<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 and may be distributed to others
only if preceded or accompanied by a current prospectus.
VARAR -- 10/98
V99]ANNUAL REPORT
OCTOBER 31, 1998
[AMERICAN AADVANTAGE FUNDS LOGO]
BALANCED FUND
GROWTH AND INCOME FUND
INTERMEDIATE BOND FUND
INTERNATIONAL EQUITY FUND
SHORT-TERM BOND FUND
MANAGED BY AMR INVESTMENT SERVICES, INC.
<PAGE> 2
Dear Fellow Shareholder:
We are pleased to report to you on the performance of the American
AAdvantage Balanced, Growth and Income, International Equity, Intermediate Bond
and Short-Term Bond Funds and to provide you with a copy of the Annual Report
for the twelve months ended October 31, 1998.
THE DOMESTIC EQUITY FUNDS
MARKET RECAP:
The U.S. equity market, as measured by the S&P 500 Index, ended the
twelve-month period posting strong returns after a very tumultuous year. While
approaching an unprecedented fourth straight year of above twenty percent gains,
and posting record highs in July, the market plummeted amid concerns that the
economic crisis in the Asian markets and Russia would spread globally. Investors
sought refuge in U.S. Treasuries and large-cap blue chip stocks. The market
declined 14.5% for the month of August and over 19% from its record highs.
However, as the Federal Reserve cut interest rates in late September and
mid-October to quell the global crisis and the bailout of the hedge fund,
Long-Term Capital Management, a majority of stocks rebounded. The S&P 500 Index
gained 8% in October alone, thus alleviating any fears of a bear market, but
leaving investors shaky from the volatility.
Large-cap stocks dominated market performance for the period with the S&P
500 Index returning 22.0% for the twelve months. The Dow Jones Industrial
Average lagged, returning 17.4%. The Russell Mid-Cap Index lagged the blue chip
oriented S&P 500 Index, posting returns of only 4.5% for the year. However,
smaller-cap stocks suffered the brunt of the investor flight, with the Russell
2000 falling 11.9% for the twelve-month period. In addition to market
capitalization, investment style was also a major determinant for performance.
Growth stocks benefited from the flight-to-quality as the Barra Growth Index and
the Russell 1000 Growth Index returned 32.1% and 24.6%, respectively, besting
the Barra Value Index and the Russell 1000 Value Index returns of 11.7% and
14.8%, respectively.
PERFORMANCE RECAP:
American AAdvantage Balanced Fund
The Balanced Fund's total return for the twelve months ended October 31,
1998 was 9.34% for the AMR Class, 9.04% for the Institutional Class and 8.73%
for the PlanAhead Class. These returns slightly lagged the Lipper Balanced Index
of 395 funds with a total return of 10.62% for the period.
The Fund modestly increased its holdings in stocks from 56.4% in October
1997 to 58.1% in October 1998 and decreased its exposure to bonds as stock
prices became more attractive late in the year. The bond segment returned 10.47%
for the twelve-month period, outpacing the Lehman Govt/ Corp. Index return of
10.27%. The Fund's longer duration had a positive impact on returns as interest
rates declined.
The Fund's stock segment returned 8.10% for the twelve-month period versus
the S&P 500 Index's return of 22.01%. The underperformance was largely due to
the Fund's value investment style and holding stocks with a smaller market
capitalization than the S&P 500 Index (the average market cap for the Fund was
$24.9 billion at October 31, 1998 versus the S&P 500 Index's average of $72.9
billion). As a result, the Fund's stock selection and resulting sector
weightings were very different from the S&P 500. The Fund's largest
overweightings were utilities and financial stocks. While utilities performed
well in the period, financial stocks, particularly banks, were hard hit due to
their exposure to losses related to Russia and other overseas markets. As a
result of the Fund's value investment style, health care and technology
<PAGE> 3
stocks were significantly underweighted relative to the S&P 500 as the majority
of stocks in these sectors carry high price-to-earnings multiples. Yet,
investors still flocked to many of the large growth stocks in these sectors as
they deemed that dependable earnings streams and liquidity were more important
than valuations.
Currently, the Fund is poised to take advantage of the improving benefits
of a low interest rate environment and the domestic strength of utilities by
overweighting the sector. Also, we believe that the Fund should benefit from
overweighting the financial sector as money center and regional bank stocks
rebound, driven by share buyback activity and mergers. The Fund continues to
underweight technology and healthcare stocks because we believe that these
sectors should lag when investors shift their focus to valuations.
American AAdvantage Growth and Income Fund
The Growth and Income Fund's total return for the twelve months ended
October 31, 1998 was 6.56% for the AMR Class, 6.28% for the Institutional Class
and 5.94% for the PlanAhead Class. These returns lagged the Lipper Growth and
Income Index of 726 funds with a total return of 9.54% for the period.
Since the Fund utilizes the same investment managers and the same approach
to stock selection as the Balanced Fund, it also suffered from the overweighted
position in financial stocks and from underweighting health care and technology
stocks.
INTERNATIONAL EQUITY FUND
MARKET RECAP:
Despite solid foreign market returns over the past twelve months, there was
a marked disparity in performance among different countries, regions and time
periods, as markets were quite volatile over this time period. The first part of
this period was marked by a struggling Japan trying to cope with slumping
economic growth, disappointing stimulus packages and uncertainty regarding the
region's economic crisis. However, conditions in Europe could not have been
better as European markets were propelled by the euphoria of European Monetary
Union (EMU) and lower interest rates which drove investors into the equity
markets. This disparity lasted through the first half of 1998, before a number
of negative global events shook investors' confidence worldwide and sent markets
around the world dramatically lower. With the Russian government defaulting on
their bonds and spreading contagion concerns to Latin America, investors
worldwide departed more risky, less liquid securities and asset classes. This
near panic environment subsided and most markets bounced back in October, as
many of the events that transpired in the third quarter were either temporarily
rectified or resolved. As the dust settled on the past twelve months, the
ranking of the markets that comprise the EAFE Index (the Morgan Stanley Capital
International Europe, AustralAsia and Far East Index) shows markets located in
Europe generally outperformed markets located in Asia.
PERFORMANCE RECAP:
The International Equity Fund's total return for the twelve month period
was 4.44% for the AMR Class, 4.19% for the Institutional Class and 3.94% for the
PlanAhead Class, compared to a 4.69% return for the period out of 489 funds for
the Lipper International Index.
2
<PAGE> 4
The underweighting of Japan continues to be the top factor in adding value
for the Fund while other country weighting decisions were also positive for the
Fund. The Japanese market represents over 20% of the EAFE Index and was down
almost 15% for the past twelve months. In addition to successfully
underweighting the Japanese market, the stocks that were selected added value
compared to the stocks in the Japanese Index. Many of these Japanese holdings
were large global companies, which have undertaken the necessary restructurings
to compete in the global marketplace. The Fund continues to underweight Japan
entering into the new fiscal year.
The primary reason for the underperformance by the Fund for the past twelve
months was stock selection, especially in the larger markets of Germany and the
United Kingdom. While past time periods have displayed an outperformance of
value securities compared to growth securities, the past twelve months showed
just the opposite. The Fund focuses on buying and holding value securities
(securities with characteristics such as low price to earnings or price to book
ratios), while the securities that performed the best over the past twelve
months were large well-known companies that are considered growth securities
(high price to earnings ratios). The gap between the EAFE Value Index and the
EAFE Growth Index was close to 4% during the period.
As the new fiscal year begins, the United Kingdom remains the largest
weighting in the Fund. Additionally, the Fund has many small overweightings
among the more attractive smaller European markets, while significant
underweightings in Germany and Japan remain.
THE BOND FUNDS
MARKET RECAP:
The twelve-month period ended October 31, 1998 began with great optimism
about the U.S. economy as an oasis of prosperity with its ability to generate
solid growth without provoking the threat of inflationary pressure. Several
sectors, in fact, experienced price deflation. The employment market continued
to improve with the unemployment rate under 5%, and year-over-year GDP growth in
excess of 3.5%. The source of this robust growth was a very confident consumers
who continued their spending ways buoyed by record highs on the Dow Jones and
steady monetary policy.
The U.S. was on the verge of completing a successful year of profitability
when the brewing problems in Asia and Russia boiled over onto our soil. Several
Asian economies devalued their currencies in response to capital flights, their
interest rates were forced sky high, and industry was severely impacted by a
global credit crunch. Many of the problems culminated in the third quarter of
1998 when the Russian government effectively defaulted on its debt. Exacerbating
the instability, several large and highly leveraged hedge funds were forced into
liquidation as distortion in financial markets spread.
The ensuing effect on the U.S. bond market was an unprecedented flight to
quality, pushing the 30-year Treasury Bond to a record low of 4.72%, as
investors saw U.S. Treasuries as the only securities worthy of holding. The flip
side of the surge into Treasuries was a dramatic increase in credit risk
premiums across all sectors -- most notably in the lower-rated securities. As
did many industrial countries during the turmoil, the U.S. Federal Reserve Bank
lowered short-term interest rates twice (25 basis points each time) by the end
of October, and was contemplating a third ease for November. Not surprisingly,
Treasuries provided some of the highest total returns of nearly all sectors of
the U.S. bond markets throughout this period.
3
<PAGE> 5
PERFORMANCE RECAP:
American AAdvantage Intermediate Bond Fund
The Intermediate Bond Fund's performance for the twelve months ended
October 31, 1998 was 9.50% for the Institutional Class and 6.63% for the
PlanAhead Class for the period March 2, through October 31, 1998. The return of
the Institutional Class outperformed the benchmark, the Lipper Intermediate
Investment Grade Debt Average of 220 funds, by 1.56%.
The Fund's longer duration added value as yields fell during the year. The
Fund also benefited from holding bonds that experienced credit upgrades since
prices increased for those corporate bonds with improving credit quality and its
increased exposure to U.S. Treasuries.
American AAdvantage Short-Term Bond Fund
The Short-Term Bond Fund's total return for the twelve months ended October
31, 1998 was 6.93% for the AMR Class, 6.60% for the Institutional Class, and
6.50% for the PlanAhead Class, compared to 5.93% for the period for the
benchmark, the Linked Lipper Short-Term Investment Grade Debt Average universe
of 101 funds.
For the period, the duration of the Fund was primarily long of its
benchmark, which had a positive impact on the Fund's returns. As of October 31,
1998, the Fund's weighted-average effective duration was 2.1 years, as compared
to the benchmark duration of 1.8 to 2.0 years.
As always, we appreciate your confidence and support and we will continue
to strive to provide you with above average long-term returns.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American AAdvantage Funds
4
<PAGE> 6
PERFORMANCE SUMMARIES THROUGH OCTOBER 31, 1998
AMERICAN AADVANTAGE BALANCED FUND
[GRAPH]
AMERICAN AADVANTAGE GROWTH AND INCOME FUND
[GRAPH]
- ---------------
(A) 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
PERFORMANCE SUMMARIES THROUGH OCTOBER 31, 1998
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
[GRAPH]
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
[GRAPH]
- ---------------
(A) Fund performance represents the total returns achieved by the Institutional
Class from 9/15/97 through 3/1/98 and returns of PlanAhead Class since
3/1/98. 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 9/15/97.
(B) Inception date of American AAdvantage International Equity Fund was 8/7/91.
Changes in values for respective indices have a starting date of 8/7/91.
Inception date of the American Advantage Intermediate Bond Fund was 9/15/97.
Changes in values for respective indices have a starting date of 9/15/97.
(C) 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
PERFORMANCE SUMMARIES THROUGH OCTOBER 31, 1998
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
[GRAPH]
- ---------------
(A) 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.
(B) 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 Short-Term Bond 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, American AAdvantage
International Equity Fund, and the American AAdvantage Short-Term Bond Fund
(collectively, "the Funds") (separate funds comprising the American AAdvantage
Funds) as of October 31, 1998, 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 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, 1998, 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, 1998, 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
Dallas, Texas
December 17, 1998
8
<PAGE> 10
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Intermediate International Short-Term
Balanced Income Bond Equity Bond
---------- ----------- ------------ ------------- ----------
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in Portfolio, at value............ $1,074,707 $1,893,020 $ 178,950 $ 954,203 $ 108,844
Receivable for fund shares sold.............. 63 691 - 3,311 8,436
Receivable for expense reimbursement......... 1 - - - 2
---------- ---------- ---------- ---------- ---------
TOTAL ASSETS............................. 1,074,771 1,893,711 178,950 957,514 117,282
---------- ---------- ---------- ---------- ---------
LIABILITIES:
Payable for fund shares redeemed............. 1,425 21,683 5 6,519 -
Accrued organization costs................... - - 2 3 -
Dividends payable............................ - - 8 - 19
Management fees payable (Note 2)............. 40 49 38 99 21
Other liabilities............................ 90 92 27 30 11
---------- ---------- ---------- ---------- ---------
TOTAL LIABILITIES........................ 1,555 21,824 80 6,651 51
---------- ---------- ---------- ---------- ---------
NET ASSETS....................................... $1,073,216 $1,871,887 $ 178,870 $ 950,863 $ 117,231
========== ========== ========== ========== =========
ANALYSIS OF NET ASSETS:
Paid-in-capital.............................. 840,159 1,379,098 169,250 818,647 125,956
Accumulated undistributed investment
income..................................... 30,375 31,907 - 16,864 15
Accumulated net realized gain (loss)......... 85,014 189,372 5,646 24,684 (8,999)
Unrealized appreciation of investments....... 117,668 271,510 3,974 90,668 259
---------- ---------- ---------- ---------- ---------
NET ASSETS....................................... $1,073,216 $1,871,887 $ 178,870 $ 950,863 $ 117,231
========== ========== ========== ========== =========
Shares outstanding (no par value):
Institutional Class.......................... 9,998,382 10,347,308 17,020,340 24,135,929 1,916,859
========== ========== ========== ========== =========
PlanAhead Class.............................. 2,837,873 1,978,780 2,798 2,760,400 386,292
========== ========== ========== ========== =========
AMR Class.................................... 60,869,999 76,770,293 29,168,423 9,880,995
========== ========== ========== =========
Net asset value, offering and redemption price
per share:
Institutional Class.......................... $ 14.56 $ 20.93 $ 10.50 $ 16.93 $ 9.63
========== ========== ========== ========== =========
PlanAhead Class.............................. $ 14.35 $ 20.67 $ 10.55 $ 16.75 $ 9.64
========== ========== ========== ========== =========
AMR Class.................................... $ 14.57 $ 21.03 $ 17.01 $ 9.62
========== ========== ========== =========
</TABLE>
See accompanying notes
9
<PAGE> 11
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Intermediate International Short-Term
Balanced Income Bond Equity Bond
---------------- ---------------- ---------------- ---------------- ----------------
(in thousands)
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME ALLOCATED
FROM PORTFOLIO:
Interest income........ $ 28,071 $ 3,017 $13,318 $ 3,021 $6,828
Dividend income (net of
foreign taxes of
$2,543 in
International Equity
Fund)................ 14,029 43,053 - 21,438 -
Income derived from
securities lending,
net.................. 368 241 51 434 7
Portfolio expenses..... (3,261) (5,849) (611) (4,708) (310)
-------- --------- ------- -------- ------
NET INVESTMENT
INCOME ALLOCATED
FROM PORTFOLIO... 39,207 40,462 12,758 20,185 6,525
-------- --------- ------- -------- ------
FUND EXPENSES:
Administrative service
fees (Note 2):
Institutional
Class.............. 369 569 530 886 52
PlanAhead Class...... 104 94 - 82 10
Transfer agent fees:
Institutional
Class.............. 11 24 13 12 12
PlanAhead Class...... 25 19 - 13 3
AMR Class............ 3 - - 2 1
Professional fees...... 33 37 6 14 7
Registration fees and
expenses............. 26 25 45 22 9
Service Fees --
PlanAhead Class...... 104 93 - 74 9
Other expenses......... 29 35 6 18 5
-------- --------- ------- -------- ------
TOTAL FUND
EXPENSES......... 704 896 600 1,123 108
-------- --------- ------- -------- ------
Less reimbursement
of expenses (Note
2)............... - - - - 3
-------- --------- ------- -------- ------
Net fund
expenses......... 704 896 600 1,123 105
-------- --------- ------- -------- ------
NET INVESTMENT INCOME...... 38,503 39,566 12,158 19,062 6,420
-------- --------- ------- -------- ------
REALIZED AND UNREALIZED
GAIN (LOSS) ALLOCATED
FROM PORTFOLIO:
Net realized gain
(loss) on investments
and foreign currency
transactions......... 84,921 192,254 5,667 25,471 (447)
Change in net
unrealized
appreciation or
depreciation of
investments and
foreign currency
translations......... (34,989) (126,548) 2,100 (18,604) 365
-------- --------- ------- -------- ------
NET GAIN (LOSS) ON
INVESTMENTS...... 49,932 65,706 7,767 6,867 (82)
-------- --------- ------- -------- ------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $ 88,435 $ 105,272 $19,925 $ 25,929 $6,338
======== ========= ======= ======== ======
</TABLE>
See accompanying notes
10
<PAGE> 12
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Growth and Income Intermediate Bond
---------------------- ----------------------- ----------------------------
Year Ended
October 31, September 15,
-------------------------------------------------------------- to October 31,
1998 1997 1998 1997 1998 1997
---------- --------- ---------- ---------- ----------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income........ $ 38,503 $ 40,600 $ 39,566 $ 32,794 $ 12,158 $ 1,505
Net realized gain (loss) on
investments and foreign
currency transactions....... 84,921 133,817 192,254 122,605 5,667 255
Change in net unrealized
appreciation or depreciation
of investments and foreign
currency translations....... (34,989) 16,669 (126,548) 165,036 2,100 1,874
---------- --------- ---------- ---------- --------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS.............. 88,435 191,086 105,272 320,435 19,925 3,634
---------- --------- ---------- ---------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class......... (5,493) (11,595) (4,185) (1,615) (12,157) (1,505)
PlanAhead Class............. (1,472) (803) (491) (343) (1) -
AMR Class................... (34,157) (23,794) (29,335) (25,654) - -
Net realized gain on
investments:
Institutional Class......... (19,670) (22,827) (16,184) (5,181) (276) -
PlanAhead Class............. (5,247) (1,633) (2,302) (1,190) - -
AMR Class................... (108,479) (44,091) (105,652) (72,372) - -
---------- --------- ---------- ---------- --------- --------
DISTRIBUTIONS TO
SHAREHOLDERS............ (174,518) (104,743) (158,149) (106,355) (12,434) (1,505)
---------- --------- ---------- ---------- --------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of
shares...................... 163,258 179,736 344,005 335,985 55,413 223,471
Reinvestment of dividends and
distributions............... 173,853 104,257 157,512 105,754 12,589 1,505
Cost of shares redeemed...... (129,631) (311,199) (239,129) (99,228) (112,872) (10,856)
---------- --------- ---------- ---------- --------- --------
NET INCREASE (DECREASE) IN
NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS...... 207,480 (27,206) 262,388 342,511 (44,870) 214,120
---------- --------- ---------- ---------- --------- --------
NET INCREASE (DECREASE) IN NET
ASSETS......................... 121,397 59,137 209,511 556,591 (37,379) 216,249
---------- --------- ---------- ---------- --------- --------
NET ASSETS:
Beginning of period.......... 951,819 892,682 1,662,376 1,105,785 216,249 -
---------- --------- ---------- ---------- --------- --------
END OF PERIOD*............... $1,073,216 $ 951,819 $1,871,887 $1,662,376 $ 178,870 $216,249
========== ========= ========== ========== ========= ========
* Includes undistributed net
investment income of....... $ 30,375 $ 32,994 $ 31,907 $ 26,352 $ - $ -
========== ========= ========== ========== ========= ========
<CAPTION>
International Equity Short-Term Bond
--------------------- --------------------
Year Ended
October 31,
--------------------------------------------
1998 1997 1998 1997
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income........ $ 19,062 $ 14,178 $ 6,420 $ 13,514
Net realized gain (loss) on
investments and foreign
currency transactions....... 25,471 20,326 (447) (356)
Change in net unrealized
appreciation or depreciation
of investments and foreign
currency translations....... (18,604) 55,776 365 (638)
--------- --------- -------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS.............. 25,929 90,280 6,338 12,520
--------- --------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class......... (4,914) (1,369) (1,349) (9,031)
PlanAhead Class............. (477) (157) (244) (279)
AMR Class................... (9,771) (7,262) (4,827) (4,204)
Net realized gain on
investments:
Institutional Class......... (6,986) (1,859) - -
PlanAhead Class............. (735) (230) - -
AMR Class................... (12,707) (8,971) - -
--------- --------- -------- ---------
DISTRIBUTIONS TO
SHAREHOLDERS............ (35,590) (19,848) (6,420) (13,514)
--------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of
shares...................... 635,921 338,012 37,611 82,371
Reinvestment of dividends and
distributions............... 34,569 19,534 6,183 13,189
Cost of shares redeemed...... (426,422) (112,550) (18,534) (174,367)
--------- --------- -------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS...... 244,068 244,996 25,260 (78,807)
--------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS......................... 234,407 315,428 25,178 (79,801)
--------- --------- -------- ---------
NET ASSETS:
Beginning of period.......... 716,456 401,028 92,053 171,854
--------- --------- -------- ---------
END OF PERIOD*............... $ 950,863 $ 716,456 $117,231 $ 92,053
========= ========= ======== =========
* Includes undistributed net
investment income of....... $ 16,864 $ 12,964 $ 15 $ 15
========= ========= ======== =========
</TABLE>
See accompanying notes
11
<PAGE> 13
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
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 Short-Term Bond Funds (each a "Fund" and collectively, the "Funds"),
each a series of the Trust. Prior to March 1, 1998, the American AAdvantage
Short-Term Bond Fund was known as the American AAdvantage Limited-Term Income
Fund. The American AAdvantage Intermediate Bond Fund "Institutional Class" and
the "PlanAhead Class" commenced active operations on September 15, 1997 and
March 2, 1998, respectively. 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
Short-Term Bond Fund Short-Term Bond 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 (99.65%,
99.47%, 99.97%, 92.81% and 98.65% at October 31, 1998 of the AMR Investment
Services Balanced, Growth and Income, Intermediate Bond, International Equity
and Short-Term Bond 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.
12
<PAGE> 14
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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 and
unrealized gain (loss) in the Portfolio each day. All net investment income and
realized and unrealized gain (loss) of each Portfolio is 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 Short-Term Bond 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, 1998, the Short-Term Bond Fund had a
capital loss carryforward for federal income tax purposes of approximately
$9,199,000 expiring in years 2001-2006.
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.
13
<PAGE> 15
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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.
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. During the year ended October
31, 1998, the Manager waived service fees totaling $3,025 for the Short-Term
Bond Fund.
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, 1998, the cost of air transportation was not material
to any of the Funds. At October 31, 1998, AMR Corporation and subsidiary
companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of
the Funds.
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, 1998 Institutional Class PlanAhead Class AMR Class
--------------------------- -------------------- ------------------ ------------------
Balanced Fund Shares Amount Shares Amount Shares Amount
------------- ------- --------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 311 $ 4,507 1,325 $ 19,901 9,561 $138,850
Reinvestment of dividends.................... 1,792 24,512 496 6,705 10,442 142,636
Shares redeemed.............................. (1,264) (19,259) (1,127) (16,805) (6,540) (93,567)
------ -------- ------ -------- ------ --------
Net increase in capital shares outstanding... 839 $ 9,760 694 $ 9,801 13,463 $187,919
====== ======== ====== ======== ====== ========
</TABLE>
14
<PAGE> 16
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<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.................................. 3,629 $ 76,949 1,359 $ 28,766 11,020 $ 238,290
Reinvestment of dividends.................... 978 19,751 139 2,773 6,666 134,988
Shares redeemed.............................. (3,546) (74,564) (907) (18,695) (6,887) (145,870)
------- --------- ------ --------- ------ ---------
Net increase in capital shares outstanding... 1,061 $ 22,136 591 $ 12,844 10,799 $ 227,408
======= ========= ====== ========= ====== =========
</TABLE>
<TABLE>
<CAPTION>
Institutional Class PlanAhead Class
-------------------- -------------------
Intermediate Bond Fund Shares Amount Shares Amount
---------------------- ------- --------- ------ ---------
<S> <C> <C> <C> <C>
Shares sold.................................. 5,402 $ 55,384 3 $ 29
Reinvestment of dividends.................... 1,204 12,589 - -
Shares redeemed.............................. (10,855) (112,872) - -
------- --------- ------ ---------
Net increase (decrease) in capital shares
outstanding................................ (4,249) $ (44,899) 3 $ 29
======= ========= ====== =========
</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.................................. 24,063 $ 379,746 8,870 $ 127,776 7,532 $ 128,399
Reinvestment of dividends.................... 686 10,935 73 1,156 1,408 22,478
Shares redeemed.............................. (14,183) (206,694) (7,369) (102,036) (6,868) (117,692)
------- --------- ------ --------- ------ ---------
Net increase in capital shares outstanding... 10,566 $ 183,987 1,574 $ 26,896 2,072 $ 33,185
======= ========= ====== ========= ====== =========
</TABLE>
<TABLE>
<CAPTION>
Institutional Class PlanAhead Class AMR Class
-------------------- ------------------- -------------------
Short-Term Bond Fund Shares Amount Shares Amount Shares Amount
-------------------- ------- --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 381 $ 3,680 183 $ 1,771 3,338 $ 32,160
Reinvestment of dividends.................... 114 1,099 24 233 504 4,851
Shares redeemed.............................. (962) (9,258) (350) (3,379) (613) (5,897)
------- --------- ------ --------- ------ ---------
Net increase (decrease) in capital shares
outstanding................................ (467) $ (4,479) (143) $ (1,375) 3,229 $ 31,114
======= ========= ====== ========= ====== =========
</TABLE>
<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>
15
<PAGE> 17
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<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>
<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
------------------- ------------------- -------------------
Short-Term Bond 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>
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,
------------------------------------------------------
1998(A) 1997(A) 1996(A B) 1995(A C) 1994(D)
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 16.18 $ 15.14 $ 13.95 $ 12.36 $ 13.23
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................................. 0.51(J) 0.63(J) 0.59(J) 0.54 0.57
Net gains (losses) on securities (both realized and
unrealized).......................................... 0.76(J) 2.16(J) 1.61(J) 1.71 (0.54)
-------- -------- -------- -------- --------
Total from investment operations........................... 1.27 2.79 2.20 2.25 0.03
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income................... (0.63) (0.59) (0.57) (0.52) (0.56)
Distributions from net realized gains on securities.... (2.26) (1.16) (0.44) (0.14) (0.34)
-------- -------- -------- -------- --------
Total distributions........................................ (2.89) (1.75) (1.01) (0.66) (0.90)
-------- -------- -------- -------- --------
Net asset value, end of period............................. $ 14.56 $ 16.18 $ 15.14 $ 13.95 $ 12.36
======== ======== ======== ======== ========
Total return (annualized)(E F)............................. 9.04% 20.04% 16.46% 19.39% (0.08)%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)............... $145,591 $148,176 $298,009 $249,913 $222,873
Ratios to average net assets (annualized)(G H):
Expenses........................................... 0.59%(J) 0.60%(J) 0.62%(J) 0.63% 0.36%
Net investment income.............................. 3.54%(J) 3.88%(J) 4.00%(J) 4.30% 4.77%
Portfolio turnover rate(I)............................. - - - 73% 48%
</TABLE>
- ---------------
(A) 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.
(B) Capital Guardian Trust Company was replaced by Brandywine Asset Management,
Inc. as an investment adviser to the Balanced Fund on April 1, 1996.
(C) GSB Investment Management, Inc. was added as an investment adviser to the
Balanced Fund as of January 1, 1995.
(D) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.
(E) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(F) 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.
(G) Effective August 1, 1994, expenses included administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses excluded
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.
(H) 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>
(I) 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, October
31, 1997 and October 31, 1998 is shown in the Statement of Changes in Net
Assets of the AMR Investment Services Trust included elsewhere in this
report.
(J) 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
- ----------------------------------------------------------- -----------------------------------------------------------
August 1, August 1,
Year Ended October 31, to Year Ended October 31, to
- --------------------------------------------- October 31, ------------------------------------------- October 31,
1998(A) 1997(A) 1996(A B) 1995(A C) 1994(D) 1998(A) 1997(A) 1996(A B) 1995(A C) 1994(D)
- ------- ------- --------- ----------- ----------- -------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 16.03 $ 15.03 $ 13.90 $12.35 $ 12.35 $ 16.23 $ 15.18 $ 13.98 $ 12.36 $ 12.35
- ------- ------- ------- ------ ---------- -------- -------- -------- -------- ----------
0.47(J) 0.63(J) 0.57(J) 0.54 0.12 0.55(J) 0.70(J) 0.63(J) 0.58 0.14
0.75(J) 2.10(J) 1.56(J) 1.67 (0.12) 0.76(J) 2.13(J) 1.61(J) 1.71 (0.13)
- ------- ------- ------- ------ ---------- -------- -------- -------- -------- ----------
1.22 2.73 2.13 2.21 -- 1.31 2.83 2.24 2.29 0.01
- ------- ------- ------- ------ ---------- -------- -------- -------- -------- ----------
(0.64) (0.57) (0.56) (0.52) -- (0.71) (0.62) (0.60) (0.53) --
(2.26) (1.16) (0.44) (0.14) -- (2.26) (1.16) (0.44) (0.14) --
- ------- ------- ------- ------ ---------- -------- -------- -------- -------- ----------
(2.90) (1.73) (1.00) (0.66) -- (2.97) (1.78) (1.04) (0.67) --
- ------- ------- ------- ------ ---------- -------- -------- -------- -------- ----------
$ 14.35 $ 16.03 $ 15.03 $13.90 $ 12.35 $ 14.57 $ 16.23 $ 15.18 $ 13.98 $ 12.36
======= ======= ======= ====== ========== ======== ======== ======== ======== ==========
8.73% 19.75% 16.01% 19.06% (0.16)% 9.34% 20.36% 16.77% 19.77% (0.08)%
======= ======= ======= ====== ========== ======== ======== ======== ======== ==========
$40,717 $34,354 $18,000 $5,450 $528 $886,908 $769,289 $576,673 $542,619 $ 393,504
0.89%(J) 0.90%(J) 0.97%(J) 0.99% 0.92% 0.33%(J) 0.34%(J) 0.37%(J) 0.38% 0.36%
3.23%(J) 3.52%(J) 3.64%(J) 3.70% 4.04% 3.79%(J) 4.09%(J) 4.26%(J) 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,
---------------------------------------------------
1998(A) 1997(A) 1996(A B) 1995(A) 1994(C)
-------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 21.63 $ 18.50 $ 15.91 $ 14.19 $ 14.63
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income..................................... 0.40(I) 0.42(I) 0.42(I) 0.41 0.43
Net gains on securities (both realized and unrealized).... 0.89(I) 4.43(I) 3.15(I) 2.28 0.08
-------- -------- ------- ------- -------
Total from investment operations............................ 1.29 4.85 3.57 2.69 0.51
-------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income...................... (0.41) (0.41) (0.41) (0.43) (0.41)
Distributions from net realized gains on securities....... (1.58) (1.31) (0.57) (0.54) (0.54)
-------- -------- ------- ------- -------
Total distributions......................................... (1.99) (1.72) (0.98) (0.97) (0.95)
-------- -------- ------- ------- -------
Net asset value, end of period.............................. $ 20.93 $ 21.63 $ 18.50 $ 15.91 $ 14.19
======== ======== ======= ======= =======
Total return (annualized)(D E).............................. 6.28% 28.05% 23.37% 20.69% 3.36%
======== ======== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands).................. $216,548 $200,887 $81,183 $71,608 $22,737
Ratios to average net assets (annualized)(F G):
Expenses................................................ 0.57%(I) 0.61%(I) 0.62%(I) 0.62% 0.33%
Net investment income................................... 1.86%(I) 2.10%(I) 2.55%(I) 2.84% 3.28%
Portfolio turnover rate(H).............................. - - - 26% 23%
</TABLE>
- ---------------
(A) 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.
(B) 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.
(C) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.
(D) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(E) 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.
(F) Effective August 1, 1994, expenses included administrative services fees
paid by the fund to the Manager. Prior to that date, expenses excluded
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.
(G) 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>
(H) 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, October 31, 1997 and October 31, 1998 is shown in the Statement
of Changes in Net Assets of the AMR Investment Services Trust included
elsewhere in this report.
(I) 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
- ------------------------------------------------------ --------------------------------------------------------------
Year Ended October 31, August 1, to Year Ended October 31, August 1, to
- --------------------------------------- October 31, ----------------------------------------------- October 31,
1998(A) 1997(A) 1996(A B) 1995(A) 1994(C) 1998(A) 1997(A) 1996(A B) 1995(A) 1994(C)
- ------- ------- --------- ------- ------------ ---------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 21.38 $ 18.33 $ 15.81 $ 14.17 $13.99 $ 21.70 $ 18.56 $ 15.95 $ 14.20 $ 13.99
- ------- ------- ------- ------- ------ ---------- ---------- ---------- -------- --------
0.35(I) 0.35(I) 0.39(I) 0.40 0.05 0.46(I) 0.45(I) 0.47(I) 0.44 0.11
0.86(I) 4.39(I) 3.10(I) 2.22 0.13 0.89(I) 4.47(I) 3.15(I) 2.30 0.10
- ------- ------- ------- ------- ------ ---------- ---------- ---------- -------- --------
1.21 4.74 3.49 2.62 0.18 1.35 4.92 3.62 2.74 0.21
- ------- ------- ------- ------- ------ ---------- ---------- ---------- -------- --------
(0.34) (0.38) (0.40) (0.44) - (0.44) (0.47) (0.44) (0.45) -
(1.58) (1.31) (0.57) (0.54) - (1.58) (1.31) (0.57) (0.54) -
- ------- ------- ------- ------- ------ ---------- ---------- ---------- -------- --------
(1.92) (1.69) (0.97) (0.98) - (2.02) (1.78) (1.01) (0.99) -
- ------- ------- ------- ------- ------ ---------- ---------- ---------- -------- --------
$ 20.67 $ 21.38 $ 18.33 $ 15.81 $14.17 $ 21.03 $ 21.70 $ 18.56 $ 15.95 $ 14.20
======= ======= ======= ======= ====== ========== ========== ========== ======== ========
5.94% 27.64% 22.98% 20.14% 3.21% 6.56% 28.40% 23.66% 21.03% 3.43%
======= ======= ======= ======= ====== ========== ========== ========== ======== ========
$40,907 $29,684 $16,084 $4,821 $56 $1,614,432 $1,431,805 $1,008,518 $706,884 $505,892
0.86%(I) 0.93%(I) 0.94%(I) 0.99% 0.95% 0.31%(I) 0.34%(I) 0.36%(I) 0.38% 0.37%
1.58%(I) 1.85%(I) 2.16%(I) 2.23% 1.50% 2.12%(I) 2.45%(I) 2.80%(I) 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 PlanAhead
-------------------------------- Class
Year Ended September 15, ----------------
October 31, to October 31, March 2, to
1998 1997 October 31, 1998
----------- ------------------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.17 $ 10.00 $10.25
-------- -------- ------
Income from investment operations:
Net investment income..................................... 0.59 0.07 0.37
Net gains on securities (both realized and
unrealized)(A).......................................... 0.34 0.17 0.30
-------- -------- ------
Total from investment operations............................ 0.93 0.24 0.67
-------- -------- ------
Less distributions:
Dividends from net investment income...................... (0.59) (0.07) (0.37)
Distributions from net realized gains on securities....... (0.01) - -
-------- -------- ------
Total distributions......................................... (0.60) (0.07) (0.37)
-------- -------- ------
Net asset value, end of period.............................. $ 10.50 $ 10.17 $10.55
======== ======== ======
Total return................................................ 9.37% 2.41% 6.63%
======== ======== ======
Ratios and supplemental data:
Net assets, end of period (in thousands).................. $178,840 $216,249 $ 30
Ratios to average net assets (annualized)(A):
Expenses................................................ 0.57% 0.59% 0.86%
Net investment income................................... 5.74% 5.63% 5.21%
</TABLE>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services 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,
-------------------------------------------------------
1998(A) 1997(A) 1996(A) 1995(A) 1994(B C)
-------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 17.08 $ 15.01 $ 13.29 $ 12.87 $ 12.07
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income.................................. 0.33(H) 0.34(H) 0.28(H) 0.27 0.32
Net gains on securities (both realized and
unrealized).......................................... 0.34(H) 2.44(H) 1.95(H) 0.68 1.10
-------- -------- ------- ------- -------
Total from investment operations........................... 0.67 2.78 2.23 0.95 1.42
-------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income................... (0.34) (0.30) (0.27) (0.21) (0.17)
Distributions from net realized gains on securities.... (0.48) (0.41) (0.24) (0.32) (0.45)
-------- -------- ------- ------- -------
Total distributions........................................ (0.82) (0.71) (0.51) (0.53) (0.62)
-------- -------- ------- ------- -------
Net asset value, end of period............................. $ 16.93 $ 17.08 $ 15.01 $ 13.29 $ 12.87
======== ======== ======= ======= =======
Total return (annualized)(D E)............................. 4.19% 19.08% 17.27% 7.90% 11.77%
======== ======== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)............... $408,581 $231,793 $62,992 $25,757 $23,115
Ratios to average net assets (annualized)(F):
Expenses........................................... 0.80%(H) 0.83%(H) 0.85%(H) 0.85% 0.61%
Net investment income.............................. 2.05%(H) 2.35%(H) 2.19%(H) 2.37% 2.74%
Portfolio turnover rate(G)............................. - - - 21% 37%
</TABLE>
- ---------------
(A) 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.
(B) Morgan Stanley Asset Management Inc. was added as an investment adviser to
the International Equity Fund as of August 1, 1994.
(C) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.
(D) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(E) 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.
(F) Effective August 1, 1994, expenses included administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses excluded
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.
(G) 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, October 31, 1997 and October 31, 1998 is shown in
the Statement of Changes in Net Assets of the AMR Investment Services Trust
included elsewhere in this report.
(H) 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
- ----------------------------------------------------------- ---------------------------------------------------------------
Year Ended October 31, August 1, to Year Ended October 31, August 1, to
- -------------------------------------------- October 31, ----------------------------------------------- October 31,
1998(A) 1997(A) 1996(A) 1995(A) 1994(C) 1998 1997(A) 1996(A) 1995(A) 1994(C)
- ------- ------- ------- ------- ------------ -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 16.92 $ 14.90 $ 13.20 $12.85 $ 12.61 $ 17.15 $ 15.06 $ 13.31 $ 12.87 $ 12.61
- ------- ------- ------- ------ ------- -------- -------- -------- -------- --------
0.31(H) 0.30(H) 0.26(H) 0.24 0.06 0.37(H) 0.37(H) 0.31(H) 0.30 0.05
0.31(H) 2.41(H) 1.92(H) 0.64 0.18 0.34(H) 2.46(H) 1.98(H) 0.68 0.21
- ------- ------- ------- ------ ------- -------- -------- -------- -------- --------
0.62 2.71 2.18 0.88 0.24 0.71 2.83 2.29 0.98 0.26
- ------- ------- ------- ------ ------- -------- -------- -------- -------- --------
(0.31) (0.28) (0.24) (0.21) - (0.37) (0.33) (0.30) (0.22) -
(0.48) (0.41) (0.24) (0.32) - (0.48) (0.41) (0.24) (0.32) -
- ------- ------- ------- ------ ------- -------- -------- -------- -------- --------
(0.79) (0.69) (0.48) (0.53) - (0.85) (0.74) (0.54) (0.54) -
- ------- ------- ------- ------ ------- -------- -------- -------- -------- --------
$ 16.75 $ 16.92 $ 14.90 $13.20 $ 12.85 $ 17.01 $ 17.15 $ 15.06 $ 13.31 $ 12.87
======= ======= ======= ====== ======= ======== ======== ======== ======== ========
3.94% 18.71% 16.95% 7.37% 11.60% 4.44% 19.39% 17.72% 8.18% 11.77%
======= ======= ======= ====== ======= ======== ======== ======== ======== ========
$46,242 $20,075 $7,138 $1,456 $375 $496,040 $464,588 $330,898 $227,939 $165,524
1.08%(H) 1.14%(H) 1.17%(H) 1.33% 1.25% 0.53%(H) 0.58%(H) 0.57%(H) 0.60% 0.63%
1.72%(H) 1.95%(H) 1.76%(H) 2.08% 1.86% 2.26%(H) 2.51%(H) 2.49%(H) 2.65% 1.41%
- - - 21% 37% - - - 21% 37%
</TABLE>
25
<PAGE> 27
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------
Year Ended October 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 9.63 $ 9.68 $ 9.82 $ 9.67 $ 10.23
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................................. 0.62(F) 0.64(F) 0.62(F) 0.62 0.52
Net gains (losses) on securities (both realized and
unrealized).......................................... -(F) (0.05)(F) (0.14)(F) 0.15 (0.46)
-------- -------- -------- -------- --------
Total from investment operations........................... 0.62 0.59 0.48 0.77 0.06
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income................... (0.62) (0.64) (0.62) (0.62) (0.52)
Distributions from net realized gains on securities.... - - - - (0.10)
-------- -------- -------- -------- --------
Total distributions........................................ (0.62) (0.64) (0.62) (0.62) (0.62)
-------- -------- -------- -------- --------
Net asset value, end of period............................. $ 9.63 $ 9.63 $ 9.68 $ 9.82 $ 9.67
======== ======== ======== ======== ========
Total return (annualized)(A B)............................. 6.60% 6.29% 5.10% 8.18% 0.42%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)............... $ 18,453 $ 22,947 $108,929 $137,293 $112,141
Ratios to average net assets (annualized)(C D ):
Expenses........................................... 0.65%(F) 0.57%(F) 0.60%(F) 0.60% 0.31%
Net investment income.............................. 6.43%(F) 6.67%(F) 6.41%(F) 6.36% 5.26%
Portfolio turnover rate(E)............................. - - - 183% 94%
</TABLE>
- ---------------
(A) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.
(B) 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.
(C) Effective August 1, 1994, expenses included administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses excluded
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.
(D) 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 October 31, August 1, to
----------------------------- October 31,
1998 1997 1996 1995 1994
----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets (annualized)........ 0.93% 0.90% 0.94% 1.06% 1.00%
Ratio of net investment income to average net assets
(annualized).............................................. 6.16% 6.31% 6.02% 5.94% 4.89%
</TABLE>
(E) 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 October 31, 1997 and October 31, 1998 is shown in
the Statement of Changes in Net Assets of the AMR Investment Services Trust
included elsewhere in this report.
(F) 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 Short-Term Bond 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,
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
- ------ ------ ------ ------ ----------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.63 $ 9.68 $ 9.82 $ 9.68 $ 9.78 $ 9.62 $ 9.67 $ 9.81 $ 9.68 $ 9.78
- ------ ------ ------ ------ ------- ------- ------- ------- ------- -------
0.60 (F) 0.61(F) 0.60(F) 0.59 0.13 0.65(F) 0.66(F) 0.65(F) 0.64 0.14
0.01 (F) (0.05)(F) (0.14)(F) 0.14 (0.10) -(F) (0.05)(F) (0.14)(F) 0.13 (0.10)
- ------ ------ ------ ------ ------- ------- ------- ------- ------- -------
0.61 0.56 0.46 0.73 0.03 0.65 0.61 0.51 0.77 0.04
- ------ ------ ------ ------ ------- ------- ------- ------- ------- -------
(0.60) (0.61) (0.60) (0.59) (0.13) (0.65) (0.66) (0.65) (0.64) (0.14)
- - - - - - - - - -
- ------ ------ ------ ------ ------- ------- ------- ------- ------- -------
(0.60) (0.61) (0.60) (0.59) (0.13) (0.65) (0.66) (0.65) (0.64) (0.14)
- ------ ------ ------ ------ ------- ------- ------- ------- ------- -------
$ 9.64 $ 9.63 $ 9.68 $ 9.82 $ 9.68 $ 9.62 $ 9.62 $ 9.67 $ 9.81 $ 9.68
====== ====== ====== ====== ======= ======= ======= ======= ======= =======
6.50% 6.01% 4.83% 7.83% 0.45% 6.93% 6.57% 5.38% 8.22% 0.59%
====== ====== ====== ====== ======= ======= ======= ======= ======= =======
$3,722 $5,096 $3,399 $1,576 $403 $95,056 $64,010 $59,526 $64,595 $53,445
0.85% (F) 0.85%(F) 0.85%(F) 0.83% 0.79% 0.34%(F) 0.32%(F) 0.33%(F) 0.36% 0.33%
6.24% (F) 6.36%(F) 6.11%(F) 6.16% 5.10% 6.71%(F) 6.90%(F) 6.66%(F) 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 Short-Term Bond 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 Short-Term Bond Portfolio (collectively, "the
Portfolios") (separate portfolios comprising the AMR Investment Services Trust),
including the schedules of investments, as of October 31, 1998, 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, 1998, 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, 1998,
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
Dallas, Texas
December 17, 1998
28
<PAGE> 30
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 21.45%
U. S. TREASURY BILLS - 0.75%
Due 1/21/1999.................. $ 8,199 $ 8,107
-----------
TOTAL U.S. TREASURY
BILLS.................... 8,107
-----------
U.S. TREASURY BONDS - 8.80%
11.625%, Due 11/15/2004........ 1,195 1,633
14.00%, Due 11/15/2011......... 2,750 4,414
10.375%, Due 11/15/2012........ 8,775 12,252
7.25%, Due 5/15/2016........... 3,500 4,266
8.125%, Due 8/15/2019.......... 10,880 14,572
7.25%, Due 8/15/2022........... 12,000 14,963
6.25%, Due 8/15/2023........... 5,080 5,690
6.00%, Due 2/15/2026........... 8,820 9,633
6.75%, Due 8/15/2026........... 9,670 11,598
6.375%, Due 8/15/2027.......... 11,750 13,520
6.125%, Due 11/15/2027......... 2,145 2,412
-----------
TOTAL U. S. TREASURY
BONDS.................... 94,953
-----------
U.S. TREASURY COUPON STRIP - 2.59%
Due 2/15/2009.................. 32,250 19,289
Due 5/15/2011.................. 4,000 2,081
Due 2/15/2016.................. 17,000 6,511
-----------
TOTAL U.S. TREASURY COUPON
STRIP.................... 27,881
-----------
U.S. TREASURY NOTES - 9.31%
5.625%, Due 11/30/1998......... 4,000 4,004
5.875%, Due 3/31/1999.......... 2,750 2,766
6.375%, Due 5/15/1999.......... 1,000 1,010
6.00%, Due 6/30/1999........... 1,000 1,010
5.875%, Due 8/31/1999.......... 2,000 2,022
7.13%, Due 9/30/1999........... 2,350 2,405
5.625%, Due 10/31/1999......... 1,500 1,517
6.875%, Due 3/31/2000.......... 1,500 1,551
5.63%, Due 4/30/2000........... 1,000 1,018
6.25%, Due 5/31/2000........... 1,000 1,029
6.00%, Due 8/15/2000........... 2,000 2,057
8.50%, Due 11/15/2000.......... 3,540 3,827
5.625%, Due 11/30/2000......... 4,500 4,615
6.375%, Due 3/31/2001.......... 2,000 2,092
7.875%, Due 8/15/2001.......... 5,120 5,586
6.38%, Due 9/30/2001........... 2,000 2,109
7.50%, Due 11/15/2001.......... 1,000 1,088
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
5.88%, Due 11/30/2001.......... $ 1,900 $ 1,978
7.50%, Due 5/15/2002........... 1,500 1,650
6.375%, Due 8/15/2002.......... 1,485 1,586
6.25%, Due 8/31/2002........... 10,840 11,538
6.25%, Due 2/15/2003........... 1,000 1,072
5.50%, Due 5/31/2003........... 3,390 3,552
7.875%, Due 11/15/2004......... 2,000 2,349
7.50%, Due 2/15/2005........... 9,235 10,718
6.50%, Due 5/15/2005........... 7,635 8,494
7.00%, Due 7/15/2006........... 4,830 5,558
6.625%, Due 5/15/2007.......... 10,750 12,191
-----------
TOTAL U.S. TREASURY
NOTES.................... 100,392
-----------
TOTAL U.S. TREASURY
OBLIGATIONS.............. 231,333
-----------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 2.48%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 1.27%
5.73%, Due 8/11/2003........... 1,000 1,031
5.13%, Due 9/15/2003........... 4,220 4,243
5.81%, Due 8/17/2005........... 1,250 1,297
6.50%, Due 10/15/2006.......... 1,470 1,484
5.85%, Due 1/22/2008........... 1,000 1,038
7.00%, Due 12/1/2012........... 1,287 1,302
6.00%, Due 3/1/2013............ 628 631
6.50%, Due 10/1/2028........... 2,000 2,016
6.50%, Due 10/1/2028........... 585 590
-----------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION..... 13,632
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 0.83%
6.74%, Due 5/13/2004........... 1,000 1,079
Series 1989-21 G, 10.45%,
Due 4/25/2019................ 120 129
Discount Note, 0.00%,
Due 10/9/2019................ 2,950 858
Pool #218949, 7.73%,
Due 12/1/2023................ 440 444
Pool #266196, 7.49%,
Due 1/1/2024................. 866 874
Pool #306505, 8.00%,
Due 3/1/2025................. 552 570
6.09%, Due 9/27/2027........... 2,500 2,510
</TABLE>
See accompanying notes
29
<PAGE> 31
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
5.98%, Due 11/12/2027.......... $ 2,500 $ 2,506
-----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION..... 8,970
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 0.38%
Pool #180220, 9.00%,
Due 10/15/2016............... 608 650
Pool #1849, 8.50%,
Due 8/20/2024................ 251 264
Pool #466318, 7.00%,
Due 1/15/2028................ 3,134 3,206
-----------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION..... 4,120
-----------
TOTAL U.S. AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 26,722
-----------
ASSET-BACKED SECURITIES - 1.53%
Amresco Commercial Mortgage
Funding I, Series 1997-C1 A3,
7.19%, Due 6/17/2029......... 1,510 1,605
Asset Securitization
Corporation, Series 1997-D5
A1C, 6.75%, Due 2/14/2041.... 2,000 2,083
Chase Commercial Mortgage
Securities Corporation,
Series 1997-1 A2, 7.37%, Due
2/19/2007.................... 1,100 1,170
Chase Manhattan Credit Card
Master Trust 1996-4A, 6.73%,
Due 2/15/2003................ 1,550 1,564
Citibank Credit Card Master
Trust I, 5.85%, Due
4/10/2003.................... 2,380 2,430
Ditech Home Owner Trust 5.49%,
Due 11/15/2009............... 1,805 1,805
6.71%, Due 8/15/2018......... 2,225 2,279
Firstplus Home Loan Owner
Trust, 6.32%, Due
8/10/2016.................... 3,000 3,039
Olympic Automobile Receivable,
7.875%, Due 7/15/2001........ 395 399
Western Financial Grantor
Trust, 6.65%, Due
12/1/1999.................... 72 72
-----------
TOTAL ASSET-BACKED
SECURITIES............... 16,446
-----------
NON-AGENCY MORTGAGE-BACKED
OBLIGATIONS - 1.44%
125 Home Loan Owner Trust,
144a, 6.29%, Due 7/15/2011
(Note B)..................... 2,200 2,202
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
CitiCorp Mortgage Securities,
Incorporated, 6.92%, Due
8/25/2027.................... $ 1,218 $ 1,223
Credit Suisse First Boston
Mortgage, 7.24%, Due
6/20/2029.................... 400 429
CountryWide, Incorporated,
8.25%, Due 5/25/2010......... 600 629
7.50%, Due 7/25/2011......... 627 639
DLJ Mortgage Acceptance
Corporation, 6.83%, Due
3/25/2024.................... 161 161
Green Tree Financial
Corporation, 7.00%, Due
10/15/2027................... 1,300 1,326
ICI Funding Corporation Secured
Assets Trust, 7.60%, Due
7/25/2028.................... 1,750 1,777
Long Beach Acceptance Auto
Grantor, 6.19%, Due
1/25/2005.................... 632 637
The Money Store Home Equity
Trust, 7.66%, Due 8/15/2026.. 1,500 1,567
Mortgage Capital Funding,
Incorporated, 6.758%, Due
2/20/2004.................... 640 662
Nomura Asset Securities
Corporation, 8.15%, Due
4/4/2027..................... 2,500 2,789
Residential Funding Mortgage
Securities I, 6.35%, Due
8/25/2023.................... 203 203
Securitized Multiple Asset,
144a, 7.72%, Due 4/15/2005
(Note B)..................... 1,647 1,318
-----------
TOTAL NON-AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 15,562
-----------
CORPORATE BONDS - 12.28%
BANKS - 1.16%
BankAmerica Corporation, 9.75%,
Due 7/1/2000................. 600 642
Bank of Boston, N.A., MTN,
6.375%, Due 3/25/2008........ 990 992
6.38%, Due 4/15/2008......... 550 551
Capital One Bank MTN,
8.125%, Due 3/1/2000......... 1,690 1,739
7.35%, Due 6/20/2000......... 385 394
Chase Manhattan Corporation,
8.625%, Due 5/1/2002......... 700 765
First Chicago Corporation,
9.875%, Due 8/15/2000........ 1,000 1,079
</TABLE>
See accompanying notes
30
<PAGE> 32
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
NationsBank Corporation,
7.00%, Due 9/15/2001......... $ 1,000 $ 1,049
6.60%, Due 5/15/2010......... 1,600 1,641
Skandinaviska Enskilda Banken,
6.44%, Due 6/29/2049......... 3,800 3,686
-----------
TOTAL BANKS................ 12,538
-----------
FINANCE - 5.10%
Allstate Corporation, 6.90%,
Due 5/15/2038................ 1,825 1,792
Associates Corporation of North
America, 6.00%, Due
4/15/2003.................... 2,000 2,025
Auburn Hills Trust, 12.00%, Due
5/1/2020..................... 1,650 2,687
Banponce Trust I, 8.327%, Due
2/1/2027..................... 1,000 953
Beneficial Corporation, 6.55%,
Due 9/26/2003................ 1,800 1,872
Camden Property Trust, 6.63%,
Due 2/15/2001................ 2,500 2,550
Caterpillar Financial Services,
6.32%, Due 9/1/2000.......... 2,500 2,549
CNA Financial Corporation,
6.95%, Due 1/15/2018......... 1,675 1,619
Countrywide Funding
Corporation, MTN, 6.38%, Due
10/8/2002.................... 2,135 2,162
Credit Suisse First Boston,
6.48%, Due 4/11/2030......... 2,500 2,554
CS First Boston Mortgage
Securities Corporation,
6.60%, Due 6/15/2027......... 2,600 2,634
EOP Oper Limited Partnership,
6.38%, Due 2/15/2012......... 1,120 1,103
Florida Windstorm Underwriting,
6.85%, Due 8/25/2007......... 1,950 2,027
Ford Motor Credit Company,
6.125%, Due 4/28/2003........ 2,125 2,163
General Electric Capital Corp,
7.875%, Due 12/1/2006........ 1,000 1,155
General Motors Acceptance
Corporation, 6.375%, Due
12/1/2001.................... 1,700 1,751
Lehman Brothers Holdings,
Incorporated,
7.41%, Due 5/25/1999......... 500 504
6.04%, Due 1/17/2000......... 2,200 2,134
Merrill Lynch & Company,
Incorporated, 6.00%, Due
2/12/2003.................... 1,000 1,012
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
Merrill Lynch Mortgage
Investors, Incorporated,
7.12%, Due 6/18/2029......... $ 660 $ 698
Paine Webber Group,
Incorporated MTN, 7.74%, Due
1/30/2012.................... 2,200 2,338
PMI Group, Incorporated, 6.75%,
Due 11/15/2006............... 2,000 2,130
Provident Companies,
Incorporated, 7.25%, Due
3/15/2028.................... 2,070 2,045
Salomon, Incorporated, 6.25%,
Due 5/15/2003................ 2,750 2,777
Simon Debartolo Group LP,
6.63%, Due 6/15/2003......... 1,675 1,638
6.75%, Due 7/15/2004......... 750 732
Spieker Properties LP, 8.00%,
Due 7/19/2005................ 290 303
Texaco, Incorporated MTN,
6.19%, Due 7/9/2003.......... 750 774
Travelers Property Casualty
Corporation, 6.75%, Due
4/15/2001.................... 2,600 2,700
United Dominion Realty Trust,
Incorporated, 7.25%, Due
1/15/2007.................... 1,000 1,053
URSA Major Rated Limited, MTN,
144a, 5.90%, Due 1/6/2003
(Note B)..................... 2,500 2,586
-----------
TOTAL FINANCE.............. 55,020
-----------
INDUSTRIAL - 4.38%
Albertsons, Incorporated,
6.375%, Due 6/1/2000......... 1,000 1,016
Atlantic Richfield Corporation,
8.50%, Due 4/1/2012.......... 1,270 1,603
Bemis, Incorporated, 6.70%, Due
7/1/2005..................... 1,000 1,066
Capital Cities ABC,
Incorporated, 8.875%, Due
12/15/2000................... 1,000 1,079
Coca Cola Company, 6.625%, Due
10/1/2002.................... 1,000 1,036
E.I. DuPont de Nemours &
Company, 6.75%, Due
10/15/2002................... 1,000 1,062
Exxon Corporation, 7.45%, Due
12/15/2001................... 1,000 1,072
Ford Motor Company,
9.00%, Due 9/15/2001......... 1,000 1,099
6.63%, Due 10/1/2028......... 1,665 1,643
Hershey Foods Corporation,
6.95%, Due 3/1/2007.......... 1,000 1,096
</TABLE>
See accompanying notes
31
<PAGE> 33
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
Ingersoll Rand Company, 6.34%,
Due 12/3/2001................ $ 2,100 $ 2,159
May Department Stores Company,
7.625%, Due 8/15/2013........ 1,890 2,106
McDonalds Corporation MTN,
6.50%, Due 8/1/2007.......... 1,000 1,062
Motorola Incorporated, 5.80%,
Due 10/15/2008............... 2,270 2,276
Occidental Petroleum
Corporation,
6.40%, Due 4/1/2003.......... 1,035 1,042
6.50%, Due 4/1/2005.......... 520 514
Paramount Communications
Incorporated, 5.875%, Due
7/15/2000.................... 2,140 2,160
Philip Morris Companies,
Incorporated,
8.25%, Due 10/15/2003........ 2,840 3,169
8.375%, Due 1/15/2017........ 437 475
Potash Corporation Sask,
Incorporated, 7.125%, Due
6/15/2007.................... 630 670
Praxair, Incorporated, 6.15%,
Due 4/15/2003................ 3,800 3,837
Sara Lee Corporation, 6.00%,
Due 1/15/2008................ 1,200 1,229
Sears Roebuck Acceptance
Corporation MTN,
6.60%, Due 10/9/2001......... 3,170 3,288
6.71%, Due 9/17/2003......... 2,710 2,864
Sysco Corporation, 7.00%, Due
5/1/2006..................... 1,000 1,095
Time Warner Asset Trust, 144a,
6.10%, Due 12/30/2001 (Note
B)........................... 2,050 2,090
Tribune Company, 5.50%, Due
10/6/2008.................... 1,000 975
USA Waste Services,
Incorporated. 7.00%, Due
7/15/2028.................... 1,270 1,207
Walt Disney Company, 6.75%, Due
3/30/2006.................... 1,000 1,085
Williams Companies,
Incorporated, 6.50%, Due
8/1/2006..................... 850 869
WMX Technologies, Incorporated,
6.65%, Due 5/15/2005......... 1,200 1,237
-----------
TOTAL INDUSTRIAL........... 47,181
-----------
TRANSPORTATION - 0.41%
CSX Corporation, 6.25%, Due
10/15/2008................... 1,985 1,980
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
------- -----------
(dollars in thousands)
<S> <C> <C>
NWA Trust, 11.30%, Due
6/21/2014.................... $ 1,919 $ 2,380
-----------
TOTAL TRANSPORTATION....... 4,360
-----------
UTILITY - 0.33%
Southern California Edison
Company, 8.25%, Due
2/1/2000..................... 1,425 1,473
WorldCom, Incorporated, 6.40%,
Due 8/15/2005................ 2,035 2,115
-----------
TOTAL UTILITY.............. 3,588
-----------
FOREIGN - 0.90%
Fokus Bank AS, 6.40%, Due
9/29/2004.................... 1,600 1,610
Foreningsbk Kredit, 6.25%, Due
12/29/2049................... 3,250 3,244
Nordbanken AB MTN, 5.81%, Due
10/29/2049................... 3,000 2,975
Province of Quebec, 7.00%, Due
1/30/2007.................... 1,750 1,884
-----------
TOTAL FOREIGN.............. 9,713
-----------
TOTAL CORPORATE BONDS...... 132,400
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares
-------
<S> <C> <C>
PREFERRED STOCK - 0.14%
Home Ownership Funding
Corporation II, Series 144a
(Note B)..................... 2 $ 1,492
-----------
TOTAL PREFERRED STOCK...... 1,492
-----------
COMMON STOCK - 58.03%
BASIC MATERIALS - 3.47%
AGRICULTURAL PRODUCTS - 0.27%
New Holland N.V. (non-income
producing)................... 233,000 2,942
-----------
TOTAL AGRICULTURAL
PRODUCTS................. 2,942
-----------
ALUMINUM - 0.34%
Aluminum Company of America.... 24,000 1,902
Reynolds Metals Company........ 30,000 1,798
-----------
TOTAL ALUMINUM............. 3,700
-----------
CHEMICALS - 1.47%
Airgas, Incorporated........... 173,450 1,995
Dow Chemical................... 20,000 1,873
</TABLE>
See accompanying notes
32
<PAGE> 34
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
E.I. DuPont de Nemours &
Company...................... 23,000 $ 1,323
Eastman Chemical Company....... 28,000 1,645
FMC Corporation (non-income
producing)................... 51,350 2,622
Millenium Chemicals,
Incorporated................. 197,371 4,811
Witco Corporation.............. 84,100 1,582
-----------
TOTAL CHEMICALS............ 15,851
-----------
CONSTRUCTION - 0.11%
DeBeers Construction Mines,
Limited...................... 81,100 1,166
-----------
TOTAL CONSTRUCTION......... 1,166
-----------
CONTAINERS/PACKAGING (PAPER) - 0.13%
Union Camp Corporation......... 32,000 1,376
-----------
TOTAL CONTAINERS/
PACKAGING................ 1,376
-----------
PAPER & FOREST PRODUCTS - 1.00%
Boise Cascade Corporation...... 18,000 504
Bowater, Incorporated.......... 37,000 1,510
Georgia Pacific Corporation.... 50,000 1,109
Georgia Pacific Group.......... 20,500 1,061
International Paper Company.... 33,000 1,532
Mead Corporation............... 50,000 1,581
Westvaco Corporation........... 55,000 1,354
Weyerhaeuser Company........... 45,000 2,107
-----------
TOTAL PAPER & FOREST
PRODUCTS................. 10,758
-----------
STEEL - 0.15%
USX US Steel Group............. 68,400 1,590
-----------
TOTAL STEEL................ 1,590
-----------
TOTAL BASIC MATERIALS...... 37,383
-----------
CAPITAL GOODS - 7.14%
AEROSPACE/DEFENSE - 1.39%
Avteam, Incorporated (non-
income producing)............ 36,700 211
Cordant Technologies,
Incorporated................. 41,100 1,672
Lockheed Martin Corporation.... 94,988 10,579
Northrop Corporation........... 32,000 2,552
-----------
TOTAL AEROSPACE/ DEFENSE... 15,014
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
CONTAINERS (METAL AND GLASS) - 0.11%
Crown Cork & Seal,
Incorporated................. 37,000 $ 1,179
-----------
TOTAL CONTAINERS (METAL AND
GLASS)................... 1,179
-----------
ELECTRICAL EQUIPMENT - 1.46%
AMP Incorporated............... 20,760 852
The Carbide/Graphite Group
(non-income producing)....... 12,600 158
Honeywell, Incorporated........ 125,200 10,000
Philips Electronics N.V........ 54,500 2,991
Rockwell International
Corporation.................. 40,000 1,642
Stoneridge, Incorporated (non-
income producing)............ 9,500 142
-----------
TOTAL ELECTRICAL
EQUIPMENT................ 15,785
-----------
MACHINERY (DIVERSIFIED) - 1.03%
Case Corporation............... 82,000 1,804
Deere and Company.............. 173,300 6,130
Denison International PLC ADR
(non-income producing)....... 14,800 218
Dover Corporation.............. 91,000 2,889
Hussman International,
Incorporated................. 4,500 70
-----------
TOTAL MACHINERY
(DIVERSIFIED)............ 11,111
-----------
MANUFACTURING (DIVERSIFIED) - 2.19%
Allied Signal, Incorporated.... 40,000 1,558
Coltec Industries, Incorporated
(non-income producing)....... 163,100 2,722
Eaton Corporation.............. 20,000 1,354
Harsco Corporation............. 75,000 2,456
Hawk Corporation (non-income
producing)................... 2,300 23
Millipore Corporation.......... 88,925 2,190
Tenneco, Incorporated.......... 167,100 5,076
Textron, Incorporated.......... 110,200 8,196
Titan International,
Incorporated................. 2,000 21
-----------
TOTAL MANUFACTURING
(DIVERSIFIED)............ 23,596
-----------
</TABLE>
See accompanying notes
33
<PAGE> 35
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
WASTE MANAGEMENT - 0.96%
Waste Management
Incorporated................. 228,531 $ 10,312
-----------
TOTAL WASTE MANAGEMENT..... 10,312
-----------
TOTAL CAPITAL GOODS........ 76,997
-----------
COMMUNICATION SERVICE - 3.89%
BROADCASTING - 0.02%
Alliance Atlantis
Communication,
Incorporated................. 10,600 197
-----------
TOTAL BROADCASTING......... 197
-----------
TELEPHONE - 3.53%
Alltel Corporation............. 153,600 7,190
Bell Atlantic Corporation...... 45,656 2,425
GTE Corporation................ 155,800 9,144
SBC Communications............. 206,768 9,576
US West, Incorporated.......... 170,200 9,765
-----------
TOTAL TELEPHONE............ 38,100
-----------
TELEPHONE LONG DISTANCE - 0.34%
AT&T Corporation............... 41,200 2,565
BCE, Incorporated.............. 33,000 1,124
-----------
TOTAL TELEPHONE LONG
DISTANCE................. 3,689
-----------
TOTAL COMMUNICATION
SERVICE.................. 41,986
-----------
CONSUMER STAPLES - 5.40%
BEVERAGES-ALCOHOLIC - 1.06%
Anheuser Busch Companies,
Incorporated................. 191,500 11,382
Canandaigua Wine,
Incorporated................. 900 45
-----------
TOTAL BEVERAGES-
ALCOHOLIC................ 11,427
-----------
BROADCASTING (TV RADIO CABLE) - 0.01%
Groupe AB SA................... 38,720 114
-----------
TOTAL BROADCASTING (TV
RADIO CABLE)............. 114
-----------
FOODS - 0.41%
J & J Snack Foods
Corporation.................. 12,800 288
Nabisco Holdings Corporation,
Class A...................... 31,975 1,207
RJR Nabisco Holdings........... 94,850 2,709
Vlasic Foods International,
Incorporated (non-income
producing)................... 10,700 200
-----------
TOTAL FOODS................ 4,404
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
HOUSEHOLD PRODUCTS (NON-DURABLE) - 1.39%
First Brands Corporation....... 103,750 $ 3,917
Fort James Corporation......... 275,000 11,086
-----------
TOTAL HOUSEHOLD PROD
(NON-DURABLE)............ 15,003
-----------
HOUSEWARES - 0.15%
Fortune Brands, Incorporated... 50,000 1,653
-----------
TOTAL HOUSEWARES........... 1,653
-----------
PRINTING - 0.19%
DeLuxe Corporation............. 64,000 2,072
-----------
TOTAL PRINTING............. 2,072
-----------
RETAIL STORES-FOOD CHAINS - 0.12%
Dominick's Supermarkets,
Incorporated (non-income
producing)................... 5,300 259
Wendy's International,
Incorporated................. 48,400 1,016
-----------
TOTAL RETAIL STORES-FOOD
CHAINS................... 1,275
-----------
TOBACCO - 2.07%
Gallaher Group PLC, ADR........ 79,400 2,164
Hanson PLC, ADR................ 34,150 1,206
Imperial Tobacco Group PLC..... 85,100 1,681
Philip Morris Companies,
Incorporated................. 338,250 17,293
-----------
TOTAL TOBACCO.............. 22,344
-----------
TOTAL CONSUMER STAPLES..... 58,292
-----------
CONSUMER CYCLICALS - 7.73%
AUTO PARTS & EQUIPMENT - 1.22%
Dana Corporation............... 183,900 7,689
Goodyear Tire and Rubber
Company...................... 36,400 1,961
ITT Industries, Incorporated... 92,600 3,310
TRW, Incorporated, 144a (Note
B)........................... 4,000 228
-----------
TOTAL AUTO PARTS &
EQUIPMENT................ 13,188
-----------
AUTOMOBILES - 1.94%
Ford Motor Company............. 276,600 15,006
</TABLE>
See accompanying notes
34
<PAGE> 36
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
General Motors Corporation..... 94,300 $ 5,947
-----------
TOTAL AUTOMOBILES.......... 20,953
-----------
FOOTWEAR - 0.21%
Nine West Group,
Incorporated................. 177,975 2,258
-----------
TOTAL FOOTWEAR............. 2,258
-----------
GAMING LOTTERY & PARIMUTUEL - 0.03%
American Coin Merchandising,
Incorporated (non-income
producing)................... 19,900 274
-----------
TOTAL GAMING LOTTERY &
PARIMUTUEL............... 274
-----------
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.18%
Whirlpool Corporation.......... 37,500 1,922
-----------
TOTAL HOUSEHOLD FURNISHINGS
& APPLIANCES............. 1,922
-----------
LEISURE TIME (PRODUCTS) - 1.03%
Hasbro, Incorporated........... 80,925 2,837
Mattel, Incorporated........... 230,000 8,251
Midway Games, Incorporated
(non-income producing)....... 6,700 66
-----------
TOTAL LEISURE TIME
(PRODUCTS)............... 11,154
-----------
PUBLISHING - 0.29%
A.H. Belo, Incorporated, Class
A............................ 156,850 2,853
Playboy Enterprises............ 16,400 233
-----------
TOTAL PUBLISHING........... 3,086
-----------
RETAIL - 2.02%
Friedmans, Incorporated........ 18,500 111
J.C. Penney Company,
Incorporated................. 198,400 9,424
K Mart Corporation............. 294,500 4,160
Sears Roebuck & Company........ 180,600 8,116
-----------
TOTAL RETAIL............... 21,811
-----------
SERVICES - 0.62%
Cendant Corporation (non-income
producing)................... 328,900 3,762
Firstservice Corporation....... 14,300 167
Mac-Gray Corporation (non-
income producing)............ 5,400 54
Pittston Company............... 83,200 2,475
Princeton Video Image,
Incorporated................. 6,600 22
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
Ralco Holdings, Incorporated... 10,100 $ 178
-----------
TOTAL SERVICES............. 6,658
-----------
TEXTILES (APPAREL) - 0.19%
Liz Claiborne, Incorporated.... 40,000 1,175
Russell Corporation............ 37,800 928
-----------
TOTAL TEXTILES (APPAREL)... 2,103
-----------
TOTAL CONSUMER CYCLICALS... 83,407
-----------
ENERGY - 4.96%
OIL & GAS - 2.50%
Abraxas Petroleum Corporation
(non-income producing)....... 14,291 83
Baker Hughes, Incorporated..... 383,900 8,470
Burlington Resources........... 64,586 2,660
Coho Energy, Incorporated...... 12,757 57
Halliburton Company............ 250,200 8,992
Oryx Energy Company............ 147,625 2,067
Transcoastal Marine Services,
Incorporated (non-income
producing)................... 2,700 12
Ultramar Diamond Shamrock
Corporation.................. 58,000 1,562
Union Pacific Resource Group,
Incorporated................. 208,900 2,716
Usec, Incorporated (non-income
producing)................... 22,100 323
-----------
TOTAL OIL & GAS............ 26,942
-----------
OIL (DOMESTIC INTEGRATED) - 1.86%
Atlantic Richfield Company..... 89,000 6,130
Conoco, Incorporated........... 30,900 769
Occidental Petroleum
Corporation.................. 233,000 4,631
Phillips Petroleum Company..... 198,200 8,572
-----------
TOTAL OIL (DOMESTIC
INTEGRATED).............. 20,102
-----------
OIL (INTERNATIONAL INTEGRATED) - 0.60%
Amoco Corporation.............. 35,700 2,004
British Petroleum PLC.......... 22,152 1,959
Elf Aquitaine.................. 20,100 1,166
YPF Sociedad Anonima........... 47,000 1,360
-----------
TOTAL OIL (INTERNATIONAL
INTEGRATED).............. 6,489
-----------
TOTAL ENERGY............... 53,533
-----------
</TABLE>
See accompanying notes
35
<PAGE> 37
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
FINANCIALS - 12.57%
BANKS - 5.65%
BankAmerica, Corporation....... 165,468 $ 9,504
Bank One Corporation........... 253,320 12,381
Bankers Trust Company New
York......................... 143,225 8,996
Chase Manhattan Corporation.... 219,800 12,487
First Midwest Bank,
Incorporated................. 2,600 107
First Security Corporation..... 85,000 1,737
First Union Corporation........ 34,200 1,984
Fleet Financial Group,
Incorporated................. 79,600 3,179
J.P. Morgan & Company,
Incorporated................. 31,375 2,957
KeyCorp........................ 31,700 961
PNC Bank Corporation........... 133,300 6,665
-----------
TOTAL BANKS................ 60,958
-----------
CONSUMER FINANCE - 0.46%
Associates First Capital
Corporation.................. 45,027 3,174
Household International,
Incorporated................. 48,332 1,767
-----------
TOTAL CONSUMER FINANCE..... 4,941
-----------
FINANCIAL - 1.78%
Ace, Limited................... 81,400 2,757
American Express Company....... 43,900 3,880
Citi Group, Incorporated....... 51,205 2,410
Executive Risk, Incorporated... 3,100 147
Federal Home Loan Mortgage
Corporation.................. 58,150 3,344
Federal National Mortgage
Association.................. 38,000 2,691
FPIC Insurance Group (non-
income producing)............ 2,947 86
Fund American Enterprises,
Incorporated................. 7,425 941
Morgan Stanley Dean Witter
Discover & Company........... 24,200 1,567
The PMI Group, Incorporated.... 28,000 1,412
-----------
TOTAL FINANCIAL............ 19,235
-----------
INSURANCE - 3.38%
Allstate Corporation........... 103,600 4,461
American Financial Group,
Incorporated................. 66,100 2,318
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
Aon Corporation................ 86,450 $ 5,360
Chubb Corporation.............. 65,800 4,047
Esg Re Limited................. 18,100 335
Healthplan Services
Corporation.................. 22,500 211
IPC Holdings, Limited.......... 6,530 152
Lincoln National Corporation... 80,800 6,131
Old Republic International
Corporation.................. 87,125 1,655
Renaissancere Holdings......... 48,825 1,843
Safeco Corporation............. 39,100 1,694
St. Paul Companies,
Incorporated................. 172,100 5,701
Stirling Cooke Brown
Holdings..................... 12,900 231
TIG Holdings, Incorporated..... 86,500 1,206
Travelers Property Casualty
Corporation.................. 37,000 1,135
-----------
TOTAL INSURANCE............ 36,480
-----------
INVESTMENT BANKING/BROKERAGE - 0.29%
Paine Webber Group,
Incorporated................. 94,350 3,155
-----------
TOTAL INVESTMENT BANKING/
BROKERAGE................ 3,155
-----------
SAVINGS & LOAN COMPANIES - 1.01%
Coastal Bancorp,
Incorporated................. 1,075 20
Washington Mutual,
Incorporated................. 288,200 10,789
-----------
TOTAL SAVINGS & LOAN
COMPANIES................ 10,809
-----------
TOTAL FINANCIALS........... 135,578
-----------
HEALTH CARE - 0.74%
Baxter International,
Incorporated................. 32,000 1,918
Bristol-Myers Squibb Company... 31,400 3,472
Pharmacia & Upjohn,
Incorporated................. 48,300 2,557
-----------
TOTAL HEALTH CARE.......... 7,947
-----------
TECHNOLOGY - 2.98%
COMPUTERS - 1.15%
Data General Corporation (non-
income producing)............ 128,400 2,183
Ikon Office Solutions,
Incorporated................. 26,600 251
International Business Machines
Corporation.................. 48,000 7,125
Radisys Corporation............ 15,000 289
</TABLE>
See accompanying notes
36
<PAGE> 38
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
Seagate Technology............. 96,000 $ 2,532
-----------
TOTAL COMPUTERS............ 12,380
-----------
ELECTRONICS - 0.68%
Raytheon Company............... 130,943 7,333
-----------
TOTAL ELECTRONICS.......... 7,333
-----------
SERVICES - 1.15%
Eastman Kodak Company.......... 27,400 2,124
Vanstar Corporation............ 29,900 335
Xerox Corporation.............. 103,100 9,988
-----------
TOTAL SERVICES............. 12,447
-----------
TOTAL TECHNOLOGY........... 32,160
-----------
TRANSPORTATION - 1.78%
AIR FREIGHT - 0.01%
Airnet Systems................. 9,900 139
-----------
TOTAL AIR FREIGHT.......... 139
-----------
RAILROADS - 1.77%
Burlington Northern,
Incorporated................. 53,400 1,649
CSX Corporation................ 189,300 7,430
GATX Corporation............... 50,000 1,725
Norfolk Southern Corporation... 221,300 7,289
Union Pacific Capital Trust.... 20,000 952
-----------
TOTAL RAILROADS............ 19,045
-----------
TOTAL TRANSPORTATION....... 19,184
-----------
UTILITIES - 7.37%
ELECTRIC COMPANIES - 6.00%
Central & Southwest
Corporation.................. 103,600 2,881
CMP Group, Incorporated........ 7,500 138
CMS Energy Corporation......... 160,000 7,050
Dominion Resources,
Incorporated................. 78,800 3,640
DTE Energy Company............. 109,700 4,676
Edison International........... 65,000 1,714
Entergy Corporation............ 207,200 5,957
GPU, Incorporated.............. 45,000 1,941
Houston Industries,
Incorporated................. 250,500 7,781
Illinova Corporation........... 126,900 3,212
Niagara Mohawk Power
Corporation.................. 161,625 2,364
Northeast Utilities............ 359,400 5,616
Peco Energy Company............ 52,000 2,012
Potomac Electric Power......... 50,400 1,320
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------- -----------
(dollars in thousands)
<S> <C> <C>
PP&L Resources, Incorporated... 123,806 $ 3,358
Public Service Enterprise
Group, Incorporated.......... 38,400 1,459
Rochester Gas & Electric,
Incorporated................. 30,000 874
Scana Corporation.............. 60,000 2,029
Texas Utilities Company........ 85,600 3,745
Unicom Corporation............. 77,500 2,921
-----------
TOTAL ELECTRIC COMPANIES... 64,688
-----------
NATURAL GAS-DISTRIBUTION-PIPE LINE - 1.37%
Coastal Corporation............ 68,650 2,420
El Paso Energy Corporation..... 10,130 359
Equitable Resources,
Incorporated................. 65,100 1,811
MCN Energy Group,
Incorporated................. 67,200 1,298
Peoples Energy Corporation..... 46,000 1,696
Sempra Energy.................. 19,367 504
Williams Companies,
Incorporated................. 243,235 6,674
-----------
TOTAL NATURAL GAS-
DISTRIBUTION-PIPE LINE... 14,762
-----------
TOTAL UTILITIES............ 79,450
-----------
TOTAL COMMON STOCKS............ 625,917
-----------
SHORT-TERM INVESTMENTS (NOTE A) - 21.85%
AMR Investments Enhanced Yield
Business Trust............... 68,882,000 68,881
AMR Investments Strategic Cash
Business Trust............... 142,104,000 142,104
Par
Amount
-------
Goldman Sachs Tri-Party
Repurchase Agreement, 5.52%,
Due 11/2/1998 (Collateral
held at The Bank of New York
Company, Incorporated by
Federal Home Loan Mortgage
Corporation, 6.125%, Due
10/1/2032 - Market Value
$25,220)..................... $24,725 24,725
-----------
TOTAL SHORT-TERM
INVESTMENTS.............. 235,710
-----------
TOTAL INVESTMENTS - 119.20%
(COST $1,168,034)............ 1,285,582
-----------
LIABILITIES, NET OF OTHER
ASSETS - (19.20%)............ (207,057)
-----------
TOTAL NET ASSETS - 100%........ $ 1,078,525
===========
</TABLE>
See accompanying notes
37
<PAGE> 39
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
- ---------------
Based on the cost of investments of $1,171,440 for federal income tax purposes
at October 31, 1998, the aggregate gross unrealized appreciation was $147,941,
the aggregate gross unrealized depreciation was $33,799 and the net unrealized
appreciation of investments was $114,142.
(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 $9,916 or 0.92% of net assets.
ABBREVIATIONS:
ADR - American Depositary Receipt
AS - Company
LP - Limited Partnership
MTN - Medium-Term Note
NV - Company
PLC - Public Limited Corporation
REMIC - Real Estate Mortgage Investment Conduit
SA - Company
TBA - To Be Announced
See accompanying notes
38
<PAGE> 40
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
----------- ----------
(dollars in thousands)
<S> <C> <C>
COMMON STOCKS - 97.82%
BASIC MATERIALS - 5.51%
AGRICULTURAL PRODUCTS - 0.24%
New Holland NV (non-income
producing)................. 359,000 $ 4,532
----------
TOTAL AGRICULTURAL
PRODUCTS............... 4,532
----------
ALUMINUM - 0.52%
Aluminum Company of America.. 58,001 4,597
Reynolds Metals Company...... 90,000 5,394
----------
TOTAL ALUMINUM........... 9,991
----------
CHEMICALS - 2.53%
Airgas, Incorporated......... 699,975 8,050
Dow Chemical Company......... 51,000 4,775
E.I. Du Pont de Nemours &
Company.................... 60,000 3,450
Eastman Chemical Company..... 77,000 4,524
FMC Corporation (non-income
producing)................. 195,250 9,970
Millennium Chemicals
Incorporated............... 538,371 13,123
Witco Corporation............ 229,100 4,310
----------
TOTAL CHEMICALS.......... 48,202
----------
CONSTRUCTION - 0.21%
DeBeers Construction Mines,
Limited.................... 274,400 3,944
----------
TOTAL CONSTRUCTION....... 3,944
----------
CONTAINERS/PACKAGING (PAPER) - 0.20%
Union Camp Corporation....... 89,000 3,827
----------
TOTAL CONTAINERS/
PACKAGING (PAPER)...... 3,827
----------
PAPER & FOREST PRODUCTS - 1.60%
Bowater, Incorporated........ 113,000 4,612
Georgia-Pacific
Corporation................ 204,800 6,265
International Paper
Company.................... 87,000 4,040
Mead Corporation............. 145,000 4,586
Westvaco Corporation......... 197,100 4,854
Weyerhaeuser Company......... 130,000 6,086
----------
TOTAL PAPER & FOREST
PRODUCTS............... 30,443
----------
STEEL - 0.21%
USX-US Steel Group........... 173,800 4,041
----------
TOTAL STEEL.............. 4,041
----------
TOTAL BASIC MATERIALS.... 104,980
----------
CAPITAL GOODS - 12.79%
AEROSPACE/DEFENSE - 2.87%
Avteam, Incorporated (non-
income producing).......... 86,400 497
</TABLE>
<TABLE>
<CAPTION>
Shares Value
----------- ----------
(dollars in thousands)
<S> <C> <C>
Cordant Technologies,
Incorporated............... 254,500 $ 10,355
Lockheed Martin
Corporation................ 318,148 35,434
Northrop Grumman
Corporation................ 104,700 8,350
----------
TOTAL AEROSPACE/
DEFENSE................ 54,636
----------
CONTAINERS (METAL AND GLASS) - 0.20%
Crown Cork & Seal,
Incorporated............... 120,000 3,825
----------
TOTAL CONTAINERS (METALS
AND GLASS)............. 3,825
----------
ELECTRICAL EQUIPMENT - 2.20%
Amp, Incorporated............ 63,151 2,593
The Carbide/Graphite Group
(non-income producing)..... 29,600 370
Honeywell, Incorporated...... 319,700 25,536
Philips Electronics N.V...... 169,000 9,274
Rockwell International
Corporation................ 90,000 3,696
Stoneridge, Incorporated
(non-income producing)..... 22,100 330
----------
TOTAL ELECTRICAL
EQUIPMENT.............. 41,799
----------
MACHINERY - DIVERSIFIED - 1.75%
Case Corporation............. 202,000 4,444
Deere and Company............ 451,100 15,958
Denison International PLC,
ADR (non-income
producing)................. 34,700 512
Dover Corporation............ 384,600 12,211
Hussman International,
Incorporated............... 10,600 165
Titan International
Incorporated............... 4,700 49
----------
TOTAL MACHINERY -
DIVERSIFIED............ 33,339
----------
MANUFACTURING (DIVERSIFIED) - 4.20%
Allied Signal,
Incorporated............... 105,600 4,112
Coltec Industries,
Incorporated (non-income
producing)................. 649,900 10,845
Eaton Corporation............ 80,000 5,415
Harsco Corporation........... 151,000 4,945
Hawk Corporation (non-income
producing)................. 5,400 54
Millipore Corporation........ 415,875 10,241
Tenneco, Incorporated........ 476,500 14,474
Textron, Incorporated........ 401,500 29,862
----------
TOTAL MANUFACTURING
(DIVERSIFIED).......... 79,948
----------
</TABLE>
See accompanying notes
39
<PAGE> 41
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
WASTE MANAGEMENT - 1.57%
Waste Management,
Incorporated................ 660,378 $ 29,800
----------
TOTAL WASTE MANAGEMENT.... 29,800
----------
TOTAL CAPITAL GOODS....... 243,347
----------
COMMUNICATION SERVICE - 6.18%
TELEPHONE - 5.58%
Alltel Corporation............ 424,300 19,863
Bell Atlantic Corporation..... 143,440 7,620
GTE Corporation............... 420,600 24,684
SBC Communications,
Incorporated................ 573,354 26,553
US West, Incorporated......... 478,600 27,460
----------
TOTAL TELEPHONE........... 106,180
----------
TELEPHONE LONG DISTANCE - 0.60%
AT&T Corporation.............. 127,300 7,924
BCE, Incorporated............. 100,000 3,406
----------
TOTAL TELEPHONE LONG
DISTANCE................ 11,330
----------
TOTAL COMMUNICATION
SERVICE................. 117,510
----------
CONSUMER STAPLES - 9.46%
BEVERAGES - ALCOHOLIC - 1.59%
Anheuser-Busch Companies,
Incorporated................ 509,100 30,260
Canandaigua Wine,
Incorporated................ 2,200 110
----------
TOTAL BEVERAGES -
ALCOHOLIC............... 30,370
----------
BROADCASTING (TV RADIO CABLE) - 0.04%
Alliance Atlantis
Communications
Incorporated................ 25,000 466
Groupe AB SA, ADR (non-income
producing).................. 89,960 264
----------
TOTAL BROADCASTING (TV
RADIO CABLE)............ 730
----------
FOODS - 1.10%
J & J Snack Foods,
Corporation................. 29,000 652
Nabisco Holdings Corporation,
Class A..................... 218,825 8,261
RJR Nabisco Holdings
Corporation................. 402,170 11,487
Vlasic Foods International,
Incorporated (non-income
producing).................. 24,600 460
----------
TOTAL FOODS............... 20,860
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
HOUSEHOLD PRODUCTS (NON-DURABLE) - 2.15%
First Brands Corporation...... 388,150 $ 14,653
Fort James Corporation........ 650,400 26,219
----------
TOTAL HOUSEHOLD PRODUCTS
(NON-DURABLE)........... 40,872
----------
HOUSEWARES - 0.25%
Fortune Brands,
Incorporated................ 144,000 4,761
----------
TOTAL HOUSEWARES.......... 4,761
----------
PRINTING - 0.35%
DeLuxe Corporation............ 203,600 6,592
----------
TOTAL PRINTING............ 6,592
----------
RETAIL STORES - FOOD CHAINS - 0.17%
Dominick's Supermarkets
Incorporated................ 12,700 620
Wendy's International
Incorporated................ 124,000 2,604
----------
TOTAL RETAIL STORES - FOOD
CHAINS.................. 3,224
----------
TOBACCO - 3.81%
Gallaher Group PLC, ADR....... 277,200 7,554
Hanson PLC, ADR............... 81,087 2,863
Imperial Tobacco Group PLC.... 226,200 4,467
Philip Morris Companies,
Incorporated................ 1,128,850 57,711
----------
TOTAL TOBACCO............. 72,595
----------
TOTAL CONSUMER STAPLES.... 180,004
----------
CONSUMER CYCLICALS - 12.55%
AUTO PARTS & EQUIPMENT - 1.94%
Dana Corporation.............. 478,500 20,007
Goodyear Tire & Rubber
Company..................... 110,300 5,942
ITT Industries,
Incorporated................ 308,800 11,040
----------
TOTAL AUTO PARTS &
EQUIPMENT............... 36,989
----------
AUTOMOBILES - 2.73%
Ford Motor Company............ 751,200 40,753
General Motors Corporation.... 178,100 11,231
----------
TOTAL AUTOMOBILES......... 51,984
----------
FOOTWEAR - 0.27%
Nine West Group,
Incorporated................ 407,800 5,174
----------
TOTAL FOOTWEAR............ 5,174
----------
GAMING LOTTERY & PARIMUTUEL - 0.03%
American Coin Merchandising,
Incorporated (non-income
producing).................. 47,100 648
----------
TOTAL GAMING LOTTERY &
PARIMUTUEL.............. 648
----------
</TABLE>
See accompanying notes
40
<PAGE> 42
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.34%
Whirlpool Corporation......... 125,000 $ 6,406
----------
TOTAL HOUSEHOLD
FURNISHINGS &
APPLIANCES.............. 6,406
----------
LEISURE TIME (PRODUCTS) - 2.00%
Hasbro, Incorporated.......... 340,975 11,955
Midway Games, Incorporated
(non-income producing)...... 15,900 156
Mattel, Incorporated.......... 722,250 25,911
----------
TOTAL LEISURE TIME
(PRODUCTS).............. 38,022
----------
PUBLISHING - 0.60%
A. H. Belo, Incorporated,
Class A..................... 597,250 10,862
Playboy Enterprises
Incorporated................ 38,500 548
----------
TOTAL PUBLISHING.......... 11,410
----------
RETAIL - 3.14%
Friedman's Incorporated (non-
income producing)........... 43,500 261
K Mart Corporation............ 761,600 10,758
J.C. Penney Company,
Incorporated................ 557,400 26,476
Sears Roebuck & Company....... 497,400 22,352
----------
TOTAL RETAIL.............. 59,847
----------
SERVICES - 1.15%
Cendant Corporation (non-
income producing)........... 1,028,675 11,765
Firstservice Corporation...... 33,400 389
Mac-Gray Corporation (non-
income producing)........... 12,700 127
Pittston Brinks Group......... 306,700 9,124
Princeton Video Image
Incorporated................ 15,600 53
Ralcorp Holdings Incorporated
New......................... 23,800 419
----------
TOTAL SERVICES............ 21,877
----------
TEXTILES (APPAREL) - 0.35%
Liz Claiborne, Incorporated... 125,400 3,684
Russell Corporation........... 119,000 2,923
----------
TOTAL TEXTILES
(APPAREL)............... 6,607
----------
TOTAL CONSUMER
CYCLICALS............... 238,964
----------
ENERGY - 8.37%
OIL & GAS - 4.23%
Abraxas Petroleum Corporation
(non-income producing)...... 33,518 195
Baker Hughes, Incorporated.... 956,700 21,107
Burlington Resources.......... 202,141 8,326
Coho Energy, Incorporated
(non-income producing)...... 30,064 135
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Halliburton Company........... 578,000 $ 20,772
MCN Energy Group,
Incorporated................ 195,600 3,778
Oryx Energy Company........... 665,475 9,317
Sempra Energy................. 52,498 1,365
Transcoastal Marine Services,
Incorporated (non-income
producing).................. 6,200 28
Ultramar Diamond Shamrock
Corporation................. 170,000 4,579
Union Pacific Resources Group,
Incorporated................ 759,400 9,872
USEC Incorporated (non-income
producing).................. 83,500 1,221
----------
TOTAL OIL & GAS........... 80,695
----------
OIL (DOMESTIC INTEGRATED) - 2.91%
Atlantic Richfield
Corporation................. 264,300 18,204
Conoco, Incorporated.......... 86,700 2,157
Occidental Petroleum
Corporation................. 615,200 12,227
Phillips Petroleum Company.... 525,700 22,737
----------
TOTAL OIL (DOMESTIC
INTEGRATED)............. 55,325
----------
OIL (INTERNATIONAL INTEGRATED) - 1.23%
Amoco Corporation............. 118,000 6,623
British Petroleum, PLC, ADR... 58,176 5,145
Elf Aquitaine SA, ADR......... 73,600 4,269
Mobil Corporation............. 44,000 3,330
YPF Sociedad Anonima.......... 138,000 3,993
----------
TOTAL OIL (INTERNATIONAL
INTEGRATED)............. 23,360
----------
TOTAL ENERGY.............. 159,380
----------
FINANCIALS - 21.54%
BANKS - 9.59%
Banc One Corporation.......... 836,257 40,872
BankAmerica Corporation....... 506,233 29,077
Bankers Trust Corporation New
York........................ 432,725 27,181
Chase Manhattan Corporation... 607,728 34,527
First Midwest Bancorp,
Incorporated................ 6,300 258
First Security Corporation.... 247,500 5,058
First Union Corporation....... 142,200 8,248
Fleet Financial Group,
Incorporated................ 201,000 8,027
J.P. Morgan & Company,
Incorporated................ 96,425 9,088
KeyCorp....................... 130,700 3,962
PNC Bank Corporation.......... 322,300 16,115
----------
TOTAL BANKS............... 182,413
----------
</TABLE>
See accompanying notes
41
<PAGE> 43
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
CONSUMER FINANCE - 0.77%
Associates First Capital
Corporation................. 122,922 $ 8,666
Household International,
Incorporated................ 161,663 5,911
----------
TOTAL CONSUMER FINANCE.... 14,577
----------
FINANCIAL (DIVERSIFIED) - 3.40%
Ace Limited................... 351,150 11,895
American Express Company...... 120,000 10,605
CitiGroup, Incorporated....... 137,086 6,452
Executive Risk,
Incorporated................ 7,300 347
Federal Home Loan Mortgage
Corporation................. 212,450 12,216
Federal National Mortgage
Association................. 115,000 8,143
FPIC Insurance Group,
Incorporated (non-income
producing).................. 7,020 204
Fund American Enterprises,
Incorporated................ 42,750 5,419
Morgan Stanley Dean Witter
Discover & Company.......... 80,400 5,206
The PMI Group, Incorporated... 82,000 4,136
----------
TOTAL FINANCIAL
(DIVERSIFIED)........... 64,623
----------
INSURANCE (LIFE/HEALTH) - 0.34%
Esg Re Limited................ 43,000 795
TransAmerica Corporation...... 55,000 5,720
----------
TOTAL INSURANCE
(LIFE/HEALTH)........... 6,515
----------
INSURANCE (MULTI-LINE) - 0.92%
Lincoln National
Corporation................. 230,200 17,466
----------
TOTAL INSURANCE
(MULTI-LINE)............ 17,466
----------
INSURANCE BROKERS - 0.57%
Aon Corporation............... 167,100 10,360
Healthplan Services
Corporation................. 53,100 498
----------
TOTAL INSURANCE BROKERS... 10,858
----------
INSURANCE - PROPERTY - CASUALTY - 3.96%
Allstate Corporation.......... 248,828 10,715
American Financial Group
Incorporated Ohio........... 304,640 10,681
Chubb Corporation............. 149,800 9,213
IPC Holdings, Limited......... 15,410 358
Old Republic International
Corporation................. 362,025 6,878
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Renaissancere Holdings........ 143,800 $ 5,428
Safeco Corporation............ 130,000 5,631
St. Paul Company,
Incorporated................ 505,600 16,748
Stirling Cooke Brown
Holdings.................... 30,200 540
TIG Holdings Incorporated..... 372,900 5,197
Travelers Property Casualty
Corporation................. 129,900 3,986
----------
TOTAL INSURANCE PROPERTY -
CASUALTY................ 75,375
----------
INVESTMENT BANKING/BROKERAGE - 0.47%
Paine Webber Group,
Incorporated................ 268,200 8,968
----------
TOTAL INVESTMENT BANKING/
BROKERAGE............... 8,968
----------
SAVINGS & LOAN COMPANIES - 1.52%
Coastal Bancorp,
Incorporated................ 2,521 48
Washington Mutual,
Incorporated................ 773,600 28,962
----------
TOTAL SAVINGS & LOAN
COMPANIES............... 29,010
----------
TOTAL FINANCIALS.......... 409,805
----------
HEALTH CARE - 1.52%
Baxter International,
Incorporated................ 70,000 4,196
Bristol-Myers Squibb
Company..................... 105,000 11,609
Foundation Health Systems..... 209,100 2,457
Mallinckrodt, Incorporated.... 50,000 1,425
Pharmacia & Upjohn,
Incorporated................ 174,000 9,211
----------
TOTAL HEALTH CARE......... 28,898
----------
TECHNOLOGY - 5.11%
COMPUTERS - 1.92%
Data General Corporation (non-
income producing)........... 395,900 6,730
Ikon Office Solutions,
Incorporated................ 69,800 659
International Business
Machines Corporation........ 141,200 20,959
Radisys Corporation........... 35,400 681
Seagate Technology............ 287,100 7,572
----------
TOTAL COMPUTERS........... 36,601
----------
ELECTRONICS - 1.27%
Raytheon Company.............. 431,475 24,163
----------
TOTAL ELECTRONICS......... 24,163
----------
SERVICES - 1.92%
Eastman Kodak Company......... 86,300 6,688
Vanstar Corporation........... 70,400 788
</TABLE>
See accompanying notes
42
<PAGE> 44
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Xerox Corporation............. 300,500 $ 29,111
----------
TOTAL SERVICES............ 36,587
----------
TOTAL TECHNOLOGY.......... 97,351
----------
TRANSPORTATION - 2.84%
AIR FREIGHT - 0.02%
Airnet Systems,
Incorporated................ 23,300 328
----------
TOTAL AIR FREIGHT......... 328
----------
RAILROADS - 2.82%
Burlington Northern,
Incorporated................ 168,600 5,206
CSX Corporation............... 543,400 21,328
GATX Corporation.............. 147,800 5,099
Norfolk Southern
Corporation................. 671,300 22,111
----------
TOTAL RAILROADS........... 53,744
----------
TOTAL TRANSPORTATION...... 54,072
----------
UTILITIES - 11.95%
ELECTRIC COMPANIES - 9.84%
Central and Southwest
Corporation................. 380,000 10,569
CMP Group, Incorporated....... 17,700 326
CMS Energy Corporation........ 456,500 20,115
Dominion Resources,
Incorporated................ 207,500 9,584
DTE Energy Company............ 331,500 14,130
Edison International.......... 202,500 5,341
Entergy Corporation........... 611,900 17,592
GPU Incorporated.............. 120,500 5,197
Houston Industries,
Incorporated................ 606,300 18,833
Illinova Corporation.......... 371,200 9,396
Niagara Mohawk Power
Corporation................. 503,145 7,358
Northeast Utilities........... 863,600 13,494
PP&L Resources,
Incorporated................ 427,247 11,589
Peco Energy Company........... 174,900 6,766
Potomac Electric Power
Company..................... 173,800 4,551
Public Service Enterprise
Group, Incorporated......... 168,900 6,418
Scana Corporation............. 200,000 6,762
Texas Utilities Company....... 277,400 12,136
Unicom Corporation............ 186,700 7,036
----------
TOTAL ELECTRIC
COMPANIES............... 187,193
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
NATURAL GAS - DISTRIBUTION - PIPE LINE - 2.11%
Coastal Corporation........... 235,150 $ 8,289
El Paso Energy Corporation.... 83,454 2,957
Equitable Resources,
Incorporated................ 196,900 5,476
Peoples Energy Corporation.... 68,000 2,507
Williams Companies,
Incorporated................ 762,197 20,913
----------
TOTAL NATURAL GAS -
DISTRIBUTION - PIPE
LINE.................... 40,142
----------
TOTAL UTILITIES........... 227,335
----------
TOTAL COMMON STOCKS....... 1,861,646
----------
SHORT-TERM INVESTMENTS (NOTE A) - 5.83%
AMR Investments Strategic Cash
Business Trust.............. 72,841,807 72,842
Par
Amount
----------
<S> <C> <C>
Goldman Sachs Tri-Party
Repurchase Agreement, 5.52%,
Due 11/2/1998 (Collateral
held at The Bank of New York
Company, Incorporated by
Federal Home Loan Mortgage
Corporation 6.888%, Due
11/1/2027 and Federal Home
Loan Mortgage Corporation
6.125%, Due
2/1/2037 - Market Value
$38,826).................... $ 38,065 38,065
----------
TOTAL SHORT-TERM
INVESTMENTS............. 110,907
----------
TOTAL INVESTMENTS - 103.65%
(COST $1,700,090)........... 1,972,553
----------
LIABILITIES, NET OF OTHER
ASSETS - (3.65%)............ (69,496)
----------
TOTAL NET ASSETS - 100%....... $1,903,057
==========
</TABLE>
- ---------------
Based on the cost of investments of $1,709,122 for federal income tax purposes
at October 31, 1998, the aggregate gross unrealized appreciation was $396,092,
the aggregate gross unrealized depreciation was $132,661, and the net unrealized
appreciation of investments was $263,431.
(A) Rates associated with short-term investments represent yield to maturity.
ABBREVIATIONS:
ADR - American Depositary Receipt
NV - Company
PLC - Public Limited Corporation
SA - Company
See accompanying notes
43
<PAGE> 45
AMR INVESTMENT SERVICES INTERMEDIATE BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ---------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 25.92%
U.S. TREASURY BONDS - 10.41%
10.375%, Due 11/15/2012..................................... $ 3,130 $ 4,370
8.125%, Due 8/15/2019....................................... 8,785 11,766
6.125%, Due 11/15/2027...................................... 2,220 2,497
--------
TOTAL U.S. TREASURY BONDS............................... 18,633
--------
U.S. TREASURY NOTES - 15.51%
7.875%, Due 8/15/2001....................................... 3,005 3,278
6.25%, Due 8/31/2002........................................ 1,050 1,118
5.875%, Due 11/15/2005...................................... 17,000 18,408
6.125%, Due 8/15/2007....................................... 4,500 4,963
--------
TOTAL U.S. TREASURY NOTES............................... 27,767
--------
TOTAL U.S. TREASURY OBLIGATIONS......................... 46,400
--------
U.S. AGENCY OBLIGATIONS - 2.30%
Federal Home Loan Mortgage Corporations, 5.75%, Due
4/15/2008................................................. 4,000 4,125
--------
TOTAL U.S. AGENCY OBLIGATIONS........................... 4,125
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 6.34%
FEDERAL HOME LOAN MORTGAGE ASSOCIATION - 2.57%
Gold Pool #E00506, 7.00%, Due 9/1/2012...................... 1,158 1,171
Gold Pool #E69244, 6.00%, Due 3/1/2013...................... 1,337 1,343
Gold Pool #E00540, 6.00%, Due 3/1/2013...................... 676 679
Gold Pool #C16078, 6.50%, Due 10/1/2028..................... 385 388
Gold Pool #C00658, 6.50%, Due 10/1/2028..................... 1,000 1,008
--------
TOTAL FEDERAL HOME LOAN MORTGAGE ASSOCIATION............ 4,589
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.77%
Pool #780570, 7.00%, Due 5/15/2027.......................... 1,198 1,226
Pool #448701, 7.50%, Due 9/15/2027.......................... 5,364 5,528
--------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 6,754
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 11,343
--------
ASSET-BACKED SECURITIES - 1.47%
Ford Credit Auto Owner Trust, 5.81%, Due 3/15/2002.......... 2,600 2,635
--------
TOTAL ASSET-BACKED SECURITIES........................... 2,635
--------
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 2.93%
General Motors Acceptance Corporation Commercial Mortgage
Securities, Incorporated, 6.869%, Due 8/15/2007........... 5,000 5,245
--------
TOTAL COMMERCIAL MORTGAGE-BACKED OBLIGATIONS............ 5,245
--------
CORPORATE OBLIGATIONS - 58.50%
FINANCIAL - 29.79%
Allstate Corporation, 6.90%, Due 5/15/2038.................. 1,635 1,606
American Express Credit Corporation, 6.125%, Due
6/15/2000................................................. 2,000 2,031
BankAmerica Corporation,
9.20%, Due 5/15/2003...................................... 2,300 2,622
7.20%, Due 4/15/2006...................................... 1,280 1,371
Bear Stearns Company, Variable Rate, 4.20%, Due 7/10/2000... 5,000 4,950
Chase Manhattan Corporation, 7.125%, Due 6/15/2009.......... 2,200 2,352
Chrysler Financial Corporation, Variable Rate, 4.15%, Due
7/17/2000................................................. 5,000 4,946
</TABLE>
See accompanying notes
44
<PAGE> 46
AMR INVESTMENT SERVICES INTERMEDIATE BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ---------
(dollars in thousands)
<S> <C> <C>
CitiCorp, 7.20%, Due 6/15/2007.............................. $ 2,400 $ 2,566
Countrywide Funding Corporation, MTN, 6.38%, Due
10/8/2002................................................. 1,360 1,377
EOP Oper Limited Partnership, 6.38%, Due 2/15/2012.......... 1,315 1,295
Ford Motor Credit Corporation, Variable Rate, 6.125%, Due
4/28/2003................................................. 2,490 2,535
General Motors Acceptance Corporation, 6.375%, Due
12/1/2001................................................. 2,000 2,060
Merrill Lynch and Company, Variable Rate, 4.47%, Due
6/27/2000................................................. 5,000 4,951
NationsBank Corporation, 6.60%, Due 5/15/2010............... 3,350 3,435
Sears Roebuck Acceptance Corporation,
6.93%, Due 10/3/2002...................................... 2,000 2,106
6.72%, Due 11/5/2003...................................... 2,200 2,330
Simon Debartolo Group LP, 6.625%, Due 6/15/2003............. 1,950 1,907
Swiss Bank Corporation, 7.375%, Due 7/15/2015............... 3,000 3,079
Travelers Property Casualty Corporation, 6.75%, Due
4/15/2001................................................. 4,000 4,153
Wells Fargo and Company, 6.875%, Due 5/10/2001.............. 1,600 1,660
--------
TOTAL FINANCIAL......................................... 53,332
--------
INDUSTRIAL - 23.88%
Auburn Hills Trust, 12.00%, Due 5/1/2020.................... 1,825 2,972
Coca Cola Company, Incorporated, 6.00%, Due 3/15/2001....... 4,000 4,084
Fort James Corporation, 6.625%, Due 9/15/2004............... 2,000 2,062
General Motors, Incorporated 7.70%, Due 4/15/2016........... 3,000 3,314
Ingersoll Rand, Company, 6.34%, Due 12/3/2001............... 2,000 2,056
J. C. Penny and Company, 7.95%, Due 4/1/2017................ 3,000 3,270
Loews Corporation, 6.75%, Due 12/15/2006.................... 2,000 2,112
Occidental Petroleum Corporation,
6.40%, Due 4/1/2003....................................... 1,310 1,319
6.50%, Due 4/1/2005....................................... 3,600 3,562
Phillip Morris Companies, Incorporated, 7.20%, Due
2/1/2007.................................................. 2,000 2,161
Sears Roebuck and Company, MTN, 9.05%, Due 2/6/2012......... 4,000 4,999
Time Warner Asset Trust, 6.10%, Due 12/30/2001.............. 2,420 2,467
Union Oil Company of California, 7.20%, Due 5/15/2005....... 3,800 4,004
USA Waste Services, Incorporated, 7.00%, Due 7/15/2028...... 1,500 1,425
Williams Companies, Incorporated, 6.50%, Due 8/1/2006....... 1,480 1,513
WMX Technologies, Incorporated, 6.65%, Due 5/15/2005........ 1,375 1,417
--------
TOTAL INDUSTRIAL........................................ 42,737
--------
SOVEREIGN - 1.31%
Province of Quebec, 7.00%, Due 1/30/2007.................... 2,170 2,336
--------
TOTAL SOVEREIGN......................................... 2,336
--------
UTILITIES - 3.52%
WorldCom Incorporated, 6.40%, Due 8/15/2005................. 4,025 4,184
Western Resources, Incorporated, 6.875%, Due 8/1/2004....... 2,000 2,123
--------
TOTAL UTILITIES......................................... 6,307
--------
TOTAL CORPORATE OBLIGATIONS............................. 104,712
--------
</TABLE>
See accompanying notes
45
<PAGE> 47
AMR INVESTMENT SERVICES INTERMEDIATE BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
----------- --------
(dollars in thousands)
<S> <C> <C>
SHORT-TERM INVESTMENTS (NOTE A) - 26.58%
AMR Investments Strategic Cash Business Trust............... 45,829,515 $ 45,830
</TABLE>
<TABLE>
<CAPTION>
Par
Amount
-------
<S> <C> <C>
Goldman Sachs Treasury Tri-Party Repurchase Agreement,
5.52%, Due 11/2/1998 (Collateral held at The Bank of New
York, Company, Incorporated, by U.S. Treasury Notes,
7.875% to 8.875%, Due 11/15/1998 to 11/15/1999 -- Market
Value: $1,785)............................................ $ 1,750 1,750
--------
TOTAL SHORT-TERM INVESTMENTS............................ 47,580
--------
TOTAL INVESTMENTS - 124.04% (COST $218,066)................. 222,040
--------
LIABILITIES, NET OF OTHER ASSETS - (24.04%)................. (43,036)
--------
TOTAL NET ASSETS - 100%..................................... $179,004
========
</TABLE>
- ---------------
Based on the cost of investments of $218,104 for federal income tax purposes at
October 31, 1998, the aggregate gross unrealized appreciation was $4,498, the
aggregate gross unrealized depreciation was $562, and the net unrealized
appreciation of investments was $3,936.
(A) Rates associated with short-term investments represent yield to maturity.
ABBREVIATIONS:
MTN -- Medium-Term Note
See accompanying notes
46
<PAGE> 48
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
AUSTRALIA COMMON STOCKS - 3.48%
Australia & New Zealand
Banking Group.............. 1,267,152 $ 7,215
Brambles Industries,
Limited.................... 197,400 4,310
Foster's Brewing Group,
Limited.................... 820,400 2,006
Mayne Nickless, Limited...... 965,000 4,432
News Corporation Preferred
Rights..................... 345,000 2,065
News Corporation, Limited.... 210,000 1,428
Pioneer International,
Limited.................... 2,554,675 5,278
QBE Insurance Group,
Limited.................... 1,413,428 5,559
RGC, Limited................. 550,000 832
WMC, Limited................. 785,000 2,652
----------
TOTAL AUSTRALIA COMMON
STOCKS................. 35,777
----------
AUSTRIA - 0.84%
PREFERRED STOCKS - 0.28%
Bank Austria AG.............. 54,000 2,938
----------
TOTAL AUSTRIA PREFERRED
STOCKS................. 2,938
----------
COMMON STOCKS - 0.56%
Boehler-Uddeholm............. 60,185 2,836
Evn Energie-Versorgung
Niederoesterreich AG....... 7,960 1,134
Mayr-Melnhof Karton AG....... 16,000 742
VA Technologie AG............ 11,000 1,020
----------
TOTAL AUSTRIA COMMON
STOCKS................. 5,732
----------
TOTAL AUSTRIA............ 8,670
----------
BELGIUM COMMON STOCKS - 0.64%
Electrabel SA................ 8,800 3,246
GIB Holdings, Limited NPV.... 29,300 1,402
Solvay Et Cie, NPV........... 25,000 1,961
----------
TOTAL BELGIUM COMMON
STOCKS................. 6,609
----------
CANADA COMMON STOCKS - 3.87%
Alcan Aluminum, Limited...... 105,000 2,630
Anderson Exploration,
Limited.................... 170,000 1,725
Canadian Imperial Bank of
Commerce................... 160,570 3,181
IMASCO, Limited.............. 238,000 4,462
Methanex Corporation......... 275,000 1,600
Newbridge Network............ 100,000 2,049
Noranda, Incorporated........ 254,875 3,757
Oshawa Group, Limited........ 66,000 1,397
Potash Corporation of
Saskatchewan............... 69,623 4,793
Ranger Oil, Limited.......... 289,010 1,822
Renaissance Energy........... 399,450 5,358
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Transcanada Pipelines,
Limited.................... 117,000 $ 1,792
Telus Corporation............ 256,650 5,268
----------
TOTAL CANADA COMMON
STOCKS................. 39,834
----------
DENMARK COMMON STOCKS - 0.93%
BG Bank...................... 32,820 1,903
Den Danske Bank.............. 21,800 2,960
Teledanmark AS, "B".......... 16,700 1,820
Unidanmark AS, "A"........... 38,400 2,928
----------
TOTAL DENMARK COMMON
STOCKS................. 9,611
----------
FINLAND COMMON STOCKS - 2.82%
Enso-Gutzeit OY, "R"......... 212,000 1,641
Huhtamaki Group I Free....... 27,800 932
Merita Bank, Limited......... 1,021,550 5,474
Metra OY, "B"................ 194,295 3,394
Metsa-Serla OY, "B".......... 100,000 756
Nokia OY,"A"................. 87,000 7,917
Rauma OY..................... 121,467 1,434
UPM-Kymmene OY............... 310,760 7,432
----------
TOTAL FINLAND COMMON
STOCKS................. 28,980
----------
FRANCE COMMON STOCKS - 9.95%
Alcatel Alsthom CG........... 58,150 6,478
Associated General de
France..................... 30,100 1,685
Axa SA....................... 35,542 4,017
Banque Nationale de Paris.... 97,525 6,176
BIC SA....................... 31,739 1,953
Bongrain SA.................. 2,124 896
CSF (Thomson)................ 164,573 5,716
Elf Aquitaine SA............. 131,400 15,205
France Telecom SA............ 43,910 3,062
Groupe Danone................ 37,700 9,966
La Farge-Coppee SA........... 67,183 6,867
Pechiney SA.................. 51,800 1,780
Pernod-Ricard................ 64,782 4,313
Rhone-Poulenc, "A"........... 141,200 6,454
Saint Gobain................. 22,098 3,269
Schneider SA................. 26,000 1,543
Scor SA...................... 21,010 1,205
Seita........................ 97,102 5,766
Societe Generale............. 32,319 4,275
Total Petroleum Company,
"B"........................ 85,500 9,863
Usinor Sacilor............... 156,520 1,789
----------
TOTAL FRANCE COMMON
STOCKS................. 102,278
----------
GERMANY - 6.13%
PREFERRED STOCKS - 0.80%
Dyckerhoff AG................ 14,099 4,342
Herlitz AG................... 23,947 766
</TABLE>
See accompanying notes
47
<PAGE> 49
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- ----------
(dollars in thousands)
<S> <C> <C>
Volkswagen AG................. 65,700 $ 3,086
----------
TOTAL GERMANY PREFERRED
STOCKS.................. 8,194
----------
COMMON STOCKS - 5.33%
BASF AG....................... 178,600 7,570
BAYER AG...................... 164,825 6,698
BBS Kraftfahrzeugtechnik...... 1,526 313
Buderus AG.................... 7,475 3,110
Commerzbank AG................ 134,500 4,044
Deutsche Bank AG.............. 36,000 2,239
Dragerwerk AG................. 145,980 2,380
Hoechst AG.................... 42,100 1,759
Karstadt AG................... 4,000 2,041
Muenchener Rueckversicherung
AG, Warrants................ 7,345 2,244
Muenchener Rueckversicherung
AG DEM 10................... 1,400 641
Muenchener Rueckversicherung
AG DEM 10A.................. 293 133
Muenchener Rueckversicherung
AG DEM 5.................... 293 13
RWE AG........................ 125,619 6,811
Varta AG...................... 1,291 193
Veba AG....................... 137,653 7,688
Viag AG....................... 7,440 5,054
Volkswagen AG................. 25,000 1,879
Volkswagen AG NPV............. 700 33
----------
TOTAL GERMANY COMMON
STOCKS.................. 54,843
----------
TOTAL GERMANY............. 63,037
----------
HONG KONG COMMON STOCKS - 3.56%
Asia Satellite
Telecommunications Holdings,
Limited..................... 275,000 486
Cheung Kong Holdings,
Limited..................... 655,000 4,482
Hang Lung Development Company,
Limited..................... 3,155,000 3,584
Hong Kong Electric Holdings... 793,400 2,909
Hutchinson Whampoa, Limited... 600,000 4,299
Hysan Development Company,
Limited..................... 49,600 1
National Mutual of Asia,
Limited..................... 1,700,000 1,163
New World Development Company,
Limited..................... 1,164,000 2,705
South China Morning Post...... 7,886,000 4,225
Swire Pacific, Class "A"...... 1,991,500 10,567
Swire Pacific, Class "B"...... 632,500 523
Television Broadcast.......... 625,000 1,662
----------
TOTAL HONG KONG COMMON
STOCKS.................. 36,606
----------
IRELAND COMMON STOCKS - 0.76%
Greencore Group PLC........... 889,960 3,477
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- ----------
(dollars in thousands)
<S> <C> <C>
Jefferson Smurfit PLC......... 2,614,872 $ 4,322
----------
TOTAL IRELAND COMMON
STOCKS.................. 7,799
----------
ITALY - 3.38%
PREFERRED STOCKS - 0.22%
Concessioni E Contruzioni
Autostrade.................. 525,000 2,306
----------
TOTAL ITALY PREFERRED
STOCKS.................. 2,306
----------
COMMON STOCKS - 3.16%
Burgo (Cartiere) SPA.......... 119,420 729
Eni SPA....................... 941,380 5,603
Fiat SPA...................... 775,000 2,223
Instituto Nazionale Delle
Assicurazioni............... 1,000,000 2,756
Mediaset...................... 589,800 3,739
STET Telecom Italia........... 2,965,800 17,397
----------
TOTAL ITALY COMMON
STOCKS.................. 32,447
----------
TOTAL ITALY............... 34,753
----------
JAPAN COMMON STOCKS - 11.40%
Aisin Seiki Company,
Limited..................... 301,000 3,151
Aoyama Trading Company........ 69,100 1,705
Best Denki Company............ 200,000 1,373
Canon, Incorporated........... 55,000 1,041
Central Japan Railway......... 388 1,991
Chudenko Corporation.......... 32,000 735
Daibiru Corporation........... 240,000 1,679
Daiwa House Industries........ 112,000 1,264
Eisai Company................. 126,000 1,977
Fuji Photo Film Company....... 191,000 6,999
Fujisawa Pharmaceutical
Company..................... 95,000 1,121
Hitachi Zosen Corporation..... 212,000 322
Hitachi, Limited.............. 542,000 2,758
Japan Tobacco................. 950 7,965
Kanamoto Company.............. 310,000 1,397
KAO Corporation............... 369,000 7,473
Koito Manufacturing Company... 424,000 1,728
Kokusai Electric.............. 469,000 2,302
Kyocera Corporation........... 108,000 4,773
Makita Corporation............ 105,000 1,110
Matsushita Electric Industrial
Company..................... 164,000 2,408
Matsuzakaya Company........... 500,000 2,678
MOS Food Services............. 359,000 5,299
Namco......................... 239,600 5,274
NEC Corporation............... 80,000 592
Nichicon Corporation.......... 293,000 3,181
Nichido Fire & Marine
Insurance................... 397,000 2,048
</TABLE>
See accompanying notes
48
<PAGE> 50
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- ----------
(dollars in thousands)
<S> <C> <C>
Nintendo Company, Limited..... 74,900 $ 6,338
Nippon Telephone & Telegraph
Company..................... 700 5,479
Okumura Corporation........... 700,000 3,034
Ono Pharmaceutical............ 65,000 1,941
Promise Company, Limited...... 138,100 6,246
Shionogi & Company............ 341,000 2,514
Showa Sangyo Company.......... 796,000 1,571
Sony Corporation.............. 36,200 2,299
Sumitomo Marine & Fire
Insurance................... 447,000 2,616
TDK Corporation............... 24,000 1,582
Toyo Seikan Kaisha............ 200,000 3,596
Yamanouchi Pharmaceutical..... 61,000 1,748
Yamato Kogyo Company,
Limited..................... 120,000 546
Yodogawa Steel Works.......... 319,000 1,273
Yoshitomi Pharmaceutical...... 185,000 2,056
----------
TOTAL JAPAN COMMON
STOCKS.................. 117,183
----------
MALAYSIA COMMON STOCKS - 0.13%
Golden Hope Plantations BHD... 2,603,000 1,274
Hicom Holdings BHD............ 370,863 98
----------
TOTAL MALAYSIA COMMON
STOCKS.................. 1,372
----------
MEXICO COMMON STOCKS - 0.57%
Alfa, SA...................... 436,000 1,163
Consorcio Grupo Dina Sa De C
V........................... 590,000 885
Grupo Mexico SA............... 1,047,300 2,659
Industrias Penoles............ 215,000 656
Vitro Sa...................... 335,000 483
----------
TOTAL MEXICO COMMON
STOCKS.................. 5,846
----------
NETHERLANDS COMMON STOCKS - 6.17%
ABN AMRO Holdings NV.......... 313,165 5,869
Akzo Nobel NV................. 294,205 11,436
Buhrmann NV................... 46,408 832
CSM NV........................ 16,550 815
Fortis Amev NV................ 51,654 3,355
Hollandsche Beton Groep NV.... 339,630 4,583
Ing Groep NV.................. 244,769 11,847
Kon KPN NV.................... 131,125 5,097
Koninklijke Bijenkorf Beheer
NV.......................... 17,400 1,543
Philips Electronics........... 219,221 11,667
TNT Post Groep NV............. 129,410 3,464
Unilever NV................... 40,000 2,968
----------
TOTAL NETHERLANDS COMMON
STOCKS.................. 63,476
----------
NEW ZEALAND COMMON STOCKS - 0.98%
Brierley Investments,
Limited..................... 1,753,762 399
Carter Holt Harvey, Limited... 605,889 494
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- ----------
(dollars in thousands)
<S> <C> <C>
Fisher & Paykel, Limited...... 880,000 $ 2,609
Fletcher Challenge Building... 2,564,979 3,395
Fletcher Challenge Forest..... 2,778,284 941
Fletcher Challenge Paper...... 765,000 486
Lion Nathan, Limited.......... 679,600 1,781
----------
TOTAL NEW ZEALAND COMMON
STOCKS.................. 10,105
----------
NORWAY COMMON STOCKS - 1.48%
Den Norsk Bank, Series A...... 270,000 949
Kvaerner Industries AS, Class
"A"......................... 108,419 2,338
Kvaerner Industries AS, Class
"B"......................... 18,000 339
Norsk Hydro AS................ 60,000 2,604
Nycomed AS, Series B.......... 953,855 6,793
Saga Petroleum, Series B
Free........................ 110,175 1,390
Unitor AS..................... 80,000 803
----------
TOTAL NORWAY COMMON
STOCK................... 15,216
----------
PORTUGAL COMMON STOCKS - 0.01%
Cimpor Ciment................. 700 24
----------
TOTAL PORTUGAL COMMON
STOCKS.................. 24
----------
SINGAPORE COMMON STOCKS - 1.20%
Development Bank of
Singapore................... 1,052,870 6,596
Hong Kong Land................ 1,580,847 2,245
Inchcape Berhad............... 325,000 112
Inchcape Motors............... 325,000 275
Singapore Finance, Limited.... 387,000 250
Singapore Press............... 105,300 905
United Overseas Bank.......... 410,000 1,926
----------
TOTAL SINGAPORE COMMON
STOCK................... 12,309
----------
SPAIN COMMON STOCKS - 2.92%
Banco Popular Espanol......... 28,000 1,726
Banco Santander SA............ 229,969 4,205
Iberdrola SA.................. 587,457 9,471
Repsol SA (BR)................ 37,000 1,854
Telefonica de Espana.......... 283,140 12,761
----------
TOTAL SPAIN COMMON
STOCKS.................. 30,017
----------
SOUTH KOREA COMMON STOCKS - 0.14%
Korea Electric Power
Corporation................. 80,860 1,440
----------
TOTAL SOUTH KOREA COMMON
STOCKS.................. 1,440
----------
SWEDEN COMMON STOCKS - 3.52%
Assidoman AB.................. 56,000 1,060
Astra AB, "B" Free............ 55,200 865
</TABLE>
See accompanying notes
49
<PAGE> 51
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- ----------
(dollars in thousands)
<S> <C> <C>
Autoliv Incorporated.......... 125,000 $ 4,158
Electrolux AB, "B"............ 475,075 7,141
Esselte AB, Class "A"......... 2,000 26
Esselte AB, Class "B"......... 17,000 248
Foreningssparbk............... 204,800 5,541
Granges AB.................... 15,000 196
Nordbanken AS................. 550,000 3,293
Pharmacia & Upjohn,
Incorporated................ 15,400 786
SKF AB, "B" Free.............. 80,000 916
Stora Kopparsbergs Bergslags,
"A"......................... 122,100 1,343
Stora Kopparsbergs Bergslags,
"B"......................... 25,800 281
Svedala Industries, "A"
Free........................ 90,000 1,416
Svenska Cellulosa, "B" Free... 225,400 5,277
Volvo AB...................... 170,000 3,665
----------
TOTAL SWEDEN COMMON
STOCK................... 36,212
----------
SWITZERLAND COMMON STOCKS - 6.94%
ABB AG........................ 2,690 3,222
Cie Fin Richemont............. 5,820 7,737
Forbo Holding AG.............. 3,280 1,356
Holderbank Financial
Glarus-B.................... 3,650 4,068
Nestle SA..................... 8,546 18,176
Novartis AG................... 5,007 9,022
Saurer AG..................... 3,360 1,985
Schindler Holding AG (BR)..... 1,160 1,570
Schweitz Ruckversiche......... 3,291 7,330
Sig Schweitz Industries AG.... 12,004 8,067
Sulzer AG..................... 6,598 3,801
SwissCom AG................... 100 34
UBS AG........................ 5,665 1,554
Zurich Allied AG.............. 5,700 3,464
----------
TOTAL SWITZERLAND COMMON
STOCK................... 71,386
----------
UNITED KINGDOM COMMON STOCKS - 22.10%
Aggreko, PLC.................. 502,977 1,272
Albert Fisher Group, PLC...... 262,500 33
Allied Domecq, PLC............ 627,274 5,778
Allied Zurich................. 407,062 4,840
Arcadia Group................. 41,875 184
Arriva........................ 205,000 1,267
Associated British Foods
Group, PLC.................. 27,172 255
Bank of Scotland.............. 361,844 3,933
BG, PLC....................... 1,301,216 8,531
Billiton...................... 1,072,976 2,632
Blue Circle Industries........ 455,000 2,484
BOC Group..................... 204,582 3,005
British American Tobacco
Industries, PLC............. 506,902 4,557
British Energy, PLC........... 300,000 2,934
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- ----------
(dollars in thousands)
<S> <C> <C>
British Telecommunications.... 784,400 $ 10,141
BTR, PLC...................... 4,431,262 7,755
Bunzl, PLC.................... 814,100 3,763
Burmah Castro, PLC............ 369,950 5,576
Coats Viyella, PLC............ 1,695,330 880
Commercial Union, PLC......... 577,890 9,160
Cookson Group, PLC............ 2,091,155 4,378
Cortaulds Textiles, PLC....... 150,000 362
Danka Business Systems, PLC... 495,000 622
Debenhams Retail.............. 83,750 541
Diageo........................ 297,690 3,216
English China Claylord
Group....................... 423,110 1,169
Express Dairies............... 250,000 542
Fairview Holdings, PLC........ 260,495 357
General Electric.............. 435,000 3,479
Great Universal Stores........ 242,100 2,603
Hanson, PLC................... 1,054,385 7,425
Hillsdown Holdings, PLC....... 1,264,530 1,800
Hyder, PLC.................... 201,840 2,772
Imperial Chemical Industries,
PLC......................... 312,000 2,803
Imperial Tobacco Group........ 197,600 2,015
Inchcape, PLC................. 300,000 517
Laporte, PLC.................. 578,513 5,464
Lex Service................... 350,000 2,098
Lloyds TSB Group, PLC......... 426,770 5,271
Lonrho........................ 387,125 2,107
Lonrho Africa................. 243,625 253
Lucasvarity, PLC.............. 610,000 2,084
Medeva, PLC................... 3,122,053 6,379
National Grid Group, PLC...... 255,000 1,747
National Power, PLC........... 50,000 435
National Westminster Bank,
PLC......................... 607,037 10,258
Next, PLC..................... 190,000 1,607
Northern Foods, PLC........... 1,000,000 2,713
PowerGen, PLC................. 310,400 4,393
Premier Farnell, PLC.......... 452,500 1,269
Racal Electronics, PLC........ 394,604 1,791
Reckitt & Colman, PLC......... 398,954 6,902
RMC Group..................... 301,850 4,297
Rolls Royce, PLC.............. 189,873 701
Royal & Sun Alliance Insurance
Group....................... 319,900 2,930
Safeway, PLC.................. 509,677 2,561
Salvesen (Christian), PLC..... 502,977 750
Scapa Group................... 525,000 967
Shell Transportation & Trading
Company, PLC................ 535,000 3,234
Storehouse.................... 980,000 2,872
Tate & Lyle, PLC.............. 705,800 4,196
Terranova Foods, PLC.......... 457,425 927
Tesco, PLC.................... 1,031,457 2,911
Thames Water Group, PLC....... 173,983 3,228
</TABLE>
See accompanying notes
50
<PAGE> 52
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- ----------
(dollars in thousands)
<S> <C> <C>
TI Group, PLC................. 703,850 $ 4,196
Tomkins....................... 1,549,688 7,176
Transport Development Group... 28,260 114
Unilever, PLC................. 213,900 2,149
Vickers Group................. 693,333 1,939
Williams, PLC................. 352,570 2,201
Wolseley...................... 631,700 4,332
WPP Group, PLC................ 1,438,600 7,155
----------
TOTAL UNITED KINGDOM
COMMON STOCKS........... 227,188
----------
UNITED STATES - 14.65%
FOREIGN SECURITIES DENOMINATED IN U.S. DOLLARS - 1.70%
G P Batteries International,
Limited..................... 436,000 959
Kookmin Bank GDR, Reg......... 82,796 308
Kookmin Bank GDR, 144a (Note
B).......................... 79,021 294
Jardine Matheson Holding,
Limited..................... 871,000 2,439
Jardine Strategic............. 1,824,000 2,918
Jardine Strategic............. 20,000 30
New Holland NV................ 160,000 2,020
Nova Corporation.............. 23,400 320
Sk Telecom, Limited........... 164,351 1,695
Stolt-Nielsen SA, "B"......... 38,000 461
Telmex ADR.................... 113,000 5,968
----------
TOTAL FOREIGN SECURITIES
DENOMINATED IN U.S.
DOLLARS................. 17,412
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount
---------
<S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY OBLIGATIONS (NOTE
A) - 2.86%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.17%
Discount Note, 5.56%,
Due 12/15/1998........ $ 1,745 1,745
----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION.... 1,745
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
--------- ----------
(dollars in thousands)
U.S. TREASURY BILLS - 2.69%
Due 11/5/1998................. $ 7 $ 7
Due 11/27/1998................ 57 57
Due 12/10/1998................ 14,401 14,323
Due 12/17/1998................ 126 125
Due 1/14/1999................. 3,276 3,244
Due 2/4/1999.................. 4,652 4,601
Due 3/4/1999.................. 1,578 1,556
Due 3/11/1999................. 172 170
Due 4/1/1999.................. 3,644 3,583
----------
TOTAL U.S. TREASURY
BILLS................... 27,666
----------
TOTAL UNITED STATES
GOVERNMENT AND AGENCY
OBLIGATIONS............. 29,411
----------
SHORT TERM INVESTMENTS (NOTE A) - 10.09%
Shares
---------
<S> <C> <C>
AMR Investments Strategic Cash
Business Trust.............. 92,804,911 92,805
Par
Amount
---------
International Business
Machines, 5.01%, Due
11/2/1998................... $ 5,000 4,999
State Street Bank Euro........ 5,951 5,951
----------
TOTAL SHORT TERM
INVESTMENTS............. 103,755
----------
TOTAL UNITED STATES....... 150,578
----------
TOTAL INVESTMENTS - 108.57%
(COST $1,025,698)........... 1,116,306
----------
LIABILITIES, NET OF OTHER
ASSET - (8.57%)............. (88,161)
----------
TOTAL NET ASSETS - 100%....... $1,028,145
==========
</TABLE>
See accompanying notes
51
<PAGE> 53
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
Based on the cost of investments of $1,025,940 for federal income tax purposes
at October 31, 1998, the aggregate gross unrealized appreciation was $184,460,
the aggregate gross unrealized depreciation was $94,094, and the net unrealized
appreciation of investments was $90,366.
(A) Rates associated with short-term investments represent yield to maturity or
yield to next reset date.
(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 $294 or 0.03% of net assets.
ABBREVIATIONS:
AB - Company (Sweden)
ADR - American Depository Receipt (United States)
AG - Company (Austria, Germany, Switzerland)
AS - Company (Denmark, Norway, Sweden)
BHD - Berhard (Malaysia)
BR - Bearer (Spain, Switzerland)
CG - Company General (France)
GDR - Global Depository Receipt (United States)
NPV - No Par Value (Belgium)
NV - Company (Netherlands, United States)
OY - Company (Finland)
PLC - Public Limited Corporation (United Kingdom)
Reg - Registered (United States)
SA - Company (Belgium, France, Mexico, Spain, Switzerland, United States )
SPA - Company (Italy)
INDUSTRY DIVERSIFICATION
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
Capital Goods............................................... 7.10%
Consumer Durables........................................... 3.16%
Consumer Non-Durables....................................... 20.34%
Energy...................................................... 12.01%
Finance..................................................... 21.36%
Materials and Services...................................... 22.23%
Technology.................................................. 5.33%
Transportation.............................................. 0.97%
Utilities................................................... 3.12%
Fixed-Income................................................ 2.86%
Short-Term Investments...................................... 10.09%
Other Assets (Liabilities).................................. (8.57)%
------
NET ASSETS........................................ 100.00%
======
</TABLE>
See accompanying notes
52
<PAGE> 54
AMR INVESTMENT SERVICES SHORT-TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- --------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY NOTES - 10.69%
6.25%, Due 2/15/2003........................................ $ 11,000 $ 11,798
--------
TOTAL U.S. TREASURY NOTES............................... 11,798
--------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 23.56%
Federal Home Loan Mortgage Corporation, M H-1 A
REMIC, 10.15%, Due 4/15/2006.............................. 51 51
REMIC, 7.10%, Due 4/10/2007............................... 4,000 4,488
Federal National Mortgage Association, 9.85%, Due
11/1/2018................................................. 12,870 14,028
Government National Mortgage Association, Pool #780173,
9.50%, Due 12/15/2019..................................... 6,871 7,431
--------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS.............. 25,998
--------
CORPORATE OBLIGATIONS - 50.14%
FINANCIAL - 20.89%
BankAmerica Corporation, 9.50%, Due 4/1/2001................ 2,380 2,603
Bear Stearns Company, Variable Rate, 5.54%, Due 7/10/2000... 5,000 4,951
Chase Manhattan Corporation, 8.50%, Due 2/15/2002........... 2,200 2,387
Chrysler Finance Corporation, Variable Rate, 5.48%, Due
7/17/2000................................................. 5,000 4,946
CitiCorp, 8.625%, Due 12/1/2002............................. 2,000 2,215
Merrill Lynch and Company, Variable Rate, 4.47%, Due
6/27/2000................................................. 6,000 5,941
--------
TOTAL FINANCIAL......................................... 23,043
--------
INDUSTRIAL - 20.59%
Fort James Corporation, 8.375%, Due 11/15/2001.............. 3,000 3,232
General Motors Corporation, 9.125%, Due 7/15/2001........... 4,000 4,394
Occidental Petroleum Corporation, 6.50%, Due 4/1/2005....... 2,500 2,473
Phillip Morris Companies, Incorporated, 7.25%, Due
1/15/2003................................................. 3,000 3,195
Sears Roebuck & Company, MTN, 9.05%, Due 2/6/2012........... 1,000 1,250
Tandy Corporation, MTN, 6.31%, Due 12/17/2001............... 4,000 4,117
Union Oil Company of California, 6.375%, Due 2/1/2004....... 2,880 2,940
Weyerhaeuser Company, 9.05%, Due 2/1/2003................... 1,000 1,121
--------
TOTAL INDUSTRIAL........................................ 22,722
--------
UTILITY - 5.58%
Puget Sound Power & Light Company, MTN, 6.50%, Due
9/14/1999................................................. 3,000 3,029
Texas Utilities Electric Company, 7.375%, Due 8/1/2001...... 1,000 1,054
WorldCom Incorporated, 6.25%, Due 8/15/2003................. 2,000 2,074
--------
TOTAL UTILITY........................................... 6,157
--------
FOREIGN - 3.08%
Province of Quebec, 8.80%, Due 4/15/2003.................... 3,000 3,397
--------
TOTAL FOREIGN........................................... 3,397
--------
TOTAL CORPORATE OBLIGATIONS............................. 55,319
--------
ASSET-BACKED SECURITIES - 2.84%
Citibank Credit Card Master Trust I, Series 1997 3-B,
6.989%, Due 2/10/2004..................................... 3,000 3,134
--------
TOTAL ASSET-BACKED SECURITIES........................... 3,134
--------
NON-AGENCY MORTGAGE BACKED OBLIGATIONS - 2.65%
Resolution Trust Corporation,
1992-1 A1, 7.318%, Due 5/25/2028.......................... 1,239 1,241
1992-4 A2, 7.452%, Due 7/25/2028.......................... 1,674 1,681
--------
TOTAL NON-AGENCY MORTGAGE BACKED OBLIGATIONS............ 2,922
--------
</TABLE>
See accompanying notes
53
<PAGE> 55
AMR INVESTMENT SERVICES SHORT-TERM BOND PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- --------
(dollars in thousands)
<S> <C> <C>
SHORT-TERM INVESTMENTS (NOTE A) - 18.17%
AMR Investments Strategic Cash Business Trust............... 9,990,000 $ 9,990
Par
Amount
----------
Goldman Sachs Treasury Tri-Party Repurchase Agreement,
5.52%, Due 11/2/1998 (Collateral held at The Bank of New
York, Company, Incorporated, by 6.125%, Federal Home Loan
Mortgage Note, Due 2/1/2037 - Market Value - $10,259)..... $ 10,057 10,057
--------
TOTAL SHORT-TERM INVESTMENTS............................ 20,047
--------
TOTAL INVESTMENTS - 108.05% (COST $118,967)................. 119,218
--------
LIABILITIES, NET OF OTHER ASSETS - (8.05%).................. (8,881)
--------
TOTAL NET ASSETS - 100%..................................... $110,337
========
</TABLE>
Based on the cost of investments of $118,967 for federal income tax purposes at
October 31, 1998, the aggregate gross unrealized appreciation was $1,202, the
unrealized aggregate gross depreciation was $951, and the net unrealized
appreciation of investments was $251.
(A) Rates associated with short-term investments represent yield to maturity.
ABBREVIATIONS:
MTN - Medium-Term Note
REMIC - Real Estate Mortgage Investment Conduit
See accompanying notes
54
<PAGE> 56
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Intermediate International Short-Term
Balanced Income Bond Equity Bond
---------- ---------- ------------ ------------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities at value
(cost - $1,168,034; $1,700,090;
$218,066; $1,025,698; $118,967,
respectively)*......................... $1,285,582 $1,972,553 $222,040 $1,116,306 $119,218
Cash, including foreign currency......... - - - 3,940 -
Unrealized appreciation on foreign
currency contracts..................... - - - 267 -
Dividends and interest receivable........ 7,031 3,059 2,736 2,550 1,168
Reclaims receivable...................... - - - 1,547 -
Receivable for investments sold.......... 3,809 7,896 472 916 -
Deferred organization costs, net......... - - 22 5 -
Other assets............................. - 18 - - -
---------- ---------- -------- ---------- --------
TOTAL ASSETS......................... 1,296,422 1,983,526 225,270 1,125,531 120,386
---------- ---------- -------- ---------- --------
LIABILITIES:
Payable for investments purchased........ 6,452 6,980 350 2,928 -
Payable upon return of securities
loaned................................. 210,985 72,842 45,829 92,805 9,990
Management and investment advisory fees
payable (Note 2)....................... 401 632 34 930 23
Accrued organization costs............... 9 9 21 5 9
Other liabilities........................ 50 6 32 718 27
---------- ---------- -------- ---------- --------
TOTAL LIABILITIES.................... 217,897 80,469 46,266 97,386 10,049
---------- ---------- -------- ---------- --------
NET ASSETS APPLICABLE TO INVESTORS'
BENEFICIAL INTERESTS....................... $1,078,525 $1,903,057 $179,004 $1,028,145 $110,337
========== ========== ======== ========== ========
</TABLE>
- ---------------
* Includes repurchase agreements of $24,725, $38,065, $1,750 and $10,057 for the
Balanced Portfolio, Growth and Income Portfolio, Intermediate Bond Portfolio
and Short-Term Bond Portfolio, respectively.
See accompanying notes
55
<PAGE> 57
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Intermediate International Short-Term
Balanced Income Bond Equity Bond
-------- ---------- ------------ ------------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.................................... $ 28,177 $ 3,034 $13,320 $ 3,264 $6,921
Dividend income (net of foreign taxes of $2,758 in
International Equity Portfolio).................. 14,082 43,303 - 23,214 -
Income derived from securities lending, net........ 369 242 51 470 7
-------- --------- ------- -------- ------
TOTAL INVESTMENT INCOME........................ 42,628 46,579 13,371 26,948 6,928
-------- --------- ------- -------- ------
EXPENSES:
Management and investment advisory fees (Note 2)... 3,106 5,718 528 4,226 246
Custodian fees..................................... 138 145 52 807 22
Professional fees.................................. 43 45 13 35 11
Other expenses..................................... 79 289 18 23 35
-------- --------- ------- -------- ------
TOTAL EXPENSES................................. 3,366 6,197 611 5,091 314
-------- --------- ------- -------- ------
Less fees waived (Note 2)...................... 93 314 - - -
-------- --------- ------- -------- ------
NET EXPENSES................................... 3,273 5,883 611 5,091 -
-------- --------- ------- -------- ------
NET INVESTMENT INCOME.................................. 39,355 40,696 12,760 21,857 6,614
-------- --------- ------- -------- ------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss) on investments............ 85,245 193,378 5,668 35,803 (453)
Net realized loss on foreign currency
transactions..................................... - - - (8,187) -
Change in net unrealized appreciation or
depreciation of investments...................... (35,136) (127,017) 2,101 74,320 373
Change in net unrealized depreciation of foreign
currency contracts and translations.............. - - - (94,242) --
-------- --------- ------- -------- ------
NET GAIN (LOSS) ON INVESTMENTS................. 50,109 66,361 7,769 7,694 (80)
-------- --------- ------- -------- ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ 89,464 $ 107,057 $20,529 $ 29,551 $6,534
======== ========= ======= ======== ======
</TABLE>
See accompanying notes
56
<PAGE> 58
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Growth and Income Intermediate Bond
---------------------- ----------------------- ----------------------------
Year Ended Year Ended Year Ended September 15,
October 31, October 31, October 31, to October 31,
---------------------- ----------------------- ----------- --------------
1998 1997 1998 1997 1998 1997
---------- --------- ---------- ---------- ----------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income........... $ 39,355 $ 41,759 $ 40,696 $ 33,481 $ 12,760 $ 1,585
Net realized gain (loss) on
investments and foreign
currency transactions.......... 85,245 134,243 193,378 123,365 5,668 255
Change in net unrealized
appreciation or depreciation of
investments and foreign
currency translations.......... (35,136) 16,668 (127,017) 166,119 2,101 1,874
---------- --------- ---------- ---------- -------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... 89,464 192,670 107,057 322,965 20,529 3,714
---------- --------- ---------- ---------- -------- ---------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS:
Contributions................... 166,037 282,834 359,223 446,329 55,600 224,975
Withdrawals..................... (130,643) (417,319) (231,823) (212,851) (113,440) (12,374)
---------- --------- ---------- ---------- -------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS........ 35,394 (134,485) 127,400 233,478 (57,840) 212,601
---------- --------- ---------- ---------- -------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS............................ 124,858 58,185 234,457 556,443 (37,311) 216,315
---------- --------- ---------- ---------- -------- ---------
NET ASSETS:
Beginning of period............. 953,667 895,482 1,668,600 1,112,157 216,315 -
---------- --------- ---------- ---------- -------- ---------
END OF PERIOD................... $1,078,525 $ 953,667 $1,903,057 $1,668,600 $179,004 $ 216,315
========== ========= ========== ========== ======== =========
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- --------------------------------------------------------------------------------------------------------------------
RATIOS*:
Expenses to average net assets
(annualized)................... 0.32% 0.34% 0.31% 0.34% 0.29% 0.29%
Net investment income to average
net assets (annualized)........ 3.80% 4.11% 2.12% 2.45% 6.03% 5.92%
Portfolio turnover rate......... 87% 105% 40% 35% 181% 47%
<CAPTION>
International Equity Short-Term Bond
---------------------- ----------------------
Year Ended Year Ended
October 31, October 31,
---------------------- ----------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income........... $ 21,857 $ 15,411 $ 6,614 $ 13,988
Net realized gain (loss) on
investments and foreign
currency transactions.......... 27,616 21,331 (453) (355)
Change in net unrealized
appreciation or depreciation of
investments and foreign
currency translations.......... (19,922) 57,105 373 (644)
---------- --------- ---------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... 29,551 93,847 6,534 12,989
---------- --------- ---------- ---------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS:
Contributions................... 678,114 397,499 30,059 95,910
Withdrawals..................... (441,193) (134,169) (19,825) (188,507)
---------- --------- ---------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS........ 236,921 263,330 10,234 (92,597)
---------- --------- ---------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS............................ 266,472 357,177 16,768 (79,608)
---------- --------- ---------- ---------
NET ASSETS:
Beginning of period............. 761,673 404,496 93,569 173,177
---------- --------- ---------- ---------
END OF PERIOD................... $1,028,145 $ 761,673 $ 110,337 $ 93,569
========== ========= ========== =========
- ------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- -----------------------------------------------------------------------------------------------------------
RATIOS*:
Expenses to average net assets
(annualized)................... 0.53% 0.57% 0.32% 0.30%
Net investment income to average
net assets (annualized)........ 2.29% 2.55% 6.74% 6.91%
Portfolio turnover rate......... 24% 15% 74% 282%
</TABLE>
- ---------------
* Operating results of the Balanced and Growth and Income Portfolios excluded
fees waived by the Manager during the year ended October 31, 1998. The ratio
of expenses and net investment income to average net assets were .33% and
3.79%, respectively for the Balanced Portfolio, and .32% and 2.11%,
respectively for the Growth and Income Portfolio.
See accompanying notes
57
<PAGE> 59
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
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, the AMR Investment Services Short-Term Bond Portfolio (each a
"Portfolio" and collectively the "Portfolios"). Prior to March 1, 1998, the AMR
Investment Services Short-Term Bond Portfolio was known as 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 (the "Board").
Investment grade short-term obligations with 60 days or less to maturity are
valued using the amortized cost method.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Dividend income is recorded on the ex-dividend date except
certain dividends from foreign securities which are recorded as soon as the
information is available to the Portfolios. Interest income is earned from
settlement date and is recorded on an accrual basis. Premiums and discounts on
debt securities purchased in the Intermediate Bond Portfolio and zero coupon
instruments in the Balanced Portfolio are amortized or accreted to interest
income over the lives of the respective securities. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
58
<PAGE> 60
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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.
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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. Investment assets of the
Balanced, Growth and Income, Intermediate Bond and International
59
<PAGE> 61
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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 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>
Amounts paid to Net Amounts
Management Management Investment Retained by
Fee Rate Fee Advisors Manager
---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Portfolio........................................ .225%-.70% $3,013 $1,978 $1,035
Growth and Income Portfolio............................... .225%-.70% 5,404 3,525 1,879
Intermediate Bond Portfolio............................... .25% 528 185 343
International Equity Portfolio............................ .25%-.90% 4,226 2,987 1,239
</TABLE>
The Manager serves as the sole investment adviser to the Short-Term Bond
Portfolio. Pursuant to the Management Agreement, the Manager receives from the
Portfolio an annualized fee equal to .25% of the average daily net assets of the
Short-Term Bond Portfolio. During the year ended October 31, 1998, the Manager
waived management fees totaling $92,788 and $314,407 for the Balanced and Growth
and Income Portfolios.
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, 1998, the cost of air transportation was not material
to any of the Portfolios.
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended October 31, 1998 (excluding
short-term investments) are as follows (in thousands):
<TABLE>
<CAPTION>
Growth and Intermediate International Short-Term
Balanced Income Bond Equity Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Purchases.................................. $923,015 $885,076 $367,483 $509,821 $77,738
Proceeds from sales........................ $862,266 $729,153 $396,950 $207,212 $70,683
</TABLE>
60
<PAGE> 62
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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, 1998, the
Portfolio had outstanding forward foreign currency contracts as follows:
<TABLE>
<CAPTION>
Settlement Unrealized
Contracts to Deliver Date Value Gain/(Loss)
-------------------- ---------- ------- -----------
(amounts in thousands)
<C> <S> <C> <C> <C>
1,509 Deutsche Mark............................................... 11/2/98 $ 911 $ 3
1,884 French Franc................................................ 11/30/98 339 -
51,598 Hong Kong Dollar............................................ 2/26/99 6,625 (223)
62,621 Hong Kong Dollar............................................ 4/30/99 8,003 (21)
3,786 Japanese Yen................................................ 11/4/98 32 -
1,000 Japanese Yen................................................ 4/13/99 9,660 (22)
94 Pound Sterling.............................................. 11/4/98 158 -
7,700 Pound Sterling.............................................. 11/9/98 12,888 (201)
9,102 Pound Sterling.............................................. 11/30/98 15,218 (622)
------- -------
Total contracts to deliver (Receivable amount $52,748).............. $53,834 $(1,086)
======= =======
Contracts to Receive
- --------------------------------------------------------------------
(amounts in thousands)
2,856 Australian Dollar........................................... 11/9/98 $ 1,777 $ (49)
25,948 Deutsche Mark............................................... 11/30/98 15,690 1,099
5,060 French Franc................................................ 11/2/98 911 (4)
51,598 Hong Kong Dollar............................................ 2/26/99 6,625 1
460 Japanese Yen................................................ 11/4/98 4 -
1,414 Pound Sterling.............................................. 11/4/98 2,368 (7)
9 Pound Sterling.............................................. 11/5/98 14 -
6,100 Pound Sterling.............................................. 11/9/98 10,210 314
11 Singapore Dollar............................................ 11/3/98 7 -
122 Singapore Dollar............................................ 11/4/98 75 (1)
15 Singapore Dollar............................................ 11/5/98 9 -
------- -------
Total contracts to receive (Payable amount $36,337)................. $37,690 $ 1,353
======= =======
</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.
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
61
<PAGE> 63
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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 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, 1998, securities with a market value of approximately
$206,243,255, $72,243,001, $44,772,181, $91,368,762 and $9,771,455 were loaned
by the Balanced, Growth and Income, Intermediate Bond, International Equity and
Short-Term Bond Portfolios, respectively. The Portfolio received cash collateral
which they invested in the AMR Investments Strategic Cash Business Trust and in
the AMR Investments Enhanced Yield Business Trust (collectively, the "Business
Trusts") totaling $210,985,275, $72,841,807, $45,829,515, $92,804,911 and
$9,990,000 for the Balanced, Growth and Income, Intermediate Bond, International
Equity and Short-Term Bond Portfolios, respectively. The Custodian held non-cash
collateral totaling $1,028,705 for the International Equity Portfolio. The
Manager serves as Trustee and as investment adviser to the Business Trusts. The
Manager receives from the Business Trusts annualized fees equal to 0.10% of the
average daily net assets of the Business Trusts.
62
<PAGE> 64
[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 and may be distributed to others
only if preceded or accompanied by a current prospectus.
MMAR-10/98
[AMERICAN AADVANTAGE MILEAGE FUNDS LOGO]
<PAGE> 65
Dear Fellow Shareholder:
We are pleased to report to you on the performance of the American
AAdvantage Money Market Funds and to provide you with a copy of the Annual
Report for the year ended October 31, 1998.
Market Recap
This period was characterized by two distinctive time frames, the first
nine months and the last three months of the period.
The first time frame was characterized by solid economic growth, low
unemployment, high consumer confidence and contained inflation. Although the Fed
had a bias to tighten because of such strong growth, monetary policy was held
steady because inflation posed little or no threat. During this time, the Money
Market Funds benefited by investing in 3 month LIBOR variable rate securities
that reset quarterly.
Conversely, the latter part of the period was characterized by market
instability and global turmoil. The combination of economic unrest in Asia,
Russia and Latin America, as well as the orchestrated bailout of the Long-Term
Capital Management hedge fund here at home, caused the Fed to cut the Fed Funds
rate 75 basis points in seven weeks to 4.75%. The Money Market Funds benefited
during this period by investing in six month fixed rate securities, thus
extending their weighted average maturities.
We believe the Fed will continue to be responsive to shifts in economic
momentum both domestically and abroad.
Performance Recap
Money Market Fund
For the twelve months ended October 31, 1998, the annualized total return
of the Institutional Class of the American AAdvantage Money Market Fund was
5.63%. Lipper Analytical Services ranked the Institutional Class in the 14th
percentile out of its universe of 192 Institutional Money Market Funds for that
period. During the same twelve month period, the annualized total returns of the
PlanAhead Class and the Platinum Class were 5.31% and 4.89%, respectively.
Municipal Money Market Fund
The Institutional Class of the American AAdvantage Municipal Money Market
Fund achieved an annualized total return of 3.46% for the twelve month period
ending October 31, 1998. Lipper Analytical Services ranked the Institutional
Class in the 16th percentile out of its universe of 88 Institutional Tax-Exempt
Money Market Funds during that period. During the same twelve month period, the
annualized total returns of the PlanAhead Class and the Platinum Class were
3.17% and 2.75%, respectively. Since its inception, the American AAdvantage
Municipal Money Market Fund has invested exclusively in high credit worthy
municipal issuers that are further credit enhanced by either a bank letter of
credit or bond insurance.
U.S. Government Money Market Fund
For the twelve month period ending October 31, 1998, the Institutional
Class of the American AAdvantage U.S. Government Money Market Fund had an
annualized total return of 5.47% and was ranked in the 15th percentile out of
its Lipper Analytical Services universe of 88 Institutional U.S. Government
Money Market Funds. During the same twelve month period, the annualized total
returns of the PlanAhead Class and the Platinum Class were 5.13% and 4.71%,
respectively.
<PAGE> 66
As always, we appreciate your confidence and support and we will continue
to strive to provide you with above average returns.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American AAdvantage Funds
2
<PAGE> 67
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, 1998, and the related statements of operation, 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 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, 1998, 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, 1998, 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
Dallas, Texas
December 17, 1998
3
<PAGE> 68
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<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....................... $ 2,277,182 $ 102,251 $ 218,356
Receivable for expense reimbursement.................... - - 2
Receivable for shares of beneficial interest sold....... 3,680 - 16
-------------- ----------- -----------
TOTAL ASSETS........................................ 2,280,862 102,251 218,374
-------------- ----------- -----------
LIABILITIES:
Dividends payable....................................... 2,283 1 409
Payable for shares of beneficial interest redeemed...... 2,713 - 625
Management and administrative services fees payable
(Note 2).............................................. 482 44 20
Other liabilities....................................... 400 34 36
-------------- ----------- -----------
TOTAL LIABILITIES................................... 5,878 79 1,090
-------------- ----------- -----------
NET ASSETS.................................................. $ 2,274,984 $ 102,172 $ 217,284
============== =========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 2,274,984 102,172 217,284
-------------- ----------- -----------
NET ASSETS.................................................. $ 2,274,984 $ 102,172 $ 217,284
============== =========== ===========
Shares outstanding (no par value):
Institutional Class..................................... 1,241,999,159 846,850 39,003,514
============== =========== ===========
PlanAhead Class......................................... 288,759,353 13,473,752 99,868,900
============== =========== ===========
Platinum Class.......................................... 744,225,594 87,851,672 78,412,189
============== =========== ===========
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> 69
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<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......................................... $111,697 $3,629 $8,184
Portfolio expenses...................................... (3,041) (182) (245)
-------- ------ ------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO...... 108,656 3,447 7,939
-------- ------ ------
FUND EXPENSES:
Administrative service fees (Note 2):
Institutional Class................................... 655 3 13
PlanAhead Class....................................... 142 7 27
Platinum Class........................................ 3,121 405 385
Transfer agent fees:
Institutional Class................................... 54 - 2
PlanAhead Class....................................... 129 4 11
Platinum Class........................................ 2 1 2
Professional fees....................................... 58 2 4
Registration fees and expenses.......................... 115 86 83
Distribution fees:
PlanAhead Class....................................... - - 97
Platinum Class........................................ 2,112 201 189
Service fees - PlanAhead Class.......................... - 27 -
Other expenses.......................................... 153 31 27
-------- ------ ------
TOTAL FUND EXPENSES................................. 6,541 767 840
-------- ------ ------
LESS REIMBURSEMENT OF EXPENSES (NOTE 2)..................... - 20 2
-------- ------ ------
NET FUND EXPENSES........................................... 6,541 747 838
-------- ------ ------
NET INVESTMENT INCOME....................................... 102,115 2,700 7,101
-------- ------ ------
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments........................ 38 10 -
-------- ------ ------
NET GAIN ON INVESTMENTS............................. 38 10 -
-------- ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $102,153 $2,710 $7,101
======== ====== ======
</TABLE>
See accompanying notes
5
<PAGE> 70
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
--------------------------- --------------------- ---------------------
1998 1997 1998 1997 1998 1997
------------ ------------ --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income................ $ 102,115 $ 93,000 $ 2,700 $ 1,938 $ 7,101 $ 4,950
Net realized gain on investments..... 38 29 10 - - 5
------------ ------------ --------- --------- --------- ---------
NET INCREASE IN
NET ASSETS
RESULTING FROM
OPERATIONS..................... 102,153 93,029 2,710 1,938 7,101 4,955
------------ ------------ --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class................ (60,857) (73,743) (199) (64) (1,643) (1,541)
PlanAhead Class.................... (12,056) (7,500) (333) (221) (1,945) (841)
Platinum Class..................... (29,202) (11,757) (2,168) (1,653) (3,513) (2,568)
Net realized gain on investments:
Institutional Class................ (24) (24) - - - (2)
PlanAhead Class.................... (4) (2) (2) - - -
Platinum Class..................... (10) (3) (8) - - (3)
------------ ------------ --------- --------- --------- ---------
DISTRIBUTIONS
TO SHAREHOLDERS................ (102,153) (93,029) (2,710) (1,938) (7,101) (4,955)
------------ ------------ --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares........ 12,479,014 18,317,950 277,194 163,384 445,222 332,729
Reinvestment of dividends and
distributions...................... 78,917 62,571 2,809 1,875 5,150 3,495
Cost of shares redeemed.............. (12,090,198) (18,207,080) (251,672) (143,626) (335,519) (313,363)
------------ ------------ --------- --------- --------- ---------
NET INCREASE IN
NET ASSETS FROM
CAPITAL SHARE
TRANSACTIONS................... 467,733 173,441 28,331 21,633 114,853 22,861
------------ ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS............... 467,733 173,441 28,331 21,633 114,853 22,861
NET ASSETS:
Beginning of period.................. 1,807,251 1,633,810 73,841 52,208 102,431 79,570
------------ ------------ --------- --------- --------- ---------
END OF PERIOD........................ $ 2,274,984 $ 1,807,251 $ 102,172 $ 73,841 $ 217,284 $ 102,431
============ ============ ========= ========= ========= =========
</TABLE>
See accompanying notes
6
<PAGE> 71
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
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. 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 (92.34%,
80.51% and 86.63% at October 31, 1998 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> 72
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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 is 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.
Approximately 99.80% of dividends paid by the Municipal Money Market Fund
were "exempt - interest dividends" which are free of any regular federal income
tax. Approximately 36% 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> 73
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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 received the following fees
based on average daily net assets of the Funds:
<TABLE>
<CAPTION>
ANNUALIZED FEE ANNUALIZED FEE
THROUGH AUGUST 31, 1998 FROM SEPTEMBER 1, 1998
----------------------- ----------------------
<S> <C> <C>
Institutional Class -
Money Market Fund............................... 0.05% 0.10%
Municipal Money Market Fund..................... 0.05% 0.10%
U.S. Government Money Market Fund............... 0.05% 0.01%
PlanAhead Class - All Funds....................... 0.05% 0.10%
Platinum Class - All Funds........................ 0.50% 0.55%
</TABLE>
Distribution Plan
The Trust except for the Platinum Class of the Funds, has adopted a
"defensive" Distribution Plan (the "Plan") in accordance with the Rule 12b-1
under the Investment Company Act of 1940 (the "Act"), 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.
A separate Distribution Plan (the "Distribution Plan") has been adopted
pursuant to Rule 12b-1 under the Act for the Platinum Classes of the Funds.
Under the Distribution Plan, as compensation for distribution assistance, the
Manager receives an annual fee of .25% of the average daily net assets of each
Class. The fee will be payable without regard to the Manager for distribution
assistance. During the year ended October 31, 1998, the Manager waived
distribution fees totaling $20,358 and $2,075 for the Platinum Classes of the
Municipal Money Market and U.S. Government Money Market Funds, respectively.
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, 1998, the cost of air transportation was not material
to any of the Funds. At October 31, 1998, American employees owned 61% of
Institutional Class shares of the Municipal Money Market Fund.
9
<PAGE> 74
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
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, 1998 Class Class Class
--------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Money Market Fund
- ------------------------------------------------------------
Shares sold................................................. 10,013,078 1,167,759 1,298,177
Reinvestment of dividends................................... 38,783 11,508 28,626
Shares redeemed............................................. (9,933,511) (1,079,696) (1,076,991)
----------- ---------- ----------
Net increase in capital shares outstanding.................. 118,350 99,571 249,812
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Institutional PlanAhead Platinum
Municipal Money Market Fund Class Class Class
--------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Shares sold................................................. 32,535 42,978 201,681
Reinvestment of dividends................................... 195 324 2,290
Shares redeemed............................................. (32,252) (39,418) (180,002)
----------- ---------- ----------
Net increase in capital shares outstanding.................. 478 3,884 23,969
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Institutional PlanAhead Platinum
U.S. Government Money Market Fund Class Class Class
--------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Shares sold................................................. 127,960 204,783 112,479
Reinvestment of dividends................................... 1,003 396 3,751
Shares redeemed............................................. (119,907) (109,356) (106,256)
----------- ---------- ----------
Net increase in capital shares outstanding.................. 9,056 95,823 9,974
=========== ========== ==========
</TABLE>
<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>
<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>
10
<PAGE> 75
(This page intentionally left blank)
11
<PAGE> 76
AMERICAN AADVANTAGE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------------------------
Year Ended October 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<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(A) 0.06(A) 0.05(A) 0.06 0.04
Less dividends from net investment
income................................... (0.06) (0.06) (0.05) (0.06) (0.04)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return (annualized)...................... 5.63% 5.60% 5.57% 5.96% 3.85%
========== ========== ========== ========== ==========
Ratios and supplemental data:
Net assets, end of period (in thousands)... $1,241,999 $1,123,649 $1,406,939 $1,206,041 $1,893,144
Ratios to average net assets (annualized):
Expenses............................... 0.23%(A) 0.23%(A) 0.24%(A) 0.23% 0.21%
Net investment income.................. 5.49%(A) 5.46%(A) 5.41%(A) 5.79% 3.63%
</TABLE>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Money Market Portfolio.
(B) 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.
(C) 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> 77
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 October 31, 1995 to
- ------------------------------------------ October 31, ----------------------- October 31,
1998 1997 1996 1995 1994 1998 1997 1996
- -------- -------- -------- ------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- ------- ----- -------- -------- --------
0.05 (A) 0.05(A) 0.05(A) 0.05 0.01 0.05(A) 0.05(A) 0.05(A)
(0.05) (0.05) (0.05) (0.05) (0.01) (0.05) (0.05) (0.05)
- -------- -------- -------- ------- ----- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======= ===== ======== ======== ========
5.31% 5.28% 5.21% 5.60% 3.73%(B) 4.89% 4.87% 4.85%(C)
======== ======== ======== ======= ===== ======== ======== ========
$288,759 $189,189 $106,890 $41,989 $ 25 $744,226 $494,413 $119,981
0.53% (A) 0.54%(A) 0.58%(A) 0.55% 0.70% 0.94%(A) 0.93%(A) 0.94%(A)
5.18% (A) 5.17%(A) 5.06%(A) 5.56% 4.42% 4.78%(A) 4.80%(A) 4.63%(A)
</TABLE>
13
<PAGE> 78
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,
1998 1997 1996 1995 1994
------ ------ ------ ------ ------------
<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....................... 0.03(A) 0.04(A) 0.04(A) 0.04 0.02
Less dividends from net investment income... (0.03) (0.04) (0.04) (0.04) (0.02)
------ ------ ------ ------ ------
Net asset value, end of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return (annualized)(B).................... 3.46% 3.52% 3.59% 3.75% 2.44%
====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands).... $ 847 $ 369 $ 6 $ 7 $9,736
Ratios to average net assets
(annualized)(B):
Expenses............................... 0.33%(A) 0.31%(A) 0.27%(A) 0.35% 0.30%
Net investment income.................. 3.35%(A) 3.49%(A) 3.49%(A) 3.70% 2.38%
</TABLE>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Municipal Money Market Portfolio.
(B) Operating results of each class of the Municipal Money Market Fund in the
years and periods indicated below excluded fees waived by the Manager.
Results prior to fees waived were as follows:
<TABLE>
<CAPTION>
Institutional Class
------------------------------------------------
November 10,
Year Ended October 31, 1993 to
--------------------------------- October 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets
(annualized)................................ NA 0.32% 0.33% 0.55% 0.50%
Ratio of net investment income to average net
assets (annualized)......................... NA 3.48% 3.43% 3.50% 2.18%
</TABLE>
(C) 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.
(D) 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> 79
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PlanAhead Class Platinum Class
- -------------------------------------------------------- --------------------------------------
August 1, November 7,
Year Ended October 31, to Year Ended October 31, 1995 to
- ---------------------------------------- October 31, ----------------------- October 31,
1998 1997 1996 1995 1994 1998 1997 1996
- ------- ------ ------ ------ ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------- ------ ------ ------ ------ ------- ------- -------
0.03 (A) 0.03(A) 0.03(A) 0.03 0.01 0.03(A) 0.03(A) 0.03(A)
(0.03) (0.03) (0.03) (0.03) (0.01) (0.03) (0.03) (0.03)
- ------- ------ ------ ------ ------ ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ====== ======= ======= =======
3.17% 3.24% 3.27% 3.39% 2.35%(C) 2.75% 2.79% 2.88%(D)
======= ====== ====== ====== ====== ======= ======= =======
$13,474 $9,590 $2,340 $ 129 $ - $87,852 $63,883 $49,862
0.64% (A) 0.60%(A) 0.62%(A) 0.72% 0.77% 1.04%(A) 1.03%(A) 0.97%(A)
3.07% (A) 3.18%(A) 3.12%(A) 3.32% 2.49% 2.69%(A) 2.75%(A) 2.72%(A)
</TABLE>
<TABLE>
<CAPTION>
PlanAhead Class Platinum Class
- -------------------------------------------------------- --------------------------------------
August 1, November 7,
Year Ended October 31, to Year Ended October 31, 1995 to
- ---------------------------------------- October 31, ----------------------- October 31,
1998 1997 1996 1995 1994 1998 1997 1996
- ------- ------ ------ ------ ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NA 0.61% 0.67% 0.92% 0.97% 1.07% 1.04% 1.02%
NA 3.17% 3.07% 3.12% 2.29% 2.66% 2.74% 2.67%
</TABLE>
15
<PAGE> 80
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,
---------------------------------------------------
1998 1997(C) 1996 1995 1994
------- ------- ------- ------- -------
<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(A) 0.05(A) 0.05(A) 0.06 0.04
Less dividends from net investment income............... (0.05) (0.05) (0.05) (0.06) (0.04)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return (annualized)................................... 5.47% 5.36% 5.29% 5.67% 3.70%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $39,004 $29,946 $25,595 $47,184 $67,607
Ratios to average net assets (annualized)(E):
Expenses............................................ 0.30%(A) 0.27%(A) 0.32%(A) 0.32% 0.25%
Net investment income............................... 5.34%(A) 5.24%(A) 5.16%(A) 5.49% 3.44%
</TABLE>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services U.S. Government Money Market Portfolio.
(B) 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.
(C) 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.
(D) 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.
(E) Operating results of the Platinum Class excluded fees waived by the Manager
during the year ended October 31, 1998. The ratio of expenses to average net
assets was 1.02% and the ratio of net investment income to average net
assets was 4.62% prior to expenses waived.
16
<PAGE> 81
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, October 31, November 7, 1995
- ----------------------------------------- to October 31, ----------------- to October 31,
1998 1997(C) 1996 1995 1994 1998 1997(C) 1996
- ------- ------- ------ ------ -------------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------- ------ ------ ------ ------ ------- ------- -------
0.05 (A) 0.05(A) 0.05(A) 0.05 0.01 0.05(A) 0.05(A) 0.04(A)
(0.05) (0.05) (0.05) (0.05) (0.01) (0.05) (0.05) (0.04)
- ------- ------ ------ ------ ------ ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ====== ====== ======= ======= =======
5.13% 5.08% 4.94% 5.19% 3.58%(B) 4.71% 4.61% 4.58%(D)
======= ====== ====== ====== ====== ======= ======= =======
$99,869 $4,046 $1,822 $ 530 $ - $78,412 $68,439 $52,153
0.57% (A) 0.52%(A) 0.67%(A) 0.76% 0.75% 1.01%(A) 0.99%(A) 1.00%(A)
5.01% (A) 5.00%(A) 4.74%(A) 5.19% 3.94% 4.62%(A) 4.53%(A) 4.35%(A)
</TABLE>
17
<PAGE> 82
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, 1998, 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, 1998, 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, 1998,
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
Dallas, Texas
December 17, 1998
18
<PAGE> 83
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
EURODOLLAR TIME DEPOSITS (NOTE A) - 9.86%
Banque Paribas, 5.625%, Due 11/2/1998....................... $ 100,000 $ 100,000
Den Danske Bank AG, 5.625%, Due 11/2/1998................... 42,243 42,243
Svenska Handelsbanken, 5.375%, Due 11/2/1998................ 100,940 100,940
----------
TOTAL EURODOLLAR TIME DEPOSITS.......................... 243,183
----------
CERTIFICATES OF DEPOSIT (NOTE A) - 24.91%
FOREIGN BANKS - 14.77%
Instituto San Paolo DiTorino, 5.464%, Due 6/8/1999.......... 95,000 94,961
Merita North America, Incorporated, 4.97%, Due 2/22/1999.... 50,000 49,220
Skandinaviska Enskilda Banken, Variable Rate, 5.44%, Due
6/15/1999................................................. 95,000 95,000
Societe Generale, New York, Variable Rate, 5.249%, Due
1/19/1999................................................. 100,000 99,990
AB Spintab, Variable Rate, 5.625%, Due 5/26/1999............ 25,000 24,994
----------
TOTAL FOREIGN BANKS..................................... 364,165
----------
DOMESTIC BANKS - 10.14%
Banco Popular de Puerto Rico, Variable Rate 5.688%, Due
5/10/1999................................................. 50,000 50,000
First Union National Bank, 5.32%, Due 3/29/1999............. 50,000 50,000
Mellon Bank, N.A., 5.48%, Due 3/12/1999..................... 50,000 50,000
PNC Bank, N.A., 5.233%, Due 1/19/1999....................... 100,000 99,988
----------
TOTAL DOMESTIC BANKS.................................... 249,988
----------
TOTAL CERTIFICATES OF DEPOSIT........................... 614,153
----------
PROMISSORY NOTES (NOTE A) - 22.91%
Combined Insurance Company of America, Variable Rate,
5.654%, Due 12/10/1998 (Note C)........................... 50,000 50,000
First Allmerica Financial Life Insurance Company, Variable
Rate, 5.757%, Due 11/5/1998 (Note C)...................... 90,000 90,000
General American Life Insurance Company, 5.55%, Due
11/20/1998 (Note B)....................................... 110,000 110,000
Goldman Sachs Group L.P., Variable Rate, 5.318%, Due
7/12/1999 (Note B)........................................ 130,000 130,000
Jackson National Life Insurance Company, 5.645%, Due
9/1/1999 (Note B)......................................... 100,000 100,000
Security Life of Denver Insurance Company, Variable Rate
5.50%, Due 3/24/1999 (Note C)............................. 40,000 40,000
5.737%, Due 11/19/1998 (Note C)........................... 15,000 15,000
Transamerica Life & Annuity Insurance Company, 5.313%, Due
5/13/1999 (Note B)........................................ 30,000 30,000
----------
TOTAL PROMISSORY NOTES.................................. 565,000
----------
COMMERCIAL PAPER (NOTE A) - 15.72%
Bank Brussels Lambert North America, Incorporated, 5.20%,
Due 2/12/1999............................................. 98,000 96,500
Credit Suisse First Boston, Incorporated, 5.133%, Due
4/13/1999................................................. 50,000 48,868
General Electric Capital Corporation, 5.35%, Due 3/4/1999... 130,000 129,360
Merita North America, Incorporated, 5.14%, Due 1/29/1999.... 20,000 19,746
Salomon Smith Barney Holdings, Incorporated, 5.35%, Due
3/9/1999.................................................. 50,000 49,049
Swedbank, Incorporated, 5.10%, Due 3/2/1999................. 45,000 44,229
----------
TOTAL COMMERCIAL PAPER.................................. 387,752
----------
VARIABLE RATE MEDIUM-TERM NOTES (NOTE A) - 26.05%
American Honda Finance Corporation, 144A, 5.329%, Due
4/16/1999................................................. 95,000 95,000
Bankers Trust New York Corporation, 5.667%, Due 2/19/1999... 40,000 39,999
Fleet Credit Card, LLC, 5.85%, Due 3/19/1999................ 10,000 10,015
General Motors Acceptance Corporation, 5.737%, Due 2/2/2000
(Note C).................................................. 115,000 115,000
International Business Machines Corporation, 5.454%, Due
4/5/1999.................................................. 88,000 87,978
Lehman Brothers Holdings, Incorporated, 5.229%, Due
1/20/1999................................................. 100,000 100,000
Merrill Lynch and Company, Incorporated, 5.887%, Due
2/5/1999.................................................. 15,000 15,010
Morgan Stanley Group, Incorporated, 5.72%, Due 3/1/1999..... 6,000 6,006
</TABLE>
See accompanying notes
19
<PAGE> 84
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
NationsBank N.A., 5.60%, Due 12/18/1998..................... $ 32,000 $ 32,007
Sanwa Business Credit Corporation, 144A, 5.787%, Due
5/14/1999 (Note B)........................................ 100,000 100,000
AB Spintab, 5.563%, Due 3/12/1999........................... 41,500 41,503
----------
TOTAL VARIABLE RATE MEDIUM-TERM NOTES................... 642,518
----------
TOTAL INVESTMENTS - 99.45% (COST $2,452,606)................ 2,452,606
----------
OTHER ASSETS, NET OF LIABILITIES - 0.55%.................... 13,588
----------
TOTAL NET ASSETS - 100%..................................... $2,466,194
==========
</TABLE>
- ---------------
Based on the cost of investments of $2,452,606 for federal income tax purposes
at October 31, 1998, 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 an unconditional put back to the issuer with seven
calendar days notice.
(C) Obligation is subject to an unconditional put back to the issuer with ninety
calendar days notice.
ABBREVIATION:
AG - Company
LLC - Limited Liability Corporation
L.P. - Limited Partnership
See accompanying notes
20
<PAGE> 85
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
MUNICIPAL OBLIGATIONS - 97.07%
COMMERCIAL PAPER (NOTE A) - 21.57%
Carbon County, Pennsylvania Industrial Development Authority
Resource Recovery Bonds, (Panther Creek Project), Series
1991A, 3.55%, Due 12/10/1998, LOC National Westminster
Bank, PLC................................................. $ 2,000 $ 2,000
City of Austin, Texas Combined Utility Systems Commercial
Paper Notes (Travis and Williamson Counties Project),
3.40%, Due 11/12/1998, LOC Morgan Guaranty Trust.......... 4,000 4,000
City of Austin, Texas Combined Utility Systems Commercial
Paper Notes (Travis and Williamson Counties Project),
3.15%, Due 2/12/1999, LOC Morgan Guaranty Trust........... 1,200 1,200
City of Philadelphia, 3.50%, Due 12/17/1998, LOC Canadian
Imperial Bank of Commerce................................. 3,000 3,000
The Economic Development Corporation of the Township of
Cornell Michigan Environmental Improvement Revenue Bonds,
(Mead-Escanala Paper Company Project), Series 1986, 3.45%,
Due 11/18/1998, LOC Credit Suisse......................... 3,500 3,500
Intermountain Power Agency Commercial Paper Notes, 3.55%,
Series B, Due 11/13/1998, LOC Bank of America............. 1,500 1,500
Montgomery County, Maryland Consolidated Commercial Paper
Bond Anticipation Notes, Series 1995, 3.00%, Due 3/10/1999
LOC Union Bank of Switzerland............................. 1,500 1,500
North Central Texas Health Facilities Development
Corporation (Methodist Hospital of Dallas Project), Bond
Insurance - MBIA, Series 1991 A, 3.40%, Due 12/17/1998,
SPA Rabobank Nederland.................................... 2,000 2,000
Palm Beach County, Florida Health Facilities Authority
Pooled Hospital Loan Program, Bond Insurance MBIA, 3.40%,
Due 12/10/1998, SPA Credit Suisse......................... 2,500 2,500
Sweetwater County, Wyoming Customized Purchase Pollution
Control Revenue Refunding Bonds (PacifiCorp Project),
Series 1988 A, 3.50%, Due 11/9/1998, LOC Union Bank of
Switzerland............................................... 4,500 4,500
Toledo-Lucas County, Ohio Port Facility Refunding Revenue
Bonds (CSX Transportation, Incorporated), Series 1992,
2.95%, Due 2/4/1999, LOC Bank of Nova Scotia.............. 1,700 1,700
----------
TOTAL COMMERCIAL PAPER.................................. 27,400
----------
VARIABLE RATE DEMAND OBLIGATIONS (NOTE A) - 75.50%
ARIZONA - 2.05%
Pima County, Arizona Industrial Development Authority
(Tucson Electric Power Company Retirement Project), 3.20%,
Due 10/1/2022, LOC Societe Generale....................... 2,600 2,600
----------
TOTAL ARIZONA........................................... 2,600
----------
CALIFORNIA - 1.81%
California Pollution Control Finance Authority Resource
Recovery Revenue Bonds (Wadham Energy Limited
Partnership), Series 1987A, 3.65%, Due 11/1/2017, LOC
Banque Paribas............................................ 2,300 2,300
California Pollution Control Finance Authority Solid Waste
Revenue Bonds (Taormina Industries, Incorporated Project
), Series 1994 B, 4.25%, Due 8/1/2014, LOC Sanwa Bank,
Limited................................................... 5 5
----------
TOTAL CALIFORNIA........................................ 2,305
----------
COLORADO - 1.50%
Moffat County, Colorado Pollution Control Revenue Bonds (Ute
Electric Company Project), Bond Insurance - AMBAC
Indemnity Corporation, Series 1984, 3.20%, Due 7/1/2010,
SPA Societe Generale...................................... 1,900 1,900
----------
TOTAL COLORADO.......................................... 1,900
----------
CONNECTICUT - 3.15%
Connecticut State Health and Education Facilities Authority
Revenue Bonds (Edgehill Project), Series 1997B, 3.10%, Due
7/1/2004, LOC Banque Paribas.............................. 4,000 4,000
----------
TOTAL CONNECTICUT....................................... 4,000
----------
DISTRICT OF COLUMBIA - 0.47%
District of Columbia General Obligation Bonds, Series B-1,
3.75%, Due 6/1/2003, LOC Societe Generale................. 600 600
----------
TOTAL DISTRICT OF COLUMBIA.............................. 600
----------
</TABLE>
See accompanying notes
21
<PAGE> 86
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
FLORIDA - 3.62%
Hillsborough County Industrial Development Authority
Adjustable Tender Revenue Bonds, (Seaboard Tampa Terminal
Venture Project), Series 1986, 3.15%, Due 12/1/2016 LOC
First Union Bank.......................................... $ 2,000 $ 2,000
Orlando, Florida Special Assessment Revenue Bonds (Republic
Drive Interchange Project), Series 1997 A, 2.95%, Due
10/1/2021, LOC Morgan Guaranty Trust...................... 2,600 2,600
----------
TOTAL FLORIDA........................................... 4,600
----------
GEORGIA - 6.69%
Clayton County, Georgia Housing Authority (Chateau Forest
Apartments), Series E, Bond Insurance - Financial Security
Assurance, 3.15%, Due 1/1/2021, SPA Barclays Bank, PLC.... 5,000 5,000
Thomaston-Upson County Industrial Development Revenue
Authority (Yamaha Music Manufacturing, Incorporated
Project), Series 1988, 4.20%, Due 8/1/2018, LOC Bank of
Tokyo-Mitsubishi, Limited................................. 3,500 3,500
----------
TOTAL GEORGIA........................................... 8,500
----------
ILLINOIS - 5.69%
City of Chicago, Illinois Multi-Family Housing Revenue Bonds
(Waveland Associates Project), Series 1985 A, 3.15%, Due
11/1/2010, LOC Union Bank of Switzerland.................. 1,500 1,500
Illinois Development Finance Authority (Illinois Power
Project), Series 1987B, 3.35%, Due 3/1/2017, LOC Bank of
Tokyo-Mitsubishi, Limited................................. 900 900
Illinois Health Facilities Authority (Loyola University
Health System B Revenue Bonds), Bond Insurance - MBIA,
3.05%, Due 7/1/2024, SPA Credit Suisse.................... 1,900 1,900
Illinois State Toll Highway Authority Refunding Revenue
Bonds, Bond Insurance - MBIA, Series 1993 B, 3.05%, Due
1/1/2010, SPA Societe Generale............................ 2,500 2,500
Oswego, Illinois Industrial Development Revenue Bonds
(Griffith Laboratories World Wide, Incorporated Project),
Series 1995, 3.20%, Due 7/1/2025, LOC ABN AMRO Bank,
N.V....................................................... 430 430
----------
TOTAL ILLINOIS.......................................... 7,230
----------
INDIANA - 1.15%
Fort Wayne, Indiana Industrial Economic Development Revenue
Bonds (ND-Tech Corporation Project), Series 1989, 3.20%,
Due 7/1/2009, LOC Societe Generale........................ 1,000 1,000
Princeton Industrial Development Revenue Bonds (Orion
Electric America, Incorporated Project), Series 1987,
4.50%, Due 4/30/2017, LOC Bank of Tokyo-Mitsubishi,
Limited................................................... 455 455
----------
TOTAL INDIANA........................................... 1,455
----------
IOWA - 1.55%
Dubuque, Iowa Industrial Development Revenue Bonds (Swiss
Valley Farms Company Project), Series 1987, 3.20%, Due
12/1/2001, LOC Rabobank Nederland Bank.................... 1,150 1,150
Polk County, Iowa Hospital Equipment and Improvement, Bond
Insurance - MBIA, 3.15%, Due 12/1/2005, SPA Bank of New
York Company, Incorporated................................ 815 815
----------
TOTAL IOWA.............................................. 1,965
----------
LOUISIANA - 2.02%
Jefferson Parish, Louisiana Hospital District #1 (West
Jefferson Medical Center Project), Series 1986, 3.15%, Due
1/1/2026, LOC Rabobank Nederland Bank..................... 1,185 1,185
Jefferson Parish, Louisiana Industrial Development Board
Revenue Refunding Bonds (George J. Ackel Sr. Project),
Series 1986, 3.20%, Due 12/1/2004, LOC Banclays Bank,
PLC....................................................... 400 400
Louisiana Public Facilities Finance Authority (College &
University Equipment & Capital Facilities Revenue Bonds),
Bond Insurance - FGIC, Series 1985, 3.15%, Due 9/1/2010,
LOC Societe Generale...................................... 985 985
----------
TOTAL LOUISIANA......................................... 2,570
----------
MISSOURI - 4.33%
Missouri Higher Education Loan Authority Revenue Bonds,
Series 1988A, 3.10%, Due 6/1/2017, LOC National
Westminster Bank, PLC..................................... 5,500 5,500
----------
TOTAL MISSOURI.......................................... 5,500
----------
</TABLE>
See accompanying notes
22
<PAGE> 87
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
NEBRASKA - 0.79%
Lancaster County, Nebraska Industrial Revenue Bonds
(Sun-Husker Foods, Incorporated Project), Series 1989,
4.20%, Due 8/15/2009, LOC Bank of Tokyo-Mitsubishi,
Limited................................................... $ 1,000 $ 1,000
----------
TOTAL NEBRASKA.......................................... 1,000
----------
NEVADA - 3.43%
Nevada Housing Division Multi-Unit Housing Revenue Bonds
(Oakmont at Reno Project), 3.40%, Due 5/1/2016, LOC Banque
Paribas................................................... 4,350 4,350
----------
TOTAL NEVADA............................................ 4,350
----------
NEW YORK - 6.85%
Franklin County, New York Industrial Development Agency
Revenue Bonds, (KES Chateaugay, Limited Partnership),
Series A, 4.20%, Due 7/1/2021, LOC Bank of Tokyo -
Mitsubishi, Limited....................................... 5,000 5,000
New York, New York General Obligation Bonds, Series 1993B-2,
3.60%, Due 8/15/2020, LOC Morgan Guaranty Trust........... 1,600 1,600
New York, New York General Obligation Bonds, Series 1993B-3,
3.60%, Due 8/15/2021, LOC Morgan Guaranty Trust........... 200 200
New York City, General Obligation Bonds, Series B-2, 3.60%,
Due 8/15/2019, LOC Morgan Guaranty Trust.................. 500 500
New York City, General Obligation Bonds, Series 1993 B, Bond
Insurance FGIC 3.60%, Due 10/1/2022....................... 1,400 1,400
----------
TOTAL NEW YORK.......................................... 8,700
----------
NORTH CAROLINA - 1.42%
Wake County, North Carolina Industrial Facilities &
Pollution Control Financing Authority Revenue Bonds,
3.75%, Due 3/1/2017, LOC First Union Bank................. 1,800 1,800
----------
TOTAL NORTH CAROLINA.................................... 1,800
----------
OREGON - 2.36%
State of Oregon (Toyo Tanso USA), Series CXLVII, 3.48%, Due
2/1/2012, LOC Bank of Tokyo - Mitsubishi, Limited......... 3,000 3,000
----------
TOTAL OREGON............................................ 3,000
----------
PENNSYLVANIA - 9.85%
Cambria County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Bonds (Cambria Cogen
Company Project), Series 1989 V-1, 3.15%, Due 9/1/2019,
LOC ABN AMRO Bank, N.V.................................... 1,000 1,000
Cambria County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Bonds (Cambria Cogen
Company Project), Series 1989 V-2, 3.15%, Due 9/1/2019,
LOC ABN AMRO Bank, N.V.................................... 900 900
Cambria County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Bonds (Cambria Cogen
Company Project), Series 1991 V-1, 3.15%, Due 9/1/2019,
LOC ABN AMRO Bank, N.V.................................... 2,250 2,250
Delaware Valley, Pennsylvania Regional Finance Authority
Local Government Revenue Bonds, Series D, 3.10%, Due
12/1/2020 LOC Credit Swisse............................... 2,000 2,000
Gettysburg Area Industrial Development Authority Refunding
Bonds (Dal-Tile Corporation), Series 1987B, 3.25%, Due
3/1/2004, LOC Credit Suisse............................... 1,370 1,370
Northumberland County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Bonds (Foster Wheeler
Mt. Carmel, Incorporated Project), Series 1987A, 3.20%,
Due 2/1/2010, LOC Union Bank of Switzerland............... 1,000 1,000
Northumberland County, Pennsylvania Industrial Development
Authority Resource Recovery Revenue Bonds (Foster Wheeler
Mt. Carmel, Incorporated Project), Series 1987B, 3.20%,
Due 2/1/2010, LOC Union Bank of Switzerland............... 785 785
Schuykill County, Pennsylvania Industrial Development
Authority Revenue Bonds, 3.10%, Due 12/1/2002, LOC Mellon
Bank, N.A................................................. 3,200 3,200
----------
TOTAL PENNSYLVANIA...................................... 12,505
----------
</TABLE>
See accompanying notes
23
<PAGE> 88
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
SOUTH CAROLINA - 0.94%
Florence County, South Carolina Solid Waste Disposal and
Wastewater Treatment Center Revenue Bonds (Roche Carolina
Incorporated Project), 3.85%, Due 4/1/2027, LOC Union Bank
of Switzerland............................................ $ 1,200 $ 1,200
----------
TOTAL SOUTH CAROLINA.................................... 1,200
----------
TENNESSEE - 1.65%
Covington, Tennessee Industrial Development Board Revenue
Bonds (Charms Company Project), Series 1992, 3.20%, Due
6/1/2027, LOC Societe Generale............................ 300 300
Rutherford County, Tennessee (Outboard Marine Project),
Series 1987, 3.30%, Due 10/1/2007, LOC First Chicago NBD
Corporation............................................... 1,800 1,800
----------
TOTAL TENNESSEE......................................... 2,100
----------
TEXAS - 3.55%
Texas Higher Education Authority, Incorporated Educational
Facilities Revenue Bonds, Series 1985 B, Bond Insurance
FGIC, 3.15%, Due 12/1/2025................................ 510 510
Texas Small Business Industrial Development Corporation
Revenue Bond (Texas Public Facilities Capital Access),
3.20%, Due 7/1/2026, LOC National Westmister Bank, PLC.... 4,000 4,000
----------
TOTAL TEXAS............................................. 4,510
----------
UTAH - 3.15%
Utah State Board of Regents Student Loan Revenue Bonds, Bond
Insurance-AMBAC Indemnity Corporation, Series 1988C,
3.10%, Due 11/1/2013, SPA Dresdner Bank AG................ 1,000 1,000
Utah Student Board of Regents Student Loan Revenue Bonds,
Bond Insurance - AMBAC Indemnity Corporation, Series B,
3.00%, Due 11/1/2000, SPA Dresdner Bank AG................ 3,000 3,000
----------
TOTAL UTAH.............................................. 4,000
----------
VERMONT - 1.18%
Vermont, Industrial Development Authority (Ryegate Project),
Series 1990, 3.35%, Due 12/1/2015, LOC ABN AMRO Holding,
N.V....................................................... 1,500 1,500
----------
TOTAL VERMONT........................................... 1,500
----------
VIRGINIA - 0.16%
Virginia Housing Development Authority (AHC Service
Corporation), Series 1987A, 4.00%, Due 9/1/2017, LOC Bank
of Tokyo - Mitsubishi, Limited............................ 200 200
----------
TOTAL VIRGINIA.......................................... 200
----------
WASHINGTON - 5.26%
Pierce County, Washington Economic Development Corporation
Dock & Warf Facilities Revenue Bonds (SCS Industries
Project), Series 1995, 3.20%, Due 7/1/2030, LOC Bank of
Nova Scotia............................................... 3,585 3,585
Port of Vancouver Washington Adjustable Tender Refunding
Revenue Bonds United Grain Corporation of Oregon Project,
Series 1984, 3.15%, Due 12/1/2009, LOC Bank of
America, N.A.............................................. 3,100 3,100
----------
TOTAL WASHINGTON........................................ 6,685
----------
WEST VIRGINIA - 0.88%
Marion County, West Virginia Solid Waste Disposal Facility
Revenue Bonds, Series 1990B, 3.10%, Due 10/1/2017, LOC
National Westminster Bank, PLC............................ 115 115
Marion County, West Virginia Solid Waste Disposal Facility
Revenue Bonds, Series 1990C, 3.10%, Due 10/1/2017,
National Westminster Bank, PLC............................ 1,000 1,000
----------
TOTAL WEST VIRGINIA..................................... 1,115
----------
TOTAL VARIABLE RATE DEMAND OBLIGATIONS.................. 95,890
----------
TOTAL MUNICIPAL OBLIGATIONS............................. 123,290
----------
</TABLE>
See accompanying notes
24
<PAGE> 89
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
OTHER INVESTMENTS - 3.88%
Alliance Capital Management Institutional Reserves Tax-Free
Portfolio (#38)........................................... 3,574 $ 3,574
Provident Institutional Funds Municipal Cash Fund........... 1,346 1,346
----------
TOTAL OTHER INVESTMENTS................................. 4,920
----------
TOTAL INVESTMENTS - 100.95% (COST $128,210)................. 128,210
----------
LIABILITIES, NET OF OTHER ASSETS - (0.95%).................. (1,205)
----------
TOTAL NET ASSETS - 100%..................................... $ 127,005
==========
</TABLE>
- ---------------
Based on the cost of investments of $128,210 for federal income tax purposes at
October 31, 1998, 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.
ABBREVIATIONS:
AG - Company
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
25
<PAGE> 90
AMR INVESTMENT SERVICES U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ---------
(dollars in thousands)
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (NOTE A) - 72.85%
Federal Home Loan Bank, Variable Rate, 5.448%, Due
5/27/1998................................................. $25,000 $ 24,989
Federal Home Loan Mortgage Corporation,
5.02%, Due 1/22/1999...................................... 20,000 19,771
4.88%, Due 3/5/1999....................................... 55,075 54,150
Federal National Mortgage Association,
5.00%, Due 1/25/1999...................................... 10,140 10,020
4.97%, Due 1/27/1999...................................... 25,000 24,707
5.457%, Due 2/19/1999, Variable Rate...................... 50,000 49,991
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS................ 183,628
--------
U.S. GOVERNMENT REPURCHASE AGREEMENTS (NOTES A AND B) - 26.84%
Goldman Sachs Tri-Party Government Repurchase Agreement,
5.52%, Due 11/2/1998 (Collateral held at The Bank of New
York Company, Incorporated by Federal Home Loan Mortgage
Corporation 6.559%, Due 6/1/2028 and Federal National
Mortgage Association, 6.131%, Due 4/1/2035 -- Market Value
$69,001).................................................. 67,648 67,648
--------
TOTAL U.S. GOVERNMENT REPURCHASE AGREEMENTS............. 67,648
--------
TOTAL INVESTMENTS - 99.69% (COST $251,276).................. 251,276
--------
OTHER ASSETS, NET OF LIABILITIES - 0.31%.................... 787
--------
TOTAL NET ASSETS - 100%..................................... $252,063
========
</TABLE>
- ---------------
Based on the cost of investments of $251,276 for federal income tax purposes at
October 31, 1998, 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, State Street Bank and Trust Company, 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
26
<PAGE> 91
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1998
- --------------------------------------------------------------------------------
<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 - $2,452,606;
$128,210; $251,276, respectively)*.................... $2,452,606 $128,210 $251,276
Dividends and interest receivable....................... 13,784 503 831
Other assets............................................ 264 - 5
---------- -------- --------
TOTAL ASSETS........................................ 2,466,654 128,713 252,112
---------- -------- --------
LIABILITIES:
Management and investment advisory fees payable (Note
2).................................................... 207 8 21
Accrued organization costs.............................. 9 9 12
Other liabilities....................................... 244 1,691 16
---------- -------- --------
TOTAL LIABILITIES................................... 460 1,708 49
---------- -------- --------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $2,466,194 $127,005 $252,063
========== ======== ========
</TABLE>
- ---------------
* Includes repurchase agreements of $67,648 for the U.S. Government Money Market
Portfolio.
See accompanying notes
27
<PAGE> 92
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S.
Municipal Government
Money Money Money
Market Market Market
-------- --------- ----------
(in thousands)
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................................... $121,562 $4,627 $10,012
-------- ------ -------
TOTAL INVESTMENT INCOME............................. 121,562 4,627 10,012
-------- ------ -------
EXPENSES:
Management and investment advisory fees (Note 2)........ 2,982 176 248
Custodian fees.......................................... 180 25 21
Professional fees....................................... 39 2 4
Other expenses.......................................... 109 29 29
-------- ------ -------
TOTAL EXPENSES...................................... 3,310 232 302
-------- ------ -------
NET INVESTMENT INCOME....................................... 118,252 4,395 9,710
-------- ------ -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments................. 41 12 -
-------- ------ -------
NET GAIN (LOSS) ON INVESTMENTS...................... 41 12 -
-------- ------ -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $118,293 $4,407 $ 9,710
======== ====== =======
</TABLE>
See accompanying notes
28
<PAGE> 93
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Municipal Money Market U.S. Government Money Market
-------------------------- ----------------------- -----------------------------
Year Ended Year Ended Year Ended
October 31, October 31, October 31,
-------------------------- ----------------------- -----------------------------
1998 1997 1998 1997 1998 1997
----------- ------------ ---------- ---------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income........... $ 118,252 $ 103,560 $ 4,395 $ 3,432 $ 9,710 $ 6,233
Net realized gain on investments
and foreign currency
transactions.................. 41 31 12 - - 5
----------- ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS................ 118,293 103,591 4,407 3,432 9,710 6,238
----------- ------------ --------- --------- --------- ---------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS:
Contributions................... 5,610,180 18,538,305 168,434 186,159 319,177 365,792
Withdrawals..................... (5,233,609) (18,435,488) (146,527) (170,158) (208,604) (330,942)
----------- ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS...... 376,571 102,817 21,907 16,001 110,573 34,850
----------- ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS.......... 494,864 206,408 26,314 19,433 120,283 41,088
----------- ------------ --------- --------- --------- ---------
NET ASSETS:
Beginning of period............. 1,971,330 1,764,922 100,691 81,258 131,780 90,692
----------- ------------ --------- --------- --------- ---------
END OF PERIOD................... $ 2,466,194 $ 1,971,330 $ 127,005 $ 100,691 $ 252,063 $ 131,780
=========== ============ ========= ========= ========= =========
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- --------------------------------------------------------------------------------------------------------------------------
RATIOS*:
Expenses to average net
assets........................ 0.16% 0.16% 0.19% 0.18% 0.17% 0.19%
Net investment income to average
net assets.................... 5.56% 5.52% 3.55% 3.59% 5.45% 5.32%
</TABLE>
- ---------------
* Operating results of the Municipal Money Market Portfolio excluded fees waived
by the Manager during the year ended October 31, 1997. The ratio of expenses
to average net assets was .19% and the ratio of net investment income to
average net assets was 3.58% prior to expenses waived.
See accompanying notes
29
<PAGE> 94
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
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 -- CONTINUED
October 31, 1998
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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.
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, 1998, the cost of air transportation was not material
to any of the Portfolios.
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