CONSECO FUND GROUP
TABLE OF CONTENTS
CONSECO FUND GROUP PAGE
Report to Shareholders .................................... 2
Statement of Assets and Liabilities as of
April 30, 1998 ........................................... 3
Statement of Operations for the period from inception
(January 2, 1998) through April 30, 1998 ................ 4
Statement of Changes in Net Assets for the period of
inception (January 2, 1998) through April 30, 1998 ...... 5
Notes to Financial Statements as of April 30, 1998 ........ 6-11
AMR INVESTMENT SERVICES
Schedule of Investments as of April 30, 1998 .............. 12-22
Industry Diversification .................................. 23
Statement of Assets and Liabilities as of April 30, 1998 .. 24
Statement of Operations - Six months ended April 30, 1998 . 25
Statement of Changes in Net Assets ........................ 26
Notes to Financial Statements as of April 30, 1998 ........ 27-30
1
<PAGE>
CONSECO FUND GROUP
REPORT TO SHAREHOLDERS
Dear Shareholder,
We are pleased to present the performance of the Conseco International Fund for
the period from inception (January 2, 1998) through April 30, 1998. The Fund is
managed by AMR Investments, Inc. and invests in the International Equity
Portfolio of AMR Investments Services Trust, which, in turn, invests primarily
in equity securities of issuers based outside the United States.
The following market recap comes directly from William Quinn, President of AMR
Investments, Inc.
DESPITE THE STRONG FOREIGN MARKET RETURNS OVER THE PAST SIX MONTHS,
THERE WAS A MARKED DISPARITY AMONG DIFFERENT COUNTRIES AND REGIONS.
EUROPEAN MARKETS WERE SWEPT UP IN THE EUPHORIA OF EUROPEAN MONETARY
UNION (EMU) AND LOWER INTEREST RATES WHICH HAVE DRIVEN INVESTORS INTO
THE EQUITY MARKETS. HOWEVER THE JAPANESE MARKET, DESPITE STRENGTH EARLY
IN 1998, REMAINED DISAPPOINTING AS THE CONTENT OF THE LATEST STIMULUS
PACKAGE, COMBINED WITH SLUMPING ECONOMIC GROWTH AND AN UNCERTAIN
OUTCOME TO THE REGION'S CRISIS, NEGATIVELY IMPACTED INVESTOR SENTIMENT.
WITH THE EXCEPTION OF NORWAY, EACH EUROPEAN MARKET GENERATED POSITIVE
RETURNS. THE DRIVE TOWARD EMU BOOSTED INVESTOR CONFIDENCE DURING THE
QUARTER AS INTEREST RATES FELL AND INFLATION REMAINED SUBDUED. MANY
HURDLES HAVE BEEN CROSSED AS ELEVEN COUNTRIES (AUSTRIA, BELGIUM,
FINLAND, FRANCE, GERMANY, IRELAND, ITALY, LUXEMBOURG, NETHERLANDS,
PORTUGAL AND SPAIN) HAVE EMERGED AS ENTRANTS INTO EMU IN 1999.
DESPITE THE NEAR-PERFECT CONDITIONS (LOW INFLATION, MODERATE ECONOMIC
GROWTH AND STRONG INVESTOR CASH FLOWS) EUROPEAN EQUITY VALUATIONS
REMAIN HIGH VERSUS HISTORICAL LEVELS. INVESTORS WILL NEED TO FOCUS ONE
EYE ON SEARCHING FOR HIDDEN VALUE (FOR EXAMPLE, COMPANIES SOLD DOWN ON
ONE-TIME EARNINGS DISAPPOINTMENTS) WHILE THE OTHER EYE SEARCHES FOR THE
FIRST HINT OF TROUBLE (AN UPTICK IN INFLATION OR THE UNCERTAINTY THAT
THE EMU BRINGS).
JAPAN'S RETURN OF APPROXIMATELY NEGATIVE 10% FOR THE SIX MONTHS ENDED
APRIL 30, RANKED IT SECOND TO LAST, JUST AHEAD OF MALAYSIA, AMONG THE
21 MARKETS THAT COMPRISE THE EAFE INDEX (THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALIA AND FAR EAST INDEX). EACH ASIAN MARKET,
WITH THE EXCEPTION OF THE PERIPHERAL MARKET OF AUSTRALIA, GENERATED A
NEGATIVE RETURN FOR THE SIX MONTH PERIOD, AS JUST PRIOR TO THE FUND'S
FISCAL YEAR-END THE CRISIS IN ASIA REACHED ITS PEAK AND THE CURRENCY
CONTAGION BECAME MORE WIDESPREAD. AS INVESTOR SENTIMENT IN THE REGION
REACHED ALL-TIME LOWS, A DISAPPOINTING GOVERNMENT STIMULUS PACKAGE IN
JAPAN (LOWER INCOME TAXES AND THE PLEDGE OF PUBLIC FUNDS TO SUPPORT THE
BANKING SYSTEM) WAS VIEWED AS TOO LITTLE AND TOO LATE BY INVESTORS AS
ECONOMIC INDICATORS DEPICTED AN ECONOMY GOING NOWHERE.
IN JAPAN, THE FOCUS WILL CONTINUE TO BE ON THE JAPANESE GOVERNMENT AND
ITS ATTEMPTS TO MOVE THE ECONOMY BACK ONTO A GROWTH PATH. PRIOR
STIMULUS PACKAGES HAVE BEEN DISAPPOINTING AS THEY HAVE BEEN TEMPORARY
IN NATURE AND HAVE NOT FOCUSED ON FUNDAMENTAL CHANGES. HOWEVER, DESPITE
THE EIGHT YEAR BEAR MARKET AND FIVE FAILED STIMULUS PACKAGES, THE
LIKELIHOOD OF FUNDAMENTAL CHANGE IS NOT HIGH.
ALTHOUGH INDIVIDUAL STOCK BARGAINS MAY APPEAR, THE OUTLOOK FOR THE REST
OF ASIA REMAINS POOR. DESPITE THE PRESENCE OF THE IMF (INTERNATIONAL
MONETARY FUND), INVESTOR SENTIMENT IS SHAKEN IN THE REGION AS ADHERING
TO THE IMF GUIDELINES HAS COME INTO QUESTION WHILE THE EXTENT OF THE
SLOWDOWN IS JUST BEGINNING TO TAKE SHAPE. NEAR TERM, THE OUTLOOK IS FOR
LOW GROWTH, HIGH INFLATION, PROFIT DECLINES AND BALANCE SHEET
REFINANCINGS. UNLIKE THE 1994-95 MEXICAN PESO CRISIS, WHICH HAD THE US
ECONOMIC ENGINE TO SPUR ECONOMIC ACTIVITY, JAPAN HAS NOT BEEN ABLE TO
PROVIDE THAT STIMULUS TO THE REST OF ASIA.
- WILLIAM F. QUINN
PRESIDENT, AMR INVESTMENTS, INC.
Conseco Fund Group is committed to providing you with a wide range of investment
products designed to help you take the next step toward your financial goals. We
appreciate your support, and look forward to serving you in the future.
Sincerely,
Maxwell E. Bublitz, CFA
President & CEO
Conseco Capital Management, Inc.
2
<PAGE>
CONSECO FUND GROUP
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Conseco
International
Fund
----
<S> <C>
Assets:
Investments in Portfolio at value (cost: $10,257,958) ....................... $11,592,688
Receivable for Fund shares sold ............................................. 13,249
Organizational costs ........................................................ 109,861
-----------
Total assets ........................................................ $11,715,798
-----------
Liabilities and net assets:
Payable to Conseco, Inc. and subsidiaries ................................... 121,753
Accrued expenses ............................................................ 35,069
-----------
Total liabilities ................................................... 156,822
-----------
Net assets .......................................................... $11,558,976
===========
Net assets consist of:
Paid in capital ............................................................. 10,006,078
Accumulated undistributed net investment income ............................. 19,967
Accumulated undistributed net realized gains on investments and foreign
currency transactions ..................................................... 198,201
Net change in unrealized appreciation on investments and foreign currency
translations .............................................................. 1,334,730
-----------
Net assets .......................................................... $11,558,976
===========
Net asset value, redemption price and offering price per share:
Class A Shares:
Shares outstanding .......................................................... 1,000,460
Net assets .................................................................. $11,556,968
Net asset value and redemption price per share .............................. $ 11.55
Maximum sales charge per share (5 3/4 percent of offering price) ............ .70
Maximum offering price per share ............................................ $ 12.25
Class C Shares:
Shares outstanding .......................................................... 174
Net assets .................................................................. $ 2,008
Net asset value per share ................................................... $ 11.54
Redemption proceeds per share (contingent deferred sales charge per share,
1 percent of net asset value at time of purchase or net asset value at time
of redemption, whichever is less) ......................................... $ 11.42
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CONSECO FUND GROUP
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JANUARY 2, 1998) THROUGH APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Conseco
International
Fund
----
<S> <C>
Investment income allocated from Portfolio:
Interest income ..................................................... $ 12,881
Dividends (net of foreign taxes of ($10,124) in the Portfolio) ...... 84,434
Income derived from securities lending, net ......................... 752
Portfolio expenses .................................................. (18,058)
-----------
Total investment income allocated from Portfolio ............ 80,009
-----------
Expenses:
Administrative fee (Note 3) ......................................... 26,034
Transfer agent fee .................................................. 7,627
Reports - printing .................................................. 3,814
Insurance ........................................................... 3,134
Audit fees .......................................................... 3,178
Director fees and expenses .......................................... 2,262
Legal fees .......................................................... 3,178
Amortization of organizational costs ................................ 7,456
Custody fees ........................................................ 3,814
Distribution and service fees (Note 3) .............................. 17,357
Other ............................................................... 3,786
-----------
Total expenses .............................................. 81,640
-----------
Fees waived and/or charged to subsidiaries of Conseco, Inc. (Note 3) (21,598)
-----------
Net expenses ................................................ 60,042
-----------
Net investment income ....................................... 19,967
-----------
Net realized gains on investments and foreign currency transactions ..... 198,201
Net change in unrealized appreciation of investments and foreign currency
translations ........................................................ 1,334,730
-----------
Net increase in net assets from operations .................. $ 1,552,898
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CONSECO FUND GROUP
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM INCEPTION (JANUARY 2, 1998) THROUGH APRIL 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Conseco
International
Fund
----
<S> <C>
Changes from operations:
Net investment income ............................................ $ 19,967
Net realized gains on investments and foreign currency
transactions ................................................. 198,201
Net change in unrealized appreciation of investments and foreign
currency translations ........................................ 1,334,730
-----------
Net increase in net assets from operations ............... 1,552,898
-----------
Capital share transactions:
Net proceeds from sales of shares ................................ 10,006,078
Cost of shares redeemed .......................................... --
-----------
Net increase in net assets from capital share transactions 10,006,078
-----------
Total net increase in net assets ......................... 11,558,976
-----------
Net assets, beginning of period ...................................... --
Net assets, end of period ............................................ $11,558,976
===========
Share data:
Class A Shares:
Sold ............................................................. 1,000,460
Class C Shares:
Sold ............................................................. 174
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CONSECO FUND GROUP
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
(unaudited)
1. ORGANIZATION
Conseco Fund Group (the "Trust") is an open-end diversified management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act"). The Trust was organized as
a Massachusetts business trust on September 24, 1996. The Trust is a "series"
type of mutual fund which issues separate series of shares of beneficial
interest, each of which represents a separate diversified portfolio of
investments. The Trust consists of six series as follows: Conseco Fixed Income
Fund, Conseco High Yield Fund, Conseco Asset Allocation Fund, Conseco Equity
Fund, Conseco International Fund and Conseco 20 Fund. Each has its own
investment objective and investment policies. The Trust offers four classes of
shares: Class A, Class B, Class C and Class Y. Sales of Class A shares may be
subject to a front-end sales charge. Sales of Class B and Class C shares are
subject to a contingent deferred sales charge (as a percentage of net asset
value at time of purchase or net asset value at the time of redemption,
whichever is less). Class Y shares are available with no sales charge to certain
institutional investors and qualifying individual investors. The Trust is
authorized to issue an unlimited number of shares.
The Conseco International Fund (the "Fund") seeks long-term capital
appreciation. The Fund seeks to achieve its objective by investing all of its
investable assets in the International Equity Portfolio (the "Portfolio") of the
AMR Investment Services Trust (the "AMR Trust"), which invests primarily in
equity securities of issuers outside the United States. The Portfolio invests in
securities in accordance with an investment objective, policies and limitations
substantially similar to those of the Fund. The investment experience of the
Fund will correspond directly with the investment experience of the Portfolio.
The Fund became operational and available for sale on January 2, 1998. There
were no Class B or Class Y share sales for the period from inception (January 2,
1998) through April 30, 1998.
The value of the Fund's investment reflects a proportionate interest in the
net assets of the Portfolio. The financial statements of the Portfolio are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
The Portfolio is a separate investment company managed by AMR Investment
Services, Inc. ("AMR"). AMR is a wholly owned subsidiary of AMR Corporation, the
parent company of American Airlines, Inc., and was organized in 1986 to provide
business management, advisory, administrative and asset management consulting
services.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION, TRANSACTIONS, AND RELATED INVESTMENT INCOME
Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements, which are included elsewhere in this
report.
The price per share is calculated separately for the Fund on each day on
which shares are offered for sale and orders accepted or upon receipt of a
redemption request. Net asset value per share is computed by dividing the value
of the Fund's total assets (which includes the value of the Fund's investment in
the Portfolio), less liabilities, by the number of Fund shares outstanding.
The Fund records its share of net investment income and realized and
unrealized gain (loss) in the Portfolio each day. All net investment income and
realized and unrealized gain (loss) of the Portfolio are allocated pro rata to
the Fund and other investors in the Portfolio at the time of such determination.
6
<PAGE>
CONSECO FUND GROUP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
APRIL 30, 1998
(unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income will be declared and distributed
annually. However, the Trustees may decide to declare dividends at other
intervals.
Dividends to shareholders from net investment income are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Permanent book and tax differences relating to dividends
to shareholders may result in reclassifications to paid in capital and may
affect the per-share allocation between net investment income and realized and
unrealized gain (loss). Any taxable income or gain of the Trust remaining at
fiscal year end will be declared and distributed in the following year to the
shareholders of the Fund to which such gains are attributable.
ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with their organization and public
offering of shares totaling $117,317 have been deferred and will be amortized
over a period of approximately 5 years beginning with the initial date of sale
of shares to the public. The costs were advanced by Conseco, Inc. ("Conseco"), a
publicly owned financial services company, and will be reimbursed by the Fund
over a period of approximately 5 years. The proceeds of any redemption of the
initial shares by any holder thereof will be reduced by any unamortized
organizational costs in the same proportion as the number of initial shares
being redeemed to the number of initial shares outstanding at the time of such
redemption.
FEDERAL INCOME TAXES
For federal income tax purposes, the Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code by
distributing substantially all of its taxable income and net capital gain to its
shareholders annually or otherwise complying with the requirements for regulated
investment companies. Therefore, no provision has been made for federal income
taxes.
EXPENSES
Expenses directly attributable to a Fund are charged to operations.
Expenses directly attributable to a Class of shares are charged to that Class.
The Fund pays expenses of Trustees who are not affiliated persons of the Adviser
or the Trust.
3. AGREEMENTS
INVESTMENT ADVISORY AGREEMENT
Conseco Capital Management, Inc. (the "Adviser"), a wholly owned subsidiary
of Conseco, serves as the Trust's investment adviser to the Fund pursuant an
investment advisory agreement. The Adviser supervises the Trust's management and
investment program, performs a variety of administrative services and pays all
compensation of officers and Trustees of the Trust, who are affiliated persons
of the Adviser or Trust. The Adviser is responsible for selecting the investment
company in which the Fund invests. If the Adviser is not satisfied with the
performance
7
<PAGE>
CONSECO FUND GROUP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
APRIL 30, 1998
(unaudited)
INVESTMENT ADVISORY AGREEMENT, CONTINUED
of that investment company, the Adviser will recommend to the Board of Trustees
of the Trust other investment companies in which the Fund may invest, or
recommend that the Adviser manage the Fund itself.
Under the terms of the Investment Advisory Agreement, the Adviser has
contracted to receive an investment advisory fee equal to an annual rate of
1.00% of the average daily net assets of the Fund. The Adviser has voluntarily
agreed to waive all of its fees under the agreement so long as the Fund invests
all of its investable assets in the Portfolio or another investment company with
substantially the same investment objective and policies. If the aforementioned
agreement had not been in effect during the period, the advisory fees for Class
A and Class C shares would have been $34,712.
MANAGEMENT AGREEMENT
AMR has entered into a Management Agreement with AMR Trust that obligates
AMR to provide or oversee all administrative, investment advisory and portfolio
management services for the AMR Trust, including the International Portfolio.
AMR bears the expense of providing the above services and pays the fees of the
investment advisers of the Portfolio. As compensation, for performing the duties
required under the Management Agreement, AMR receives an annualized advisory fee
of .10% that is calculated and accrued daily on the average daily net assets for
the Portfolio. Additionally, the International Fund is responsible for its pro
rata portion of the Portfolio's expenses. The total fees incurred for such
services for the period from inception (January 2, 1998) through April 30, 1998
with respect to Class A and Class C shares were $18,058.
ADMINISTRATIVE AGREEMENT
Conseco Services, LLC (the "Administrator"), a wholly owned subsidiary of
Conseco, supervises the preparation and filing of all documents required for
compliance by the Fund with applicable laws and regulations, supervises the
maintenance of books and records of the Fund and provides other general and
administrative services. For providing these services, the Administrator
receives compensation at the annual rate of .75% of the average daily net assets
of the Fund. The Administrator has voluntarily agreed to waive its fees and/or
reimburse the Fund to the extent that the ratio of expenses to net assets on an
annual basis exceeds 2.25% for Class A shares and 2.75% for Class C shares. The
total fees incurred for such services for the period from inception (January 2,
1998) through April 30, 1998 with respect to Class A and Class C shares were
$26,034.
DISTRIBUTION ARRANGEMENTS
Conseco Equity Sales, Inc. (the "Distributor"), a wholly owned subsidiary
of Conseco, serves as the principal underwriter for the Fund pursuant to an
Underwriting Agreement, initially approved by the Board of Trustees. The
Distributor is a registered broker-dealer and member of the National Association
of Securities Dealers, Inc. ("NASD"). Shares of the Fund will be continuously
offered and are sold by brokers, dealers and other financial intermediaries who
have executed selling agreements with the Distributor. The Distributor bears all
the expenses of providing services pursuant to the Underwriting Agreement
including the payment of the expenses relating to the distribution of
Prospectuses for sales purposes as well as any advertising or sales literature.
The Trust has adopted distribution and service plans (the "Plans"), dated
December 31, 1997, for Class A and Class C shares of the Fund, in accordance
with the requirements of Rule 12b-1 under the 1940 Act, and the requirements of
the applicable rules for the NASD regarding asset based sales charges.
8
<PAGE>
CONSECO FUND GROUP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
APRIL 30, 1998
(unaudited)
DISTRIBUTION ARRANGEMENTS, CONTINUED
Pursuant to the Plans, the Fund may compensate the Distributor for its
expenditures in financing any activity primarily intended to result in the sale
of Class A and Class C shares of the Fund and for maintenance and personal
service provided to existing Class A and Class C shareholders, respectively. The
Fund's Plan authorizes payments to the Distributor up to .50% for Class A shares
and 1.00% for Class C shares annually of the Fund's average daily net assets
attributable to Class A shares and Class C shares, respectively. The Plans
provide for periodic payments by the distributor to brokers, dealers and
financial intermediaries for providing shareholder services to accounts that
hold Class A and Class C shares and for promotional and other sales related
costs. The Distributor has voluntarily agreed to waive its fees and/or reimburse
the Fund to the extent that the ratio of expenses to net assets on an annual
basis exceeds 2.25% for Class A shares and 2.75% for Class C shares. The total
fees incurred under the Plans for such services for Class A shares for the
period from inception (January 2, 1998) through April 30, 1998, were $17,356.
Due to the fact the date of the initial investment in Class C shares was not
until April 8, 1998, the distribution fees incurred under the Plans for such
services were minimal for the period.
9
<PAGE>
CONSECO FUND GROUP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
APRIL 30, 1998
(unaudited)
4. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the period from inception
(January 2, 1998) through
April 30, 1998
--------------
Conseco
International
Fund
----
<S> <C>
Class A Shares
Net asset value per share, beginning of period .......................... $10.00
Income from investment operations (a):
Net investment income ............................................... .02
Net realized gains and change in unrealized appreciation
on investments .................................................. 1.53
-----------
Net asset value per share, end of period .................... $11.55
===========
Total return (not annualized) (b) (c) ................................... 15.50%
Ratios/supplemental data (c):
Net assets, end of period ........................................... $11,556,968
Ratio of expenses to average net assets (annualized) (b) ............ 2.25%
Ratio of net investment income to average net assets (annualized) (b) .59%
</TABLE>
- ---------------------------
(a) Per share amounts presented are based on daily shares outstanding during
the period from inception (January 2, 1998) through April 30, 1998.
(b) The Adviser, Administrator and Distributor have voluntarily agreed to
waive their fees and/or reimburse Fund expense to the extent that the
ratio of expenses to average net assets would exceed on an annual basis
2.25 percent for Class A. These voluntary limits may be discontinued by
the Adviser, Administrator and Distributor at any time after April 30,
1999. If the aforementioned agreements had not been in effect during the
period, the annualized ratio of expenses to average net assets would have
been 2.94 percent.
(c) Total return figures do not include sales loads; results would be lower
if sales charges were included.
10
<PAGE>
CONSECO FUND GROUP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
APRIL 30, 1998
(unaudited)
4. FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
For the period from inception
(January 2, 1998) through
April 30, 1998
Conseco
International
Fund
----
<S> <C>
Class C Shares
Net asset value per share, beginning of period............................... $11.50
Income from investment operations (a):
Net investment income.................................................... -
Net realized gains and change in unrealized appreciation
on investments....................................................... .04
------------
Net asset value per share, end of period......................... $11.54
============
Total return (not annualized) (b) (c)........................................ .35%
Ratios/supplemental data (c):
Net assets, end of period................................................ $2,008
Ratio of expenses to average net assets (annualized) (b)................. 2.75%
Ratio of net investment income to average net assets (annualized) (b).... .14%
</TABLE>
- --------------------------
(a) Per share amounts presented are based on daily shares outstanding from the
date of initial investment (April 8, 1998) through April 30, 1998.
(b) The Adviser, Administrator and Distributor have voluntarily agreed to waive
their fees and/or reimburse Fund expense to the extent that the ratio of
expenses to average net assets would exceed on an annual basis 2.75 percent
for Class C. These voluntary limits may be discontinued by the Adviser,
Administrator and Distributor at any time after April 30, 1999. If the
aforementioned agreements had not been in effect during the period, the
annualized ratio of expenses to average net assets would have been 3.48
percent.
(c) Total return figures do not include sales loads; results would be lower if
sales charges were included.
11
<PAGE>
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
--------- -----------
(dollars in thousands)
AUSTRALIA COMMON STOCKS - 4.05%
Australia & New Zealand
Banking Group.............. 1,147,152 $ 8,005
Brambles Industries,
Limited.................... 166,700 3,436
CSR, Limited................. 199,200 636
Foster's Brewing Group,
Limited.................... 1,900,300 4,138
GIO Australia Holdings,
Limited.................... 1,191,949 3,419
Goodman Fielder, Limited..... 1,150,000 1,784
Mayne Nickless, Limited...... 625,000 3,375
News Corporation, Limited.... 210,000 1,408
News Corporation Preferred
Rights..................... 345,000 1,943
Pioneer International,
Limited.................... 2,054,675 5,867
QBE Insurance Group, Limited. 1,149,636 5,277
RGC, Limited................. 550,000 753
WMC, Limited................. 785,000 2,794
-----------
TOTAL AUSTRALIA COMMON
STOCKS................. 42,835
-----------
AUSTRIA -- 1.11%
PREFERRED STOCKS -- 0.32%
Bank Austria AG.............. 44,000 3,401
-----------
TOTAL AUSTRIA PREFERRED
STOCKS................. 3,401
-----------
COMMON STOCKS -- 0.79%
Boehler-Uddeholm AG.......... 60,185 4,437
Evn Energie-Versorgung
Niederroesterreich AG...... 7,960 1,176
Mayr-Melnhof Karton AG....... 16,000 1,110
VA Technologie AG............ 11,000 1,581
-----------
TOTAL AUSTRIA COMMON
STOCKS................. 8,304
-----------
TOTAL AUSTRIA............ 11,705
-----------
BELGIUM COMMON STOCKS - 0.53%
Electrabel SA................ 8,800 2,336
GIB Holdings, Limited, NPV... 29,000 1,425
Solvay Et Cie, NPV........... 25,000 1,880
-----------
TOTAL BELGIUM COMMON
STOCKS................. 5,641
-----------
CANADA COMMON STOCKS - 4.11%
Alcan Aluminum, Limited...... 97,000 3,147
Anderson Exploration,
Limited.................... 170,000 2,068
Canadian Imperial Bank of
Commerce................... 157,200 5,588
IMASCO, Limited.............. 119,000 4,480
Methanex Corporation......... 275,000 2,394
Newbridge Network............ 100,000 2,929
Noranda, Incorporated........ 254,875 5,257
Oshawa Group, Limited........ 66,000 1,061
Potash Corporation of
Saskatchewan............... 40,704 3,625
Ranger Oil, Limited.......... 116,200 808
Renaissance Energy........... 334,200 6,437
Telus Corporation............ 210,000 5,660
-----------
TOTAL CANADA COMMON
STOCKS................. 43,454
-----------
DENMARK COMMON STOCKS - 0.69%
BG Bank...................... 20,750 1,213
Den Danske Bank.............. 12,000 1,455
Teledanmark AS, "B".......... 16,700 1,403
Unidanmark AS, "A"........... 38,200 3,210
-----------
TOTAL DENMARK COMMON
STOCKS................. 7,281
-----------
FINLAND COMMON STOCKS - 2.85%
Enso-Gutzeit OY, "R"......... 212,000 2,257
Huhtamaki Group I Free....... 27,500 1,590
Merita Bank, Limited......... 785,000 5,259
Metra OY,"B"................. 194,295 4,886
Metsa-Serla OY, "B".......... 100,000 1,037
Nokia OY, "A"................ 87,000 5,845
Rauma OY..................... 83,277 1,559
UPM-Kymmene OY............... 254,280 7,631
-----------
TOTAL FINLAND COMMON
STOCKS................. 30,064
-----------
FRANCE COMMON STOCKS - 9.56%
Alcatel Alsthom CG........... 47,200 8,745
Axa SA....................... 35,542 4,170
Banque Nationale de Paris.... 45,000 3,791
Bongrain SA.................. 2,274 1,171
Elf Aquitaine SA............. 117,700 15,432
France Telecom SA............ 105,300 5,727
Groupe Danone................ 40,300 9,510
La Farge..................... 5,415 497
La Farge-Coppee SA........... 64,983 6,134
Pechiney SA.................. 51,800 2,316
Pernod-Ricard................ 70,689 4,875
Rhone-Poulenc, "A"........... 126,100 6,163
Sa Des Galeries Lafayette.... 162 142
Saint Gobain................. 21,848 3,638
Schneider SA................. 43,000 3,215
Scor SA...................... 31,500 1,941
Seita........................ 115,202 5,169
Societe Generale............. 37,984 7,903
Total Petroleum Company, "B". 57,100 6,784
Usinor Sacilor............... 248,752 3,720
-----------
TOTAL FRANCE COMMON
STOCKS................. 101,043
-----------
12
<PAGE>
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
--------- -----------
(dollars in thousands)
GERMANY - 4.45%
PREFERRED STOCKS - 0.97%
Dyckerhoff AG................ 14,274 $ 4,916
Herlitz AG................... 23,947 1,455
Volkswagen AG................ 6,570 3,899
-----------
TOTAL GERMANY PREFERRED
STOCKS................. 10,270
-----------
COMMON STOCKS - 3.48%
BASF AG...................... 120,300 5,356
BAYER AG..................... 149,125 6,632
BBS Kraftfahrzeugtechnik..... 1,526 269
Commerzbank AG............... 134,500 5,187
Deutsche Bank AG............. 36,000 2,770
Hoechst AG................... 41,700 1,682
Karstadt AG.................. 4,000 1,806
Muenchener Rueckversicherungs
AG......................... 7,160 2,434
Varta AG
(non-income producing)..... 1,440 286
Veba AG...................... 93,500 6,179
Viag AG...................... 7,340 3,718
Volkswagen AG................ 505 402
-----------
TOTAL GERMANY COMMON
STOCKS................. 36,721
-----------
TOTAL GERMANY............ 46,991
-----------
HONG KONG COMMON STOCKS - 3.57%
Asia Satellite
Telecommunications
Holdings, Limited.......... 275,000 506
Cheung Kong Holdings,
Limited.................... 355,000 2,360
China Light and Power
Company.................... 818,000 3,928
Dickson Concepts
(International), Limited... 643,000 888
Hang Lung Development
Company, Limited........... 3,155,000 4,114
Hong Kong Aircraft
Engineering Company,
Limited.................... 7,200 13
Hong Kong Electric
Holdings................... 793,400 2,438
Hong Kong Telecommunications,
Limited.................... 1,024,400 1,918
HSBC Holdings, Limited....... 114,500 3,267
Hutchinson Whampoa,
Limited.................... 300,000 1,855
Hysan Development............ 496,000 704
Hysan Development Company,
Limited.................... 49,600 1
National Mutual of Asia,
Limited.................... 1,700,000 1,361
New World Development
Company, Limited........... 919,000 2,616
Peregrine Investments
Holdings, Limited.......... 605,000 336
Peregrine Investments
Holdings, Limited
Warrants................... 55,000 1
South China Morning Post..... 7,886,000 4,734
Swire Pacific, Limited,
"A"........................ 632,500 539
Swire Pacific, Limited "B"... 1,234,500 6,168
-----------
TOTAL HONG KONG COMMON
STOCKS................. 37,747
-----------
IRELAND COMMON STOCKS - 0.73%
Jefferson Smurfit............ 2,063,082 7,678
-----------
TOTAL IRELAND COMMON
STOCKS................. 7,678
-----------
ITALY - 3.16%
PREFERRED STOCK - 0.20%
Concessioni E Costruzioni
Autostrade................. 525,000 2,053
-----------
TOTAL ITALY PREFERRED
STOCK.................. 2,053
-----------
COMMON STOCKS - 2.96%
Burgo (Cartiere) SPA......... 225,020 1,803
Danieli Group................ 94,960 25
Danieli Group Risp........... 94,960 504
Eni SPA...................... 941,380 6,319
Fiat SPA..................... 775,000 3,073
Instituto Nazionale Delle
Assicurazioni.............. 1,000,000 2,988
Mediaset..................... 541,100 3,542
STET Risp Non Convertible.... 550,000 4,113
STET Telecom Italia Risp..... 1,696,500 8,942
-----------
TOTAL ITALY COMMON
STOCKS................. 31,309
-----------
TOTAL ITALY.............. 33,362
-----------
JAPAN COMMON STOCKS - 9.87%
Aisin Seiki Company,
Limited.................... 300,000 2,881
Aoyama Trading Company....... 68,100 1,572
Best Denki Company........... 26,000 148
Canon, Incorporated.......... 54,000 1,279
Central Japan Railway........ 500 1,718
Chudenko Corporation......... 33,000 764
Daibiru Corporation.......... 240,000 1,615
Daicel Chemical.............. 859,000 1,502
Eisai Company................ 101,000 1,452
Fuji Photo Film.............. 203,000 7,236
Fujisawa Pharmaceutical
Company.................... 77,000 751
Hitachi Zosen Corporation.... 212,000 324
Hitachi, Limited............. 324,000 2,327
Japan Tobacco................ 950 6,809
Kanamoto Company............. 51,000 239
KAO Corporation.............. 365,000 5,373
Kioto Manufacturing Company,
Limited.................... 432,000 2,223
Kyocera Corporation.......... 108,000 5,673
Makita Corporation........... 33,000 360
Matsushita Electric
Industrial Company......... 304,000 4,878
Matsuzakaya Company.......... 266,000 1,158
MOS Food Services............ 97,000 1,237
NKK Corporation.............. 1,200,000 1,044
13
<PAGE>
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
--------- -----------
(dollars in thousands)
NEC Corporation.............. 79,000 $ 891
Namco........................ 150,000 3,048
Nichicon Corporation......... 293,000 3,193
Nichido Fire & Marine
Insurance.................. 393,000 2,109
Nintendo Company, Limited.... 64,400 5,917
Nippon Telephone & Telegraph
Company.................... 370 3,248
Okumura Corporation.......... 420,000 1,558
Ono Pharmaceutical........... 64,000 1,395
Promise Company, Limited..... 106,800 5,432
Ryosan Company............... 9,000 129
Sekisui Chemical Company,
Limited.................... 311,000 1,711
Shionogi & Company........... 173,000 940
Showa Sangyo Company......... 593,000 1,158
Sony Corporation............. 80,800 6,733
Sumitomo Marine & Fire
Insurance.................. 442,000 2,639
Sumitomo Rubber Industries... 77,000 455
Suzuki Motor Company,
Limited.................... 193,000 1,662
Toyo Seikan Kaisha........... 198,000 2,555
Yamanouchi Pharmaceutical.... 127,000 3,009
Yamato Kogyo Company,
Limited.................... 120,000 896
Yodogawa Steel Works......... 499,000 2,115
Yoshitomi Pharmaceutical..... 185,000 976
-----------
TOTAL JAPAN COMMON
STOCKS................. 104,332
-----------
MALAYSIA COMMON STOCKS - 0.44%
Genting BHD.................. 508,700 1,687
Golden Hope Plantations
BHD........................ 1,668,000 2,060
Hicom Holdings BHD........... 529,300 209
Malaysian International
Shipping Corporation BHD... 402,666 700
-----------
TOTAL MALAYSIA COMMON
STOCKS................. 4,656
-----------
MEXICO COMMON STOCKS - 0.60%
Alfa, SA..................... 121,000 660
Consorcio Grupo Dina Sa De C
V.......................... 367,625 1,907
Grupo Mexico SA, Series
"B"........................ 435,000 1,409
Grupo Mexico SA, Series
"L"........................ 63,000 200
Industrias Penoles........... 215,000 886
Vitro Sa..................... 335,000 1,243
-----------
TOTAL MEXICO COMMON
STOCKS................. 6,305
-----------
NETHERLANDS COMMON STOCKS - 6.47%
ABN AMRO Holdings NV......... 447,715 10,902
Akzo Nobel NV................ 66,750 13,578
Fortis Amev NV............... 51,654 3,022
Hollandsche Beton Groep NV... 158,040 3,293
Ing Groep NV................. 235,577 15,309
Kon PTT Nederland............ 129,410 6,687
Koninklijke Bijenkorf
Beheer NV.................. 17,400 1,240
Koninklijke KNP BT........... 58,010 1,593
Phillips Electronics......... 112,900 9,946
Unilever NV.................. 40,000 2,847
-----------
TOTAL NETHERLANDS COMMON
STOCKS................. 68,417
-----------
Par
Amount
---------
NEW ZEALAND - 0.70%
FOREIGN BONDS - 0.01%
Brierley Investments, Limited
Subordinated Convertible,
9.00%, Due 6/30/1998....... $ 63 35
-----------
TOTAL NEW ZEALAND FOREIGN
BONDS.................. 35
-----------
Shares
---------
COMMON STOCKS - 0.69%
Brierley Investments,
Limited.................... 1,691,262 977
Carter Holt Harvey,
Limited.................... 605,889 805
Fisher & Paykel, Limited..... 660,000 1,962
Fletcher Challenge
Building................... 775,250 1,568
Fletcher Challenge Forest.... 8,284 5
Fletcher Challenge Paper..... 365,000 537
Lion Nathan, Limited......... 534,700 1,420
-----------
TOTAL NEW ZEALAND COMMON
STOCKS................. 7,274
-----------
TOTAL NEW ZEALAND........ 7,309
-----------
NORWAY COMMON STOCKS - 1.79%
Den Norsk Bank, Series A..... 270,000 1,419
Kvaerner Industries AS....... 117,289 5,140
Norsk Hydro AS............... 60,000 2,993
Nycomed AS, Series B......... 190,771 6,190
Saga Petroleum............... 10,175 202
Saga Petroleum, Series B Free 100,000 1,783
Unitor AS.................... 80,000 1,234
-----------
TOTAL NORWAY COMMON
STOCKS................. 18,961
-----------
SINGAPORE COMMON STOCKS - 0.47%
Development Bank of
Singapore.................. 46,000 305
Development Bank of
Singapore, "A" Shares...... 16,500 109
Fraser & Neave, Limited...... 541,000 2,426
Hong Kong Land............... 708,847 1,000
Inchcape Berhad.............. 325,000 112
Inchcape Motors.............. 325,000 554
Singapore Finance, Limited... 387,000 293
Van Der Horst................ 440,000 186
-----------
TOTAL SINGAPORE COMMON
STOCKS................. 4,985
-----------
SPAIN COMMON STOCKS - 3.14%
Banco Popular Espanol........ 28,000 2,296
Banco Santander SA........... 112,730 5,954
14
<PAGE>
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
--------- -----------
(dollars in thousands)
Iberdrola SA................. 522,757 $ 8,403
Repsol SA (BR)............... 100,135 5,486
Telefonica................... 144,000 113
Telefonica de Espana......... 261,900 10,929
-----------
TOTAL SPAIN COMMON
STOCKS................. 33,181
-----------
SOUTH KOREA COMMON STOCKS - 0.10%
Korea Electric Power
Corporation................ 80,860 1,101
-----------
TOTAL SOUTH KOREA COMMON
STOCKS................. 1,101
-----------
SWEDEN COMMON STOCKS - 4.06%
Assidoman AB................. 56,000 1,505
Astra AB, "B" Free........... 55,200 1,098
Autoliv Incorporated......... 105,000 3,189
Electrolux AB, "B"........... 95,015 8,840
Esselte AB, Class "A"........ 2,000 45
Esselte AB, Class "B"........ 17,000 389
Foreningssparbk.............. 178,500 5,582
Granges AB................... 15,000 273
Nordbanken AS................ 358,100 2,638
Pharmacia & Upjohn,
Incorporated............... 91,300 3,982
Skandia Forsakrings AB....... 14,300 996
SKF AB, "B" Free............. 94,600 1,907
Stora Kopparsbergs Bergslags,
"A"........................ 122,100 2,091
Stora Kopparsbergs Bergslags,
"B"........................ 25,800 440
Svedala Industries, "A"
Free....................... 90,000 2,146
Svenska Cellulosa, "B"
Free....................... 149,400 4,305
Volvo AB..................... 120,000 3,504
-----------
TOTAL SWEDEN COMMON
STOCKS................. 42,930
-----------
SWITZERLAND COMMON STOCKS - 6.36%
ABB AG....................... 2,840 4,658
Cie Fin Richemont............ 3,940 5,648
Forbo Holding AG............. 3,280 1,684
Holderbank Financial
Glarus-B................... 3,600 3,811
Nestle SA.................... 9,541 18,510
Novartis AG.................. 2,879 4,760
Schindler Holding AG (BR).... 1,110 1,795
Schweitz Ruckversiche........ 3,676 8,112
SGS Holdings................. 240 409
Sig Schweitz Industries AG... 11,140 9,269
Sulzer AG.................... 7,017 5,029
Zurich Versicherungs......... 5,700 3,473
-----------
TOTAL SWITZERLAND COMMON
STOCKS................. 67,158
-----------
UNITED KINGDOM COMMON STOCKS - 22.86%
Aggreko, PLC................. 502,977 1,682
Albert Fisher Group, PLC..... 262,500 123
Allied Domecq, PLC........... 510,710 5,252
Arcadia Group................ 41,875 329
Arriva....................... 205,000 1,446
Associated British Foods
Group, PLC................. 78,500 736
Bank of Scotland............. 306,044 3,761
BAT Industries, PLC.......... 925,984 8,732
BG, PLC...................... 1,332,016 7,116
British Energy, PLC.......... 300,000 2,734
British Telecommunications... 732,400 7,954
BTR, PLC..................... 4,577,800 15,213
Bunzl, PLC................... 792,900 3,818
Burmah Castrol, PLC.......... 366,050 7,571
Coats Viyella, PLC........... 1,695,330 2,636
Commercial Union, PLC........ 474,200 8,872
Cookson Group, PLC........... 1,814,400 8,145
Cortaulds, PLC............... 362,000 2,657
Cortaulds Textiles, PLC...... 150,000 805
Danka Business Systems, PLC.. 604,100 3,005
Debenhams Retail............. 83,750 549
Diageo....................... 360,590 4,293
Elementis.................... 511,260 1,299
English China Claylord
Group...................... 418,610 1,725
Express Dairies.............. 250,000 679
General Electric............. 435,000 3,600
Great Universal Stores....... 239,500 3,648
Hanson, PLC.................. 1,054,385 6,219
Hillsdown Holdings, PLC...... 2,171,600 6,499
Hyder, PLC................... 289,000 4,648
Imperial Chemical
Industries, PLC............ 37,000 672
Imperial Tobacco Group....... 374,100 2,696
Inchcape, PLC................ 300,000 1,122
Lex Service.................. 350,000 3,540
Lonrho....................... 243,625 1,756
Lucasvarity, PLC............. 610,000 2,726
Medeva, PLC.................. 2,156,273 6,417
National Grid Group, PLC..... 255,000 1,646
National Power, PLC.......... 50,000 487
National Westminster Bank,
PLC........................ 543,219 10,872
Northern Foods, PLC.......... 500,000 1,852
Peninsular & Orient Steam
Company.................... 294,158 4,340
Pilkington, PLC.............. 363 1
PowerGen, PLC................ 310,400 4,193
Premier Farnell, PLC......... 287,200 1,723
Racal Electronics, PLC....... 390,404 2,170
Reckitt & Coleman, PLC....... 394,754 7,953
RMC Group.................... 212,500 3,731
Rolls Royce, PLC............. 243,273 1,135
Royal & Sun Alliance
Insurance Group............ 313,400 3,500
Safeway, PLC................. 459,677 2,740
Salvesen (Christian), PLC.... 502,977 1,051
Scapa Group.................. 525,000 1,663
Shell Transportation &
Trading, PLC............... 135,000 1,004
15
<PAGE>
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares Value
--------- -----------
(dollars in thousands)
Somerfield................... 308,000 $ 1,742
Southern Electric, PLC....... 151,400 1,411
Storehouse................... 880,000 3,642
Tate & Lyle, PLC............. 764,000 6,132
Tesco, PLC................... 343,819 3,219
Thames Water Group, PLC...... 189,800 3,094
Tomkins...................... 1,205,668 7,096
Transport Development
Group...................... 28,260 135
Transport Development Group,
"B" shares................. 50,000 28
Unilever, PLC................ 522,900 5,569
Vickers...................... 695,000 2,742
WPP Group, PLC............... 1,369,800 8,692
Wolseley..................... 483,300 3,390
-----------
TOTAL UNITED KINGDOM
COMMON STOCKS.......... 241,628
-----------
UNITED STATES - 22.54%
FOREIGN SECURITIES DENOMINATED IN U.S. DOLLARS - 1.83%
Cho Hung Bank GDR............ 340,000 417
Dairy Farm International..... 908,000 1,162
G P Batteries International,
Limited.................... 137,000 379
Kookmin Bank GDR............. 84,797 561
Kookmin Bank GDR,
Series "S"................. 50,000 331
Jardine Matheson Holdings,
Limited.................... 871,000 3,676
Jardine Strategic............ 1,824,000 4,742
New Holland NV............... 80,000 1,960
Nova Corporation............. 225,000 2,559
Sk Telecom, Limited.......... 115,051 856
Stolt-Nielsen SA, "B"........ 38,000 722
Telmex ADR................... 35,000 1,982
-----------
TOTAL FOREIGN SECURITIES
DENOMINATED IN U.S.
DOLLARS................ 19,347
-----------
Par
Amount Value
--------- -----------
(dollars in thousands)
UNITED STATES GOVERNMENT AND AGENCY OBLIGATIONS (NOTE
A) - 4.19%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.94%
Discount Note, 5.41%,
Due 6/12/1998.............. $ 4,435 $ 4,407
Discount Note, 5.41%,
Due 6/15/1998.............. 1,365 1,356
Discount Note, 5.39%,
Due 6/18/1998.............. 419 416
Discount Note, 5.40%,
Due 7/15/1998.............. 14,530 14,367
-----------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION... 20,546
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.16%
5.40%, Due 5/15/1998......... 384 383
5.41%, Due 6/12/1998......... 1,267 1,259
-----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION... 1,642
-----------
U.S. TREASURY BILLS - 2.09%
Due 5/7/1998................. 13,275 13,264
Due 6/25/1998................ 5,482 5,440
Due 7/23/1998................ 77 76
Due 9/17/1998................ 3,333 3,268
-----------
TOTAL U.S. TREASURY
BILLS.................. 22,048
-----------
TOTAL UNITED STATES
GOVERNMENT AND
AGENCY OBLIGATIONS..... 44,236
-----------
SHORT-TERM INVESTMENTS (NOTE B) - 16.52%
AMR Investments Strategic
Cash Business Trust........ 174,553 174,553
-----------
TOTAL SHORT-TERM
INVESTMENTS............ 174,553
-----------
TOTAL UNITED STATES........ 238,136
-----------
TOTAL INVESTMENTS -
114.21% (COST $989,636).... 1,206,900
-----------
LIABILITIES, NET OF OTHER
ASSETS - (14.21%).......... (150,121)
-----------
TOTAL NET ASSETS - 100%...... $ 1,056,779
===========
16
<PAGE>
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Based on the cost of investments of $989,946 for federal income tax purposes at
April 30, 1998, the aggregate gross unrealized appreciation was $257,641, the
aggregate gross unrealized depreciation was $40,688, and the net unrealized
appreciation of investments was $216,953.
(A) Rates associated with United States Government Bonds represent yield to
maturity from time of purchase.
(B) Rates associated with short-term investments represent yield to maturity or
yield to next reset date.
ABBREVIATIONS:
AB - Company (Sweden)
ADR - American Depository Receipt (United States)
AG - Company (Austria, Germany, Switzerland)
AS - Company (Denmark, Norway, Sweden)
BHD - Berhard (Malaysia)
BR - Bearer (Spain, Switzerland)
CG - Company General (France)
GDR - Global Depository Receipt (United States)
NPV - No Par Value (Belgium)
NV - Company (Netherlands, United States)
OY - Company (Finland)
PLC - Public Limited Corporation (United Kingdom)
SA - Company (Belgium, France, Mexico, Spain, Switzerland, United States)
SPA - Company (Italy)
INDUSTRY DIVERSIFICATION
April 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
Percent of
Net Assets
----------
Capital Goods............................................... 7.14%
Consumer Durables........................................... 4.11%
Consumer Non-Durables....................................... 20.20%
Energy...................................................... 10.38%
Finance..................................................... 19.91%
Materials and Services...................................... 22.94%
Technology.................................................. 4.71%
Transportation.............................................. 1.49%
Utilities................................................... 2.62%
Fixed-Income................................................ 4.19%
Short-Term Investments...................................... 16.52%
Other Assets (Liabilities).................................. (14.21%)
------
NET ASSETS........................................ 100.00%
======
17
<PAGE>
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
International
Equity
------------
(in thousands)
ASSETS:
Investments in securities at value (cost -
$989,636)................ $1,206,900
Cash, including foreign currency............. 39,405
Unrealized appreciation on foreign currency
contracts.................................. 149
Dividends and interest receivable............ 4,734
Reclaims receivable.......................... 378
Receivable for investments sold.............. 1,683
Deferred organization costs, net............. 5
Other assets................................. -
----------
TOTAL ASSETS............................. 1,253,254
----------
LIABILITIES:
Payable for investments purchased............ 20,375
Payable upon return of securities loaned..... 174,553
Management and investment advisory fees
payable (Note 2)........................... 1,415
Accrued organization costs................... 33
Other liabilities............................ 471
----------
TOTAL LIABILITIES........................ 196,847
----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS...................................... $1,056,407
==========
See accompanying notes
18
<PAGE>
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Equity
------------
(in thousands)
<S> <C>
INVESTMENT INCOME:
Interest income............................. $ 1,478
Dividend income (net of foreign taxes of
$900 in International Equity Portfolio)... 9,659
Income derived from securities lending,
net....................................... 96
--------
TOTAL INVESTMENT INCOME................. 11,233
--------
EXPENSES:
Management and investment advisory fees
(Note 2).................................. 1,899
Custodian fees.............................. 356
Professional fees........................... 18
Other expenses.............................. 197
--------
TOTAL EXPENSES.......................... 2,470
--------
NET INVESTMENT INCOME........................... 8,763
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments..... 20,202
Net realized loss on foreign currency
transactions.............................. (3,382)
Change in net unrealized appreciation or
depreciation of investments............... 121,521
Change in net unrealized depreciation of
foreign currency contracts and
translations.............................. (15,024)
--------
NET GAIN (LOSS) ON INVESTMENTS.......... 123,317
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $132,080
========
</TABLE>
See accompanying notes
19
<PAGE>
International Equity
----------------------------
Six Months
Ended Year Ended
April 30, 1998 October 31,
(Unaudited) 1997
-------------- -----------
(in thousands)
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income.......... $ 8,763 $ 15,411
Net realized gain (loss) on
investments and foreign
currency transactions......... 16,820 21,331
Change in net unrealized
appreciation or depreciation
of investments and foreign
currency translations......... 106,497 57,105
---------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS................ 132,080 93,847
---------- --------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS:
Contributions.................. 370,870 397,499
Withdrawals.................... (208,216) (134,169)
---------- --------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS...... 162,654 263,330
---------- --------
NET INCREASE IN NET ASSETS........ 294,734 357,177
---------- --------
NET ASSETS:
Beginning of period............ 761,673 404,496
---------- --------
END OF PERIOD.................. $1,056,407 $761,673
========== ========
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- -------------------------------------------------------------------------------
RATIOS:
Expenses to average net assets
(annualized).................. 0.57% 0.57%
Net investment income to
average net assets
(annualized).................. 2.03% 2.55%
Portfolio turnover rate........ 12% 15%
Average commission rate paid*.. $0.159 $0.0164
- -----------------
* Foreign commissions usually are lower than U.S. commissions when expressed as
cents per share due to the lower per share price of many non-U.S. securities.
See accompanying notes
20
<PAGE>
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
AMR Investment Services Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York pursuant to a Declaration of Trust dated as of June 27, 1995 and
amended on August 11, 1995. The AMR Investment Services International Equity
Portfolio (the "Portfolio") is one of the portfolios of the Trust. The
Portfolio commenced active operations on November 1, 1995. The Declaration of
Trust permits the Board of Trustees (the "Trustees") to issue beneficial
interests in the Portfolio.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
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.
Security Valuation
Equity securities that are primarily traded on domestic securities
exchanges are valued at the last quoted sales price on a designated exchange
prior to the close of trading on the New York Stock Exchange (the "Exchange")
or, lacking any current sales, on the basis of the last current bid price prior
to the close of trading on the Exchange. Portfolio securities that are primarily
traded on foreign securities exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges where primarily
traded. Over-the-counter equity securities are valued on the basis of the last
bid price on that date prior to the close of trading. Debt securities (other
than short-term securities) normally will be valued on the basis of prices
provided by a pricing service and may take into account appropriate factors such
as institution-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. In some cases, the prices of debt securities may be determined using
quotes obtained from brokers. Securities for which market quotations are not
readily available are valued at fair value, as determined in good faith and
pursuant to procedures approved by the Trust's Board of Trustees (the "Board").
Investment grade short-term obligations with 60 days or less to maturity are
valued using the amortized cost method.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Dividend income is recorded on the ex-dividend date except
certain dividends from foreign securities which are recorded as soon as the
information is available to the Portfolio. 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
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financial and tax reporting purposes, realized gains and losses are determined
on the basis of specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the bid price of such currencies
against U.S. dollars as last quoted by a recognized dealer. Income, expenses and
purchases and sales of investments are translated into U.S. dollars at the rate
of exchange prevailing on the respective dates of such transactions. The
Portfolio includes that portion of the results of operations resulting from
changes in foreign exchange rates with net realized and unrealized gain on
investments, as appropriate.
Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency
contracts to hedge the exchange rate risk on investment transactions or to hedge
the value of portfolio securities denominated in foreign currencies. Forward
foreign currency contracts are valued at the forward exchange rate prevailing on
the day of valuation.
Federal Income and Excise 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 sub-chapter M of the
Internal Revenue Code.
Deferred Organization Expenses
Expenses incurred by the Portfolio in connection with its organization are
being amortized on a straight-line basis over a five-year period.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. Investment assets
Portfolio are managed by multiple investment advisers which have entered into
separate
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investment advisory and portfolio management services. Investment assets of the
portfolio are managed by multiple investment advisers which have entered into
separate investment advisory agreements with the Manager. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Portfolio an annualized fee equal to .10% of the average daily
net assets of the Portfolio plus amounts paid by the Manager to the investment
advisors hired by the Manager to direct investment activities of the Portfolio.
Management fees are paid as follows (dollars in thousands):
Net
Amount paid to Amount
Management Management Investment paid to
Fee Rates Fee Advisors Manager
---------- ---------- --------------- -----------
.25%-.90% 1,900 1,372 528
Other
Certain officers or trustees of the Portfolio are also officers of the
Manager or American. The Portfolio makes no direct payments to its officers.
Unaffiliated trustees and their spouses are provided free unlimited air
transportation on American. However, the Portfolio compensates each Trustee with
payments in an amount equal to the Trustee's income tax on the value of this
free airline travel. For the six months ended April 30, 1998, the cost of air
transportation was not material to the Portfolio.
3. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of investments,
other than short-term obligations, for the six months ended April 30, 1998 were
$309,228 and $99,220, respectively.
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4. COMMITMENTS
In order to protect itself against a decline in the value of particular
foreign currencies against the U.S. dollar, the Portfolio has entered into
forward contracts to deliver or receive foreign currency in exchange for U.S.
dollars as described below. The Portfolio bears the market risk that arises
from changes in foreign exchange rates, and accordingly, the unrealized gain
(loss) on these contracts is reflected in the accompanying financial statements.
The Portfolio also bears the credit risk if the counterparty fails to perform
under the contract. At April 30, 1998, the Portfolio had outstanding forward
foreign currency contracts as follows:
<TABLE>
<CAPTION>
Settlement Unrealized
Contracts to Deliver Date Value Gain/(Loss)
-------------------- ---------- ---------- -----------
(amounts in thousands)
<C> <S> <C> <C> <C>
79,000 French Franc................................................ 6/19/98 $13,165 $ 677
154 Irish Pound................................................. 5/5/98 217 1
393 Pound Sterling.............................................. 5/5/98 657 1
1,600 Pound Sterling.............................................. 11/9/98 2,653 (20)
6,100 Pound Sterling.............................................. 11/9/98 10,115 (60)
------- -----
Total contracts to deliver (Receivable amount $27,406).............. $26,807 $ 599
======= =====
Contracts to Receive
- ----------------------------------------------------------------------
(amounts in thousands)
46 Canadian Dollar............................................. 5/1/98 $ 32 $ 0
144 Deutsche Mark............................................... 5/4/98 80 0
29,000 French Franc................................................ 6/19/98 4,833 (239)
21,300 French Franc................................................ 6/19/98 3,550 (210)
6,994 Japanese Yen................................................ 5/1/98 53 0
21,139 Japanese Yen................................................ 5/6/98 160 0
6 Malaysian Ringgit........................................... 5/4/98 2 0
14 Malaysian Ringgit........................................... 5/5/98 4 0
169 Pound Sterling.............................................. 5/6/98 283 0
92 Pound Sterling.............................................. 5/7/98 154 0
1,185 Pound Sterling.............................................. 5/1/98 1,981 (1)
------- -----
Total contracts to receive (Payable amount $11,582)................. $11,132 $(450)
======= =====
</TABLE>
5. SECURITIES LENDING
The Portfolio participates in a securities lending program under which
securities are loaned to selected institutional investors. All such loans
require collateralization with cash, securities of the U.S. Government and its
agencies or letters of credit that at all times equal at least 100% of the
market value of the loaned securities plus accrued interest. The Portfolio may
bear the risk of delay in recovery
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of, or even loss of rights in, the securities loaned should the borrower of
securities fail financially. The Portfolio receives fee income or the interest
on the collateral less any fees and rebates paid to agents and transferees of
securities. The Portfolio also continues to receive interest on the securities
loaned, and any gain or loss in the market price of securities loaned that may
occur during the term of the loan will be for the account of the Portfolio.
At April 30, 1998, securities with a market value of approximately $173,137
were loaned by the Portfolio. The Custodian for the Portfolio held an investment
in the AMR Investments Strategic Cash Business Trust (the "Business Trust")
totaling $174,553. In addition, the Custodian held non-cash collateral totaling
$3,616. The Manager serves as Trustee and as investment adviser to the Business
Trust. The Manager receives from the Business Trust an annualized fee equal to
0.10% of the average daily net assets of the Business Trust.
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