AMERICAN AADVANTAGE FUNDS, 497, 1997-09-15

AMERICAN AADVANTAGE FUNDS
497, 1997-09-15

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THIS PROSPECTUS contains important information about the Institutional Class of
the AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) ("Fund"), a series of the
American AAdvantage Funds ("Trust"), an open-end management investment company.
THE FUND SEEKS INCOME AND CAPITAL APPRECIATION BY INVESTING ALL OF ITS
INVESTABLE ASSETS IN THE INTERMEDIATE BOND PORTFOLIO ("PORTFOLIO") OF THE AMR
INVESTMENT SERVICES TRUST ("AMR TRUST") WHICH IN TURN PRIMARILY INVESTS IN DEBT
OBLIGATIONS. The investment experience of the Fund will correspond directly
with the investment experience of the Portfolio. The Fund consists of two
classes of shares designed to meet the needs of different groups of investors.
Institutional Class shares are offered primarily to institutional investors
investing at least $2 million in the Fund. Prospective investors in the
Institutional Class should read this Prospectus carefully before making an
investment decision and retain it for future reference.

IN ADDITION TO THIS PROSPECTUS, a Statement of Additional Information ("SAI")
dated September 15, 1997 has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The SAI contains more
detailed information about the Fund. For a free copy of the SAI, call (817)
967-3509. For further information about the Institutional Class or for
information on the other class of shares of the Fund, please refer to the
appropriate address and phone number on the back cover of this Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

PROSPECTUS

SEPTEMBER 15, 1997

[AMERICAN AADVANTAGE LOGO]

INSTITUTIONAL CLASS

INTERMEDIATE BOND FUND

MANAGED BY
AMR INVESTMENT SERVICES, INC.

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Under a Hub and Spoke(R)(1) operating structure, the Fund seeks its
investment objective by investing all of its investable assets in the Portfolio
as described above. The Portfolio's investment objective is identical to that of
the Fund. Whenever the phrase "all of the Fund's investable assets" is used, it
means that the only investment securities that will be held by the Fund will be
the Fund's interest in the Portfolio. AMR Investment Services, Inc. ("Manager")
provides investment management and administrative services to the Portfolio and
administrative services to the Fund. This Hub and Spoke structure is different
from that of many other investment companies which directly acquire and manage
their own portfolios of securities. Accordingly, investors should carefully
consider this investment approach. See "Investment Objective, Policies and
Risks -- Additional Information About the Portfolio." The Fund may withdraw its
investment in the Portfolio at any time if the Trust's Board of Trustees
("Board") determines that it would be in the best interest of the Fund and its
shareholders to do so. Upon any such withdrawal, the Fund's assets would be
invested in accordance with the investment policies and restrictions described
in this Prospectus and the SAI.

<TABLE>
<S> <C>
Table of Fees and Expenses................ 2
Introduction.............................. 3
Investment Objective, Policies and
Risks.................................... 4
Investment Restrictions................... 10
Yields and Total Returns.................. 11
Management and Administration of the
Trusts................................... 12
Investment Adviser........................ 15
Purchase, Redemption and Valuation of
Shares................................... 15
Dividends, Other Distributions and Tax
Matters.................................. 18
General Information....................... 20
Shareholder Communications................ 21
</TABLE>

TABLE OF FEES AND EXPENSES

Shown below are all Institutional Class expenses expected to be incurred by
the Fund during its initial fiscal year. Because the Fund's shares were not
offered for sale prior to the date of this Prospectus, annual operating expenses
are based on estimated expenses.

Annual Operating Expenses (as a percentage of average net assets):

<TABLE>
<S> <C>
Management Fees 0.25%
12b-1 Fees 0.00%
Other Expenses 0.38%
----
Total Operating Expenses 0.63%
====
</TABLE>

- ---------------

(1) Hub and Spoke is a registered service mark of Signature Financial Group,
Inc.
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The above expenses reflect the estimated expenses of the Fund and the
Portfolio. The Board believes that the aggregate per share expenses of the Fund
(including its proportionate share of the Portfolio's expenses) will be
approximately equal to the per share expenses that the Fund would incur if its
assets were invested directly in the type of securities held by the Portfolio.

EXAMPLE

An Institutional Class investor in the Fund would directly or indirectly pay
on a cumulative basis the following expenses on a $1,000 investment assuming a
5% annual return:

<TABLE>
<S> <C>
1 Year $ 6
3 Years $20
</TABLE>

The purpose of the table above is to assist a potential investor in
understanding the various costs and expenses to be incurred directly or
indirectly as a shareholder in the Institutional Class of the Fund. Additional
information may be found under "Management and Administration of the Trusts" and
"Investment Adviser."

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN AND PERFORMANCE MAY BE BETTER OR WORSE THAN THE 5% ANNUAL RETURN
ASSUMED IN THE EXAMPLE.

INTRODUCTION

The Trust is an open-end, diversified management investment company
organized as a Massachusetts business trust on January 16, 1987. The Fund is a
separate investment portfolio of the Trust. The Fund invests all of its
investable assets in the Portfolio, which has an identical investment objective.
The Manager provides the Portfolio with business and asset management services,
including the evaluation and monitoring of the investment adviser, and it
provides the Fund with administrative services. The Fund consists of two classes
of shares, including the "AMR Class," which is available to tax exempt
retirement and benefit plans of AMR Corporation and its affiliates, and the
"Institutional Class," which is primarily for institutional investors investing
at least $2 million in the Fund. For further information about the AMR Class,
call (800) 967-9009.

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investment income and the gains (losses) earned (or incurred) by the Fund. It
also will bear its proportionate share of expenses that are allocated to the
Fund as a whole. However, certain expenses are allocated separately to each
class of shares.

The assets of the Portfolio are allocated by the Manager between the Manager
and another investment adviser. The Manager and the other investment adviser
each have discretion to purchase and sell portfolio securities in accordance
with the investment objective, policies and restrictions described in this
Prospectus, the SAI, and by specific investment strategies developed by the
Manager. See "Investment Adviser."

Institutional Class shares are sold without any sales charges at the next
share price calculated after an investment is received and accepted. Shares will
be redeemed at the next share price calculated after receipt of a redemption
order. See "Purchase, Redemption and Valuation of Shares."

INVESTMENT OBJECTIVE, POLICIES AND RISKS

The Fund has a fundamental investment policy which allows it to invest all
of its investable assets in the Portfolio. All other fundamental investment
policies and the non-fundamental investment policies of the Fund and the
Portfolio are identical. Therefore, although the following discusses the
investment policies of the Portfolio and the AMR Trust's Board of Trustees ("AMR
Trust Board"), it applies equally to the Fund and the Board.

The Fund's investment objective is to realize income and capital
appreciation. As an investment policy, the Fund primarily seeks income and
secondarily seeks capital appreciation. The Fund seeks its investment objective
by investing all of its investable assets in the Portfolio, which invests
primarily in debt obligations. Permissible investments include securities of the
U.S. Government and its agencies and instrumentalities, including separately
traded registered principal and interest securities ("STRIPS") and other zero
coupon obligations; corporate bonds, notes and debentures; non-convertible
preferred stocks; mortgage-backed securities; asset-backed securities; domestic,
Yankeedollar and Eurodollar certificates of deposit, bank deposit notes, and
bank notes; other investment companies; and cash or cash equivalents, including
investment grade short-term obligations. Such obligations may have a fixed,
variable or floating rate of interest. At the time of purchase, all such
securities will be rated in one of the four highest rating categories by all
nationally recognized statistical rating organizations ("Rating Organizations")
rating that security, such as Standard & Poor's ("S&P") or Moody's Investor
Services, Inc. ("Moody's") or, if unrated, are deemed to be of comparable
quality by the Manager or the investment adviser. Obligations rated in the
fourth highest rating category are limited to 25% of the Portfolio's total
assets. Obligations rated in the BBB or Baa categories by any Rating
Organization have speculative characteristics and thus changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds. The Portfolio, at the discretion of the Manager and the investment
adviser, may retain a security which has

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been downgraded below the initial investment criteria. See the SAI for
definitions of the foregoing securities and for a description of debt ratings.
Principal and/or interest payments for obligations of the U.S. Government's
agencies or instrumentalities may or may not be backed by the full faith and
credit of the U.S. Government.

Although investments will not be restricted by either maturity or duration
of the securities purchased, under normal circumstances, the Portfolio will seek
to maintain a dollar weighted average duration of three to seven years. Because
the timing on return of principal for both asset-backed and mortgage-backed
securities is uncertain, in calculating the average weighted duration of the
Portfolio, the duration of these securities may be based on certain industry
conventions.

The Portfolio may engage in dollar rolls, or purchase or sell securities on
a "when-issued" or "forward commitment" basis. The purchase or sale of
when-issued securities enables an investor to hedge against anticipated changes
in interest rates and prices by locking in an attractive price or yield. The
price of when-issued securities is fixed at the time the commitment to purchase
or sell is made, but delivery and payment for the when-issued securities take
place at a later date, normally one to two months after the date of purchase.
During the period between purchase and settlement, no payment is made by the
purchaser to the issuer and no interest accrues to the purchaser. Dollar rolls
are a type of forward commitment transaction. Purchases and sales of securities
on a forward commitment basis involve a commitment to purchase or sell
securities with payment and delivery to take place at some future date, normally
one to two months after the date of the transaction. As with when-issued
securities, these transactions involve certain risks, but they also enable an
investor to hedge against anticipated changes in interest rates and prices.
Forward commitment transactions are executed for existing obligations, whereas
in a when-issued transaction, the obligations have not yet been issued. When
purchasing securities on a when-issued or forward commitment basis, a segregated
account of liquid assets at least equal to the value of purchase commitments for
such securities will be maintained until the settlement date.

Mortgage-backed securities are securities representing interests in "pools"
of mortgages in which payments of both interest and principal on the securities
are made monthly, in effect, "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities). Early repayment of
principal on mortgage pass-through securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose the Portfolio to a lower
rate of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment, the
value of the premium would be lost. Like other debt securities, when interest
rates rise, the value of mortgage-related securities generally will decline;

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however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other debt securities.

Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA")) or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported with various credit enhancements such
as pool insurance, guarantees issued by governmental entities, a letter of
credit from a bank or senior/subordinated structures.

Collateralized mortgage obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a mortgage pass-through, interest and prepaid principal
on a CMO are paid, in most cases, monthly. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured
in multiple classes, with each class bearing a different stated maturity or
interest rate.

The Portfolio is permitted to invest in asset-backed securities, subject to
the Portfolio's rating and quality requirements. Through the use of trusts and
special purpose subsidiaries, various types of assets, primarily home equity
loans, automobile and credit card receivables, and other types of receivables or
other assets as well as purchase contracts, financing leases and sales
agreements entered into by municipalities, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above.
Consistent with the Fund's and the Portfolio's investment objective, policies
and quality standards, the Portfolio may invest in these and other types of
asset-backed securities which may be developed in the future.

Asset-backed securities involve certain risks that do not exist with
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete security interest in
the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on the securities. The risks associated

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with asset-backed securities are often reduced by the addition of credit
enhancements such as a letter of credit from a bank, excess collateral or a
third-party guarantee.

Investments in Eurodollar (U.S. dollar obligations issued outside the United
States by domestic or foreign entities) and Yankeedollar (U.S. dollar
obligations issued inside the United States by foreign entities) obligations
involve risks that differ from investments in securities of domestic issuers.
Most notably, there generally is less publicly available information about
foreign issuers; there may be less governmental regulation and supervision;
foreign issuers may use different accounting and financial standards; and the
adoption of foreign governmental restrictions may affect adversely the payment
of principal and interest on foreign investments. In addition, not all foreign
branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.

The market value of fixed rate securities, and thus the net asset value of
the Portfolio's shares, is expected to vary inversely with movements in interest
rates. The market value of variable and floating rate instruments should not
vary as much due to the periodic adjustments in their interest rates. An
adjustment which increases the interest rate of such securities should reduce or
eliminate declines in market value resulting from a prior upward movement in
interest rates, and an adjustment which decreases the interest rate of such
securities should reduce or eliminate increases in market value resulting from a
prior downward movement in interest rates.

Except as otherwise indicated, the investment policies of the Fund may be
changed at any time by the Board to the extent that such changes are consistent
with the investment objective of the Fund. However, the Fund's investment
objective may not be changed without a majority vote of the Fund's outstanding
shares, which is defined as the lesser of (a) 67% of the shares of the Fund
present or represented if the holders of more than 50% of the shares are present
or represented at the shareholder's meeting, or (b) more than 50% of the shares
of the Fund (hereinafter, "majority vote"). The Portfolio's investment objective
may not be changed without a majority vote of the Portfolio's interest holders.

OTHER INVESTMENT POLICIES -- In addition to the investment policies described
above, the Portfolio also may lend its securities, enter into fully
collateralized repurchase agreements, and invest in private placement offerings.

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exceed 33 1/3% of its total assets. The Portfolio continues to receive interest
on the securities loaned and simultaneously earns either interest on the
investment of the cash collateral or fee income if the loan is otherwise
collateralized. Should the borrower of the securities fail financially, there is
a risk of delay in recovery of the securities loaned or loss of rights in the
collateral. However, the Portfolio seeks to minimize this risk by making loans
only to borrowers which are deemed by the Manager to be of good financial
standing and which have been approved by the AMR Trust Board. For purposes of
complying with the Portfolio's investment policies and restrictions, collateral
received in connection with securities loans will be deemed an asset of the
Portfolio to the extent required by law. The Manager will receive compensation
for administrative and oversight functions with respect to securities lending.
The amount of such compensation will depend on the income generated by the loan
of the Portfolio's securities. The Securities and Exchange Commission ("SEC")
has granted exemptive relief that permits the Portfolio to invest cash
collateral received from securities lending transactions in shares of one or
more private investment companies managed by the Manager. See the SAI for
further information regarding loan transactions.

REPURCHASE AGREEMENTS. A repurchase agreement is an agreement under which
securities are acquired by the Portfolio from a securities dealer or bank
subject to resale at an agreed upon price on a later date. The Portfolio bears a
risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations and the Portfolio is delayed or prevented from
exercising its rights to dispose of the collateral securities. However, the
Manager and the investment adviser attempt to minimize this risk by entering
into repurchase agreements only with financial institutions which are deemed to
be of good financial standing and which have been approved by the AMR Trust
Board. See the SAI for more information regarding repurchase agreements.

PRIVATE PLACEMENT OFFERINGS. Investments in private placement offerings are
made in reliance on the "private placement" exemption from registration afforded
by Section 4(2) of the Securities Act of 1933 (the "1933 Act"), and resold to
qualified institutional buyers under Rule 144A under the 1933 Act ("Section 4(2)
securities"). Section 4(2) securities are restricted as to disposition under the
federal securities laws, and generally are sold to institutional investors such
as the Portfolio, that agree they are purchasing the securities for investment
and not with an intention to distribute to the public. Any resale by the
purchaser must be pursuant to an exempt transaction and may be accomplished in
accordance with Rule 144A. Section 4(2) securities normally are resold to other
institutional investors such as the Portfolio through or with the assistance of
the issuer or dealers that make a market in the Section 4(2) securities, thus
providing liquidity. The Portfolio will not invest more than 15% of its net
assets in Section 4(2) securities and illiquid securities unless the Manager or
the investment adviser determine, by continuous reference to the appropriate
trading markets and pursuant to guidelines approved by the AMR Trust Board, that
any Section 4(2) securities held by such Portfolio in excess of this level are
at all times liquid.
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The AMR Trust Board, the Manager and the investment adviser, pursuant to
the guidelines approved by the AMR Trust Board, will carefully monitor the
Portfolio's investments in Section 4(2) securities offered and sold under Rule
144A, focusing on such important factors, among others, as valuation, liquidity,
and availability of information. Investments in Section 4(2) securities could
have the effect of reducing the Portfolio's liquidity to the extent that
qualified institutional buyers no longer wish to purchase these restricted
securities.

BROKERAGE PRACTICES -- The Portfolio normally will not incur any brokerage
commissions on its transactions because debt instruments are generally traded on
a "net" basis, with dealers acting as principal for their own accounts and
without a stated commission. The price of the obligation, however, usually
includes a profit to the dealer. Obligations purchased in underwritten offerings
include a fixed amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. No commissions or discounts are
paid when securities are purchased directly from an issuer. The Manager and the
investment adviser will each place their own orders to execute securities
transactions designed to implement the Portfolio's investment objective and
policies. In placing such orders, the Manager and the investment adviser will
seek the best available price and most favorable execution. The full range and
quality of services offered by the executing broker or dealer is considered when
making these determinations.

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO -- As previously described, investors
should be aware that the Fund, unlike mutual funds that directly acquire and
manage their own portfolios of securities, seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio, which is a
separate investment company. Since the Fund will invest only in the Portfolio,
the Fund's shareholders will acquire only an indirect interest in the
investments of the Portfolio.

The Manager expects, although it cannot guarantee, that the Fund will
achieve economies of scale by investing in the Portfolio. In addition to selling
its interests to the Fund, the Portfolio may sell its interests to other
nonaffiliated investment companies and/or other institutional investors. All
institutional investors in the Portfolio will pay a proportionate share of the
Portfolio's expenses and will invest in the Portfolio on the same terms and
conditions. However, if another investment company invests all of its assets in
the Portfolio, it would not be required to sell its shares at the same public
offering price as the Fund and would be allowed to charge different sales
commissions. Therefore, investors in the Fund may experience different returns
from investors in another investment company that invests exclusively in the
Portfolio.

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The Fund's investment in the Portfolio may be materially affected by the
actions of large investors in the Portfolio, if any. For example, as with all
open-end investment companies, if a large investor were to redeem its interest
in the Portfolio, the Portfolio's remaining investors could experience higher
pro rata operating expenses, thereby producing lower returns. As a result, the
Portfolio's security holdings could become less diverse, resulting in increased
risk. Institutional investors in the Portfolio that have a greater pro rata
ownership interest in the Portfolio than the Fund could have effective voting
control over the operation of the Portfolio. A change in the Portfolio's
fundamental objective, policies and restrictions that is not approved by the
shareholders of the Fund could require the Fund to redeem its interest in the
Portfolio. Any such redemption could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio.
Should such a distribution occur, the Fund could incur brokerage fees or other
transaction costs in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified portfolio of investments
for the Fund and could affect adversely its liquidity.

The Portfolio's and Fund's investment objectives and policies are described
above. See "Investment Restrictions" for a description of their investment
restrictions. The investment objective of the Fund can be changed only with
shareholder approval. The approval of the Fund and of other investors in the
Portfolio, if any, is not required to change the investment objective, policies
or limitations of the Portfolio, unless otherwise specified. Written notice
shall be provided to shareholders of the Fund within thirty days prior to any
changes in the Portfolio's investment objective. If the investment objective of
the Portfolio changes and the shareholders of the Fund do not approve a parallel
change in the Fund's investment objective, the Fund would seek an alternative
investment vehicle or the Manager and the investment adviser would actively
manage the Fund.

See "Management and Administration of the Trust" for a complete description
of the investment management fee and other expenses associated with the Fund's
investment in the Portfolio. This Prospectus and the SAI contain more detailed
information about the Fund and the Portfolio, including information related to
(1) the investment objective, policies and restrictions of the Fund and the
Portfolio, (2) the Board of Trustees and officers of the Trust and the AMR
Trust, (3) brokerage practices, (4) the Fund's shares, including the rights and
liabilities of its shareholders, (5) additional performance information,
including the method used to calculate yield, total return, and the value of the
Fund's shares.

INVESTMENT RESTRICTIONS

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investment restrictions may be changed with respect to the Fund by the majority
vote of the Fund's outstanding shares or with respect to the Portfolio by the
majority vote of the Portfolio's interest holders. The Portfolio may not:

- Invest more than 5% of its total assets (taken at market value) in
securities of any one issuer, other than obligations issued by the U.S.
Government, its agencies or instrumentalities, or purchase more than 10%
of the voting securities of any one issuer, with respect to 75% of the
Portfolio's total assets.

- Invest more than 25% of its total assets in the securities of companies
primarily engaged in any one industry other than the U.S. Government, its
agencies and instrumentalities. Municipal governments and their agencies
and authorities are not deemed to be industries. Finance companies as a
group are not considered a single industry for purposes of this policy.
Further, wholly owned finance companies will be considered to be in the
industries of their parent companies if their activities are primarily
related to financing the activities of their parent companies.

The following non-fundamental investment restriction may be changed with
respect to the Fund by a vote of a majority of the Board or with respect to the
Portfolio by a vote of a majority of the AMR Trust Board: the Portfolio may not
invest more than 15% of its net assets in illiquid securities, including time
deposits and repurchase agreements that mature in more than seven days.

The above percentage limits are based upon asset values at the time of the
applicable transaction; accordingly, a subsequent change in asset values will
not affect a transaction that was in compliance with the investment restrictions
at the time such transaction was effected. See the SAI for other investment
limitations.

YIELDS AND TOTAL RETURNS

Each class of the Fund has different expenses which will impact its
performance. Advertised yields for the Institutional Class of the Fund will be
computed by dividing the net investment income earned per share during the
relevant time period by the maximum offering price per share for the class on
the last day of the period. Total return quotations advertised by the Fund may
reflect the average annual compounded (or aggregate compounded) rate of return
during the designated time period based on a hypothetical initial investment and
the redeemable value of that investment at the end of the period. Additionally,
each class of the Fund may advertise a "monthly distribution rate." This rate is
based on an annualized monthly dividend accrual rate per share compared with the
month-end share price of each class of the Fund. The Fund will at times compare
its performance to applicable published indices, and also may disclose its
performance as ranked by certain ranking entities. See the SAI for more
information about the calculation of yields and total returns.

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MANAGEMENT AND ADMINISTRATION OF THE TRUSTS

FUND MANAGEMENT AGREEMENT -- The Board has general supervisory responsibility
over the Trust's affairs. The Manager provides or oversees all administrative,
investment advisory and portfolio management services for the Trust pursuant to
a Management Agreement dated April 3, 1987, as amended July 25, 1997, together
with the Administrative Services Agreement described below. The AMR Trust and
the Manager also entered into a Management Agreement dated October 1, 1995, as
amended July 25, 1997, that obligates the Manager to provide or oversee all
administrative, investment advisory and portfolio management services for the
AMR Trust. The Manager, located at 4333 Amon Carter Boulevard, MD 5645, Fort
Worth, Texas 76155, is a wholly owned subsidiary of AMR Corporation ("AMR"), the
parent company of American Airlines, Inc., and was organized in 1986 to provide
investment management, advisory, administrative and asset management consulting
services. The assets of the Portfolio are allocated by the Manager between the
Manager and the investment adviser. See "Investment Adviser." As of June 30,
1997, the Manager had assets under management totaling approximately $17.8
billion, including approximately $6.6 billion under active management and $11.2
billion as named fiduciary or fiduciary adviser. Of the total, approximately
$13.1 billion of assets are related to AMR. American Airlines, Inc. is not
responsible for investments made in the Fund.

The Manager provides the Trust and the AMR Trust with office space, office
equipment and personnel necessary to manage and administer the Trusts'
operations. This includes complying with reporting requirements; corresponding
with shareholders; maintaining internal bookkeeping, accounting and auditing
services and records; and supervising the provision of services to the Trusts by
third parties. The Manager oversees the Portfolio's participation in securities
lending activities and any actions taken by securities lending agents in
connection with those activities to ensure compliance with all applicable
regulatory and investment guidelines. The Manager also develops the investment
programs for the Portfolio, selects and changes investment advisers (subject to
approval by the AMR Trust Board and appropriate interest holders), allocates
assets among investment advisers, monitors the investment advisers' investment
programs and results, and coordinates the investment activities of the
investment advisers to ensure compliance with regulatory restrictions.

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compensation in connection with securities lending activities. If the Portfolio
lends its portfolio securities and receives cash collateral from the borrower,
the Manager will receive up to 25% of the net annual interest income (the gross
interest earned by the investment less the amount paid to the borrower as well
as related expenses) received from the investment of such cash. If a borrower
posts collateral other than cash, the borrower will pay to the lender a loan
fee. The Manager will receive up to 25% of the loan fees posted by borrowers.
The Manager also is compensated through the Administrative Services Agreement,
as described below, for other services provided.

The Management Agreement will continue in effect provided that annually such
continuance is specifically approved by a vote of the Board and the AMR Trust
Board, including the affirmative votes of a majority of the Trustees of each
Board who are not parties to the Management Agreement or "interested persons" as
defined in the 1940 Act of any such party ("Independent Trustees"), cast in
person at a meeting called for the purpose of considering such approval, or by
the vote of the Fund's shareholders or the Portfolio's interest holders. The
Management Agreement may be terminated with respect to the Fund or the Portfolio
at any time, without penalty, by a majority vote of outstanding Fund shares or
Portfolio interests on sixty (60) days' written notice to the Manager, or by the
Manager, on sixty (60) days' written notice to the Trust or the AMR Trust. The
Management Agreement will automatically terminate in the event of its
"assignment" as defined in the 1940 Act.

The Trust is responsible for the following expenses: audits by independent
auditors; transfer agency, custodian, dividend disbursing agent and shareholder
recordkeeping services; taxes, if any, and the preparation of the Fund's tax
returns; interest; costs of Trustee and shareholder meetings; printing and
mailing prospectuses and reports to existing shareholders; fees for filing
reports with regulatory bodies and the maintenance of the Fund's existence;
legal fees; fees to federal and state authorities for the registration of
shares; fees and expenses of Independent Trustees; insurance and fidelity bond
premiums; and any extraordinary expenses of a nonrecurring nature.

A majority of the Independent Trustees of the Board have adopted written
procedures reasonably appropriate to deal with potential conflicts of interest
between the Trust and the AMR Trust, including creating a separate Board of
Trustees of the AMR Trust.

FUND ADVISORY AGREEMENTS -- The investment adviser has entered into separate
investment advisory agreements with the Manager to provide investment advisory
services to the Fund and the Portfolio. To the extent that the Fund invests all
of its investable assets in the Portfolio, however, the investment adviser will
receive an advisory fee only on behalf of the Portfolio and not on behalf of the
Fund. The assets of the Portfolio are allocated between the Manager and the
investment adviser for the Portfolio as described in this Prospectus under
"Investment Adviser." The Manager is permitted to enter into new or modified
advisory agreements with existing or new investment
PROSPECTUS

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<PAGE> 14

advisers without approval of Fund shareholders or Portfolio interest holders,
but subject to approval of the Board and the AMR Trust Board. The SEC issued an
exemptive order which eliminates the need for shareholder/interest holder
approval, subject to compliance with certain conditions. These conditions
include the requirement that within 90 days of hiring a new adviser or
implementing a material change with respect to an advisory contract, the Fund
send a notice to shareholders containing information about the change that would
be included in a proxy statement. The Manager recommends investment advisers to
the Board and the AMR Trust Board based upon its continuing quantitative and
qualitative evaluation of the investment advisers' skill in managing assets
using specific investment styles and strategies. The allocation of assets to the
investment adviser may be changed at any time by the Manager. In general, the
allocation will vary based upon a variety of factors, including the overall
investment performance of the investment adviser, the Portfolio's cash flow
needs and market conditions. The investment adviser can be terminated without
penalty to the AMR Trust by the Manager, the AMR Trust Board or the interest
holders of the Portfolio. Short-term investment performance, by itself, is not a
significant factor in selecting or terminating an investment adviser, and the
Manager does not expect to recommend frequent changes of investment advisers.
The Prospectus will be supplemented if additional investment advisers are
retained or the contract with the existing investment adviser is terminated.

The Manager and the investment adviser have discretion to purchase and sell
securities for their segment of the Portfolio's assets in accordance with the
Portfolio's objective, policies and restrictions and the more specific
strategies provided by the Manager. Although the investment adviser is subject
to general supervision by the AMR Trust Board and the Manager, these parties do
not evaluate the investment merits of specific securities transactions. As
compensation for its services, the investment adviser is paid a fee by the
Manager out of the proceeds of the management fee received by the Manager from
the AMR Trust.

ADMINISTRATIVE SERVICES AGREEMENT -- The Manager and the Trust entered into an
Administrative Services Agreement which obligates the Manager to provide the
Fund those administrative and management services (other than investment
advisory services) described in the Management Agreement. As compensation for
these services, the Manager receives an annualized fee of 0.25% of the net
assets of the Fund.

ALLOCATION OF FUND EXPENSES -- Expenses of the Fund generally are allocated
equally among the shares of the Fund, regardless of class. However, certain
expenses approved by the Board will be allocated solely to the class to which
they relate.

PRINCIPAL UNDERWRITER -- BROKERS TRANSACTION SERVICES, INC. ("BTS"), 7001
Preston Road, Dallas, Texas 75205, serves as the principal underwriter of the
Trust.

PROSPECTUS

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<PAGE> 15

CUSTODIAN AND TRANSFER AGENT -- NATIONSBANK OF TEXAS, N.A., Dallas, Texas,
serves as custodian for the Portfolio and the Fund, and as transfer agent for
the Institutional Class.

INDEPENDENT AUDITOR -- The independent auditor for the Fund and the AMR Trust is
ERNST & YOUNG LLP, Dallas, Texas.

INVESTMENT ADVISER

BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("Barrow"), 3232 McKinney Avenue,
15th Floor, Dallas, Texas 75204, is a professional investment counseling firm
which has been providing investment advisory services since 1979. The firm is
wholly owned by United Asset Management Corporation, a Delaware corporation. As
of June 30, 1997, Barrow had discretionary investment management authority with
respect to approximately $24.4 billion of assets, including approximately $1.7
billion of assets of AMR and its subsidiaries and affiliated entities. The
Manager pays Barrow an annualized fee equal to .30% on the first $200 million in
AMR Trust assets under its discretionary management, .20% on the next $300
million, .15% on the next $500 million, and .125% on assets over $1 billion.
Solely for the purpose of determining the applicable percentage rates when
calculating Barrow's fees, there shall be included all other assets or trust
assets of American Airlines, Inc. also under management by Barrow (except assets
managed under the HALO Bond Program). The inclusion of any such assets will
result in lower overall fee rates being applied to the Portfolio. Barrow
provides no services to the Fund or the Portfolio except for portfolio
investment management and related recordkeeping services, and has no affiliation
with the Trust, the AMR Trust or the Manager.

The Manager is responsible for oversight of the investment adviser, regular
review of the investment adviser's performance and asset allocations between the
Manager and the investment adviser. William F. Quinn has served as President of
the Manager since it was founded in 1986 and Nancy A. Eckl serves as Vice
President - Trust Investments of the Manager. Ms. Eckl previously served as Vice
President - Finance and Compliance of the Manager from December 1990 to May
1995. In these capacities, Mr. Quinn and Ms. Eckl have primary responsibility
for the day-to-day operations of the Fund and the Portfolio. Further information
about the Manager can be found in this Prospectus under "Management and
Administration of the Trusts."

PURCHASE, REDEMPTION AND VALUATION OF SHARES

PURCHASING SHARES OF THE TRUST -- Institutional Class shares are offered without
a sales charge to institutions including bank trust departments acting on behalf
of their clients (such as employee benefit plans, personal trusts and other
accounts for which the bank acts as agent or fiduciary); endowment funds and
charitable foundations; employee welfare plans which are tax-exempt under
Section 501(c)(9) of the Internal Revenue
PROSPECTUS

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<PAGE> 16

Code of 1986, as amended ("Code"); qualified pension and profit sharing plans,
and cash or deferred arrangements under Section 401(k) of the Code;
corporations; and other institutional investors who make an initial investment
of at least $2 million. The Manager may allow a reasonable period of time after
opening an account for an investor to meet the initial investment requirement.
The Manager may waive the minimum investment requirement for certain individuals
associated with AMR or the Manager, as more fully described in the SAI. In
addition, for investors such as investment advisors, trust companies and
financial advisors who make investments for a group of clients, the minimum
initial investment can be met through an aggregated purchase order for more than
one client. Shares purchased through financial intermediaries may be subject to
transaction fees.

Fund shares are sold without a sales charge at the next share price
calculated after the acceptance of a purchase order. Shares of the Fund are
offered and purchase orders accepted until 4:00 p.m. Eastern time on each day on
which the New York Stock Exchange (the "Exchange") is open for trading which
excludes the following business holidays: New Year's Day, Martin Luther King's
Birthday, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day ("Business Day"). The Trust reserves the
right to reject any order for the purchase of shares and to limit or suspend,
without prior notice, the offering of shares.

Institutional Class shares may be purchased and redeemed as follows:

BY WIRE -- Purchases may be made by wiring funds. If opening a new account, an
investor should first forward a completed new account application to the Manager
at P.O. Box 619003, MD 5645, DFW Airport, TX 75261-9003 or by facsimile to (817)
967-0768. To ensure prompt receipt of a transmission by wire, the investor
should: telephone the transfer agent at (214) 508-5038 or (800) 658-5811 and
specify the Fund whose shares are to be purchased; provide the name, address,
telephone number and account number of the investor; and identify the amount
being wired and by which bank. The transfer agent will provide the investor with
an account number. The investor should instruct its bank to designate the
account number and transmit the federal funds to: Federal Reserve Bank, Dallas,
for NationsBank of Texas, N.A. ABA Routing # 111-000-025, Corporate Trust
Suspense Account No. 0180019810, reference American AAdvantage Funds, attention:
Fund Account Services.

PROSPECTUS

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<PAGE> 17

any sale restrictions. Within five business days after receipt of the written
description, the Manager will advise the investor whether the securities to be
exchanged are acceptable. There is no charge for this review by the Manager.
Securities accepted by the Fund must have a readily ascertainable value as
evidenced by a listing on the Exchange, American Stock Exchange or The Nasdaq
Stock Market. Securities are valued in the manner described for valuing
Portfolio assets in the section entitled "Valuation of Shares." Acceptance of
such orders may occur on any day during the five-day period afforded the Manager
to review the acceptability of the securities. Upon notice of acceptance of such
orders, the securities must be delivered in fully negotiable form within three
days. The Manager will provide delivery instructions at the time of acceptance.
A gain or loss for federal income tax purposes may be realized by the investor
upon the securities exchange, depending upon the adjusted tax basis and value of
the securities tendered. The Fund will accept securities in this manner only for
investment by the Portfolio, and not for resale.

BY MAIL -- Share purchases of the Fund may be made by mail by sending a check or
other negotiable bank draft payable to the Fund to "NationsBank of Texas, N.A.,
11th Floor, Elm Place, P.O. Box 830840, Dallas, Texas 75283-0840, Attn.:
American AAdvantage Funds -- Institutional Class." An additional purchase of
shares should be accompanied by the shareholder's account number. Purchase
checks are accepted subject to collection at full face value in U.S. funds and
must be drawn in U.S. dollars on a U.S. bank.

REDEMPTION OF SHARES -- Fund shares may be redeemed on any Business Day by
writing directly to NationsBank of Texas, N.A. at the address above under
"Purchasing Shares of the Trust -- By Mail." The redemption price will be the
net asset value per share next determined after receipt by NationsBank of Texas,
N.A. of all required documents in good order. "Good order" means that the
request must include a letter of instruction or stock assignment specifying the
number of shares or dollar amount to be redeemed, signed by an authorized
signatory for the owners of the shares in the exact names in which they appear
on the account, and accompanied by such other supporting legal documents, if
required, in the case of estates, trusts, guardianships, custodians,
corporations, IRAs and welfare, pension and profit-sharing plans. In addition,
any share certificates being redeemed must be returned duly endorsed or
accompanied by a stock assignment with signatures guaranteed by a bank, trust
company or member of a recognized stock exchange. Shares redeemed through
financial intermediaries may be subject to transaction fees.

17
<PAGE> 18

of its net asset value is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit for protection of the Fund's
shareholders. Shares purchased by check may not be redeemed until the funds have
cleared, which may take up to 15 days. Although the Fund intends to redeem
shares in cash, it reserves the right to pay the redemption price in whole or in
part by a distribution of readily marketable securities held by the Portfolio.
See the SAI for further information concerning redemptions in kind.

DISTRIBUTION OF TRUST SHARES -- Shares are distributed through the Fund's
principal underwriter, BTS. BTS is compensated by the Manager, and not the
Trust. The Trust does not incur any direct distribution expenses. However, the
Trust has adopted a Distribution Plan in accordance with Rule 12b-1 under the
1940 Act which authorizes the use of any fees received by the Manager in
accordance with the Management and Administrative Services Agreements and any
fees received by the investment adviser pursuant to its Advisory Agreement with
the Manager, to be used for distribution purposes.

VALUATION OF SHARES -- The net asset value of each share (share price) of the
Fund is determined as of 4:00 p.m. Eastern time on each Business Day. The net
asset value of shares of the Institutional Class will be determined based on a
pro rata allocation of the value of the Fund's net assets, which in turn is
based on the Fund's pro rata allocation of the value of the Portfolio's assets
(net of liabilities) and the Portfolio's investment income, expenses and total
capital gains and losses. The allocation will be based on comparative net asset
value at the beginning of the day except for expenses related solely to one
class of shares ("Class Expenses"), which will be borne only by the appropriate
class of shares. Because of the Class Expenses, the net income attributable to
and the dividends payable for each class of shares may be different.
Additionally, the Fund may compute differing share prices as a result of Class
Expenses.

Debt securities (other than short-term securities) normally are 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 AMR Trust
Board. Investment grade short-term obligations with 60 days or less to maturity
are valued using the amortized cost method as described in the SAI.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAX MATTERS

PROSPECTUS

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<PAGE> 19

monthly, normally are declared on each Business Day immediately prior to the
determination of the class's net asset value per share and are payable to
shareholders of record as of the close of business on the day on which declared.
The Fund's net investment income attributable to the Institutional Class
consists of that class's pro rata share of the Fund's share of dividends and
interest (including discount) accrued on the Portfolio's securities, less
applicable expenses of the Fund (including its share of the Portfolio's expenses
allocable to the Institutional Class). Distributions of the Fund's share of the
Portfolio's realized net short-term capital gain, and net capital gain (the
excess of net long-term capital gain over net short-term capital loss), if any,
normally are made annually.

Unless a shareholder elects otherwise on the account application, all
dividends and other distributions on the Fund's Institutional Class shares are
automatically declared and paid in additional Institutional Class shares of the
Fund. However, a shareholder may choose to have distributions of realized net
short-term capital gain and net capital gain paid in shares and dividends paid
in cash or to have all such distributions and dividends paid in cash. An
election may be changed at any time by delivering written notice that is
received by the transfer agent at least ten days prior to the payment date for a
dividend or other distribution.

TAX INFORMATION -- The Fund is treated as a separate corporation for federal
income tax purposes and intends to qualify for treatment as a regulated
investment company under the Code. In each taxable year that the Fund so
qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on that part of its investment company taxable income (generally, net
investment income plus any net short-term capital gain) and net capital gain
that it distributes to its shareholders. However, the Fund will be subject to a
nondeductible 4% excise tax to the extent that it fails to distribute by the end
of any calendar year substantially all of its ordinary income for that calendar
year and its capital gain net income for the one-year period ending on October
31 of that year, plus certain other amounts. For these and other purposes,
dividends and other distributions declared by the Fund in October, November or
December of any year and payable to shareholders of record on a date in one of
those months will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if they are paid by the Fund during the
following January. The Portfolio has received an opinion of counsel that it
should be classified for federal income tax purposes as a partnership;
accordingly, the Portfolio should not be subject to federal income tax.

Dividends from the Fund's investment company taxable income are taxable to
its shareholders as ordinary income to the extent of its earnings and profits,
whether received in cash or paid in additional Fund shares. Distributions of the
Fund's net capital gain (whether received in cash or paid in additional Fund
shares), when designated as such, generally are taxable to its shareholders as
long-term capital gain,

PROSPECTUS

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<PAGE> 20

regardless of how long they have held their Fund shares. A capital gain
distribution from the Fund may be offset by capital losses from other sources.

Redemption of Fund shares may result in taxable gain or loss to the
redeeming shareholder, depending upon whether the fair market value of the
redemption proceeds exceeds or is less than the shareholder's adjusted basis for
the redeemed shares. If shares of the Fund are redeemed at a loss after being
held for six months or less, the loss will be treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received on those shares.

The Fund notifies its shareholders following the end of each calendar year
of the amounts of dividends and capital gain distributions paid (or deemed paid)
that year.

The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to any individuals and certain
other non-corporate shareholders who do not provide the Fund with a correct
taxpayer identification number or (except with respect to redemption proceeds)
who otherwise are subject to back-up withholding.

The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders. Prospective investors are
urged to consult their own tax advisers regarding specific questions as to the
effect of federal, state or local income taxes on any investment in the Fund.
For further tax information, see the SAI.

GENERAL INFORMATION

The Trust currently is comprised of ten separate investment portfolios. The
Fund is comprised of two classes of shares, which can be issued in an unlimited
number. Each share represents an equal proportionate beneficial interest in the
Fund and is entitled to one vote. Only shares of a particular class may vote on
matters affecting that class. Only shares of the Fund may vote on matters
affecting the Fund. All shares of the Trust vote on matters affecting the Trust
as a whole. Share voting rights are not cumulative, and shares have no
preemptive or conversion rights. Shares of the Trust are nontransferable. Each
series in the Trust will not be involved in any vote involving a Portfolio in
which it does not invest its assets. Shareholders of all of the series of the
Trust, however, will vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.

PROSPECTUS

20
<PAGE> 21

interests in the Portfolio, one or more other Portfolio investors could, in
certain instances, approve an action against which a majority of the outstanding
voting securities of the Fund had voted. This could result in the Fund redeeming
its investment in the Portfolio, which could result in increased expenses for
the Fund. Whenever the shareholders of the Fund are called to vote on matters
related to the Portfolio, the Board shall vote shares for which they receive no
voting instructions in the same proportion as the shares for which they do
receive voting instructions. Any information received from the Portfolio in the
Portfolio's report to shareholders will be provided to the shareholders of the
Fund.

As a Massachusetts business trust, the Trust is not obligated to conduct
annual shareholder meetings. However, the Trust will hold special shareholder
meetings whenever required to do so under the federal securities laws or the
Trust's Declaration of Trust or By-Laws. Trustees can be removed by a
shareholder vote at special shareholder meetings.

SHAREHOLDER COMMUNICATIONS

Shareholders will receive periodic reports, including annual and semi-annual
reports which will include financial statements showing the results of the
Fund's operations and other information. The financial statements of the Fund
will be audited by Ernst & Young LLP, independent auditor, at least annually.
Shareholder inquiries and requests for information regarding the other
investment companies which also invest in the AMR Trust should be made in
writing to the Fund at P.O. Box 619003, MD 5645, Dallas/Fort Worth Airport,
Texas 75261-9003, or by calling (800) 388-3344.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN SALES
LITERATURE SPECIFICALLY APPROVED BY OFFICERS OF THE TRUST FOR USE IN CONNECTION
WITH THE OFFER OF ANY INSTITUTIONAL CLASS SHARES, AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY
BE MADE.

American AAdvantage Funds is a registered service mark of AMR Corporation.
American AAdvantage Intermediate Bond Fund is a service mark of AMR Investment
Services, Inc.
PROSPECTUS

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<PAGE> 22

-- Notes --
<PAGE> 23

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 24

American Advantage Funds(R)

- INSTITUTIONAL CLASS -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas 75261-9003
(800) 967-9009

- AMR CLASS -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas 75261-9003
(800) 967-9009
<PAGE> 25
PROSPECTUS

AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM)
-- AMR CLASS --
SEPTEMBER 15, 1997

This Prospectus contains important information about the AMR Class of
the American AAdvantage Intermediate Bond Fund ("Fund"), a series of the
American AAdvantage Funds(R) ("Trust"), an open-end management investment
company. THE FUND SEEKS INCOME AND CAPITAL APPRECIATION BY INVESTING ALL OF ITS
INVESTABLE ASSETS IN THE INTERMEDIATE BOND PORTFOLIO ("PORTFOLIO") OF THE AMR
INVESTMENT SERVICES TRUST ("AMR TRUST") WHICH IN TURN PRIMARILY INVESTS IN DEBT
OBLIGATIONS. The investment experience of the Fund will correspond directly
with the investment experience of the Portfolio. The Fund consists of two
classes of shares designed to meet the needs of different groups of investors.
AMR Class shares are offered to tax exempt retirement and benefit plans of AMR
Corporation and its affiliates. Prospective investors in the AMR Class should
read this Prospectus carefully before making an investment decision and retain
it for future reference.

In addition to this Prospectus, a Statement of Additional Information
("SAI") dated September 15, 1997 has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The SAI contains
more detailed information about the Fund. For a free copy of the SAI, call
(817) 967-3509. For further information about the AMR Class or for information
on the other class of shares of the Fund, please refer to the appropriate
address and phone number on the last page of this Prospectus.

Under a Hub and Spoke(R)1 operating structure, the Fund seeks its
investment objective by investing all of its investable assets in the Portfolio
as described above. The Portfolio's investment objective is identical to that
of the Fund. Whenever the phrase "all of the Fund's investable assets" is used,
it means that the only investment securities that will be held by the Fund will
be the Fund's interest in the Portfolio. AMR Investment Services, Inc.
("Manager") provides investment management and administrative services to the
Portfolio and administrative services to the Fund. This Hub and Spoke
structure is different from that of many other investment companies which
directly acquire and manage their own portfolios of securities. Accordingly,
investors should carefully consider this investment approach. See "Investment
Objective, Policies and Risks -- Additional Information About the Portfolio."
The Fund may withdraw its investment in the Portfolio at any time if the
Trust's Board of Trustees ("Board") determines that it would be in the best
interest of the Fund and its shareholders to do so. Upon any such withdrawal,
the Fund's assets would be invested in accordance with the investment policies
and restrictions described in this Prospectus and the SAI.

<TABLE>
<S> <C><C> <C>
Table of Fees and Expenses ........................ 2 Investment Adviser ................................ 9

Introduction ...................................... 2 Purchase, Redemption and Valuation of ............. 11

Investment Objective, Policies and Risks .......... 3 Dividends, Other Distributions and Tax Matters .... 12

Investment Restrictions ........................... 7 General Information ............................... 12

Yields and Total Returns .......................... 7 Shareholder Communications ........................ 13

Management and Administration of the Trusts ....... 7
</TABLE>

- ---------------------
(1) Hub and Spoke is a registered service mark of Signature Financial Group,
Inc.
<PAGE> 26
TABLE OF FEES AND EXPENSES

Shown below are all AMR Class expenses expected to be incurred by the
Fund during its initial fiscal year. Because the Fund's shares were not
offered for sale prior to the date of this Prospectus, annual operating
expenses are based on estimated expenses.

Annual Operating Expenses (as a percentage of average net assets):

Management Fees 0.25%
12b-1 Fees 0.00%
Other Expenses 0.13%
-----
Total Operating Expenses 0.38%

EXAMPLE

An AMR Class investor in the Fund would directly or indirectly pay on
a cumulative basis the following expenses on a $1,000 investment assuming a 5%
annual return:

1 Year $4
3 Years $12

The purpose of the table above is to assist a potential investor in
understanding the various costs and expenses to be incurred directly or
indirectly as a shareholder in the AMR Class of the Fund. Additional
information may be found under "Management and Administration of the Trusts"
and "Investment Adviser."

INTRODUCTION

The Trust is an open-end, diversified management investment company
organized as a Massachusetts business trust on January 16, 1987. The Fund is a
separate investment portfolio of the Trust. The Fund invests all of its
investable assets in the Portfolio, which has an identical investment
objective. The Manager provides the Portfolio with business and asset
management services, including the evaluation and monitoring of the investment
adviser, and it provides the Fund with administrative services. The Fund
consists of two classes of shares, including the "AMR Class," which is
available to tax exempt retirement and benefit plans of AMR Corporation and its
affiliates, and the "Institutional Class," which is primarily for institutional
investors investing at least $2 million in the Fund. For further information
about the Institutional Class, call (800) 967-9009.

Although each class of shares is designed to meet the needs of
different categories of investors, both classes of the Fund share the same
portfolio of investments and share a common investment objective. See
"Investment Objective, Policies and Risks." There is no guarantee that the Fund
will achieve its investment objective. Based on its value, a share of the Fund,
regardless of class, will receive a proportionate share of the investment
income and the gains (losses) earned (or incurred) by the Fund. It also will
bear its proportionate share of expenses that are allocated to the Fund as a
whole. However, certain expenses are allocated separately to each class of
shares.

2 PROSPECTUS

<PAGE> 27
The assets of the Portfolio are allocated by the Manager between the
Manager and another investment adviser. The Manager and the other investment
adviser each have discretion to purchase and sell portfolio securities in
accordance with the investment objective, policies and restrictions described
in this Prospectus, the SAI, and by specific investment strategies developed by
the Manager. See "Investment Adviser."

AMR Class shares are sold without any sales charges at the next share
price calculated after an investment is received and accepted. Shares will be
redeemed at the next share price calculated after receipt of a redemption
order. See "Purchase, Redemption and Valuation of Shares."

INVESTMENT OBJECTIVE, POLICIES AND RISKS

The Fund has a fundamental investment policy which allows it to invest
all of its investable assets in the Portfolio. All other fundamental investment
policies and the non-fundamental investment policies of the Fund and the
Portfolio are identical. Therefore, although the following discusses the
investment policies of the Portfolio and the AMR Trust's Board of Trustees
("AMR Trust Board"), it applies equally to the Fund and the Board.

The Fund's investment objective is to realize income and capital
appreciation. As an investment policy, the Fund primarily seeks income and
secondarily seeks capital appreciation. The Fund seeks its investment objective
by investing all of its investable assets in the Portfolio, which invests
primarily in debt obligations. Permissible investments include securities of
the U.S. Government and its agencies and instrumentalities, including
separately traded registered principal and interest securities ("STRIPS") and
other zero coupon obligations; corporate bonds, notes and debentures;
non-convertible preferred stocks; mortgage-backed securities; asset-backed
securities; domestic, Yankeedollar and Eurodollar certificates of deposit, bank
deposit notes, and bank notes; other investment companies; and cash or cash
equivalents including investment grade short-term obligations. Such obligations
may have a fixed, variable or floating rate of interest. At the time of
purchase, all such securities will be rated in one of the four highest rating
categories by all nationally recognized statistical rating organizations
("Rating Organizations") rating that security, such as Standard & Poor's
("S&P") or Moody's Investor Services, Inc. ("Moody's") or, if unrated, are
deemed to be of comparable quality by the Manager or the investment adviser.
Obligations rated in the fourth highest rating category are limited to 25% of
the Portfolio's total assets. Obligations rated in the BBB or Baa categories by
any Rating Organization have speculative characteristics and thus changes in
economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case with
higher grade bonds. The Portfolio, at the discretion of the Manager and the
investment adviser, may retain a security which has been downgraded below the
initial investment criteria. See the SAI for definitions of the foregoing
securities and for a description of debt ratings. Principal and/or interest
payments for obligations of the U.S. Government's agencies or instrumentalities
may or may not be backed by the full faith and credit of the U.S. Government.

Although investments will not be restricted by either maturity or
duration of the securities purchased, under normal circumstances, the Portfolio
will seek to maintain a dollar weighted average duration of three to seven
years. Because the timing on return of principal for both asset-backed and
mortgage-backed securities is uncertain, in calculating the average weighted
duration of the Portfolio, the duration of these securities may be based on
certain industry conventions.

The Portfolio may engage in dollar rolls, or purchase or sell
securities on a "when-issued" or "forward commitment" basis. The purchase or
sale of when-issued securities enables an investor to hedge against anticipated
changes in interest rates and prices by locking in an attractive price or
yield. The price of when-issued securities is fixed at the time the commitment
to purchase or sell is made, but delivery and payment for the when-issued
securities take place at a later date, normally one to two months after the
date of purchase. During the period between purchase and settlement, no payment
is made by the purchaser to the issuer and no interest accrues to the
purchaser. Dollar rolls are a type of forward commitment transaction. Purchases
and sales of securities on a forward commitment basis involve a commitment to
purchase or sell securities with payment and delivery to take place at some
future date, normally one to two months after the date of the transaction. As
with when-issued securities, these transactions involve certain risks, but they
also enable an investor to hedge against anticipated changes in interest rates
and prices. Forward commitment transactions are executed for existing
obligations, whereas in a when-issued transaction, the obligations have not yet
been issued. When purchasing securities on a when-issued or forward commitment
basis, a segregated account of liquid

3
PROSPECTUS
<PAGE> 28
assets at least equal to the value of purchase commitments for such securities
will be maintained until the settlement date.

Mortgage-backed securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect, "passing through" monthly payments made
by the individual borrowers on the mortgage loans which underlie the securities
(net of fees paid to the issuer or guarantor of the securities). Early
repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing,
or foreclosure, net of fees and costs which may be incurred) may expose the
Portfolio to a lower rate of return upon reinvestment of principal. Also, if a
security subject to prepayment has been purchased at a premium, in the event of
prepayment, the value of the premium would be lost. Like other debt securities,
when interest rates rise, the value of mortgage-related securities generally
will decline; however, when interest rates decline, the value of
mortgage-related securities with prepayment features may not increase as much
as other debt securities.

Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by the Government National Mortgage Association ("GNMA"))
or guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are
supported only by the discretionary authority of the U.S. Government to
purchase the agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported with various credit enhancements
such as pool insurance, guarantees issued by governmental entities, a letter of
credit from a bank or senior/subordinated structures.

Collateralized mortgage obligations ("CMOs") are hybrid instruments
with characteristics of both mortgage- backed bonds and mortgage pass-through
securities. Similar to a mortgage pass-through, interest and prepaid principal
on a CMO are paid, in most cases, monthly. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured
in multiple classes, with each class bearing a different stated maturity or
interest rate.

The Portfolio is permitted to invest in asset-backed securities,
subject to the Portfolio's rating and quality requirements. Through the use of
trusts and special purpose subsidiaries, various types of assets, primarily
home equity loans, automobile and credit card receivables, and other types of
receivables or other assets as well as purchase contracts, financing leases and
sales agreements entered into by municipalities, are being securitized in
pass-through structures similar to the mortgage pass-through structures
described above. Consistent with the Fund's and the Portfolio's investment
objective, policies and quality standards, the Portfolio may invest in these
and other types of asset-backed securities which may be developed in the
future.

Asset-backed securities involve certain risks that do not exist with
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete security interest
in the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, some of which may reduce the ability to
obtain full payment. In the case of automobile receivables, due to various
legal and economic factors, proceeds from repossessed collateral may not always
be sufficient to support payments on the securities. The risks associated with
asset-backed securities are often reduced by the addition of credit
enhancements such as a letter of credit from a bank, excess collateral or a
third-party guarantee.

Investments in Eurodollar (U.S. dollar obligations issued outside the
United States by domestic or foreign entities) and Yankeedollar (U.S. dollar
obligations issued inside the United States by foreign entities) obligations
involve risks that differ from investments in securities of domestic issuers.
Most notably, there generally is less publicly available information about
foreign issuers; there may be less governmental regulation and supervision;
foreign issuers may use different accounting and financial standards; and the
adoption of foreign governmental restrictions may affect adversely the payment
of principal and interest on foreign investments. In addition, not all foreign
branches of United

4 PROSPECTUS
<PAGE> 29
States banks are supervised or examined by regulatory authorities as are United
States banks, and such branches may not be subject to reserve requirements.

The market value of fixed rate securities, and thus the net asset
value of the Portfolio's shares, is expected to vary inversely with movements
in interest rates. The market value of variable and floating rate instruments
should not vary as much due to the periodic adjustments in their interest
rates. An adjustment which increases the interest rate of such securities
should reduce or eliminate declines in market value resulting from a prior
upward movement in interest rates, and an adjustment which decreases the
interest rate of such securities should reduce or eliminate increases in market
value resulting from a prior downward movement in interest rates.

Except as otherwise indicated, the investment policies of the Fund may
be changed at any time by the Board to the extent that such changes are
consistent with the investment objective of the Fund. However, the Fund's
investment objective may not be changed without a majority vote of the Fund's
outstanding shares, which is defined as the lesser of (a) 67% of the shares of
the Fund present or represented if the holders of more than 50% of the shares
are present or represented at the shareholder's meeting, or (b) more than 50%
of the shares of the Fund (hereinafter, "majority vote"). The Portfolio's
investment objective may not be changed without a majority vote of the
Portfolio's interest holders.

SECURITIES LENDING. The Portfolio may lend securities to
broker-dealers or other institutional investors pursuant to agreements
requiring that the loans be continuously secured by any combination of cash,
securities of the U.S. Government and its agencies and instrumentalities and
approved bank letters of credit that at all times equal at least 100% of the
market value of the loaned securities. Such loans will not be made if, as a
result, the aggregate amount of all outstanding securities loans by the
Portfolio would exceed 331/3% of its total assets. The Portfolio continues to
receive interest on the securities loaned and simultaneously earns either
interest on the investment of the cash collateral or fee income if the loan is
otherwise collateralized. Should the borrower of the securities fail
financially, there is a risk of delay in recovery of the securities loaned or
loss of rights in the collateral. However, the Portfolio seeks to minimize this
risk by making loans only to borrowers which are deemed by the Manager to be of
good financial standing and which have been approved by the AMR Trust Board.
For purposes of complying with the Portfolio's investment policies and
restrictions, collateral received in connection with securities loans will be
deemed an asset of the Portfolio to the extent required by law. The Manager
will receive compensation for administrative and oversight functions with
respect to securities lending. The amount of such compensation will depend on
the income generated by the loan of the Portfolio's securities. The Securities
and Exchange Commission ("SEC") has granted exemptive relief that permits the
Portfolio to invest cash collateral received from securities lending
transactions in shares of one or more private investment companies managed by
the Manager. See the SAI for further information regarding loan transactions.

REPURCHASE AGREEMENTS. A repurchase agreement is an agreement under
which securities are acquired by the Portfolio from a securities dealer or bank
subject to resale at an agreed upon price on a later date. The Portfolio bears
a risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations and the Portfolio is delayed or prevented from
exercising its rights to dispose of the collateral securities. However, the
Manager and the investment adviser attempt to minimize this risk by entering
into repurchase agreements only with financial institutions which are deemed to
be of good financial standing and which have been approved by the AMR Trust
Board. See the SAI for more information regarding repurchase agreements.

PRIVATE PLACEMENT OFFERINGS. Investments in private placement
offerings are made in reliance on the "private placement" exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 (the "1933
Act"), and resold to qualified institutional buyers under Rule 144A under the
1933 Act ("Section 4(2) securities"). Section 4(2) securities are restricted as
to disposition under the federal securities laws and generally are sold to
institutional investors such as the Portfolio that agree they are purchasing
the securities for investment and not with an intention to distribute to the
public. Any resale by the purchaser must be pursuant to an exempt transaction
and may be accomplished in accordance with Rule 144A. Section 4(2) securities
normally are resold to other institutional investors such as the Portfolio
through or with the assistance of the issuer or dealers that make a market in
the Section 4(2) securities, thus providing liquidity. The Portfolio will not
invest more than 15% of its net assets in Section 4(2) securities and illiquid
securities unless the Manager or the investment adviser determine, by
continuous reference to the appropriate trading

5 PROSPECTUS
<PAGE> 30
markets and pursuant to guidelines approved by the AMR Trust Board, that any
Section 4(2) securities held by the Portfolio in excess of this level are at
all times liquid.

The AMR Trust Board, the Manager and the investment adviser, pursuant
to the guidelines approved by the AMR Trust Board, will carefully monitor the
Portfolio's investments in Section 4(2) securities offered and sold under Rule
144A, focusing on such important factors, among others, as valuation,
liquidity, and availability of information. Investments in Section 4(2)
securities could have the effect of reducing the Portfolio's liquidity to the
extent that qualified institutional buyers no longer wish to purchase these
restricted securities.

BROKERAGE PRACTICES -- The Portfolio normally will not incur any
brokerage commissions on its transactions because debt instruments are
generally traded on a "net" basis, with dealers acting as principal for their
own accounts and without a stated commission. The price of the obligation,
however, usually includes a profit to the dealer. Obligations purchased in
underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
No commissions or discounts are paid when securities are purchased directly
from an issuer. The Manager and the investment adviser will each place their
own orders to execute securities transactions designed to implement the
Portfolio's investment objective and policies. In placing such orders, the
Manager and the investment adviser will seek the best available price and most
favorable execution. The full range and quality of services offered by the
executing broker or dealer is considered when making these determinations.

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO -- As previously described,
investors should be aware that the Fund, unlike mutual funds that directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing all of its investable assets in the
Portfolio, which is a separate investment company. Since the Fund will invest
only in the Portfolio, the Fund's shareholders will acquire only an indirect
interest in the investments of the Portfolio.

The Manager expects, although it cannot guarantee, that the Fund will
achieve economies of scale by investing in the Portfolio. In addition to
selling its interests to the Fund, the Portfolio may sell its interests to
other nonaffiliated investment companies and/or other institutional investors.
All institutional investors in the Portfolio will pay a proportionate share of
the Portfolio's expenses and will invest in the Portfolio on the same terms and
conditions. However, if another investment company invests all of its assets in
the Portfolio, it would not be required to sell its shares at the same public
offering price as the Fund and would be allowed to charge different sales
commissions. Therefore, investors in the Fund may experience different returns
from investors in another investment company that invests exclusively in the
Portfolio.

The Fund's investment in the Portfolio may be affected materially by
the actions of large investors in the Portfolio, if any. For example, as with
all open-end investment companies, if a large investor were to redeem its
interest in the Portfolio, the Portfolio's remaining investors could experience
higher pro rata operating expenses, thereby producing lower returns. As a
result, the Portfolio's security holdings could become less diverse, resulting
in increased risk. Institutional investors in the Portfolio that have a greater
pro rata ownership interest in the Portfolio than the Fund could have effective
voting control over the operation of the Portfolio. A change in the Portfolio's
fundamental objective, policies and restrictions that is not approved by the
shareholders of the Fund could require the Fund to redeem its interest in the
Portfolio. Any such redemption could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio.
Should such a distribution occur, the Fund could incur brokerage fees or other
transaction costs in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified portfolio of
investments for the Fund and could affect adversely its liquidity.

The Portfolio's and Fund's investment objectives and policies are
described above. See "Investment Restrictions" for a description of their
investment restrictions. The investment objective of the Fund can be changed
only with shareholder approval. The approval of the Fund and of other investors
in the Portfolio, if any, is not required to change the investment objective,
policies or limitations of the Portfolio, unless otherwise specified. Written
notice shall be provided to shareholders of the Fund within thirty days prior
to any changes in the Portfolio's investment objective. If the investment
objective of the Portfolio changes and the shareholders of the Fund do not
approve a parallel change in the Fund's investment objective, the Fund would
seek an alternative investment vehicle or the Manager and the investment
adviser would actively manage the Fund.

6 PROSPECTUS
<PAGE> 31
See "Management and Administration of the Trust" for a complete
description of the investment management fee and other expenses associated with
the Fund's investment in the Portfolio. This Prospectus and the SAI contain
more detailed information about the Fund and the Portfolio, including
information related to (1) the investment objective, policies and restrictions
of the Fund and the Portfolio, (2) the Board of Trustees and officers of the
Trust and the AMR Trust (3) brokerage practices, (4) the Fund's shares,
including the rights and liabilities of its shareholders and (5) additional
performance information, including the method used to calculate yield, total
return, and the value of the Fund's shares.

INVESTMENT RESTRICTIONS

The following fundamental investment restrictions and the
non-fundamental investment restriction are identical for the Fund and the
Portfolio. Therefore, although the following discusses the investment
restrictions of the Portfolio and the AMR Trust Board, it applies equally to
the Fund and Board. The following fundamental investment restrictions may be
changed with respect to the Fund by the majority vote of the Fund's outstanding
shares or with respect to the Portfolio by the majority vote of the Portfolio's
interest holders. The Portfolio may not:

o Invest more than 5% of its total assets (taken at market value) in
securities of any one issuer, other than obligations issued by the
U.S. Government, its agencies or instrumentalities, or purchase more
than 10% of the voting securities of any one issuer, with respect to
75% of the Portfolio's total assets.

o Invest more than 25% of its total assets in the securities of
companies primarily engaged in any one industry other than the U.S.
Government, its agencies and instrumentalities. Municipal governments
and their agencies and authorities are not deemed to be industries.
Finance companies as a group are not considered a single industry for
purposes of this policy. Further, wholly owned finance companies will
be considered to be in the industries of their parent companies if
their activities are primarily related to financing the activities of
their parent companies.

The following non-fundamental investment restriction may be changed
with respect to the Fund by a vote of a majority of the Board or with respect
to the Portfolio by a vote of a majority of the AMR Trust Board: the Portfolio
may not invest more than 15% of its net assets in illiquid securities,
including time deposits and repurchase agreements that mature in more than
seven days.

The above percentage limits are based upon asset values at the time of
the applicable transaction; accordingly, a subsequent change in asset values
will not affect a transaction that was in compliance with the investment
restrictions at the time such transaction was effected. See the SAI for other
investment limitations.

YIELDS AND TOTAL RETURNS

Each class of the Fund has different expenses which will impact its
performance. Advertised yields for the AMR Class of the Fund will be computed
by dividing the net investment income earned per share during the relevant time
period by the maximum offering price per share for the class on the last day of
the period. Total return quotations advertised by the Fund may reflect the
average annual compounded (or aggregate compounded) rate of return during the
designated time period based on a hypothetical initial investment and the
redeemable value of that investment at the end of the period. Additionally,
each class of the Fund may advertise a "monthly distribution rate." This rate
is based on an annualized monthly dividend accrual rate per share compared with
the month-end share price of each class of the Fund. The Fund will at times
compare its performance to applicable published indices, and also may disclose
its performance as ranked by certain ranking entities. See the SAI for more
information about the calculation of yields and total returns.

MANAGEMENT AND ADMINISTRATION OF THE TRUSTS

7 PROSPECTUS
<PAGE> 32
Agreement dated October 1, 1995, as amended July 25, 1997, that obligates the
Manager to provide or oversee all administrative, investment advisory and
portfolio management services for the AMR Trust. The Manager, located at 4333
Amon Carter Boulevard, MD 5645, Fort Worth, Texas 76155, is a wholly owned
subsidiary of AMR Corporation ("AMR"), the parent company of American Airlines,
Inc., and was organized in 1986 to provide investment management, advisory,
administrative and asset management consulting services. The assets of the
Portfolio are allocated by the Manager between the Manager and the investment
adviser. See "Investment Adviser." As of June 30, 1997, the Manager had assets
under management totaling approximately $17.8 billion, including approximately
$6.6 billion under active management and $11.2 billion as named fiduciary or
fiduciary adviser. Of the total, approximately $13.1 billion of assets are
related to AMR. American Airlines, Inc. is not responsible for investments made
in the Fund.

The Manager provides the Trust and the AMR Trust with office space,
office equipment and personnel necessary to manage and administer the Trusts'
operations. This includes complying with reporting requirements; corresponding
with shareholders; maintaining internal bookkeeping, accounting and auditing
services and records; and supervising the provision of services to the Trusts
by third parties. The Manager oversees the Portfolio's participation in
securities lending activities and any actions taken by securities lending
agents in connection with those activities to ensure compliance with all
applicable regulatory and investment guidelines. The Manager also develops the
investment programs for the Portfolio, selects and changes investment advisers
(subject to approval by the AMR Trust Board and appropriate interest holders),
allocates assets among investment advisers, monitors the investment advisers'
investment programs and results, and coordinates the investment activities of
the investment advisers to ensure compliance with regulatory restrictions.

The Manager bears the expense of providing the above services and pays
the fees of the investment adviser of the Fund and the Portfolio. As
compensation for paying the investment advisory fees and for providing the
Portfolio with advisory and asset allocation services, the Manager receives
from the AMR Trust an annualized advisory fee that is calculated and accrued
daily, equal to 0.25% of the net assets of the Portfolio. The advisory fee is
payable quarterly in arrears. To the extent that the Fund invests all of its
investable assets in the Portfolio, the Manager will not receive an advisory
fee under its Management Agreement with the Trust. The Manager receives
compensation in connection with securities lending activities. If the Portfolio
lends its portfolio securities and receives cash collateral from the borrower,
the Manager will receive up to 25% of the net annual interest income (the gross
interest earned by the investment less the amount paid to the borrower as well
as related expenses) received from the investment of such cash. If a borrower
posts collateral other than cash, the borrower will pay to the lender a loan
fee. The Manager will receive up to 25% of the loan fees posted by borrowers.
The Manager also is compensated through the Administrative Services Agreement,
as described below, for other services provided.

The Management Agreement will continue in effect provided that
annually such continuance is specifically approved by a vote of the Board and
the AMR Trust Board, including the affirmative votes of a majority of the
Trustees of each Board who are not parties to the Management Agreement or
"interested persons" as defined in the 1940 Act of any such party ("Independent
Trustees"), cast in person at a meeting called for the purpose of considering
such approval, or by the vote of the Fund's shareholders or the Portfolio's
interest holders. The Management Agreement may be terminated with respect to
the Fund or the Portfolio at any time, without penalty, by a majority vote of
outstanding Fund shares or Portfolio interests on sixty (60) days' written
notice to the Manager, or by the Manager, on sixty (60) days' written notice to
the Trust or the AMR Trust. The Management Agreement will automatically
terminate in the event of its "assignment" as defined in the 1940 Act.

The Trust is responsible for the following expenses: audits by
independent auditors; transfer agency, custodian, dividend disbursing agent and
shareholder recordkeeping services; taxes, if any, and the preparation of the
Fund's tax returns; interest; costs of Trustee and shareholder meetings;
printing and mailing prospectuses and reports to existing shareholders; fees
for filing reports with regulatory bodies and the maintenance of the Fund's
existence; legal fees; fees to federal and state authorities for the
registration of shares; fees and expenses of Independent Trustees; insurance
and fidelity bond premiums; and any extraordinary expenses of a nonrecurring
nature.

A majority of the Independent Trustees of the Board have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest between the Trust and the AMR Trust, including creating a separate
Board of Trustees of the AMR Trust.

8 PROSPECTUS
<PAGE> 33
FUND ADVISORY AGREEMENTS -- The investment adviser has entered into
separate investment advisory agreements with the Manager to provide investment
advisory services to the Fund and the Portfolio. To the extent that the Fund
invests all of its investable assets in the Portfolio, however, the investment
adviser will receive an advisory fee only on behalf of the Portfolio and not on
behalf of the Fund. The assets of the Portfolio are allocated between the
Manager and the investment adviser for the Portfolio as described in this
Prospectus under "Investment Adviser." The Manager is permitted to enter into
new or modified advisory agreements with existing or new investment advisers
without approval of Fund shareholders or Portfolio interest holders, but
subject to approval of the Board and the AMR Trust Board. The SEC issued an
exemptive order which eliminates the need for shareholder/interest holder
approval, subject to compliance with certain conditions. These conditions
include the requirement that within 90 days of hiring a new adviser or
implementing a material change with respect to an advisory contract, the Fund
send a notice to shareholders containing information about the change that
would be included in a proxy statement. The Manager recommends investment
advisers to the Board and the AMR Trust Board based upon its continuing
quantitative and qualitative evaluation of the investment advisers' skill in
managing assets using specific investment styles and strategies. The allocation
of assets to the investment adviser may be changed at any time by the Manager.
In general, the allocation will vary based upon a variety of factors, including
the overall investment performance of the investment adviser, the Portfolio's
cash flow needs and market conditions. The investment adviser can be terminated
without penalty to the AMR Trust by the Manager, the AMR Trust Board or the
interest holders of the Portfolio. Short-term investment performance, by
itself, is not a significant factor in selecting or terminating an investment
adviser, and the Manager does not expect to recommend frequent changes of
investment advisers. The Prospectus will be supplemented if additional
investment advisers are retained or the contract with the existing investment
adviser is terminated.

The Manager and the investment adviser have discretion to purchase and
sell securities for their segment of the Portfolio's assets in accordance with
the Portfolio's objective, policies and restrictions and the more specific
strategies provided by the Manager. Although the investment adviser is subject
to general supervision by the AMR Trust Board and the Manager, these parties do
not evaluate the investment merits of specific securities transactions. As
compensation for its services, the investment adviser is paid a fee by the
Manager out of the proceeds of the management fee received by the Manager from
the AMR Trust.

ADMINISTRATIVE SERVICES AGREEMENT -- The Manager and the Trust entered
into an Administrative Services Agreement which obligates the Manager to
provide the Fund those administrative and management services (other than
investment advisory services) described in the Management Agreement. As
compensation for these services, the Manager receives an annualized fee of
0.05% of the net assets of the Fund. To the extent that the Fund invests all of
its investable assets in the Portfolio, however, the Manager will receive no
fee under this Agreement.

ALLOCATION OF FUND EXPENSES -- Expenses of the Fund generally are
allocated equally among the shares of the Fund, regardless of class. However,
certain expenses approved by the Board will be allocated solely to the class to
which they relate.

PRINCIPAL UNDERWRITER -- BROKERS TRANSACTION SERVICES, INC. ("BTS"),
7001 Preston Road, Dallas, Texas 75205, serves as the principal underwriter of
the Trust.

CUSTODIAN AND TRANSFER AGENT -- NATIONSBANK OF TEXAS, N.A., Dallas,
Texas, serves as custodian for the Portfolio and the Fund, and as transfer
agent for the AMR Class.

INDEPENDENT AUDITOR -- The independent auditor for the Fund and the
AMR Trust is ERNST & YOUNG LLP, Dallas, Texas.

INVESTMENT ADVISER

9 PROSPECTUS
<PAGE> 34
Barrow an annualized fee equal to .30% on the first $200 million in AMR Trust
assets under its discretionary management, .20% on the next $300 million, .15%
on the next $500 million, and .125% on assets over $1 billion. Solely for the
purpose of determining the applicable percentage rates when calculating
Barrow's fees, there shall be included all other assets or trust assets of
American Airlines, Inc. also under management by Barrow (except assets managed
under the HALO Bond Program). The inclusion of any such assets will result in
lower overall fee rates being applied to the Portfolio. Barrow provides no
services to the Fund or the Portfolio except for portfolio investment
management and related recordkeeping services, and has no affiliation with the
Trust, the AMR Trust or the Manager.

The Manager is responsible for oversight of the investment adviser,
regular review of the investment adviser's performance and asset allocations
between the Manager and the investment adviser. William F. Quinn has served as
President of the Manager since it was founded in 1986 and Nancy A. Eckl serves
as Vice President-Trust Investments of the Manager. Ms. Eckl previously served
as Vice President-Finance and Compliance of the Manager from December 1990 to
May 1995. In these capacities, Mr. Quinn and Ms. Eckl have primary
responsibility for the day-to-day operations of the Fund and the Portfolio.
Further information about the Manager can be found in this Prospectus under
"Management and Administration of the Trusts."

PURCHASE, REDEMPTION AND VALUATION OF SHARES

PURCHASING SHARES OF THE TRUST -- AMR Class shares are offered to
tax-exempt retirement and benefit plans of AMR Corporation and its affiliates.
Shares are sold without a sales charge at the next share price calculated after
the acceptance of a purchase order. AMR Class shares are offered and orders
accepted until 4:00 p.m. Eastern time on each day on which the New York Stock
Exchange ("Exchange") is open for trading, which excludes the following
business holidays: New Year's Day, Martin Luther King's Birthday, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day ("Business Day"). The Trust reserves the right to reject any
order for the purchase of shares and to limit or suspend, without prior notice,
the offering of shares.

AMR Class shares may be purchased and redeemed as follows:

BY WIRE -- Purchases may be made by wiring funds. To ensure prompt
receipt of a transmission by wire, the investor should: telephone the transfer
agent at (214) 508-5038 or (800) 658-5811 and specify the Fund whose shares are
to be purchased; provide the name, address, telephone number and account number
of the investor; and identify the amount being wired and by which bank. If the
investor is opening a new account, the transfer agent will provide the investor
with an account number. The investor should instruct its bank to designate the
account number which the transfer agent has assigned to the investor and to
transmit the federal funds to: Federal Reserve Bank, Dallas, for NationsBank of
Texas, N.A. ABA Routing # 111-000-025, Corporate Trust Suspense Account No.
0180019810, reference American AAdvantage Funds, attention: Fund Account
Services.

BY DEPOSITING SECURITIES -- Shares of the Fund may be purchased in
exchange for an investor's securities if the securities are acceptable to the
Portfolio and satisfy applicable investment objectives and policies. Investors
interested in exchanging securities must first contact the Manager and acquire
instructions regarding submission of a written description of the securities
which the investor wishes to exchange. The investor must represent that all
such securities offered to the Fund are not subject to any sale restrictions.
Within five business days after receipt of the written description, the Manager
will advise the investor whether the securities to be exchanged are acceptable.
There is no charge for this review by the Manager. Securities accepted by the
Fund must have a readily ascertainable value as evidenced by a listing on the
Exchange, the American Stock Exchange or The Nasdaq Stock Market. Securities
are valued in the manner described for valuing Portfolio assets in the section
entitled "Valuation of Shares." Acceptance of such orders may occur on any day
during the five-day period afforded the Manager to review the acceptability of
the securities. Upon notice of acceptance of such orders, the securities must
be delivered in fully negotiable form within three days. The Manager will
provide delivery instructions at the time of acceptance. A gain or loss for
federal income tax purposes may be realized by the investor upon the securities
exchange, depending upon the adjusted tax basis and value of the securities
tendered. The Fund will accept securities in this manner only for investment by
the Portfolio, and not for resale.

BY MAIL -- Share purchases of the Fund may be made by mail by sending
a check or other negotiable bank draft payable to the applicable Fund to
"NationsBank of Texas, N.A., 11th Floor, Elm Place, P.O. Box 830840, Dallas,

10 PROSPECTUS
<PAGE> 35
Texas 75283-0840, Attn.: American AAdvantage Funds -- AMR Class." An additional
purchase of shares should be accompanied by the shareholder's account number.
Purchase checks are accepted subject to collection at full face value in U.S.
funds and must be drawn in U.S. dollars on a U.S. bank.

REDEMPTION OF SHARES -- Fund shares may be redeemed on any Business
Day by writing directly to NationsBank of Texas, N.A. at the address above
under "Purchasing Shares of the Trust -- By Mail." The redemption price will be
the net asset value per share next determined after receipt by NationsBank of
Texas, N.A. of all required documents in good order. "Good order" means that
the request must include a letter of instruction or stock assignment specifying
the number of shares or dollar amount to be redeemed, signed by an authorized
signatory for the owners of the shares in the exact names in which they appear
on the account, and accompanied by such other supporting legal documents, if
required, in the case of estates, trusts, guardianships, custodians,
corporations, IRAs and welfare, pension and profit-sharing plans. In addition,
any share certificates being redeemed must be returned duly endorsed or
accompanied by a stock assignment with signatures guaranteed by a bank, trust
company or member of a recognized stock exchange.

Payment for redeemed shares will be made in cash within seven days
after the receipt of a redemption request in good order. However, the Fund
reserves the right to suspend redemptions or postpone the date of payment (a)
for any periods during which the Exchange is closed (other than for customary
weekend and holiday closings), or when trading on the Exchange is restricted,
(b) at such time as an emergency exists as determined by the SEC so that
disposal of the Fund's investments or determination of its net asset value is
not reasonably practicable, or (c) for such other periods as the SEC by order
may permit for protection of the Fund's shareholders. Shares purchased by check
may not be redeemed until the funds have cleared, which may take up to 15 days.
Although the Fund intends to redeem shares in cash, it reserves the right to
pay the redemption price in whole or in part by a distribution of readily
marketable securities held by the Portfolio. See the SAI for further
information concerning redemptions in kind.

DISTRIBUTION OF TRUST SHARES -- Shares are distributed through the
Fund's principal underwriter, BTS. BTS is compensated by the Manager, and not
the Trust. The Trust does not incur any direct distribution expenses. However,
the Trust has adopted a Distribution Plan in accordance with Rule 12b-1 under
the 1940 Act which authorizes the use of any fees received by the Manager in
accordance with the Management and Administrative Services Agreements and any
fees received by the investment adviser pursuant to its Advisory Agreement with
the Manager, to be used for distribution purposes.

VALUATION OF SHARES -- The net asset value of each share (share price)
of the Fund is determined as of 4:00 p.m. Eastern time on each Business Day.
The net asset value of AMR Class shares will be determined based on a pro rata
allocation of the value of the Fund's net assets, which in turn is based on the
Fund's pro rata allocation of the value of the Portfolio's assets (net of
liabilities) and the Portfolio's investment income, expenses and total capital
gains and losses. The allocation will be based on comparative net asset value
at the beginning of the day except for expenses related solely to one class of
shares ("Class Expenses"), which will be borne only by the appropriate class of
shares. Because of the Class Expenses, the net income attributable to and the
dividends payable for each class of shares may be different. Additionally, the
Fund may compute differing share prices as a result of Class Expenses.

Debt securities (other than short-term securities) normally are 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 AMR Trust
Board. Investment grade short-term obligations with 60 days or less to maturity
are valued using the amortized cost method as described in the SAI.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAX MATTERS

DIVIDENDS AND OTHER DISTRIBUTIONS -- Dividends and other distributions
paid on each class of the Fund's shares are calculated at the same time and in
the same manner. Dividends consisting of substantially all of the net
investment income of the Fund, which are paid monthly, normally are declared on
each Business Day immediately prior to the determination of the class's net
asset value per share and are payable to shareholders of record as of the close
of

11 PROSPECTUS
<PAGE> 36
business on the day on which declared. The Fund's net investment income
attributable to the AMR Class consists of that class's pro rata share of the
Fund's share of dividends and interest (including discount) accrued on the
Portfolio's securities, less applicable expenses of the Fund (including its
share of the Portfolio's expenses allocable to the AMR Class). Distributions of
the Fund's share of the Portfolio's realized net short-term capital gain and
net capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, normally are made annually.

Unless a shareholder elects otherwise on the account application, all
dividends and other distributions on the Fund's AMR Class shares are
automatically declared and paid in additional AMR Class shares of the Fund.
However, a shareholder may choose to have distributions of realized net
short-term capital gain and net capital gain paid in shares and dividends paid
in cash or to have all such distributions and dividends paid in cash. An
election may be changed at any time by delivering written notice that is
received by the transfer agent at least ten days prior to the payment date for
a dividend or other distribution.

TAX INFORMATION -- The Fund is treated as a separate corporation for
federal income tax purposes and intends to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended. In each
taxable year that the Fund so qualifies, the Fund (but not its shareholders)
will be relieved of federal income tax on that part of its investment company
taxable income (generally, net investment income plus any net short-term
capital gain) and net capital gain that it distributes to its shareholders.
However, the Fund will be subject to a nondeductible 4% excise tax to the
extent that it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that calendar year and its capital
gain net income for the one-year period ending on October 31 of that year, plus
certain other amounts. For these and other purposes, dividends and other
distributions declared by the Fund in October, November or December of any year
and payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of that year if they are paid by the Fund during the following
January. The Portfolio has received an opinion of counsel that it should be
classified for federal income tax purposes as a partnership; accordingly, the
Portfolio should not be subject to federal income tax.

The qualified retirement and benefit plans of AMR Corporation and its
affiliates ("Plans"), which are the AMR Class shareholders, pay no federal
income tax. Individual participants in the Plans should consult the Plans'
governing documents and their own tax advisers for information on the tax
consequences associated with participating in the Plans.

The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders. Prospective
investors are urged to consult their own tax advisers regarding specific
questions as to the effect of federal, state or local income taxes on any
investment in the Fund. For further tax information, see the SAI.

GENERAL INFORMATION

The Trust currently is comprised of ten separate investment
portfolios. The Fund is comprised of two classes of shares, which can be issued
in an unlimited number. Each share represents an equal proportionate beneficial
interest in the Fund and is entitled to one vote. Only shares of a particular
class may vote on matters affecting that class. Only shares of the Fund may
vote on matters affecting the Fund. All shares of the Trust vote on matters
affecting the Trust as a whole. Share voting rights are not cumulative, and
shares have no preemptive or conversion rights. Shares of the Trust are
nontransferable. Each series in the Trust will not be involved in any vote
involving a Portfolio in which it does not invest its assets. Shareholders of
all of the series of the Trust, however, will vote together to elect Trustees
of the Trust and for certain other matters. Under certain circumstances, the
shareholders of one or more series could control the outcome of these votes.

On most issues subjected to a vote of the Portfolio's interest
holders, as required by the 1940 Act, the Fund will solicit proxies from its
shareholders and will vote its interest in the Portfolio in proportion to the
votes cast by the Fund's shareholders. Because the Portfolio interest holder's
votes are proportionate to its percentage interests in the Portfolio, one or
more other Portfolio investors could, in certain instances, approve an action
against which a majority of the outstanding voting securities of the Fund had
voted. This could result in the Fund redeeming its investment in the Portfolio,
which could result in increased expenses for the Fund. Whenever the
shareholders of the Fund are called to vote on matters related to the
Portfolio, the Board shall vote shares for which they receive no voting
instructions in the same proportion as the shares for which they do receive
voting instructions. Any information received from the Portfolio in the
Portfolio's report to shareholders will be provided to the shareholders of the
Fund.

12 PROSPECTUS
<PAGE> 37
As a Massachusetts business trust, the Trust is not obligated to
conduct annual shareholder meetings. However, the Trust will hold special
shareholder meetings whenever required to do so under the federal securities
laws or the Trust's Declaration of Trust or By-Laws. Trustees can be removed by
a shareholder vote at special shareholder meetings.

SHAREHOLDER COMMUNICATIONS

Shareholders will receive periodic reports, including annual and
semi-annual reports which will include financial statements showing the results
of the Fund's operations and other information. The financial statements of the
Fund will be audited by Ernst & Young LLP, independent auditor, at least
annually. Shareholder inquiries and requests for information regarding the
other investment companies which also invest in the AMR Trust should be made in
writing to the Fund at P.O. Box 619003, MD 5645, Dallas/Fort Worth Airport,
Texas 75261-9003 or by calling (800) 388-3344.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN SALES
LITERATURE SPECIFICALLY APPROVED BY OFFICERS OF THE TRUST FOR USE IN CONNECTION
WITH THE OFFER OF ANY AMR CLASS SHARES, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY
BE MADE.

American AAdvantage Funds is a registered service mark of AMR
Corporation. American AAdvantage Intermediate Bond Fund is a service mark of
AMR Investment Services, Inc.

13 PROSPECTUS
<PAGE> 38
[AMERICAN ADVANTAGE LOGO]

-- AMR Class --
P.O. Box 619003
Dallas/Fort Worth Airport, Texas 75261-9003
(800) 967-9009

-- Institutional Class --
P.O. Box 619003
Dallas/Fort Worth Airport, Texas 75261-9003
(800) 967-9009

<PAGE> 39
STATEMENT OF ADDITIONAL INFORMATION

AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM)

-- AMR CLASS --
-- INSTITUTIONAL CLASS --

SEPTEMBER 15, 1997

The American AAdvantage Intermediate Bond Fund (the "Fund") is one of ten
separate investment portfolios of the American AAdvantage Funds (the "Trust"),
a no-load, open-end, diversified management investment company. The Fund
consists of two classes of shares, the AMR Class and the Institutional Class,
designed to meet the needs of different groups of investors.

The Fund seeks its investment objective by investing all of its
investable assets in the Intermediate Bond Portfolio (the "Portfolio") of the
AMR Investment Services Trust ("AMR Trust"). The Portfolio has an investment
objective identical to the Fund's. The AMR Trust is a separate investment
company managed by AMR Investment Services, Inc. (the "Manager").

This Statement of Additional Information ("SAI") should be read in
conjunction with an AMR Class or Institutional Class prospectus, dated
September 15, 1997 (individually, a "Prospectus"), copies of which may be
obtained without charge by calling (817) 967-3509.

This SAI is not a prospectus and is authorized for distribution to
prospective investors only if preceded or accompanied by a current Prospectus.

INVESTMENT RESTRICTIONS

The Fund has the following fundamental investment policy that enables it
to invest in the Portfolio:

Notwithstanding any other limitation, the Fund may invest all of
its investable assets in an open-end management investment company
with substantially the same investment objectives, policies and
limitations as the Fund. For this purpose, "all of the Fund's
investable assets" means that the only investment securities that
will be held by the Fund will be the Fund's interest in the
investment company.

All other fundamental investment policies and the non-fundamental
policies of the Fund and the Portfolio are identical. Therefore, although the
following discusses the investment policies of the Portfolio and the AMR
Trust's Board of Trustees ("AMR Trust Board"), it applies equally to the Fund
and the Trust's Board of Trustees ("Board").

In addition to the investment limitations noted in the Prospectus, the
following seven restrictions have been adopted by the Portfolio, and may be
changed with respect to the Portfolio only by the majority vote of the
Portfolio's outstanding interests. "Majority of the outstanding voting
securities" under the Investment Company Act of 1940, as amended (the "1940
Act"), and as used herein means, with respect to the Portfolio, the lesser of
(a) 67% of the interests of the Portfolio present at the meeting if the holders
of more than 50% of the interests are present and represented at the interest
holders' meeting or (b) more than 50% of the interests of the Portfolio.
Whenever the Fund is requested to vote on a change in the investment
restrictions of the Portfolio, the Fund will hold a meeting of its shareholders
and will cast its votes as instructed by its shareholders. The percentage of
the Fund's votes representing the Fund's shareholders not voting will be voted
by the Board in the same proportion as those Fund shareholders who do, in fact,
vote.

The Portfolio may not:

1. Purchase or sell real estate or real estate limited partnership
interests, provided, however, that the Portfolio may invest in securities
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein when consistent with the other
policies and limitations described in the Prospectus.

2. Purchase or sell commodities (including direct interests and/or
leases in oil, gas or minerals) or commodities contracts, except with
respect to forward foreign currency exchange contracts, foreign currency
<PAGE> 40
futures contracts and "when-issued" securities when consistent with the
other policies and limitations described in the Prospectus.

3. Engage in the business of underwriting securities issued by others,
except to the extent that, in connection with the disposition of
securities, the Portfolio may be deemed an underwriter under federal
securities law.

4. Make loans to any person or firm, provided, however, that the
making of a loan shall not be construed to include (i) the acquisition
for investment of bonds, debentures, notes or other evidences of
indebtedness of any corporation or government which are publicly
distributed or (ii) the entry into repurchase agreements and further
provided, however, that the Portfolio may lend its portfolio securities
to broker-dealers or other institutional investors in accordance with the
guidelines stated in the Prospectus.

5. Purchase from or sell portfolio securities to its officers,
Trustees or other "interested persons" of the Trust, as defined in the
1940 Act, including its investment advisers and their affiliates, except
as permitted by the 1940 Act and exemptive rules or orders thereunder.

6. Issue senior securities except that the Portfolio may engage in
when-issued securities and forward commitment transactions.

7. Borrow money, except from banks or through reverse repurchase
agreements for temporary purposes in an aggregate amount not to exceed
10% of the value of its total assets at the time of borrowing. In
addition, although not a fundamental policy, the Portfolio intends to
repay any money borrowed before any additional portfolio securities are
purchased. See "Other Information" for a further description regarding
reverse repurchase agreements.

The following non-fundamental investment restriction applies to the
Portfolio and may be changed by a majority vote of the AMR Trust Board: the
Portfolio may not purchase securities on margin, effect short sales (except
that the Portfolio may obtain such short term credits as may be necessary for
the clearance of purchases or sales of securities) or purchase or sell call
options or engage in the writing of such options.

The Portfolio may invest in the securities of other investment companies
to the extent permitted by law. The Portfolio may incur duplicate advisory or
management fees when investing in another mutual fund.

TRUSTEES AND OFFICERS OF THE TRUST AND THE AMR TRUST

The Board provides broad supervision over the Trust's affairs. The
Manager is responsible for the management of Trust assets, and the Trust's
officers are responsible for the Trust's operations. The Trustees and officers
of the Trust and AMR Trust are listed below, together with their principal
occupations during the past five years. Unless otherwise indicated, the
address of each person listed below is 4333 Amon Carter Boulevard, MD 5645,
Fort Worth, Texas 76155.

<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ---------------------- ------------ --------------------------------------------------------
<S> <C> <C>
William F. Quinn* (49) Trustee and President President, AMR Investment Services, Inc. (1986-Present);
Chairman, American Airlines Employees Federal Credit
Union (1989-Present); Trustee, American Performance Funds
(1990-1994); Director, Crescent Real Estate Equities, Inc.
(1994-Present); Trustee, American AAdvantage Mileage
Funds (1995-Present).

Alan D. Feld (60) Trustee Partner, Akin, Gump, Strauss, Hauer & Feld, LLP
1700 Pacific Avenue (1960-Present)#; Director, Clear Channel Communications
Suite 4100 (1984-Present); Director, CenterPoint Properties, Inc.
Dallas, Texas 75201 (1994-Present); Trustee, American AAdvantage Mileage Funds
(1996-Present).
</TABLE>

2
<PAGE> 41
<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- ------------- -------------------------------------------------------
<S> <C> <C>
Ben J. Fortson (65) Trustee President and CEO, Fortson Oil Company (1958-Present);
301 Commerce Street Director, Kimbell Art Foundation (1964-Present);
Suite 3301 Director, Burnett Foundation (1987-Present); Honorary
Fort Worth, Texas 76102 Trustee, Texas Christian University (1986-Present);
Trustee, American AAdvantage Mileage Funds (1996-
Present).

John S. Justin (80) Trustee Chairman and Chief Executive Officer, Justin Industries,
2821 West Seventh Street Inc. (a diversified holding company) (1969-Present);
Fort Worth, Texas 76107 Executive Board Member, Blue Cross/Blue Shield of Texas
(1985-Present); Board Member, Zale Lipshy Hospital
(1993-Present); Trustee, Texas Christian University
(1980-Present); Director and Executive Board Member,
Moncrief Radiation Center (1985-Present); Director,
Texas New Mexico Enterprises (1984-1993); Director,
Texas New Mexico Power Company (1979-1993); Trustee,
American AAdvantage Mileage Funds (1995-Present).

Stephen D. O'Sullivan* (62) Trustee Consultant (1994-Present); Vice President and Controller
(1985-1994), American Airlines, Inc.; Trustee, American
AAdvantage Mileage Funds (1995-Present).

Roger T. Staubach (55) Trustee Chairman of the Board and Chief Executive Officer of The
6750 LBJ Freeway Staubach Company (a commercial real estate company)
Dallas, Texas 75240 (1982-Present); Director, Halliburton Company (1991-
Present); Director, First USA, Inc. (1993-Present);
Director, Brinker International (1993-Present);
Director, Columbus Realty Trust (1994-Present); Member
of the Advisory Board, The Salvation Army; Trustee,
Institute for Aerobics Research; Member of Executive
Council, Daytop/Dallas; former quarterback of the Dallas
Cowboys professional football team; Trustee, American
AAdvantage Mileage Funds (1995-Present).

Kneeland Youngblood, M.D.(41) Trustee Physician (1982-Present); President, Youngblood
2305 Cedar Springs Road Enterprises, Inc. (a health care investment and
Suite 401 management firm) (1983-Present); Trustee, Teachers
Dallas, Texas 75201 Retirement System of Texas (1993-Present); Director,
United States Enrichment Corporation (1993-Present),
Director, Just For the Kids (1995-Present); Member,
Council on Foreign Relations (1995-Present); Trustee,
American AAdvantage Mileage Funds (1996-Present).

Nancy A. Eckl (34) Vice President Vice President, AMR Investment Services, Inc. (1990-
Present).

Michael W. Fields (43) Vice President Vice President, AMR Investment Services, Inc. (1988-
Present).

Barry Y. Greenberg (34) Vice President and Director, Legal and Compliance, AMR Investment Services,
Assistant Secretary Inc. (1995-Present); Branch Chief (1992-1995), Securities
and Exchange Commission.

Rebecca L. Harris (30) Treasurer Director of Finance (1995-Present), Controller (1991-
1995), AMR Investment Services, Inc.
</TABLE>

3
<PAGE> 42
<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- ------------ ---------------------------------------------------------
<S> <C> <C>
John B. Roberson (39) Vice President Vice President, AMR Investment Services, Inc. (1991-
Present).

Thomas E. Jenkins, Jr. (30) Assistant Secretary Senior Compliance Analyst, AMR Investment Services, Inc.
(1996-Present); Staff Accountant (1994-1996) and
Compliance Examiner (1991-1994), Securities and Exchange
Commission.

Adriana R. Posada (43) Assistant Secretary Senior Compliance Analyst (1996-Present) and Compliance
Analyst (1993-Present), AMR Investment Services, Inc.;
Special Sales Representative, American Airlines, Inc.
(1991-1993).

Clifford J. Alexander (53) Secretary Partner, Kirkpatrick & Lockhart LLP (law firm).

Robert J. Zutz (44) Assistant Secretary Partner, Kirkpatrick & Lockhart LLP (law firm).
</TABLE>

o The law firm of Akin, Gump, Strauss, Hauer & Feld LLP ("Akin, Gump")
provides legal services to American Airlines, Inc., an affiliate of the
Manager. Mr. Feld has advised the Trusts that he has had no material
involvement in the services provided by Akin, Gump to American Airlines,
Inc. and that he has received no material benefit in connection with
these services. Akin, Gump does not provide legal services to the
Manager or AMR Corporation.

* Messrs. Quinn and O'Sullivan, by virtue of their current or former
positions, are deemed to be "interested persons" of the Trust and AMR
Trust as defined by the 1940 Act.

All Trustees and officers as a group own less than 1% of the outstanding
shares of the Fund.

As compensation for their service to the Trust and the AMR Trust, the
Trustees of the Trust and the AMR Trust who are not parties to the Management
Agreement or "interested persons" as defined in the 1940 Act of any such party
("Independent Trustees") and their spouses receive free air travel from
American Airlines, Inc., an affiliate of the Manager. The Trust and the AMR
Trust do not pay for these travel arrangements. However, the Trusts compensate
each Trustee with payments in an amount equal to the Trustee's income tax on
the value of this free airline travel. Mr. O'Sullivan, who as a retiree of
American Airlines, Inc. already receives free airline travel, receives
compensation annually of up to three round trip airline tickets for each of his
three adult children. Trustees are also reimbursed for any expenses incurred
in attending Board meetings. These amounts are reflected in the following
table for the fiscal year ended October 31, 1996.(1)

<TABLE>
<CAPTION>
Total
Aggregate Pension or Retirement Estimated Compensation
Compensation Benefits Accrued as Annual Benefits From American
From the Part of the Upon AAdavantage Funds
Name of Trustee Trust Trust's Expenses Retirement Complex
- --------------- ------------ --------------------- --------------- -----------------
<S> <C> <C> <C> <C>
William F. Quinn $ 0 $ 0 $ 0 $ 0
John S. Justin $ 373 $ 0 $ 0 $ 1,492
Stephen D. O'Sullivan $ 458 $ 0 $ 0 $ 1,832
Roger T. Staubach $ 2,832 $ 0 $ 0 $ 11,330
</TABLE>

MANAGEMENT, ADMINISTRATIVE SERVICES AND DISTRIBUTION FEES

As described more fully in the Prospectus, the Manager is paid a
management fee as compensation for paying investment advisory fees and for
providing the Trust and the AMR Trust with advisory and asset allocation
services. In addition to the management fee, the Manager is paid an
administrative services fee for providing administrative and management
services (other than investment advisory services) to the Fund.

__________________________________

(1) Messrs. Feld and Fortson and Dr. Youngblood did not serve as Trustees during
this period.

4
<PAGE> 43
Brokers Transaction Services, Inc. ("BTS") is the distributor of the
Fund's shares, and as such receives an annualized fee of $50,000 from the
Manager for distributing the shares of the Trust and the American AAdvantage
Mileage Funds.

REDEMPTIONS IN KIND

Although the Fund intends to redeem shares in cash, it reserves the right
to pay the redemption price in whole or in part by a distribution of readily
marketable securities held by the Portfolio. However, shareholders always will
be entitled to redeem shares for cash up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period. Redemption in kind is not as
liquid as a cash redemption. In addition, if redemption is made in kind,
shareholders who receive securities and sell them could receive less than the
redemption value of their securities and could incur certain transaction
costs.

INVESTMENT ADVISORY AGREEMENTS

The Manager and the investment adviser entered into separate investment
advisory agreements with the Fund and the Portfolio, as described in the
Prospectus. The Manager provides investment advisory services pursuant to a
Management Agreement dated April 3, 1987, and amended on July 25, 1997, as
approved by the Board and the AMR Trust Board. The Advisory Agreement with the
investment adviser was approved by the Board and the AMR Trust Board and became
effective as of November 1, 1995.

Each Investment Advisory Agreement will automatically terminate if
assigned, and may be terminated without penalty at any time by the Manager, by
a vote of a majority of the Trustees or by a vote of a majority of the
outstanding voting securities of the Fund on no less than thirty (30) days' nor
more than sixty (60) days' written notice to the investment adviser, or by the
investment adviser upon sixty (60) days' written notice to the Trust. The
Investment Advisory Agreements will continue in effect provided that annually
such continuance is specifically approved by a vote of the Trustees, including
the affirmative votes of a majority of the Trustees who are not parties to the
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of considering such
approval, or by the vote of shareholders.

PORTFOLIO SECURITIES TRANSACTIONS

The Investment Advisory Agreements provide, in substance, that in executing
portfolio transactions and selecting brokers or dealers, the principal
objective of each investment adviser is to seek the best net price and
execution available. It is expected that securities ordinarily will be
purchased in the primary markets, and that in assessing the best net price and
execution available, each investment adviser shall consider all factors it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis.

In selecting brokers or dealers to execute particular transactions, the
Manager and the investment adviser ("investment advisers") are authorized to
consider "brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934), provision of statistical
quotations (including the quotations necessary to determine a Portfolio's net
asset value), the sale of Trust shares by such broker-dealer or the servicing
of Trust shareholders by such broker-dealer, and other information provided to
the Portfolio or to the investment advisers (or their affiliates), provided,
however, that the investment adviser determines that it has received the best
net price and execution available. The fees of the investment advisers are not
reduced by reason of receipt of such brokerage and research services. However,
with disclosure to and pursuant to written guidelines approved by the Board, an
investment adviser of the Portfolio or its affiliated broker-dealer may execute
portfolio transactions and receive usual and customary brokerage commissions
(within the meaning of Rule 17e-1 under the 1940 Act) for doing so.

The Portfolio anticipates that it will experience high portfolio turnover
rate. High portfolio turnover can increase the Portfolio's transaction costs
and generate additional capital gains or losses.

<PAGE> 44
TAX INFORMATION

TAXATION OF THE FUND

To qualify as a regulated investment company ("RIC") under the Internal
Revenue Code of 1986, as amended ("Code"), the Fund (which is treated as a
separate corporation for these purposes) must, among other requirements:

# Derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the
sale or other disposition of securities ("Income Requirement");
# Derive less than 30% of its gross income each taxable year from the sale
or other disposition of securities that are held for less than three
months ("Short-Short Limitation");
# Diversify its investments in securities within certain statutory limits;
and
# Distribute annually to its shareholders at least 90% of its investment
company taxable income (generally, net investment income plus net
short-term capital gain) ("Distribution Requirement").

Effective for the taxable year beginning November 1, 1997, the Short-Short
Limitation, discussed above, is repealed. Accordingly, the Fund will not be
required to meet such limitation. Certain other funds of the Trust have
received a ruling from the Internal Revenue Service ("IRS") that each such
fund, as an investor in the AMR Trust, will be deemed to own a proportionate
share of that portfolio's assets and to be entitled to the income of that
portfolio attributable to that share for purposes of determining whether the
fund satisfies the first three requirements described above to qualify as a
RIC. Although that ruling may not be relied upon as a precedent by the Fund,
the Manager believes that the reasoning and, hence, the conclusion thereof
apply to the Fund as well.

See the next section for a discussion of the tax consequences to the Fund
of distributions to it from the Portfolio and certain investments by the
Portfolio.

TAXATION OF THE PORTFOLIO

The other portfolios of the AMR Trust have received rulings from the IRS to
the effect that, among other things, for federal income tax purposes, each such
portfolio will be treated as a separate entity and will be classified as a
partnership that will not be a "publicly traded partnership." Although these
rulings may not be relied on as precedent by the Portfolio, the Manager
believes that the reasoning thereof and, hence, their conclusion apply to the
Portfolio as well. As a result, the Portfolio is not subject to federal income
tax; instead, each investor in the Portfolio, such as the Fund, is required to
take into account in determining its federal income tax liability its share of
the Portfolio's income, gains, losses, deductions and credits without regard to
whether it has received any cash distributions from the Portfolio.

Because, as noted above, the Fund is deemed to own a proportionate share of
the Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
conduct its operations so that the Fund will be able to satisfy all those
requirements.

Distributions to the Fund from the Portfolio (whether pursuant to a partial
or complete withdrawal or otherwise) will not result in the Fund's recognition
of any gain or loss for federal income tax purposes, except that (1) gain will
be recognized to the extent any cash that is distributed exceeds the Fund's
basis for its interest in the Portfolio before the distribution, (2) income or
gain will be recognized if the distribution is in liquidation of the Fund's
entire interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio and (3) loss will be recognized if
a liquidation distribution consists solely of cash and/or unrealized
receivables. The Fund's basis for its interest in the Portfolio generally will
equal the amount of cash the Fund invests in the Portfolio, increased by the
Fund's share of the Portfolio's net income and capital gains and decreased by
(a) the amount of cash and the basis of any property the Portfolio distributes
to the Fund and (b) the Fund's share of the Portfolio's losses.

The Portfolio may acquire zero coupon or other securities issued with
original issue discount. As an investor in the Portfolio that holds those
securities, the Fund would have to include in its income its share of the
original issue discount that accrues on the securities during the taxable year,
even if the Portfolio (and, hence, the Fund) receives no corresponding payment
on the securities during the year. Because the Fund annually must distribute
substantially all of its investment company taxable income, including any
original issue discount, to satisfy the Distribution Requirement and avoid
imposition of the 4% excise tax described in the Prospectus, the Fund may be
required in a

6
<PAGE> 45
particular year to distribute as a dividend an amount that is greater than the
total amount of cash it actually receives. Those distributions would be made
from the Fund's cash assets, if any, or the proceeds of redemption of a portion
of the Fund's interest in the Portfolio (which redemption proceeds would be
paid from the Portfolio's cash assets or the proceeds of sales of portfolio
securities, if necessary). The Portfolio might realize capital gains or losses
from any such sales, which would indirectly increase or decrease the Fund's
investment company taxable income and/or net capital gain (the excess of net
long-term capital gain over net short-term capital loss).

The foregoing is only a summary of some of the important federal income tax
considerations affecting the Fund and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, prospective investors are
advised to consult their own tax advisers for more detailed information
regarding the above and for information regarding federal, state, local and
foreign taxes.

YIELD AND TOTAL RETURN QUOTATIONS

The advertised yield for each class of the Fund is computed by dividing the
net investment income per share earned during a 30-day (or one month) period
less the aggregate fees that are charged to all shareholder accounts of the
class in proportion to the 30-day (or one month) period and the weighted
average size of an account in that class of the Fund by the maximum offering
price per share of the class on the last day of the period, according to the
following formula:

yield = 2{({(a-b)/cd}+1)(6)-1}

where, with respect to a particular class of the Fund, "a" is the dividends and
interest earned during the period; "b" is the sum of the expenses accrued for
the period (net of reimbursement, if any) and the aggregate fees that are
charged to all shareholder accounts in proportion to the 30-day (or one month)
period and the weighted average size of an account in the class; "c" is the
average daily number of class shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per class
share on the last day of the period.

Each class of the Fund may also advertise a monthly distribution rate. The
distribution rate gives the return of the class based solely on the dividend
payout to that class if someone was entitled to the dividends for an entire
month. A monthly distribution rate is calculated from the following formula:

monthly distribution rate = A/P*(365/N)

where, with respect to a particular class of shares, "A" is the dividend
accrual per share during the month, "P" is the share price at the end of the
month and "N" is the number of days in the month. The "monthly distribution
rate" is a non-standardized performance calculation and when used in an
advertisement will be accompanied by the appropriate standardized SEC
calculations.

The advertised total return for a class of a Fund would be calculated by
equating an initial amount invested in a class of a Fund to the ending
redeemable value, according to the following formula:

P(1 + T)(n) = ERV

where "P" is a hypothetical initial payment of $1,000; "T" is the average
annual total return for the class; "n" is the number of years involved; and
"ERV" is the ending redeemable value of a hypothetical $1,000 payment made in
the class at the beginning of the investment period covered.

Each class of the Fund may also use "aggregate" total return figures for
various periods which represent the cumulative change in value of an investment
in a class for the specific period. Such total returns reflect changes in
share prices of a class and assume reinvestment of dividends and distributions.

In reports or other communications to shareholders or in advertising
material, each class of the Fund from time to time may compare its performance
with that of other mutual funds in rankings prepared by Lipper Analytical
Services, Inc., Morningstar, Inc., IBC Financial Data, Inc. and other similar
independent services which monitor the performance of mutual funds or
publications such as the "New York Times," "Barrons" and the "Wall Street
Journal." Each class of the Fund also may compare its performance with various
indices prepared by independent services such as Standard & Poor's, Morgan
Stanley or Lehman Brothers or to unmanaged indices that may assume reinvestment
of dividends but generally do not reflect deductions for administrative and
management costs.

<PAGE> 46
The Fund may advertise the standard deviation of its returns for various
time periods and compare its standard deviation to that of various indices.
Standard deviation of returns over time is a measure of volatility. It
indicates the spread of a Fund's returns about their central tendency or mean.
In theory, a Fund that is more volatile should receive a higher return in
exchange for taking extra risk. Standard deviation is a well-accepted
statistic to gauge the riskiness of an investment strategy and measure its
historical volatility as a predictor of risk, although the measure is subject
to time selection bias.

Advertisements for the Fund may compare the Fund to federally insured
investments such as bank certificates of deposit and credit union deposits,
including the long-term effects of inflation on these types of investments.
Advertisements also may compare the historical rate of return of different
types of investments.

From time to time, the Manager may use contests as a means of promoting
the American AAdvantage Funds. Prizes may include free air travel and/or hotel
accommodations. Listings for certain of the Funds may be found in newspapers
under the heading "Amer AAdvant."

DESCRIPTION OF THE TRUST

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable for its obligations.
However, the Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of Trust property for any
shareholder held personally liable for the obligations of the Trust. The
Declaration of Trust also provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding) for the protection of the Trust, its
shareholders, Trustees, officers, employees and agents to cover possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial
loss due to shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations. The Trust has not engaged in any other business.

The Trust was originally created to manage money for large institutional
investors, including pension and 401(k) plans for American Airlines, Inc. The
AMR Class is offered to tax-exempt retirement and benefit plans of AMR
Corporation and its affiliates. The following individuals are eligible for
purchasing shares of the Institutional Class with an initial investment of less
than $2 million: (i) employees of the Manager, (ii) officers and directors of
AMR and (iii) members of the Trust's Board of Trustees.

OTHER INFORMATION

Bank Deposit Notes-Bank deposit notes are obligations of a bank, rather
than bank holding company corporate debt. The only structural difference
between bank deposit notes and certificates of deposit is that interest on bank
deposit notes is calculated on a 30/360 basis as are corporate notes/bonds.
Similar to certificates of deposit, deposit notes represent bank level
investments and, therefore, are senior to all holding company corporate debt.

Bankers' Acceptances-Bankers' acceptances are short-term credit instruments
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be
as long as 270 days, most acceptances have maturities of six months or less.

Cash Equivalents-Cash equivalents include certificates of deposit, bearer
deposit notes, bankers' acceptances, government obligations, commercial paper,
short-term corporate debt securities and repurchase agreements.

Certificates of Deposit-Certificates of deposit are issued against funds
deposited in an eligible bank (including its domestic and foreign branches,
subsidiaries and agencies), are for a definite period of time, earn a specified
rate of return and are normally negotiable.

<PAGE> 47
Commercial Paper-Commercial paper refers to promissory notes representing
an unsecured debt of a corporation or finance company with a fixed maturity of
no more than 270 days. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.

Debentures-Debentures are unsecured debt securities. The holder of a
debenture is protected only by the general creditworthiness of the issuer.

Derivatives-Generally, a derivative is a financial arrangement, the value
of which is based on, or "derived" from, a traditional security, asset or
market index. Some "derivatives" such as mortgage-related and other
asset-backed securities are in many respects like any other investment,
although they may be more volatile or less liquid than more traditional debt
securities. There are, in fact, many different types of derivatives and many
different ways to use them. There are a range of risks associated with those
uses.

Full Faith and Credit Obligations of the U.S. Government-Securities issued
or guaranteed by the U.S. Treasury, backed by the full taxing power of the U.S.
Government or the right of the issuer to borrow from the U.S. Treasury.

General Obligation Bonds-General obligation bonds are secured by the pledge
of the issuer's full faith, credit, and usually, taxing power. The taxing
power may be an unlimited ad valorem tax or a limited tax, usually on real
estate and personal property. Most states do not tax real estate, but leave
that power to local units of government.

Illiquid Securities. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933 Act ("1933 Act"),
securities that are otherwise not readily marketable and repurchase agreements
having a remaining maturity of longer than seven calendar days. Securities
that have not been registered under the 1933 Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven calendar days. A mutual fund
also might have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment.
However, the fact that there are contractual or legal restrictions on resale of
such investments to the general public or to certain institutions may not be
indicative of their liquidity.

Loan Participation Interests-Loan participation interests represent
interests in bank loans made to corporations. The contractual arrangement with
the bank transfers the cash stream of the underlying bank loan to the
participating investor. Because the issuing bank does not guarantee the
participations, they are subject to the credit risks generally associated with
the underlying corporate borrower. In addition, because it may be necessary
under the terms of the loan participation for the investor to assert through
the issuing bank such rights as may exist against the underlying corporate
borrower, in the event the underlying corporate borrower fails to pay principal
and interest when due, the investor may be subject to delays, expenses and
risks that are greater than those that would have been involved if the
investor had purchased a direct obligation (such as commercial paper) of such
borrower. Moreover, under the terms of the loan participation, the investor
may be regarded as a creditor of the issuing bank (rather than of the
underlying corporate borrower), so that the issuer also may be subject to the
risk that the issuing bank may become insolvent. Further, in the event of the
bankruptcy or insolvency of the corporate borrower, the loan participation may
be subject to certain defenses that can be asserted by such borrower as a
result of improper conduct by the issuing bank. The secondary market, if any,
for these loan participations is extremely limited and any such participations
purchased by the investor are regarded as illiquid.

Loan Transactions-Loan transactions involve the lending of securities to a
broker-dealer or institutional investor for its use in connection with short
sales, arbitrages or other security transactions. The purpose of a

<PAGE> 48
qualified loan transaction is to afford a lender the opportunity to continue to
earn income on the securities loaned and at the same time earn fee income or
income on the collateral held by it.

Securities loans will be made in accordance with the following conditions:
(1) the Portfolio must receive at least 100% collateral in the form of cash or
cash equivalents, securities of the U.S. Government and its agencies and
instrumentalities, and approved bank letters of credit; (2) the borrower must
increase the collateral whenever the market value of the loaned securities
(determined on a daily basis) rises above the level of collateral; (3) the
Portfolio must be able to terminate the loan after notice, at any time; (4) the
Portfolio must receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest or other
distributions on the securities loaned, and any increase in market value of the
loaned securities; (5) the Portfolio may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the securities loaned may
pass to the borrower, provided, however, that if a material event affecting the
investment occurs, the AMR Trust Board must be able to terminate the loan and
vote proxies or enter into an alternative arrangement with the borrower to
enable the AMR Trust Board to vote proxies.

While there may be delays in recovery of loaned securities or even a loss
of rights in collateral supplied should the borrower fail financially, loans
will be made only to firms deemed by the AMR Trust Board to be of good
financial standing and will not be made unless the consideration to be earned
from such loans would justify the risk. Such loan transactions are referred to
in this SAI as "qualified" loan transactions.

The cash collateral so acquired through qualified loan transactions may be
invested only in those categories of high quality liquid securities previously
authorized by the AMR Trust Board.

Mortgage-Backed Securities-Mortgage-backed securities consist of both
collateralized mortgage obligations and mortgage pass-through certificates.

Collateralized Mortgage Obligations ("CMOs")-CMOs and interests in real
estate mortgage investment conduits ("REMICs") are debt securities
collateralized by mortgages, or mortgage pass-through securities. CMOs divide
the cash flow generated from the underlying mortgages or mortgage pass-through
securities into different groups referred to as "tranches," which are then
retired sequentially over time in order of priority. The principal
governmental issuers of such securities are the Federal National Mortgage
Association ("FNMA"), a government sponsored corporation owned entirely by
private stockholders and the Federal Home Loan Mortgage Corporation ("FHLMC"),
a corporate instrumentality of the United States created pursuant to an act of
Congress which is owned entirely by Federal Home Loan Banks. The issuers of
CMOs are structured as trusts or corporations established for the purpose of
issuing such CMOs and often have no assets other than those underlying the
securities and any credit support provided. A REMIC is a mortgage securities
vehicle that holds residential or commercial mortgages and issues securities
representing interests in those mortgages. A REMIC may be formed as a
corporation, partnership, or segregated pool of assets. The REMIC itself is
generally exempt from federal income tax, but the income from the mortgages is
reported by investors. For investment purposes, interests in REMIC securities
are virtually indistinguishable from CMOs.

Mortgage Pass-Through Certificates-Mortgage pass-through certificates
are issued by governmental, government-related and private organizations which
are backed by pools of mortgage loans.

(1) Government National Mortgage Association ("GNMA") Mortgage
Pass-Through Certificates ("Ginnie Maes")-GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
Ginnie Maes represent an undivided interest in a pool of mortgages that are
insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Ginnie Maes
entitle the holder to receive all payments (including prepayments) of
principal and interest owed by the individual mortgagors, net of fees paid to
GNMA and to the issuer which assembles the mortgage pool and passes through the
monthly mortgage payments to the certificate holders (typically, a mortgage
banking firm), regardless of whether the individual mortgagor actually makes
the payment. Because payments are made to certificate holders regardless of
whether payments are actually received on the underlying mortgages, Ginnie Maes
are of the "modified pass-through" mortgage certificate type. The GNMA is
authorized to guarantee the timely payment of principal and interest on the
Ginnie Maes. The GNMA guarantee is backed by the full faith and credit of the
United States, and the GNMA has unlimited authority to borrow funds from the
U.S. Treasury to make payments under the guarantee. The market for Ginnie Maes
is highly liquid because of the size of the market and the active participation
in the secondary market of security dealers and a variety of investors.

(2) FHLMC Mortgage Participation Certificates ("Freddie Macs")-Freddie
Macs represent interests in groups of specified first lien residential
conventional mortgages underwritten and owned by the FHLMC. Freddie Macs

10
<PAGE> 49
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC guarantees either ultimate collection or timely payment of
all principal payments on the underlying mortgage loans. In cases where the
FHLMC has not guaranteed timely payment of principal, the FHLMC may remit the
amount due because of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable. Freddie Macs are not guaranteed by the United
States or by any of the Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. The
secondary market for Freddie Macs is highly liquid because of the size of the
market and the active participation in the secondary market of the FHLMC,
security dealers and a variety of investors.

(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes")-Fannie Maes represent an undivided interest in a pool of conventional
mortgage loans secured by first mortgages or deeds of trust, on one family or
two to four family, residential properties. The FNMA is obligated to
distribute scheduled monthly installments of principal and interest on the
mortgages in the pool, whether or not received, plus full principal of any
foreclosed or otherwise liquidated mortgages. The obligation of the FNMA under
its guarantee is solely its obligation and is not backed by, nor entitled to,
the full faith and credit of the United States.

(4) Mortgage-Related Securities Issued by Private Organizations-Pools
created by non-governmental issuers generally offer a higher rate of interest
than government and government-related pools because there are no direct or
indirect government guarantees of payments in such pools. However, timely
payment of interest and principal of these pools is often partially supported
by various enhancements such as over-collateralization and senior/subordination
structures and by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance. The insurance and
guarantees are issued by government entities, private insurers or the mortgage
poolers. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable.

Ratings of Long-Term Obligations-The Portfolio utilizes ratings provided by
the following nationally recognized statistical rating organizations ("Rating
Organizations") in order to determine eligibility of long-term obligations.

The four highest Moody's Investors Service, Inc. ("Moody's") ratings for
long-term obligations (or issuers thereof) are Aaa, Aa, A and Baa. Obligations
rated Aaa are judged by Moody's to be of the best quality. Obligations rated
Aa are judged to be of high quality by all standards. Together with the Aaa
group, such debt comprises what is generally known as high-grade debt. Moody's
states that debt rated Aa is rated lower than Aaa debt because margins of
protection or other elements make long-term risks appear somewhat larger than
for Aaa debt. Obligations which are rated A by Moody's possess many favorable
investment attributes and are considered "upper medium-grade obligations."
Obligations which are rated Baa by Moody's are considered to be medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Moody's also supplies numerical
indicators 1, 2, and 3 to rating categories. The modifier 1 indicates that the
security is in the higher end of its rating category; the modifier 2 indicates
a mid-range ranking; and modifier 3 indicates a ranking toward the lower end of
the category.

The four highest Standard & Poor's ratings for long-term obligations are
AAA, AA, A and BBB. Obligations rated AAA have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is extremely
strong. Obligations rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a small degree.
Obligations rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions. Obligations rated BBB by Standard &
Poor's are regarded as having adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.

Duff & Phelps' four highest ratings for long-term obligations are AAA, AA,
A and BBB. Obligations rated AAA have the highest credit quality with risk
factors being negligible. Obligations rated AA are of high credit quality and
have strong protection factors. Risk is modest but may vary slightly from time
to time because of economic conditions. Obligations rated A have average but
adequate protection factors. However, risk factors are more variable and
greater in periods of economic stress. Obligations rated BBB have below
average protection factors with considerable variability in risk during
economic cycles, but are still considered sufficient for prudent investment.

Thomson BankWatch ("BankWatch") long-term debt ratings apply to specific
issues of long-term debt and preferred stock. They specifically assess the
likelihood of an untimely repayment of principal or interest over the term to
maturity of the rated instrument. BankWatch's four highest ratings for
long-term obligations are AAA, AA, A

11
<PAGE> 50
and BBB. Obligations rated AAA indicate that the ability to repay principal
and interest on a timely basis is very high. Obligations rated AA indicate a
superior ability to repay principal and interest on a timely basis, with
limited incremental risk compared to issues rated in the highest category.
Obligations rated A indicate the ability to repay principal and interest is
strong. Issues rated A could be more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings. BBB is the lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated BBB are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.

Fitch Investors Service, Inc. ("Fitch") investment grade bond ratings
provide a guide to investors in determining the credit risk associated with a
particular security. The ratings represent Fitch's assessment of the issuer's
ability to meet the obligations of a specific debt issue or class of debt in a
timely manner. Obligations rated AAA are considered to be investment grade and
of the highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected by
reasonable foreseeable events. Bonds rated AA are considered to be investment
grade and of very high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as strong as bonds rated
AAA. Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.

IBCA's four highest long-term obligation ratings are AAA, AA, A and BBB.
Obligations rated AAA are those for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially. AA
obligations have a very low expectation of investment risk. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic, or financial conditions may increase investment risk albeit
not very significantly. Obligations rated A have a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic, or financial conditions
may lead to increased investment risk. Obligations rated BBB have a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic, or
financial conditions are more likely to lead to increased investment risk than
for obligations in other categories.

Standard & Poor's, Duff & Phelps and Fitch apply indicators, such as
"+","-," or no character, to indicate relative standing within the major rating
categories.

Ratings of Short-term Obligations-The rating P-1 is the highest short-term
rating assigned by Moody's. Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluations of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.

Short-term obligations (or issuers thereof) rated A-1 by Standard & Poor's
have the following characteristics. Liquidity ratios are adequate to meet cash
requirements. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determines whether the issuer's short-term
obligation is rated A-1, A-2, or A-3.

IBCA's short-term rating of A-1 indicates obligations supported by the
highest capacity for timely repayment. Where issues possess particularly
strong credit features, a rating of A-1+ is assigned. Obligations rated A-2
are supported by a good capacity for timely repayment.

The distinguishing feature of Duff & Phelps Credit Ratings' short-term
rating is the refinement of the traditional 1 category. The majority of
short-term debt issuers carry the highest rating, yet quality differences exist
within that tier. Obligations rated D-1+ indicate the highest certainty of
timely payment. Safety is just below risk-free U.S.

<PAGE> 51
Treasury obligations. Obligations rated D-1 have a very high certainty of
timely payment. Risk factors are minor. Obligations rated D-1- have a high
certainty of timely payment. Risk factors are very small. Obligations rated
D-2 have good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

Thomson BankWatch short-term ratings are intended to assess the likelihood
of an untimely or incomplete payment of principal or interest. Obligations
rated TBW-1 indicate a very high likelihood that principal and interest will be
paid on a timely basis. While the degree of safety regarding timely payment of
principal and interest is strong for an obligation rated TBW-2, the relative
degree of safety is not as high as for issues rated TBW-1.

Fitch's short-term ratings apply to debt obligations that are payable on
demand or generally have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. A rating of F-1+ indicates exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment. Obligations rated F-1 have very
strong credit quality. Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than issues rated F-1+. Issues
assigned a rating of F-2 indicate good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F- 1+ and F-1 ratings.

Repurchase Agreements-A repurchase agreement, which provides a means to
earn income on funds for periods as short as overnight, is an arrangement under
which the purchaser (e.g., the Portfolio) purchases securities and the seller
agrees, at the time of sale, to repurchase the securities at a specified time
and price. The repurchase price will be higher than the purchase price, the
difference being income to the purchaser, or the purchase and repurchase prices
may be the same, with interest at a stated rate due to the purchaser together
with the repurchase price on repurchase. In either case, the income to the
purchaser is unrelated to the interest rate on the securities subject to the
repurchase agreement.

The Portfolio may enter into repurchase agreements with any bank or
registered broker-dealer who, in the opinion of the AMR Trust Board, presents a
minimum risk of bankruptcy during the term of the agreement based upon
guidelines that periodically are reviewed by the AMR Trust Board. The
Portfolio may enter into repurchase agreements as a short-term investment of
its idle cash in order to earn income. The securities will be held by a
custodian (or agent) approved by the AMR Trust Board during the term of the
agreement. However, if the market value of the securities subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Portfolio will direct the seller of the securities to deliver
additional securities so that the market value of all securities subject to the
repurchase agreement will equal or exceed the repurchase price.

In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before the repurchase of the
securities under a repurchase agreement, the Portfolio may encounter a delay
and incur costs before being able to sell the security being held as
collateral. Delays may involve loss of interest or decline in price of the
securities. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the securities, in
which case the Portfolio may incur a loss if the proceeds to the Portfolio from
the sale of the securities to a third party are less than the repurchase price.

Reverse Repurchase Agreements-The Portfolio may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Portfolio would sell portfolio securities to financial
institutions such as banks and broker/dealers and agree to repurchase them at a
mutually agreed-upon date and price. The Portfolio intends to enter into
reverse repurchase agreements only to avoid selling securities to meet
redemptions during market conditions deemed unfavorable by the investment
adviser possessing investment authority. At the time the Portfolio enters into
a reverse repurchase agreement, it will place in a segregated custodial account
assets such as liquid high quality debt securities having a value not less than
100% of the repurchase price (including accrued interest), and will
subsequently monitor the account to ensure that such required value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by the Portfolio may decline below the price at
which it is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by an investment company under the
1940 Act.

Separately Traded Registered Interest and Principal Securities and Zero
Coupon Obligations-Separately traded registered interest and principal
securities or "STRIPS" and zero coupon obligations are securities that do not
make regular interest payments. Instead they are sold at a discount from their
face value. Each Portfolio will take into account as income a portion of the
difference between these obligations' purchase prices and their face values.
Because they do not pay coupon income, the prices of STRIPS and zero coupon
obligations can be very volatile when interest rates change. STRIPS are zero
coupon bonds issued by the U.S. Treasury.

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U.S. Government Securities-U.S. Government securities are issued or
guaranteed by the U.S. Government and include U.S. Treasury obligations (see
definition below) and securities issued by U.S. agencies and instrumentalities.

U. S. Government agencies or instrumentalities that issue or guarantee
securities include the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, GNMA, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Banks, FHLMC, Federal Intermediate Credit
Banks, Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank,
Asian-American Development Bank, Agency for International Development, Student
Loan Marketing Association and International Bank of Reconstruction and
Development.

Obligations of U.S. Government agencies and instrumentalities may or may
not be supported by the full faith and credit of the United States. Some are
backed by the right of the issuer to borrow from the Treasury; others are
supported by discretionary authority of the U.S. Government to purchase the
agencies' obligations; while still others, such as the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. In the
case of securities not backed by the full faith and credit of the United
States, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the United States itself in the event the agency or
instrumentality does not meet its commitment.

U.S. Treasury Obligations-U.S. Treasury obligations include bills, notes
and bonds issued by the U.S. Treasury and STRIPS.

Variable or Floating Rate Obligations-A variable rate obligation is one
whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate obligation is one whose terms
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a
market value that approximates its par value. Variable or floating rate
obligations may be secured by bank letters of credit.

As used above, an obligation is "subject to a demand feature" when the
Portfolio is entitled to receive the principal amount of the obligation either
at any time on no more than 30 days' notice or at specified intervals not
exceeding one year and upon no more than 30 days' notice.

When-Issued and Delayed Delivery Securities-Delivery of and payment for
securities on a when-issued or delayed delivery basis may take place as long as
a month or more after the date of the purchase commitment. The value of these
securities is subject to market fluctuation during this period and no income
accrues to the Portfolio until settlement takes place. The Portfolio maintains
with the Custodian a segregated account containing high grade liquid securities
in an amount at least equal to these commitments. When entering into a
when-issued or delayed delivery transaction, the Portfolio will rely on the
other party to consummate the transaction; if the other party fails to do so,
the Portfolio may be disadvantaged.

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TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Trustees and Officers of the Trust and the AMR Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Management, Administrative Services and Distribution Fees . . . . . . . . . . . . . . . . . . . . . . . . 4

Redemptions in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Investment Advisory Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Portfolio Securities Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Yield and Total Return Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Description of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>