessment that a
reimbursement is unlikely.
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.
For FASB Interpretation No. 48, "Accounting for Uncertainties in Income
Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, remains subject to
examination by the Internal Revenue Service. If applicable, the Funds recognize
interest accrued related to unrecognized tax benefits in interest expense and
penalties in "Other expenses" on the Statements of Operations. For the year
ended December 31, 2008, the Funds recognized $0 in interest and penalties.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid for the years ended December 31,
2008 and December 31, 2007 were as follows (in thousands):
Money Market Fund Government Fund
------------------------------------- -------------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007
----------------- ----------------- ----------------- -----------------
Distributions paid from:
Ordinary income*................... $ 216,392 $ 547,297 $ 19,166 $ 46,308
Long-term capital gain............. -- 5 -- --
--------- --------- -------- --------
Total distributions paid.............. $ 216,392 $ 547,302 $ 19,166 $ 46,308
========= ========= ======== ========
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 2008, the components of distributable earnings on a tax
basis were the same as book. The cost basis of investments for federal income
tax purposes was also the same as the book basis. The Funds do not have capital
loss carryforwards as of December 31, 2008.
12
AMERICAN BEACON MONEY MARKET SELECT FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Year Ended December 31,
---------------------------------------------------------------
2008 2007 2006 2005 2004
-------- ---------- --------- ---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) .......................... 0.03 0.05 0.05 0.03 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 .............. 0.03 0.05 0.05 0.03 0.01
-------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income .............. (0.03) (0.05) (0.05) (0.03) (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 .................................. (0.03) (0.05) (0.05) (0.03) (0.01)
-------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========== ========== ========== ==========
TOTAL RETURN ......................................... 2.73% 5.32% 5.08% 3.23% 1.33%
======== ========== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $708,366 $8,579,288 $8,473,536 $5,216,927 $3,973,103
Ratios to average net assets (annualized):(A)
Expenses, after expense reimbursements
(recoupments) ............................... 0.12% 0.11% 0.11% 0.12% 0.12%
Expenses, before expense reimbursements
(recoupments) ............................... 0.12% 0.11% 0.11% 0.12% 0.12%
Net investment income, after expense
reimbursements (recoupments) ................ 2.95% 5.20% 5.02% 3.20% 1.28%
Net investment income, before expense
reimbursements (recoupments) ................ 2.95% 5.20% 5.02% 3.20% 1.28%
(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 corresponding American Beacon 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,
---------------------------------------------------------
2008 2007 2006 2005 2004
-------- ---------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ---------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) .................... 0.02 0.05 0.05 0.03 0.01
Net realized gain on investments ............ 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(B)
-------- ---------- -------- -------- --------
Total income from investment operations ........ 0.02 0.05 0.05 0.03 0.01
-------- ---------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.02) (0.05) (0.05) (0.03) (0.01)
Distributions from net realized gains on
investments ............................... 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(B)
-------- ---------- -------- -------- --------
Total distributions ............................ (0.02) (0.05) (0.05) (0.03) (0.01)
-------- ---------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========== ======== ======== ========
TOTAL RETURN ................................... 2.32% 5.17% 5.04% 3.19% 1.29%
======== ========== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $374,550 $1,361,459 $534,536 $196,696 $193,287
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) ......................... 0.13% 0.12% 0.13% 0.14% 0.12%
Net investment income, after expense
reimbursements (recoupments) .......... 2.70% 4.99% 4.99% 3.17% 1.31%
Net investment income, before expense
reimbursements (recoupments) .......... 2.69% 4.98% 4.98% 3.15% 1.31%
(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 corresponding American Beacon 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, 2008, 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, 2008, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Master Trust as of December 31, 2008, the results of 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 25, 2009
See accompanying notes
15
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
CERTIFICATES OF DEPOSIT AND BANK NOTES - 17.67%
Commonwealth Bank of Australia N.Y., 0.90%, Due 2/18/2009 ... $ 30,000 $ 30,000
DNB NOR Bank ASA N.Y., 0.73%, Due 2/20/2009 ................. 30,000 30,000
Lloyds TSB Bank N.Y., 1.60%, Due 2/10/2009 .................. 30,000 30,000
Societe Generale N.Y., 0.85%, Due 3/12/2009++ ............... 50,000 50,000
Svenska Handelsbanken AB N.Y., 1.50%, Due 2/9/2009 .......... 30,000 30,000
-----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ................ 170,000
-----------
COMMERCIAL PAPER - 38.91%
Alpine Securitization Corp., 0.95%, Due 1/28/2009 # ......... 30,000 29,979
Bank of Nova Scotia N.Y., 0.50%, Due 2/12/2009 .............. 45,000 44,960
BNP Paribas Finance Inc., 1.25%, Due 2/17/2009 .............. 30,000 29,951
Danske Corp., 1.49%, Due 2/17/2009 # ........................ 30,000 29,942
Gemini Securitization Corp. LLC, 1.25%, Due 3/11/2009 # ..... 30,000 29,928
National Australia Funding (Del) Inc., 1.25%,
Due 2/13/2009 # .......................................... 30,000 29,955
Nordea North America, Inc., 1.10%, Due 3/9/2009 ............. 30,000 29,938
Surrey Funding Corp., 1.50%, Due 1/12/2009 # ................ 30,000 29,986
Toyota Motor Credit Corp.,
0.55%, Due 1/14/2009 ..................................... 15,000 14,997
0.95%, Due 1/15/2009 ..................................... 30,000 29,989
Variable Funding Capital Co. LLC, 1.60%, Due 3/26/2009 # .... 45,000 44,832
Windmill Funding Corp., 1.20%, Due 3/9/2009 # ............... 30,000 29,933
-----------
TOTAL COMMERCIAL PAPER ...................................... 374,390
-----------
TIME DEPOSITS - 4.16%
Dexia Credit Local S.A., 0.35%, Due 1/2/2009 ................ 40,000 40,000
-----------
SHARES
-----------
SHORT TERM INVESTMENTS - 9.97%
OTHER SHORT-TERM INVESTMENTS - 9.97%
Goldman Sachs Financial Square Government Fund .............. 48,000,000 48,000
JP Morgan U.S. Government Money Market Fund ................. 48,000,000 48,000
-----------
TOTAL SHORT TERM INVESTMENTS ................................ 96,000
-----------
PAR
AMOUNT
-----------
REPURCHASE AGREEMENTS - 29.27%
Bank of America, NA, 0.24%, Due 1/2/2009 (Held at Bank of
New York Mellon, Collateralized by Mortgage Obligations
valued at $51,360, 2/23/2036) ............................ $ 48,000 48,000
Barclays Capital, Inc., 0.29%, Due 1/2/2009 (Held at Bank
of New York Mellon, Collateralized by Equity Securities
valued at $50,400) ....................................... 48,000 48,000
Credit Suisse Securities (USA) LLC, 0.29%, Due 1/2/2009
(Held at JPMorgan Chase, Collateralized by Equity
Securities valued at $49,500) ............................ 45,000 45,000
Deutsche Bank Securities, Inc., 0.24%, Due 1/2/2009
(Held at Bank of New York Mellon, Collateralized by
Equity Securities valued at $52,800) ..................... 48,000 48,000
See accompanying notes
16
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
Goldman Sachs & Co., 0.04%, Due 1/2/2009 (Held at Bank
of New York Mellon, Collateralized by U.S. Government
Agency Obligations valued at $2,711, 4.0% - 10.5%,
3/1/2010 - 11/1/2036) .................................... $ 2,658 $ 2,658
JP Morgan Chase & Co., 0.29%, Due 1/2/2009 (Held at
JPMorgan Chase, Collateralized by Equity Securities
valued at $47,249) ....................................... 45,000 45,000
Morgan Stanley & Co., 0.39%, Due 1/2/2009 (Held at
JPMorgan Chase, Collateralized by Equity Securities
valued at $49,500) ....................................... 45,000 45,000
-----------
TOTAL REPURCHASE AGREEMENTS ................................. 281,658
-----------
TOTAL INVESTMENTS - 99.98% (COST $962,048) ..................... $ 962,048
OTHER ASSETS, NET OF LIABILITIES - 0.02% ....................... 240
-----------
TOTAL NET ASSETS - 100.00% ..................................... $ 962,288
===========
Percentages are stated as a percent of net assets.
++ Obligation is subject to an unconditional put back to the issuer with one
business day notice.
# Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $224,555 or 23.34% of net
assets. The Fund has no right to demand registration of these securities.
See accompanying notes
17
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 40.83%
FEDERAL HOME LOAN BANK - 12.67%
4.12%, Due 1/9/2009 ......................................... $ 25,000 $ 25,001
3.346%, Due 1/28/2009 ....................................... 25,000 25,000
-----------
50,001
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 18.96%
0.22%, Due 2/13/2009 ........................................ 6,700 6,698
1.80%, Due 3/3/2009 ......................................... 10,000 9,970
1.75%, Due 3/6/2009 ......................................... 5,000 4,984
1.75%, Due 3/16/2009 ........................................ 10,000 9,964
1.65%, Due 4/1/2009 ......................................... 10,000 9,959
0.35%, Due 4/14/2009 ........................................ 13,335 13,322
1.405%, Due 6/2/2009 ........................................ 5,000 4,970
1.05%, Due 6/24/2009 ........................................ 10,000 9,949
1.05%, Due 7/10/2009 ........................................ 5,000 4,972
-----------
74,788
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.20%
1.60%, Due 3/13/2009 ........................................ 6,500 6,480
1.20%, Due 5/5/2009 ......................................... 5,000 4,979
1.49%, Due 5/13/2009 ........................................ 5,000 4,973
1.28%, Due 6/22/2009 ........................................ 5,000 4,969
0.35%, Due 7/1/2009 ......................................... 5,000 4,991
1.08%, Due 10/1/2009 ........................................ 10,000 9,918
-----------
36,310
-----------
TOTAL U.S. AGENCY OBLIGATIONS .................................. 161,099
-----------
SHARES
-----------
SHORT TERM INVESTMENTS - 9.63%
OTHER SHORT-TERM INVESTMENTS - 9.63%
Goldman Sachs Financial Square Government Fund .............. 19,000,000 19,000
JP Morgan U.S. Government Money Market Fund ................. 19,000,000 19,000
-----------
TOTAL SHORT TERM INVESTMENTS ................................ 38,000
-----------
PAR
AMOUNT
-----------
REPURCHASE AGREEMENTS - 49.47%
Banc of America Securities LLC, 0.10%, Due 1/2/2009 (Held at
Bank of New York Mellon, Collateralized by U.S.
Government Agency Obligations valued at
$91,800, 5.0%, 1/1/2035) ................................. $ 90,000 90,000
Barclays Capital, Inc., 0.03%, Due 1/2/2009 (Held at
Bank of New York Mellon, Collateralized by U.S.
Government Agency Obligations valued at
$45,900, 4.0% - 5.5%, 9/1/2023 - 2/1/2038) ............... 45,000 45,000
Credit Suisse Securities (USA) LLC, 0.07%, Due 1/2/2009
(Held at JPMorgan Chase, Collateralized by U.S.
Government Agency Obligations valued at
$51,002, 4.0% - 8.5%, 8/1/2009 - 1/1/2039) ............... 50,000 50,000
See accompanying notes
18
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
Goldman Sachs & Co., 0.04%, Due 1/2/2009 (Held at Bank of
New York Mellon, Collateralized by U.S. Government
Agency Obligations valued at $10,425, 4.0% - 11.5%,
12/1/2011 - 11/1/2038) ................................... $ 10,221 $ 10,221
-----------
TOTAL REPURCHASE AGREEMENTS 195,221
-----------
TOTAL INVESTMENTS - 99.93% (COST $394,320) ..................... $ 394,320
OTHER ASSETS, NET OF LIABILITIES - 0.07% ....................... 284
-----------
TOTAL NET ASSETS - 100.00% ..................................... $ 394,604
===========
Percentages are stated as a percent of net assets.
See accompanying notes
19
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investment in securities at value (cost - $680,390 and $199,099,
respectively) ............................................... $680,390 $199,099
Repurchase agreements (cost - $281,658 and $195,221,
respectively) 281,658 195,221
Dividends and interest receivable .............................. 432 429
Prepaid expenses ............................................... 160 9
-------- --------
TOTAL ASSETS ................................................ 962,640 394,758
-------- --------
LIABILITIES:
Management and investment advisory fees payable (Note 2) ....... 230 33
Other liabilities .............................................. 122 121
-------- --------
TOTAL LIABILITIES ........................................... 352 154
-------- --------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ......... $962,288 $394,604
======== ========
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2008 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
INVESTMENT INCOME:
Dividend income .............................................. $ 31,989 $ 1,475
Interest income .............................................. 310,930 19,060
-------- -------
TOTAL INVESTMENT INCOME ................................... 342,919 20,535
-------- -------
EXPENSES:
Management and investment advisory fees (Note 2) ............. 11,068 725
Custodian fees ............................................... 383 25
Professional fees ............................................ 100 27
Other expenses ............................................... 534 51
-------- -------
TOTAL EXPENSES ............................................ 12,085 828
-------- -------
Less reimbursement of fund expense (Note 2) .................. -- (20)
-------- -------
NET EXPENSES .............................................. 12,085 808
-------- -------
NET INVESTMENT INCOME ........................................... 330,834 19,727
-------- -------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ............................. 197 132
-------- -------
NET GAIN ON INVESTMENTS ................................... 197 132
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $331,031 $19,859
======== =======
See accompanying notes
20
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,
---------------------------- ------------------------
2008 2007 2008 2007
------------ ------------- ----------- ----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ...................... $ 330,834 $ 824,823 $ 19,727 $ 47,203
Net realized gain on investments ........... 197 127 132 3
------------ ------------- ----------- ----------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................... 331,031 824,950 19,859 47,206
------------ ------------- ----------- ----------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions .............................. 125,022,264 202,886,002 6,267,108 8,639,093
Withdrawals ................................ (137,575,006) (203,255,122) (7,274,347) (7,867,711)
------------ ------------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS ...... (12,552,742) (369,120) (1,007,239) 771,382
------------ ------------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS ... (12,221,711) 455,830 (987,380) 818,588
------------ ------------- ----------- ----------
NET ASSETS:
Beginning of period ........................ 13,183,999 12,728,169 1,381,984 563,396
------------ ------------- ----------- ----------
END OF PERIOD .............................. $ 962,288 $ 13,183,999 $ 394,604 $1,381,984
============ ============= =========== ==========
FINANCIAL HIGHLIGHTS
Money Market
--------------------------------
Year Ended December 31,
--------------------------------
2008 2007 2006 2005 2004
---- ---- ---- ---- ----
Total return ............................. 2.75% 5.33% 5.09% 3.25% 1.34%
Ratios to average net assets (annualized):
Expenses ................................. 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income .................... 2.94% 5.19% 5.03% 3.20% 1.30%
U.S. Government Money Market
--------------------------------
Year Ended December 31,
--------------------------------
2008 2007 2006 2005 2004
---- ---- ---- ---- ----
Total return................................. 2.34% 5.18% 5.04% 3.19% 1.30%
Ratios to average net assets (annualized):
Expenses.................................. 0.11% 0.11% 0.12% 0.12% 0.11%
Net investment income..................... 2.68% 4.98% 4.97% 3.15% 1.30%
See accompanying notes
21
AMERICAN BEACON MASTER TRUST PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Master Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no load, open-end management
investment company that was organized as a trust under the laws of the
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of
November 1, 2004. Beneficial interests in the Trust are divided into separate
series, each having distinct investment objectives and policies. These financial
statements relate to the American Beacon Master Money Market Portfolio 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.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc., which
is indirectly owned by investment funds affiliated with Pharos Capital Group,
LLC and TPG Capital, L.P., two private equity firms. Prior to September 12, the
Manager was a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. which retained a minority interest in the parent company
of Lighthouse Holdings, Inc.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Valuation of Investments
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.
The Portfolios adopted the provisions of Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the
beginning of the American Beacon Portfolios' fiscal year. This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value, and requires additional disclosures about
the use of fair value measurements. The three levels of the hierarchy under FAS
157 are described below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3- Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Portfolio's own assumptions about the
factors market participants would use in pricing an investment, and would
be based on the best information available.
A summary of the inputs used to value the Portfolios' investments as of
December 31, 2008 is as follows (in thousands):
Investments in Securities
------------------------------
U.S. Government
Valuation Inputs Money Market Money Market
- ------------------------------------------------- ------------ ---------------
Level 1 - Quoted Prices.......................... $ 96,000 $ 38,000
Level 2 - Other significant observable inputs.... 866,048 356,320
Level 3 - Significant unobservable inputs........ -- --
-------- --------
Total............................................ $962,048 $394,320
22
AMERICAN BEACON MASTER TRUST PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. For
example, money market securities are valued using amortized cost, in accordance
with rules under the Investment Company Act of 1940. Generally, amortized cost
approximates the current fair value of a security, but since the value is not
obtained from a quoted price in an active market, such securities are reflected
as Level 2.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums or
accretion of discounts on investment grade short-term securities and zero coupon
instruments. For financial and tax reporting purposes, realized gains and losses
are determined on the basis of specific lot identification.
Redemption in Kind
Beginning September 19, 2008, proceeds from redemption requests exceeding
$250,000 were made in pro rata payments of cash and in-kind distributions of
securities held by the Money Market Portfolio. The Money Market Portfolio and
feeder funds of the Money Market Portfolio implemented this procedure to prevent
redemptions from forcing the sale of securities below their economic value,
which would have resulted in a material adverse impact on the Money Market
Portfolio and the remaining shareholders. The policy was lifted on December 12,
2008. During this time, beneficial interests of the Portfolio totaling 938,602
(in thousands) were redeemed.
Federal Income and Excise Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code.
For FASB Interpretation No. 48, "Accounting for Uncertainties in Income
Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, remains subject to
examination by the Internal Revenue Service. If applicable, the Portfolios
recognize interest accrued related to unrecognized tax benefits in interest
expense and penalties in "Other expenses" on the Statements of Operations. For
the year ended December 31, 2008, the Portfolios recognized $0 in interest and
penalties.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Portfolio from a securities dealer or a bank that are subject to resale at a
later date. Repurchase agreements are fully collateralized by government or
non-government securities. All collateral is valued at cost, which approximates
market value and is held at the custodian bank. The collateral is monitored
daily by the Manager so that the collateral's market value exceeds the carrying
value of the repurchase agreement plus accrued interest.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated. Certain
prior year amounts have been reclassed in order to be consistent with current
year presentation.
23
AMERICAN BEACON MASTER TRUST PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory and portfolio management services. The Manager serves as the sole
investment advisor to the Portfolios. As compensation for performing the duties
required under the Management Agreement, the Manager received from each
Portfolio 0.10% of its average daily net assets through September 11, 2008. From
September 12, 2008 the Manager receives 0.09% of the average daily net asset of
each Portfolio.
Administrative Services Agreement
Beginning September 12, 2008, the Manager and the Trust entered into an
Administrative Services Agreement that obligates the Manager to provide or
oversee administrative and management services to the Portfolios. As
compensation for performing the duties required under the Administrative
Services Agreement, the Manager receives an annualized fee of 0.01% of the
average daily net assets of each Portfolio.
Reimbursement of Expenses
The Manager voluntarily waived a portion of its fee for the U.S. Government
Portfolio. Fees totaling $19,659 were waived for the year ended December 31,
2008.
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, 2008 the credit facility was not
utilized.
24
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,
2008 include short-term capital gains of $123,718 and $120,552 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, 2008. 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 to shareholders of the U.S. Government Money
Market Fund during the tax year ended December 31, 2008, 29.4% were derived from
U.S. Treasury Obligations.
25
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-three 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*
Alan D. Feld** (72) Trustee since 1999 Sole Shareholder of a professional corporation which is
a Partner in the law firm of Akin, Gump, Strauss, Hauer
& Feld, LLP (1960-Present); Director, Clear Channel
Communications (1984-2008); Trustee, CenterPoint
Properties (1994-2006); Member, Board of Trustees,
Southern Methodist University; Member, Board of
Visitors, M.D. Anderson Hospital; Board of Visitors,
Zale/Lipshy Hospital; Trustee, American Beacon Funds
(1996-Present); Trustee, American Beacon Mileage Funds
(1996-Present); Trustee, American Beacon Master Trust
(1996-Present)
NON-INTERESTED TRUSTEES Term
W. Humphrey Bogart (64) Trustee since 2004 Board Member, Baylor University Medical Center
Foundation (1992-2004); Consultant, New River Canada
Ltd. (mutual fund servicing company) (1998-2003);
President and CEO, Allmerica Trust Company, NA
(1996-1997); President and CEO, Fidelity Investments
Southwest Company (1983-1995); Senior Vice President of
Regional Centers, Fidelity Investments (1988-1995);
Trustee, American Beacon Funds (2004-Present); Trustee,
American Beacon Mileage Funds (2004-Present); Trustee,
American Beacon Master Trust (2004-Present)
Brenda A. Cline (48) Trustee since 2004 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary, Kimbell Art Foundation
(1993-Present); Trustee, Texas Christian University
(1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a
Cook Children's Health Foundation) (2001-2006); Director,
Christian Church Foundation (1999-2007); Trustee, American
Beacon Funds (2004-Present); Trustee, American Beacon
Mileage Funds (2004-Present); Trustee, American Beacon
Master Trust (2004-Present)
Eugene J. Duffy (54) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset
Management (1994-Present); Director, Sunrise Bank of
Atlanta (2008-Present); Chairman, Special Contributions
Fund Board of Trustees, National Association for the
Advancement of Colored People (2007-Present); Trustee,
National Association for the Advancement of Colored
People (2000-Present); Board of Visitors, Emory
University (2006-Present); Trustee, Atlanta Botanical
Garden (2006-Present); Board Member, Willie L. Brown
Jr. Institute on Politics and Public Service
(2001-Present); Chair, National Association of
Securities Professionals (2000-2002); Deputy Chief
Administrative Officer, City of Atlanta (1985-1990);
Trustee, American Beacon Funds, (2008-Present);
Trustee, American Beacon Mileage Funds (2008-Present);
Trustee, American Beacon Master Trust (2008-Present)
26
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.)
Thomas M. Dunning (65) Trustee since 2008 Consultant, (2008-Present); Chairman (1998-2008) and
Chief Executive Officer (1998-2007), Lockton Dunning
Benefits (consulting firm in employee benefits);
Director, (Oncor Electric Delivery Company LLC
(2007-Present); Immediate Past Chairman and Board
Member (2003-Present), Dallas Citizens Council;
Director, Baylor Health Care System Foundation
(2007-Present); Vice Chair, State Fair of Texas
(1987-Present); Board Member, Southwestern Medical
Foundation (1994-Present)
Richard A. Massman (65) Trustee since 2004 Senior Vice President and General Counsel, Hunt
Chairman since Consolidated, Inc. (holding company engaged in oil and
2008 gas exploration and production, refining, real estate,
farming, ranching and venture capital activities)
(1994-Present); Chairman (2007-Present) and Director
(2005-Present), The Dallas Opera Foundation; Chairman
(2006-Present) and Director (2005-Present), Temple
Emanu-El Foundation; Trustee, Presbyterian Healthcare
Foundation (2006-Present); Trustee, American Beacon
Funds (2004-Present); Trustee, American Beacon Mileage
Funds (2004-Present); Trustee, American Beacon Master
Trust (2004-Present)
R. Gerald Turner (63) Trustee since 2001 President, Southern Methodist University
225 Perkins Admin. Bldg. (1995-Present); Director, ChemFirst (1986-2002);
Southern Methodist Univ. Director, J.C. Penney Company, Inc. (1996-Present);
Dallas, Texas 75275 Director, California 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 Funds (2001-Present); Trustee,
American Beacon Mileage Funds (2001-Present); Trustee,
American Beacon Master Trust (2001-Present)
Paul J. Zucconi,CPA (67) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc.
(producer of nonstandard automobile insurance)
(2004-present); Director, Titanium Metals Corporation
(producer of titanium melted and mill products and
sponge) (2002-Present); Director, Torchmark Corporation
(life and health insurance products) (2002-Present);
Director, National Kidney Foundation serving North
Texas (2003-Present); Director, Dallas Chapter of
National Association of Corporate Directors
(2004-Present); Partner, KPMG (1976-2001); Trustee,
American Beacon Funds (2008-Present); Trustee, American
Beacon Mileage Funds (2008-Present); Trustee, American
Beacon Master Trust (2008-Present)
OFFICERS Term
One Year
William F. Quinn (60) President from Chairman (2006-Present) and CEO (2006-2007 and
1999 to 2007 2008-Present), President (1986-2006) and Director
and 2008 to (2003-Present), American Beacon Advisors, Inc.;
Present Chairman (1989-2003) and Director (1979-1989,
Executive Vice 2003-Present), American Airlines Federal Credit Union;
President from Director, Crescent Real Estate Equities,
2007 to 2008 Inc.(1994-2007); Director, Pritchard, Hubble & Herr,
Trustee from LLC (investment advisor) (2001-2006); Director of
1999 to 2008 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 Funds (1987-2008); Trustee, American
Beacon Mileage Funds (1987-2008); Trustee, American
Beacon Master Trust (1995-2008)
27
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
- ----------------------- ------------------ -----------------------------------------------------
Rosemary K. Behan (49) VP, Secretary and Vice President, Legal and Compliance, American Beacon
Chief Legal Advisors, Inc. (2006-Present); Assistant General
Officer since 2006 Counsel, First Command Financial Planning, Inc.
(2004-2006); Enforcement Attorney (2002-2004) and
Branch Chief (2000-2002), Securities and Exchange
Commission
Brian E. Brett (48) VP since 2004 Vice President, Director of Sales and Marketing,
American Beacon Advisors, Inc. (2004-Present);
Regional Vice President, Neuberger Berman, LLC
(investment advisor) (1996-2004)
Michael W. Fields (54) VP since 1999 Vice President, Fixed Income Investments, American
Beacon Advisors, Inc. (1988-Present)
Rebecca L. Harris (42) Treasurer since Vice President, Finance and Accounting, American
1999 Beacon Advisors, Inc. (1995-Present)
Christina E. Sears (37) Chief Compliance Chief Compliance Officer, American Beacon Advisors,
Officer since 2004 Inc. (2004-Present); Senior Compliance Analyst,
and Asst. American Beacon Advisors, Inc. (1998-2004)
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trust and Master
Trust, as defined by the 1940 Act. Mr. Feld's law firm of Akin, Gump,
Strauss, Hauer & Feld LLP has provided legal services within the past two
fiscal years to the Manager.
28
RESULTS OF SHAREHOLDER MEETING
(UNAUDITED)
A special meeting of shareholders of each of the portfolios of the American
Beacon Funds (the "Beacon Trust"), the American Beacon Select Funds (the "Select
Trust"), and the American Beacon Mileage Funds (the "Mileage Trust") was held on
August 22, 2008. The shareholders of the Money Market and the U.S. Government
Money Market Funds (the "Funds") approved a new investment management agreement
between American Beacon Advisors, Inc. and the Funds. This proposal required a
majority of shareholders of each Fund to achieve a quorum. The following are the
results of the shareholder votes for this proposal:
FUND FOR AGAINST ABSTAIN NON-VOTING
- ---------------------------- ----------------- ------------- ------------- ---------------
Money Market Fund 1,476,635,057.525 3,700.000 3,828,338.210 759,108,024.320
U.S. Govt. Money Market Fund 30,926,226.210 -0- -0- -0-
Money Market Select fund 4,647,553,318.330 -0- 301,904.000 990,879,183.230
U.S. Govt. Select Fund 376,578,304.880 86,995.210 -0- -0-
Money Market Mileage Fund 31,003,631.310 6,775,050.300 456,806.870 -0-
The shareholders of the Beacon Trust, Select Trust, and Mileage Trust
(collectively, the "Trusts") also approved the re-election of five of the
current Trustees to the Board of the Trusts and the election of three additional
Trustees to the Board. This proposal required a majority of the shareholders of
the Trusts to vote to achieve a quorum. The following are the results of the
election of each Trustee:
BEACON TRUST SELECT TRUST MILEAGE TRUST
----------------- ---------------- -------------
ALAN D. FELD
Affirmative....... 12,634,553,751.62 5,579,522,662.80 30,648,100.70
Withhold.......... 519,818,259.90 435,877,042.85 7,587,387.78
W. HUMPHREY BOGART
Affirmative....... 12,999,746,162.82 6,013,838,886.28 30,717,064.11
Withhold.......... 154,625,848.70 1,560,819.37 7,518,424.37
BRENDA A. CLINE
Affirmative....... 13,009,050,779.42 6,015,104,773.65 31,044,304.34
Withhold.......... 145,321,232.10 294,932.00 7,191,184.14
RICHARD A. MASSMAN
Affirmative....... 13,004,756,096.42 5,971,204,773.65 30,618,827.22
Withhold.......... 149,615,915.10 44,194,932.00 7,616,661.26
R. GERALD TURNER
Affirmative....... 13,004,259,224.92 6,015,104,773.65 30,262,464.39
Withhold.......... 150,112,786.60 294,932.00 7,973,024.09
THOMAS M. DUNNING
Affirmative....... 13,003,350,236.48 6,013,838,886.28 30,548,724.44
Withhold.......... 151,021,775.04 1,560,819.37 7,686,764.04
EUGENE J. DUFFY
Affirmative....... 12,985,296,316.39 6,013,838,886.28 30,573,632.38
Withhold.......... 169,075,695.13 1,560,819.37 7,661,856.10
PAUL J. ZUCCONI
Affirmative....... 12,983,378,136.76 6,013,838,886.28 32,956,909.20
Withhold.......... 170,993,874.76 1,560,819.37 5,278,579.28
29
(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:
Call (800) 658-5811 American Beacon Select Funds
P.O. Box 219643
Kansas City, MO 64121
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
In addition to the Schedule of Investments provided in each semi-annual and
annual report, the Fund files a complete schedule of its portfolio holdings with
the Securities and Exchange Commission ("SEC") on Form N-Q as of the first and
third fiscal quarters. The Fund's Forms N-Q are available on the SEC's website
at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC's
Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information
regarding the operation of the SEC's Public Reference Room may be obtained by
calling 1-800-SEC-0330. A complete schedule of the Fund's portfolio holdings is
also available on the Funds' website (www.americanbeaconfunds.com) approximately
thirty days after the end of each month.
AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
A description of the policies and procedures the Fund uses to determine how to
vote proxies relating to portfolio securities is available in the Fund's
Statement of Additional Information, is available free of charge on the Fund's
website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by
accessing the SEC's website at www.sec.gov. The Fund's proxy voting record for
the most recent year ended June 30 is filed annually with the SEC on Form N-PX.
The Fund's Forms N-PX are available on the SEC's website at www.sec.gov. The
Fund's proxy voting record may also be obtained by calling 1-800-967-9009.
FUND SERVICE PROVIDERS:
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 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, American Beacon Money Market Select
Fund, and American Beacon U.S. Government Money Market Select Fund are service
marks of American Beacon Advisors, Inc.
AR 12/08
00065971
ITEM 2. CODE OF ETHICS.
The Trust did not amend the code of ethics that applies to its principal
executive and financial officers (the "Code") nor did it grant any waivers to
the provisions of the Code during the period covered by the shareholder reports
presented in Item 1.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust's Board of Trustees has determined that Mr. Paul J. Zucconi, CPA, a
member of the Trust's Audit and Compliance Committee, is an "audit committee
financial expert" as defined in Form N-CSR. Mr. Paul J. Zucconi is
"independent" as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$20,740 12/31/2007
$21,525 12/31/2008
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$0 12/31/2007
$0 12/31/2008
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$3,809 12/31/2007
$2,032 12/31/2008
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 12/31/2007
$0 12/31/2008
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee
shall have the following duties and powers pertaining to pre-approval
of audit and non-audit services provided by the Trust's principal
accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trusts' financial
statements, and, in connection therewith, reviewing and evaluating
matters potentially affecting the independence and capabilities of
the auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trusts, an investment adviser to
any series of the Trusts or any entity controlling, controlled by,
or under common control with an investment adviser ("adviser
affiliate") that provides ongoing services to the Trusts, if the
engagement relates directly to the operations and financial
reporting of the Trusts;
- to consider whether the non-audit services provided by a Trust's
auditor to an investment adviser or any adviser affiliate that
provides ongoing services to a series of the Trusts, which services
were not pre-approved by the Committee, are compatible with
maintaining the auditor's independence;
- to review the arrangements for and scope of the annual audit and
any special audits; and
- to review and approving the fees proposed to be charged to the
Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority,
including the authority to grant pre-approvals of audit and permitted
non-audit services, to a subcommittee of one or more members. Any decisions
of the subcommittee to grant pre-approvals shall be presented to the full
committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$3,809 $0 N/A 12/31/2007
$2,032 $0 N/A 12/31/2008
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder reports presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached
hereto as EX-99.CERT.
(a)(3) Not Applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Select Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: March 6, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ William F. Quinn
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William F. Quinn
President
Date: March 6, 2009
By /s/ Rebecca L. Harris
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Rebecca L. Harris
Treasurer
Date: March 6, 2009