<PAGE>
-------------------------------------------------------------
The
ORBITEX
Cash Reserves
Fund
-------------------------------------------------------------
Semi-Annual Report
June 30, 2000
(Unaudited)
<PAGE>
------------------------------------------------ORBITEX-Registered Trademark-
------------------------------------------------ GROUP OF FUNDS
Dear Shareholder:
We are pleased to present you with the Semi-Annual Report for The Orbitex
Cash Reserves Fund for the period ended June 30, 2000. The Federal Reserve
has been quite active during the last few months and we believe that the Fund
performed well during this volatile period. As you know, the fund is
sub-advised by AMR Investments and their proven track record over the last 14
years should continue to serve you well.
Thank you for you continued support of The Orbitex Group of Funds. We look
forward to serving your investment needs for many years to come.
Sincerely,
Richard E. Stierwalt
President - Orbitex Group of Funds
1
<PAGE>
ORBITEX CASH RESERVES FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in AMR Investment Services Money
Market Portfolio, at value (a).............................. $1,955,220
Receivable due from adviser (Note 3).......................... 8,703
----------
Total Assets ...................................................... 1,963,923
----------
LIABILITIES
Payable for trustee fees (Note 3)............................. 313
Accrued expenses and other liabilities ....................... 8,581
----------
Total Liabilities ................................................. 8,894
----------
NET ASSETS $1,955,029
==========
COMPOSITION OF NET ASSETS:
Paid in Capital............................................... $1,955,029
----------
NET ASSETS $1,955,029
==========
INSTITUTIONAL SHARES
(no par value per share)...................................... 1,955,029
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE $ 1.00
==========
</TABLE>
(a) Cost of Investments.
-------------------------------------------------------------------------------
See Notes to Financial Statements.
2
<PAGE>
ORBITEX CASH RESERVES FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JUNE 30, 2000 (1) (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME ALLOCATED FROM
AMR INVESTMENT SERVICES MONEY
MARKET PORTFOLIO:
Interest Income................................................... $5,301
Net Expense....................................................... (90)
------
Net Investment income allocated from AMR Investment
Services Money Market Portfolio ..................................... 5,211
------
EXPENSES:
Transfer agent fee (Note 3)....................................... 2,000
Fund Accounting fee (Note 3)...................................... 2,000
Audit fee......................................................... 1,865
Custodian fee..................................................... 1,255
Printing expense.................................................. 785
Registration fees................................................. 516
Trustees' fee (Note 3)............................................ 313
Administration fee (Note 3)....................................... 80
Advisory fees (Note 3)............................................ 80
Legal fee......................................................... 70
Other expenses.................................................... 11
------
Total expenses......................................................... 8,975
Expenses reimbursed and fees waived (Note 3)...................... (8,783)
------
Net Expenses .......................................................... 192
------
NET INVESTMENT INCOME, REPRESENTING NET INCREASE
IN NET ASSETS RESULTING FROM OPERATIONS........................... $5,019
------
</TABLE>
---------------------------------------
(1) For the period June 7, 2000 (commencement of operations) to
June 30, 2000.
-------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
ORBITEX CASH RESERVES FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED JUNE 30, 2000 (1) (UNAUDITED)
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income..................................... $ 5,019
----------
DISTRIBUTIONS TO SHAREHOLDERS OF INSTITUTIONAL SHARES:
From net investment income.................................... (5,019)
----------
CAPITAL SHARE TRANSACTIONS - INSTITUTIONAL SHARES:
(at $1.00 per share)
Sales of Shares............................................... 1,950,010
Reinvestment of distributions................................. 5,019
----------
Net increase (decrease) from Capital Share Transactions... 1,955,029
----------
Net increase (decrease) in net assets..................... 1,955,029
----------
NET ASSETS, BEGINNING OF PERIOD -0-
NET ASSETS, END OF PERIOD $1,955,029
==========
</TABLE>
---------------------------------------
(1) For the period June 7, 2000 (commencement of operations) to
June 30, 2000.
-------------------------------------------------------------------------------
See Notes to Financial Statements.
4
<PAGE>
ORBITEX CASH RESERVES FUND
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
PERIOD ENDED JUNE 30, 2000 (1)
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES
-------------
<S> <C>
Net asset value, beginning of period............................ $1.0000
Investment Operations
Net investment income ..................................... 0.0039
Distributions From
Net investment income ..................................... (0.0039)
-------------
Net asset value, end of period.................................. $1.0000
=============
Total return (4)................................................ 0.38%
Ratio/Supplementary Data
Net Assets, at End of Period (000's omitted).................... $1,955
Ratio of expenses to average net assets:
Expenses including reimbursement/waiver (3)................ 0.24% (2)
Expenses excluding reimbursement/waiver (3)................ 11.22% (2)
Net investment income including reimbursement/waiver....... 6.27% (2)
</TABLE>
---------------------------------------
(1) For the period June 7, 2000 (commencement of operations) to June 30, 2000.
(2) Annualized.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
(4) Not annualized.
-------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
ORBITEX CASH RESERVES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
-------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
The Orbitex Cash Reserves Fund (the "Fund") is a series of the Orbitex Group
of Funds (the "Trust") incorporated in Delaware in December 1996. The Trust
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. Currently, the Fund offers two
classes of shares: Institutional Shares and Investor Shares. Investor Shares
was not in operation as of the date of this report, therefore, the financial
statements and footnotes presented herein apply solely to the Fund's
Institutional Shares. The Trust Instrument of the Trust authorizes the Fund
to issue an unlimited number of shares of beneficial interest without par
value.
The Fund seeks to achieve its investment objectives by investing all of its
investable assets in AMR Investment Services Money Market Portfolio (the
"Portfolio"), a registered open-end management investment company with the
same investment objective and substantially similar policies as the Fund. The
Portfolio is managed by AMR Investment Services Trust ("AMR") a wholly owned
subsidiary of AMR Corporation, the parent company of American Airlines, Inc.
The Fund may withdraw its investments from the Portfolio at any time if the
Trust's Board of Trustees (the "Board") determines that it is in the best
interest of the Fund and its shareholders to do so. The Fund accounts for its
investments in the Portfolio as partnership investments, commonly referred to
as a master-feeder arrangement.
The performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the schedule
of investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. At June 30, 2000, the
percentage of the Portfolio owned by the Fund was less than 1%.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets
from operations during the fiscal periods. Actual results could differ from
those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION - The Fund records its investment in the Portfolio at
value. Valuation of securities held in the Portfolio, are discussed in the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
INVESTMENT INCOME AND EXPENSES- The Fund records daily its pro rata share of
the Portfolio's income, expenses and realized gain and loss. In addition, the
Fund accrues its own expenses. The expenses of the Fund, that are directly
identifiable to a specific class, are charged to that class. Expenses that
are not readily identifiable to a specific class, are allocated in such a
manner as deemed equitable, taking into account the nature and type of
expense and the relative size of the classes.
DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders of net
investment income are declared daily and paid monthly. Net capital gain, if
any, is distributed to shareholders at least annually. Distributions are
based on amounts calculated in accordance with applicable federal income tax
regulations.
6
<PAGE>
ORBITEX CASH RESERVES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
-------------------------------------------------------------------------------
FEDERAL TAXES - The Fund intends to qualify and continue to qualify each year
as a regulated investment company and distribute all of its taxable income.
In addition, by distributing in each calendar year substantially all of its
net investment income, capital gains and certain other amounts, if any, the
Fund will not be subject to a federal excise tax. Therefore, no federal
income or excise tax provision is required.
REALIZED GAIN AND LOSS - Security transactions are recorded on trade date.
Realized gain and loss on investments sold are recorded on the basis of
identified cost.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS
ADVISORY FEES
The Fund has entered into an investment advisory agreement with Orbitex
Management, Inc. (the "Adviser"). As compensation for the services rendered,
facilities furnished, and expenses borne by the Adviser, each Class pays the
Adviser a fee accrued daily and paid monthly, at the annualized rate of 0.10%
of each class' average daily net assets. The Adviser has agreed to waive or
limit its fees and to pay certain operating expenses to the extent necessary
to limit total operating expenses to 0.24% and 0.60% of the average daily net
assets of Institutional Shares and Investor Shares, respectively.
Fees waived and/or expenses reimbursed by the Adviser for the period ended
June 30, 2000 amounted to $8,783.
Under the master feeder arrangement, AMR serves as the Fund's investment
adviser. For its services, each Class pays AMR a fee accrued daily and paid
monthly, at an annualized rate of 0.10% of each class' average daily net
assets. The Fund may withdraw its investments from the Portfolio at any time
if the Board determines that it is in the best interest of the Fund and its
shareholders to do so. In the event the Fund was to make such a withdrawal,
the Adviser would act as investment adviser to the Fund.
ADMINISTRATION, FUND ACCOUNTING AND TRANSFER AGENT FEES
American Data Services, Inc. ("ADS"), an affiliate of the Adviser, serves as
the administrator of the Fund. For providing administration services to the
Fund, ADS receives a fee accrued daily and paid monthly, at the annualized
rate 0.10% of the Fund's average daily net assets.
ADS also acts as the fund accounting agent and transfer agent of the Fund.
For providing fund accounting services, the Fund pays ADS a fixed monthly fee
for average net assets less than $25 million plus out-of-pocket expenses. For
providing transfer agent services, the Fund pays ADS a minimum monthly or per
account fee plus certain transaction fees.
7
<PAGE>
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
--------------------
(dollars in thousands)
<S> <C> <C>
TIME DEPOSITS - 1.61%
Den Danske Bank, 7.06%, Due 7/3/2000 $ 21,000 $ 21,000
Societe Generale, 7.00%, Due 7/3/2000 38,426 38,426
----------
TOTAL TIME DEPOSITS 59,426
----------
VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES - 34.60%
FOREIGN BANKS - 10.71%
Landesbank Hessen Thuringen, 6.28%, Due 10/2/2000 125,000 124,979
Merita Bank, PLC, 6.23%, Due 1/22/2001 150,000 149,958
Svenska Handelsbanken, 6.28%, Due 10/13/2000 120,000 119,968
----------
TOTAL FOREIGN BANKS 394,905
----------
DOMESTIC BANKS - 23.89%
Banco Popular de Puerto Rico, 6.92%, Due 5/25/2001 (Note D) 150,000 150,000
Bank of America, NA, 6.87%, Due 2/26/2001 10,000 10,005
Bank One, NA, 6.25%, Due 10/20/2000 100,000 99,973
Branch Banking & Trust Company, 6.88%, Due 3/9/2001 100,000 99,963
First Union National Bank,
6.86%, Due 9/25/2000 10,000 10,000
6.96%, Due 11/13/2000 70,000 70,049
6.25%, Due 4/20/2001 100,000 100,000
Key Bank, NA,
6.64%, Due 11/2/2000 20,000 20,018
6.94%, Due 12/21/2000 20,000 20,023
Mellon Bank, NA, 6.82%, Due 8/30/2000 96,000 95,996
National City Bank,
6.82%, Due 8/30/2000 130,000 129,989
6.97%, Due 12/14/2000 25,000 25,026
6.79%, Due 3/23/2001 50,000 50,028
----------
TOTAL DOMESTIC BANKS 881,070
----------
TOTAL VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES 1,275,975
----------
PROMISSORY NOTES - 2.71%
Jackson National Life Insurance Company,
Variable Rate, 7.18%, Due 9/1/2000 (Note B) 100,000 100,000
----------
TOTAL PROMISSORY NOTES 100,000
----------
ASSET-BACKED COMMERCIAL PAPER (NOTE A) - 5.31%
Atlantis One Funding Corporation, 6.62%, Due 10/3/2000 28,710 28,214
Enterprise Funding Corporation, 6.69%, Due 8/23/2000 20,345 20,145
Govco, Incorporated, 6.65%, Due 9/15/2000 50,000 49,298
Moat Funding, LLC, 6.63%, Due 9/28/2000 100,000 98,361
----------
TOTAL ASSET-BACKED COMMERCIAL PAPER 196,018
----------
VARIABLE RATE COMMERCIAL PAPER - 5.42%
General Electric Capital Corporation,
6.74%, Due 9/5/2000 160,000 160,000
6.58%, Due 11/3/2000 40,000 40,000
----------
TOTAL VARIABLE RATE COMMERCIAL PAPER 200,000
----------
</TABLE>
1
<PAGE>
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
--------------------
(dollars in thousands)
<S> <C> <C>
VARIABLE RATE MEDIUM-TERM NOTES - 49.56%
AB Spintab, 6.81%, Due 9/19/2000 $150,000 $ 150,011
Abbey National Treasury Services, 6.44%, Due 8/3/2000 25,000 24,998
American Honda Finance Corporation, 144a, (Note E)
6.85%, Due 11/20/2000 15,000 15,003
6.26%, Due 1/10/2001 60,000 59,997
6.80%, Due 6/12/2001 50,000 50,000
6.81%, Due 6/14/2001 25,000 25,000
AT&T Capital Corporation, 6.44%, Due 4/9/2001 81,500 81,627
Bankers Trust Corporation, 6.72%, Due 8/6/2000 28,000 28,000
Caterpillar Financial Services,
6.30%, Due 1/19/2001 30,000 30,007
6.34%, Due 4/2/2001 20,000 20,011
Chase Manhattan Corporation,
6.53%, Due 10/13/2000 20,000 20,017
7.07%, Due 11/24/2000 30,500 30,535
7.08%, Due 11/30/2000 10,000 10,009
6.35%, Due 4/26/2001 61,500 61,533
Citicorp Incorporated, 6.76%, Due 11/10/2000 15,000 15,000
Commerzbk Overseas Finance, NV, 6.27%, Due 1/30/2001 20,000 19,982
Fleet National Bank,
6.67%, Due 8/10/2000 30,000 29,999
6.37%, Due 10/10/2000 25,000 25,007
6.88%, Due 11/9/2000 15,000 15,011
6.41%, Due 1/22/2001 30,000 30,020
6.47%, Due 2/1/2001 25,000 25,014
Ford Motor Credit Company,
6.77%, Due 10/2/2000 105,000 104,978
6.53%, Due 4/12/2001 10,000 10,022
General Motors Acceptance Corporation,
7.10%, Due 12/11/2000 25,000 25,032
6.79%, Due 2/11/2002 (Note C) 150,000 150,000
Goldman Sachs Group, L.P.,
6.47%, Due 11/1/2000 50,000 50,000
7.00%, Due 11/28/2000, 144a, (Note E) 45,000 45,036
6.73%, Due 1/16/2001, 144a, (Note E) 10,000 10,026
6.49%, Due 1/25/2001, 144a, (Note E) 75,000 75,078
7.22%, Due 2/26/2001, 144a, (Note E) 5,000 5,012
GTE Corporation,
6.82%, Due 12/11/2000 150,000 149,948
6.30%, Due 1/5/2001 25,000 24,998
Huntington National Bank, 6.44%, Due 2/2/2001 64,000 64,030
Merrill Lynch & Company, Incorporated,
6.34%, Due 7/3/2000 20,000 20,000
6.72%, Due 8/14/2000 30,000 29,999
6.93%, Due 2/16/2001 50,000 50,072
6.35%, Due 4/9/2001 25,000 25,025
6.24%, Due 4/12/2001 75,000 74,989
Morgan Stanley Dean Witter Company,
7.32%, Due 11/13/2000 67,000 67,130
6.43%, Due 1/22/2001 10,000 10,008
6.75%, Due 3/16/2001 50,000 50,000
Royal Bank of Canada, 6.38%, Due 7/28/2000 10,000 10,000
Sanwa Business Credit Corporation, 6.54%, Due 4/3/2001 10,000 10,018
----------
TOTAL VARIABLE RATE MEDIUM-TERM NOTES 1,828,182
----------
TOTAL INVESTMENTS - 99.21% (COST $3,659,601) 3,659,601
----------
</TABLE>
2
<PAGE>
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
--------------------
(dollars in thousands)
<S> <C> <C>
OTHER ASSETS, NET OF LIABILITIES - 0.79% $ 29,059
----------
TOTAL NET ASSETS - 100% $3,688,660
==========
</TABLE>
Based on the cost of investments of $3,659,601 for federal income tax
purposes at June 30, 2000, there was no unrealized appreciation or
depreciation of investments.
(A) Rates associated with money market securities represent discount rate at
time of purchase.
(B) Obligation is subject to an unconditional put back to the issuer with
seven calendar days notice.
(C) Obligation is subject to an unconditional put back to the issuer with
ninety calendar days notice.
(D) Obligation is subject to a credit quality put back to the issuer with
seven calendar days notice.
(E) Security exempt from registration under Rule 144a of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $285,152 or 7.73% of net assets.
ABBREVIATION:
LLC - Limited Liability Company
L.P. - Limited Partnership
NA - National Association
NV - Company
PLC - Public Limited Corporation
3
<PAGE>
AMR INVESTMENT SERVICES TRUST PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET
--------------
(IN THOUSANDS)
<S> <C>
ASSETS:
Investments in securities at value
(cost - $3,659,601)........................................ $3,659,601
Dividends and interest receivable............................ 29,377
----------
TOTAL ASSETS........................................ 3,688,978
----------
LIABILITIES:
Management and investment advisory
fees payable (Note 2)..................................... 305
Accrued organization costs................................... 4
Other liabilities............................................ 9
----------
TOTAL LIABILITIES................................... 318
----------
NET ASSETS APPLICABLE TO INVESTORS'
BENEFICIAL INTERESTS....................................... $3,688,660
==========
</TABLE>
-------------------------------------------------------------------------------
See Notes to Financial Statements.
4
<PAGE>
AMR INVESTMENT SERVICES TRUST PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET
--------------
(IN THOUSANDS)
<S> <C>
INVESTMENT INCOME:
Interest income........................................... $134,502
--------
TOTAL INVESTMENT INCOME........................... 134,502
--------
EXPENSES:
Management and investment advisory
fees (Note 2)........................................... 2,160
Custodian fees............................................ 109
Professional fees......................................... 54
Other expenses............................................ 77
--------
TOTAL EXPENSES.................................... 2,400
--------
NET INVESTMENT INCOME.......................................... 132,102
--------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.......................... 35
--------
NET GAIN ON INVESTMENTS.......................... 35
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................................. $132,137
========
</TABLE>
-------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET (IN THOUSANDS)
----------------------------------------------
SIX MONTHS ENDED TWO MONTHS
JUNE 30 ENDED YEAR ENDED
2000 DECEMBER 31, OCTOBER 31,
(Unaudited) 1999 1999
---------------- ------------ -----------
<S> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income................................... $ 132,102 $ 34,541 $ 132,222
Net realized gain on investments........................ 35 - 23
----------- ---------- -----------
TOTAL INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... 132,137 34,541 132,245
----------- ---------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions........................................... 15,118,339 3,797,759 13,198,063
Withdrawals............................................. (15,213,487) (3,489,471) (12,487,660)
----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS............................ (95,148) 308,288 710,403
----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS...................... 36,989 342,829 842,648
----------- ---------- -----------
NET ASSETS:
Beginning of year....................................... 3,651,671 3,308,842 2,466,194
----------- ---------- -----------
END OF YEAR............................................. $ 3,688,660 $3,651,671 $ 3,308,842
=========== ========== ===========
----------------------------------------------------------------------------------------------------------
Financial Highlights:
----------------------------------------------------------------------------------------------------------
RATIOS:
Expenses to average net assets
(annualized) ......................................... 0.11% 0.11% 0.11%
Net investment income to average net
assets (annualized) ................................. 6.12% 5.77% 5.11%
</TABLE>
-------------------------------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE>
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (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. Beneficial interests in the Trust are divided
into ten separate series, each having distinct investment objectives and
policies. These financial statements relate to the AMR Investment Services
Money Market Portfolio, (the "Portfolio"). The assets of the Portfolio belong
only to that Portfolio, and the liabilities of the Portfolio are borne solely
by that Portfolio and no other. The Trust commenced active operations on
November 1, 1995.
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
Securities of the Portfolio are valued using the amortized cost
method. 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 which the Board believes would result in a material
dilution to shareholders or purchasers, the Board will promptly consider the
appropriate action which should be initiated.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums
or accretion of discounts on investment grade short-term securities and zero
coupon instruments. For financial and tax reporting purposes, realized gains
and losses are determined on the basis of specific lot identification.
FEDERAL INCOME AND EXCISE TAXES
The Portfolio will be treated as partnerships 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.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, securities are acquired
by the Portfolio from a securities dealer or a bank which are subject to
resale at a later date. Repurchase agreements are fully collateralized by
U.S. Treasury or Government agency securities. All collateral is held at the
Portfolio's custodian bank, State Street Bank and Trust Company, or at
subcustodian banks. The collateral is monitored daily by the Portfolio so
that the collateral's market value exceeds the carrying value of the
repurchase agreement.
7
<PAGE>
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with 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.
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. The
Manager serves as the sole investment adviser to the Portfolio. Pursuant to
the Management Agreement, the Manager receives from the Portfolio an
annualized fee equal to .10% of the average daily net assets of the Portfolio.
OTHER
Certain officers or trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Unaffiliated trustees and their spouses are
provided free unlimited air transportation on American. However, the Trust
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
June 30, 2000, the cost of air transportation for the trustees was not
material to the Portfolio. One trustee, as a retiree of American, already
receives flight benefits. Prior to March 1, 2000, the Trust compensated this
trustee up to $10,000 annually to cover his personal flight service charges
and the charges for his three adult children, as well as the income tax
charged on the value of these benefits. Beginning March 1, 2000, the trustee
will receive an annual retainer of $20,000 plus $1,250 for each Board meeting
attended.
8
