<PAGE> 1
[AMERICAN AADVANTAGE FUNDS LOGO]
- Institutional Class -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas
75261-9003
(800) 967-9009
- PlanAhead Class(R) -
P.O. Box 419643
Kansas City, Missouri 64141-6643
(800) 388-3344
- AMR Class(sm) -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas
75261-9003
(800) 967-9009
This report is prepared for shareholders of the American
AAdvantage Funds included herein and may be
distributed to others only if preceded or accompanied
by a current prospectus.
ANNUAL
REPORT
OCTOBER 31, 1997
[AMERICAN AADVANTAGE FUNDS LOGO]
BALANCED FUND
GROWTH AND INCOME FUND
INTERMEDIATE BOND FUND
INTERNATIONAL EQUITY FUND
LIMITED-TERM INCOME FUND
Managed by AMR Investment Services, Inc.
<PAGE> 2
Dear Fellow Shareholder:
1997 marked the 10th anniversary for the American AAdvantage Funds family.
During that time the Funds have grown from $325 million in 1987 to over $6
billion. We have been blessed by both good market conditions and achieving our
goals to provide our shareholders with diversified, low-cost funds that have
consistently achieved above average returns. We are pleased to report to you on
this year's performance of the American AAdvantage Balanced, Growth and Income,
Intermediate Bond, International Equity and Limited-Term Income Funds and to
provide you with a copy of the Annual Report for the year ended October 31,
1997.
Balanced Fund
The Balanced Fund's total return for the year ending October 31, 1997 was
20.36% for the AMR Class, 20.04% for the Institutional Class and 19.75% for the
PlanAhead Class. While the AMR Class exceeded the Lipper Balanced Index total
return of 20.10%, the Institutional and PlanAhead Classes lagged slightly.
The Fund's 56.3% stock exposure was slightly below the Fund's "neutral"
stock weighting of 60% primarily due to expectations of slowing corporate profit
growth in 1997 and 1998. Stock segment returns were 31.18% versus the S&P 500
Index's return of 32.18%, while the bond segment's 9.16% return surpassed the
Lehman Govt/Corp Index total return of 8.81% for the year.
Stocks continued to climb to record highs as the strong U.S. economy
coupled with full employment and low inflation attracted domestic and foreign
investors alike. Performance was dominated by a few large cap growth stocks for
most of the year, but this trend reversed in the last months of the period as
investors moved out of the higher priced stocks into small to mid cap stocks
that perform well in a benign interest rate environment. Thirty year Treasury
bond yields fell from 6.64% at the end of October 1996 to 6.15% at the end of
October 1997 as fears of inflation abated. The Consumer Price Index (CPI)
remained low during the year, approaching an eleven year low for inflation in
the U.S.
The Fund employs an investment discipline that emphasizes purchasing
securities with above average growth expectations which are selling at a
discount to the market. As a result, the Fund significantly overweighted the
financial sector, which posted strong returns due to steady earnings growth and
continued consolidation in the banking industry. The Fund's performance was also
boosted by the superior stock selection and modest overweighting of the consumer
cyclicals sector. Growth in personal income and strong consumer confidence have
resulted in autos and retailers posting strong earnings. Although technology was
the best performing sector in the S&P 500 Index, the Fund underweighted this
area as very few technology stocks fall within the Fund's value parameters.
Growth and Income Fund
The Growth and Income Fund performed well for the year ending October 31,
1997. The Fund's total return was 28.40% for the AMR Class, 28.05% for the
Institutional Class and 27.64% for the PlanAhead Class. Both the AMR Class and
the Institutional Class exceeded the Lipper Growth and Income Index total return
average of 28.03%, while the PlanAhead Class fell just short of the Index
return.
Since the Fund utilizes the same investment managers and the same value
approach to stock selection as the Balanced Fund, it also benefited from
overweighted positions in financial and consumer cyclical stocks but was also
hurt from its underweighting in technology.
<PAGE> 3
Intermediate Bond Fund
The American AAdvantage Funds introduced the Intermediate Bond Fund on
September 15, 1997. The Fund's total return from inception through October 31,
1997 was 2.41% for the Institutional Class, just shy of the Lipper Intermediate
Investment Grade Average's total return of 2.59%. However, the Fund outperformed
substantially in October, its first full month, returning 1.47% versus Lipper's
1.18%.
The bond market, from the Fund's inception through October 31, experienced
a strong rally in prices and a sharp fall in interest rates based on continued
low inflation and weakness in the Asian markets. The Fund participated in this
rally with a duration largely neutral to the benchmark and no exposure to Asian
credits.
The Fund will continue to seek opportunistic investments in securities that
offer a strong yield advantage to the market while reflecting strong credit and
structural merit.
International Equity Fund
The International Equity Fund continued to post strong results on an
absolute and relative basis for the year ending October 31, 1997. The Fund's
total return for the one year period was 19.39% for the AMR Class, 19.08% for
the Institutional Class, and 18.71% for the PlanAhead Class, compared to a
13.35% return for the Lipper International Index.
Relative to the EAFE Index (the Morgan Stanley Capital International
Europe, Australia and Far East Index), which returned 4.91% for the twelve month
period, the Fund added significant value through both good country and stock
selection.
While overall EAFE returns were volatile and disappointing, returns for
Europe were much stronger and less volatile. Investors reacted positively to
stronger economic growth, higher corporate earnings, the increased likelihood of
European Monetary Union and a heightened focus on "shareholder value" and
"corporate restructuring". Additionally, low inflation and low interest rates
have given investors more confidence in the equity markets. Over the past twelve
months, successful overweightings particularly of the Dutch, Finnish, Norwegian
and Spanish markets, combined with positive stock selection in France and the
Netherlands, favorably impacted the Fund's returns.
The overall underweighting of the Japanese market and the Fund's
concentration in export-related companies within Japan added the most value
relative to EAFE returns. The Fund's average weighting was just over 13% for the
period while the EAFE Index's weighting was close to 32%. The Fund's Japanese
holdings returned 3.7% compared to Japan's index return of a negative 18.0% for
the twelve months ended October 31. The outlook for Japan remains cautious.
Despite the poor performance of the Japanese market, valuation levels for stocks
remain high relative to other parts of the world. In addition, the problems with
the banking system and the crisis in Southeast Asia continue to be cause for
concern. As a result, the Fund expects to continue to significantly underweight
Japan.
Limited-Term Income Fund
For the year ending October 31, 1997, the total return of the Limited-Term
Income Fund was 6.57% for the AMR Class, 6.29% for the Institutional Class and
6.01% for the PlanAhead Class. These results represent, in the two former cases,
an outperformance of the Linked Lipper Short-Term Investment Grade Debt Average
of 6.05% for the twelve months.
The twelve month period was characterized by a moderate rise then fall in
interest rates. The two year Treasury note's yield ended the period at 5.61%, 13
basis points lower than the same time last year.
2
<PAGE> 4
The economy was relatively strong for the entire period, but was able to grow
without inflation, thus keeping the Fed on the sidelines after it raised rates
25 basis points on March 25, 1997. For the period, the duration of the Fund was
largely neutral or short of its benchmark which had a slightly negative impact
on the Fund's returns. On October 31, the portfolio's weighted average duration
was 1.7 years.
The Fund realized incremental income by holding mortgage-backed securities.
During a period of generally unchanged prices, this higher income component
improved total return.
As always, we appreciate your confidence and support and look forward to
serving you -- our shareholders -- over the next ten years.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American AAdvantage Funds
3
<PAGE> 5
AMERICAN AADVANTAGE BALANCED FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the Standard &
Poor's 500 Index, the Shearson Lehman Government/Corporate and the Lipper
Balanced Index.
<TABLE>
<CAPTION>
Annualized Returns
1 Year 5 Year 10 Year
------ ------ -------
<S> <C> <C> <C>
Institutional Class...................... 20.04% 14.73% 13,02%
PlanAhead Class *........................ 19.75% 14.50% 12.91%
AMR Class *.............................. 20.36% 14.92% 13.11%
S&P 500.................................. 32.18% 19.86% 17.16%
SLGC..................................... 8.81% 7.62% 9.19%
Lipper Balanced Index.................... 20.10% 13.28% 12.73%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Nov-87 Oct-88 Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional
Class............... $10,000 $11,463 $13,239 $12,545 $15,725 $17,102 $20,385 $20,368 $24,317 $28,320 $33,996
PlanAhead Class *.... $10,000 $11,463 $13,239 $12,545 $15,725 $17,102 $20,385 $20,351 $24,231 $28,111 $33,662
AMR Class *.......... $10,000 $11,463 $13,239 $12,545 $15,725 $17,102 $20,385 $20,368 $24,394 $28,485 $34,286
S&P 500.............. $10,000 $11,477 $14,501 $13,415 $17,912 $19,695 $22,631 $23,522 $29,723 $36,862 $48,723
SLGC................. $10,000 $11,063 $12,406 $13,089 $15,100 $16,688 $18,967 $18,088 $21,010 $22,143 $24,093
Lipper Balanced
Index............... $10,000 $11,316 $13,228 $12,726 $16,311 $17,773 $20,632 $20,506 $24,112 $27,605 $33,153
</TABLE>
- ---------------
* Fund performance represents the total returns achieved by the Institutional
Class from 11/1/87 up to 8/1/94, the inception date of the PlanAhead and AMR
Classes and the returns of the PlanAhead and AMR Classes since inception of
the Classes. Expenses of the PlanAhead Class are higher than those of the
Institutional Class. Therefore, total returns shown may be higher than they
would have been had the PlanAhead Class been in place since 11/1/87. Expenses
of the AMR Class are lower than those of the Institutional Class. As a
result, total returns shown may be lower than they would have been had the
AMR Class been in place since 11/1/87.
4
<PAGE> 6
AMERICAN AADVANTAGE GROWTH AND INCOME FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the Standard &
Poor's 500 Index and the Lipper Growth and Income Index.
<TABLE>
<CAPTION>
Annualized Returns
1 Year 5 Year 10 Year
------ ------ -------
<S> <C> <C> <C>
Institutional Class...................... 28.00% 19.08% 16.24%
PlanAhead Class *........................ 27.64% 18.78% 16.10%
AMR Class *.............................. 28.40% 19.28% 16.34%
S&P 500.................................. 32.18% 19.86% 17.16%
Lipper Growth and Income Index........... 28.03% 18.17% 15.53%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Nov-87 Oct-88 Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class........ $10,000 $12,220 $14,780 $12,782 $17,106 $18,816 $22,859 $23,627 $28,515 $35,180
PlanAhead Class *.......... $10,000 $12,220 $14,780 $12,782 $17,106 $18,816 $22,859 $23,594 $28,346 $34,859
AMR Class *................ $10,000 $12,220 $14,780 $12,782 $17,106 $18,816 $22,859 $23,644 $28,617 $35,386
S&P 500.................... $10,000 $11,477 $14,501 $13,415 $17,912 $19,695 $22,631 $23,522 $29,723 $36,862
Lipper Growth &
Income Index.............. $10,000 $11,817 $14,278 $12,627 $16,878 $18,382 $21,965 $22,659 $27,254 $33,086
<CAPTION>
Oct-97
-------
<S> <C>
Institutional Class........ $45,048
PlanAhead Class *.......... $44,496
AMR Class *................ $45,435
S&P 500.................... $48,723
Lipper Growth &
Income Index.............. $42,360
</TABLE>
- ---------------
* Fund performance represents the total returns achieved by the Institutional
Class from 11/1/87 up to 8/1/94, the inception date of the PlanAhead and AMR
Classes and the returns of the PlanAhead and AMR Classes since inception of
the Classes. Expenses of the PlanAhead Class are higher than those of the
Institutional Class. Therefore, total returns shown may be higher than they
would have been had the PlanAhead Class been in place since 11/1/87. Expenses
of the AMR Class are lower than those of the Institutional Class. As a result,
total returns shown may be lower than they would have been had the AMR Class
been in place since 11/1/87.
5
<PAGE> 7
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the EAFE (Europe,
Australia and Far East) and the Lipper International Index.
<TABLE>
<CAPTION>
Annualized Returns
Since
1 Year 5 Year Inception
------ ------ ---------
<S> <C> <C> <C>
Institutional Class...................... 19.08% 18.13% 12.20%
PlanAhead Class *........................ 12.71% 17.83% 11.98%
AMR Class *.............................. 19.39% 18.34% 12.36%
EAFE .................................... 4.91% 12.07% 8.25%
Lipper International Index .............. 13.35% 13.70% 10.44%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Aug-91 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97
------- ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class............... $10,000 $10,132 $8,910 $12,167 $13,599 $14,673 $17,208 $20,492
PlanAhead Class **................ $10,000 $10,132 $8,910 $12,167 $13,578 $14,578 $17,049 $20,240
AMR Class **...................... $10,000 $10,132 $8,910 $12,167 $13,599 $14,711 $17,319 $20,677
EAFE Index........................ $10,000 $10,676 $9,286 $12,804 $14,132 $14,124 $15,645 $16,414
Lipper International Index........ $10,000 $10,314 $9,792 $13,127 $14,638 $14,569 $16,412 $18,602
</TABLE>
- ---------------
* Fund inception was 8/7/91. Changes in value for indices have a starting date
of 8/7/91.
** Fund performance represents the total returns achieved by the Institutional
Class from 8/7/91 up to 8/1/94, the inception date of the PlanAhead and AMR
Classes and the returns of the PlanAhead and AMR Classes since inception of
the Classes. Expenses of the PlanAhead Class are higher than those of the
Institutional Class. Therefore, total returns shown may be higher than they
would have been had the PlanAhead Class been in place since 8/7/91. Expenses
of the AMR Class are lower than those of the Institutional Class. As a
result, total returns shown may be lower than they would have been had the
AMR Class been in place since 8/7/91.
6
<PAGE> 8
AMERICAN AADVANTAGE LIMITED-TERM INCOME FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the
Shearson Lehman Government/Corporate 1-5 Year Index* and the
Linked Lipper Average ***.
<TABLE>
<CAPTION>
Annualized Returns Since
1 Year 5 Year Inception
------ ------ -------
<S> <C> <C> <C>
Institutional Class...................... 6.29% 5.40% 6.91%
PlanAhead Class *........................ 6.01% 5.23% 6.82%
AMR Class *.............................. 6.57% 5.56% 6.99%
SLGC 1-5 Year Index...................... 6.89% 6.10% 7.77%
Linked Lipper Average.................... 6.05% 5.13% 6.88%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Dec-87 Oct-88 Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional........ $10,000 $10,670 $11,482 $12,345 $13,810 $14,906 $15,979 $16,047 $17,359 $18,244 $19,391
PlanAhead **......... $10,000 $10,670 $11,482 $12,345 $13,810 $14,906 $15,979 $16,052 $17,308 $18,144 $19,235
AMR **............... $10,000 $10,670 $11,482 $12,345 $13,810 $14,906 $15,979 $16,074 $17,396 $18,331 $19,536
Linked Lipper Average
***................. $10,000 $10,730 $11,696 $12,613 $14,026 $15,077 $16,048 $16,070 $17,459 $18,252 $19,358
Shearson Lehman G/C
1-5 Year Index...... $10,000 $10,675 $11,723 $12,715 $14,310 $15,622 $16,833 $16,795 $18,545 $19,655 $21,009
</TABLE>
- ---------------
* Fund inception was 12/3/87. Changes in value for indices have a starting date
of 12/3/87.
** Fund performance represents the total returns achieved by the Institutional
Class from 12/3/87 up to 8/1/94, the inception date of the PlanAhead and AMR
Classes and the returns of the PlanAhead and AMR Classes since inception of
the Classes. Expenses of the PlanAhead Class are higher than those of the
Institutional Class. Therefore, total returns shown may be higher than they
would have been had the PlanAhead Class been in place since 12/3/87.
Expenses of the AMR Class are lower than those of the Institutional Class.
As a result, total returns shown may be lower than they would have been had
the AMR Class been in place since 12/3/87.
*** The Linked Lipper Average is created by linking the Lipper Short-Term (1-5
Year) Investment Grade Debt Average from 11/30/87 through 12/31/95, the
Lipper Short-Intermediate Investment Grade Debt Average from 1/1/96 through
7/31/96 and the Lipper Short-Term (1-3 Year) Investment Grade Debt Average
since 8/1/96.
7
<PAGE> 9
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
American AAdvantage Balanced Fund
American AAdvantage Growth and Income Fund
American AAdvantage Intermediate Bond Fund
American AAdvantage International Equity Fund
American AAdvantage Limited-Term Income Fund
We have audited the accompanying statements of assets and liabilities of
the American AAdvantage Balanced Fund, the American AAdvantage Growth and Income
Fund, the American AAdvantage Intermediate Bond Fund, the American AAdvantage
International Equity Fund, and the American AAdvantage Limited-Term Income Fund
(collectively, "the Funds") (separate funds comprising the American AAdvantage
Funds) as of October 31, 1997, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective American AAdvantage Funds at October 31, 1997, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
December 19, 1997
8
<PAGE> 10
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Intermediate International Limited-Term
Balanced Income Bond Equity Income
------------ ----------- ------------ ------------- ------------
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in Portfolio, at value...... $ 950,220 $1,658,791 $ 216,315 $ 715,271 $ 92,333
Receivable for fund shares sold........ 2,095 3,875 - 3,086 197
Receivable for expense reimbursement... - 1 - - 1
------------ ----------- ----------- ----------- -----------
TOTAL ASSETS....................... 952,315 1,662,667 216,315 718,357 92,531
------------ ----------- ----------- ----------- -----------
LIABILITIES:
Payable for fund shares redeemed....... 387 169 9 1,815 414
Accrued organization costs............. - - - 3 -
Dividends payable...................... - - - - 48
Management fees payable (Note 2)....... 41 50 44 54 7
Other liabilities...................... 68 72 13 29 9
------------ ----------- ----------- ----------- -----------
TOTAL LIABILITIES.................. 496 291 66 1,901 478
------------ ----------- ----------- ----------- -----------
NET ASSETS................................. $ 951,819 $1,662,376 $ 216,249 $ 716,456 $ 92,053
============ =========== =========== =========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital........................ 632,679 1,116,710 214,120 574,579 100,696
Accumulated undistributed investment
income............................... 32,994 26,352 - 12,964 15
Accumulated net realized gain (loss)... 133,489 121,256 255 19,548 (8,552)
Unrealized appreciation (depreciation)
of investments....................... 152,657 398,058 1,874 109,365 (106)
------------ ----------- ----------- ----------- -----------
NET ASSETS................................. $ 951,819 $1,662,376 $ 216,249 $ 716,456 $ 92,053
============ =========== =========== =========== ===========
Shares outstanding (no par value):
Institutional Class.................... 9,159,242 9,285,854 21,269,854 13,569,593 2,383,165
============ =========== =========== =========== ===========
PlanAhead Class........................ 2,143,511 1,388,456 - 1,186,427 529,058
============ =========== =========== =========== ===========
AMR Class.............................. 47,407,557 65,971,929 - 27,096,145 6,652,049
============ =========== =========== =========== ===========
Net asset value, offering and redemption
price per share:
Institutional Class.................... $ 16.18 $ 21.63 $ 10.17 $ 17.08 $ 9.63
============ =========== =========== =========== ===========
PlanAhead Class........................ $ 16.03 $ 21.38 $ - $ 16.92 $ 9.63
============ =========== =========== =========== ===========
AMR Class.............................. $ 16.23 $ 21.70 $ - $ 17.15 $ 9.62
============ =========== =========== =========== ===========
</TABLE>
See accompanying notes
9
<PAGE> 11
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Intermediate International Limited-Term
Balanced Income Bond Equity Income
---------------- ---------------- ---------------- ---------------- ----------------
Year Ended September 15, to Year Ended
October 31, 1997 October 31, 1997 October 31, 1997
----------------------------------- ---------------- -----------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME ALLOCATED
FROM PORTFOLIO:
Interest income........ $ 28,853 $ 2,556 $ 1,663 $ 2,745 $ 14,520
Dividend income (net of
foreign taxes of
$1,530 in
International Equity
Fund)................ 15,936 35,089 - 14,916 -
Income derived from
securities lending,
net.................. 239 202 - 317 1
Portfolio expenses..... (3,395) (4,571) (78) (3,284) (605)
-------- -------- -------- -------- --------
NET INVESTMENT
INCOME ALLOCATED
FROM PORTFOLIO... 41,633 33,276 1,585 14,694 13,916
-------- -------- -------- -------- --------
FUND EXPENSES:
Administrative service
fees (Note 2):
Institutional
Class.............. 756 233 67 376 338
PlanAhead Class...... 75 59 - 33 11
Transfer agent fees:
Institutional
Class.............. 13 14 2 12 20
PlanAhead Class...... 17 20 - 9 4
AMR Class............ 3 - - 2 1
Professional fees...... 41 43 1 11 7
Registration fees and
expenses............. 39 39 10 32 9
Service Fees --
PlanAhead Class...... 75 59 - 33 11
Other expenses......... 14 15 - 8 3
-------- -------- -------- -------- --------
TOTAL FUND
EXPENSES......... 1,033 482 80 516 404
-------- -------- -------- -------- --------
Less reimbursement
of expenses (Note
2)............... - - - - 2
-------- -------- -------- -------- --------
Net fund
expenses......... 1,033 482 80 516 402
-------- -------- -------- -------- --------
NET INVESTMENT INCOME...... 40,600 32,794 1,505 14,178 13,514
-------- -------- -------- -------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ALLOCATED
FROM PORTFOLIO:
Net realized gain
(loss) on investments
and foreign currency
transactions......... 133,817 122,605 255 20,326 (356)
Change in net
unrealized
appreciation or
depreciation of
investments and
foreign currency
translations......... 16,669 165,036 1,874 55,776 (638)
-------- -------- -------- -------- --------
NET GAIN (LOSS) ON
INVESTMENTS...... 150,486 287,641 2,129 76,102 (994)
-------- -------- -------- -------- --------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............... $191,086 $320,435 $ 3,634 $ 90,280 $ 12,520
======== ======== ======== ======== ========
</TABLE>
See accompanying notes
10
<PAGE> 12
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate
Balanced Growth and Income Bond International Equity
--------------------- ----------------------- -------------- ---------------------
Year Ended Year Ended Year Ended
October 31, October 31, September 15, October 31,
--------------------- ----------------------- to October 31, ---------------------
1997 1996 1997 1996 1997 1997 1996
---------- -------- ---------- ---------- -------------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income... $ 40,600 $ 35,844 $ 32,794 $ 26,800 $ 1,505 $ 14,178 $ 7,898
Net realized gain (loss)
on investments and
foreign currency
transactions.......... 133,817 67,577 122,605 77,475 255 20,326 11,093
Change in net unrealized
appreciation or
depreciation of
investments and
foreign currency
translations.......... 16,669 27,642 165,036 93,955 1,874 55,776 30,557
---------- -------- ---------- ---------- -------- -------- --------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS.... 191,086 131,063 320,435 198,230 3,634 90,280 49,548
---------- -------- ---------- ---------- -------- -------- --------
DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income:
Institutional Class... (11,595) (10,135) (1,615) (1,936) (1,505) (1,369) (608)
PlanAhead Class....... (803) (238) (343) (143) - (157) (31)
AMR Class............. (23,794) (22,970) (25,654) (20,011) - (7,262) (5,125)
Net realized gain on
investments:
Institutional Class... (22,827) (7,867) (5,181) (2,653) - (1,859) (546)
PlanAhead Class....... (1,633) (187) (1,190) (202) - (230) (31)
AMR Class............. (44,091) (16,814) (72,372) (25,694) - (8,971) (4,170)
---------- -------- ---------- ---------- -------- -------- --------
NET DISTRIBUTIONS TO
SHAREHOLDERS....... (104,743) (58,211) (106,355) (50,639) (1,505) (19,848) (10,511)
---------- -------- ---------- ---------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of
shares................ 179,736 169,963 335,985 208,797 223,471 338,012 126,546
Reinvestment of
dividends and
distributions......... 104,257 57,693 105,754 50,139 1,505 19,534 10,164
Cost of shares
redeemed.............. (311,199) (206,839) (99,228) (86,256) (10,856) (112,550) (31,126)
---------- -------- ---------- ---------- -------- -------- --------
NET INCREASE
(DECREASE) IN NET
ASSETS FROM CAPITAL
SHARE
TRANSACTIONS....... (27,206) 20,817 342,511 172,680 214,120 244,996 105,584
---------- -------- ---------- ---------- -------- -------- --------
NET INCREASE (DECREASE) IN
NET ASSETS................ 59,137 93,669 556,591 320,271 216,249 315,428 144,621
---------- -------- ---------- ---------- -------- -------- --------
NET ASSETS:
Beginning of period..... 892,682 799,013 1,105,785 785,514 - 401,028 256,407
---------- -------- ---------- ---------- -------- -------- --------
END OF PERIOD*.......... $ 951,819 $892,682 $1,662,376 $1,105,785 $216,249 $716,456 $401,028
========== ======== ========== ========== ======== ======== ========
* Includes undistributed
net investment income
of.................... $ 32,994 $ 28,578 $ 26,352 $ 21,170 $ - $ 12,964 $ 7,574
========== ======== ========== ========== ======== ======== ========
<CAPTION>
Limited-Term Income
-------------------
Year Ended
October 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income... $ 13,514 $ 11,662
Net realized gain (loss)
on investments and
foreign currency
transactions.......... (356) (3,194)
Change in net unrealized
appreciation or
depreciation of
investments and
foreign currency
translations.......... (638) 469
-------- --------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS.... 12,520 8,937
-------- --------
DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income:
Institutional Class... (9,031) (7,273)
PlanAhead Class....... (279) (155)
AMR Class............. (4,204) (4,272)
Net realized gain on
investments:
Institutional Class... - -
PlanAhead Class....... - -
AMR Class............. - -
-------- --------
NET DISTRIBUTIONS TO
SHAREHOLDERS....... (13,514) (11,700)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of
shares................ 82,371 76,269
Reinvestment of
dividends and
distributions......... 13,189 11,656
Cost of shares
redeemed.............. (174,367) (117,354)
-------- --------
NET INCREASE
(DECREASE) IN NET
ASSETS FROM CAPITAL
SHARE
TRANSACTIONS....... (78,807) (29,429)
-------- --------
NET INCREASE (DECREASE) IN
NET ASSETS................ (79,801) (32,192)
-------- --------
NET ASSETS:
Beginning of period..... 171,854 204,046
-------- --------
END OF PERIOD*.......... $ 92,053 $171,854
======== ========
* Includes undistributed
net investment income
of.................... $ 15 $ 15
======== ========
</TABLE>
See accompanying notes
11
<PAGE> 13
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American AAdvantage Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a no-load, open-end management investment company. These financial
statements and notes to the financial statements relate to the American
AAdvantage Balanced, American AAdvantage Growth and Income, American AAdvantage
Intermediate Bond, American AAdvantage International Equity and American
AAdvantage Limited-Term Income Funds (each a "Fund" and collectively, the
"Funds"), each a series of the Trust. The American AAdvantage Intermediate Bond
Fund commenced active operations on September 15, 1997. The Trust commenced
sales of additional classes of shares of the Funds (other than the Intermediate
Bond Fund) on August 1, 1994, designated as "Mileage Class", "PlanAhead Class"
and "AMR Class" shares. At the same time, the existing shares of each Fund were
redesignated as "Institutional Class" shares. The Mileage Class of each Fund
(other than the Intermediate Bond Fund) was terminated on November 1, 1996.
Differences between the Classes include the services offered to and the expenses
borne by each class and certain voting rights. Investment income, net capital
gains (losses) and all expenses incurred by the Funds are allocated based on
relative net assets of each class, except for service fees and certain other
fees and expenses related solely to one class of shares.
Each Fund invests all of its investable assets in the corresponding
portfolio of the AMR Investment Services Trust, an open-end diversified
management investment company, as follows:
<TABLE>
<S> <C> <C>
AMERICAN AADVANTAGE: & INVESTS ASSETS IN & AMR INVESTMENT SERVICES TRUST:
Balanced Fund Balanced Portfolio
Growth and Income Fund Growth and Income Portfolio
Intermediate Bond Fund Intermediate Bond Portfolio
International Equity Fund International Equity Portfolio
Limited-Term Income Fund Limited-Term Income Portfolio
</TABLE>
Each AMR Investment Services Portfolio has the same investment objectives
as its corresponding Fund. The value of such investment reflects each Fund's
proportionate interest in the net assets of the corresponding portfolio (99.64%,
99.41%, 100.00%, 93.91% and 98.68% at October 31, 1997 of the AMR Investment
Services Balanced, Growth and Income, Intermediate Bond, International Equity
and Limited-Term Income Portfolios, respectively) (each a "Portfolio" and
collectively the "Portfolios"). The financial statements of the Portfolios are
included elsewhere in this report and should be read in conjunction with the
Funds' financial statements.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
The following is a summary of the significant accounting policies followed
by the Funds.
Valuation of Investments
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements which are included elsewhere in this
report.
12
<PAGE> 14
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income and realized and
unrealized gain (loss) in the Portfolio each day. All net investment income and
realized and unrealized gain (loss) of each Portfolio are allocated pro rata
among the corresponding Fund and other investors in each Portfolio at the time
of such determination. Dividends from net investment income of the Balanced,
Growth and Income and International Equity Funds normally will be declared and
paid annually. The Intermediate Bond and Limited-Term Income Funds generally
declare dividends from net investment income daily, payable monthly.
Distributions, if any, of net realized capital gains normally will be paid
annually after the close of the fiscal year in which realized.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently than generally accepted accounting
principles.
Federal Income and Excise Taxes
It is the policy of each of the Funds to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income as well as any net realized
capital gains on the sale of investments. Therefore, no federal income or excise
tax provision is required. At October 31, 1997, the Limited-Term Income Fund had
a capital loss carryforward for federal income tax purposes of approximately
$8,763,000 expiring in years 2001-2005.
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations. Expenses directly attributable to a Class of shares are charged to
that Class. Expenses incurred by the Trust with respect to any two or more of
the Funds are allocated in proportion to the net assets of each Fund, except
where allocations of direct expenses to each Fund can otherwise be made fairly.
Each share of each Fund, regardless of class, bears equally those expenses that
are allocated to the Fund as a whole.
Valuation of Shares
The price per share is calculated separately for each class of each Fund on
each day on which shares are offered for sale and orders accepted or upon
receipt of a redemption request. With respect to a class of a Fund, price per
share is computed by dividing the value of the Class' pro rata allocation of the
Fund's investments and other assets, less liabilities, by the number of Class
shares outstanding.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Manager and the Trust entered into an Administrative Service Agreement
which obligates the Manager to provide or oversee administrative and management
services to the Funds. As compensation for performing the duties required under
the Administrative Services Agreement, the Manager receives an annualized fee of
.25% of the average daily net assets of the Institutional and PlanAhead Classes
of each of the Funds.
13
<PAGE> 15
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
Distribution Plan
The Trust has adopted a "defensive" Distribution Plan in accordance with
Rule 12b-1 under the Investment Company Act of 1940, pursuant to which no fees
may be charged to the Funds for distribution purposes. However, the plan
authorizes the fees received by the Manager and the investment advisers hired by
the Manager to be used for distribution purposes. Under this plan, the Trust
does not intend to compensate the Manager or any other party, either directly or
indirectly, for the distribution of Trust shares.
Other
Certain officers or trustees of the Trust are also officers of the Manager
or American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. For
the year ended October 31, 1997, the cost of air transportation was not material
to any of the Funds. At October 31, 1997, AMR Corporation and subsidiary
companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of
the Funds. During the year ended October 31, 1997, the Manager waived service
fees totaling $2,349 for the Limited-Term Income Fund.
3. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (in thousands):
<TABLE>
<CAPTION>
Year Ended October 31, 1997 Institutional Class PlanAhead Class AMR Class
--------------------------- -------------------- -------------------- --------------------
Balanced Fund Shares Amount Shares Amount Shares Amount
------------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............................. 2,444 $ 36,119 1,251 $ 18,380 8,412 $ 125,237
Reinvestment of dividends............... 2,402 33,940 173 2,432 4,801 67,885
Shares redeemed......................... (15,370) (247,389) (478) (7,408) (3,799) (56,402)
------- --------- ------- --------- ------- ---------
Net increase (decrease) in capital
shares outstanding.................... (10,524) $(177,330) 946 $ 13,404 9,414 $ 136,720
======= ========= ======= ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Institutional Class PlanAhead Class AMR Class
-------------------- -------------------- --------------------
Growth and Income Fund Shares Amount Shares Amount Shares Amount
---------------------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............................. 6,639 $ 145,514 647 $ 12,472 8,960 $ 177,999
Reinvestment of dividends............... 343 6,205 85 1,523 5,410 98,026
Shares redeemed......................... (2,084) (40,979) (220) (4,252) (2,722) (53,997)
------- --------- ------- --------- ------- ---------
Net increase in capital shares
outstanding........................... 4,898 $ 110,740 512 $ 9,743 11,648 $ 222,028
======= ========= ======= ========= ======= =========
</TABLE>
14
<PAGE> 16
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
-------------------
Intermediate Bond Fund Shares Amount
---------------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................... 22,194 $ 223,471
Reinvestment of dividends..................... 148 1,505
Shares redeemed............................... (1,072) (10,856)
------- ---------
Net increase in capital shares outstanding.... 21,270 $ 214,120
======= =========
</TABLE>
<TABLE>
<CAPTION>
Institutional Class PlanAhead Class AMR Class
------------------- ------------------- -------------------
International Equity Fund Shares Amount Shares Amount Shares Amount
------------------------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................... 13,465 $ 221,719 1,319 $ 21,757 5,816 $ 94,536
Reinvestment of dividends..................... 194 2,954 23 348 1,067 16,232
Shares redeemed............................... (4,285) (72,975) (635) (10,572) (1,765) (29,003)
------- --------- ------- --------- ------- ---------
Net increase in capital shares outstanding.... 9,374 $ 151,698 707 $ 11,533 5,118 $ 81,765
======= ========= ======= ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Institutional Class PlanAhead Class AMR Class
------------------- ------------------- -------------------
Limited-Term Income Fund Shares Amount Shares Amount Shares Amount
------------------------ ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................... 7,374 $ 71,284 214 $ 2,062 938 $ 9,025
Reinvestment of dividends..................... 905 8,713 28 272 437 4,204
Shares redeemed............................... (17,152) (165,296) (64) (616) (877) (8,455)
------- --------- ------- --------- ------- ---------
Net increase (decrease) in capital
shares outstanding.......................... (8,873) $ (85,299) 178 $ 1,718 498 $ 4,774
======= ========= ======= ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
1996 Institutional Class Mileage Class PlanAhead Class AMR Class
- ---------------------- ------------------- ------------------- ------------------- -------------------
Balanced Fund Shares Amount Shares Amount Shares Amount Shares Amount
------------- ------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............ 3,818 $ 54,692 - $ - 937 $ 13,340 7,142 $ 101,931
Reinvestment of
dividends............ 1,286 17,671 - - 17 238 2,889 39,784
Shares redeemed........ (3,337) (47,982) (74) (1,035) (149) (2,148) (10,857) (155,674)
------- --------- ------- --------- ------- --------- ------- ---------
Net increase (decrease)
in capital shares
outstanding.......... 1,767 $ 24,381 (74) $ (1,035) 805 $ 11,430 (826) $ (13,959)
======= ========= ======= ========= ======= ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Institutional Class Mileage Class PlanAhead Class AMR Class
------------------- ------------------- ------------------- -------------------
Growth and Income Fund Shares Amount Shares Amount Shares Amount Shares Amount
- ---------------------- ------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............ 1,665 $ 28,490 - $ - 724 $ 12,146 9,838 $ 168,161
Reinvestment of
dividends............ 266 4,293 - - 9 142 2,834 45,704
Shares redeemed........ (2,043) (35,315) (139) (2,214) (160) (2,706) (2,673) (46,021)
------- --------- ------- --------- ------- --------- ------- ---------
Net increase (decrease)
in capital shares
outstanding.......... (112) $ (2,532) (139) $ (2,214) 573 $ 9,582 9,999 $ 167,844
======= ========= ======= ========= ======= ========= ======= =========
</TABLE>
15
<PAGE> 17
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class Mileage Class PlanAhead Class AMR Class
------------------- ----------------- ----------------- -----------------
International Equity Fund Shares Amount Shares Amount Shares Amount Shares Amount
------------------------- ------- --------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............................. 2,590 $ 37,103 - $ - 655 $ 9,341 5,594 $ 80,102
Reinvestment of dividends............... 63 839 - - 2 30 693 9,295
Shares redeemed......................... (396) (5,688) (95) (1,251) (288) (4,114) (1,432) (20,073)
------ -------- ------ -------- ------ -------- ------ --------
Net increase (decrease) in capital
shares outstanding.................... 2,257 $ 32,254 (95) $ (1,251) 369 $ 5,257 4,855 $ 69,324
====== ======== ====== ======== ====== ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Institutional Class Mileage Class PlanAhead Class AMR Class
------------------- ----------------- ----------------- -----------------
Limited-Term Income Fund Shares Amount Shares Amount Shares Amount Shares Amount
------------------------ ------- --------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............................. 4,609 $ 44,766 - $ 3 401 $ 3,879 2,861 $ 27,621
Reinvestment of dividends............... 708 6,889 - - 15 142 476 4,625
Shares redeemed......................... (8,044) (78,331) (60) (586) (225) (2,167) (3,764) (36,270)
------ -------- ------ -------- ------ -------- ------ --------
Net increase (decrease) in capital
shares outstanding.................... (2,727) $(26,676) (60) $ (583) 191 $ 1,854 (427) $ (4,024)
====== ======== ====== ======== ====== ======== ====== ========
</TABLE>
16
<PAGE> 18
(This page intentionally left blank)
17
<PAGE> 19
AMERICAN AADVANTAGE BALANCED FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
--------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------
1997(1) 1996(1)(2) 1995(1)(3) 1994(4) 1993
-------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 15.14 $ 13.95 $ 12.36 $ 13.23 $ 11.99
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.............................. 0.63(11) 0.59(11) 0.54 0.57 0.49
Net gains (losses) on securities (both realized and
unrealized)...................................... 2.16(11) 1.61(11) 1.71 (0.54) 1.57
-------- -------- -------- -------- --------
Total from investment operations....................... 2.79 2.20 2.25 0.03 2.06
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income............... (0.59) (0.57) (0.52) (0.56) (0.52)
Distributions from net realized gains on
securities....................................... (1.16) (0.44) (0.14) (0.34) (0.30)
-------- -------- -------- -------- --------
Total distributions.................................... (1.75) (1.01) (0.66) (0.90) (0.82)
-------- -------- -------- -------- --------
Net asset value, end of period......................... $ 16.18 $ 15.14 $ 13.95 $ 12.36 $ 13.23
======== ======== ======== ======== ========
Total return (annualized)(5)(6)........................ 20.04% 16.46% 19.39% (0.08)% 19.19%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)........... $148,176 $298,009 $249,913 $222,873 $532,543
Ratios to average net assets (annualized)(7)(8)(9):
Expenses....................................... 0.60%(11) 0.62%(11) 0.63% 0.36% 0.34%
Net investment income.......................... 3.88%(11) 4.00%(11) 4.30% 4.77% 4.91%
Portfolio turnover rate(10)........................ - - 73% 48% 83%
</TABLE>
- ---------------
(1) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share.
(2) Capital Guardian Trust Company was replaced by Brandywine Asset Management,
Inc. as an investment adviser to the Balanced Fund on April 1, 1996.
(3) GSB Investment Management, Inc. was added as an investment adviser to the
Balanced Fund as of January 1, 1995.
(4) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.
(5) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(6) Total returns for the PlanAhead and AMR Classes for the period ended
October 31, 1994 reflect Institutional Class returns from November 1, 1993
through July 31, 1994 and returns of the applicable class for the period
August 1, 1994 (commencement of operations of the new classes) through
October 31, 1994. Due to the different expense structures between the
classes, total returns would vary from the results shown had the classes
been in operation for the entire year.
(7) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager.
Such fees amounted to approximately $.01 per share in each period on an
annualized basis.
(8) The method of determining average net assets was changed from a monthly
average to a daily average starting with the period ended October 31, 1994.
(9) Operating results of the PlanAhead Class in the year and period indicated
below excluded fees waived by the Manager. Results prior to expenses waived
were as follows:
<TABLE>
<CAPTION>
Year Ended August 1, to
October 31, 1995 October 31, 1994
----------------- -----------------
<S> <C> <C>
Ratio of expenses to average net assets (annualized)........ 1.09% 0.99%
Ratio of net investment income to average net assets
(annualized).............................................. 3.60% 3.97%
</TABLE>
(10) On November 1,1995, the American AAdvantage Balanced Fund invested all of
its investable assets in the AMR Investment Services Balanced Portfolio.
The portfolio turnover rate for the years ended October 31, 1996 and
October 31, 1997 is shown in the Statement of Changes in Net Assets of the
AMR Investment Services Trust included elsewhere in this report.
(11) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Balanced Portfolio.
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class AMR Class
- -------------------------------------------------- ---------------------------------------------------
Year Ended October 31, August 1, Year Ended October 31, August 1,
- --------------------------------- to October 31, ---------------------------------- to October 31,
1997(1) 1996(1)(2) 1995(1)(3) 1994(4) 1997(1) 1996(1)(2) 1995(1)(3) 1994(4)
- ------- ---------- ---------- -------------- -------- ---------- ---------- --------------
<C> <C> <C> <C> <C> <C> <C> <C>
$15.03 $ 13.90 $12.35 $ 12.35 $ 15.18 $ 13.98 $ 12.36 $ 12.35
- ------- ------- ------ ------- -------- -------- -------- --------
0.63(11) 0.57(11) 0.54 0.12 0.70(11) 0.63(11) 0.58 0.14
2.10(11) 1.56(11) 1.67 (0.12) 2.13(11) 1.61(11) 1.71 (0.13)
- ------- ------- ------ ------- -------- -------- -------- --------
2.73 2.13 2.21 - 2.83 2.24 2.29 0.01
- ------- ------- ------ ------- -------- -------- -------- --------
(0.57) (0.56) (0.52) - (0.62) (0.60) (0.53) -
(1.16) (0.44) (0.14) - (1.16) (0.44) (0.14) -
- ------- ------- ------ ------- -------- -------- -------- --------
(1.73) (1.00) (0.66) - (1.78) (1.04) (0.67) -
- ------- ------- ------ ------- -------- -------- -------- --------
$16.03 $ 15.03 $13.90 $ 12.35 $ 16.23 $ 15.18 $ 13.98 $ 12.36
======= ======= ====== ======= ======== ======== ======== ========
19.75% 16.01% 19.06% (0.16)% 20.36% 16.77% 19.77% (0.08)%
======= ======= ====== ======= ======== ======== ======== ========
$34,354 $18,000 $5,450 $ 528 $769,289 $576,673 $542,619 $393,504
0.90%(11) 0.97%(11) 0.99% 0.92% 0.34%(11) 0.37%(11) 0.38% 0.36%
3.52%(11) 3.64%(11) 3.70% 4.04% 4.09%(11) 4.26%(11) 4.54% 4.65%
- - 73% 48% - - 73% 48%
</TABLE>
19
<PAGE> 21
AMERICAN AADVANTAGE GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------
1997(1) 1996(1)(2) 1995(1) 1994(3) 1993
----------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 18.50 $ 15.91 $14.19 $14.63 $ 12.79
-------- ------- ------- ------- --------
Income from investment operations:
Net investment income............................... 0.42(10) 0.42(10) 0.41 0.43 0.36
Net gains on securities (both realized and
unrealized)....................................... 4.43(10) 3.15(10) 2.28 0.08 2.21
-------- ------- ------- ------- --------
Total from investment operations...................... 4.85 3.57 2.69 0.51 2.57
-------- ------- ------- ------- --------
Less distributions:
Dividends from net investment income................ (0.41) (0.41) (0.43) (0.41) (0.37)
Distributions from net realized gains on
securities........................................ (1.31) (0.57) (0.54) (0.54) (0.36)
-------- ------- ------- ------- --------
Total distributions................................... (1.72) (0.98) (0.97) (0.95) (0.73)
-------- ------- ------- ------- --------
Net asset value, end of period........................ $ 21.63 $ 18.50 $15.91 $14.19 $ 14.63
======== ======= ======= ======= ========
Total return (annualized)(4)(5)....................... 28.05% 23.37% 20.69% 3.36% 21.49%
======== ======= ======= ======= ========
Ratios and supplemental data:
Net assets, end of period (in thousands)............ $200,887 $81,183 $71,608 $22,737 $477,088
Ratios to average net assets (annualized)(6)(7)(8):
Expenses.......................................... 0.61%(10) 0.62%(10) 0.62% 0.33% 0.34%
Net investment income............................. 2.10%(10) 2.55%(10) 2.84% 3.28% 3.12%
Portfolio turnover rate(9)........................ - - 26% 23% 30%
</TABLE>
- ---------------
(1) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share.
(2) Capital Guardian Trust Company was replaced by Brandywine Asset Management,
Inc. as an investment adviser to the Growth and Income Fund on April 1,
1996.
(3) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.
(4) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(5) Total returns for the PlanAhead and AMR Classes for the period ended
October 31, 1994 reflect Institutional Class returns from November 1, 1993
through July 31, 1994 and returns of the applicable class for the period
August 1, 1994 (commencement of operations of the new classes) through
October 31, 1994. Due to the different expense structures between the
classes, total returns would vary from the results shown had the classes
been in operation for the entire year.
(6) Effective August 1, 1994, expenses include administrative services fees
paid by the fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager.
Such fees amounted to less than $.01 per share in each period on an
annualized basis.
(7) The method of determining average net assets was changed from a monthly
average to a daily average starting with the period ended October 31, 1994.
(8) Operating results of the PlanAhead Class in the years and period indicated
below excluded fees waived by the Manager. Results prior to expenses waived
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended August 1, to
October 31, 1996 October 31, 1995 October 31, 1994
---------------- ---------------- -----------------
<S> <C> <C> <C>
Ratio of expenses to average net assets
(annualized)..................................... 0.96% 1.08% 1.05%
Ratio of net investment income to average net
assets (annualized).............................. 2.14% 2.14% 1.40%
</TABLE>
(9) On November 1,1995, the American AAdvantage Growth and Income Fund invested
all of its investable assets in the AMR Investment Services Growth and
Income Portfolio. The portfolio turnover rate for the years ended October
31, 1996 and October 31, 1997 is shown in the Statement of Changes in Net
Assets of the AMR Investment Services Trust included elsewhere in this
report.
(10) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Growth and Income Portfolio.
20
<PAGE> 22
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class AMR Class
- --------------------------------------------- ----------------------------------------------------
August 1, August 1,
Year Ended October 31, to Year Ended October 31, to
- ------------------------------- October 31, -------------------------------------- October 31,
1997(1) 1996(1)(2) 1995(1) 1994(3) 1997(1) 1996(1)(2) 1995(1) 1994(3)
- ------- ---------- ------- ----------- ---------- ---------- -------- -----------
<C> <C> <C> <C> <C> <C> <C> <C>
$18.33 $ 15.81 $ 14.17 $13.99 $ 18.56 $ 15.95 $ 14.20 $ 13.99
- ------- ------- ------- ------ ---------- ---------- -------- --------
0.35(10) 0.39(10) 0.40 0.05 0.45(10) 0.47(10) 0.44 0.11
4.39(10) 3.10(10) 2.22 0.13 4.47(10) 3.15(10) 2.30 0.10
- ------- ------- ------- ------ ---------- ---------- -------- --------
4.74 3.49 2.62 0.18 4.92 3.62 2.74 0.21
- ------- ------- ------- ------ ---------- ---------- -------- --------
(0.38) (0.40) (0.44) - (0.47) (0.44) (0.45) -
(1.31) (0.57) (0.54) - (1.31) (0.57) (0.54) -
- ------- ------- ------- ------ ---------- ---------- -------- --------
(1.69) (0.97) (0.98) - (1.78) (1.01) (0.99) -
- ------- ------- ------- ------ ---------- ---------- -------- --------
$21.38 $ 18.33 $ 15.81 $14.17 $ 21.70 $ 18.56 $ 15.95 $ 14.20
======= ======= ======= ====== ========== ========== ======== ========
27.64% 22.98% 20.14% 3.21% 28.40% 23.66% 21.03% 3.43%
======= ======= ======= ====== ========== ========== ======== ========
$29,684 $16,084 $ 4,821 $ 56 $1,431,805 $1,008,518 $706,884 $505,892
0.93%(10) 0.94%(10) 0.99% 0.95% 0.34%(10) 0.36%(10) 0.38% 0.37%
1.85%(10) 2.16%(10) 2.23% 1.50% 2.45%(10) 2.80%(10) 3.20% 3.18%
- - 26% 23% - - 26% 23%
</TABLE>
21
<PAGE> 23
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
-------------------
September 15,
to October 31,
1997
-------------------
<S> <C>
Net asset value, beginning of period........................ $ 10.00
Income from investment operations:
Net investment income..................................... .07
Net gains (losses) on securities (both realized and
unrealized)(1).......................................... 0.17
--------
Total from investment operations............................ 0.24
--------
Less distributions:
Dividends from net investment income...................... (.07)
Distributions from net realized gains on securities....... -
--------
Total distributions......................................... (.07)
--------
Net asset value, end of period.............................. $ 10.17
========
Total return................................................ 2.41%
========
Ratios and supplemental data:
Net assets, end of period (in thousands).................. $216,249
Ratios to average net assets (annualized)(1):
Expenses................................................ 0.59%
Net investment income................................... 5.63%
</TABLE>
- ---------------
(1) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Intermediate Bond Portfolio.
22
<PAGE> 24
(This page intentionally left blank)
23
<PAGE> 25
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
---------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------
1997(1) 1996(1) 1995(1) 1994(2)(3) 1993(4)
-------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 15.01 $13.29 $12.87 $ 12.07 $ 8.93
-------- ------- ------- ------- -------
Income from investment operations:
Net investment income........................... 0.34(10) 0.28(10) 0.27 0.32 0.17
Net gains (losses) on securities (both realized
and unrealized)............................... 2.44(10) 1.95(10) 0.68 1.10 3.09
-------- ------- ------- ------- -------
Total from investment operations.................... 2.78 2.23 0.95 1.42 3.26
-------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income............ (0.30) (0.27) (0.21) (0.17) (0.12)
Distributions from net realized gains on
securities.................................... (0.41) (0.24) (0.32) (0.45) -
-------- ------- ------- ------- -------
Total distributions................................. (0.71) (0.51) (0.53) (0.62) (0.12)
-------- ------- ------- ------- -------
Net asset value, end of period...................... $ 17.08 $15.01 $13.29 $ 12.87 $ 12.07
======== ======= ======= ======= =======
Total return (annualized)(5)(6)..................... 19.08% 17.27% 7.90% 11.77% 36.56%
======== ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)........ $231,793 $62,992 $25,757 $23,115 $66,652
Ratios to average net assets (annualized)(7)(8):
Expenses.................................... 0.83%(10) 0.85%(10) 0.85% 0.61% 0.78%
Net investment income....................... 2.35%(10) 2.19%(10) 2.37% 2.74% 2.00%
Portfolio turnover rate(9)...................... - - 21% 37% 61%
</TABLE>
- ---------------
(1) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share.
(2) Morgan Stanley Asset Management Inc. was added as an investment adviser to
the International Equity Fund as of August 1, 1994.
(3) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.
(4) HD International Limited was replaced by Hotchkis and Wiley as an
investment adviser to the International Equity Fund as of the close of
business on May 21, 1993.
(5) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(6) Total returns for the PlanAhead and AMR Classes for the period ended
October 31, 1994 reflect Institutional Class returns from November 1, 1993
through July 31, 1994 and returns of the applicable class for the period
August 1, 1994 (commencement of operations of the new classes) through
October 31, 1994. Due to the different expense structures between the
classes, total returns would vary from the results shown had the classes
been in operation for the entire year.
(7) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager.
Such fees amounted to less than $.04 per share in each period on an
annualized basis.
(8) The method of determining average net assets was changed from a monthly
average to a daily average starting with the period ended October 31, 1994.
(9) On November 1,1995, the American AAdvantage International Equity Fund
invested all of its investable assets in the AMR Investment Services
International Equity Portfolio. The portfolio turnover rate for the years
ended October 31, 1996 and October 31, 1997 is shown in the Statement of
Changes in Net Assets of the AMR Investment Services Trust included
elsewhere in this report.
(10) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services International Equity Portfolio.
24
<PAGE> 26
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class AMR Class
- ------------------------------------------------ ---------------------------------------------------
August 1, August 1,
Year Ended October 31, to Year Ended October 31, to
- --------------------------------- October 31, ------------------------------------ October 31,
1997(1) 1996(1) 1995(1) 1994(2)(3) 1997(1) 1996(1) 1995(1) 1994(2)(3)
- ------- ------- ------- ----------- -------- -------- -------- -----------
<C> <C> <C> <C> <C> <C> <C> <C>
$14.90 $ 13.20 $12.85 $ 12.61 $ 15.06 $ 13.31 $ 12.87 $ 12.61
- ------- ------- ------ ------- -------- -------- -------- --------
0.30(10) 0.26(10) 0.24 0.06 0.37(10) 0.31(10) 0.30 0.05
2.41(10) 1.92(10) 0.64 0.18 2.46(10) 1.98(10) 0.68 0.21
- ------- ------- ------ ------- -------- -------- -------- --------
2.71 2.18 0.88 0.24 2.83 2.29 0.98 0.26
- ------- ------- ------ ------- -------- -------- -------- --------
(0.28) (0.24) (0.21) - (0.33) (0.30) (0.22) -
(0.41) (0.24) (0.32) - (0.41) (0.24) (0.32) -
- ------- ------- ------ ------- -------- -------- -------- --------
(0.69) (0.48) (0.53) - (0.74) (0.54) (0.54) -
- ------- ------- ------ ------- -------- -------- -------- --------
$16.92 $ 14.90 $13.20 $ 12.85 $ 17.15 $ 15.06 $ 13.31 $ 12.87
======= ======= ====== ======= ======== ======== ======== ========
18.71% 16.95% 7.37% 11.60% 19.39% 17.72% 8.18% 11.77%
======= ======= ====== ======= ======== ======== ======== ========
$20,075 $ 7,138 $1,456 $ 375 $464,588 $330,898 $227,939 $165,524
1.14%(10) 1.17%(10) 1.33% 1.25% 0.58%(10) 0.57%(10) 0.60% 0.63%
1.95%(10) 1.76%(10) 2.08% 1.86% 2.51%(10) 2.49%(10) 2.65% 1.41%
- - 21% 37% - - 21% 37%
</TABLE>
25
<PAGE> 27
AMERICAN AADVANTAGE LIMITED-TERM INCOME FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
-------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 9.68 $ 9.82 $ 9.67 $ 10.23 $ 10.13
------- -------- -------- -------- --------
Income from investment operations:
Net investment income................................ 0.64(7) 0.62(7) 0.62 0.52 0.58
Net gains (losses) on securities (both realized and
unrealized)........................................ (0.05)(7) (0.14)(7) 0.15 (0.46) 0.15
------- -------- -------- -------- --------
Total from investment operations......................... 0.59 0.48 0.77 0.06 0.73
------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income................. (0.64) (0.62) (0.62) (0.52) (0.58)
Distributions from net realized gains on
securities......................................... - - - (0.10) (0.05)
------- -------- -------- -------- --------
Total distributions...................................... (0.64) (0.62) (0.62) (0.62) (0.63)
------- -------- -------- -------- --------
Net asset value, end of period........................... $ 9.63 $ 9.68 $ 9.82 $ 9.67 $ 10.23
======= ======== ======== ======== ========
Total return (annualized)(1)(2).......................... 6.29% 5.10% 8.18% 0.42% 7.20%
======= ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)............. $22,947 $108,929 $137,293 $112,141 $238,874
Ratios to average net assets (annualized)(3)(4)(5):
Expenses......................................... 0.57%(7) 0.60%(7) 0.60% 0.31% 0.26%
Net investment income............................ 6.67%(7) 6.41%(7) 6.36% 5.26% 5.76%
Portfolio turnover rate(6)........................... - - 183% 94% 176%
</TABLE>
- ---------------
(1) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(2) Total returns for the PlanAhead and AMR Classes for the period ended October
31, 1994 reflect Institutional Class returns from November 1, 1993 through
July 31, 1994 and returns of the applicable class for the period August 1,
1994 (commencement of operations of the new classes) through October 31,
1994. Due to the different expense structures between the classes, total
returns would vary from the results shown had the classes been in operation
for the entire year.
(3) Effective August 1, 1994, expenses include administrative services fees paid
by the Fund to the Manager. Prior to that date, expenses exclude shareholder
services fees paid directly by shareholders to the Manager. Such fees
amounted to less than $.03 per share in each period on an annualized basis.
(4) The method of determining average net assets was changed from a monthly
average to a daily average starting with the period ended October 31, 1994.
(5) Operating results of the PlanAhead Class in the years and periods indicated
below excluded fees waived by the Manager. Results prior to expenses waived
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended August 1, to
October 31, 1997 October 31, 1996 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Ratio of expenses to average net assets
(annualized).......................... 0.90% 0.94% 1.06% 1.00%
Ratio of net investment income to
average net assets (annualized)....... 6.31% 6.02% 5.94% 4.89%
</TABLE>
(6) On November 1, 1995, the American AAdvantage Limited-Term Income Fund
invested all of its investable assets in the AMR Investment Services
Limited-Term Income Portfolio. The portfolio turnover rate for the years
ended October 31, 1996 and October 31, 1997 is shown in the Statement of
Changes in Net Assets of the AMR Investment Services Trust included
elsewhere in this report.
(7) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Limited-Term Income Portfolio.
26
<PAGE> 28
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class AMR Class
- ------------------------------------------- ----------------------------------------------
August 1, August 1,
Year Ended October 31, to Year Ended October 31, to
- ----------------------------- October 31, -------------------------------- October 31,
1997 1996 1995 1994 1997 1996 1995 1994
- ------ ------ ------ ----------- ------- ------- ------- -----------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 9.68 $ 9.82 $ 9.68 $ 9.78 $ 9.67 $ 9.81 $ 9.68 $ 9.78
- ------ ------ ------ ------- ------- ------- ------- -------
0.61(7) 0.60(7) 0.59 0.13 0.66(7) 0.65(7) 0.64 0.14
(0.05)(7) (0.14)(7) 0.14 (0.10) (0.05)(7) (0.14)(7) 0.13 (0.10)
- ------ ------ ------ ------- ------- ------- ------- -------
0.56 0.46 0.73 0.03 0.61 0.51 0.77 0.04
- ------ ------ ------ ------- ------- ------- ------- -------
(0.61) (0.60) (0.59) (0.13) (0.66) (0.65) (0.64) (0.14)
- - - - - - - -
- ------ ------ ------ ------- ------- ------- ------- -------
(0.61) (0.60) (0.59) (0.13) (0.66) (0.65) (0.64) (0.14)
- ------ ------ ------ ------- ------- ------- ------- -------
$ 9.63 $ 9.68 $ 9.82 $ 9.68 $ 9.62 $ 9.67 $ 9.81 $ 9.68
====== ====== ====== ======= ======= ======= ======= =======
6.01% 4.83% 7.83% 0.45% 6.57% 5.38% 8.22% 0.59%
====== ====== ====== ======= ======= ======= ======= =======
$5,096 $3,399 $1,576 $ 403 $64,010 $59,526 $64,595 $53,445
0.85%(7) 0.85%(7) 0.83% 0.79% 0.32%(7) 0.33%(7) 0.36% 0.33%
6.36%(7) 6.11%(7) 6.16% 5.10% 6.90%(7) 6.66%(7) 6.60% 5.77%
- - 183% 94% - - 183% 94%
</TABLE>
27
<PAGE> 29
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
AMR Investment Services Balanced Portfolio
AMR Investment Services Growth and Income Portfolio
AMR Investment Services Intermediate Bond Portfolio
AMR Investment Services International Equity Portfolio
AMR Investment Services Limited-Term Income Portfolio
We have audited the accompanying statements of assets and liabilities of
the AMR Investment Services Balanced Portfolio, the AMR Investment Services
Growth and Income Portfolio, the AMR Investment Services Intermediate Bond
Portfolio, the AMR Investment Services International Equity Portfolio, and the
AMR Investment Services Limited-Term Income Portfolio (collectively, "the
Portfolios") (separate portfolios comprising the AMR Investment Services Trust),
including the schedules of investments, as of October 31, 1997, and the related
statements of operations, the statements of changes in net assets, and the
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Portfolios'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the portfolios of the AMR Investment Services Trust at October 31, 1997,
the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
December 19, 1997
28
<PAGE> 30
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 18.96%
U.S. TREASURY BILLS - 1.05%
5.11%, Due 11/13/1997.......... $ 10,000 $ 9,985
----------
TOTAL U.S. TREASURY
BILLS.................... 9,985
----------
U.S. TREASURY BONDS - 4.44%
11.625%, Due 11/15/2004........ 4,000 5,306
10.375%, Due 11/15/2012........ 3,260 4,305
8.75%, Due 5/15/2017........... 1,420 1,825
8.125%, Due 8/15/2019.......... 4,485 5,491
8.75%, Due 8/15/2020........... 2,525 3,293
7.25%, Due 8/15/2022........... 12,000 13,515
6.75%, Due 8/15/2026........... 7,270 7,811
6.625%, Due 2/15/2027.......... 725 769
----------
TOTAL U.S. TREASURY
BONDS.................... 42,315
----------
U.S. TREASURY COUPON STRIPS - 1.44%
Due 11/15/2008................. 796 409
Due 5/15/2011.................. 4,000 1,746
Due 2/15/2016.................. 17,000 5,450
Due 11/15/2018................. 23,000 6,164
----------
TOTAL U.S. TREASURY COUPON
STRIPS................... 13,769
----------
U.S. TREASURY NOTES - 12.03%
5.125%, Due 11/30/1998......... 9,225 9,182
5.625%, Due 11/30/1998......... 6,000 6,002
5.125%, Due 12/31/1998......... 1,000 995
5.875%, Due 3/31/1999.......... 2,750 2,759
5.875%, Due 2/28/1999.......... 6,160 6,175
6.375%, Due 5/15/1999.......... 3,000 3,032
5.875%, Due 8/31/1999.......... 3,500 3,513
7.125%, Due 9/30/1999.......... 100 103
5.875%, Due 6/30/2000.......... 960 965
6.00%, Due 8/15/2000........... 2,000 2,016
6.125%, Due 9/30/2000.......... 5,770 5,833
8.50%, Due 11/15/2000.......... 5,500 5,921
5.625%, Due 11/30/2000......... 3,000 2,992
7.75%, Due 2/15/2001........... 8,800 9,325
6.375%, Due 3/31/2001.......... 2,000 2,039
6.50%, Due 5/31/2001........... 6,000 6,146
7.50%, Due 11/15/2001.......... 2,000 2,124
7.50%, Due 5/15/2002........... 2,000 2,138
6.375%, Due 8/15/2002.......... 6,250 6,410
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
6.25%, Due 2/15/2003........... $ 1,000 $ 1,021
5.75%, Due 8/15/2003........... 2,000 1,994
7.25%, Due 8/15/2004........... 1,500 1,616
7.875%, Due 11/15/2004......... 2,000 2,229
6.50%, Due 5/15/2005........... 5,000 5,184
6.50%, Due 8/15/2005........... 3,000 3,111
6.875%, Due 5/15/2006.......... 2,000 2,128
7.00%, Due 7/15/2006........... 8,025 8,609
6.125%, Due 8/15/2007.......... 4,000 4,088
6.25%, Due 8/15/2023........... 5,650 5,664
6.50%, Due 11/15/2026.......... 1,350 1,407
----------
TOTAL U.S. TREASURY
NOTES.................... 114,721
----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS....... 180,790
----------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS - 4.54%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 0.85%
Series 1194G, 6.50%,
Due 10/15/2006............... 1,500 1,509
Pool #E20271, 7.00%,
Due 11/1/2011................ 1,474 1,494
Series 1250F, 7.00%,
Due 4/15/2019................ 494 495
Pool #C00436, 7.50%,
Due 12/1/2025................ 4,503 4,599
----------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION..... 8,097
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 2.95%
Series 1993-85E, 6.50%,
Due 11/25/2007............... 1,558 1,549
Series 1349PG, 6.50%,
Due 5/15/2014................ 303 303
Pool #66185, 6.366%,
Due 7/1/2018................. 1,701 1,666
Series 1992-143G, 6.75%,
Due 10/25/2018............... 317 317
Series 1989-21G, 10.45%,
Due 4/25/2019................ 173 191
Discount Note, 0.00%,
Due 10/9/2019................ 2,950 714
Pool #218949, 7.50%,
Due 12/1/2023................ 693 705
</TABLE>
See accompanying notes
29
<PAGE> 31
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Pool #266196, 7.345%,
Due 1/1/2024................. $ 1,304 $ 1,324
Pool #306505, 8.00%,
Due 3/1/2025................. 1,216 1,259
Pool #308798, 7.277%,
Due 4/1/2025................. 231 241
Pool #339141, 7.00%,
Due 3/1/2026................. 3,369 3,377
TBA, 7.50%,
Due 1/21/1999................ 11,220 11,515
TBA, 7.00%,
Due 11/1/2026................ 2,470 2,478
TBA, 6.50%,
Due 11/1/2026................ 2,520 2,477
----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION..... 28,116
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.74%
Pool #102932, 10.50%,
Due 9/15/1998................ 3 3
Series 1994-2 CIO, 7.99125%,
Due 4/16/2010................ 985 992
Pool #180220, 9.00%,
Due 10/15/2016............... 817 872
Pool #1849, 8.50%,
Due 8/20/2024................ 453 471
TBA, 7.50%,
Due 10/15/2027............... 4,600 4,705
----------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION 7,043
----------
TOTAL U.S. AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 43,256
----------
ASSET-BACKED SECURITIES - 1.47%
Amresco Commercial Mortgage
Funding I, Series 1997-C1 A3,
7.19%, Due 6/17/2029......... 1,510 1,575
Asset Securitization
Corporation, Series 1997-D5
A1C, 6.75%, Due 2/14/2041.... 2,000 2,019
Chase Commercial Mortgage
Securities Corporation,
Series 1997-1 A2, 7.3%,
Due 2/19/2007................ 1,100 1,158
Chase Manhattan Auto Owner Trust,
1996-C A3, 5.95%,
Due 11/15/2000............... 850 852
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Chase Manhattan Credit Card
Master Trust, 1996-4A, 6.73%,
Due 2/15/2003................ $ 1,550 $ 1,571
ContiMortgage Home Equity
Loan Trust, 1994-4 A2, 7.96%,
Due 9/15/2009................ 876 887
CS First Boston Mortgage
Securities Corporation,
Series 1997-C1 A1C, 7.24%,
Due 4/20/2007................ 3,000 3,133
NationsBank Auto Owner Trust,
1996-A A3, 6.375%,
Due 7/15/2000................ 2,550 2,564
Western Financial Grantor
Trust, 1994-3 A2, 6.65%, Due
12/1/1999.................... 224 225
----------
TOTAL ASSET-BACKED
SECURITIES............... 13,984
----------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.05%
CFS, Series 1997-5 A1, 7.72%,
Due 6/15/2005................ 1,788 1,788
Champion Auto Grantor Trust,
Series 1997D-A, 6.27%,
Due 9/15/2002................ 1,106 1,106
Citicorp Mortgage Securities,
Incorporated,
1987-14 A1, 9.50%,
Due 9/25/2002.............. 438 436
1987-5 A1, 8.50%,
Due 4/25/2017.............. 505 503
DLJ Mortgage Acceptance
Corporation, 1994-Q1 2A1,
4.56029%, Due 3/25/2024...... 262 261
General Electric Capital
Mortgage Services,
Incorporated, 1992-4A A4,
8.00%, Due 4/25/2022......... 455 460
Green Tree Financial
Corporation, 1996-8 A4,
7.00%,
Due 10/15/2027............... 1,300 1,337
Independent National Mortgage
Corporation, 1995-F A5,
8.25%, Due 5/25/2010......... 600 629
The Money Store Home Equity
Trust, Series 1996 A-A8,
7.66%,
Due 8/15/2026................ 1,500 1,582
Olympic Automobile Receivables
Trust, Series 1995A, 7.875%,
Due 7/15/2001................ 733 744
Residential Asset
Securitization Trust, 1996-A3
A11, 7.50%,
Due 7/25/2011................ 845 861
</TABLE>
See accompanying notes
30
<PAGE> 32
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Residential Funding Mortgage 1,
1993-S28 A4, 6.35%,
Due 8/25/2023................ $ 300 $ 299
----------
TOTAL NON-AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 10,006
----------
CORPORATE BONDS - 15.05%
FINANCIAL - 6.36%
Associates Corporation of North America,
5.96%, Due 5/15/2037......... 1,750 1,777
BankAmerica Corporation, 9.75%,
Due 7/1/2000................. 600 653
Bankers Trust New York, 8.25%,
Due 5/1/2005................. 980 1,071
Bank One Corporation, 7.60%,
Due 5/1/2007................. 2,300 2,452
BanPonce, 8.327%, Due
2/1/2027..................... 1,000 1,055
CIT Group Holdings, 6.375%,
Due 5/21/1999................ 750 756
Capital One Bank
8.125%, Due 3/1/2000......... 1,690 1,758
7.35%, Due 6/20/2000......... 385 395
Chase Manhattan Corporation,
8.625%, Due 5/1/2002......... 700 763
Chemical New York Corporation,
9.75%, Due 6/15/1999......... 900 951
China International Trust,
9.00%,
Due 10/15/2006............... 1,100 1,163
Chrysler Financial Corporation,
6.95%, Due 3/25/2002......... 2,700 2,775
First Chicago Capital I,
6.4938%, Due 2/1/2027........ 2,000 1,949
First Chicago NBD, 9.875%, Due
8/15/2000.................... 1,000 1,094
First Union Corporation, 7.85%,
Due 1/1/2027................. 1,650 1,696
Fleet Financial Corporation,
7.92%, Due 12/11/2026........ 1,180 1,214
Ford Motor Credit Company,
7.95%, Due 5/17/1999......... 2,000 2,058
6.375%, Due 9/15/1999........ 1,000 1,007
7.75%, Due 11/15/2002........ 360 383
General Electric Capital Corporation,
7.875%, Due 12/1/2006........ 1,000 1,104
Lehman Brothers Holding, Incorporated,
7.41%, Due 5/25/1999......... 500 509
6.09%, Due 11/6/2000......... 3,000 3,005
7.375%, Due 5/15/2004........ 1,125 1,166
Mellon Capital, Incorporated,
7.72%, Due 12/1/2026......... 890 904
7.995%, Due 1/15/2027........ 1,490 1,551
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Merrill Lynch Mortgage
Investors, 7.12%, Due
6/18/2029.................... $ 660 $ 693
Mortgage Capital Funding,
Incorporated, 6.758%, Due
2/20/2004.................... 668 679
National Bank of Detroit,
7.125%, Due 5/15/2007........ 700 725
NationsBank Corporation,
7.00%, Due 9/15/2001......... 1,000 1,027
NWA Trust, 11.30%, Due
12/21/2012................... 1,971 2,546
Paine Webber, 7.74%, Due
1/30/2012.................... 2,200 2,392
PNC Funding Corporation,
6.875%, Due 7/15/2007........ 1,500 1,522
Sears Roebuck Acceptance
Corporation,
6.60%, Due 10/9/2001......... 4,270 4,320
6.71%, Due 9/17/2003......... 2,710 2,750
Simon Debartolo Group LP,
6.75%, Due 7/15/2004......... 750 749
6.875%, Due 10/27/2005....... 1,060 1,066
Spieker Properties Corporation,
8.00%, Due 7/19/2005......... 290 314
7.125%, Due 12/1/2006........ 260 266
Travelers/Aetna Property and Casualty,
6.75%, Due 4/15/2001......... 2,600 2,642
United Dominion Realty Corporation,
7.25%, Due 1/15/2007......... 1,000 1,032
Wells Fargo Capital,
7.96%, Due 12/15/2026........ 4,570 4,707
----------
TOTAL FINANCIAL............ 60,639
----------
INDUSTRIAL - 5.81%
A.H. Belo Corporation, 7.25%,
Due 9/15/2027................ 930 933
Atlantic Richfield Corporation,
8.50%, Due 4/1/2012.......... 1,270 1,518
9.875%, Due 3/1/2016......... 700 923
Bemis Company, Incorporated,
6.70% Due 7/1/2005........... 1,000 1,010
Capital Cities/ABC, 8.875%, Due
12/15/2000................... 1,000 1,078
Caterpillar Finance, 6.32%, Due
9/1/2000..................... 2,500 2,511
Coca-Cola Company, 6.625%, Due
10/1/2002.................... 1,000 1,020
Coca-Cola Enterprises, 6.70%,
Due 10/15/2036............... 1,120 1,151
Comcast Cable Communication,
144A, 8.375%, Due 5/1/2007
(Note B)..................... 4,000 4,435
CSX Corporation, 7.05%, Due
5/1/2002..................... 2,000 2,050
</TABLE>
See accompanying notes
31
<PAGE> 33
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Dresser Industries, 6.25%, Due
6/1/2000..................... $ 2,000 $ 2,012
E.I. DuPont de Nemours & Company,
6.75%, Due 10/15/2002........ 1,000 1,024
Exxon Capital Corporation,
7.45%, Due 12/15/2001........ 1,000 1,051
Halliburton Company, 7.53%, Due
5/12/2017.................... 905 970
Hershey Foods Company,
6.95%, Due 3/1/2007.......... 1,000 1,045
Hilton Hotels Corporation,
7.00%, Due 7/15/2004......... 2,180 2,196
7.95%, Due 4/15/2007......... 1,430 1,526
International Business
Machines, Incorporated,
7.125%, Due 12/1/2096........ 2,090 2,099
Keycorp, 7.826%, Due
12/1/2026.................... 2,000 2,036
The May Department Store
Company, 7.625%,
Due 8/15/2013................ 1,890 2,020
McDonald's Corporation, 6.50%,
Due 8/1/2007................. 1,000 1,013
Millipore Corporation, 7.50%,
Due 4/1/2007................. 700 740
Norfolk Southern, 7.80%,
Due 5/15/2027................ 1,680 1,820
Oracle Corporation, 6.91%, Due
2/15/2007.................... 1,250 1,279
Petroleum Geo-Services Corporation,
7.50%, Due 3/31/2007......... 1,610 1,691
Petroleum National, 144A,
7.125% Due 10/18/2006 (Note
B)........................... 3,000 2,882
Philip Morris Companies,
Incorporated,
8.25%, Due 10/15/2003........ 4,540 4,902
8.375%, Due 1/15/2017........ 625 641
Phillips 66 Capital 11
Corporation, 8.00%, Due
1/15/2037.................... 1,270 1,313
Service Corporation
International, 7.70%, Due
4/15/2009.................... 1,440 1,552
Stop & Shop Companies, 9.75%,
Due 2/1/2002................. 2,000 2,238
Sysco Corporation, 7.00%, Due
5/1/2006..................... 1,000 1,040
Texaco Cap, MTN, 6.19%, Due
7/9/2003..................... 750 743
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Walt Disney, Incorporated,
6.75%, Due 3/30/2006......... $ 1,000 $ 1,017
----------
TOTAL INDUSTRIAL........... 55,479
----------
UTILITY - 0.37%
General Telephone Southwest,
Incorporated, 8.50%, Due
11/15/2031................... 600 722
Southern California Edison
Company, 8.25%, Due
2/1/2000..................... 1,425 1,489
U.S. West Capital Funding,
6.85%, Due 1/15/2002......... 1,300 1,287
----------
TOTAL UTILITY.............. 3,531
----------
FOREIGN BONDS - 2.51%
BCH Cayman Islands Limited,
7.70%, Due 7/15/2006......... 2,080 2,200
Fokus Bank AS, Variable Rate,
Due 9/29/2004................ 1,600 1,616
Enersis SA, 6.90%, Due
12/1/2006.................... 1,500 1,516
European Investment Bank,
Due 11/6/2026................ 7,650 1,167
Foreningsbanken, Variable Rate,
Due 12/29/2049............... 3,000 3,019
Hydro-Quebec,
9.40%, Due 2/1/2021.......... 660 832
7.91%, Due 11/18/2024........ 670 814
Korea Development Bank,
5.875%, Due 12/1/1998........ 100 98
6.25%, Due 5/1/2000.......... 770 742
Midland Bank PLC, 7.625%, Due
6/15/2006.................... 910 971
Nordbanken, Variable Rate,
Due 10/29/2049............... 3,000 3,000
Potash Corporation Saskatchewan,
7.125%, Due 6/15/2007........ 630 652
Province of Quebec,
7.00%, Due 1/30/2007......... 1,750 1,802
5.735%, Due 3/2/2026......... 890 881
Santander Financial Issuance
Limited,
7.75%, Due 5/15/2005......... 250 267
7.00%, Due 4/1/2006.......... 460 471
</TABLE>
See accompanying notes
32
<PAGE> 34
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Skandinaviska Enskilda Banken,
Floating Rate, 6.71875%, Due
6/29/2049.................... $ 3,800 $ 3,876
----------
TOTAL FOREIGN BONDS........ 23,924
----------
TOTAL CORPORATE BONDS...... 143,573
----------
Shares
--------
PREFERRED STOCK - 0.16%
Home Ownership Funding 2,
Series 144A (Note B)......... 1,500 1,493
----------
TOTAL PREFERRED STOCK...... 1,493
----------
COMMON STOCK - 56.29%
FOREIGN STOCKS - 2.21%
Ace, Limited................... 20,400 1,896
British Petroleum PLC, ADR..... 20,251 1,777
Denison International PLC ADR
(non-income producing)....... 2,500 47
Elf Aquitane SA ADR............ 53,100 3,279
Energy Group PLC............... 34,150 1,379
Gallaher Group PLC, ADR (non-
income producing)............ 79,400 1,523
Groupe AB SA, ADR (non-income
producing)................... 38,720 288
Hanson PLC, ADR................ 34,150 871
Imperial Tobacco Group PLC..... 23,300 286
Mid Ocean, Limited............. 23,000 1,492
Millenium Chemicals,
Incorporated................. 24,171 568
New Holland, N.V............... 65,000 1,848
Royal Dutch Petroleum Company,
New York Registry............ 112,100 5,899
----------
TOTAL FOREIGN
STOCKS................... 21,153
----------
CONSUMER STAPLES - 7.05%
DEPARTMENT AND MAIL ORDER - 1.54%
Friedman's, Incorporated (non-
income producing)............ 19,300 344
J.C. Penney Company,
Incorporated................. 75,700 4,443
K Mart Corporation............. 294,500 3,884
Marks Brothers Jewelers,
Incorporated (non-income
producing)................... 3,100 50
Sears Roebuck & Company........ 124,700 5,222
Tupperware, Incorporated....... 30,000 752
----------
TOTAL DEPARTMENT AND MAIL
ORDER.................... 14,695
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
DISTILLERS AND BREWERS - 0.56%
Anheuser-Busch Companies,
Incorporated................. 127,400 $ 5,088
Brown-Foreman, Incorporated.... 5,575 274
----------
TOTAL DISTILLERS AND
BREWERS.................. 5,362
----------
DRUGS AND HOSPITAL SUPPLY - 1.10%
American Home Products
Corporation.................. 30,000 2,224
Apria Healthcare Group (non-
income producing)............ 4,237 64
Baxter International,
Incorporated................. 32,000 1,480
Bristol-Myers Squibb Company... 25,400 2,229
Foundation Health Systems...... 65,500 1,883
Healthcare Services Group (non-
income producing)............ 583 7
Integrated Health Services..... 379 12
Pharmacia & Upjohn,
Incorporated................. 82,300 2,613
----------
TOTAL DRUGS AND HOSPITAL
SUPPLY................... 10,512
----------
FOODS - 0.18%
Dominick's Supermarkets
Incorporated (non-income
producing)................... 11,500 420
Nabisco Holdings Corporation,
Class A...................... 31,975 1,315
----------
TOTAL FOODS................ 1,735
----------
LEISURE - 0.72%
American Coin Merchandising,
Incorporated (non-income
producing)................... 17,200 281
Hasbro, Incorporated........... 44,525 1,291
Mattel, Incorporated........... 100,850 3,921
Toys R Us, Incorporated........ 40,500 1,380
----------
TOTAL LEISURE.............. 6,873
----------
PUBLISHING - 0.44%
A.H. Belo, Incorporated, Class A... 71,425 3,375
Playboy Enterprises............ 12,800 177
Readers Digest Association,
Incorporated................. 28,000 637
----------
TOTAL PUBLISHING........... 4,189
----------
RETAIL - OTHER - 0.01%
Intimate Brands,
Incorporated................. 6,645 142
----------
TOTAL RETAIL - OTHER....... 142
----------
SERVICES - 0.24%
Mac-Gray Corporation (non-
income producing)............ 8,800 130
</TABLE>
See accompanying notes
33
<PAGE> 35
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Transcoastal Marine Services,
Incorporated (non-income 2,700 $ 67
producing)...................
Wackenhut Corporation.......... 3,100 62
Waste Management,
Incorporated................. 86,200 1,999
----------
TOTAL SERVICES............. 2,258
----------
TOBACCO - 1.75%
Fortune Brands, Incorporated... 50,000 1,653
Philip Morris Companies,
Incorporated................. 299,850 11,882
RJR Nabisco Holdings........... 98,350 3,116
----------
TOTAL TOBACCO.............. 16,651
----------
MISCELLANEOUS - CONSUMER STAPLES - 0.51%
Nine West Group,
Incorporated................. 62 2,194
Pittston Company............... 53 1,922
Russell Corporation............ 25 734
----------
TOTAL MISCELLANEOUS -
CONSUMER STAPLES......... 4,850
----------
TOTAL CONSUMER STAPLES..... 67,267
----------
INTEREST SENSITIVE - 20.16%
BANKS - 5.78%
Banc One Corporation........... 42,400 2,210
BankAmerica Corporation........ 135,300 9,674
Bankers Trust Company
New York..................... 69,550 8,207
Chase Manhattan Corporation.... 119,000 13,730
CoreStates Financial Corporation... 15,000 1,091
Corus Bankshares,
Incorporated................. 6,400 224
First Chicago NBD.............. 100,281 7,295
First of America Bank
Corporation.................. 33,000 1,840
First Security Corporation..... 70,000 2,030
Fleet Financial Group,
Incorporated................. 38,000 2,444
J.P. Morgan & Company,
Incorporated................. 20,675 2,269
PNC Bank Corporation........... 86,200 4,095
Washington Federal,
Incorporated................. 690 20
----------
TOTAL BANKS................ 55,129
----------
BUILDING AND MATERIALS - 0.35%
Giant Cement Holding,
Incorporated (non-income
producing)................... 2,888 70
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
NCI Building Systems,
Incorporated (non-income 5,025 $ 183
producing)...................
PPG Industries, Incorporated... 54,500 3,086
----------
TOTAL BUILDING AND
MATERIALS................ 3,339
----------
FINANCE - 1.21%
Beneficial Corporation......... 29,000 2,224
Brandywine Realty Trust........ 4,100 96
First USA Paymentech........... 6,900 122
Household International,
Incorporated................. 20,000 2,265
MGI Properties, Incorporated... 3,897 90
Paine Webber Group,
Incorporated................. 58,900 2,603
The PMI Group, Incorporated.... 20,000 1,209
Redwood Trust, Incorporated.... 8,500 214
Washington Mutual,
Incorporated................. 40,000 2,738
----------
TOTAL FINANCE.............. 11,561
----------
INSURANCE - LIFE AND MULTI-LINE - 2.03%
American Financial Group,
Incorporated................. 57,275 2,180
American General Corporation... 28,600 1,459
Aon Corporation................ 126,450 6,820
FPIC Insurance Group (non-
income producing)............ 2,947 88
Lincoln National Corporation... 30,000 2,063
Old Republic International
Corporation.................. 65,950 2,358
Travelers Corporation.......... 62,337 4,364
----------
TOTAL INSURANCE - LIFE AND
MULTI-LINE............... 19,332
----------
INSURANCE - PROPERTY AND CASUALTY - 1.49%
Allstate Corporation........... 51,800 4,296
Chubb Corporation.............. 59,000 3,909
IPC Holdings, Limited.......... 6,830 210
Liberty Corporation............ 2,900 124
Mutual Risk Management,
Limited...................... 8,400 218
Nac Re Corporation............. 2,800 125
Safeco Corporation............. 25,000 1,191
TIG Holdings, Incorporated..... 122,000 4,133
----------
TOTAL INSURANCE - PROPERTY
AND CASUALTY............. 14,206
----------
SAVINGS AND LOAN - 0.28%
Coastal Bancorp,
Incorporated................. 717 20
H.F. Ahmanson & Company........ 45,000 2,655
----------
TOTAL SAVINGS AND LOAN..... 2,675
----------
</TABLE>
See accompanying notes
34
<PAGE> 36
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UTILITIES - ELECTRIC - 3.77%
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Central and Southwest
Corporation.................. 37,600 $ 811
CMS Energy Corporation......... 50,000 1,825
DTE Energy Company............. 109,700 3,373
Edison International........... 65,000 1,666
Entergy Corporation............ 329,200 8,045
Houston Industries,
Incorporated................. 78,500 1,707
Illinova Corporation........... 75,000 1,669
Northeast Utilities............ 359,400 4,133
Peco Energy Company............ 58,000 1,316
Potomac Electric Power......... 44,400 996
PP&L Resources, Incorporated... 61,000 1,319
Public Service Enterprise
Group, Incorporated.......... 38,400 996
Rochester Gas and Electric,
Incorporated................. 30,000 756
Texas Utilities Company........ 36,000 1,292
Unicom Corporation............. 214,600 6,009
----------
TOTAL UTILITIES -
ELECTRIC................. 35,913
----------
UTILITIES - NATURAL GAS - 0.35%
Equitable Resources,
Incorporated................. 37,100 1,180
Peoples Energy Corporation..... 46,000 1,645
Williams Companies............. 10,500 535
----------
TOTAL UTILITIES - NATURAL
GAS...................... 3,360
----------
UTILITIES - TELEPHONE - 2.63%
Alltel Corporation............. 55,000 1,946
AT&T Corporation............... 58,000 2,838
Bell Atlantic Corporation...... 12,328 985
GTE Corporation................ 90,400 3,836
MCI Communications
Corporation.................. 35,400 1,257
SBC Communications............. 104,284 6,635
US West, Incorporated.......... 190,200 7,572
----------
TOTAL UTILITIES -
TELEPHONE................ 25,069
----------
MISCELLANEOUS - INTEREST
SENSITIVE - 2.27%
American Express Company....... 143,700 11,209
Federal Home Loan Mortgage
Corporation.................. 70,150 2,657
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Federal National Mortgage 98,225 $ 4,758
Association..................
Fund American Enterprises,
Incorporated................. 7,425 887
Morgan Stanley Dean Witter
Discover & Company........... 45,200 2,215
----------
TOTAL MISCELLANEOUS -
INTEREST SENSITIVE....... 21,726
----------
TOTAL INTEREST
SENSITIVE................ 192,310
----------
CONSUMER CYCLICALS - 4.90%
AUTOMOBILE AND TRUCK - 4.41%
Chrysler Corporation........... 154,800 5,457
Dana Corporation............... 159,900 7,485
Eaton Corporation.............. 20,000 1,933
First Brands Corporation....... 98,750 2,518
Ford Motor Company............. 349,600 15,273
General Motors Corporation..... 142,800 9,166
Meritor Automotive,
Incorporated................. 8,333 186
----------
TOTAL AUTOMOBILE AND
TRUCK.................... 42,018
----------
ELECTRICAL HOUSEHOLD EQUIPMENT - 0.24%
Whirlpool Corporation.......... 37,000 2,243
----------
TOTAL ELECTRICAL
HOUSEHOLD EQUIPMENT........ 2,243
----------
TEXTILE - APPAREL - 0.01%
Designer Holdings, Limited..... 16,000 138
----------
TOTAL TEXTILE - APPAREL.... 138
----------
TIRE AND RUBBER - 0.24%
Goodyear Tire & Rubber
Company...................... 35,800 2,242
----------
TOTAL TIRE AND RUBBER...... 2,242
----------
TOTAL CONSUMER CYCLICALS... 46,641
----------
INTERMEDIATE GOODS & SERVICES - 13.74%
CHEMICALS - 2.09%
ARCO Chemical Company.......... 30,000 1,466
The Carbide/Graphite Group
(non-income producing)....... 6,000 214
Dow Chemical................... 81,300 7,378
E.I. DuPont de Nemours &
Company...................... 32,000 1,820
Eastman Chemical Company....... 66,400 3,959
</TABLE>
See accompanying notes
35
<PAGE> 37
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
FMC Corporation (non-income 44,350 $ 3,584
producing)...................
Geon Corporation............... 5,100 111
Great Lakes Chemical
Corporation.................. 27,000 1,269
Wellman Industries, Incorporated... 8,700 177
----------
TOTAL CHEMICALS............ 19,978
----------
FOREST PRODUCTS - 1.55%
Boise Cascade Corporation...... 29,700 1,028
Georgia-Pacific Corporation.... 13,000 1,103
International Paper Company.... 134,500 6,053
Louisiana Pacific
Corporation.................. 59,200 1,243
Mead Corporation............... 22,000 1,331
Union Camp Corporation......... 29,000 1,571
Westvaco Corporation........... 20,000 656
Weyerhaeuser Company........... 37,000 1,767
----------
TOTAL FOREST PRODUCTS...... 14,752
----------
METALS - ALUMINUM - 0.49%
Alumax, Incorporated........... 80,000 2,600
Aluminum Company of America.... 24,000 1,752
Citation Corporation
(non-income producing)....... 10,996 187
Commonwealth Industries
Incorporated................. 3,400 60
Northwest Pipe Company (non-
income producing)............ 757 18
WHX Corporation (non-income
producing)................... 5,400 72
----------
TOTAL METALS - ALUMINUM.... 4,689
----------
NATURAL GAS TRANSMISSION - 0.30%
Coastal Corporation............ 34,325 2,064
El Paso Natural Gas Company.... 13,844 830
----------
TOTAL NATURAL GAS
TRANSMISSION............. 2,894
----------
OIL - 4.97%
Abraxas Petroleum Corporation
(non-income producing)....... 14,291 266
Amoco Corporation.............. 27,400 2,512
Atlantic Richfield
Corporation.................. 40,000 3,293
Burlington Resources........... 49,486 2,422
Chevron Corporation............ 17,000 1,410
Coho Energy, Incorporated (non-
income producing)............ 12,757 150
Exxon Corporation.............. 93,100 5,720
Mobil Corporation.............. 16,000 1,165
Occidental Petroleum
Corporation.................. 233 6,495
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Oryx Energy Company............ 89,125 $ 2,457
Phillips Petroleum Company..... 211,000 10,207
Tenneco, Incorporated.......... 94,700 4,256
Ultramar Diamond Shamrock
Corporation.................. 58,000 1,791
Union Pacific Resources Group,
Incorporated................. 108,800 2,679
Union Texas Petroleum Holdings,
Incorporated................. 111,900 2,546
----------
TOTAL OIL.................. 47,369
----------
OIL SERVICE - 1.04%
Baker Hughes, Incorporated..... 216,800 9,959
----------
TOTAL OIL SERVICE.......... 9,959
----------
TRANSPORTATION - 1.68%
Airnet Systems................. 6,800 139
Burlington Northern,
Incorporated................. 14,800 1,406
CSX Corporation................ 126,100 6,896
Norfolk Southern Corporation... 228,600 7,344
Teekay Shipping Corporation.... 5,992 192
----------
TOTAL
TRANSPORTATION........... 15,977
----------
MISCELLANEOUS - INTERMEDIATE
GOODS & SERVICES - 1.62%
Alliance Communications
Corporation.................. 5,900 72
Dresser Industries,
Incorporated................. 226,800 9,554
GATX Corporation............... 33,000 2,131
Harnischfeger Industries,
Incorporated................. 12,800 504
Lukens, Incorporated........... 5,600 101
Mapco, Incorporated............ 94,100 3,105
----------
TOTAL MISCELLANEOUS -
INTERMEDIATE GOODS &
SERVICES................. 15,467
----------
TOTAL INTERMEDIATE GOODS &
SERVICES................. 131,085
----------
CAPITAL GOODS - 8.23%
AEROSPACE - 3.22%
Avteam, Incorporated
(non-income producing)....... 8,100 69
Coltec Industries, Incorporated
(non-income producing)....... 101,800 2,036
Harsco Corporation............. 40,000 1,660
Lockheed Martin Corporation.... 103,888 9,876
Northrop Corporation........... 21,000 2,294
Raytheon Company............... 66,800 3,624
Rockwell International
Corporation.................. 30,000 1,470
</TABLE>
See accompanying notes
36
<PAGE> 38
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Textron, Incorporated.......... 128,600 $ 7,435
Thiokol Corporation............ 24,550 2,248
----------
TOTAL AEROSPACE............ 30,712
----------
ELECTRICAL EQUIPMENT - 1.30%
Dover Corporation.............. 5,750 388
Honeywell, Incorporated........ 54,800 3,730
ITT Industries, Incorporated... 92,600 2,923
MEMC Electronic Materials,
Incorporated................. 55,600 1,115
Westinghouse Electric
Corporation.................. 161,500 4,270
----------
TOTAL ELECTRICAL
EQUIPMENT................ 12,426
----------
ELECTRONICS - INDUSTRIAL - 0.29%
Channell Commercial
Corporation (non-income
producing)................... 1,190 15
PG&E Corporation............... 10,000 256
Stoneridge, Incorporated
(non-income producing)....... 12,200 198
VLSI Technology, Incorporated
(non-income producing)....... 77,300 2,290
----------
TOTAL ELECTRONICS -
INDUSTRIAL............... 2,759
----------
MACHINERY - 1.25%
Caterpillar Tractor Company.... 18,000 923
Deere and Company.............. 160,000 8,420
Gleason Corporation............ 4,060 112
Millipore Corporation.......... 62,325 2,438
----------
TOTAL MACHINERY............ 11,893
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
OFFICE EQUIPMENT - 2.17%
Applied Magnetics Corporation
(non-income producing)....... 5,140 $ 118
Data General Corporation
(non-income producing)....... 3,200 62
Exabyte Corporation (non-income
producing)................... 10,495 111
Hutchinson Technology.......... 5,200 137
International Business Machines
Corporation.................. 67,000 6,570
Lexmark International Group,
Incorporated, Class A
(non-income producing)....... 31,200 954
Micros Systems, Incorporated
(non-income producing)....... 5,453 245
Seagate Technology............. 38,000 1,031
Storage Tech Group............. 21,200 1,244
Xerox Corporation.............. 128,700 10,208
----------
TOTAL OFFICE
EQUIPMENT................ 20,680
----------
TOTAL CAPITAL GOODS........ 78,470
----------
TOTAL COMMON STOCK......... 536,926
----------
Par
Amount
--------
SHORT-TERM INVESTMENTS (NOTE A) - 11.66%
AMR Investments Strategic Cash
Business Trust............... $ 66,635 66,635
Banque Paribas, Euro TD,
5.6875%, Due 11/3/1997....... 44,541 44,541
----------
TOTAL SHORT-TERM
INVESTMENTS.............. 111,176
----------
TOTAL INVESTMENTS - 109.18%
(COST $888,520).............. 1,041,204
----------
LIABILITIES, NET OF OTHER
ASSETS - (9.18%)............. (87,537)
----------
TOTAL NET ASSETS - 100%........ $ 953,667
==========
</TABLE>
- ---------------
Based on the cost of investments of $889,971 for federal income tax purposes at
October 31, 1997, the aggregate gross unrealized appreciation was $158,434, the
aggregate gross unrealized depreciation was $7,201 and the net unrealized
appreciation of investments was $151,233.
(A) Rates associated with short-term investments represent yield to maturity.
(B) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $8,810,000 or 0.9% of net assets.
ABBREVIATIONS:
ADR - American Depositary Receipt
AG - Company
AS - Company
BA - Bankers Acceptance
FRN - Floating Rate Note
MTN - Medium-Term Note
NV - Company
PLC - Public Limited Corporation
SA - Company
TBA - To Be Announced
TD - Time Deposit
See accompanying notes
37
<PAGE> 39
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
COMMON STOCK - 98.25%
FOREIGN STOCKS - 4.01%
Ace, Limited.................. 91,850 $ 8,537
British Petroleum PLC, ADR.... 99,176 8,704
Denison International PLC ADR
(non-income producing)...... 5,500 104
Elf Aquitane SA, ADR.......... 151,600 9,361
Energy Group, PLC............. 81,087 3,274
Gallaher Group PLC, ADR (non-
income producing)........... 217,200 4,168
Groupe AB SA, ADR (non-income
producing).................. 89,960 669
Hanson PLC, ADR............... 81,087 2,068
Imperial Tobacco Group PLC.... 108,400 1,332
Mid Ocean, Limited............ 86,000 5,579
Millenium Chemicals,
Incorporated................ 82,671 1,943
New Holland N.V............... 185,000 5,261
Royal Dutch Petroleum Company,
New York Registry........... 301,400 15,861
----------
TOTAL FOREIGN STOCKS...... 66,861
----------
CONSUMER STAPLES - 13.81%
DEPARTMENT AND MAIL ORDER - 2.46%
Friedman's, Incorporated (non-
income producing)........... 45,200 805
J.C. Penney Company,
Incorporated................ 256,800 15,071
K Mart Corporation............ 747,000 9,851
Marks Brothers Jewelers,
Incorporated (non-income
producing).................. 7,300 119
Sears Roebuck & Company....... 323,400 13,542
Tupperware, Incorporated...... 65,000 1,629
----------
TOTAL DEPARTMENT AND MAIL
ORDER................... 41,017
----------
DISTILLERS AND BREWERS - 1.31%
Anheuser-Busch Companies,
Incorporated................ 518,800 20,720
Brown-Foreman, Incorporated... 23,825 1,172
----------
TOTAL DISTILLERS AND
BREWERS................. 21,892
----------
DRUGS AND HOSPITAL SUPPLY - 2.05%
American Home Products
Corporation................. 52,000 3,855
Apria Healthcare Group (non-
income producing)........... 9,960 151
Baxter International,
Incorporated................ 70,000 3,238
Bristol-Myers Squibb
Company..................... 152,000 13,338
Foundation Health Systems..... 200,100 5,753
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Healthcare Services Group
(non-income producing)...... 1,337 $ 17
Integrated Health Services.... 888 28
Pharmacia & Upjohn,
Incorporated................ 245,000 7,779
----------
TOTAL DRUGS AND HOSPITAL
SUPPLY.................. 34,159
----------
FOOD PROCESSING - 0.19%
Heinz H.J. Company............ 5,000 232
I B P, Incorporated........... 128,400 2,977
----------
TOTAL FOOD PROCESSING..... 3,209
----------
FOODS - 0.60%
Dominick's Supermarkets,
Incorporated (non-income
producing).................. 27,100 989
Nabisco Holdings Corporation,
Class A..................... 218,825 8,999
----------
TOTAL FOODS............... 9,988
----------
LEISURE - 1.73%
American Coin Merchandising,
Incorporated (non-income
producing).................. 40,800 666
Hasbro, Incorporated.......... 362,975 10,526
Mattel, Incorporated.......... 359,350 13,970
Toys R Us, Incorporated....... 107,500 3,662
----------
TOTAL LEISURE............. 28,824
----------
PUBLISHING - 0.73%
A.H. Belo, Incorporated, Class A... 248,875 11,759
Playboy Enterprises........... 30,000 414
----------
TOTAL PUBLISHING.......... 12,173
----------
RETAIL - Other - 0.02%
Intimate Brands,
Incorporated................ 15,565 333
----------
TOTAL RETAIL - OTHER...... 333
----------
SERVICES - 0.45%
Mac-Gray Corporation (non-
income producing)........... 22,200 327
Transcoastal Marine Services,
Incorporated (non-income
producing).................. 6,200 154
Wackenhut Corporation......... 7,300 147
Waste Management,
Incorporated................ 300,000 6,956
----------
TOTAL SERVICES............ 7,584
----------
TOBACCO - 3.27%
Fortune Brands,
Incorporated................ 142,000 4,695
Philip Morris Companies,
Incorporated................ 935,950 37,087
RJR Nabisco Holdings.......... 401,670 12,728
----------
TOTAL TOBACCO............. 54,510
----------
</TABLE>
See accompanying notes
38
<PAGE> 40
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
MISCELLANEOUS - CONSUMER STAPLES - 0.99%
Nine West Group,
Incorporated................ 269,300 $ 9,510
Pittston Company.............. 189,600 6,849
Russell Corporation........... 11,000 323
----------
TOTAL MISCELLANEOUS -
CONSUMER STAPLES........ 16,682
----------
TOTAL CONSUMER STAPLES.... 230,371
----------
INTEREST SENSITIVE - 32.73%
BANKS - 9.55%
Banc One Corporation.......... 108,100 5,635
BankAmerica Corporation....... 366,700 26,219
Bankers Trust Company
New York.................... 225,850 26,650
Chase Manhattan Corporation... 311,714 35,964
CoreStates Financial
Corporation................. 50,000 3,638
Corus Bankshares,
Incorporated................ 15,000 525
First Chicago NBD............. 259,965 18,912
First of America Bank
Corporation................. 79,000 4,404
First Security Corporation.... 184,250 5,343
First Union Corporation....... 34,000 1,668
Fleet Financial Group,
Incorporated................ 77,000 4,952
J.P. Morgan & Company,
Incorporated................ 96,425 10,583
NationsBank Corporation....... 80,000 4,790
PNC Bank Corporation.......... 207,700 9,866
Washington Federal,
Incorporated................ 1,617 48
----------
TOTAL BANKS............... 159,197
----------
BUILDING AND MATERIALS - 0.60%
Giant Cement Holding,
Incorporated (non-income
producing).................. 6,742 163
NCI Building Systems,
Incorporated (non-income
producing).................. 11,797 430
PPG Industries,
Incorporated................ 166,600 9,434
----------
TOTAL BUILDING AND
MATERIALS............... 10,027
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
FINANCE - 1.60%
Beneficial Corporation........ 71,000 $ 5,445
Brandywine Realty Trust....... 9,600 225
First USA Paymentech.......... 16,300 287
Household International,
Incorporated................ 46,000 5,210
MGI Properties,
Incorporated................ 9,159 211
Paine Webber Group,
Incorporated................ 128,800 5,691
The PMI Group, Incorporated... 47,000 2,841
Redwood Trust, Incorporated... 19,300 485
Washington Mutual,
Incorporated................ 92,000 6,296
----------
TOTAL FINANCE............. 26,691
----------
INSURANCE - LIFE AND MULTI-LINE - 4.08%
American Financial Group,
Incorporated................ 247,075 9,404
American General
Corporation................. 88,600 4,519
Aon Corporation............... 276,100 14,892
FPIC Insurance Group,
Incorporated (non-income
producing).................. 7,020 209
Hartford Financial Services
Group, Incorporated......... 43,200 3,499
Lincoln National
Corporation................. 82,000 5,638
Old Republic International
Corporation................. 389,850 13,937
TransAmerica Corporation...... 60,000 6,056
Travelers Corporation......... 142,791 9,995
----------
TOTAL INSURANCE - LIFE
AND MULTI-LINE.......... 68,149
----------
INSURANCE - PROPERTY AND CASUALTY - 1.87%
Allstate Corporation.......... 124,414 10,319
Chubb Corporation............. 102,600 6,797
IPC Holdings, Limited......... 16,010 493
Liberty Corporation........... 6,900 295
Mutual Risk Management,
Limited..................... 19,600 508
Nac Re Corporation............ 6,700 298
Safeco Corporation............ 69,000 3,286
TIG Holdings, Incorporated.... 273,500 9,265
----------
TOTAL INSURANCE - PROPERTY
AND CASUALTY............ 31,261
----------
SAVINGS AND LOAN - 0.40%
Coastal Bancorp,
Incorporated................ 1,681 47
H.F. Ahmanson & Company....... 112,000 6,608
----------
TOTAL SAVINGS AND LOAN.... 6,655
----------
</TABLE>
See accompanying notes
39
<PAGE> 41
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
UTILITIES - ELECTRIC - 5.91%
Central and Southwest
Corporation................. 175,000 $ 3,773
CMS Energy Corporation........ 140,000 5,110
DTE Energy Company............ 331,500 10,194
Edison International.......... 202,500 5,189
Entergy Corporation........... 776,400 18,973
Houston Industries,
Incorporated................ 186,300 4,052
Illinova Corporation.......... 215,000 4,784
New York State Electric & Gas
Corporation................. 70,000 1,868
Northeast Utilities........... 863,600 9,931
Peco Energy Company........... 148,900 3,378
Potomac Electric Power........ 128,800 2,890
PP&L Resources,
Incorporated................ 210,900 4,561
Public Service Enterprise
Group, Incorporated......... 153,900 3,992
Rochester Gas and Electric,
Incorporated................ 40,000 1,008
Texas Utilities Company....... 138,400 4,965
Unicom Corporation............ 500,900 14,025
----------
TOTAL UTILITIES -
ELECTRIC................ 98,693
----------
UTILITIES - NATURAL GAS - 0.57%
Equitable Resources,
Incorporated................ 111,900 3,560
Peoples Energy Corporation.... 68,000 2,431
Williams Companies,
Incorporated................ 69,000 3,515
----------
TOTAL UTILITIES - NATURAL
GAS..................... 9,506
----------
UTILITIES - TELEPHONE - 4.06%
Alltel Corporation............ 122,300 4,326
AT&T Corporation.............. 176,200 8,623
Bell Atlantic Corporation..... 43,720 3,492
GTE Corporation............... 229,800 9,752
MCI Communications
Corporation................. 111,300 3,951
SBC Communications............ 251,577 16,007
US West, Incorporated......... 543,600 21,642
----------
TOTAL UTILITIES -
TELEPHONE............... 67,793
----------
MISCELLANEOUS - INTEREST SENSITIVE - 4.09%
American Express Company...... 358,600 27,971
Federal Home Loan Mortgage
Corporation................. 327,450 12,402
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Federal National Mortgage
Association................. 338,975 $ 16,419
Fund American Enterprises,
Incorporated................ 42,750 5,109
Morgan Stanley Dean Witter
Discover & Company.......... 128,400 6,292
----------
TOTAL MISCELLANEOUS -
INTEREST SENSITIVE...... 68,193
----------
TOTAL INTEREST
SENSITIVE............... 546,165
----------
CONSUMER CYCLICALS - 7.79%
AUTOMOBILE AND TRUCK - 7.00%
Chrysler Corporation.......... 403,100 14,209
Dana Corporation.............. 441,100 20,649
Eaton Corporation............. 61,000 5,894
First Brands Corporation...... 388,150 9,898
Ford Motor Company............ 925,800 40,446
General Motors Corporation.... 394,600 25,328
Meritor Automotive,
Incorporated................ 20,333 454
----------
TOTAL AUTOMOBILE AND
TRUCK................... 116,878
----------
ELECTRICAL HOUSEHOLD EQUIPMENT - 0.39%
Whirlpool Corporation......... 107,900 6,541
----------
TOTAL ELECTRICAL HOUSEHOLD
EQUIPMENT............... 6,541
----------
TEXTILE - APPAREL - 0.02%
Designer Holdings, Limited.... 37,600 324
----------
TOTAL TEXTILE - APPAREL... 324
----------
TIRE AND RUBBER - 0.38%
Goodyear Tire & Rubber
Company..................... 100,100 6,269
----------
TOTAL TIRE AND RUBBER..... 6,269
----------
TOTAL CONSUMER
CYCLICALS............... 130,012
----------
INTERMEDIATE GOODS & SERVICES - 25.28%
CHEMICALS - 3.58%
ARCO Chemical Company......... 96,000 4,692
The Carbide/Graphite Group
(non-income producing)...... 14,100 502
Dow Chemical.................. 219,000 19,892
E.I. DuPont de Nemours &
Company..................... 82,000 4,664
Eastman Chemical Company...... 190,175 11,339
FMC Corporation (non-income
producing).................. 184,950 14,946
Geon Corporation.............. 12,100 262
Great Lakes Chemicals
Corporation................. 65,600 3,083
</TABLE>
See accompanying notes
40
<PAGE> 42
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Wellman Industries,
Incorporated................ 20,400 $ 414
----------
TOTAL CHEMICALS........... 59,794
----------
FOREST PRODUCTS - 2.46%
Boise Cascade Corporation..... 89,000 3,082
Georgia-Pacific Corporation... 37,000 3,138
International Paper Company... 371,600 16,722
Louisiana Pacific
Corporation................. 155,900 3,274
Mead Corporation.............. 47,000 2,844
Union Camp Corporation........ 71,000 3,847
Westvaco Corporation.......... 92,100 3,022
Weyerhaeuser Company.......... 108,000 5,157
----------
TOTAL FOREST PRODUCTS..... 41,086
----------
METALS - ALUMINUM - 0.70%
Alumax, Incorporated.......... 206,500 6,711
Aluminum Company of America... 58,000 4,234
Citation Corporation (non-
income producing)........... 25,868 440
Commonwealth Industries,
Incorporated................ 7,600 134
Northwest Pipe Company (non-
income producing)........... 1,776 43
WHX Corporation (non-income
producing).................. 12,700 169
----------
TOTAL METALS - ALUMINUM... 11,731
----------
NATURAL GAS TRANSMISSION - 0.64%
Coastal Corporation........... 117,575 7,069
El Paso Natural Gas Company... 59,759 3,582
----------
TOTAL NATURAL GAS
TRANSMISSION............ 10,651
----------
OIL - 10.69%
Abraxas Petroleum Corporation
(non-income producing)...... 33,518 624
Amoco Corporation............. 69,600 6,381
Atlantic Richfield
Corporation................. 368,500 30,332
Burlington Resources.......... 202,141 9,892
Chevron Corporation........... 43,000 3,566
Coho Energy, Incorporated
(non-income producing)...... 30,064 353
Exxon Corporation............. 225,200 13,836
Mobil Corporation............. 44,000 3,204
Occidental Petroleum
Corporation................. 556,300 15,507
Oryx Energy Company........... 370,475 10,211
Phillips Petroleum Company.... 539,900 26,118
Tenneco, Incorporated......... 228,800 10,282
Texaco, Incorporated.......... 336,600 19,165
Ultramar Diamond Shamrock
Corporation................. 142,000 4,384
Union Pacific Resources Group,
Incorporated................ 410,300 10,104
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Union Texas Petroleum
Holdings, Incorporated...... 513,700 $ 11,687
Valero Refining and
Marketing................... 89,200 2,687
----------
TOTAL OIL................. 178,333
----------
OIL SERVICE - 1.60%
Baker Hughes, Incorporated.... 581,100 26,694
----------
TOTAL OIL SERVICE......... 26,694
----------
TRANSPORTATION - 2.75%
Airnet Systems................ 16,000 328
Burlington Northern,
Incorporated................ 47,200 4,484
CSX Corporation............... 390,300 21,345
Norfolk Southern
Corporation................. 599,400 19,256
Teekay Shipping Corporation... 14,049 450
----------
TOTAL TRANSPORTATION...... 45,863
----------
MISCELLANEOUS - INTERMEDIATE GOODS
& SERVICES - 2.86%
Alliance Communications
Corporation................. 14,000 170
Dresser Industries,
Incorporated................ 594,300 25,035
GATX Corporation.............. 73,900 4,771
Harnischfeger Industries,
Incorporated................ 30,900 1,217
Lukens, Incorporated.......... 13,200 238
Mapco, Incorporated........... 358,100 11,817
USX-US Steel Group............ 130,000 4,420
----------
TOTAL MISCELLANEOUS -
INTERMEDIATE GOODS &
SERVICES................ 47,668
----------
TOTAL INTERMEDIATE GOODS &
SERVICES................ 421,820
----------
CAPITAL GOODS - 14.63%
AEROSPACE - 5.88%
Avteam, Incorporated (non-
income producing)........... 19,000 161
Coltec Industries,
Incorporated (non-income
producing).................. 484,600 9,692
Harsco Corporation............ 112,000 4,648
Lockheed Martin Corporation... 298,648 28,390
Northrop Corporation.......... 51,000 5,572
Raytheon Company.............. 158,400 8,593
Rockwell International
Corporation................. 61,000 2,989
Textron, Incorporated......... 440,300 25,455
Thiokol Corporation........... 137,250 12,567
----------
TOTAL AEROSPACE........... 98,067
----------
</TABLE>
See accompanying notes
41
<PAGE> 43
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
ELECTRICAL EQUIPMENT - 1.92%
Dover Corporation............. 35,050 $ 2,366
Honeywell, Incorporated....... 139,100 9,467
ITT Industries,
Incorporated................ 208,800 6,590
MEMC Electronic Materials,
Incorporated................ 170,400 3,419
Westinghouse Electric
Corporation................. 388,400 10,268
----------
TOTAL ELECTRICAL
EQUIPMENT............... 32,110
----------
ELECTRONICS - INDUSTRIAL - 0.54%
Channell Commercial
Corporation (non-income
producing).................. 2,790 35
PG&E Corporation.............. 36,620 936
Stoneridge, Incorporated (non-
income producing)........... 28,600 465
VLSI Technology, Incorporated
(non-income producing)...... 257,500 7,628
----------
TOTAL ELECTRONICS -
INDUSTRIAL.............. 9,064
----------
MACHINERY - 2.70%
Caterpillar Tractor Company... 73,300 3,757
Deere and Company............. 467,500 24,602
Gleason Corporation........... 9,520 262
Millipore Corporation......... 269,075 10,528
Tecumseh Products Company..... 113,900 5,909
----------
TOTAL MACHINERY........... 45,058
----------
OFFICE EQUIPMENT - 3.59%
Applied Magnetics Corporation
(non-income producing)...... 12,050 277
Data General Corporation (non-
income producing)........... 10,000 193
Exabyte Corporation (non-
income producing)........... 24,606 260
Hutchinson Technology......... 12,300 324
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
International Business
Machines Corporation........ 160,200 $ 15,710
Lexmark International Group
Incorporated, Class A....... 103,100 3,151
Micros Systems, Incorporated
(non-income producing)...... 12,740 573
Seagate Technology............ 124,100 3,366
Storage Tech Group............ 77,400 4,542
Xerox Corporation............. 396,400 31,439
----------
TOTAL OFFICE EQUIPMENT.... 59,835
----------
TOTAL CAPITAL
GOODS................... 244,134
----------
TOTAL COMMON
STOCK................... 1,639,363
----------
Par
Amount
----------
SHORT-TERM INVESTMENTS (NOTE A) - 4.98%
AMR Investments Strategic Cash
Business Trust.............. $ 44,725 44,725
Bank of Tokyo-Mitsubishi,
Limited, BA, 5.58%,
Due 11/28/1997.............. 10,000 9,959
Banque Paribas, Euro TD,
5.6875%, Due 11/3/1997...... 19,373 19,373
Sanwa Bank, Limited, BA,
5.635%, Due 11/12/1997...... 9,000 8,985
----------
TOTAL SHORT-TERM
INVESTMENTS............. 83,042
----------
TOTAL INVESTMENTS - 103.23%
(COST $1,322,925)........... 1,722,405
----------
LIABILITIES, NET OF OTHER
ASSETS - (3.23%)............ (53,805)
----------
TOTAL NET ASSETS - 100%....... $1,668,600
==========
</TABLE>
- ---------------
Based on the cost of investments of $1,325,782 for federal income tax purposes
at October 31, 1997, the aggregate gross unrealized appreciation was $417,200,
the aggregate gross unrealized depreciation was $20,577, and the net unrealized
appreciation of investments was $396,623.
(A) Rates associated with short-term investments represent yield to maturity.
ABBREVIATIONS:
ADR - American Depositary Receipt
BA - Bankers Acceptance
NV - Company
PLC - Public Limited Corporation
SA - Company
TD - Time Deposit
See accompanying notes
42
<PAGE> 44
AMR INVESTMENT SERVICES INTERMEDIATE BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
--------- ---------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 33.07%
U.S. TREASURY BONDS - 18.03%
10.375%, Due 11/15/2012......... $ 265 $ 350
7.25%, Due 5/15/2016............ 17,000 18,971
8.75%, Due 5/15/2017............ 375 482
8.125%, Due 8/15/2019........... 13,325 16,315
6.75%, Due 8/15/2026............ 1,800 1,934
6.625%, Due 2/15/2027........... 900 954
--------
TOTAL U.S. TREASURY BONDS... 39,006
--------
U.S. TREASURY NOTES - 15.04%
6.50%, Due 4/30/1999............ 20,500 20,756
5.50%, Due 4/15/2000............ 1,000 996
6.375%, Due 3/31/2001........... 4,100 4,179
7.875%, Due 11/15/2004.......... 1,000 1,114
6.50%, Due 8/15/2005............ 1,000 1,037
5.625%, Due 2/15/2006........... 2,000 1,963
6.875%, Due 5/15/2006........... 1,000 1,064
7.00%, Due 7/15/2006............ 1,325 1,421
--------
TOTAL U.S. TREASURY NOTES... 32,530
--------
TOTAL U.S. TREASURY
OBLIGATIONS............... 71,536
--------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS - 20.06%
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION - 1.25%
Gold Pool #E67819, 6.50%, Due
10/1/2012..................... 2,700 2,698
--------
TOTAL FEDERAL HOME LOAN
MORTGAGE ASSOCIATION...... 2,698
--------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 6.24%
Pool #303585, 7.00%,
Due 10/1/2025................. 681 684
1997-13 QG, 6.50%,
Due 4/18/2027................. 9,079 8,949
Pool #401447, 7.00%,
Due 11/1/2027................. 3,862 3,870
--------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION...... 13,503
--------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
--------- ---------
(dollars in thousands)
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 12.57%
Pool #780285, 9.50%,
Due 12/15/2017................ $ 19,776 $ 21,532
Pool #448701, 7.50%,
Due 9/15/2027................. 5,539 5,664
--------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION...... 27,196
--------
TOTAL U.S. AGENCY
MORTGAGE-BACKED
OBLIGATIONS............... 43,397
--------
ASSET-BACKED SECURITIES - 2.38%
Citibank Credit Card Master
Trust I, 6.989%, Due
2/10/2004..................... 5,000 5,138
--------
TOTAL ASSET-BACKED
SECURITIES................ 5,138
--------
COMMERCIAL MORTGAGE-BACKED
OBLIGATIONS - 2.36%
GMAC Commercial Mortgage
Securities, Incorporated
6.869%, Due 8/15/2007......... 5,000 5,110
--------
TOTAL MORTGAGE-BACKED
OBLIGATIONS............... 5,110
--------
CORPORATE OBLIGATIONS - 33.11%
FINANCIAL - 19.54%
American Express Credit
Corporation, 6.125%,
Due 6/15/2000................. 2,000 2,006
Associates Corporation of North
America, 7.875%, Due
9/30/2001..................... 3,550 3,752
BankAmerica Corporation, 7.20%,
Due 4/15/2006................. 1,280 1,323
Bear Stearns Company, Variable
Rate, 5.89%, Due 7/10/2000.... 5,000 4,983
Chrysler Finance Corporation,
Variable Rate, 5.86%, Due
7/17/2000..................... 5,000 4,978
Ford Motor Credit Corporation,
Variable Rate, 5.99%,
Due 8/7/2000.................. 5,000 4,978
Ford Motor Credit Corporation,
7.00%, Due 9/25/2001.......... 3,125 3,211
Merrill Lynch and Company,
Variable Rate, 5.88%,
Due 6/27/2000................. 5,000 4,978
Sears Roebuck Acceptance
Corporation, 6.93%,
Due 10/03/2002................ 2,000 2,054
Sears Roebuck Acceptance
Corporation, 6.72%,
Due 11/5/2003................. 2,200 2,233
</TABLE>
See accompanying notes
43
<PAGE> 45
AMR INVESTMENT SERVICES INTERMEDIATE BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
--------- ---------
(dollars in thousands)
<S> <C> <C>
Swiss Bank Corporation, 7.375%,
Due 7/15/2015................. $ 2,000 $ 2,086
Travelers Property Casualty
Corporation, 6.75%,
Due 4/15/2001................. 4,000 4,065
Wells Fargo and Company, 6.875%,
Due 5/10/2001................. 1,600 1,631
--------
TOTAL FINANCIAL............. 42,278
--------
INDUSTRIAL - 8.82%
Atlantic Richfield Corporation,
9.00%, Due 4/1/2021........... 2,000 2,501
Dresser Industries, 6.25%,
Due 6/1/2000.................. 2,000 2,012
Fort James Corporation, 6.625%,
Due 9/15/2004................. 2,000 1,994
General Motors, Incorporated
7.70%, Due 4/15/2016.......... 2,000 2,167
Halliburton Company, 7.53%, Due
5/12/2017..................... 1,555 1,666
J. C. Penney and Company, 7.95%,
Due 4/1/2017.................. 2,000 2,201
Loews Corporation, 6.75%,
Due 12/15/2006................ 2,000 2,014
Noranda, Incorporated 8.125%,
Due 6/15/2004................. 2,300 2,476
Phillip Morris Companies,
Incorporated, 7.20%,
Due 2/1/2007.................. 2,000 2,053
--------
TOTAL INDUSTRIAL............ 19,084
--------
TRANSPORTATION - 2.83%
CSX Corporation, 7.05%,
Due 5/1/2002.................. 3,000 3,066
Norfolk Southern Corporation,
6.95%, Due 5/1/2002........... 3,000 3,065
--------
TOTAL TRANSPORTATION........ 6,131
--------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
--------- ---------
(dollars in thousands)
<S> <C> <C>
UTILITIES - 0.94%
Western Resources, Incorporated,
6.875%, Due 8/1/2004.......... $ 2,000 $ 2,024
--------
TOTAL UTILITIES............. 2,024
--------
FOREIGN - 0.98%
Hydro-Quebec, 7.50%,
Due 4/1/2016.................. 2,000 2,112
--------
TOTAL FOREIGN............... 2,112
--------
TOTAL CORPORATE
OBLIGATIONS............... 71,629
--------
SHORT-TERM INVESTMENTS
(NOTE A) - 3.46%
First Boston Treasury Tri-Party
Repurchase Agreement, 5.65%,
Due 11/3/1997 (Collateral held
at The Chase Manhattan Bank,
N.A. by U.S. Treasury Notes,
7.875% to 8.875%, Due
11/15/1998 to 11/15/1999 -
Market Value: $7,653)......... 7,485 7,485
--------
TOTAL SHORT-TERM
INVESTMENTS............... 7,485
--------
TOTAL INVESTMENTS - 94.44%
(COST $202,422)........... 204,295
--------
OTHER ASSETS, NET OF
LIABILITIES 5.56%........ 12,020
--------
TOTAL NET ASSETS-100%....... $216,315
========
</TABLE>
- ---------------
Based on the cost of investments of $202,441 for federal income tax purposes at
October 31, 1997, the aggregate gross unrealized appreciation was $1,894, the
unrealized depreciation was $40, and the net unrealized appreciation of
investments was $1,854.
(A) Rates associated with short-term investments represent yield to maturity.
44
<PAGE> 46
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
AUSTRALIA COMMON STOCKS - 3.29%
Australia & New Zealand
Banking Group.............. 843,442 $ 5,899
Brambles Industries,
Limited.................... 180,312 3,475
CSR, Limited................. 680,000 2,368
Foster's Brewing Group,
Limited.................... 1,027,800 1,956
GIO Australia Holdings, Limited... 486,509 1,248
Goodman Fielder, Limited..... 1,150,000 1,767
News Corporation, Limited.... 210,000 1,008
News Corporation Preferred
Rights..................... 345,000 1,534
Pioneer International,
Limited.................... 1,024,615 2,716
QBE Insurance Group, Limited... 536,496 2,515
RGC, Limited................. 275,000 562
-----------
TOTAL AUSTRALIA COMMON
STOCKS................. 25,048
-----------
AUSTRIA -- 1.17%
PREFERRED STOCKS -- 0.27%
Bank Austria AG.............. 44,000 2,013
-----------
TOTAL AUSTRIA PREFERRED
STOCKS................. 2,013
-----------
COMMON STOCKS -- 0.90%
Boehler-Uddeholm AG.......... 50,185 3,605
Evn Energie-Versorgung
Niederroesterreich AG...... 3,960 461
Mayr-Melnhof Karton AG....... 16,000 853
VA Technologie AG............ 11,000 1,956
-----------
TOTAL AUSTRIA COMMON
STOCKS................. 6,875
-----------
TOTAL AUSTRIA............ 8,888
-----------
BELGIUM COMMON STOCKS - 0.47%
Electrabel SA................ 4,400 988
GIB Holdings, Limited, NPV... 22,000 1,115
Solvay Et Cie, NPV........... 25,000 1,507
-----------
TOTAL BELGIUM COMMON
STOCKS................. 3,610
-----------
CANADA COMMON STOCKS - 2.43%
Anderson Exploration,
Limited.................... 115,000 1,265
Bank of Nova Scotia.......... 67,839 2,992
Canadian Imperial Bank of
Commerce................... 120,000 3,509
IMASCO, Limited.............. 119,000 3,784
Noranda, Incorporated........ 133,620 2,352
Oshawa Group, Limited........ 66,000 1,138
Potash Corporation of
Saskatchewan............... 6,520 532
Telus Corporation............ 146,850 2,944
-----------
TOTAL CANADA COMMON
STOCKS................. 18,516
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
DENMARK COMMON STOCKS - 0.96%
BG Bank...................... 20,750 $ 1,335
Den Danske Bank.............. 13,400 1,514
Novo Nordisk AS, "B"......... 6,850 742
Teledanmark AS, "B".......... 16,700 981
Unidanmark AS, "A"........... 40,800 2,759
-----------
TOTAL DENMARK COMMON
STOCKS................. 7,331
-----------
FINLAND COMMON STOCKS - 2.73%
Enso-Gutzeit OY, "R"......... 212,000 1,990
Huhtamaki Group I Free....... 27,500 1,134
Merita Bank, Limited......... 785,000 3,844
Metra OY,"B"................. 121,565 3,247
Metsa-Serla OY, "B".......... 100,000 881
Nokia OY, "A"................ 43,500 3,805
Rauma OY..................... 50,878 955
UPM-Kymmene OY............... 221,030 4,923
-----------
TOTAL FINLAND COMMON
STOCKS................. 20,779
-----------
FRANCE COMMON STOCKS - 8.60%
Adecco SA.................... 2,820 917
Alcatel Alsthom CG........... 53,000 6,409
Axa SA....................... 35,542 2,439
Banque Nationale de Paris.... 68,190 3,021
Bertrande Faure.............. 39,500 2,388
Bongrain SA.................. 2,370 873
Elf Aquitaine SA............. 78,300 9,713
France Telecom SA............ 29,449 1,117
Groupe Danone................ 19,200 2,942
La Farge-Coppee SA........... 97,218 6,087
Pechiney SA.................. 41,800 1,723
Pernod-Ricard................ 78,934 3,666
Peugot SA.................... 12,800 1,452
Rhone-Poulenc, "A"........... 50,000 2,185
Sa Des Galeries Lafayette.... 162 76
Saint Gobain................. 13,148 1,891
Schneider SA................. 37,500 2,007
Scor SA...................... 31,500 1,466
Seita........................ 109,712 3,507
Societe Generale............. 23,339 3,203
Total Petroleum Company,
"B"........................ 48,200 5,359
Usinor Sacilor............... 186,702 3,098
Valeo SA..................... 13 1
-----------
TOTAL FRANCE COMMON
STOCKS................. 65,540
-----------
</TABLE>
45
<PAGE> 47
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
GERMANY - 4.64%
PREFERRED STOCKS - 0.81%
Dyckerhoff AG................ 7,614 $ 2,345
Herlitz AG................... 11,947 768
Volkswagen AG................ 6,700 3,087
-----------
TOTAL GERMANY PREFERRED
STOCKS................. 6,200
-----------
COMMON STOCKS - 3.83%
BASF AG...................... 72,600 2,468
BAYER AG..................... 188,525 6,791
Commerzbank AG............... 160,550 5,504
Deutsche Bank AG............. 36,000 2,382
Hoechst AG................... 44,000 1,694
Karstadt AG.................. 3,100 1,077
Muenchener Rueckversicherungs
AG......................... 3,000 627
Varta AG
(non-income producing)..... 1,520 236
Veba AG...................... 87,300 4,920
Viag AG...................... 5,940 2,778
Volkswagen AG................ 1,150 684
-----------
TOTAL GERMANY COMMON
STOCKS................. 29,161
-----------
TOTAL GERMANY............ 35,361
-----------
HONG KONG COMMON STOCKS - 3.13%
Amoy Properties.............. 20,500 18
Asia Satellite
Telecommunications
Holdings, Limited.......... 275,000 662
Cheung Kong Holdings,
Limited.................... 235,000 1,634
China Light and Power
Company.................... 818,000 4,307
Dickson Concepts
(International), Limited... 643,000 1,385
Hang Lung Development
Company, Limited........... 1,268,000 1,747
Hong Kong Aircraft
Engineering Company,
Limited.................... 7,200 19
Hong Kong Electric
Holdings................... 368,400 1,249
Hong Kong Telecommunications,
Limited.................... 1,024,400 1,961
HSBC Holdings, Limited....... 114,500 2,592
Hutchinson Whampoa,
Limited.................... 200,000 1,384
Hysan Development Company,
Limited.................... 32,000 67
National Mutual of Asia, Limited... 1,700,000 1,540
New Asia Realty and Trust
Company, Limited........... 135,000 321
New World Development
Company, Limited........... 656,000 2,308
Peregrine Investments
Holdings, Limited.......... 605,000 595
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Peregrine Investments
Holdings, Limited
Warrants................... 55,000 $ 2
Swire Pacific, Limited,
"A"........................ 383,500 2,049
-----------
TOTAL HONG KONG COMMON
STOCKS................. 23,840
-----------
IRELAND COMMON STOCKS - 0.47%
Jefferson Smurfit............ 1,199,242 3,554
-----------
TOTAL IRELAND COMMON
STOCKS................. 3,554
-----------
ITALY - 3.31%
PREFERRED STOCK - 0.15%
Concessioni E Costruzioni
Autostrade................. 525,000 1,165
-----------
TOTAL ITALY PREFERRED
STOCK.................. 1,165
-----------
COMMON STOCKS - 3.16%
Burgo (Cartiere) SPA......... 229,020 1,371
Danieli Group Risp........... 473,960 1,852
Eni SPA...................... 778,000 4,382
Fiat SPA..................... 880,000 2,804
Instituto Nazionale Delle
Assicurazioni.............. 1,300,000 2,096
Mediaset..................... 336,900 1,531
Merloni Elettrodomestici
SPA........................ 185,500 697
STET Risp Non Convertible.... 550,000 3,453
STET Telecom Italia Risp..... 1,452,209 5,877
-----------
TOTAL ITALY COMMON
STOCKS................. 24,063
-----------
TOTAL ITALY.............. 25,228
-----------
JAPAN COMMON STOCKS - 10.98%
Aisin Seiki Company,
Limited.................... 151,000 1,720
Aoyama Trading Company....... 42,300 1,136
Canon, Incorporated.......... 90,000 2,185
Chudenko Corporation......... 33,000 804
Daibiru Corporation.......... 168,000 1,802
Daicel Chemical.............. 271,000 744
Fuji Photo Film.............. 222,000 8,048
Hitachi Koki Company, Limited... 53,000 257
Hitachi, Limited............. 324,000 2,492
Japan Tobacco................ 388 3,184
KAO Corporation.............. 296,000 4,135
Kioto Manufacturing Company,
Limited.................... 375,000 2,245
Matsushita Electric
Industrial Company......... 264,000 4,434
MOS Food Services............ 97,000 1,298
NKK Corporation.............. 711,000 987
NEC Corporation.............. 79,000 867
Nichicon Corporation......... 234,000 2,899
Nichido Fire & Marine
Insurance.................. 393,000 2,539
Nintendo Company, Limited.... 35,200 3,044
</TABLE>
46
<PAGE> 48
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Nissan Motor Company......... 336,000 $ 1,791
Promise Company, Limited..... 77,300 4,525
Ryosan Company............... 12,000 232
Sekisui Chemical Company,
Limited.................... 538,000 4,236
Shionogi & Company........... 168,000 1,021
Sony Corporation............. 97,800 8,124
Sumitomo Marine & Fire
Insurance.................. 442,000 2,947
Sumitomo Rubber Industries... 86,000 488
Suzuki Motor Company,
Limited.................... 193,000 2,054
TDK Corporation.............. 30,000 2,489
Toyo Seikan Kaisha........... 198,000 3,111
Yamanouchi Pharmaceutical.... 110,000 2,707
Yamato Kogyo Company,
Limited.................... 110,000 869
Yodogawa Steel Works......... 499,000 2,660
Yoshinoya D & C Company,
Limited.................... 39 412
Yoshitomi Pharmaceutical..... 185,000 1,181
-----------
TOTAL JAPAN COMMON
STOCKS................. 83,667
-----------
MALAYSIA COMMON STOCKS - 0.72%
Arab Malaysian Finance....... 780,000 407
Bolton Properties............ 909,000 377
Genting BHD.................. 623,700 1,750
Golden Hope Plantations
BHD........................ 968,000 1,260
Hicom Holdings BHD........... 506,300 428
Kedah Cement Holdings BHD.... 729,000 459
Malaysian International
Shipping Corporation BHD... 459,666 768
-----------
TOTAL MALAYSIA COMMON
STOCKS................. 5,449
-----------
MEXICO COMMON STOCKS - 0.19%
Alfa, SA..................... 121,000 884
Grupo Mexico SA.............. 145,000 560
-----------
TOTAL MEXICO COMMON
STOCKS................. 1,444
-----------
NETHERLANDS COMMON STOCKS - 6.34%
ABN AMRO Holdings NV......... 162,700 3,278
Aegon NV..................... 34,000 2,680
Akzo Nobel NV................ 63,150 11,132
Fortis Amev NV............... 51,654 2,031
Hollandsche Beton Groep NV... 158,040 3,168
Internationale Nederlanden
Groep NV................... 202,045 8,485
Koninklijke Bijenkorf Beheer NV... 17,400 1,098
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Koninklijke KNP BT........... 54,100 $ 1,232
Phillips Electronics......... 110,600 8,662
Royal PTT Nederland NV....... 115,410 4,412
Unilever NV.................. 40,000 2,127
-----------
TOTAL NETHERLANDS COMMON
STOCKS................. 48,305
-----------
Par
Amount
---------
NEW ZEALAND - 0.93%
FOREIGN BONDS - 0.01%
Brierley Investments, Limited
Subordinated Convertible,
9.00%, Due 6/30/1998....... $ 63 43
-----------
TOTAL NEW ZEALAND FOREIGN
BONDS.................. 43
-----------
Shares
---------
COMMON STOCKS - 0.92%
Brierley Investments,
Limited.................... 1,600,000 1,238
Carter Holt Harvey,
Limited.................... 220,000 384
Fisher & Paykel, Limited..... 230,000 732
Fletcher Challenge
Building................... 775,250 2,345
Fletcher Challenge Forest.... 8,284 8
Fletcher Challenge Paper..... 365,000 601
Lion Nathan, Limited......... 693,000 1,677
-----------
TOTAL NEW ZEALAND COMMON
STOCKS................. 6,985
-----------
TOTAL NEW ZEALAND........ 7,028
-----------
NORWAY COMMON STOCKS - 2.21%
Den Norsk Bank, Series A..... 387,600 1,755
Kvaerner Industries AS....... 49,789 2,564
Norsk Hydro AS............... 40,000 2,203
Nycomed AS, Series B......... 293,225 7,288
Saga Petroleum, Series B Free... 100,000 1,771
Unitor AS.................... 80,000 1,268
-----------
TOTAL NORWAY COMMON
STOCKS................. 16,849
-----------
SINGAPORE COMMON STOCKS - 0.71%
Fraser & Neave, Limited...... 230,000 1,155
Hong Kong Land............... 673,847 1,536
Inchcape Berhad.............. 325,000 1,025
Sembawang Corporation........ 295,000 908
Singapore Finance, Limited... 387,000 362
Van Der Horst................ 440,000 386
-----------
TOTAL SINGAPORE COMMON
STOCKS................. 5,372
-----------
SPAIN COMMON STOCKS - 2.97%
Banco Popular Espanol........ 28,000 1,655
Banco Santander SA........... 112,730 3,160
Iberdrola SA................. 410,357 4,912
</TABLE>
47
<PAGE> 49
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Repsol SA (BR)............... 127,420 $ 5,347
Telefonica de Espana......... 277,400 7,576
-----------
TOTAL SPAIN COMMON
STOCKS................. 22,650
-----------
SOUTH KOREA COMMON STOCKS - 0.07%
Korea Electric Power
Corporation................ 37,500 532
-----------
TOTAL SOUTH KOREA COMMON
STOCKS................. 532
-----------
SWEDEN COMMON STOCKS - 3.86%
Assidoman AB................. 56,000 1,571
Astra AB, "B" Free........... 55,200 856
Electrolux AB, "B"........... 92,085 7,628
Esselte AB, Class "A"........ 2,000 42
Esselte AB, Class "B"........ 17,000 370
Granges AB................... 22,050 361
Marieberg Tidnings........... 77,267 2,065
Nordbanken AS................ 35,900 1,127
Pharmacia & Upjohn,
Incorporated............... 59,100 1,883
Skandia Forsakrings AB....... 16,600 776
SKF AB, "B" Free............. 112,100 2,606
Sparbanken Sverige AB, "A"... 144,900 3,291
Stora Kopparsbergs Bergslags,
"A"........................ 82,100 1,135
Stora Kopparsbergs Bergslags,
"B"........................ 25,800 355
Svedala Industries, "A"
Free....................... 90,000 1,768
Svenska Cellulosa, "B"
Free....................... 52,600 1,181
Volvo AB..................... 90,000 2,357
-----------
TOTAL SWEDEN COMMON
STOCKS................. 29,372
-----------
SWITZERLAND COMMON STOCKS - 5.29%
ABB AG....................... 1,690 2,209
Forbo Holding AG............. 3,280 1,292
Holderbank Financial
Glarus-B................... 2,810 2,268
Nestle SA.................... 8,021 11,333
Novartis AG.................. 2,879 4,521
Schindler Holding AG (Reg)... 140 170
Schindler Holding AG (BR).... 1,400 1,549......
Sig Schweitz Industries AG... 2,200 5,940
Societe Generale de
Surveillance............... 240 464
Sulzer AG.................... 4,279 3,138
Swiss Reinsurance Company.... 3,876 5,854
Zurich Versicherungs......... 3,800 1,573
-----------
TOTAL SWITZERLAND COMMON
STOCKS................. 40,311
-----------
UNITED KINGDOM COMMON STOCKS - 20.39%
Aggreko, PLC................. 502,977 1,316
Albert Fisher Group, PLC..... 262,500 164
Allied Domecq, PLC........... 510,710 4,132
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Associated British Foods
Group, PLC................. 46,600 $ 371
Bank of Scotland............. 255,380 2,123
Barclays, PLC................ 27,900 705
BAT Industries, PLC.......... 827,564 7,265
BG, PLC...................... 1,615,700 7,065
British Energy, PLC.......... 300,000 1,954
British Telecommunications... 640,900 4,855
BTR, PLC..................... 1,978,800 6,744
Bunzl, PLC................... 121,100 504
Burmah Castrol, PLC.......... 221,050 3,766
Burton Group, PLC............ 335,000 712
Coats Viyella, PLC........... 1,649,500 3,015
Commercial Union, PLC........ 487,600 6,342
Cookson Group, PLC........... 613,900 2,460
Cortaulds, PLC............... 362,000 1,678
Cortaulds Textiles, PLC...... 150,000 864
Danka Business Systems, PLC.. 64,700 610
De La Rue, PLC............... 197,800 1,413
Energy Group, PLC............ 124,000 1,261
English China Claylord
Group...................... 348,410 1,519
Grand Metropolitan, PLC...... 417,350 3,755
Great Universal Stores....... 239,500 2,849
Hanson, PLC.................. 724,600 3,724
Harrisons & Crosfield, PLC... 1,391,800 2,952
Hillsdown Holdings, PLC...... 1,140,100 3,231
Hyder, PLC................... 289,000 4,359
Imperial Chemical Industries, PLC.. 37,000 552
Imperial Tobacco Group....... 195,100 1,199
Inchcape, PLC................ 150,000 546
Kwik Save Group, PLC......... 264,000 1,370
Lex Service.................. 350,000 2,465
London Pacific Group, PLC.... 74,000 259
Lucasvarity, PLC............. 410,000 1,403
Medeva, PLC.................. 255,000 879
National Grid Group, PLC..... 300,000 1,394
National Power, PLC.......... 50,000 415
National Westminster Bank,
PLC........................ 485,419 7,017
Northern Foods, PLC.......... 500,000 1,937
Peninsular & Orient Steam
Company.................... 269,158 3,117
Pilkington, PLC.............. 363 1
PowerGen, PLC................ 310,400 3,443
Premier Farnell, PLC......... 225,800 1,757
Racal Electronics, PLC....... 320,404 1,187
Reckitt & Coleman, PLC....... 394,754 6,034
Redland, PLC................. 1,228,854 7,006
Rolls Royce, PLC............. 305,273 1,074
Royal & Sun Alliance
Insurance Group............ 342,325 3,298
Safeway, PLC................. 309,677 2,023
Salvesen (Christian), PLC.... 502,977 843
</TABLE>
48
<PAGE> 50
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Shell Transportation &
Trading, PLC............... 135,000 $ 956
Southern Electric, PLC....... 175,900 1,348
Storehouse................... 762,900 2,814
Tate & Lyle, PLC............. 549,000 4,184
Tesco, PLC................... 343,819 2,720
Thames Water Group, PLC...... 189,800 2,877
Unilever, PLC................ 522,900 3,884
WPP Group, PLC............... 1,005,500 4,603
Wace Group, PLC.............. 666,200 346
Williams, PLC................ 111,466 659
-----------
TOTAL UNITED KINGDOM
COMMON STOCKS.......... 155,318
-----------
UNITED STATES - 15.80%
FOREIGN SECURITIES DENOMINATED IN U.S. DOLLARS - 2.48%
Cho Hung Bank GDR............ 170,000 629
Dairy Farm International..... 908,000 717
G P Batteries International,
Limited.................... 137,000 401
Kookmin Bank GDR............. 50,000 310
Jardine Matheson Holdings,
Limited.................... 871,000 5,574
Jardine Strategic............ 1,606,000 5,139
New Holland NV............... 79,700 2,266
Nova Corporation............. 150,000 1,350
Stolt-Nielsen SA, "B"........ 38,000 1,007
Telmex ADR................... 35,000 1,514
-----------
TOTAL FOREIGN SECURITIES
DENOMINATED IN U.S.
DOLLARS................ 18,907
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount
---------
<S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY OBLIGATIONS (NOTE
A) - 5.83%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.09%
Discount Note, 5.189%,
Due 11/7/1997.............. $ 2,895 2,892
Discount Note, 5.192%,
Due 11/13/1997............. 1,505 1,502
Discount Note, 5.198%,
Due 11/21/1997............. 1,710 1,705
Discount Note, 5.198%,
Due 11/28/1997............. 1,400 1,394
Discount Note, 5.205%,
Due 12/1/1997.............. 6,600 6,569
</TABLE>
<TABLE>
<CAPTION>
Par
Amount
---------
<S> <C> <C>
Discount Note, 5.206%,
Due 12/3/1997.............. $ 4,225 $ 4,204
Discount Note, 5.208%,
Due 12/5/1997.............. 5,290 5,262
-----------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION... 23,528
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.99%
5.196%,
Due 11/17/1997............. 855 853
5.19%, Due 1/8/1998.......... 2,000 1,998
5.234%,
Due 1/15/1998.............. 3,769 3,725
5.25%, Due 3/25/1998......... 1,000 999
-----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION... 7,575
-----------
U.S. TREASURY BILLS - 1.75%
4.805%, Due 12/26/1997....... 255 253
4.88%, Due 1/2/1998.......... 6,290 6,236
4.925%, Due 1/8/1998......... 2,468 2,445
4.96%, Due 1/15/1998......... 116 115
4.98%, Due 1/22/1998......... 2,175 2,150
5.05%, Due 1/29/1998......... 2,115 2,088
-----------
TOTAL U.S. TREASURY
BILLS.................. 13,287
-----------
TOTAL UNITED STATES
GOVERNMENT AND
AGENCY OBLIGATIONS..... 44,390
-----------
SHORT-TERM INVESTMENTS (NOTE B) - 7.49%
AMR Investments Strategic
Cash Business Trust........ 47,053 47,053
E I DuPont de Nemours, CP,
Due 11/7/1997.............. 10,000 9,989
-----------
TOTAL SHORT-TERM
INVESTMENTS............ 57,042
-----------
TOTAL UNITED STATES........ 120,339
-----------
TOTAL INVESTMENTS -
101.66% (COST $664,005).... 774,331
-----------
LIABILITIES, NET OF OTHER
ASSETS
- (1.66%)................. (12,658)
-----------
TOTAL NET ASSETS - 100%...... $ 761,673
===========
</TABLE>
49
<PAGE> 51
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
Based on the cost of investments of $664,338 for federal income tax purposes at
October 31, 1997, the aggregate gross unrealized appreciation was $142,497, the
aggregate gross unrealized depreciation was $32,504, and the net unrealized
appreciation of investments was $109,993.
(A) Rates associated with United States Government Bonds represent yield to
maturity from time of purchase.
(B) Rates associated with short-term investments represent yield to maturity or
yield to next reset date.
ABBREVIATIONS:
AB - Company (Sweden)
ADR - American Depository Receipt (United States)
AG - Company (Austria, Germany, Switzerland)
AS - Company (Denmark, Norway, Sweden)
BHD - Berhard (Malaysia)
BR - Bearer (Spain, Switzerland)
CG - Company General (France)
CP - Commercial Paper (United States)
GDR - Global Depository Receipt (United States)
NPV - No Par Value (Belgium)
NV - Company (Netherlands, United States)
OY - Company (Finland)
PLC - Public Limited Corporation (United Kingdom)
SA - Company (Belgium, France, Mexico, Spain, Switzerland, United States)
SPA - Company (Italy)
INDUSTRY DIVERSIFICATION
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Basic Industry.............................................. 29.56%
Capital Goods............................................... 10.53%
Consumer Goods & Services................................... 21.79%
Energy...................................................... 5.65%
Financing, Insurance & Real Estate.......................... 16.22%
Transportation.............................................. 0.51%
Utilities................................................... 4.00%
Short Term Investments...................................... 13.32%
Other Assets/(Liabilities).................................. (1.58%)
------
NET ASSETS........................................ 100.00%
======
</TABLE>
50
<PAGE> 52
AMR INVESTMENT SERVICES LIMITED-TERM INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- --------
(dollars in thousands)
<S> <C> <C>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS - 26.82%
Federal Home Loan Mortgage
Corporation, M H-1 A REMIC,
10.15%, Due 4/15/2006........ $ 102 $ 103
Federal National Mortgage
Association, 9.85%, Due
11/1/2018.................... 12,870 14,563
Government National Mortgage
Association, Pool #780173,
9.50%, Due 12/15/2019........ 9,582 10,425
--------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS....... 25,091
--------
CORPORATE OBLIGATIONS - 44.03%
BANK FUNDING - 13.63%
Bank of America, 12.50%, Due
4/1/2001..................... 5,000 5,914
Southtrust Bank of Alabama,
5.58%, Due 2/6/2006, Puttable
2/6/2001..................... 7,000 6,839
--------
TOTAL BANK FUNDING......... 12,753
--------
FINANCIAL - 22.35%
Bear Stearns Company, Variable
Rate, 5.89%, Due 7/10/2000... 5,000 4,983
Chrysler Finance Corporation,
Variable Rate, 5.86%, Due
7/17/2000.................... 5,000 4,978
Ford Motor Credit Corporation,
Variable Rate, 5.99%, Due
8/7/2000..................... 5,000 4,978
Merrill Lynch and Company,
Variable Rate, 5.88%, Due
6/27/2000.................... 6,000 5,973
--------
TOTAL FINANCIAL............ 20,912
--------
INDUSTRIAL - 4.50%
Phillip Morris Companies,
Incorporated 7.25%, Due
1/15/2003.................... 3,000 3,083
Weyerhaeuser Company, 9.05%,
Due 2/1/2003................. 1,000 1,123
--------
TOTAL INDUSTRIAL........... 4,206
--------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
---------- --------
(dollars in thousands)
<S> <C> <C>
FOREIGN - 3.55%
Province of Quebec, 8.80%, Due
4/15/2003.................... $ 3,000 $ 3,327
--------
TOTAL FOREIGN.............. 3,327
--------
TOTAL CORPORATE
OBLIGATIONS.............. 41,198
--------
ASSET-BACKED SECURITIES - 10.86%
Citibank Credit Card Master
Trust, Series 1997 3-B,
6.989%, Due 2/10/2004........ 5,000 5,138
Saxon Asset Securities Trust,
Series 1996-2A2, 6.475%, Due
11/25/2020................... 5,000 5,024
--------
TOTAL ASSET-BACKED
SECURITIES............... 10,162
--------
NON-AGENCY MORTGAGE BACKED OBLIGATIONS - 16.85%
Collateralized Mortgage
Obligation Trust, 56 A,
9.00%, Due 5/1/2014.......... 107 110
Residential Funding Securities
Corporation, 1995-1 KS1,
6.3375%, Due 6/25/2025....... 2,184 2,201
Resolution Trust Corporation,
1992-MH3 B1, 7.25%, Due
12/15/2011................... 4,250 4,249
1992-7 A3, 4.9255%, Due
3/25/2022.................... 2,267 2,239
1992-6 A3, 5.49291%, Due
1/25/2026.................... 2,241 2,245
1992-1 A1, 5.10934%, Due
5/25/2028.................... 2,215 2,229
1992-4 A2, 4.8047%, Due
7/25/2028.................... 2,444 2,492
--------
TOTAL NON-AGENCY MORTGAGE
BACKED OBLIGATIONS....... 15,765
--------
SHORT-TERM INVESTMENTS (NOTE A) - 0.70%
First Boston Treasury Tri-Party Repurchase
Agreement, 5.65%, Due 11/3/1997
(Collateral held at The Chase Manhattan
Bank, N.A., by 8.875%, U.S. Treasury
Note, Due 2/15/1999 - Market
Value - $677)............................ 658
--------
TOTAL SHORT-TERM
INVESTMENTS.............. 658
--------
</TABLE>
51
<PAGE> 53
AMR INVESTMENT SERVICES LIMITED-TERM INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- --------
(dollars in thousands)
<S> <C> <C>
TOTAL INVESTMENTS - 99.26%
(COST $92,996)............... $ 92,874
--------
OTHER ASSETS, NET OF
LIABILITIES - 0.74%.......... 695
--------
TOTAL NET ASSETS - 100%........ $ 93,569
========
</TABLE>
- ---------------
Based on the cost of investments of $92,996 for federal income tax purposes at
October 31, 1997, the aggregate gross unrealized appreciation was $320, the
unrealized depreciation was $442, and the net unrealized depreciation of
investments was $122.
(A) Rates associated with short-term investments represent yield to maturity.
ABBREVIATIONS:
REMIC - Real Estate Mortgage Investment Conduit
52
<PAGE> 54
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited-
Growth and Intermediate International Term
Balanced Income Bond Equity Income
---------- ---------- ------------ ------------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at value (cost -
$888,520; $1,322,925; $202,422;
$664,005; $92,996, respectively)........ $1,041,204 $1,722,405 $ 204,295 $ 774,331 $ 92,874
Cash, including foreign currency.......... - - - 31,919 -
Unrealized appreciation on foreign
currency contracts...................... - - - 542 -
Dividends and interest receivable......... 6,996 2,841 2,497 2,190 761
Reclaims receivable....................... - - - 794 -
Receivable for investments sold........... 15,416 7,751 10,523 1,521 -
Deferred organization costs, net.......... 18 18 27 18 18
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS.......................... 1,063,634 1,733,015 217,342 811,315 93,653
---------- ---------- ---------- ---------- ----------
LIABILITIES:
Payable for investments purchased......... 42,310 18,160 944 1,144 -
Payable upon return of securities
loaned.................................. 66,635 44,725 - 47,053 -
Management and investment advisory fees
payable
(Note 2)................................ 908 1,423 43 1,109 20
Accrued organization costs................ 35 35 28 35 35
Other liabilities......................... 79 72 12 301 29
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES..................... 109,967 64,415 1,027 49,642 84
---------- ---------- ---------- ---------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL
INTERESTS................................... $ 953,667 $1,668,600 $ 216,315 $ 761,673 $ 93,569
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes
53
<PAGE> 55
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Intermediate International Limited-Term
Balanced Income Bond Equity Income
---------------- ---------------- ---------------- ---------------- ----------------
Year Ended September 15, to Year Ended
October 31, 1997 October 31, 1997 October 31, 1997
----------------------------------- ---------------- -----------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........ $ 28,940 $ 2,572 $ 1,663 $ 2,891 $ 14,595
Dividend income (net of
foreign taxes of
$1,542 in
International Equity
Portfolio)........... 15,983 35,305 - 15,631 -
Income derived from
securities lending,
net.................. 240 203 - 322 1
-------- -------- -------- -------- --------
TOTAL INVESTMENT
INCOME........... 45,163 38,080 1,663 18,844 14,596
-------- -------- -------- -------- --------
EXPENSES:
Management and
investment advisory
fees (Note 2)........ 3,143 4,340 66 2,828 506
Custodian fees......... 120 94 7 515 45
Professional fees...... 43 42 1 25 15
Amortization of
organization costs... 15 15 - 15 15
Other expenses......... 83 108 4 50 27
-------- -------- -------- -------- --------
TOTAL EXPENSES..... 3,404 4,599 78 3,433 608
-------- -------- -------- -------- --------
NET INVESTMENT INCOME...... 41,759 33,481 1,585 15,411 13,988
-------- -------- -------- -------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss) on
investments.......... 134,243 123,365 255 24,290 (355)
Net realized loss on
foreign currency
transactions......... - - - (2,959) -
Change in net
unrealized
appreciation or
depreciation of
investments.......... 16,668 166,119 1,874 77,517 (644)
Change in net
unrealized
depreciation of
foreign currency
contracts and
translations......... - - - (20,412) -
-------- -------- -------- -------- --------
NET GAIN (LOSS) ON
INVESTMENTS...... 150,911 289,484 2,129 78,436 (999)
-------- -------- -------- -------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $192,670 $322,965 $ 3,714 $ 93,847 $ 12,989
======== ======== ======== ======== ========
</TABLE>
See accompanying notes
54
<PAGE> 56
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate
Balanced Growth and Income Bond International Equity
----------------------- ----------------------- -------------- -----------------------
Year Ended October 31, Year Ended October 31, September 15, Year Ended October 31,
----------------------- ----------------------- to October 31, -----------------------
1997 1996 1997 1996 1997 1997 1996
---------- ---------- ---------- ---------- -------------- --------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment
income.............. $ 41,759 $ 36,765 $ 33,481 $ 27,284 $ 1,585 $ 15,411 $ 8,135
Net realized gain
(loss) on
investments and
foreign currency
transactions........ 134,243 67,731 123,365 77,846 255 21,331 11,172
Change in net
unrealized
appreciation or
depreciation of
investments and
foreign currency
translations........ 16,668 27,670 166,119 94,294 1,874 57,105 30,752
---------- ---------- ---------- ---------- -------- -------- ----------
NET INCREASE IN
NET ASSETS
RESULTING FROM
OPERATIONS....... 192,670 132,166 322,965 199,424 3,714 93,847 50,059
---------- ---------- ---------- ---------- -------- -------- ----------
TRANSACTIONS IN
INVESTORS' BENEFICIAL
INTERESTS:
Contributions......... 282,834 1,029,398 446,329 1,053,593 224,975 397,499 397,164
Withdrawals........... (417,319) (266,082) (212,851) (140,860) (12,374) (134,169) (42,727)
---------- ---------- ---------- ---------- -------- -------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM TRANSACTIONS
IN INVESTORS'
BENEFICIAL
INTERESTS........ (134,485) 763,316 233,478 912,733 212,601 263,330 354,437
---------- ---------- ---------- ---------- -------- -------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS........... 58,185 895,482 556,443 1,112,157 216,315 357,177 404,496
---------- ---------- ---------- ---------- -------- -------- ----------
NET ASSETS:
Beginning of period... 895,482 - 1,112,157 - - 404,496 -
---------- ---------- ---------- ---------- -------- -------- ----------
END OF PERIOD......... $ 953,667 $ 895,482 $1,668,600 $1,112,157 $216,315 $761,673 $ 404,496
========== ========== ========== ========== ======== ======== ==========
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- ------------------------------------------------------------------------------------------------------------------
RATIOS:
Expenses to average
net assets
(annualized)........ 0.34% 0.36% 0.34% 0.35% 0.29% 0.57% 0.56%
Net investment income
to average net
assets
(annualized)........ 4.11% 4.26% 2.45% 2.81% 5.92% 2.55% 2.50%
Portfolio turnover
rate................ 105% 76% 35% 40% 47% 15% 19%
Average commission
rate paid*.......... $ 0.0385 $ 0.0409 $ 0.0395 $ 0.0412 - $ 0.0164 $ 0.0192
<CAPTION>
Limited-Term Income
----------------------
Year Ended October 31,
----------------------
1997 1996
--------- ----------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment
income.............. $ 13,988 $ 12,102
Net realized gain
(loss) on
investments and
foreign currency
transactions........ (355) (3,216)
Change in net
unrealized
appreciation or
depreciation of
investments and
foreign currency
translations........ (644) 458
-------- ---------
NET INCREASE IN
NET ASSETS
RESULTING FROM
OPERATIONS....... 12,989 9,344
-------- ---------
TRANSACTIONS IN
INVESTORS' BENEFICIAL
INTERESTS:
Contributions......... 95,910 292,820
Withdrawals........... (188,507) (128,987)
-------- ---------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM TRANSACTIONS
IN INVESTORS'
BENEFICIAL
INTERESTS........ (92,597) 163,833
-------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS........... 79,608 173,177
-------- ---------
NET ASSETS:
Beginning of period... 173,177 -
-------- ---------
END OF PERIOD......... $ 93,569 $ 173,177
======== =========
- -------------------------
FINANCIAL HIGHLIGHTS:
- -------------------------
RATIOS:
Expenses to average
net assets
(annualized)........ 0.30% 0.31%
Net investment income
to average net
assets
(annualized)........ 6.91% 6.67%
Portfolio turnover
rate................ 282% 304%
Average commission
rate paid*.......... - -
</TABLE>
- ---------------
* Foreign commissions usually are lower than U.S. commissions when expressed as
cents per share due to the lower per share price of many non-U.S. securities.
See accompanying notes
55
<PAGE> 57
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
AMR Investment Services Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York pursuant to a Declaration of Trust dated as of June 27, 1995 and
amended on August 11, 1995. Beneficial interests in the Trust are divided into
separate series, each having distinct investment objectives and policies. These
financial statements relate to the AMR Investment Services Balanced Portfolio,
the AMR Investment Services Growth and Income Portfolio, the AMR Investment
Services Intermediate Bond Portfolio, the AMR Investment Services International
Equity Portfolio, and the AMR Investment Services Limited-Term Income Portfolio.
The assets of each Portfolio belong only to that Portfolio, and the liabilities
of each Portfolio are borne solely by that Portfolio and no other. The Trust
commenced active operations on November 1, 1995. The AMR Investment Services
Intermediate Bond Portfolio commenced active operations on September 15, 1997.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Security Valuation
Equity securities that are primarily traded on domestic securities
exchanges are valued at the last quoted sales price on a designated exchange
prior to the close of trading on the New York Stock Exchange (the "Exchange")
or, lacking any current sales, on the basis of the last current bid price prior
to the close of trading on the Exchange. Portfolio securities that are primarily
traded on foreign securities exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges where primarily
traded. Over-the-counter equity securities are valued on the basis of the last
bid price on that date prior to the close of trading. Debt securities (other
than short-term securities) normally will be valued on the basis of prices
provided by a pricing service and may take into account appropriate factors such
as institution-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. In some cases, the prices of debt securities may be determined using
quotes obtained from brokers. Securities for which market quotations are not
readily available are valued at fair value, as determined in good faith and
pursuant to procedures approved by the Trust's Board of Trustees. Investment
grade short-term obligations with 60 days or less to maturity are valued using
the amortized cost method.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Dividend income is recorded on the ex-dividend date except
certain dividends from foreign securities which are recorded as soon as the
information is available to the Portfolios. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
amortization of premiums or accretion of discounts on investment grade
short-term securities and zero coupon instruments. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
56
<PAGE> 58
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the bid price of such currencies
against U.S. dollars as last quoted by a recognized dealer. Income, expenses and
purchases and sales of investments are translated into U.S. dollars at the rate
of exchange prevailing on the respective dates of such transactions. The
Portfolios include that portion of the results of operations resulting from
changes in foreign exchange rates with net realized and unrealized gain on
investments, as appropriate.
Forward Foreign Currency Contracts
The International Equity Portfolio may enter into forward foreign currency
contracts to hedge the exchange rate risk on investment transactions or to hedge
the value of portfolio securities denominated in foreign currencies. Forward
foreign currency contracts are valued at the forward exchange rate prevailing on
the day of valuation.
Federal Income and Excise Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of sub-chapter M of the
Internal Revenue Code. Accordingly, no provision for United States federal
income or excise tax is necessary.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Portfolio from a securities dealer or a bank which are subject to resale at a
later date. Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is monitored daily by each
Portfolio so that the collateral's market value exceeds the carrying value of
the repurchase agreement.
Deferred Organization Expenses
Expenses incurred by a Portfolio in connection with its organization are
being amortized on a straight-line basis over a five-year period.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. Investment assets of the
Balanced, Growth and Income, Intermediate Bond and International Equity
Portfolios are managed by multiple investment advisers which have entered into
separate investment advisory agreements with the Manager. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Balanced, Growth and Income and
57
<PAGE> 59
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
International Equity Portfolios an annualized fee equal to .10% of the average
daily net assets plus amounts paid by the Manager to the investment advisors
hired by the Manager to direct investment activities of the Portfolios. The
Manager receives an annualized fee of .25% of the average daily net assets of
the Intermediate Bond Portfolio and pays a portion of their fee to the
investment advisor hired by the Manager to direct investment activities of the
Portfolio. Management fees are paid as follows (dollars in thousands):
<TABLE>
<CAPTION>
Net
Amounts paid to Amounts
Management Management Investment Retained by
Fee Rates Fee Advisors Manager
---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Portfolio......................................... .225%-.70% $3,143 $2,128 $1,015
Growth and Income Portfolio................................ .225%-.70% 4,340 2,976 1,364
Intermediate Bond Portfolio................................ .25% 66 24 42
International Equity Portfolio............................. .25%-.90% 2,828 2,224 604
</TABLE>
The Manager serves as the sole investment adviser to the Limited-Term
Income Portfolio. Pursuant to the Management Agreement, the Manager receives an
annualized fee equal to .25% of the average daily net assets of the Limited-Term
Income Portfolio.
Other
Certain officers or trustees of the Trust are also officers of the Manager
or American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided free unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. For
the year ended October 31, 1997, the cost of air transportation was not material
to any of the Portfolios.
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended October 31, 1997 (excluding
short-term investments) are as follows (in thousands):
<TABLE>
<CAPTION>
Growth and Intermediate International Limited-Term
Balanced Income Bond Equity Income
Portfolio Portfolio Portfolio Portfolio Portfolio
---------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Purchases.............................. $1,021,589 $729,708 $289,216 $315,060 $533,660
Proceeds from sales.................... $1,121,578 $459,559 $ 94,444 $ 84,780 $612,495
</TABLE>
58
<PAGE> 60
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
4. COMMITMENTS
In order to protect itself against a decline in the value of particular
foreign currencies against the U.S. dollar, the International Equity Portfolio
has entered into forward contracts to deliver or receive foreign currency in
exchange for U.S. dollars as described below. The Portfolio bears the market
risk that arises from changes in foreign exchange rates, and accordingly, the
unrealized gain (loss) on these contracts is reflected in the accompanying
financial statements. The Portfolio also bears the credit risk if the
counterparty fails to perform under the contract. At October 31, 1997, the
Portfolio had outstanding forward foreign currency contracts as follows:
<TABLE>
<CAPTION>
Settlement Unrealized
Contracts to Deliver Date Value Gain/(Loss)
-------------------- ---------- ---------- -----------
(amounts in thousands)
<S> <C> <C> <C> <C>
3,500 AUD........................................................ 1/12/98 $ 2,458 $ 277
56 CHF........................................................ 11/3/97 40 0
102 DEM........................................................ 11/3/97 59 0
300,000 ESP........................................................ 12/2/97 2,058 251
79,000 FRF........................................................ 6/19/98 13,830 12
------- -------
Total contracts to deliver (Receivable amount $18,985).............. $18,445 $ 540
======= =======
Contracts to Receive
- --------------------------------------------------------------------
(amounts in thousands)
187 AUD........................................................ 11/6/97 $ 132 $ 0
83 CHF........................................................ 11/3/97 59 0
300,000 JPY........................................................ 11/5/97 2,494 (6)
52 SGD........................................................ 11/7/97 33 0
4,318 DEM........................................................ 11/4/97 2,508 8
69 DEM........................................................ 11/3/97 40 0
22 AUD........................................................ 11/7/97 16 0
25 AUD........................................................ 11/10/97 17 0
------- -------
Total contracts to receive (Payable amount $5,297).................. $ 5,299 $ 2
======= =======
</TABLE>
The Portfolios may purchase securities with delivery or payment to occur at
a later date. At the time the Portfolios enter into a commitment to purchase a
security, the transaction is recorded and the value of the security is reflected
in the net asset value. The value of the security may vary with market
fluctuations. No interest accrues to the Portfolios until payment takes place.
At the time the Portfolios enter into this type of transaction it is required to
segregate cash or other liquid assets equal to the value of the securities
purchased. At October 31, 1997 the Balanced Portfolio had $21,175,000 in
purchase commitments outstanding (2% of net assets), with a corresponding amount
of assets segregated.
5. SECURITIES LENDING
The Portfolios participate in a securities lending program under which
securities are loaned to selected institutional investors. All such loans
require collateralization with cash, securities of the U.S. Government and its
agencies or letters of credit that at all times equal at least 100% of the
market
59
<PAGE> 61
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
value of the loaned securities plus accrued interest. The Portfolios may bear
the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower of securities fail financially. The Portfolios
receive fee income or the interest on the collateral less any fees and rebates
paid to agents and transferees of securities. The Portfolios also continue to
receive interest on the securities loaned, and any gain or loss in the market
price of securities loaned that may occur during the term of the loan will be
for the account of the Portfolio.
At October 31, 1997, securities with a market value of approximately
$66,477,000, $44,612,000 and $51,436,000 were loaned by the Balanced, Growth and
Income and International Equity Portfolios, respectively. The custodian for each
Portfolio held an investment in the AMR Investments Strategic Cash Business
Trust (the "Business Trust") totaling $66,635,000, $44,725,000 and $47,053,000
for the Balanced, Growth and Income and International Equity Portfolios,
respectively. In addition, the Custodian held non-cash collateral totaling
$7,446,000 for the International Equity Portfolio. The Manager serves as Trustee
and as investment adviser to the Business Trust. The Manager receives from the
Business Trust an annualized fee equal to 0.10% of the average daily net assets
of the Business Trust.
60
<PAGE> 62
[AMERICAN AADVANTAGE LOGO]
- Institutional Class -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas
75261-9003
(800) 967-9009
- PlanAhead Class(R) -
P.O. Box 419643
Kansas City, Missouri 64141-6643
(800) 388-3344
- Platinum Class(sm) -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas
75261-9003
(800) 967-9009
This report is prepared for shareholders of the
American AAdvantage Funds included herein and may be
distributed to others only if preceded or accompanied
by a current prospectus.
[AMERICAN AADVANTAGE MILEAGE FUNDS LOGO]
<PAGE> 63
Dear Fellow Shareholder:
1997 marked the 10th anniversary for the American AAdvantage Funds family.
During that time the Funds have grown from $325 million in 1987 to over $6
billion. We have been blessed by both good market conditions and achieving our
goals to provide our shareholders with diversified, low-cost funds that have
consistently achieved above average returns. For the ten years ended October 31,
1997, the Money Market Fund -- Institutional Class was ranked by Lipper as the
best performing Institutional Money Market Fund out of 34 such funds. The Money
Market Fund, Municipal Money Market Fund, and the U.S. Government Money Market
Fund have all continued to maintain a 'AAA', 'V-1+' rating by Fitch Investors
Service, which reflects their high credit quality and conservative investment
guidelines.
We are pleased to report to you this year's performance of the American
AAdvantage Money Market Funds and to provide you with a copy of the Annual
Report for the year ending October 31, 1997.
Money Market Fund
For the year ending October 31, 1997, the total return of the Institutional
Class of the American AAdvantage Money Market Fund was 5.60%. Lipper Analytical
Services ranked the Institutional Class the sixth best performing Institutional
Money Market Fund out of its universe of 172 funds for that period. Similarly,
during this period, the PlanAhead Class outperformed its benchmark, while the
Platinum Class matched its benchmark.
Since the March 25th FOMC meeting when the target Federal Funds rate was
raised by 25 basis points to 5.50%, the Federal Reserve has maintained a "bias
to tighten" but has elected to hold monetary policy stable as the economy
continued to exhibit solid growth and productivity with no signs of inflation.
One of the factors contributing to the Fund's high level of performance
during this period was the decision to invest primarily in variable rate
obligations indexed to the London Interbank Offering Rate that reset on a
quarterly basis with final maturities of 397 days or less.
Municipal Money Market Fund
The Institutional Class of the American AAdvantage Municipal Money Market
Fund achieved a total return of 3.52% for the year ending October 31, 1997. The
Plan Ahead Class achieved a total return of 3.24% during the same period while
the Platinum Class return was 2.79%. Lipper Analytical Services ranked the
Institutional Class as the 10th best performing Institutional Tax-Exempt Money
Market Fund out of its universe of 74 such funds during this period. Since its
inception, the American AAdvantage Municipal Money Market Fund has invested
exclusively in high credit worthy municipal issuers that are further credit
enhanced either by a bank letter of credit or bond insurance.
U.S. Government Money Market Fund
Effective March 1, 1997, the American AAdvantage U.S. Treasury Money Market
Fund changed its investment policies to allow for investments in U.S. Government
agency securities in order to improve returns to our shareholders. At the same
time we changed the name of the fund to the American AAdvantage U.S. Government
Money Market Fund.
For the year ending October 31, 1997, the Institutional Class of the
American AAdvantage U.S. Government Money Market Fund had a total return of
5.36% and was ranked 23rd out of its Lipper universe of 81 Institutional U.S.
Government Funds. During the same one year period, the PlanAhead Class had a
total return of 5.08%, while the Platinum Class return was 4.61%.
<PAGE> 64
As always, we appreciate your confidence and support and look forward to
serving you -- our shareholders -- over the next ten years.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American AAdvantage Funds
2
<PAGE> 65
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
American AAdvantage Money Market Fund
American AAdvantage Municipal Money Market Fund
American AAdvantage U.S. Government Money Market Fund
We have audited the accompanying statements of assets and liabilities of
the American AAdvantage Money Market Fund, the American AAdvantage Municipal
Money Market Fund, and the American AAdvantage U.S. Government Money Market Fund
(collectively, "the Funds") (separate funds comprising the American AAdvantage
Funds) as of October 31, 1997, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective American AAdvantage Funds at October 31, 1997, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
December 19, 1997
3
<PAGE> 66
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
Money Municipal Government
Market Money Market Money Market
-------------- ------------ ------------
(in thousands, except share and per share
amounts)
<S> <C> <C> <C>
ASSETS:
Investment in Portfolio, at value....................... $ 1,816,354 $ 74,017 $ 102,853
Receivable for expense reimbursement.................... - 4 -
Other assets............................................ 31 49 52
-------------- ----------- ------------
TOTAL ASSETS........................................ 1,816,385 74,070 102,905
-------------- ----------- ------------
LIABILITIES:
Dividends payable....................................... 8,616 176 441
Management and administrative services fees payable
(Note 2).............................................. 264 29 33
Other liabilities....................................... 254 24 -
-------------- ----------- ------------
TOTAL LIABILITIES................................... 9,134 229 474
-------------- ----------- ------------
NET ASSETS.................................................. $ 1,807,251 $ 73,841 $ 102,431
============== =========== ============
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 1,807,251 73,841 102,431
-------------- ----------- ------------
NET ASSETS.................................................. $ 1,807,251 $ 73,841 $ 102,431
============== =========== ============
Shares outstanding (no par value):
Institutional Class..................................... 1,123,649,409 368,720 29,945,999
============== =========== ============
PlanAhead Class......................................... 189,188,665 9,589,677 4,046,028
============== =========== ============
Platinum Class.......................................... 494,413,174 63,882,988 68,438,536
============== =========== ============
Net asset value per share, offering and redemption price per
share:
Institutional Class..................................... $ 1.00 $ 1.00 $ 1.00
============== =========== ============
PlanAhead Class......................................... $ 1.00 $ 1.00 $ 1.00
============== =========== ============
Platinum Class.......................................... $ 1.00 $ 1.00 $ 1.00
============== =========== ============
</TABLE>
See accompanying notes
4
<PAGE> 67
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
Money Municipal Government
Market Money Market Money Market
------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income......................................... $99,192 $2,603 $5,679
Portfolio expenses (net of reimbursement of $6 for the
Municipal Money Market Fund).......................... (2,869) (127) (194)
------- ------ ------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO...... 96,323 2,476 5,485
------- ------ ------
FUND EXPENSES:
Administrative service fees (Note 2):
Institutional Class................................... 676 1 15
PlanAhead Class....................................... 73 3 8
Platinum Class........................................ 1,225 300 284
Transfer agent fees:
Institutional Class................................... 54 - 2
PlanAhead Class....................................... 90 2 2
Platinum Class........................................ 2 1 2
Professional fees....................................... 81 5 10
Registration fees and expenses.......................... 107 51 14
Distribution fees - Platinum Class...................... 613 150 142
Service fees - PlanAhead Class.......................... 363 17 42
Other expenses.......................................... 39 13 14
------- ------ ------
TOTAL FUND EXPENSES................................. 3,323 543 535
------- ------ ------
LESS REIMBURSEMENT OF EXPENSES (NOTE 2)..................... - 5 -
------- ------ ------
NET FUND EXPENSES........................................... 3,323 538 535
------- ------ ------
NET INVESTMENT INCOME....................................... 93,000 1,938 4,950
------- ------ ------
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments........................ 29 - 5
------- ------ ------
NET GAIN ON INVESTMENTS............................. 29 - 5
------- ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $93,029 $1,938 $4,955
======= ====== ======
</TABLE>
See accompanying notes
5
<PAGE> 68
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Municipal U.S. Government
Money Market Money Market Money Market
-------------------------- -------------------- ---------------------
1997 1996 1997 1996 1997 1996
----------- ------------ --------- -------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................. $ 93,000 $ 79,370 $ 1,938 $ 1,039 $ 4,950 $ 3,852
Net realized gain on investments....... 29 69 - - 5 36
----------- ------------ --------- -------- --------- ---------
NET INCREASE IN
NET ASSETS
RESULTING FROM
OPERATIONS....................... 93,029 79,439 1,938 1,039 4,955 3,888
----------- ------------ --------- -------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class.................. (73,743) (72,480) (64) (1) (1,541) (1,633)
Mileage Class........................ - (19) - - - -
PlanAhead Class...................... (7,500) (3,324) (221) (28) (841) (57)
Platinum Class....................... (11,757) (3,547) (1,653) (1,010) (2,568) (2,162)
Net realized gain on investments:
Institutional Class.................. (24) (62) - - (2) (15)
PlanAhead Class...................... (2) (3) - - - -
Platinum Class....................... (3) (4) - - (3) (21)
----------- ------------ --------- -------- --------- ---------
NET DISTRIBUTIONS
TO SHAREHOLDERS.................. (93,029) (79,439) (1,938) (1,039) (4,955) (3,888)
----------- ------------ --------- -------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares.......... 18,317,950 12,974,461 163,384 120,311 332,729 199,981
Reinvestment of dividends and
distributions........................ 62,571 52,065 1,875 915 3,495 3,266
Cost of shares redeemed................ (18,207,080) (12,741,031) (143,626) (88,592) (313,363) (178,363)
----------- ------------ --------- -------- --------- ---------
NET INCREASE IN
NET ASSETS FROM
CAPITAL SHARE
TRANSACTIONS..................... 173,441 285,495 21,633 32,634 22,861 24,884
----------- ------------ --------- -------- --------- ---------
NET INCREASE IN NET ASSETS................. 173,441 285,495 21,633 32,634 22,861 24,884
NET ASSETS:
Beginning of period.................... 1,633,810 1,348,315 52,208 19,574 79,570 54,686
----------- ------------ --------- -------- --------- ---------
END OF PERIOD.......................... $ 1,807,251 $ 1,633,810 $ 73,841 $ 52,208 $ 102,431 $ 79,570
=========== ============ ========= ======== ========= =========
</TABLE>
See accompanying notes
6
<PAGE> 69
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American AAdvantage Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a no-load, open-end management investment company. These financial
statements and notes to the financial statements relate to the American
AAdvantage Money Market, American AAdvantage Municipal Money Market and American
AAdvantage U.S. Government Money Market Funds (each a "Fund" and collectively,
the "Funds"), each a series of the Trust. Prior to March 1, 1997 the American
AAdvantage U.S. Government Money Market Fund was known as the American
AAdvantage U.S. Treasury Money Market Fund and operated under different
investment policies. The Trust commenced sales of a second class of shares of
the Funds, designated as "Mileage Class" shares, on November 1, 1991 for the
Money Market Fund, November 1, 1993 for the U.S. Government Money Market Fund
and on November 10, 1993 for the Municipal Money Market Fund. At the same time,
the existing shares of each Fund were redesignated as "Institutional Class"
shares. The Trust commenced sales on August 1, 1994 of a third class of shares
of the Funds, designated as "PlanAhead Class" shares and on November 7, 1995 a
fourth class of shares of the Funds, designated as "Platinum Class" shares. The
Mileage Class of each Fund was terminated on November 15, 1995.
Each Fund invests all of its investable assets in the corresponding
portfolio of the AMR Investment Services Trust, an open-end diversified
management investment company, as follows:
<TABLE>
<S> <C> <C>
AMERICAN AADVANTAGE: & INVESTS ASSETS IN & AMR INVESTMENT SERVICES TRUST:
Money Market Fund Money Market Portfolio
Municipal Money Market Fund Municipal Money Market Portfolio
U.S. Government Money Market Fund U.S. Government Money Market Portfolio
</TABLE>
Each AMR Investment Services Portfolio has the same investment objectives
as its corresponding Fund. The value of such investment reflects each Fund's
proportionate interest in the net assets of the corresponding portfolio (92.14%,
73.51% and 78.05% at October 31, 1997 of the AMR Investment Services Money
Market, Municipal Money Market and U.S. Government Money Market Portfolios,
respectively) (each a "Portfolio" and collectively the "Portfolios"). The
financial statements of the Portfolios are included elsewhere in this report and
should be read in conjunction with the Funds' financial statements.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
7
<PAGE> 70
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997 (Continued)
- --------------------------------------------------------------------------------
The following is a summary of the significant accounting policies followed
by the Funds.
Valuation of Investments
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements which are included elsewhere in this
report.
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income and realized gain
(loss) in the Portfolio each day. All net investment income and realized gain
(loss) of each Portfolio are allocated pro rata among the corresponding Fund and
other investors in each Portfolio at the time of such determination. The Funds
generally declare dividends daily from net investment income and net short-term
capital gain, if any, payable monthly.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently than generally accepted accounting
principles.
Federal Income and Excise Taxes
It is the policy of each of the Funds to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income as well as any net realized
capital gains on the sale of investments. Therefore, no federal income or excise
tax provision is required.
All dividends paid by the Municipal Money Market Fund were
"exempt - interest dividends" and therefore 100% free of any regular federal
income tax. Approximately 54% of interest earned was derived from investments in
certain private activity bonds for purposes of the federal alternative minimum
tax calculation.
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations. Expenses directly attributable to a Class of shares are charged to
that Class. Expenses incurred by the Trust with respect to any two or more of
the Funds are allocated in proportion to the net assets of each Fund, except
where allocations of direct expenses to each Fund can otherwise be made fairly.
Each share of each Fund, regardless of class, bears equally those expenses that
are allocated to the Fund as a whole.
Valuation of Shares
The price per share is calculated separately for each class of each Fund on
each day on which shares are offered for sale and orders accepted or upon
receipt of a redemption request. With respect to a class of a Fund, price per
share is computed by dividing the value of the Class's pro rata allocation of
the Fund's investments and other assets, less liabilities, by the number of
Class shares outstanding.
8
<PAGE> 71
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997 (Continued)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Service Agreement
which obligates the Manager to provide or oversee administrative and management
services to the Funds. As compensation for performing the duties required under
the Administrative Services Agreement, the Manager receives an annualized fee of
.05% of the average daily net assets of the Institutional and PlanAhead Classes
of each of the Funds and .50% of the average daily net assets of the Platinum
Classes of each of the Funds.
Distribution Plan
The Trust has adopted a "defensive" Distribution Plan in accordance with
Rule 12b-1 under the Investment Company Act of 1940, pursuant to which no fees
may be charged to the Funds for distribution purposes. However, the plan
authorizes the fees received by the Manager and the investment advisers hired by
the Manager to be used for distribution purposes. Under this plan, the Trust
does not intend to compensate the Manager or any other party, either directly or
indirectly, for the distribution of Trust shares.
Other
Certain officers or trustees of the Trust are also officers of the Manager
or American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided free unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. For
the year ended October 31, 1997, the cost of air transportation was not material
to any of the Funds.
3. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (in thousands). Each share is valued at $1.00:
<TABLE>
<CAPTION>
Institutional PlanAhead Platinum
Year Ended October 31, 1997 Class Class Class
--------------------------- ------------- --------- --------
<S> <C> <C> <C>
Money Market Fund
- ------------------------------------------------------------
Shares sold................................................. 17,322,904 411,807 583,239
Reinvestment of dividends................................... 45,735 6,564 10,272
Shares redeemed............................................. (17,651,928) (336,072) (219,080)
----------- -------- --------
Net increase (decrease) in capital shares outstanding....... (283,289) 82,299 374,431
=========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Institutional PlanAhead Platinum
Municipal Money Market Fund Class Class Class
--------------------------- ------------- --------- --------
<S> <C> <C> <C>
Shares sold................................................. 6,976 29,523 126,885
Reinvestment of dividends................................... 63 196 1,616
Shares redeemed............................................. (6,677) (22,469) (114,480)
----------- -------- --------
Net increase in capital shares outstanding.................. 362 7,250 14,021
=========== ======== ========
</TABLE>
9
<PAGE> 72
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional PlanAhead Platinum
U.S. Government Money Market Fund Class Class Class
--------------------------------- ------------- --------- --------
<S> <C> <C> <C>
Shares sold................................................. 195,681 (57,582) 79,466
Reinvestment of dividends................................... 852 164 2,479
Shares redeemed............................................. (192,181) (55,522) (65,660)
----------- -------- --------
Net increase in capital shares outstanding.................. 4,352 2,224 16,285
=========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Institutional Mileage PlanAhead Platinum
Year Ended October 31, 1996 Class Class Class Class
--------------------------- ------------- -------- --------- --------
<S> <C> <C> <C> <C>
Money Market Fund
- ------------------------------------------------------------
Shares sold................................................. 12,617,528 654 177,716 178,563
Reinvestment of dividends................................... 46,010 - 2,969 3,086
Shares redeemed............................................. (12,462,640) (100,940) (115,783) (61,668)
----------- -------- -------- -------
Net increase (decrease) in capital shares outstanding....... 200,898 (100,286) 64,902 119,981
=========== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Institutional Mileage PlanAhead Platinum
Municipal Money Market Fund Class Class Class Class
--------------------------- ------------- -------- --------- --------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,491 - 6,330 112,490
Reinvestment of dividends................................... - - 23 892
Shares redeemed............................................. (1,492) (19,438) (4,143) (63,519)
----------- -------- -------- -------
Net increase (decrease) in capital shares outstanding....... (1) (19,438) 2,210 49,863
=========== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Institutional Mileage PlanAhead Platinum
U.S. Government Money Market Fund Class Class Class Class
--------------------------------- ------------- -------- --------- --------
<S> <C> <C> <C> <C>
Shares sold................................................. 51,499 26 4,149 144,307
Reinvestment of dividends................................... 1,225 - 49 1,992
Shares redeemed............................................. (74,313) (6,998) (2,906) (94,146)
----------- -------- -------- -------
Net increase (decrease) in capital shares outstanding....... (21,589) (6,972) 1,292 52,153
=========== ======== ======== =======
</TABLE>
10
<PAGE> 73
(This page intentionally left blank)
11
<PAGE> 74
AMERICAN AADVANTAGE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------------------------
Year Ended October 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Net investment income...................... 0.06(1) 0.05(1) 0.06 0.04 0.03
Less dividends from net investment
income................................... (0.06) (0.05) (0.06) (0.04) (0.03)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return (annualized)...................... 5.60% 5.57% 5.96% 3.85% 3.31%
========== ========== ========== ========== ==========
Ratios and supplemental data:
Net assets, end of period (in thousands)... $1,123,649 $1,406,939 $1,206,041 $1,893,144 $2,882,947
Ratios to average net assets (annualized):
Expenses............................... 0.23%(1) 0.24%(1) 0.23% 0.21% 0.23%
Net investment income.................. 5.46%(1) 5.41%(1) 5.79% 3.63% 3.23%
</TABLE>
- ---------------
(1) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Money Market Portfolio.
(2) Total return for the PlanAhead Class for the period ended October 31, 1994
reflects Institutional Class returns from November 1, 1993 through July 31,
1994 and returns of the PlanAhead Class from August 1, 1994 (commencement of
operations) through October 31, 1994. Due to the different expense
structures between the classes, total return would vary from the results
shown had the PlanAhead Class been in operation for the entire year.
(3) Total return for the Platinum Class for the period ended October 31, 1996
reflects Institutional Class returns from November 1, 1995 through November
6, 1995 and returns of the Platinum Class from November 7, 1995
(commencement of operations) through October 31, 1996. Due to the different
expense structures between the classes, total return would vary from the
results shown had the Platinum Class been in operation for the entire year.
12
<PAGE> 75
AMERICAN AADVANTAGE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class Platinum Class
- ------------------------------------------------------ -----------------------------
August 1, November 7,
Year Ended October 31, to Year Ended 1995 to
- -------------------------------------- October 31, October 31, October 31,
1997 1996 1995 1994 1997 1996
- -------- -------- ------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
- -------- -------- ------- ----- -------- --------
0.05(1) 0.05(1) 0.05 0.01 0.05(1) 0.05(1)
(0.05) (0.05) (0.05) (0.01) (0.05) (0.05)
- -------- -------- ------- ----- -------- --------
$ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
======== ======== ======= ===== ======== ========
5.28% 5.21% 5.60% 3.73%(2) 4.87% 4.85%(3)
======== ======== ======= ===== ======== ========
$189,189 $106,890 $41,989 $ 25 $494,413 $119,981
0.54%(1) 0.58%(1) 0.55% 0.70% 0.93%(1) 0.94%(1)
5.17%(1) 5.06%(1) 5.56% 4.42% 4.80%(1) 4.63%(1)
</TABLE>
13
<PAGE> 76
AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------
November 10,
Year Ended October 31, 1993 to
------------------------------ October 31,
1997 1996 1995 1994
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------
Net investment income........................... 0.04(1) 0.04(1) 0.04 0.02
Less dividends from net investment income....... (0.04) (0.04) (0.04) (0.02)
------ ------ ------ ------
Net asset value, end of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
Total return (annualized)(2)........................ 3.52% 3.59% 3.75% 2.44%
====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)........ $ 369 $ 6 $ 7 $9,736
Ratios to average net assets (annualized)(2):
Expenses................................... 0.31%(1) 0.27%(1) 0.35% 0.30%
Net investment income...................... 3.49%(1) 3.49%(1) 3.70% 2.38%
</TABLE>
- ---------------
(1) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Municipal Money Market Portfolio.
(2) Operating results of each class of the Municipal Money Market Fund in the
years and periods indicated below excluded fees waived by the Manager. Had
the Fund paid such fees, the ratio of expenses and net investment income to
average net assets for each class would have been as follows:
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------
November 10,
Year Ended October 31, 1993 to
------------------------------ October 31,
1997 1996 1995 1994
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Ratio of expenses to average net assets
(annualized)................................. 0.32% 0.33% 0.55% 0.50%
Ratio of net investment income to average net
assets (annualized).......................... 3.48% 3.43% 3.50% 2.18%
</TABLE>
(3) Total return for the PlanAhead Class for the period ended October 31, 1994
reflects Institutional Class returns from November 10, 1993 through July 31,
1994 and returns of the PlanAhead Class from August 1, 1994 (commencement of
operations) through October 31, 1994. Due to the different expense
structures between the classes, total return would vary from the results
shown had the PlanAhead Class been in operation for entire year.
(4) Total return for the Platinum Class for the period ended October 31, 1996
reflects Institutional Class returns from November 1, 1995 through November
6, 1995 and returns of the Platinum Class from November 7, 1995
(commencement of operations) through October 31, 1996. Due to the different
expense structures between the classes, total return would vary from the
results shown had the Platinum Class been in operation for the entire year.
14
<PAGE> 77
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class Platinum Class
- -------------------------------------------- --------------------------
August 1, November 7,
Year Ended October 31, to Year Ended 1995 to
- ---------------------------- October 31, October 31, October 31,
1997 1996 1995 1994 1997 1996
- ------ ------ ------ ----------- ----------- -----------
<C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------ ------ ------ ------ ------- -------
0.03(1) 0.03(1) 0.03 0.01 0.03(1) 0.03(1)
(0.03) (0.03) (0.03) (0.01) (0.03) (0.03)
- ------ ------ ------ ------ ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======= =======
3.24% 3.27% 3.39% 2.35%(3) 2.79% 2.88%(4)
====== ====== ====== ====== ======= =======
$9,590 $2,340 $ 129 $ - $63,883 $49,862
0.60%(1) 0.62%(1) 0.72% 0.77% 1.03%(1) 0.97%(1)
3.18%(1) 3.12%(1) 3.32% 2.49% 2.75%(1) 2.72%(1)
</TABLE>
<TABLE>
<CAPTION>
PlanAhead Class Platinum Class
- -------------------------------------- ---------------------------
August 1, November 7,
Year Ended October 31, to Year Ended 1995 to
- ---------------------- October 31, October 31, October 31,
1997 1996 1995 1994 1997 1996
- ---- ---- ---- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C>
0.61% 0.67% 0.92% 0.97% 1.04% 1.02%
3.17% 3.07% 3.12% 2.29% 2.74% 2.67%
</TABLE>
15
<PAGE> 78
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------
Year Ended October 31,
----------------------------------------------------
1997(1) 1996 1995 1994 1993
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- --------
Net investment income.................................. 0.05(1) 0.05(1) 0.06 0.04 0.03
Less dividends from net investment income.............. (0.05) (0.05) (0.06) (0.04) (0.03)
------- ------- ------- ------- --------
Net asset value, end of period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ========
Total return (annualized).................................. 5.36% 5.29% 5.67% 3.70% 3.07%
======= ======= ======= ======= ========
Ratios and supplemental data:
Net assets, end of period (in thousands)............... $29,946 $25,595 $47,184 $67,607 $136,813
Ratios to average net assets (annualized)(5):
Expenses........................................... 0.27%(1) 0.32%(1) 0.32% 0.25% 0.23%
Net investment income.............................. 5.24%(1) 5.16%(1) 5.49% 3.44% 2.96%
</TABLE>
- ---------------
(1) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services U.S. Government Money Market Portfolio.
(2) Total return for the PlanAhead Class for the period ended October 31, 1994
reflects Institutional Class returns from November 1, 1993 through July 31,
1994 and returns of the PlanAhead Class from August 1, 1994 (commencement of
operations) through October 31, 1994. Due to the different expense
structures between the classes, total return would vary from the results
shown had the PlanAhead Class been in operation for the entire year.
(3) Prior to March 1, 1997, the American AAdvantage U.S. Government Money Market
Fund was known as the American AAdvantage U.S. Treasury Money Market Fund
and operated under different investment policies.
(4) Total return for the Platinum Class for the period ended October 31, 1996
reflects Institutional Class returns from November 1, 1995 through November
6, 1995 and returns of the Platinum Class from November 7, 1995
(commencement of operations) through October 31, 1996. Due to the different
expense structures between the classes, total return would vary from the
results shown had the Platinum Class been in operation for the entire year.
(5) The method of determining average net assets was changed from a monthly
average to a daily average starting with the period ended October 31, 1994.
16
<PAGE> 79
AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class Platinum Class
- ---------------------------------------------- ------------------------------
Year Ended October 31, August 1, November 7, 1995
- ----------------------------- to October 31, October 31, to October 31,
1997(1) 1996 1995 1994 1997 1996
- ------- ------ ------ -------------- ----------- ----------------
<C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------- ------ ------ ------ ------- --------
0.05 (1) 0.05(1) 0.05 0.01 0.05(1) 0.04(1)
(0.05) (0.05) (0.05) (0.01) (0.05) (0.04)
- ------- ------ ------ ------ ------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ======= ========
5.08% 4.94% 5.19% 3.58%(2) 4.61%(3) 4.58%(4)
======= ====== ====== ====== ======= ========
$4,046 $1,822 $ 530 $ - $68,439 $52,153
0.52% (1) 0.67%(1) 0.76% 0.75% 0.99%(1) 1.00%(1)
5.00% (1) 4.74%(1) 5.19% 3.94% 4.53%(1) 4.35%(1)
</TABLE>
17
<PAGE> 80
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
AMR Investment Services Money Market Portfolio
AMR Investment Services Municipal Money Market Portfolio
AMR Investment Services U.S. Government Money Market Portfolio
We have audited the accompanying statements of assets and liabilities of
the AMR Investment Services Money Market Portfolio, the AMR Investment Services
Municipal Money Market Portfolio, and the AMR Investment Services U.S.
Government Money Market Portfolio (collectively, "the Portfolios") (separate
portfolios comprising the AMR Investment Services Trust), including the
schedules of investments, as of October 31, 1997, and the related statements of
operations, the statements of changes in net assets, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Portfolios' management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the portfolios of the AMR Investment Services Trust at October 31, 1997,
the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
December 19, 1997
18
<PAGE> 81
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
<S> <C> <C>
(dollars in thousands)
EURODOLLAR TIME DEPOSITS (NOTE A) - 3.98%
Fuji Bank Limited, 5.5625%,
Due 11/3/1997.............. $ 13,390 $ 13,390
Skandinaviska Enskilda
Banken, 5.75%, Due
11/3/1997.................. 65,000 65,000
----------
TOTAL EURODOLLAR TIME
DEPOSITS............... 78,390
----------
CERTIFICATES OF DEPOSIT (NOTE A) - 39.77%
FOREIGN BANKS - 19.02%
Banca CRT S.p.A., New York,
Variable Rate, 5.71875%,
Due 2/20/1998.............. 15,000 15,000
5.71875%, Due 4/9/1998..... 80,000 80,000
Christiania Bank, Variable
Rate, 5.65875%, Due
6/29/1988.................. 100,000 100,000
Instituto Bancario San Paolo
S.p.A., Variable Rate,
5.65766%, Due 5/22/1998.... 80,000 80,000
Postipankki, Limited, New
York, Variable Rate,
5.61234%, Due 10/28/1998
(Note C)................... 100,000 100,000
----------
TOTAL FOREIGN BANKS...... 375,000
----------
DOMESTIC BANKS - 20.75%
Banco Popular de Puerto Rico,
Variable Rate,
5.72%, Due 4/9/1998
(Note B)................. 40,000 40,000
5.67875% Due 6/15/1998,
(Note B)................. 50,000 50,000
Comerica Bank, Detroit,
5.57875%, Due 9/11/1998.... 95,000 94,948
CoreStates Bank N.A.,
Variable Rate,
5.71%, Due 4/3/1998........ 25,000 25,000
5.65875%, Due 6/12/1998.... 25,000 25,000
Mellon Bank, N.A., Variable
Rate, 5.65875%, Due
6/16/1998.................. 87,000 87,000
U.S. Bank, N.A., Variable
Rate, 5.59375%, Due
6/22/1998.................. 87,200 87,170
----------
TOTAL DOMESTIC BANKS..... 409,118
----------
TOTAL CERTIFICATES OF
DEPOSIT................ 784,118
----------
PROMISSORY NOTES (NOTES A AND C) - 15.98%
First Allmerica Financial
Life Insurance Company,
Variable Rate, Due
11/5/1998 (Note D)......... 40,000 40,000
General American Life
Insurance Company,
5.76875%, Due 11/21/1997... 80,000 80,000
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
<S> <C> <C>
(dollars in thousands)
Goldman Sachs Group L.P.,
Variable Rate, 5.7925%, Due
7/21/1998 (Note C)......... $ 95,000 $ 95,000
Jackson National Life
Insurance Company,
5.75438%, Due 9/1/1998
(Note C)................... 100,000 100,000
----------
TOTAL PROMISSORY NOTES... 315,000
----------
COMMERCIAL PAPER (NOTE A) - 8.37%
Bankers Trust New York
Corporation, Variable Rate,
5.67875%, Due 11/3/1997.... 90,000 90,000
General Electric Capital
Corporation, Variable Rate,
5.64875%, Due 2/20/1998.... 75,000 75,000
----------
TOTAL COMMERCIAL PAPER... 165,000
----------
VARIABLE RATE MEDIUM-TERM NOTES
(NOTE A) - 33.26%
American Honda Finance
Corporation, 144A, (Note E)
5.76781%, Due 4/6/1998..... 25,000 24,998
5.71875%, Due 4/8/1998..... 50,000 49,994
5.71875%, Due 4/9/1998..... 40,000 40,009
Bear Stearns Companies,
Incorporated, 5.70%, Due
2/13/1998.................. 70,000 70,000
6.10%, Due 5/15/1998....... 8,000 8,025
Caterpillar Financial
Services Corporation,
5.70%, Due 4/13/1998....... 42,000 42,000
Fleet Financial Group,
Incorporated, 5.85%, Due
2/13/1998.................. 12,000 12,005
Fleet Mortgage Group,
Incorporated, 6.00%, Due
7/27/1998.................. 22,500 22,536
General Motors Acceptance
Corporation, 5.71875%, Due
2/23/1998
(Note D)................. 70,000 70,000
5.59875%, Due 9/21/1998.... 15,000 14,991
5.76859%, Due 10/22/1998
(Note D)................. 25,000 25,000
International Business
Machines Credit
Corporation, 5.59219%, Due
9/10/1998.................. 42,000 41,976
Lehman Brothers Holdings,
Incorporated, 5.79687%, Due
12/5/1997
(Note C)................. 100,000 100,000
Merrill Lynch and Company,
Incorporated, 5.65266%, Due
3/3/1998................... 38,000 37,998
5.93875%, Due 5/19/1998.... 25,000 25,039
</TABLE>
See accompanying notes
19
<PAGE> 82
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
<S> <C> <C>
(dollars in thousands)
Sanwa Business Credit
Corporation, 144A, (Note E)
5.75%, Due 1/12/1998....... $ 38,000 $ 38,000
5.70875%, Due 2/24/1998.... 33,000 33,000
----------
TOTAL VARIABLE RATE
MEDIUM-TERM NOTES...... 655,571
----------
TOTAL INVESTMENTS - 101.36%
(COST $1,998,079).......... 1,998,079
----------
LIABILITIES, NET OF OTHER
ASSETS - (1.36%)........... (26,749)
----------
TOTAL NET ASSETS - 100%...... $1,971,330
==========
</TABLE>
- ---------------
Based on the cost of investments of $1,998,079 for federal income tax purposes
at October 31, 1997, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity or
yield to next reset date.
(B) Obligation is subject to a same day credit quality put back to issuer.
(C) Obligation is subject to an unconditional put back to the issuer with seven
calendar days notice.
(D) Obligation is subject to an unconditional put back to the issuer with ninety
calendar days notice.
(E) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $186,001,000 or 9.4% of net
assets.
ABBREVIATION:
L.P. - Limited Partnership
See accompanying notes
20
<PAGE> 83
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
MUNICIPAL OBLIGATIONS - 94.64%
COMMERCIAL PAPER (NOTE A) - 15.00%
City of Burlington, Kansas
Customized Purchase Pollution
Control Refunding and
Improvement Revenue Bonds,
Series 1985B, 3.75%,
Due 11/19/1997, matures
9/1/2015, LOC Societe
Generale..................... $ 1,600 $ 1,600
Michigan State Housing
Development Authority Multi-
family Housing Revenue Bonds,
Series 1988A, 3.70%, Due
11/25/1997, LOC Credit
Suisse....................... 2,000 2,000
Missouri State Environmental
Improvement and Energy
Resource Authority Pollution
Control Revenue (Union
Electric Company Project)
Series 1985A, 3.65%, Due
12/4/1997, LOC Union Bank of
Switzerland.................. 3,500 3,500
Montgomery County, Pennsylvania
Industrial Development
Pollution Control Revenue
(Peco Energy Company), Series
1996, 3.70%, Due 2/5/1998,
LOC Canadian Imperial Bank... 3,000 3,000
Sweetwater County, Wyoming
Customized Pollution Control
Refunding (Pacificorp
Project), Series 1988A,
3.80%, Due 1/14/1998, LOC
Union Bank of Switzerland.... 3,000 3,000
Toledo-Lucas County, Ohio Port
Facility Refunding Revenue
(CSX Transportation,
Incorporated), Series 1992,
3.80%, Due 1/14/1998, LOC
Bank of Nova Scotia.......... 1,000 1,000
West Virginia Public Energy
Authority Revenue Bonds
(Morgantown Association
Project), Series 1989, 3.75%,
Due 11/13/1997, LOC Swiss
Bank......................... 1,000 1,000
----------
TOTAL COMMERCIAL PAPER..... 15,100
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
VARIABLE RATE DEMAND OBLIGATIONS
(NOTE A) - 79.64%
ALASKA - 3.38%
Alaska Industrial Development &
Export Authority Refunding
Revenue Bonds (American
President Lines), Series
1991, 3.95%, Due 11/1/2009,
LOC Industrial Bank Japan,
Limited...................... $ 3,405 $ 3,405
----------
TOTAL ALASKA............... 3,405
----------
ARIZONA - 2.38%
Apache County, Arizona
Industrial Development
Authority Pollution Control
Revenue (Tucson Electric
Power Company), Series 1981B,
3.75%, Due 10/1/2021, LOC
Bank of Tokyo-Mitsubishi,
Limited...................... 2,400 2,400
----------
TOTAL ARIZONA.............. 2,400
----------
ARKANSAS - 1.19%
Little River County, Arkansas
Solid Waste Disposal Revenue
Bonds (Georgia-Pacific
Corporation Project), Series
1991, 3.80%, Due 11/1/2026,
LOC Sumitomo Bank, Limited... 1,200 1,200
----------
TOTAL ARKANSAS............. 1,200
----------
CALIFORNIA - 9.63%
California Pollution Control
Finance Authority Control
Resource Recovery (Wadham
Energy LP), Series 1987A,
3.80%, Due 11/1/17, LOC
Banque Paribas............... 3,800 3,800
California Statewide Community
Development Authority
Industrial Development
Revenue Bonds (Nichirin-Flex
U.S.A., Incorporated
Project), Series 1989, 3.80%,
Due 10/1/2009, LOC Dai-Ichi
Kangyo Bank, Limited......... 2,500 2,500
</TABLE>
See accompanying notes
21
<PAGE> 84
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Los Angeles County Industrial
Development Authority (Gary
A. Bandy), 3.70%, Due
12/1/2007, LOC Dai-Ichi
Kangyo Bank, Limited......... $ 345 $ 345
Los Angeles County Industrial
Development Authority
(Bicara, Limited Project),
Series 1987A-II, 3.70%, Due
12/1/2007, LOC Dai-Ichi
Kangyo Bank, Limited......... 550 550
Los Angeles Multifamily Housing
Revenue Bonds (Channel
Gateway Apartments Project),
Series 1989B, 4.20%, Due
8/1/2019, LOC Fuji Bank,
Limited, Los Angeles......... 2,500 2,500
----------
TOTAL CALIFORNIA........... 9,695
----------
COLORADO - 1.09%
Moffat County Pollution Control
Revenue (Ute Electric Company
Project), Bond Insurance -
AMBAC Indemnity Corporation,
Series 1984, 3.70%, due
7/1/2010, SPA Societe
Generale..................... 1,100 1,100
----------
TOTAL COLORADO............. 1,100
----------
CONNECTICUT - 2.98%
Connecticut State Health and
Education Facilities
Authority Revenue (Edgehill
Project), Series 1997B,
3.85%, Due 7/1/2004, LOC
Banque Paribas............... 3,000 3,000
----------
TOTAL CONNECTICUT.......... 3,000
----------
FLORIDA - 2.28%
Broward County, Florida Housing
Finance Authority Multifamily
Housing Revenue
Bonds(Parkview Partnership
Limited), 3.90%, Due
12/1/2010, LOC Fuji Bank,
Limited...................... 1,000 1,000
Dade County, Florida Capital
Asset Acquisition Special
Obligation Bonds, Series
1990, 3.95%, Due 10/1/2010,
LOC Sanwa Bank, Limited...... 1,300 1,300
----------
TOTAL FLORIDA.............. 2,300
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
GEORGIA - 4.57%
Industrial Development
Authority of Cartersville
(Sekisui Jushi America,
Incorporated Project), Series
1992, 4.05%, Due 6/1/2012,
LOC Sanwa Bank, Limited...... $ 1,100 $ 1,100
Thomaston-Upson County
Industrial Development
Revenue Authority (Yamaha
Music Manufacturing,
Incorporated Project), Series
1988, 4.05%, Due 8/1/2018,
LOC Bank of Tokyo-Mitsubishi,
Limited...................... 3,500 3,500
----------
TOTAL GEORGIA.............. 4,600
----------
HAWAII - 2.98%
Department of Budget and
Finance of the State of
Hawaii, Special Purpose
Revenue Bonds (G.N. Wilcox
Memorial Hospital Project),
Series 1988, 4.25%, Due
7/1/2018, LOC Fuji Bank,
Limited...................... 2,000 2,000
Hawaii State Housing Finance &
Development Revenue Bonds
(Kamakee Vista Rental Housing
Systems Project), Series
1990A, 3.80%, Due 7/1/2025,
LOC Industrial Bank of Japan,
Limited...................... 1,000 1,000
----------
TOTAL HAWAII............... 3,000
----------
ILLINOIS - 2.67%
Illinois Development Finance
Authority (Illinois Power
Project), Series 1987B,
4.00%, Due 3/1/2017, LOC Bank
of Tokyo-Mitsubishi,
Limited...................... 900 900
Illinois Housing Development
Authority Multifamily
Mortgage - Revenue Bonds
(Hyde Park Project), Series
1989, 4.10%, Due 2/1/2024,
LOC Sumitomo Bank, Limited... 1,360 1,360
Oswego, Illinois Industrial
Development Revenue Bonds
(Griffith Laboratories World
Wide, Incorporated Project),
Series 1995, 3.65%, Due
7/1/2025, LOC ABN AMRO Bank,
N.V.......................... 430 430
----------
TOTAL ILLINOIS............. 2,690
----------
</TABLE>
See accompanying notes
22
<PAGE> 85
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
INDIANA - 3.23%
Fort Wayne Industrial Economic
Development Revenue Bonds
(ND-Tech Corporation
Project), Series 1989, 3.70%,
Due 7/1/2009, LOC Societe
Generale..................... $ 1,000 $ 1,000
Princeton Industrial
Development Revenue Bonds
(Orion Electric America,
Incorporated Project), Series
1987, 3.80%, Due 4/30/2017,
LOC Bank of Tokyo-Mitsubishi,
Limited...................... 455 455
Seymour Economic Development
Revenue Bonds (Kobelco Metal
Powder of America,
Incorporated Project), Series
1987, 4.05%, Due 12/15/1997,
LOC Industrial Bank of Japan,
Limited...................... 600 600
Shelbyville, Indiana Economic
Development Revenue Bonds
(Nippisun Indiana Corporation
Project), Series 1991, 4.25%,
Due 9/1/2006, LOC Industrial
Bank of Japan, Limited....... 1,200 1,200
----------
TOTAL INDIANA.............. 3,255
----------
IOWA - 1.11%
Dubuque, Iowa Industrial
Development Revenue Bonds
(Swiss Valley Farms Company
Project), Series 1987, 3.75%,
Due 12/1/2001, LOC Rabobank
Nederland.................... 1,120 1,120
----------
TOTAL IOWA................. 1,120
----------
KENTUCKY - 2.48%
Bowling Green Industrial
Building Revenue Bonds (TWN
Fastener, Incorporated
Project), Series 1988, 4.05%,
Due 3/1/2008, LOC Industrial
Bank of Japan, Limited....... 900 900
Hopkinsville Industrial
Development Revenue Bonds
(American Precision
Machinery, Incorporated
Project), Series 1990, 3.95%,
Due 5/1/2000, LOC Bank of
Tokyo-Mitsubishi, Limited.... 1,400 1,400
Hopkinsville, Kentucky
Industrial Building Revenue
Refunding Bonds (Co Par,
Incorporated Project), Series
1994A, 4.05%, Due 4/1/2004,
LOC Dai-Ichi Kangyo Bank,
Limited...................... 100 100
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Shelbyville, Kentucky
Industrial Building Revenue
Bonds (Ichikoh Manufacturing,
Incorporated Project), Series
1987, 4.05%, Due 10/1/2007,
LOC Industrial Bank of Japan,
Limited...................... $ 100 $ 100
----------
TOTAL KENTUCKY............. 2,500
----------
LOUISIANA - 2.04%
Jefferson Parish Louisiana
Hospital District #1 (West
Jefferson Medical Center
Project), Series 1986, 3.75%,
Due 1/1/2026, LOC Rabobank
Nederland.................... 1,185 1,185
Louisiana Housing Finance
Agency Multifamily Revenue
Refunding Bonds (New
Orleanian Project), Series
1988, 3.90%, Due 12/1/2025,
LOC Sumitomo Bank, Limited... 870 870
----------
TOTAL LOUISIANA............ 2,055
----------
MISSOURI - 3.48%
Missouri Higher Education Loan
Authority Revenue Bonds,
Series 1988A, 3.70%, Due
6/1/2017, LOC National
Westminster Bank, PLC........ 3,500 3,500
----------
TOTAL MISSOURI............. 3,500
----------
NEBRASKA - 0.89%
Lancaster County, Nebraska
Industrial Revenue Bonds
(Sun-Husker Foods,
Incorporated Project), Series
1989, 4.05%, Due 8/15/2009,
LOC Bank of Tokyo-Mitsubishi,
Limited...................... 900 900
----------
TOTAL NEBRASKA............. 900
----------
NEVADA - 3.18%
Clark County, Nevada Industrial
Development Revenue Bonds
Pollution Control Refunding
Revenue Bonds (Nevada Power
Company Project), Series
1995A, 3.80%, Due 10/1/2030,
LOC Barclays Bank, PLC....... 700 700
Clark County, Nevada Industrial
Development Revenue Bonds
Pollution Control Refunding
Revenue Bonds (Nevada Power
Company Project), Series
1995C, 3.70%, Due 10/1/2030,
LOC Barclays Bank, PLC....... 2,500 2,500
----------
TOTAL NEVADA............... 3,200
----------
</TABLE>
See accompanying notes
23
<PAGE> 86
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
NEW JERSEY - 2.91%
New Jersey Health Care
Facilities Financing
Authority Revenue
Bonds(Carrier Foundation
Project), Bond Insurance -
FGIC, Series 1985C, 3.95%,
Due 7/1/2005, SPA Banque
Paribas...................... $ 2,935 $ 2,935
----------
TOTAL NEW JERSEY........... 2,935
----------
NEW YORK - 4.47%
New York, New York General
Obligation Bonds, Series
1993B-2, 3.75%, Due
8/15/2020, LOC Morgan
Guaranty Trust............... 1,000 1,000
New York, New York General
Obligation Bonds, Series
1993B-4, 3.75%, Due
8/15/2023, LOC Union Bank of
Switzerland.................. 1,500 1,500
New York, New York General
Obligation Bonds, Bond
Insurance - FGIC, Series
1992B, 3.75%, Due
10/1/2020.................... 2,000 2,000
----------
TOTAL NEW YORK............. 4,500
----------
OHIO - 3.77%
Saint Mary's, Ohio Industrial
Development Revenue Bonds
(Setex, Incorporated
Project), Series 1988, 4.05%,
Due 12/1/2001, LOC Industrial
Bank of Japan, Limited....... 1,500 1,500
Ohio State Environmental
Improvement Revenue (U S
Steel Corporation Project),
Series 1986, 3.85%, Due
5/1/2011, LOC Sanwa
Limited...................... 2,300 2,300
----------
TOTAL OHIO................. 3,800
----------
PENNSYLVANIA - 7.24%
Cambria County Industrial
Development Authority
Resource Recovery Revenue
Bonds(Cambria Cogen Company
Project), Series 1989 V-1,
3.70%, Due 9/1/2019, LOC ABN
AMRO Bank, N.V.,............. 1,000 1,000
Cambria County Industrial
Development Authority
Resource Recovery Revenue
Bonds(Cambria Cogen Company
Project), Series 1989 V-2,
3.70%, Due 9/1/2019, LOC ABN
AMRO Bank, N.V.,............. 900 900
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Cambria County Industrial
Development Authority
Resource Recovery Revenue
Bonds (Cambria Cogen Company
Project), Series 1991 V-1,
3.70%, Due 9/1/2019, LOC ABN
AMRO Bank, N.V............... $ 2,150 $ 2,150
Gettysburg Area Industrial
Development Authority
Industrial Development
Refunding Bonds (Dal-Tile
Corporation), Series 1987B,
3.80%, Due 3/1/2004, LOC
Credit Suisse................ 1,570 1,570
Northumberland County
Industrial Development
Authority Resource Recovery
Revenue Bonds (Foster Wheeler
Mt. Carmel, Incorporated
Project), Series 1987A,
3.75%, Due 2/1/2010, LOC
Union Bank of Switzerland.... 1,000 1,000
Northumberland County
Industrial Development
Authority Resource Recovery
Revenue Bonds (Foster Wheeler
Mt. Carmel, Incorporated
Project), Series 1987B,
3.75%, Due 2/1/2010, LOC
Union Bank of Switzerland.... 670 670
----------
TOTAL PENNSYLVANIA......... 7,290
----------
TENNESSEE - 0.80%
Blount County Industrial
Development Revenue Bonds
(Advanced Crystal Technology,
Incorporated Project), Series
1988, 4.05%, Due 8/1/2008,
LOC Industrial Bank of Japan,
Limited...................... 500 500
Covington, Tennessee Industrial
Development Board Industrial
Development Revenue Bonds
(Charms Company Project),
Series 1992, 3.70%, Due
6/1/2027, LOC Societe
Generale..................... 300 300
----------
TOTAL TENNESSEE............ 800
----------
TEXAS - 0.70%
Harris County, Texas Industrial
Development Revenue Bonds
(Zeon Chemicals Project),
Series 1989, 3.90%, Due
2/1/2009, LOC Industrial Bank
of Japan, Limited............ 600 600
</TABLE>
See accompanying notes
24
<PAGE> 87
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Harris County, Texas Industrial
Development Revenue Bonds
(Chusei "USA" Project),
Series 1991C, 3.60%, Due
8/1/2001, LOC Bank of Tokyo-
Mitsubishi, Limited.......... $ 100 $ 100
----------
TOTAL TEXAS................ 700
----------
UTAH - 3.28%
Housing Authority of Provo
City, Utah Multifamily Rental
Housing Revenue Refunding
Bonds(Branbury Park Project),
Series 1987A, 3.80%, Due
12/1/2010, LOC Dai-Ichi
Kangyo Bank, Limited......... 2,000 2,000
Housing Authority of Provo
City, Utah Multifamily Rental
Housing Revenue Refunding
Bonds (Branbury Park
Project), Series 1987B,
3.85%, Due 12/1/2010, LOC
Dai-Ichi Kangyo, Bank,
Limited...................... 300 300
Utah State Board of Regents
Student Loan Revenue Bonds,
Bond Insurance-AMBAC
Indemnity Corporation, Series
1988C, 3.70%, Due
11/1/2013.................... 1,000 1,000
----------
TOTAL UTAH................. 3,300
----------
VIRGINIA - 0.20%
Virginia Housing Development
Authority (AHC Service
Corporation), Series 1987A,
3.75%, Due 9/1/2017, LOC Bank
of Tokyo-Mitsubishi,
Limited...................... 200 200
----------
TOTAL VIRGINIA............. 200
----------
WASHINGTON - 5.60%
Pierce County, Washington
Economic Development
Corporation Dock & Warf
Facilities Revenue Bonds (SCS
Industries Project), Series
1995, 3.70%, Due 7/1/2030,
LOC Bank of Nova Scotia...... 3,585 3,585
Port Angeles Industrial
Development Corporation
(Daishowa America Project),
Series 1992, 4.05%, Due
8/1/2007, LOC Industrial Bank
of Japan, Limited............ 200 200
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Port Angeles Industrial
Development Corporation
Revenue Bonds, Series 1992B,
4.05%, Due 12/1/2007, LOC
Industrial Bank of Japan,
Limited...................... $ 300 $ 300
Port Everett Revenue Bonds,
Series 1986, 4.05%, Due
12/1/2006, LOC Sumitomo Bank,
Limited...................... 1,550 1,550
----------
TOTAL WASHINGTON........... 5,635
----------
WEST VIRGINIA - 1.11%
Marion County, West Virginia
Solid Waste Disposal Facility
(Grant Town Cogeneration
Project), Series 1990B,
3.70%, Due 10/1/2017, LOC
National Westminster Bank,
PLC.......................... 115 115
Marion County, West Virginia
Solid Waste Disposal Facility
(Grant Town Cogeneration
Project), Series 1990C,
3.70%, Due 10/1/2017, LOC
National Westminster Bank,
PLC.......................... 1,000 1,000
----------
TOTAL WEST VIRGINIA........ 1,115
----------
TOTAL VARIABLE
RATE DEMAND
OBLIGATIONS.............. 80,195
----------
TOTAL MUNICIPAL
OBLIGATIONS.............. 95,295
----------
OTHER INVESTMENTS - 3.82%
Alliance Capital Management
Institutional Reserves
Tax-Free Portfolio(#38)...... 2,193 2,193
Provident Institutional Funds
Municipal Cash Fund.......... 1,653 1,653
----------
TOTAL OTHER
INVESTMENTS.............. 3,846
----------
TOTAL INVESTMENTS - 98.46%
(COST $99,141)............... 99,141
----------
OTHER ASSETS, NET OF
LIABILITIES - 1.54%.......... 1,550
----------
TOTAL NET ASSETS - 100%........ $ 100,691
==========
</TABLE>
- ---------------
Based on the cost of investments of $99,141 for federal income tax purposes at
October 31, 1997, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity or
yield to next reset date.
See accompanying notes
25
<PAGE> 88
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
ABBREVIATIONS:
FGIC - Financial Guaranty Insurance Company
LOC - Letter of Credit
MBIA - Municipal Bond Investors Assurance
NV - Company
PLC - Public Limited Corporation
SPA - Support Agreement
See accompanying notes
26
<PAGE> 89
AMR INVESTMENT SERVICES U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ---------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY REPURCHASE AGREEMENTS (NOTES A AND
B) - 42.86%
Goldman Sachs Tri-Party
Government Repurchase
Agreement, 5.75%, Due
11/3/1997 (Collateral held at
The Bank of New York Company,
Incorporated by Federal Home
Loan Mortgage Corporation
7.00%, Due 9/1/2010 through
Federal National Mortgage
Association 7.00%, Due
10/1/2027 - Market Value
$30,412)...................... $30,000 $ 30,000
UBS Securities Tri-Party
Government National Mortgage
Association Repurchase
Agreement, 5.74%, Due
11/3/1997 (Collateral held at
The Chase Manhattan Bank, N.A.
by Federal National Mortgage
Association 7.25%, Due
10/1/2015 through Federal
National Mortgage Association
7.479%, Due 4/1/2027 - Market
Value $27,002)................ 26,483 26,483
--------
TOTAL U.S. TREASURY
REPURCHASE AGREEMENTS..... 56,483
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ---------
(dollars in thousands)
<S> <C> <C>
U.S. GOVERNMENT AGENCY INSTRUMENTS (NOTE A) - 56.88%
Federal Home Loan Bank Variable
Rate, 5.49%, Due 7/7/1998..... $50,000 $ 49,970
Federal National Mortgage
Association, Variable Rate,
5.46375%, Due 9/10/1998....... 25,000 24,983
--------
TOTAL U.S. GOVERNMENT AGENCY
INSTRUMENTS............... 74,953
--------
TOTAL INVESTMENTS - 99.74%
(COST - $131,436)............. 131,436
--------
OTHER ASSETS, NET OF
LIABILITIES - 0.26%........... 344
--------
TOTAL NET ASSETS - 100%......... $131,780
========
</TABLE>
- ---------------
Based on the cost of investments of $131,436 for federal income tax purposes at
October 31, 1997, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity,
or yield to next reset date.
(B) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is held at the Portfolio's
custodian bank, NationsBank of Texas, N.A., or at subcustodian banks, as
indicated. The collateral is monitored daily by the Portfolio so that its
market value exceeds the carrying value of the repurchase agreement.
See accompanying notes
27
<PAGE> 90
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Municipal U.S. Government
Market Money Market Money Market
---------- ------------ ---------------
(in thousands)
<S> <C> <C> <C>
ASSETS:
Investments in securities at value (cost - $1,998,079;
$99,141; $131,436, respectively)*..................... $1,998,079 $ 99,141 $ 131,436
Cash.................................................... - - 5
Dividends and interest receivable....................... 13,541 378 397
Receivable for investments sold......................... - 1,210 -
Deferred organization costs, net........................ 18 18 18
---------- ---------- ----------
TOTAL ASSETS........................................ 2,011,638 100,747 131,856
---------- ---------- ----------
LIABILITIES:
Payable for investments purchased....................... 40,000 - -
Management and investment advisory fees payable (Note
2).................................................... 264 13 17
Accrued organization costs.............................. 35 35 35
Other liabilities....................................... 9 8 24
---------- ---------- ----------
TOTAL LIABILITIES................................... 40,308 56 76
---------- ---------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $1,971,330 $ 100,691 $ 131,780
========== ========== ==========
</TABLE>
- ---------------
* Includes repurchase agreements of $56,483 for the U.S. Government Money Market
Portfolio.
See accompanying notes
28
<PAGE> 91
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
Money Municipal Government
Market Money Market Money Market
-------------- ------------ ------------
(in thousands, except share and per share
amounts)
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................................... $ 106,645 $ 3,607 $ 6,453
-------------- ----------- ------------
TOTAL INVESTMENT INCOME............................. 106,645 3,607 6,453
-------------- ----------- ------------
EXPENSES:
Management and investment advisory fees (Note 2)........ 2,813 143 175
Custodian fees.......................................... 130 7 9
Professional fees....................................... 70 - 2
Amortization of organization costs...................... 15 15 15
Other expenses.......................................... 57 18 19
-------------- ----------- ------------
TOTAL EXPENSES...................................... 3,085 183 220
-------------- ----------- ------------
Less fees waived (Note 2)........................... - 8 -
-------------- ----------- ------------
NET EXPENSES........................................ 3,085 175 220
-------------- ----------- ------------
NET INVESTMENT INCOME....................................... 103,560 3,432 6,233
-------------- ----------- ------------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments........................ 31 - 5
-------------- ----------- ------------
NET GAIN ON INVESTMENTS............................. 31 - 5
-------------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 103,591 $ 3,432 $ 6,238
============== =========== ============
</TABLE>
See accompanying notes
29
<PAGE> 92
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Municipal Money Market U.S. Government Money Market
--------------------------- ----------------------- -----------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ---------- ---------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income............... $ 103,560 $ 87,138 $ 3,432 $ 2,196 $ 6,233 $ 4,734
Net realized gain on investments.... 31 73 - - 5 39
------------ ------------ --------- --------- --------- ---------
TOTAL INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... 103,591 87,211 3,432 2,196 6,238 4,773
------------ ------------ --------- --------- --------- ---------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions....................... 18,538,305 14,620,176 186,159 189,085 365,792 275,202
Withdrawals......................... (18,435,488) (12,942,465) (170,158) (110,023) (330,942) (189,283)
------------ ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL
INTERESTS..................... 102,817 1,677,711 16,001 79,062 34,850 85,919
------------ ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS.............. 206,408 1,764,922 19,433 81,258 41,088 90,692
------------ ------------ --------- --------- --------- ---------
NET ASSETS:
Beginning of period................. 1,764,922 - 81,258 - 90,692 -
------------ ------------ --------- --------- --------- ---------
END OF PERIOD....................... $ 1,971,330 $ 1,764,922 $ 100,691 $ 81,258 $ 131,780 $ 90,692
============ ============ ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- ------------------------------------------------------------------------------------------------------------------
RATIOS:
Expenses to average net assets
(annualized)*..................... 0.16% 0.17% 0.18% 0.13% 0.19% 0.20%
Net investment income to average net
assets (annualized)*.............. 5.52% 5.45% 3.59% 3.59% 5.32% 5.18%
</TABLE>
- ---------------
* Operating results of the Municipal Money Market Portfolio in the years
indicated below excluded fees waived by the Manager. Results prior to expenses
waived were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
Ratio of expenses to average net assets..................... 0.19% 0.21%
Ratio of net investment income to average net assets........ 3.58% 3.51%
</TABLE>
See accompanying notes
30
<PAGE> 93
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
AMR Investment Services Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York pursuant to a Declaration of Trust dated as of June 27, 1995 and
amended on August 11, 1995. Beneficial interests in the Trust are divided into
separate series, each having distinct investment objectives and policies. These
financial statements and notes to the financial statements relate to the AMR
Investment Services Money Market Portfolio, AMR Investment Services Municipal
Money Market Portfolio and AMR Investment Services U.S. Government Money Market
Portfolio (each a "Portfolio" and collectively the "Portfolios"). Prior to March
1, 1997, the American AAdvantage U.S. Government Money Market Portfolio was
known as the American AAdvantage U.S. Treasury Money Market Portfolio and
operated under different investment policies. The assets of each Portfolio
belong only to that Portfolio, and the liabilities of each Portfolio are borne
solely by that Portfolio and no other. The Trust commenced active operations on
November 1, 1995.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Security Valuation
Securities of the Portfolios are valued using the amortized cost method. In
the event that a deviation of 1/2 of 1% or more exists between the $1.00 per
share price of the Portfolios, calculated at amortized cost, and the price per
share calculated by reference to market quotations, or if there is any other
deviation which the Trust's Board of Trustees (the "Board") believes would
result in a material dilution to shareholders or purchasers, the Board will
promptly consider the appropriate action which should be initiated.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums or
accretion of discounts on investment grade short-term securities and zero coupon
instruments. For financial and tax reporting purposes, realized gains and losses
are determined on the basis of specific lot identification.
Federal Income and Excise Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of sub-chapter M of the
Internal Revenue Code.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Portfolio from a securities dealer or a bank which are subject to resale at a
later date. Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is monitored daily by each
Portfolio so that the collateral's market value exceeds the carrying value of
the repurchase agreement.
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AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
Deferred Organization Expenses
Expenses incurred by a Portfolio in connection with its organization are
being amortized on a straight-line basis over a five-year period.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. The Manager serves as the
sole investment adviser to each of the Portfolios. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Portfolios .15% of the average daily net assets of each of the
Portfolios. During the year ended October 31, 1997, the Manager waived
management fees totaling $7,534 for the Municipal Money Market Portfolio.
Other
Certain officers or trustees of the Trust are also officers of the Manager
or American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided free unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. For
the year ended October 31, 1997, the cost of air transportation was not material
to any of the Portfolios.
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