<PAGE> 1
================================================================================
American Select Cash Reserve Fund
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Dear Fellow Shareholder:
We are pleased to present you with the Semi-Annual Report for the American
Select Cash Reserve Fund for the six months ended June 30, 2000. It gives us
great pleasure to mention to you that since the inception of the Fund, on
January 1, 2000, the Fund has achieved a number one ranking for the six month
period out of 210 Institutional Money Market Funds.
OVERVIEW
Over the past six months, the U.S. economy grew rapidly and the unemployment
rate hovered around its 30-year low of 4 percent. Historically, these conditions
would have caused inflation to accelerate, causing the Federal Reserve Board to
tighten monetary policy. This time was no different. To implement this policy,
the Fed responded with three rate increases - 25 basis points in February, 25
basis points in March and 50 basis points at the May 16th Federal Open Market
Committee meeting. At this time, it appears that the Fed's actions are beginning
to have the desired effect, with market sentiment reflecting the transition to a
possible slowdown in economic growth.
The shift in market sentiment follows a stream of economic reports that evidence
slowing in various sectors of the economy. Housing sales and construction, while
still robust, have fallen from peak levels. This is not surprising as higher
interest rates have had a direct impact on housing costs. The moderation in
housing activity also affects the demand for furniture and other household
goods, contributing to a slowing in the manufacturing sector. However, oil
prices continue to remain high, even as OPEC promises to raise production
quotas. As a result, although the inflation indicators are ticking up at the
headline level, producer and consumer prices at the core level remain benign.
Due to the market conditions over the last six months, the Money Market Funds
maintained a short weighted-average maturity during most of the period. However,
when the market sentiment began to shift, the Funds began to extend the
weighted-average maturity in order to establish a more neutral posture toward
the end of June.
TEN LARGEST ISSUER HOLDINGS
<TABLE>
<S> <C>
National City Bank General Motors Acceptance
Corp
Merrill Lynch & Company GTE Corporation
General Electric Capital AB Spintab
Corp
Goldman Sachs Group LP American Honda Finance Corp
First Union National Bank Banco Popular de Puerto
Rico
</TABLE>
As always, we appreciate your ongoing support of the American Select Cash
Reserve Fund, and we look forward to continuing to serve your investment needs
for many years to come.
Sincerely,
William F. Quinn
President
American Select Funds
<PAGE> 2
================================================================================
American Select Cash Reserve Fund
STATEMENT OF ASSETS AND LIABILITIES June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
in thousands, except share and per share amounts
<TABLE>
<S> <C>
ASSETS:
Investment in Portfolio, at value .......................... $ 868,499
Receivable for expense
reimbursement (Note 2) ................................... 83
------------
TOTAL ASSETS .................................................... 868,582
------------
LIABILITIES:
Payable for shares of beneficial interest redeemed ......... 18,251
Dividends payable .......................................... 3,069
Other liabilities .......................................... 150
------------
TOTAL LIABILITIES ............................................... 21,470
------------
NET ASSETS ...................................................... $ 847,112
============
ANALYSIS OF NET ASSETS:
Paid-in-capital ............................................ $ 847,112
------------
NET ASSETS ...................................................... $ 847,112
============
SHARES OUTSTANDING (NO PAR VALUE) ............................... 847,112,183
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ........ $ 1.00
============
</TABLE>
See accompanying notes
<PAGE> 3
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American Select Cash Reserve Fund
STATEMENT OF OPERATIONS Six Months Ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
in thousands
<TABLE>
<S> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income ................................... $ 28,909
Portfolio expenses ................................ (513)
------------
NET INVESTMENT INCOME ALLOCATED
FROM PORTFOLIO ........................ 28,396
------------
FUND EXPENSES:
Transfer agent fees ............................... 5
Professional fees ................................. 12
Registration fees and expenses .................... 137
Other expenses .................................... 31
------------
TOTAL FUND EXPENSES ......................... 185
------------
Less reimbursement of expenses (Note 2) .... 144
------------
NET FUND EXPENSES ........................ 41
------------
NET INVESTMENT INCOME .................................... 28,355
------------
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments .................. 7
------------
NET GAIN ON INVESTMENTS ..................... 7
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ........................................ $ 28,362
============
</TABLE>
See accompanying notes
<PAGE> 4
================================================================================
American Select Cash Reserve Fund
STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
in thousands
<TABLE>
<S> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ............................ $ 28,355
Net realized gain on investments ................. 7
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................... 28,362
------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................ (28,355)
Net realized gain on investment .................. (7)
------------
DISTRIBUTIONS TO SHAREHOLDERS .......... (28,362)
------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares .................... 4,663,525
Reinvestment of dividends and distributions ...... 7,871
Cost of shares redeemed .......................... (3,824,284)
------------
NET INCREASE IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS ...... 847,112
------------
NET INCREASE IN NET ASSETS ........................... 847,112
NET ASSETS:
Beginning of period .............................. --
------------
END OF PERIOD .................................... $ 847,112
============
</TABLE>
See accompanying notes
<PAGE> 5
================================================================================
American Select Cash Reserve Fund
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
2000
(UNAUDITED)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................................ $ 1.00
------------
Net investment income (A) ..................................... 0.03
Less dividends from net investment income ..................... (0.03)
------------
NET ASSET VALUE, END OF PERIOD ....................................... $ 1.00
============
TOTAL RETURN (B) ..................................................... 3.08%
============
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...................... $ 847,112
Ratios to average net assets (annualized) (A):
Expenses ................................................... 0.12%
Net investment income ...................................... 6.14%
Decrease reflected in above expense ratio due to absorption
of expenses by the manager ................................. 0.03%
</TABLE>
----------
A The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Trust Money Market Portfolio.
B Not annualized.
See accompanying notes
<PAGE> 6
================================================================================
American Select Cash Reserve Fund
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
NOTE 1-ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. Organization
American Select Funds (the "Trust") is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940 (the "Act"), as
amended, as a no load, open-end management investment company. The American
Select Cash Reserve Fund (the "Fund") is offered under the Trust and commenced
active operations on January 1, 2000.
The Fund invests all of its investable assets in the Money Market Portfolio (the
"Portfolio") of the AMR Investment Services Trust, which has the same investment
objectives as the Fund. The Portfolio is an open-end management investment
company registered under the Act. The value of such investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio.
At June 30, 2000, the Fund's investment was 23.55% of the Portfolio.
These financial statements relate to the Fund. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
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 to the Trust and other investors.
B. Valuation of Investments
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.
C. Investment Income
The Fund records its share of net investment income and realized gains and
losses from the security transactions of the Portfolio each day. All net
investment income and realized gain (loss) of the Portfolio is allocated pro
rata among the investors in the Portfolio at the time of such determination.
D. Dividends
The Fund generally declares dividends daily from net investment income and net
short-term gain, if any, payable monthly. Dividends are determined in accordance
with income tax principles which may treat certain transactions differently than
generally accepted accounting principles.
E. Federal Income and Excise Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies, and to distribute
substantially all net investment income as well as any net realized capital
gains on the sale of investments. Therefore, no federal income or excise tax
provision is required.
F. Expenses
Expenses directly attributable to the Fund are charged to the Fund's operations.
Expenses incurred by the Trust with respect to any two or more of the Funds are
allocated in proportion to the net assets of each Fund, except where allocations
of direct expenses to each Fund can otherwise be made fairly. Each share of each
Fund bears equally those expenses that are allocated to the Fund as a whole.
G. Valuation of Shares
The price per share is calculated 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.
H. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
NOTE 2-FEES AND TRANSACTIONS WITH AFFILIATES
A. Reimbursement of Expenses
The Manager has contractually agreed to reimburse the Fund for other expenses
through December 31, 2000 to the extent that total annual fund operating
expenses exceed 0.12%. For the six months ended June 30, 2000, the Manager
reimbursed expenses totaling $144,311 to the Fund.
B. Other
Certain officers or trustees of the Trust are also officers of the Manager or
American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided 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
<PAGE> 7
================================================================================
American Select Cash Reserve Fund
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) (continued)
--------------------------------------------------------------------------------
six months ended June 30, 2000, the cost of air transportation for the trustees
was not material to the Fund. 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.
NOTE 3-CAPITAL SHARE TRANSACTIONS
The table below summarizes transactions in shares of capital stock (in
thousands). Each share is valued at $1.00:
<TABLE>
<CAPTION>
For the six months
ended June 30, 2000 Shares
------------------- ------------
<S> <C>
Sold .............................. 4,663,525
Reinvested ........................ 7,871
Redeemed .......................... (3,824,284)
------------
Net increase ...................... 847,112
============
</TABLE>
<PAGE> 8
================================================================================
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
============
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE> 9
================================================================================
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 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
============
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
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE> 10
================================================================================
AMR Investment Services Money Market Portfolio
SCHEDULE OF INVESTMENTS June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
------------ ------------
(dollars in thousands)
<S> <C> <C>
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
============
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
SEE ACCOMPANYING NOTES
<PAGE> 11
================================================================================
AMR Investment Services Trust Money Market Portfolio
STATEMENT OF ASSETS AND LIABILITIES June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
in thousands
<TABLE>
ASSETS:
<S> <C>
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 ACCOMPANYING NOTES
<PAGE> 12
================================================================================
AMR Investment Services Trust Money Market Portfolio
STATEMENT OF OPERATIONS Six Months Ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
in thousands
<TABLE>
<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 ACCOMPANYING NOTES
<PAGE> 13
================================================================================
AMR Investment Services Trust Money Market Portfolio
STATEMENTS OF CHANGES IN NET ASSETS Six Months Ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
in thousands
<TABLE>
<CAPTION>
Six Months Two Months
Ended Ended Year Ended
June 30, 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 ACCOMPANYING NOTES
<PAGE> 14
================================================================================
AMR Investment Services Trust Money Market Portfolio
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
NOTE 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 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.
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.
NOTE 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.
