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: 811-09603
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)
Gene L. Needles, Jr., 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, 2009
Date of reporting period: December 31, 2009
ITEM 1. REPORT TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON SELECT FUNDS(SM) LOGO)
ANNUAL REPORT
(GRAPHIC)
DECEMBER 31, 2009
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........................................ 18
U.S. GOVERNMENT SELECT FUND..................................... 19
SCHEDULE OF INVESTMENTS
U.S. GOVERNMENT MONEY MARKET SELECT............................. 10
MONEY MARKET PORTFOLIO.......................................... 21
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, 2009
(PHOTO OF GENE L. NEEDLES, JR.)
DEAR SHAREHOLDERS,
As an introduction to the American Beacon Money Market Select Fund and the
U.S. Government Money Market Select Fund Annual Report for the 12-month period
ended December 31, 2009, please let me take a moment to tell you how pleased I
am to have been serving as President and CEO of American Beacon Advisors since
April 15, 2009. I consider it a privilege to hold this position, and I take its
responsibilities quite seriously.
I've enjoyed a long, successful career in the investment business, and I'm
no stranger to the ups and downs that markets can deliver. As a fellow investor,
I experience these trends in much the same way you do. The majority of 2008 was
difficult in many ways. However, when I took the helm at American Beacon, I
already had many reasons to be optimistic about what might develop in 2009. As
of December 31, 2009, my optimism has been largely confirmed.
Both Funds outperformed their respective indexes for the year ended
December 31, 2009. The American Beacon Money Market Select Fund returned 0.39%
compared to the Lipper Institutional Money Market Average of 0.32%. The American
Beacon U.S. Government Money Market Select Fund returned 0.25% compared to the
Lipper Institutional U.S. Government Money Market Average of 0.14%.
While this 12-month period began amid a frightening recessionary
environment, we finished the year with increasing confidence that markets have
begun to stabilize, that liquidity has returned to the debt markets and that
equity markets have had a substantial recovery.
I know as well as you do that maintaining a long-term perspective and doing
the right thing according to your risk tolerance and time horizon is not always
easy. But the professionals at American Beacon are dedicated to working hard to
help investors succeed.
Just as you maintain a commitment to your goals--and to those who inspire
you to create your goals--we maintain a strong commitment to due diligence and
oversight. That commitment is one of the key reasons I am honored to serve as
President and CEO, and pleased to be able to share my enthusiasm about the path
ahead with you.
As always, the professionals associated with the American Beacon Funds are
grateful for the opportunity to serve you.
Best Regards,
/s/ Gene L. Needles, Jr.
Gene L. Needles, Jr.
President
American Beacon Select Funds
1
ECONOMIC OVERVIEW
DECEMBER 31, 2009 (UNAUDITED)
The economic recovery continued to gain momentum during 2009. The pace of
job losses declined, unsold home inventory levels declined and consumer spending
increased. In addition, financial market conditions continued to improve as
equity prices rose and credit spreads tightened. Many major financial
institutions were able to raise capital during the year and pay back funds
received under the Troubled Asset Relief Program (TARP). In addition, the
Federal Reserve Board (the "Fed") announced in December that it anticipated most
of its special liquidity facilities would expire on February 1, 2010 - including
the Asset-backed commercial Paper Money Market Mutual Fund Liquidity Facility
(AMLF), the Commercial Paper Funding Facility (CPFF), the Primary Dealer Credit
Facility (PDCF), and the Term Securities Lending Facility (TSLF). The Fed
believed these liquidity programs would no longer be needed as a result of the
"substantial improvement in the functioning of financial markets".
Despite these improvements, challenges remain. Unlike past recoveries where
consumers were the primary drivers of growth, much of the current recovery has
been driven by unprecedented fiscal stimulus. As a result, there is a concern
about the strength of the recovery without government programs. For example,
improvements in the fragile housing market could be impaired by the wind-down of
the Fed's purchases of mortgage-backed securities (MBS) and the expiration of
the homebuyer tax credit. Furthermore, without targeted fiscal stimulus such as
the cash for clunkers program, consumer spending is expected to be moderate in
the coming quarters. Tight bank lending standards and continued concerns over
the labor market are expected to dampen consumer demand unless additional
stimulus is introduced. So while it appears that the economic recovery will be
sustainable and fears of a double dip recession have abated, the economic
recovery remains fragile.
The Fed left the target range of the federal funds rate unchanged at
0.0-0.25% at the December 16th Federal Open Market Committee meeting. The
Committee noted the improvement in economic activity but stated that "...low
rates of resource utilization, subdued inflation trends and stable inflation
expectations are likely to warrant exceptionally low levels of the federal funds
rate for an extended period".
While it is expected that the Fed will keep the fed funds rate unchanged
for most if not all of 2010, it is likely that they will begin to gradually
reduce monetary accommodation in other ways. During the crisis, the Fed employed
quantitative easing tactics to flood the financial markets with liquidity. In
order to avoid stimulating inflation as the economic recovery gains ground, the
Fed will need to implement an exit strategy to reduce liquidity. The Fed has
numerous tools available in its arsenal to drain excess liquidity from the
system including terming out bank reserve deposits, commencing reverse
repurchase agreements, and outright sale of securities purchased during the
crisis. In all likelihood, reverse repos (which the Fed has already begun
testing) and term deposits will be the Fed's most important tools for draining
bank reserves. Outright asset sales, particularly MBS, are less likely given the
fragility of the housing market. All in all, the timing of the exit strategy
will be tricky. If the Fed removes accommodation too quickly, it could hamper
the recovery, but if they move too slowly, inflationary pressure could build.
2
AMERICAN BEACON MONEY MARKET SELECT FUND(SM)
PERFORMANCE OVERVIEW
DECEMBER 31, 2009 (UNAUDITED)
Although the economy began to show signs of recovery during the year in
jobs, home sales, and consumer spending, the Federal Open Market Committee
(FOMC) maintained its 0% to 0.25% fed funds target throughout 2009. In addition,
the FOMC stated at its last meeting of the year that "...stable inflation
expectations are likely to warrant exceptionally low levels of the federal funds
rate for an extended period." With credit quality and liquidity continuing to be
a priority, the American Beacon Money Market Select Fund's primary strategy for
the year was to buy high quality, short-dated commercial paper, certificates of
deposit and overnight repurchase agreements collateralized by non-government
securities. The strategies implemented during the year enabled the Fund to
outperform its Lipper peer group.
For the twelve months ended December 31, 2009, the total return of the
American Beacon Money Market Select Fund was 0.39%. The Fund outperformed the
Lipper Institutional Money Market Average return of 0.32% by 7 basis points
(0.07%). Based on annualized total returns, Lipper Analytical Services ranked
the Fund 116 among 336, 80 among 313 and 37 among 270 Institutional Money Market
Funds for the one-year, three-year, and five-year periods ended December 31,
2009, respectively.
Money Market Returns as of
December 31, 2009
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2009
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Money Market (1,2,4) ......... 0.39% 3.34% 3.17%
Lipper Institutional Money
Market Average (3) ........ 0.32% 3.08% 2.89%
(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) 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 Lipper Institutional Money Market Average is calculated by taking an
arithmetic average of the returns of the mutual funds in the Lipper
Institutional Money Market Funds category. Lipper is an independent mutual
fund research and ranking service.
(4) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus was 0.14%. 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, 2009
7-day Current Yield* ......... 0.25%
7-day Effective Yield* ....... 0.25%
30-day Yield* ................ 0.25%
Weighted Avg. Maturity ....... 14 Days
Standard & Poor's Rating ..... 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.
3
AMERICAN BEACON MONEY MARKET SELECT FUND(SM)
PERFORMANCE OVERVIEW
DECEMBER 31, 2009 (UNAUDITED)
MONEY MARKET PORTFOLIO --
TOP TEN ISSUERS AS OF DECEMBER 31, 2009
% OF
NET ASSETS**
------------
Bank of Ireland N.Y.......................... 5.0%
Allied Irish Banks PLC....................... 5.0%
FCAR Owner Trust............................. 5.0%
Toyota Credit Canada, Inc.................... 4.9%
CBA (Delaware) Finance, Inc.................. 4.9%
Edison Asset Securitization LLC.............. 4.9%
Surrey Funding Corp.......................... 4.9%
Old Line Funding LLC......................... 4.9%
Solitaire Funding LLC........................ 4.9%
Societe Generale N.Y......................... 4.9%
MONEY MARKET PORTFOLIO --
ASSET ALLOCATION AS OF DECEMBER 31, 2009
% OF
NET ASSETS**
------------
Commercial Paper............................. 48.72%
Repurchase Agreements........................ 34.85%
Time Deposits................................ 9.99%
Short-Term Investments....................... 6.45%
Liabilities, Net of Other Assets............. -0.01%
** Percent of net assets of American Beacon Master Money Market Portfolio.
4
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET SELECT FUND(SM)
PERFORMANCE OVERVIEW
DECEMBER 31, 2009 (UNAUDITED)
Although the economy began to show signs of recovery during the year in
jobs, home sales, and consumer spending, the Federal Open Market Committee
(FOMC) maintained its 0% to 0.25% fed funds target throughout 2009. In addition,
the FOMC stated at its last meeting of the year that "...stable inflation
expectations are likely to warrant exceptionally low levels of the federal funds
rate for an extended period." During the year, the American Beacon U.S.
Government Money Market Select Fund's primary strategy was to buy short-dated
agencies and overnight repurchase agreements collateralized by non-government
securities. The strategies implemented during the year enabled the Fund to
outperform its Lipper peer group.
For the twelve months ended December 31, 2009, the total return of the
American Beacon U.S. Government Money Market Select Fund was 0.25%. The Fund
outperformed the Lipper Institutional U.S. Government Money Market Average
return of 0.14% by 11 basis points (0.11%). Based on annualized total returns,
Lipper Analytical Services ranked the Fund 27th among 158, 15th among 140 and
3rd among 124 Institutional U.S. Government Money Market Funds for the one-year,
three-year, and five-year periods ended December 31, 2009, respectively.
U.S. GOVERNMENT TOTAL RETURNS
AS OF DECEMBER 31, 2009
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2009
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
U.S. Government (1,2,4) ........................ 0.25% 3.18% 3.03%
Lipper Institutional U.S. Government Money
Market Average (3) .......................... 0.14% 2.91% 2.79%
(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") no longer in operation. The Companion Fund was managed by
American Beacon Advisors since its inception on March 2, 1992. Like the
Fund, the Companion Fund invested all of its investable assets in the same
corresponding Portfolio of the American Beacon Master Trust. The
performance results 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, 2009 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) The Lipper Institutional U.S. Government Money Market Average is calculated
by taking an arithmetic average of the returns of the mutual funds in the
Lipper Institutional U.S. Government Money Market Funds category. Lipper is
an independent mutual fund research and ranking service.
(4) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus was 0.16%. 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
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET SELECT FUND(SM)
PERFORMANCE OVERVIEW
DECEMBER 31, 2009 (UNAUDITED)
STATISTICS AS OF DECEMBER 31, 2009
U.S. GOVERNMENT
---------------
7-day Current Yield*....................... 0.01%
7-day Effective Yield*..................... 0.01%
30-day Yield*.............................. 0.04%
Weighted Avg. Maturity..................... 36 Days
Standard & Poor's Rating................... 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. A portion of the fees charged to the Fund was
waived. Yields in absence of fee waivers would have been lower than actual
yields shown. The 7-day yields would have been negative absent fee waivers.
ASSET ALLOCATION AS OF DECEMBER 31, 2009
% OF
NET ASSETS
----------
U.S. Agency Obligations ......................... 50.92%
Repurchase Agreements ........................... 39.21%
Short-Term Investments........................... 9.90%
Liabilities, Net of Other Assets................. -0.03%
6
FUND EXPENSES
AMERICAN BEACON SELECT FUNDS
DECEMBER 31, 2009 (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, 2009 through December 31,
2009.
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 Ending Expenses paid
Account Account During Period*
Value Value 7/1/09-
7/1/09 12/31/09 12/31/09
--------- --------- --------------
MONEY MARKET
Actual ............................ $1,000.00 $1,001.42 $0.71
Hypothetical (5% return
before expenses) ............... $1,000.00 $1,024.50 $0.71
U.S. GOVERNMENT MONEY MARKET
Actual ............................ $1,000.00 $1,000.64 $0.66
Hypothetical (5% return
before expenses) ............... $1,000.00 $1,024.55 $0.66
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.14% and 0.13% for the Money Market Select Feeder and
U.S. Government Money Market Portfolio 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.
7
AMERICAN BEACON MONEY MARKET SELECT FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Money Market Select Fund:
We have audited the accompanying statement of assets and liabilities of American
Beacon Money Market Select Fund (a series of American Beacon Select Funds) (the
"Fund") as of December 31, 2009, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our 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 Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2009, by correspondence with the Master
Portfolio. 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 Money Market Select Fund at December 31, 2009, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/Ernst & Young LLP
Dallas, Texas
February 26, 2010
8
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET SELECT FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon U.S. Government Money Market Select Fund:
We have audited the accompanying statement of assets and liabilities of American
Beacon U.S. Government Money Market Select Fund (a series of American Beacon
Select Funds) (the "Fund"), including the schedule of investments, as of
December 31, 2009, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our 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 Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2009, 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 U.S. Government Money Market Select Fund at December 31, 2009,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/Ernst & Young LLP
Dallas, Texas
February 26, 2010
9
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET SELECT FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
PAR AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 50.92%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 33.95%
0.32%, Due 1/19/2010...................................................... $ 5,000 $ 4,999
0.307%, Due 1/25/2010..................................................... 11,000 10,998
0.20%, Due 2/22/2010...................................................... 10,000 9,997
0.17%, Due 3/30/2010...................................................... 10,000 9,996
0.20%, Due 4/12/2010...................................................... 5,000 4,997
0.192%, Due 4/19/2010..................................................... 15,000 14,991
0.17%, Due 5/3/2010....................................................... 14,000 13,992
0.218%, Due 9/24/2010 #................................................... 50,000 50,024
--------
119,994
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.97%
0.32%, Due 1/14/2010...................................................... 5,000 4,999
0.31%, Due 1/20/2010...................................................... 5,000 4,999
0.23%, Due 3/3/2010....................................................... 20,000 19,992
0.215%, Due 3/24/2010..................................................... 5,000 4,998
0.20%, Due 4/14/2010...................................................... 5,000 4,997
0.174%, Due 7/13/2010 #................................................... 20,000 19,999
--------
59,984
--------
TOTAL U.S. AGENCY OBLIGATIONS................................................ 179,978
--------
SHARES
-----------
SHORT-TERM INVESTMENTS - 9.90%
DWS Money Market Series 23................................................... 1,000,000 1,000
RBC Prime Money Market Fund.................................................. 17,000,000 17,000
Western Asset Government Money Market........................................ 17,000,000 17,000
--------
TOTAL SHORT-TERM INVESTMENT FUNDS............................................ 35,000
--------
PAR AMOUNT
-----------
REPURCHASE AGREEMENTS - 39.21%
Barclays Capital, Inc., 0.02%, Due 1/4/2010 (Held at Bank of New York Mellon,
Collateralized by U.S. Government Agency Obligations valued at $133,620,
1.65% - 1.75%, 2/23/2011 - 10/30/2012).................................... $ 131,000 131,000
Goldman Sachs & Co., 0.01%, Due 1/4/2010 (Held at Bank of New York Mellon,
Collateralized by U.S. Government Agency Obligations valued at $7,718,
7.0%, 4/1/2038)........................................................... 7,566 7,566
--------
TOTAL REPURCHASE AGREEMENTS 138,566
--------
TOTAL INVESTMENTS - 100.03% (COST $353,544)..................................... $353,544
LIABILITIES, NET OF OTHER ASSETS - (0.03%) ..................................... (100)
TOTAL NET ASSETS - 100.00%...................................................... $353,444
========
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
10
AMERICAN BEACON SELECT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2009 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investments in securities, at value (cost - $214,978) ........ $ -- $ 214,978
Repurchase agreements (cost - $138,566) ...................... -- 138,566
Investment in Portfolio, at value ............................ 643,247 --
Receivable for fund shares sold .............................. 33 --
Receivable from Manager for expense reimbursement (Note 2) ... -- 4
Dividends and interest receivable ............................ -- 11
Prepaid expenses ............................................. -- 16
------------ ------------
TOTAL ASSETS .............................................. 643,280 353,575
------------ ------------
LIABILITIES:
Management and investment advisory fees (Note 2) ............. -- 27
Dividends payable ............................................ 3 16
Administrative service and service fees payable (Note 2) ..... -- 3
Professional fees payable .................................... 15 35
Transfer agent fees payable .................................. 10 8
Trustee fees payable ......................................... 8 18
Other liabilities ............................................ 79 24
------------ ------------
TOTAL LIABILITIES ......................................... 115 131
------------ ------------
NET ASSETS ...................................................... $ 643,165 $ 353,444
============ ============
ANALYSIS OF NET ASSETS:
Paid-in-capital ........................................... 643,165 353,444
------------ ------------
NET ASSETS ...................................................... $ 643,165 $ 353,444
============ ============
Shares outstanding (no par value) ............................... 643,165,061 353,443,722
Net asset value, offering and redemption price per share ........ $1 .00 $1 .00
See accompanying notes
See accompanying Financial Statements of the American Beacon
Money Market Portfolio
11
AMERICAN BEACON SELECT FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2009 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
INVESTMENT INCOME:
Dividend income ........................................................ $ -- $ 44
Interest income ........................................................ -- 693
Investment Income Allocated From Portfolio:
Dividend income ........................................................ 330 115
Interest income ........................................................ 3,364 921
Portfolio expenses ..................................................... (963) (227)
Other income ........................................................... -- 22
------ ------
NET INVESTMENT INCOME ............................................... 2,731 1,568
------ ------
FUND EXPENSES:
Management and investment advisory fees (Note 2) ....................... -- 238
Custodian fees ......................................................... -- 12
Administrative fees .................................................... -- 26
Transfer agent fees .................................................... 15 34
Professional fees ...................................................... 16 40
Printing expense ....................................................... 5 6
Rating services expense ................................................ -- 32
Trustee expense ........................................................ 28 50
Other expenses ......................................................... 58 25
------ ------
TOTAL FUND EXPENSES ................................................. 122 463
------ ------
Net (fees waived and expenses reimbursed)/recovered by Manager (Note 2) ... (9) (110)
------ ------
NET FUND EXPENSES ................................................... 113 353
------ ------
NET INVESTMENT INCOME ..................................................... 2,618 1,215
------ ------
REALIZED GAINS
Net realized gain on investments .......................................... -- 5
REALIZED GAIN ALLOCATED FROM PORTFOLIO
Net realized gain on investments ....................................... 63 50
------ ------
NET GAIN ON INVESTMENTS ............................................. 63 55
------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... $2,681 $1,270
====== ======
See accompanying notes
See accompanying Financial Statements of the American Beacon
Money Market Portfolio
12
AMERICAN BEACON SELECT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
Year Ended December 31, Year Ended December 31,
------------------------- -------------------------
2009 2008 2009 2008
--------- ------------- ----------- -----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ........................... $ 2,618 $ 216,268 $ 1,215 $ 19,046
Net realized gain on investments ................ 63 124 55 120
--------- ------------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................ 2,681 216,392 1,270 19,166
--------- ------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ........................... (2,618) (216,268) (1,215) (19,046)
Net realized gain on investments ................ (63) (124) (55) (120)
--------- ------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS ................ (2,681) (216,392) (1,270) (19,166)
--------- ------------- ----------- -----------
CAPITAL SHARE TRANSACTIONS (AT $1.00 PER SHARE):
Proceeds from sales of shares ................... 833,942 102,008,931 1,864,398 6,128,248
Reinvestment of dividends and distributions ..... 2,466 65,877 118 3,785
Cost of shares redeemed ......................... (901,609) (109,945,730) (1,885,622) (7,118,942)
--------- ------------- ----------- -----------
NET (DECREASE) IN NET ASSETS ................. (65,201) (7,870,922) (21,106) (986,909)
--------- ------------- ----------- -----------
NET (DECREASE) IN NET ASSETS ....................... (65,201) (7,870,922) (21,106) (986,909)
--------- ------------- ----------- -----------
NET ASSETS:
Beginning of period ............................. 708,366 8,579,288 374,550 1,361,459
--------- ------------- ----------- -----------
END OF PERIOD ................................... $ 643,165 $ 708,366 $ 353,444 $ 374,550
========= ============= =========== ===========
See accompanying notes
See accompanying Financial Statements of the American Beacon
Money Market Portfolio
13
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
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").
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of Lighthouse Holdings, Inc., and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
The Money Market Fund operates under a master-feeder structure, investing
all of its investable assets in the American Beacon Money Market Portfolio (the
"Money Market Portfolio") of the American Beacon Master Trust, an open-end
diversified management investment company. The Money Market Fund has the same
investment objectives as the Money Market Portfolio and the value of such
investment reflects the Money Market Fund's proportionate interest in the net
assets of the Money Market Portfolio (89.3% at December 31, 2009). The financial
statements of the Money Market Portfolio are included elsewhere in this report
and should be read in conjunction with the Money Market Fund's financial
statements.
Reorganization
Prior to May 18, 2009, the Government Fund operated under a master-feeder
structure and invested all of its investable assets in the American Beacon U.S.
Government Money Market Portfolio (the "Government Portfolio") of the American
Beacon Master Trust. At the beginning of business on May 18, 2009, the
Government Fund withdrew its interest in the Government Portfolio. The
Government Fund received a distribution of cash and securities from the
Government Portfolio with a market value equal to the Government Fund's
investment in the Government Portfolio in the amount of $537,530,130. The
Government Portfolio then ceased operations.
The following is a summary of the significant accounting policies followed
by the Funds.
Security Valuation
The Money Market Fund records its investment in the Money Market Portfolio
at fair value. Valuation of securities by the Money Market Portfolio is
discussed in Note 1 of the Money Market Portfolio's Notes to Financial
Statements which is included elsewhere in this report. Securities of the
Government Fund 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 Government Fund, 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.
Valuation Inputs
Various inputs may be used to determine the fair value of the Government
Fund's investments. These inputs are summarized in three broad levels for
financial statement purposes. The inputs or methodologies used to value the
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 Act. 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 typically reflected as Level 2.
14
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
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.
The Government Fund's investments are summarized by level based on the
inputs used to determine their values and at December 31, 2009, were classified
as follows: (in thousands)
Asset Description: Level 1 Level 2 Level 3 Total
- ------------------ -------- -------- ------- -------
U.S. Agency Obligations .............. $ -- $179,978 $-- $179,978
Short-Term Investments ............... 35,000 -- -- 35,000
Repurchase Agreements ................ -- 138,566 -- 138,566
-------- -------- --- --------
Total Investments in Securities ... $ 35,000 $318,544 $-- $353,544
The summary of inputs used to value the Money Market Portfolio's net
assets as of December 31, 2009 is discussed in the Money Market Portfolio's
Notes to Financial Statements, which is included elsewhere in this report.
Security Transactions
Security transactions for the Government Fund are recorded on the trade
date of the security purchase or sale.
Investment Income and Dividends to Shareholders
Interest income for the Government Fund is earned from settlement date,
recorded on an 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. The
Money Market Fund records its share of net investment income (loss) and realized
gain (loss) in the Money Market Portfolio each day. All net investment income
(loss) and realized gain (loss) of the Money Market Portfolio is allocated pro
rata to the Money Market Fund and other investors in the Money Market 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.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by the
Government Fund from a securities dealer or a bank that are subject to resale at
a later date. Repurchase agreements entered by the
15
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Government Fund during the year ended December 31, 2009 were fully
collateralized by 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.
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 Funds and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provisions of all investment
advisory and portfolio management services. The Manager serves as the sole
investment advisor to the Funds. As compensation for performing the duties
required under the Management Agreement, the Manager receives 0.09% of the
average daily net assets of the Funds. To the extent and for such periods of
time that a Fund invests all of its investable assets in another registered
investment company pursuant to a master-feeder arrangement, then the Fund will
not pay a management fee.
Administrative Services Agreement
The Manager and the Funds entered into an Administrative Services Agreement
that obligates the Manager to provide or oversee administrative services to the
Funds. As compensation for performing the duties required under the
Administrative Services Agreement, the Manager receives an annualized fee of
0.01% of the average daily net assets of the Funds. To the extent and for such
period of time that a Fund invests all of its investable assets in another
registered investment company pursuant to a master-feeder arrangement, then the
Fund will not pay administrative services fees.
Reimbursement of Expenses
The Manager voluntarily agreed to reimburse the Money Market and Government
Funds for certain expenses. For the year ended December 31, 2009, the Manager
reimbursed expenses totaling $8,901 and $109,635 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.
16
AMERICAN BEACON SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Reimbursed expenses subject to potential recovery for the Money Market Fund
totaling $119,783 and $8,901 will expire in 2011 and 2012, respectively.
Reimbursed expenses subject to potential recovery for the Government Fund
totaling $32,513, $69,000, and $109,635 will expire in 2010, 2011 and 2012,
respectively. The Funds have not recorded a liability for these potential
reimbursements due to the current assessment that reimbursements are 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.
The Funds do not have any unrecognized tax benefits in the accompanying
financial statements. Each of the tax years in the four year period ended
December 31, 2009 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 expense"
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,
2009 and December 31, 2008 were as follows (in thousands):
Money Market Fund Government Fund
----------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31,2009 December 31,2008 December 31,2009 December 31,2008
---------------- ---------------- ---------------- ----------------
Distributions paid from:
Ordinary income* ........ $2,681 $216,392 $1,270 $ 19,166
Long-term capital gain .. -- -- -- --
------ -------- ------ --------
Total distributions paid ... $2,681 $216,392 $1,270 $ 19,166
====== ======== ====== ========
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 2009, 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, 2009.
4. SUBSEQUENT EVENTS
Management has evaluated the possibility of subsequent events existing in
the Funds' financial statements through February 26, 2010. Management has
determined that there are no material events that would require disclosure in
the Funds' financial statements through this date.
17
AMERICAN BEACON MONEY MARKET SELECT FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Year Ended December 31,
-------------------------------------------------------------------
2009 2008 2007 2006 2005
--------- -------- ---------- ---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- -------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ..................... 0.00(B) 0.03 0.05 0.05 0.03
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 ......... 0.00 0.03 0.05 0.05 0.03
--------- -------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ......... 0.00(B) (0.03) (0.05) (0.05) (0.03)
Distributions from net realized gains on
investments ............................... 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(B)
--------- -------- ---------- ---------- ----------
Total distributions ............................. 0.00 (0.03) (0.05) (0.05) (0.03)
--------- -------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ========== ========== ==========
TOTAL RETURN .................................... 0.39% 2.73% 5.32% 5.08% 3.23%
========= ======== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ..... $ 643,165 $708,366 $8,579,288 $8,473,536 $5,216,927
Ratios to average net assets (annualized):(A)
Expenses, after expense reimbursements
(recoupments) .......................... 0.16% 0.12% 0.11% 0.11% 0.12%
Expenses, before expense reimbursements
(recoupments) ............................. 0.16% 0.12% 0.11% 0.11% 0.12%
Net investment income, after expense
reimbursements (recoupments) ........... 0.38% 2.95% 5.20% 5.02% 3.20%
Net investment income, before expense
reimbursements (recoupments) ........... 0.38% 2.95% 5.20% 5.02% 3.20%
(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.
18
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET SELECT FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Year Ended December 31,
--------------------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- ---------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ---------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ..................... 0.00(B) 0.02 0.05 0.05 0.03
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 ......... 0.00 0.02 0.05 0.05 0.03
-------- -------- ---------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ......... 0.00(B) (0.02) (0.05) (0.05) (0.03)
Distributions from net realized gains on
investments ............................... 0.00(B) 0.00(B) 0.00(B) 0.00(B) 0.00(B)
-------- -------- ---------- -------- --------
Total distributions ............................. 0.00 (0.02) (0.05) (0.05) (0.03)
-------- -------- ---------- -------- --------
NET ASSET VALUE, END OF PERIOD .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========== ======== ========
TOTAL RETURN .................................... 0.25% 2.32% 5.17% 5.04% 3.19%
======== ======== ========== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ..... $353,444 $374,550 $1,361,459 $534,536 $196,696
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) .......................... 0.15% 0.13% 0.12% 0.13% 0.14%
Net investment income, after expense
reimbursements (recoupments) ........... 0.26% 2.70% 4.99% 4.99% 3.17%
Net investment income, before expense
reimbursements (recoupments) ........... 0.23% 2.69% 4.98% 4.98% 3.15%
(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 Portfolio which terminated
on May 18, 2009.
(B) Amount is less than $0.01 per share.
See accompanying notes
19
AMERICAN BEACON MONEY MARKET PORTFOLIO
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Money Market Portfolio:
We have audited the accompanying statement of assets and liabilities of American
Beacon Money Market Portfolio (the "Portfolio"), including the schedule of
investments, as of December 31, 2009, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our 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 Portfolio's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolio's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2009, 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 Money Market Portfolio at December 31, 2009, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/Ernst & Young LLP
Dallas, Texas
February 26, 2010
20
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
Money Market Portfolio
PAR AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
COMMERCIAL PAPER - 48.72%
Calyon North America, Inc., 0.265%, Due 3/1/2010 ......................................... $ 35,000 $ 34,985
CBA (Delaware) Finance, Inc., 0.27%, Due 1/15/2010 ....................................... 35,000 34,996
Edison Asset Securitization LLC, 0.449%, Due 1/14/2010 #.................................. 35,000 34,994
FCAR Owner Trust, 0.40%, Due 1/6/2010 .................................................... 36,000 35,998
National Australia Funding (Del) Inc., 0.21%, Due 2/18/2010 #............................. 35,000 34,990
Old Line Funding LLC,
0.65%, Due 1/8/2010 #.................................................................. 20,000 19,997
0.28%, Due 1/12/2010 #................................................................. 5,000 5,000
0.50%, Due 2/1/2010 #.................................................................. 10,000 9,996
Societe Generale N.Y., 0.245%, Due 2/3/2010 .............................................. 35,000 34,992
Solitaire Funding LLC, 0.31%, Due 1/27/2010 #............................................. 35,000 34,992
Surrey Funding Corp., 0.24%, Due 2/1/2010 #............................................... 35,000 34,993
Toyota Credit Canada, Inc., 0.23%, Due 1/13/2010 ......................................... 35,000 34,997
--------
TOTAL COMMERCIAL PAPER.................................................................... 350,930
--------
TIME DEPOSITS - 9.99%
Allied Irish Banks PLC, 0.65%, Due 1/13/2010 ............................................. 36,000 36,000
Bank of Ireland N.Y., 0.40%, Due 1/7/2010 ................................................ 36,000 36,000
--------
TOTAL TIME DEPOSITS....................................................................... 72,000
--------
SHARES
-----------
SHORT-TERM INVESTMENTS - 6.45%
AIM Short-Term Investment Company Liquid Asset Fund....................................... 26,685,528 26,686
DWS Money Market Series 23................................................................ 1,091,499 1,091
RBC Prime Money Market Fund............................................................... 18,691,630 18,692
--------
TOTAL SHORT-TERM INVESTMENTS.............................................................. 46,469
--------
PAR AMOUNT
-----------
REPURCHASE AGREEMENTS - 34.85%
Barclays Capital, Inc., 0.463%, Due 1/4/2010 (Held at Bank of New York Mellon,
Collateralized by Corporate Obligations valued at $39,600, 5.45% - 7.0%, 9/15/2014 -
12/31/2099)............................................................................ $ 36,000 36,000
RBC Capital Markets Corp., 0.263%, Due 1/4/2010 (Held at Bank of New York Mellon,
Collateralized by Equity Securities valued at $37,805)................................. 36,000 36,000
J.P. Morgan Clearing Corp., 0.313%, Due 1/4/2010 (Held at JPMorgan Chase, Collateralized
by Equity Securities valued at $36,750)................................................ 35,000 35,000
BNP Paribas Securities Corp., 0.413%, Due 1/4/2010 (Held at Bank of New York Mellon,
Collateralized by Corporate Obligations valued at $39,600, Zero Coupon - 11.625%,
1/15/2010 - 2/15/2035)................................................................. 36,000 36,000
Morgan Stanley & Co., Inc., 0.313%, Due 1/4/2010 (Held at JPMorgan Chase, Collateralized
by Equity Securities valued at $37,800)................................................ 36,000 36,000
Wells Fargo Securities LLC, 0.363%, Due 1/4/2010 (Held at Bank of New York Mellon,
Collateralized by Corporate Obligations valued at $37,800, Zero Coupon - 17.0%,
2/25/2010 - 11/15/2056)................................................................ 36,000 36,000
Merrill Lynch, Pierce, Fenner & Smith, Inc., 0.263%, Due 1/4/2010 (Held at Bank of New
York Mellon, Collateralized by Equity Securities valued at $39,600).................... 36,000 36,000
--------
TOTAL REPURCHASE AGREEMENTS............................................................... 251,000
--------
TOTAL INVESTMENTS - 100.01% (COST $720,399).................................................. $720,399
LIABILITIES, NET OF OTHER ASSETS - (0.01%)................................................... (106)
TOTAL NET ASSETS - 100.00%................................................................... $720,293
========
Percentages are stated as a percent of net assets.
# Security exempt from registration under the Securities Act of 1933. These
securities may be resold to qualified institutional buyers pursuant to Rule
144A. At the period end, the value of these securities amounted to $174,962
or 24.29% of net assets. The Fund has no right to demand registration of
these securities.
21
AMERICAN BEACON MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2009 (IN THOUSANDS)
ASSETS:
Investment in securities at value (cost - $469,399) .......... $469,399
Repurchase agreement (cost - $251,000) ....................... 251,000
Dividends and interest receivable ............................ 31
Prepaid expenses ............................................. 11
--------
TOTAL ASSETS .............................................. 720,441
--------
LIABILITIES:
Management and investment advisory fees payable (Note 2) ..... 59
Professional fees payable .................................... 41
Trustee fees payable ......................................... 17
Other liabilities ............................................ 31
--------
TOTAL LIABILITIES ......................................... 148
--------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ........ $720,293
========
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2009 (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income ............................................ $ 385
Interest income ............................................ 4,231
------
TOTAL INVESTMENT INCOME ................................. 4,616
------
EXPENSES:
Management and investment advisory fees (Note 2) ........... 834
Custodian fees ............................................. 68
Professional fees .......................................... 47
Insurance fees ............................................. 174
Trustee expenses ........................................... 62
------
TOTAL EXPENSES .......................................... 1,185
------
NET INVESTMENT INCOME ......................................... 3,431
------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................. 85
------
NET GAIN ON INVESTMENTS .................................... 85
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... $3,516
======
22
AMERICAN BEACON MONEY MARKET PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2009 (IN THOUSANDS)
Year Ended December 31,
---------------------------
2009 2008
----------- -------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ........................................ $ 3,431 $ 330,834
Net realized gain on investments ............................. 85 197
----------- -------------
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... 3,516 331,031
----------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions ................................................ 877,408 125,022,264
Withdrawals .................................................. (1,122,919) (137,575,006)
----------- -------------
NET DECREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS .............................................. (245,511) (12,552,742)
----------- -------------
NET DECREASE IN NET ASSETS ................................ (241,995) (12,221,711)
----------- -------------
NET ASSETS:
Beginning of period .......................................... 962,288 13,183,999
----------- -------------
END OF PERIOD ................................................ $ 720,293 $ 962,288
=========== =============
FINANCIAL HIGHLIGHTS
Money Market
Year Ended December 31,
-------------------------------------
2009 2008 2007 2006 2005
----- ----- ----- ----- -----
Total return .................................. 0.42% 2.75% 5.33% 5.09% 3.25%
Ratios to average net assets (annualized):
Expenses ................................... 0.14% 0.11% 0.11% 0.11% 0.11%
Net investment income ...................... 0.41% 2.94% 5.19% 5.03% 3.20%
23
AMERICAN BEACON MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Money Market Portfolio (the "Portfolio") is a series of the
American Beacon Master Trust (the "Trust"), which 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. The objective of the Portfolio is current income, liquidity
and the maintenance of a stable price of $1.00 per share.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of Lighthouse Holdings, Inc. and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolio.
Affiliated Ownership
At December 31, 2009, 100% of the Portfolio was held by affiliated funds.
Security Valuation
Securities of the Portfolio are valued at amortized cost, which
approximates fair value. In the event that a deviation of 1/2 of 1% or more
exists between the $1.00 per share price of the Portfolio, calculated at
amortized cost, and the price per share calculated by reference to market
quotations, or if there is any other deviation that the Trust's Board of
Trustees (the "Board") believes would result in a material dilution to
shareholders or purchasers, the Board will promptly consider the appropriate
action that should be initiated.
Valuation Inputs
Various inputs may be used to determine the fair value of the Portfolio's
investments. These inputs are summarized in three broad levels for financial
statement purposes. The inputs or methodologies used to value the 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 typically reflected as Level 2.
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.
The Portfolio's investments are summarized by level based on the inputs
used to determine their values and at December 31, 2009, were classified as
follows: (in thousands)
Asset Description: Level 1 Level 2 Level 3 Total
- ------------------ ------- -------- ------- --------
Commercial Paper ....................... $ -- $350,930 $-- $350,930
Time Deposits .......................... -- 72,000 -- 72,000
Short-Term Investments ................. 46,469 -- -- 46,469
Repurchase Agreements .................. -- 251,000 -- 251,000
------- -------- --- --------
Total Investments in Securities ..... $46,469 $673,930 $-- $720,399
24
AMERICAN BEACON MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums or
accretion of discounts on investment grade short-term securities and zero coupon
instruments. For financial and tax reporting purposes, realized gains and losses
are determined on the basis of specific lot identification.
Federal Income Taxes
The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor in the Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code.
The Portfolio does not have any unrecognized tax benefits in the
accompanying financial statements. Each of the tax years in the four year period
ended December 31, 2009 remains subject to examination by the Internal Revenue
Service. If applicable the Portfolio recognizes interest accrued related to
unrecognized tax benefits in interest expense and penalties in "Other expense"
on the Statement of Operations.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by the
Portfolio from a securities dealer or a bank that are subject to resale at a
later date. Repurchase agreements are fully collateralized by 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.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory and portfolio management services. The Manager serves as the sole
investment advisor to the Portfolio. As compensation for performing the duties
required under the Management Agreement, the Manager receives from the Portfolio
0.09% of the average daily net assets of the Portfolio.
25
AMERICAN BEACON MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Administrative Services Agreement
The Trust and the Manager entered into an Administrative Services Agreement
that obligates the Manager to provide or oversee administrative services to the
Portfolio. As compensation for performing the duties required under the
Administrative Services Agreement, the Manager receives an annualized fee of
0.01% of the average daily net assets of the Portfolio.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission,
the Portfolio, along with other registered investment companies having
management contracts with the Manager, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the
Portfolio to lend money to other participating series managed by the Manager.
For the year ended December 31, 2009 the Portfolio earned $916 under the credit
facility. This amount is included in interest income on the Statement of
Operations.
3. SUBSEQUENT EVENTS
Management has evaluated the possibility of subsequent events existing in
the Portfolio's financial statements through February 26, 2010. Management has
determined that there are no material events that would require disclosure in
the Portfolio's financial statements through this date.
26
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,
2009 include short-term capital gains of $63,124 and $55,143 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, 2009. 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, 2009, 2.56% were derived from
U.S. Treasury Obligations.
27
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 nineteen 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** (73) 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 Mileage
Funds (1996-Present); Trustee, American Beacon Funds
(1996-Present)
NON-INTERESTED TRUSTEES Term
W. Humphrey Bogart (65) 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)
Brenda A. Cline (49) 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)
Eugene J. Duffy (55) 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 Mileage
Funds (2008-Present); Trustee, American Beacon Funds
(2008-Present)
28
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 (67) 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); Board Member, Baylor Health Care System
Foundation (2007-Present); Vice Chair, State Fair of
Texas; Board Member, Southwestern Medical Foundation
(1994-Present); Board Member, John Tower Center for
Political Studies/SMU (2008-Present); Board Member,
University of Texas Development Board (2008-Present);
Trustee, American Beacon Mileage Funds (2008-Present);
Trustee, American Beacon Funds (2008-Present)
Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present),
Chairman since 2008 Senior Vice President and General Counsel (1994-2009),
Hunt Consolidated, Inc. (holding company engaged in oil
and gas exploration and production, refining, real
estate, farming, ranching and venture capital
activities); Chairman (2007-Present) and Director
(2005-Present), The Dallas Opera Foundation; Chairman
(2006-2009) and Director (2005-Present), Temple Emanu-El
Foundation; Trustee, Presbyterian Healthcare Foundation
(2006-Present); Trustee, American Beacon Mileage Funds
(2004- Present); Trustee, American Beacon Funds
(2004-Present)
R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney
Southern Methodist Univ. Company, Inc. (1996-Present); Director, California
Dallas, Texas 75275 Federal Preferred Capital Corp. (2001-2003); Director,
Kronus Worldwide Inc. (chemical manufacturing)
(2003-Present); Director, First Broadcasting Investment
Partners, LLC (2003-2007); Member, Salvation Army of
Dallas Board of Directors; Member, Methodist Hospital
Advisory Board; Co-Chair, Knight Commission on
Intercollegiate Athletics; Trustee, American Beacon
Mileage Funds (2001-Present); Trustee, American Beacon
Funds (2001-Present)
Paul J. Zucconi, CPA (68) 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
Mileage Funds (2008-Present); Trustee, American Beacon
Funds (2008-Present)
OFFICERS Term
One Year
William F. Quinn (61) Executive Vice Executive Chairman (2009-Present), Chairman (2006-2009)
President from and CEO (2006-2007), President (1986-2006) and Director
2007 to 2008 and (2003-Present), American Beacon Advisors, Inc.; Chairman
2009 to Present (1989-2003) and Director (1979-1989, 2003-Present),
President from American Airlines Federal Credit Union; Director Hicks
1999 to 2007 Acquisition I, Inc. (2007-2009); Director, Crescent Real
Trustee from Estate Equities, Inc.(1994-2007); Director, Pritchard,
1999 to 2008 Hubble & Herr, LLC (investment advisor) (2001-2006);
Director of Investment Committee, Southern Methodist
University Endowment Fund (1996-Present); Member,
Southern Methodist University Cox School of Business
Advisory Board (1999-2002); Member, New York Stock
Exchange Pension Manager Committee (1997-1998, 2000-2002,
2006-Present); Vice Chairman (2004-2007) and Chairman
(2007-Present), Committee for the Investment of Employee
Benefits; Director, United Way of Metropolitan Tarrant
County (1988-2000, 2004-Present); Trustee, American
Beacon Mileage Funds (1995-2008); Trustee, American
Beacon Funds (1987-2008); Director, American Beacon
Global Funds SPC (2002-Present); Director, American
Beacon Global Funds plc (2007-2009)
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
--------------------- ----------------- -------------------------------------------
Gene L. Needles, Jr. (55) President since 2009 President, CEO and Director (2009-Present), American
Executive Vice Beacon Advisors, Inc.; President (2008-2009), Touchstone
President 2009 Investments; President (2003-2007), CEO (2004-2007),
Managing Director of Sales (2002-2003), National Sales
Manager (1999-2002), and Regional Sales Manager
(1993-1999), AIM Distributors.
Rosemary K. Behan (51) 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); Attorney, Enforcement Division, Securities
and Exchange Commission (1995-2004)
Brian E. Brett (49) 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 L. Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon
Advisors, Inc. (2007- Present); Managing Director of
Corporate Accounting (2004-2007), Director of IT Strategy
and Finance (2001-2004), American Airlines, Inc.
Michael W. Fields (56) 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 (2007-2009)
Melinda G. Heika (48) Treasurer since Vice President, Finance and Accounting, (2010-Present),
2010 Controller (2005-2009), Assistant Controller (1998-2004),
American Beacon Advisors, Inc.
Terri L. McKinney (46) VP since 2010 Vice President Enterprise Services (2009-Present),
Managing Director (2003-2009), Director of Marketing and
Retail Sales (1996-2003), American Beacon Advisors, Inc.;
Vice President, Board of Trustees (2008-Present), Trustee
(2006-2008), Down Syndrome Guild of Dallas
Jeffrey K. Ringdahl (34) VP since 2010 Chief Operating Officer, American Beacon Advisors, Inc.
(2010-Present); Vice President, Product Management,
Touchstone Advisors, Inc. (2007-2010); Senior Director,
Business Integration, Fidelity Investments (2005-2007)
Christina E. Sears (38) Chief Compliance Chief Compliance Officer, (2004-Present); Senior
Officer since 2004 Compliance Analyst (1998-2004), American Beacon Advisors,
and Asst. Inc.
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.
30
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33
(AMERICAN BEACON(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:
(E-MAIL GRAPHIC)
BY E-MAIL:
american_beacon.funds@ambeacon.com
(INTERNET GRAPHIC)
ON THE INTERNET:
Visit our website at www.americanbeaconfunds.com
(TELEPHONE GRAPHIC)
BY TELEPHONE:
Call (800) 658-5811
(MAIL GRAPHIC)
BY MAIL:
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 TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES,
TRUST SERVICES FIRM LLC
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 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 12/09
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
- ---------- -----------------
$21,525 12/31/2008
$38,617 12/31/2009
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$0 12/31/2008
$0 12/31/2009
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$2,032 12/31/2008
$0 12/31/2009
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 12/31/2008
$0 12/31/2009
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee
shall have the following duties and powers pertaining to pre-approval
of audit and non-audit services provided by the Trust's principal
accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trusts' financial
statements, and, in connection therewith, reviewing and evaluating
matters potentially affecting the independence and capabilities of
the auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trusts, an investment adviser to
any series of the Trusts or any entity controlling, controlled by,
or under common control with an investment adviser ("adviser
affiliate") that provides ongoing services to the Trusts, if the
engagement relates directly to the operations and financial
reporting of the Trusts;
- to consider whether the non-audit services provided by a Trust's
auditor to an investment adviser or any adviser affiliate that
provides ongoing services to a series of the Trusts, which services
were not pre-approved by the Committee, are compatible with
maintaining the auditor's independence;
- to review the arrangements for and scope of the annual audit and
any special audits; and
- to review and approving the fees proposed to be charged to the
Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority,
including the authority to grant pre-approvals of audit and permitted
non-audit services, to a subcommittee of one or more members. Any decisions
of the subcommittee to grant pre-approvals shall be presented to the full
committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$2,032 $0 N/A 12/31/2008
$0 $0 N/A 12/31/2009
(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/ Gene L. Needles, Jr.
--------------------
Gene L. Needles, Jr.
President
Date: March 5, 2010
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/ Gene L. Needles, Jr.
--------------------
Gene L. Needles, Jr.
President
Date: March 5, 2010
By /s/ Melinda G. Heika
---------------------
Melinda G. Heika
Treasurer
Date: March 5, 2010