AMERICAN AADVANTAGE FUNDS, 497, 1998-03-04

AMERICAN AADVANTAGE FUNDS
497, 1998-03-04

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<PAGE> 1

THIS PROSPECTUS contains important information about the INSTITUTIONAL CLASS OF
THE AMERICAN AADVANTAGE FUNDS ("Trust"), an open-end management investment
company which consists of multiple investment portfolios. This Prospectus
pertains only to the nine funds listed on this cover page (individually
referred to as a "Fund" and, collectively, the "Funds"). EACH FUND, EXCEPT THE
S&P 500 INDEX FUND, SEEKS ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS
INVESTABLE ASSETS IN A CORRESPONDING PORTFOLIO OF THE AMR INVESTMENT SERVICES
TRUST ("AMR TRUST"). THE S&P 500 INDEX FUND INVESTS ALL OF ITS INVESTABLE
ASSETS IN THE EQUITY 500 INDEX PORTFOLIO. (THE EQUITY 500 INDEX PORTFOLIO AND
THE PORTFOLIOS OF THE AMR TRUST ARE REFERRED TO HEREIN INDIVIDUALLY AS A
"PORTFOLIO" AND, COLLECTIVELY, THE "PORTFOLIOS.") EACH PORTFOLIO HAS AN
INVESTMENT OBJECTIVE IDENTICAL TO THE INVESTING FUND. The investment experience
of each Fund will correspond directly with the investment experience of each
Portfolio. Each Fund consists of multiple classes of shares designed to meet
the needs of different groups of investors. Institutional Class shares are
offered primarily to institutional investors, investing at least $2 million in
the Funds. Prospective Institutional Class investors should read this
Prospectus carefully before making an investment decision and retain it for
future reference.

IN ADDITION TO THIS PROSPECTUS, a Statement of Additional Information ("SAI")
dated March 1, 1998 has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The SAI contains more detailed
information about the Funds. For a free copy of the SAI, call (817) 967-3509.
For further information about the Institutional Class or for information on the
other classes of shares, please refer to the appropriate address and phone
number on the back cover of this Prospectus.

The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding the Funds and the Portfolios.

AN INVESTMENT IN ANY OF THE MONEY MARKET FUNDS IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THEY WILL
BE ABLE TO MAINTAIN A STABLE PRICE OF $1.00 PER SHARE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPECTUS
March 1, 1998
[AMERICAN AADVANTAGE LOGO]
- Institutional Class -
BALANCED FUND
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND
S&P 500 INDEX FUND
INTERMEDIATE BOND FUND
SHORT-TERM BOND FUND
MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
Managed by AMR Investment Services, Inc.

LOGO
<PAGE> 2

The AMERICAN AADVANTAGE BALANCED FUND(SM) ("Balanced Fund") seeks income and
capital appreciation by investing all of its investable assets in the Balanced
Portfolio of the AMR Trust ("Balanced Portfolio") which in turn primarily
invests in equity and debt securities (such as stocks and bonds).

The AMERICAN AADVANTAGE GROWTH AND INCOME FUND(SM) ("Growth and Income Fund")
seeks long-term capital appreciation and current income by investing all of its
investable assets in the Growth and Income Portfolio of the AMR Trust ("Growth
and Income Portfolio") which in turn primarily invests in equity securities
(such as stocks).

The AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) ("International Equity
Fund") seeks long-term capital appreciation by investing all of its investable
assets in the International Equity Portfolio of the AMR Trust ("International
Equity Portfolio") which in turn primarily invests in equity securities of
issuers based outside the United States (such as foreign stocks).

The AMERICAN AADVANTAGE S&P 500 INDEX FUND(1) ("S&P 500 Index Fund") seeks to
provide investment results that, before expenses, correspond to the total return
of common stocks publicly traded in the United States, as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500" or "Index"), by
investing all of its investable assets in the Equity 500 Index Portfolio which
in turn invests in common stocks of companies that compose the S&P 500.

The AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) ("Intermediate Bond Fund")
and the AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) ("Short-Term Bond Fund,"
formerly the American AAdvantage Limited-Term Income Fund) each seeks income and
capital appreciation by investing all of its investable assets in the
Intermediate Bond Portfolio of the AMR Trust ("Intermediate Bond Portfolio") and
the Short-Term Bond Portfolio of the AMR Trust ("Short-Term Bond Portfolio,"
formerly the Limited-Term Income Portfolio), respectively, which in turn
primarily invest in debt obligations. The Intermediate Bond Portfolio seeks to
maintain a dollar weighted average duration of three to seven years and the
Short-Term Bond Portfolio seeks to maintain a weighted average duration of one
to three years.

The AMERICAN AADVANTAGE MONEY MARKET FUND(SM) ("Money Market Fund"), AMERICAN
AADVANTAGE MUNICIPAL MONEY MARKET FUND(SM) ("Municipal Money Market Fund") and
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET FUND(SM) ("U.S. Government
Money Market Fund" (collectively, the "Money Market Funds") each seeks current
income, liquidity, and the maintenance of a stable price per share of $1.00 by
investing all of its investable assets in the Money Market Portfolio of the AMR
Trust ("Money Market Portfolio"), the Municipal Money Market Portfolio of the
AMR Trust ("Municipal Money Market Portfolio") and the U.S. Government Money
Market Portfolio of the AMR Trust ("U.S. Government Money Market Portfolio"),
respectively (collectively the "Money Market Portfolios"), which in turn invest
in high quality, short-term obligations. The Municipal Money Market Portfolio
invests primarily in municipal obligations and the U.S. Government Money Market
Portfolio invests exclusively in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in repurchase agreements that
are collateralized by such obligations.

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

(1) S&P is a trademark of The McGraw-Hill Companies, Inc. and has been licensed
for use. "Standard and Poor's(R)," "S&P(R)," "Standard & Poor's 500," "S&P
500(R)" and "500" are all trademarks of The McGraw-Hill Companies, Inc. and
have been licensed for use by Bankers Trust Company. The S&P 500 Index Fund
is not sponsored, sold or promoted by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing in
that Fund.
PROSPECTUS
2
<PAGE> 3

investment companies which directly acquire and manage their own portfolios of
securities. Accordingly, investors should carefully consider this investment
approach. See "Investment Objectives, Policies and Risks -- Additional
Information About the Portfolios." A Fund may withdraw its investment in a
corresponding Portfolio at any time if the Trust's Board of Trustees ("Board")
determines that it would be in the best interest of that Fund and its
shareholders to do so. Upon any such withdrawal, that Fund's assets would be
invested in accordance with the investment policies and restrictions described
in this Prospectus and the SAI.

<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Table of Fees and Expenses........................ 3
Financial Highlights.............................. 4
Introduction...................................... 12
Investment Objectives, Policies and Risks......... 13
Investment Restrictions........................... 25
Yields and Total Returns.......................... 25
Management and Administration of the Trusts....... 26
Investment Advisers............................... 29
Purchase, Redemption and Valuation of Shares...... 31
Dividends, Other Distributions and Tax Matters.... 34
General Information............................... 36
Shareholder Communications........................ 38
</TABLE>

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

TABLE OF FEES AND EXPENSES

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

<TABLE>
<CAPTION>
U.S.
GROWTH INTER- SHORT- MUNICIPAL GOVERNMENT
AND INT'L S&P 500 MEDIATE TERM MONEY MONEY MONEY
BALANCED INCOME EQUITY INDEX BOND BOND MARKET MARKET MARKET
FUND FUND FUND FUND FUND(1) FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 0.33% 0.33% 0.48% 0.05%(2) 0.25% 0.25% 0.15% 0.15% 0.15%

12b-1 Fees 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other Expenses 0.27 0.28 0.35 0.15(3) 0.34 0.32 0.08 0.16(3) 0.12
---- --- --- ---- ---- --- --- ----- -----

Total Operating Expenses 0.60% 0.61% 0.83% 0.20%(4) 0.59% 0.57% 0.23% 0.31%(4) 0.27%
==== === === ==== ==== === === ===== =====
</TABLE>

(1) Because the Intermediate Bond Fund's shares were not offered for sale prior
to September 15, 1997, annual operating expenses are based on estimated
expenses.

(2) The investment adviser has voluntarily agreed to waive a portion of its
investment advisory fee. Without such waiver, the "Management Fee" would be
equal to 0.10%.

(3) "Other Expenses" before fee waivers are estimated to be 0.53% for the S&P
500 Index Fund and 0.17% for the Municipal Money Market Fund.

(4) "Total Operating Expenses" before fee waivers are estimated to be 0.63% for
the S&P 500 Index Fund and 0.32% for the Municipal Money Market Fund.

The above expenses reflect the expenses of each Fund and the Portfolio in
which it invests. The Board believes that the aggregate per share expenses of
each Fund and its corresponding Portfolio will be approximately equal to the
expenses that the Fund would incur if its assets were invested directly in the
type of securities held by the Portfolio. The expenses of the S&P 500 Index Fund
reflect expenses of the AMR Class of the Fund, whose assets were transferred to
the Institutional Class effective March 1, 1998.

PROSPECTUS
3
<PAGE> 4

EXAMPLES

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Balanced Fund $6 $19 $33 $75

Growth and Income Fund 6 20 34 76

International Equity Fund 8 26 46 103

S&P 500 Index Fund 2 6 11 26

Intermediate Bond Fund 6 19 33 74

Short-Term Bond Fund 6 18 32 71

Money Market Fund 2 7 13 29

Municipal Money Market Fund 3 10 17 39

U.S. Government Money Market Fund 3 9 15 34
</TABLE>

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

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

FINANCIAL HIGHLIGHTS

The financial highlights in the following tables have been derived from
financial statements of the Trust. Financial highlights for each Fund except the
S&P 500 Index Fund have been audited by Ernst & Young LLP, independent auditors.
The financial highlights of the S&P 500 Index Fund have been audited by Coopers
& Lybrand, L.L.P., independent auditors. Such information should be read in
conjunction with the financial statements and the report of the independent
auditors appearing in the Annual Report incorporated by reference in the SAI,
which contains further information about performance of the Funds and can be
obtained by investors without charge.

PROSPECTUS
4
<PAGE> 5

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
BALANCED FUND -- INSTITUTIONAL CLASS(1)
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
1997(5) 1996(5)(6) 1995(4)(5) 1994(3) 1993 1992
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 15.14 $ 13.95 $ 12.36 $ 13.23 $ 11.99 $ 11.60
----- -------- -------- ----- ----- -----
Income from investment
operations:
Net investment income 0.63(7) 0.59(7) 0.54 0.57 0.49 0.55
Net gains or (losses) on
securities (both realized and
unrealized) 2.16(7) 1.61(7) 1.71 (0.54) 1.57 0.41
----- -------- -------- ----- ----- -----
Total from investment operations 2.79 2.20 2.25 0.03 2.06 0.96
----- -------- -------- ----- ----- -----
Less distributions:
Dividends from net investment
income (0.59) (0.57) (0.52) (0.56) (0.52) (0.56)
Distributions from net realized
gains on securities (1.16) (0.44) (0.14) (0.34) (0.30) (0.01)
----- -------- -------- ----- ----- -----
Total distributions (1.75) (1.01) (0.66) (0.90) (0.82) (0.57)
----- -------- -------- ----- ----- -----
Net asset value, end of period $ 16.18 $ 15.14 $ 13.95 $ 12.36 $ 13.23 $ 11.99
===== ======== ======== ===== ===== =====
Total return (annualized)(8) 20.04% 16.46% 19.39% (0.08%) 19.19% 8.75%
===== ======== ======== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period (in
thousands) $148,176 $298,009 $249,913 $222,873(13) $532,543 $370,087
Ratios to average net
assets(9)(10)(11):
Expenses 0.60%(7) 0.62%(7) 0.63% 0.36% 0.34% 0.35%
Net investment income 3.88%(7) 4.00%(7) 4.30% 4.77% 4.91% 5.31%
Portfolio turnover rate(12) 105% 76% 73% 48% 83% 80%
Average commission rate paid(12) $ 0.0385 $ 0.0409 -- -- -- --

<CAPTION>
BALANCED FUND -- INSTITUTIONAL CLASS(1)
-----------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------
1991 1990(2) 1989 1988
-----------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.87 $ 11.05 $ 10.13 $ 9.08
----- ----- ----- -----
Income from investment
operations:
Net investment income 0.58 0.57 0.53 0.56
Net gains or (losses) on
securities (both realized and
unrealized) 1.79 (1.18) 0.90 0.73
----- ----- ----- -----
Total from investment operations 2.37 (0.61) 1.43 1.29
----- ----- ----- -----
Less distributions:
Dividends from net investment
income (0.64) (0.51) (0.51) (0.24)
Distributions from net realized
gains on securities -- (0.06) -- --
----- ----- ----- -----
Total distributions (0.64) (0.57) (0.51) (0.24)
----- ----- ----- -----
Net asset value, end of period $ 11.60 $ 9.87 $ 11.05 $ 10.13
===== ===== ===== =====
Total return (annualized)(8) 25.35% (5.24%) 15.49% 14.63%
===== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period (in
thousands) $311,906 $233,702 $210,119 $147,581
Ratios to average net
assets(9)(10)(11):
Expenses 0.37% 0.44% 0.47% 0.52%
Net investment income 6.06% 6.50% 6.32% 6.25%
Portfolio turnover rate(12) 55% 62% 78% 77%
Average commission rate paid(12) -- -- -- --
</TABLE>

(1) The Balanced Fund commenced active operations on July 17, 1987.

(2) Penmark Investments, Inc. was replaced by Independence Investment
Associates, Inc. as an investment adviser to the Fund as of the close of
business on February 28, 1990.

(3) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.

(4) GSB Investment Management, Inc. was added as an investment adviser to the
Balanced Fund on January 1, 1995.

(5) 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.

(6) Brandywine Asset Management, Inc. replaced Capital Guardian Trust Company
as an investment adviser to the Fund as of April 1, 1996.

(7) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the Balanced Portfolio.

(8) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.

(9) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager,
which amounted to approximately $.01 per share in each period on an
annualized basis.

(10) The method of determining average net assets was changed from a monthly
average to a daily average starting with the year ended October 31, 1994.

(11) Annualized.

(12) On November 1, 1995 the Balanced Fund began investing all of its investable
assets in the Balanced Portfolio. Portfolio turnover rate and average
commission rate paid for the years ended October 31, 1996 and 1997 are
those of the Balanced Portfolio. Calculation and disclosure of the average
commission rate paid was not required prior to 1996.

(13) On August 1, 1994, assets of AMR Corporation and its employee benefit plans
were transferred to the AMR Class of the Fund.

PROSPECTUS
5
<PAGE> 6

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND--INSTITUTIONAL CLASS(1)
-------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
1997(5) 1996(5)(6) 1995(5) 1994(4) 1993
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.50 $ 15.91 $ 14.19 $ 14.63 $ 12.79
----- ------- ----- ----- -----
Income from investment operations:
Net investment income 0.42(7) 0.42(7) 0.41 0.43 0.36
Net gains (losses) on securities
(both realized and unrealized) 4.43%(7) 3.15(7) 2.28 0.08 2.21
----- ------- ----- ----- -----
Total from investment operations 4.85 3.57 2.69 0.51 2.57
----- ------- ----- ----- -----
Less distributions:
Dividends from net investment
income (0.41) (0.41) (0.43) (0.41) (0.37)
Distributions from net realized
gains on securities (1.31) (0.57) (0.54) (0.54) (0.36)
----- ------- ----- ----- -----
Total distributions (1.72) (0.98) (0.97) (0.95) (0.73)
----- ------- ----- ----- -----
Net asset value,
end of period $ 21.63 $ 18.50 $ 15.91 $ 14.19 $ 14.63
===== ======= ===== ===== =====
Total return (annualized)(8) 28.05% 23.37% 20.69% 3.36% 21.49%
===== ======= ===== ===== =====
Ratio/supplemental data:
Net assets,
end of period
(in thousands) $200,887 $81,183 $71,608 $22,737>(13) $477,088
Ratios to average
net assets(9)(10)(11):
Expenses 0.61%(7) 0.62%(7) 0.62% 0.33% 0.34%
Net investment income 2.10%(7) 2.55%(7) 2.84% 3.28% 3.12%
Portfolio turnover rate(12) 35% 40% 26% 23% 30%
Average commission rate paid(12) $ 0.0395 $0.0412 -- -- --

<CAPTION>
GROWTH AND INCOME FUND--INSTITUTIONAL CLASS(1)
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
1992(3) 1991 1990(2) 1989 1988
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.10 $ 9.47 $ 11.59 $ 9.96 $ 8.30
----- ----- ----- ----- -----
Income from investment operations:
Net investment income 0.39 0.42 0.42 0.42 0.42
Net gains (losses) on securities
(both realized and unrealized) 0.77 2.70 (1.94) 1.59 1.40
----- ----- ----- ----- -----
Total from investment operations 1.16 3.12 (1.52) 2.01 1.82
----- ----- ----- ----- -----
Less distributions:
Dividends from net investment
income (0.39) (0.49) (0.43) (0.38) (0.16)
Distributions from net realized
gains on securities (0.08) -- (0.17) -- --
----- ----- ----- ----- -----
Total distributions (0.47) (0.49) (0.60) (0.38) (0.16)
----- ----- ----- ----- -----
Net asset value,
end of period $ 12.79 $ 12.10 $ 9.47 $ 11.59 $ 9.96
===== ===== ===== ===== =====
Total return (annualized)(8) 10.00% 33.83% (13.52%) 20.94% 22.20%
===== ===== ===== ===== =====
Ratio/supplemental data:
Net assets,
end of period
(in thousands) $339,739 $264,628 $182,430 $187,869 $140,073
Ratios to average
net assets(9)(10)(11):
Expenses 0.36% 0.37% 0.45% 0.45% 0.53%
Net investment income 3.57% 4.19% 4.49% 4.40% 4.20%
Portfolio turnover rate(12) 35% 52% 41% 50% 56%
Average commission rate paid(12) -- -- -- -- --
</TABLE>

(1) The Growth and Income Fund commenced active operations on July 17, 1987.

(2) GSB Investment Management, Inc. was added as an investment adviser to the
Growth and Income Fund on April 10, 1990.

(3) The assets of the Growth and Income Fund previously managed by Atlanta
Capital Management were transferred to GSB Investment Management, Inc. as
of the close of business on December 5, 1991.

(4) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.

(5) 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.

(6) Brandywine Asset Management, Inc. replaced Capital Guardian Trust Company
as an investment adviser to the Fund as of April 1, 1996.

(7) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the Growth and Income Portfolio.

(8) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.

(9) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager,
which amounted to less than $.01 per share in each period on an annualized
basis.

(10) The method of determining average net assets was changed from a monthly
average to a daily average starting with the year ended October 31, 1994.

(11) Annualized.

(12) On November 1, 1995 the Growth and Income Fund began investing all of its
investable assets in the Growth and Income Portfolio. Portfolio turnover
rate and average commission rate paid for the years ended October 31, 1996
and 1997 are those of the Growth and Income Portfolio. Calculation and
disclosure of the average commission rate paid was not required prior to
1996.

(13) On August 1, 1994, assets of AMR Corporation and its employee benefit plans
were transferred to the AMR Class of the Fund.

PROSPECTUS
6
<PAGE> 7

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND--INSTITUTIONAL CLASS
-----------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED
------------------------------------------------------------------------- OCTOBER 31,
1997(5) 1996(5) 1995(5) 1994(3)(4) 1993(2) 1992 1991(1)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.01 $ 13.29 $ 12.87 $ 12.07 $ 8.93 $ 10.13 $ 10.00
----- ----- ----- ------- ----- ----- --------
Income from investment operations:
Net investment income 0.34(6) 0.28(6) 0.27 0.32 0.17 0.12 --
Net gains (losses) on securities
(both realized and unrealized) 2.44(6) 1.95(6) 0.68 1.10 3.09 (1.31) 0.13
----- ----- ----- ------- ----- ----- --------
Total from investment operations 2.78 2.23 0.95 1.42 3.26 (1.19) 0.13
----- ----- ----- ------- ----- ----- --------
Less distributions:
Dividends from net investment
income (0.30) (0.27) (0.21) (0.17) (0.12) (0.01) --
Distributions from net realized
gains
on securities (0.41) (0.24) (0.32) (0.45) -- -- --
----- ----- ----- ------- ----- ----- --------
Total distributions (0.71) (0.51) (0.53) (0.62) (0.12) (0.01) --
----- ----- ----- ------- ----- ----- --------
Net asset value, end of period $ 17.08 $ 15.01 $ 13.29 $ 12.87 $ 12.07 $ 8.93 $ 10.13
===== ===== ===== ======= ===== ===== ========
Total return (annualized)(7) 19.08% 17.27% 7.90% 11.77% 36.56% (12.07%) 5.69%
===== ===== ===== ======= ===== ===== ========
Ratios/supplemental data:
Net assets, end of period (in
thousands) $231,793 $62,992 $25,757 $23,115(13) $66,652 $38,837 $10,536
Ratios to average net assets
(annualized)(8)(9)(10):
Expenses 83%(6) 0.85%(6) 0.85% 0.61% 0.78% 1.17% 1.90%(11)
Net investment income 2.35%(6) 2.19%(6) 2.37% 2.74% 2.00% 2.04% 0.38%(11)
Portfolio turnover rate(12) 15% 19% 21% 37% 61% 21% 2%
Average commission rate paid(12) $ 0.0164 $0.0192 -- -- -- -- --
</TABLE>

(1) The International Equity Fund commenced active operations on August 7,
1991.

(2) HD International Limited was replaced by Hotchkis and Wiley as an
investment adviser to the International Equity Fund as of the close of
business on May 21, 1993.

(3) Morgan Stanley Asset Management Inc. was added as an investment adviser to
the International Equity Fund as of August 1, 1994.

(4) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.

(5) 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.

(6) 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 International Equity Portfolio.

(7) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.

(8) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager,
which amounted to less than $.04 per share in each period on an annualized
basis and were waived by the Manager for the period ended October 31, 1991.

(9) The method of determining average net assets was changed from a monthly
average to a daily average starting with the year ended October 31, 1994.

(10) Annualized.

(11) Estimated based on expected annual expenses and actual average net assets.

(12) On November 1, 1995 the International Equity Fund began investing all of
its investable assets in the International Equity Portfolio. Portfolio
turnover rate and average commission rate paid for the years ended October
31, 1996 and 1997 are those of the International Equity Portfolio.
Calculation and disclosure of the average commission rate paid was not
required in prior to 1996.

(13) On August 1, 1994 assets of AMR Corporation and its employee benefit plans
were transferred to the AMR Class of the Fund.

PROSPECTUS
7
<PAGE> 8

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
S&P 500 INDEX FUND --
AMR CLASS
---------------------
YEAR ENDED
DECEMBER 31, 1997(1)
---------------------
<S> <C> <C>
Net asset value, beginning of period $10.00
-------------
Income from investment operations:
Net investment income 0.14
Net gains (losses) on securities (both realized and
unrealized)(2) 3.16
-------------
Total from investment operations 3.30
-------------
Less distributions:
Dividends from net investment income (0.14)
Distributions from net realized gains on securities --
-------------
Total distributions (0.14)
-------------
Net asset value, end of period $13.16
=============
Total return (annualized) 33.09%
=============
Ratios/supplemental data:
Net assets, end of period (in thousands) $7,862
Ratios to average net assets (annualized)(2):
Net investment income 1.61%
Expenses 0.20%
Decrease reflected in above expense ratio due to
absorption of expenses by Bankers Trust and the
Manager 0.43%
Portfolio turnover rate(3) 19%
Average commission rate paid(3) $.0230
</TABLE>

(1) The S&P 500 Index Fund commenced active operations January 1, 1997 and on
March 1, 1998, existing shares of the Fund were designated Institutional
Class shares.

(2) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
its corresponding Portfolio.

(3) Portfolio turnover rate and average commission rate paid is that of the
Equity 500 Index Portfolio.

PROSPECTUS
8
<PAGE> 9

(FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND --
INSTITUTIONAL CLASS
-------------------------
PERIOD ENDED OCTOBER 31,
-------------------------
1997(1)
-------------------------
<S> <C>
Net asset value, beginning of period $ 10.00
---------------
Income from investment operations:
Net investment income 0.07
Net gains (losses) on securities (both realized and
unrealized)(2) 0.17
---------------
Total from investment operations 0.24
---------------
Less distributions:
Dividends from net investment income (0.07)
Distributions from net realized gains
on securities --
---------------
Total distributions (0.07)
---------------
Net asset value, end of period $ 10.17
===============
Total return (annualized) 2.41%
===============
Ratios/supplemental data:
Net assets, end of period (in thousands) $216,249
Ratios to average net assets (annualized)(2):
Expenses 0.59%
Net investment income 5.63%
Portfolio turnover rate(3) 47%
</TABLE>

(1) The Intermediate Bond Fund commenced active operation September 15, 1997.

(2) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
its corresponding Portfolio.

(3) Portfolio turnover rate is that of the Fund's corresponding Portfolio.

PROSPECTUS
9
<PAGE> 10

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SHORT-TERM BOND FUND--INSTITUTIONAL CLASS
-------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.68 $ 9.82 $ 9.67 $ 10.23 $ 10.13 $ 10.07
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.64(3) 0.62(3) 0.62 0.52 0.58 0.75
Net gains or (losses) on
securities (both realized
and unrealized) (0.05)(3) (0.14)(3) 0.15 (0.46) 0.15 0.06
----- ----- ----- ----- ----- -----
Total from investment
operations 0.59 0.48 0.77 0.06 0.73 0.81
----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net investment
income (0.64) (0.62) (0.62) (0.52) (0.58) (0.75)
Distributions from net
realized gains on securities -- -- -- (0.10) (0.05) --
----- ----- ----- ----- ----- -----
Total distributions (0.64) (0.62) (0.62) (0.62) (0.63) (0.75)
----- ----- ----- ----- ----- -----
Net asset value, end of period $ 9.63 $ 9.68 $ 9.82 $ 9.67 $ 10.23 $ 10.13
===== ===== ===== ===== ===== =====
Total return (annualized)(4) 6.29% 5.10% 8.18% 0.42% 7.20% 7.94%
===== ===== ===== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period (in
thousands) $22,947 $108,929 $137,293 $112,141(9) $238,874 $209,928
Ratios to average net
assets(5)(6)(7):
Expenses 0.57%(3) 0.60%(3) 0.60% 0.31% 0.26% 0.27%
Net investment income 6.67%(3) 6.41%(3) 6.36% 5.26% 5.76% 7.40%
Portfolio turnover rate(8) 282% 304% 183% 94% 176% 133%

<CAPTION>
SHORT-TERM BOND FUND--INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED
---------------------------- OCTOBER 31,
1991(2) 1990 1989 1988(1)
-------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.76 $ 9.94 $ 10.12 $ 10.00
----- ----- ----- --------
Income from investment
operations:
Net investment income 0.83 0.92 0.96 0.64
Net gains or (losses) on
securities (both realized
and unrealized) 0.31 (0.18) (0.12) 0.05
----- ----- ----- --------
Total from investment
operations 1.14 0.74 0.84 0.69
----- ----- ----- --------
Less distributions:
Dividends from net investment
income (0.83) (0.92) (1.02) (0.57)
Distributions from net
realized gains on securities -- -- -- --
----- ----- ----- --------
Total distributions (0.83) (0.92) (1.02) (0.57)
----- ----- ----- --------
Net asset value, end of period $ 10.07 $ 9.76 $ 9.94 $ 10.12
===== ===== ===== ========
Total return (annualized)(4) 11.87% 7.51% 7.62% 7.41%
===== ===== ===== ========
Ratios/supplemental data:
Net assets, end of period (in
thousands) $141,629 $83,265 $60,507 $40,855
Ratios to average net
assets(5)(6)(7):
Expenses 0.35% 0.48% 0.59% 0.50%
Net investment income 8.42% 9.44% 9.77% 8.01%
Portfolio turnover rate(8) 165% 156% 158% 127%
</TABLE>

(1) The Short-Term Bond Fund commenced active operations on December 3, 1987.
Prior to March 1, 1998, the Short-Term Income Fund was known as the
American AAdvantage Limited-Term Income Fund.

(2) AMR Investment Services, Inc. began portfolio management of the Short-Term
Bond Fund on March 1, 1991, replacing Brown Brothers, Harriman & Co. and
Barrow, Hanley, Mewhinney & Strauss, Inc.

(3) 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 Limited-Term Income Portfolio.

(4) Total return is calculated assuming an initial investment is made at the
net asset value last calculated on the business day before the first day of
each period reported, reinvestment of all dividends and capital gains
distributions on the payable date, accrual for the maximum shareholder
services fee of .30% (for periods prior to August 1, 1994) and a sale at
net asset value on the last day of each period reported.

(5) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager.
Such fees amounted to less than $.03 per share in each period on an
annualized basis.

(6) The method of determining average net assets was changed from a monthly
average to a daily average starting with the year ended October 31, 1994.

(7) Annualized.

(8) On November 1, 1995 the Short-Term Bond Fund began investing all of its
investable assets in the Short-Term Bond Portfolio. Portfolio turnover rate
for the years ended October 31, 1996 and 1997 is that of the Short-Term
Bond Portfolio.

(9) On August 1, 1994, assets of AMR Corporation and its employee benefit plans
were transferred to the AMR Class of the Fund.

PROSPECTUS
10
<PAGE> 11

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MONEY MARKET FUND--INSTITUTIONAL CLASS(1)
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Net investment income 0.06(2) 0.05(2) 0.06 0.04 0.03
Less dividends from net
investment income (0.06) (0.05) (0.06) (0.04) (0.03)
------ ------ ------ ------ ------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return (annualized) 5.60% 5.57% 5.96% 3.85% 3.31%
====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period
(in thousands) $1,123,649 $1,406,939 $1,206,041 $1,893,144 $2,882,947
Ratios to average net
assets (3)(4)(5):
Expenses 0.23%(2) 0.24%(2) 0.23% 0.21% 0.23%
Net investment income 5.46%(2) 5.41%(2) 5.79% 3.63% 3.23%

<CAPTION>
MONEY MARKET FUND--INSTITUTIONAL CLASS(1)
------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
1992 1991 1990 1989 1988
------------------------------------------------------
<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 0.04 0.07 0.08 0.09 0.08
Less dividends from net
investment income (0.04) (0.07) (0.08) (0.09) (0.08)
------ ----- ----- ----- -----
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ===== ===== ===== =====
Total return (annualized) 4.41% 7.18% 8.50% 9.45% 7.54%
====== ===== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period
(in thousands) $2,223,829 $715,280 $745,405 $385,916 $330,230
Ratios to average net
assets (3)(4)(5):
Expenses 0.26% 0.24% 0.20% 0.22% 0.28%
Net investment income 4.06% 6.93% 8.19% 9.11% 7.54%
</TABLE>

(1) The Money Market Fund commenced active operations on September 1, 1987.

(2) 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 Money Market Portfolio.

(3) The method of determining average net assets was changed from a monthly
average to a daily average starting with the year ended October 31, 1992.

(4) Effective October 1, 1990, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager,
which amounted to less than $.01 per share in each period on an annualized
basis.

(5) Annualized.

PROSPECTUS
11
<PAGE> 12

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MUNICIPAL MONEY MARKET FUND -- U.S. GOVERNMENT MONEY MARKET FUND --
INSTITUTIONAL CLASS INSTITUTIONAL CLASS
------------------------------------------ ----------------------------------------------------
PERIOD
YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31,
---------------------------- OCTOBER 31, ----------------------------------------------------
1997 1996 1995 1994(1) 1997 1996 1995 1994 1993
------------------------------------------ ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---- ---- ---- ------- ----- ----- ----- ----- ------
Net investment income 0.04(2) 0.04(2) 0.04 0.02 0.05(2) 0.05(2) 0.06 0.04 0.03
Less dividends from
net investment
income (0.04) (0.04) (0.04) (0.02) (0.05) (0.05) (0.06) (0.04) (0.03)
---- ---- ---- ------- ----- ----- ----- ----- ------
Net asset value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---- ---- ---- ------- ----- ----- ----- ----- ------
---- ---- ---- ------- ----- ---- ----- ----- ------
Total return
(annualized) 3.52% 3.59% 3.75% 2.44% 5.36% 5.29% 5.67% 3.70% 3.07%
---- ---- ---- ------- ----- ----- ----- ----- ------
---- ---- ---- ------- ----- ---- ----- ----- ------
Ratios/supplemental
data:
Net assets, end of
period (in
thousands) $ 369 $ 6 $ 7 $$9,736 $29,946 $25,595 $47,184 $67,607 $136,813
Ratios to average
net
assets(3)(4)(5):
Expenses 0.31%(2) 0.27%(2) 0.35% 0.30% 0.27%(2) 0.32%(2) 0.32% 0.25% 0.23%
Net investment
income 3.49%(2) 3.49%(2) 3.70% 2.38% 5.24%(2) 5.16%(2) 5.49% 3.44% 2.96%

<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND --
INSTITUTIONAL CLASS
-----------
PERIOD
ENDED
OCTOBER 31,
1992(1)
-----------
<S> <C>
Net asset value,
beginning of period $ 1.00
-------
Net investment income 0.02
Less dividends from
net investment
income (0.02)
-------
Net asset value,
end of period $ 1.00
=======
Total return
(annualized) 3.61%
=======
Ratios/supplemental
data:
Net assets, end of
period (in
thousands) $91,453
Ratios to average
net
assets(3)(4)(5):
Expenses 0.27%(6)
Net investment
income 3.46%(6)
</TABLE>

(1) The U.S. Government Money Market Fund commenced active operations on March
2, 1992 and the Municipal Money Market Fund commenced active operations on
November 10, 1993.

(2) 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 U.S. Government Money Market Portfolio and the Municipal Money Market
Portfolio, respectively.

(3) The method of determining average net assets was changed from a monthly
average to a daily average starting with the period ended October 31, 1994.

(4) Operating results for the Municipal Money Market Fund exclude management and
administrative services fees waived by the Manager. Had the Fund paid such
fees, the ratio of expenses and net investment income to average net assets
would have been 0.50% and 2.18%, respectively, for the period ended October
31, 1994, 0.55% and 3.50%, respectively, for the year ended October 31,
1995, 0.33% and 3.43%, respectively, for the year ended October 31, 1996 and
0.32% and 3.48%, respectively, for the year ended October 31, 1997.

(5) Annualized.

(6) Estimated based on expected annual expenses and actual average net assets.

INTRODUCTION

The Trust is an open-end, diversified management investment company
organized as a Massachusetts business trust on January 16, 1987. The Funds are
nine of ten investment portfolios of the Trust. Each Fund has a distinctive
investment objective and investment policies. Each Fund, except the S&P 500
Index Fund, invests all of its investable assets in a corresponding Portfolio of
the AMR Trust which has an identical investment objective. The S&P 500 Index
Fund invests all of its investable assets in the Equity 500 Index Portfolio,
which is a separate investment company advised by BT with an identical
investment objective. The Manager provides the Portfolios, except the Equity 500
Index Portfolio, with business and asset management services, including the
evaluation and monitoring of the investment advisers, and it provides the Funds
with administrative services. BT provides the Equity 500 Index Portfolio with
investment advisory, administrative and other services.

The Funds, except the S&P 500 Index Fund, currently consist of three
classes of shares and the S&P 500 Index Fund currently consists of two classes
of shares, including the "Institutional Class" which is primarily for

PROSPECTUS
12
<PAGE> 13

institutional investors investing at least $2 million in the Funds. For further
information about the Funds' other classes, please refer to the address and
phone number on the back cover of this Prospectus.

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

The assets of the Balanced Portfolio, the Growth and Income Portfolio and
the International Equity Portfolio are allocated by the Manager among investment
advisers designated for each of those Portfolios. BT serves as the investment
adviser to the Equity 500 Index Portfolio. The assets of the Intermediate Bond
Portfolio are allocated by the Manager between the Manager and another
investment adviser. Investment decisions for the Short-Term Bond Portfolio and
the Money Market Portfolios are made directly by the Manager. With the exception
of the S&P 500 Index Fund, each investment adviser has discretion to purchase
and sell portfolio securities in accordance with the investment objectives,
policies and restrictions described in this Prospectus, the SAI, and by specific
investment strategies developed by the Manager. See "Investment Advisers."

Institutional Class shares are offered without a sales charge at the net
asset value next determined after an investment is received and accepted. Shares
will be redeemed at the next share price calculated after receipt of a
redemption order. See "Purchase, Redemption and Valuation of Shares."

INVESTMENT OBJECTIVES, POLICIES AND RISKS

The investment objective and policies of each Fund and its corresponding
Portfolio are described below. Except as otherwise indicated, the investment
policies of any Fund may be changed at any time by the Board to the extent that
such changes are consistent with the investment objective of the applicable
Fund. However, each Fund's investment objective may not be changed without a
majority vote of that Fund's outstanding shares, which is defined as the lesser
of (a) 67% of the shares of the applicable Fund present or represented if the
holders of more than 50% of the shares are present or represented at the
shareholders' meeting, or (b) more than 50% of the shares of the applicable Fund
(hereinafter, "majority vote"). Except for the Equity 500 Index Portfolio, a
Portfolio's investment objective may not be changed without a majority vote of
that Portfolio's interest holders. The investment objective of the Equity 500
Index Portfolio is not a fundamental policy. Shareholders of the S&P 500 Index
Fund will receive 30 days' written notice with respect to any change in the
investment objective of the Equity 500 Index Portfolio.

Each Fund has a fundamental investment policy which allows it to invest all
of its investable assets in its corresponding Portfolio. All other fundamental
investment policies and the non-fundamental investment policies of each Fund and
its corresponding Portfolio are identical. Therefore, although the following
discusses the investment policies of each Portfolio, the AMR Trust's Board of
Trustees ("AMR Trust Board") and the Equity 500 Index Portfolio's Board of
Trustees ("Equity 500 Index Portfolio Board"), it applies equally to each Fund
and each Board.

PROSPECTUS
13
<PAGE> 14

be of comparable quality by the applicable investment adviser. Obligations rated
in the fourth highest rating category are limited to 25% of the Portfolio's debt
allocation. Obligations rated in the BBB or Baa categories by any Rating
Organization have speculative characteristics and thus changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds. See the SAI for a description of debt ratings. The Portfolio, at the
discretion of the investment advisers, may retain a security that has been
downgraded below the initial investment criteria. The Portfolio usually invests
between 50% and 65% of its assets in equity securities and between 35% and 50%
of its assets in debt securities. The remainder of the Portfolio's assets may be
invested in cash or cash equivalents, including obligations that are permitted
investments for the Money Market Portfolio and in other investment companies.
However, when its investment advisers deem that market conditions warrant, the
Portfolio may, for temporary defensive purposes, invest up to 100% of its assets
in cash, cash equivalents and investment grade short-term obligations.

The Portfolio's investments in debt securities may include investments in
obligations of the U.S. Government and its agencies and instrumentalities,
including separately traded registered interest and principal securities
("STRIPS") and other zero coupon obligations; corporate bonds, notes and
debentures; non-convertible preferred stocks; mortgage-backed securities;
asset-backed securities; and domestic, Yankeedollar and Eurodollar bank deposit
notes, certificates of deposit, bonds and notes. Such obligations may have a
fixed, variable or floating rate of interest. See the SAI for a further
description of the foregoing securities. The value of the Portfolio's debt
investments will vary in response to interest rate changes as described in
"American AAdvantage Intermediate Bond Fund and American AAdvantage Short-Term
Bond Fund."

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

The Portfolio's equity investments may consist of common stocks, preferred
stocks and convertible securities, including foreign securities that are
represented by U.S. dollar-denominated American Depositary Receipts traded in
the United States on exchanges and in the over-the-counter market. When
purchasing equity securities, primary emphasis will be placed on undervalued
securities with above average growth expectations. The Manager believes that
purchasing securities which the investment advisers believe are undervalued in
the market and that have above average growth potential will outperform other
investment styles over the longer term while minimizing volatility and downside
risk. The Manager will recommend that, with respect to portfolio management of
equity assets, the Trust retain only those investment advisers who, in the
Manager's opinion, utilize such an approach.

BARROW, HANLEY, MEWHINNEY & STRAUSS, INC.; BRANDYWINE ASSET MANAGEMENT,
INC.; GSB INVESTMENT MANAGEMENT, INC.; HOTCHKIS AND WILEY; and INDEPENDENCE
INVESTMENT ASSOCIATES, INC. currently manage the assets of the Balanced
Portfolio. See "Investment Advisers."

PROSPECTUS
14
<PAGE> 15

AMERICAN AADVANTAGE GROWTH AND INCOME FUND -- This Fund's investment objective
is to realize long-term capital appreciation and current income. This Fund seeks
its investment objective by investing all of its investable assets in the Growth
and Income Portfolio, which invests primarily in equity securities. Excluding
collateral for securities loaned, ordinarily at least 80% of the Portfolio's
assets will be invested in equity securities consisting of common stocks,
preferred stocks, securities convertible into common stocks, and securities
having common stock characteristics, such as rights and warrants, and foreign
equity securities that are represented by U.S. dollar-denominated American
Depositary Receipts traded in the United States on exchanges and in the
over-the-counter market. When purchasing equity securities, primary emphasis
will be placed on undervalued securities with above average growth expectations.
In order to seek either above average current income or capital appreciation
when interest rates are expected to decline, the Portfolio may invest in debt
securities which, at the time of purchase, are rated in one of the four highest
rating categories by all Rating Organizations rating that security or, if
unrated, are deemed to be of comparable quality by the applicable investment
adviser. Obligations rated in the fourth highest rating category are limited to
25% of the Portfolio's debt allocation. See "American AAdvantage Balanced Fund"
for a description of the risks involved with these obligations. See the SAI for
definitions of the foregoing securities and for a description of debt ratings.
The Portfolio also may invest in other investment companies or in cash and cash
equivalents, including obligations that are permitted investments for the Money
Market Portfolio. However, when its investment advisers deem that market
conditions warrant, the Portfolio may, for temporary defensive purposes, invest
up to 100% of its assets in cash, cash equivalents and investment grade
short-term obligations. In addition, the Portfolio may purchase or sell
securities on a when-issued or forward commitment basis. See "American
AAdvantage Balanced Fund" for a description of these transactions.

AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND -- This Fund's investment
objective is to realize long-term capital appreciation. This Fund seeks its
investment objective by investing all of its investable assets in the
International Equity Portfolio, which invests primarily in equity securities of
issuers based outside the United States. Ordinarily the Portfolio will invest at
least 65% of its assets in common stocks and securities convertible into common
stocks of issuers in at least three different countries located outside the
United States. However, excluding collateral for securities loaned, the
Portfolio generally invests in excess of 80% of its assets in such securities.
The remainder of the Portfolio's assets will be invested in non-U.S. debt
securities which, at the time of purchase, are rated in one of the three highest
rating categories by any Rating Organization or, if unrated, are deemed to be of
comparable quality by the applicable investment adviser and traded publicly on a
world market, or in cash or cash equivalents, including obligations that are
permitted investments for the Money Market Portfolio or in other investment
companies. However, when its investment advisers deem that market conditions
warrant, the Portfolio may, for temporary defensive purposes, invest up to 100%
of its assets in cash, cash equivalents, other investment companies and
investment grade short-term obligations.

The investment advisers select securities based upon a country's economic
outlook, market valuation and potential changes in currency exchange rates. When
purchasing equity securities, primary emphasis will be placed on undervalued
securities with above average growth expectations.

Overseas investing carries potential risks not associated with domestic
investments. Such risks include, but are not limited to: (1) political and
financial instability abroad, including risk of nationalization or expropriation
of assets and the risk of war; (2) less liquidity and greater volatility of
foreign investments; (3) less public information regarding foreign companies;
(4) less government regulation and supervision of foreign stock exchanges,
brokers and listed companies; (5) lack of uniform accounting, auditing and
financial reporting standards; (6) delays in transaction settlement in some
foreign markets; (7) possible imposition of confiscatory foreign taxes; (8)
possible limitation on the removal of securities or other assets of the
Portfolio; (9) restrictions on foreign investments and repatriation of capital;
(10) currency fluctuations; (11) cost and possible restrictions of currency
conversion; (12) withholding taxes on dividends in foreign countries; and (13)
possible higher

PROSPECTUS
15
<PAGE> 16

commissions, custodial fees and management costs than in the U.S. market. These
risks are often greater for investments in emerging or developing countries.

The Portfolio will limit its investments to those in countries which have
been recommended by the Manager and which have been approved by the AMR Trust
Board. Countries may be added or deleted with AMR Trust Board approval. In
determining which countries will be approved, the AMR Trust Board will evaluate
the risk factors set forth above and will particularly focus on the ability to
repatriate funds, the size and liquidity aspects of a particular country's
market and the investment climate for foreign investors. The current countries
in which the Portfolio may invest are Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Mexico, Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea,
Spain, Sweden, Switzerland and the United Kingdom.

The Portfolio may trade forward foreign currency contracts ("forward
contracts"), which are derivatives, to hedge currency fluctuations of underlying
stock or bond positions, or in other circumstances permitted by the Commodity
Futures Trading Commission ("CFTC"). Forward contracts to sell foreign currency
may be used when the management of the Portfolio believes that the currency of a
particular foreign country may suffer a decline against the U.S. dollar. Forward
contracts are also entered into to set the exchange rate for a future
transaction. In this manner, the Portfolio may protect itself against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar or other currency which is being used for the security purchase and the
foreign currency in which the security is denominated during the period between
the date on which the security is purchased or sold and the date on which
payment is made or received. Forward contracts involve certain risks which
include, but are not limited to: (1) imperfect correlation between the
securities hedged and the contracts themselves; and (2) possible decrease in the
total return of the Portfolio. Forward contracts are discussed in greater detail
in the SAI.

The Portfolio also may trade currency futures for the same reasons as for
entering into forward contracts as set forth above. Currency futures are traded
on U.S. and foreign currency exchanges. The use of currency futures also entails
certain risks which include, but are not limited to: (1) less liquidity due to
daily limits on price fluctuation; (2) imperfect correlation between the
securities hedged and the contracts themselves; (3) possible decrease in the
total return of the Portfolio due to hedging; (4) possible reduction in value
for both the contracts and the securities being hedged; and (5) potential losses
in excess of the amounts invested in the currency futures contracts themselves.
The Portfolio may not enter into currency futures contracts if the purchase or
sale of such contract would cause the sum of the Portfolio's initial and any
variation margin deposits to exceed 5% of its total assets. Currency futures
contracts, which are derivatives, are discussed in greater detail in the SAI.

HOTCHKIS AND WILEY, MORGAN STANLEY ASSET MANAGEMENT INC. and TEMPLETON
INVESTMENT COUNSEL, INC. currently serve as investment advisers to the
International Equity Portfolio. See "Investment Advisers."

AMERICAN AADVANTAGE S&P 500 INDEX FUND -- This Fund's investment objective is to
provide investment results that, before expenses, correspond to the total return
(the combination of capital changes and income) of common stocks publicly traded
in the United States, as represented by the S&P 500. This Fund seeks its
investment objective by investing all of its investable assets in the Equity 500
Index Portfolio which invests in common stocks of companies that compose the S&P
500. The Fund offers investors a convenient means of diversifying their holdings
of common stocks while relieving those investors of the administrative burdens
typically associated with purchasing and holding these instruments.

The Portfolio is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analyses and investment judgment. Instead,
the Portfolio, utilizing a "passive" or "indexing" investment approach, attempts
to replicate, before expenses, the performance of the S&P 500.

approximately the same weightings as the S&P 500, beginning with the
heaviest-weighted stocks that make up a larger portion of the Index's value.
Over the long term, BT normally seeks a correlation between the performance of
the Portfolio, before expenses, and that of the S&P 500 of 0.95 or better. A
figure of 1.00 would indicate perfect correlation. In the unlikely event that
the correlation is not achieved, the Equity 500 Index Portfolio Board will
consider alternative structures.

BT utilizes a two-stage sampling approach in seeking to obtain the
objective. Stage one, which encompasses large capitalization stocks, maintains
the stock holdings at or near their benchmark weights. Large capitalization
stocks are defined as those securities that represent 0.10% or more of the
Index. In stage two, smaller stocks are analyzed and selected using risk
characteristics and industry weights in order to match the sector and risk
characteristics of the smaller companies in the S&P 500. This approach helps to
maximize portfolio liquidity while minimizing costs.

BT generally will seek to match the composition of the S&P 500, but usually
will not invest the Portfolio's stock portfolio to mirror the Index exactly.
Because of the difficulty and expense of executing relatively small stock
transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks and may at times have its portfolio weighted differently
from the S&P 500. When the Portfolio's size is greater, BT expects to purchase
more of the stocks in the S&P 500 and to match the relative weighting of the S&P
500 more closely and anticipates that the Portfolio will be able to mirror,
before expenses, the performance of the S&P 500 with little variance. In
addition, the Portfolio may omit or remove any S&P 500 stock from the Portfolio
if, following objective criteria, BT judges the stock to be insufficiently
liquid or believes the merit of the investment has been substantially impaired
by extraordinary events or financial conditions. BT will not purchase the stock
of Bankers Trust New York Corporation, which is included in the Index, and
instead will overweight its holdings of companies engaged in similar businesses.

Under normal conditions, BT will attempt to invest as much of the
Portfolio's assets as is practical in common stocks included in the S&P 500.
However, the Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments hedged with stock index futures and
options to meet redemption requests or to facilitate the investment in common
stocks.

When the Portfolio has cash from new investments in the Portfolio or holds a
portion of its assets in money market instruments, it may enter into stock index
futures or options to attempt to increase its exposure to the stock market.
Strategies the Portfolio could use to accomplish this include purchasing futures
contracts, writing put options, and purchasing call options. When the Portfolio
wishes to sell securities, because of shareholder redemptions or otherwise, it
may use stock index futures or options thereon to hedge against market risk
until the sale can be completed. These strategies could include selling futures
contracts, writing call options, and purchasing put options.

BT will choose among futures and options strategies based on its judgment of
how best to meet the Portfolio's goals. In selecting futures and options, BT
will assess such factors as current and anticipated stock prices, relative
liquidity and price levels in the options and futures markets compared to the
securities markets, and the Portfolio's cash flow and cash management needs. If
BT judges these factors incorrectly, or if price changes in the Portfolio's
futures and options positions are not well correlated with those of its other
investments, the Portfolio could be hindered in the pursuit of the objective and
could suffer losses. The Portfolio could also be exposed to risks if it could
not close out its futures or options positions because of an illiquid secondary
market. BT will only use these strategies for cash management purposes. Futures
and options will not be used to increase portfolio risk above the level that
could be achieved using only traditional investment securities or to acquire
exposure to changes in the value of assets or indices that by themselves would
not be purchased for the Portfolio. Futures and options are discussed in greater
detail in the SAI.

instruments with remaining maturities of 397 days or less to meet anticipated
redemptions and expenses or for day-to-day operating purposes. Short-term
instruments consist of (1) short-term obligations of the U.S. Government, its
agencies, instrumentalities, authorities or political subdivisions; (2) other
short-term debt securities rated Aa or higher by Moody's or AA or higher by S&P
or, if unrated, of comparable quality in the opinion of BT; (3) commercial
paper; (4) bank obligations, including negotiable certificates of deposit, time
deposits and bankers' acceptances; and (5) repurchase agreements. At the time
the Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer or the issuer's parent must have outstanding debt rated
Aa or higher by Moody's or AA or higher by S&P or outstanding commercial paper
or bank obligations rated Prime-1 by Moody's or A-1 by S&P; or, if no such
ratings are available, the instrument must be of comparable quality in the
opinion of BT.

The S&P 500 is a well-known stock market index that includes common stocks
of 500 companies from several industrial sectors representing a significant
portion of the market value of all common stocks publicly traded in the United
States, most of which are listed on the New York Stock Exchange (the
"Exchange"). Stocks in the S&P 500 are weighted according to their market
capitalization (the number of shares outstanding multiplied by the stock's
current price). BT believes that the performance of the S&P 500 is
representative of the performance of publicly traded common stocks in general.
The composition of the S&P 500 is determined by Standard & Poor's Corporation
and is based on such factors as the market capitalization and trading activity
of each stock and its adequacy as a representation of stocks in a particular
industry group, and may be changed from time to time.

The Fund and the Portfolio are not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation. Standard & Poor's Corporation makes no
representation or warranty, express or implied, to the owners of the Fund or the
Portfolio or any member of the public regarding the advisability of investing in
securities generally or in the Fund and the Portfolio particularly or the
ability of the S&P 500 to track general stock market performance. Standard &
Poor's Corporation does not guarantee the accuracy and/or the completeness of
the S&P 500 or any data included therein.

STANDARD & POOR'S CORPORATION MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
THE RESULTS TO BE OBTAINED BY THE FUND OR THE PORTFOLIO, OWNERS OF THE FUND OR
THE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR ANY
DATA INCLUDED THEREIN. STANDARD & POOR'S CORPORATION MAKES NO EXPRESS OR IMPLIED
WARRANTIES AND HEREBY EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 OR ANY
DATA INCLUDED THEREIN.

The ability of the Fund and the Portfolio to meet their investment objective
depends to some extent on the cash flow experienced by the Fund and by the other
investors in the Portfolio, since investments and redemptions by shareholders of
the Fund generally will require the Portfolio to purchase or sell securities. BT
will make investment changes to accommodate cash flow in an attempt to maintain
the similarity of the Portfolio to the S&P 500. An investor should also be aware
that the performance of the S&P 500 is a hypothetical number that does not take
into account brokerage commissions and other costs of investing, unlike the
Portfolio which must bear these costs. Finally, since the Portfolio seeks to
track the S&P 500, BT generally will not attempt to judge the merits of any
particular stock as an investment.

AMERICAN AADVANTAGE INTERMEDIATE BOND FUND and AMERICAN AADVANTAGE SHORT-TERM
BOND FUND -- The investment objective of each of these Funds is to realize
income and capital appreciation. As an investment policy, each Fund primarily
seeks income and secondarily seeks capital appreciation. The Intermediate Bond
Fund and the Short-Term Bond Fund seek their investment objective by investing
all of their investable assets in the Intermediate Bond Portfolio and the
Short-Term Bond Portfolio, respectively, which invest primarily in debt
obligations. Permissible investments include securities of the U.S. Government
and its agencies and instrumentalities, including STRIPS and other zero coupon
obligations; corporate bonds, notes and debentures; non-convertible preferred
stocks; mortgage-backed securities; asset-backed securities; domestic,
Yankeedollar and Eurodollar certificates of deposit, bank deposit notes, and
bank notes; other investment companies; and cash or cash equivalents including
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obligations that are permitted investments for the Money Market Portfolio. Such
obligations may have a fixed, variable or floating rate of interest. At the time
of purchase, all such securities will be rated in one of the four highest rating
categories by all Rating Organizations rating such obligation or, if unrated,
will be deemed to be of comparable quality by the Manager or the investment
adviser. Obligations rated in the fourth highest rating category are limited to
25% of each Portfolio's total assets. See "American AAdvantage Balanced Fund"
for a description of the risks involved with these obligations. The Portfolios,
at the discretion of the Manager and the investment adviser, may retain a
security which has been downgraded below the initial investment criteria. See
the SAI for definitions of the foregoing securities and for a description of
debt ratings. Principal and/or interest payments for obligations of the U.S.
Government's agencies or instrumentalities may or may not be backed by the full
faith and credit of the U.S. Government.

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

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

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

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

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

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

Investments in Yankeedollar and Eurodollar bonds, notes and certificates of
deposit involve risks that differ from investments in securities of domestic
issuers. See "American AAdvantage Money Market Fund" for a description of these
risks. The Portfolios also may engage in dollar rolls, or purchase or sell
securities on a when-issued or forward commitment basis as described under
"American AAdvantage Balanced Fund."

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

The MANAGER serves as the sole active investment adviser to the Short-Term
Bond Portfolio. The MANAGER and BARROW, HANLEY, MEWHINNEY & STRAUSS, INC.
currently manage the assets of the Intermediate Bond Portfolio. See "Investment
Advisers."

MONEY MARKET FUNDS -- The investment objectives of the Money Market Funds are to
seek current income, liquidity and the maintenance of a stable $1.00 price per
share. The Money Market Funds seek to achieve these objectives by investing all
of their investable assets in the Money Market Portfolios, which invest in high
quality, U.S. dollar-denominated short-term obligations that have been
determined by the Manager or the AMR Trust Board to present minimal credit
risks. Portfolio investments are valued based on the amortized cost valuation
technique pursuant to Rule 2a-7 under the Investment Company Act of 1940 ("1940
Act"). See the SAI for an explanation of the amortized cost valuation method.
Obligations in which the Money Market Portfolios invest generally have remaining
maturities of 397 days or less, although instruments subject to repurchase
agreements and certain variable and floating rate obligations may bear longer
final maturities. The average dollar-weighted portfolio maturity of each Money
Market Portfolio will not exceed 90 days. The Manager serves as the sole
investment adviser to the Money Market Funds. See "Management and Administration
of the Trust."

AMERICAN AADVANTAGE MONEY MARKET FUND -- The Fund's corresponding Portfolio may
invest in obligations permitted to be purchased under Rule 2a-7 of the 1940 Act
including, but not limited to, (1) obligations of the U.S. Government or its
agencies or instrumentalities; (2) loan participation interests, medium-term
notes, funding agreements and asset-backed securities; (3) domestic,
Yankeedollar and Eurodollar certificates of deposit, time deposits, bankers'
acceptances, commercial paper, bank deposit notes and other promissory notes,
including floating or variable rate obligations issued by U.S. or foreign bank
holding companies and their bank subsidiaries, branches and agencies; and (4)
repurchase agreements involving the obligations listed above. The Money Market
Portfolio will invest only in issuers or instruments that at the time of
purchase (1) have received the highest short-term rating by two Rating
Organizations such as "A-1" by S&P and "P-1" by Moody's; (2) are single rated
and have received the highest short-term rating by a Rating Organization; or (3)
are unrated, but are determined to be of comparable quality by the Manager
pursuant to guidelines approved by the AMR Trust Board and subject to
ratification by the AMR Trust Board. See the SAI for definitions of the
foregoing instruments and rating systems. The Portfolio may invest in other
investment companies. The Portfolio also may purchase or sell securities on a
when-issued or a forward commitment basis as described in "American AAdvantage
Balanced Fund."

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The Portfolio will invest more than 25% of its assets in obligations issued
by the banking industry. However, for temporary defensive purposes during
periods when the Manager believes that maintaining this concentration may be
inconsistent with the best interest of shareholders, the Portfolio may not
maintain this concentration.

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

Variable amount master demand notes in which the Portfolio may invest are
unsecured demand notes that permit the indebtedness thereunder to vary, and
provide for periodic adjustments in the interest rate. Because master demand
notes are direct lending arrangements between the Portfolio and the issuer, they
are not normally publicly traded. There is no secondary market for the notes;
however, the period of time remaining until payment of principal and accrued
interest can be recovered under a variable amount master demand note generally
will not exceed seven days. To the extent this period is exceeded, the note in
question would be considered illiquid. Issuers of variable amount master demand
notes must satisfy the same criteria as set forth for other promissory notes
(e.g. commercial paper). The Portfolio will invest in variable amount master
demand notes only when such notes are determined by the Manager, pursuant to
guidelines established by the AMR Trust Board, to be of comparable quality to
rated issuers or instruments eligible for investment by the Portfolio. In
determining average dollar weighted portfolio maturity, a variable amount master
demand note will be deemed to have a maturity equal to the longer of the period
of time remaining until the next readjustment of the interest rate or the period
of time remaining until the principal amount can be recovered from the issuer on
demand.

AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET FUND -- The Fund's corresponding
Portfolio may invest in municipal obligations issued by or on behalf of the
governments of states, territories, or possessions of the United States; the
District of Columbia; and their political subdivisions, agencies and
instrumentalities if the interest these obligations provide is generally exempt
from federal income tax. The Municipal Money Market Portfolio will invest only
in issuers or instruments that at the time of purchase (1) are guaranteed by the
U.S. Government, its agencies, or instrumentalities; (2) are secured by letters
of credit that are irrevocable and issued by banks which qualify as authorized
issuers for the Money Market Portfolio (see "American AAdvantage Money Market
Fund"); (3) are guaranteed by one or more municipal bond insurance policies that
cannot be canceled and are issued by third-party guarantors possessing the
highest claims-paying rating from a Rating Organization; (4) have received one
of the two highest short-term ratings from at least two Rating Organizations;
(5) are single rated and have received one of the two highest short-term ratings
from that Rating Organization; (6) have no short-term rating but the instrument
is comparable to the issuer's rated short-term debt; (7) have no short-term
rating (or comparable rating) but have received one of the top two long-term
ratings from all Rating Organizations rating the issuer or instrument; or (8)
are unrated, but are determined to be of comparable quality by the Manager
pursuant to guidelines approved by, and subject to the oversight of, the AMR
Trust Board. The Portfolio also may invest in other investment companies.
Ordinarily at least 80% of the Portfolio's net assets will be invested in
municipal obligations, the interest from which is exempt from federal income
tax. However, should market conditions warrant, the Portfolio may invest up to
20% (or for temporary defensive purposes, up to 100%) of its assets in eligible
investments for the Money Market Portfolio which are subject to federal income
tax.

The Portfolio may invest in certain municipal obligations which have rates
of interest that are adjusted periodically according to formulas intended to
minimize fluctuations in the values of these instruments. These instruments,
commonly known as variable rate demand obligations, are long-term instruments
which allow the purchaser, at its discretion, to redeem securities before their
final maturity at par plus accrued interest upon notice (typically 7 to 30
days).

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Municipal obligations may be backed by the full taxing power of a
municipality ("general obligations"), or by the revenues from a specific project
or the credit of a private organization ("revenue obligations"). Some municipal
obligations are collateralized as to payment of principal and interest by an
escrow of U.S. Government or federal agency obligations, while others are
insured by private insurance companies, while still others may be supported by
letters of credit furnished by domestic or foreign banks. The Portfolio's
investments in municipal obligations may include fixed, variable, or floating
rate general obligations and revenue obligations (including municipal lease
obligations and resource recovery obligations); zero coupon and asset-backed
obligations; variable rate auction and residual interest obligations; tax,
revenue, or bond anticipation notes; tax-exempt commercial paper; and purchase
obligations that are subject to restrictions on resale. See the SAI for a
further discussion of the foregoing obligations. The Portfolio may purchase or
sell obligations on a when-issued or forward commitment basis, as described
under "American AAdvantage Balanced Fund."

The Portfolio may invest more than 25% of the value of its total assets in
municipal obligations which are related in such a way that an economic, business
or political development or change affecting one such security would also affect
the other securities; for example, securities the interest of which is paid from
revenues of similar types of projects, or securities whose issuers are located
in the same state. As a result, the Portfolio may be subject to greater risk
compared to a fund that does not follow this practice. However, the Manager
believes this risk is mitigated because it is anticipated that most of the
Portfolio's assets will be insured or backed by bank letters of credit.
Additionally, the Portfolio may invest more than 25% of the value of its total
assets in industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
non-governmental users.

The Portfolio also may invest in municipal obligations that constitute
"private activity obligations." These include obligations that finance student
loans, residential rental projects, and solid waste disposal facilities. To the
extent the Portfolio earns interest income on private activity obligations,
shareholders will be required to treat the portion of the Fund's distributions
attributable to its share of such interest as a "tax preference item" for
purposes of determining their liability for the federal alternative minimum tax
("AMT") and, as a result, may become subject to (or increase their liability
for) the AMT. Shareholders should consult their own tax advisers to determine
whether they may be subject to the AMT. The Portfolio may invest in private
activity obligations without limitation and it is anticipated that a substantial
portion of the Portfolio's assets will be invested in these obligations. As a
result, a substantial portion of the Fund's distributions may be a tax
preference item, which will reduce the net return from the Fund for taxpayers
subject to the AMT. Interest on "qualified" private activity obligations is
exempt from federal income tax.

AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET FUND -- The Fund's
corresponding Portfolio will invest exclusively in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements which are collateralized by such obligations. U.S.
Government securities include direct obligations of the U.S. Treasury (such as
Treasury bills, Treasury notes and Treasury bonds). The Fund may invest in
securities issued by the Agency for International Development, Farmers Home
Administration, Farm Credit Banks, Federal Home Loan Bank, Federal Intermediate
Credit Bank, Federal Financing Bank, Federal Land Bank, FNMA, GNMA, General
Services Administration, Rural Electrification Administration, Small Business
Administration, Tennessee Valley Authority, and others. Some of these
obligations, such as those issued by the Federal Home Loan Bank and FHLMC, are
supported only by the credit of the agency or instrumentality issuing the
obligation and the discretionary authority of the U.S. Government to purchase
the agency's obligations. See the SAI for a further discussion of the foregoing
obligations. Counterparties for repurchase agreements must be approved by the
AMR Trust Board. The Portfolio may purchase or sell securities on a when-issued
or forward commitment basis, as described under "American AAdvantage Balanced
Fund."

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

PROSPECTUS
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equal at least 100% of the market value of the loaned securities. Although the
Equity 500 Index Portfolio may lend its securities, it has agreed to abstain
from doing so. Securities loans will not be made if, as a result, the aggregate
amount of all outstanding securities loans by any Portfolio of the AMR Trust
would exceed 33 1/3% of its total assets (including the market value of
collateral received). A Portfolio continues to receive interest on the
securities loaned and simultaneously earns either interest on the investment of
the cash collateral or fee income if the loan is otherwise collateralized.
Should the borrower of the securities fail financially, there is a risk of delay
in recovery of the securities loaned or loss of rights in the collateral.
However, the Portfolios seek to minimize this risk by making loans only to
borrowers which are deemed to be of good financial standing and which have been
approved by the AMR Trust Board. For purposes of complying with each Portfolio's
investment policies and restrictions, collateral received in connection with
securities loans will be deemed an asset of a Portfolio to the extent required
by law. Except for the Equity 500 Index Portfolio, the Manager will receive
compensation for administrative and oversight functions with respect to
securities lending. The amount of such compensation will depend on the income
generated by the loan of each Portfolio's securities. The SEC has granted
exemptive relief that permits the Portfolios to invest cash collateral received
from securities lending transactions in shares of one or more private investment
companies managed by the Manager. Subject to receipt of exemptive relief from
the SEC, the Portfolios also may invest cash collateral received from securities
lending transactions in shares of one or more registered investment companies
managed by the Manager. See the SAI for further information regarding loan
transactions.

REPURCHASE AGREEMENTS. A repurchase agreement is an agreement under which
securities are acquired by a Portfolio from a securities dealer or bank subject
to resale at an agreed upon price on a later date. The acquiring Portfolio bears
a risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations and the Portfolio is delayed or prevented from
exercising its rights to dispose of the collateral securities. However, the
investment advisers or the Manager attempt to minimize this risk by entering
into repurchase agreements only with financial institutions which are deemed to
be of good financial standing and which have been approved by the AMR Trust
Board or the Equity 500 Index Portfolio Board, as appropriate. See the SAI for
more information regarding repurchase agreements.

PRIVATE PLACEMENT OFFERINGS. Investments in private placement offerings are
made in reliance on the "private placement" exemption from registration afforded
by Section 4(2) of the Securities Act of 1933 (the "1933 Act"), and resold to
qualified institutional buyers under Rule 144A under the 1933 Act ("Section 4(2)
securities"). Section 4(2) securities are restricted as to disposition under the
federal securities laws, and generally are sold to institutional investors, such
as the Portfolios, that agree they are purchasing the securities for investment
and not with an intention to distribute to the public. Any resale by the
purchaser must be pursuant to an exempt transaction and may be accomplished in
accordance with Rule 144A. Section 4(2) securities normally are resold to other
institutional investors such as the Portfolios through or with the assistance of
the issuer or dealers that make a market in the Section 4(2) securities, thus
providing liquidity. The Money Market Portfolios will not invest more than 10%
(and the other Funds' respective Portfolios, will not invest more than 15%) of
their respective net assets in Section 4(2) securities and illiquid securities
unless the applicable investment adviser determines, by continuous reference to
the appropriate trading markets and pursuant to guidelines approved by the AMR
Trust Board or the Equity 500 Index Portfolio Board, that any Section 4(2)
securities held by such Portfolio in excess of this level are at all times
liquid.

The AMR Trust Board, the Equity 500 Index Portfolio Board and the
applicable investment adviser, pursuant to the guidelines approved by their
respective Boards, will carefully monitor the Portfolios' investments in Section
4(2) securities offered and sold under Rule 144A, focusing on such important
factors, among others, as: valuation, liquidity, and availability of
information. Investments in Section 4(2) securities could have the effect of
reducing a Portfolio's liquidity to the extent that qualified institutional
buyers no longer wish to purchase these restricted securities.

PROSPECTUS
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full range and quality of services offered by the executing broker or dealer
will be considered when making these determinations. Pursuant to written
guidelines approved by the AMR Trust Board or the Equity 500 Index Portfolio
Board, as appropriate, an investment adviser of a Portfolio, or its affiliated
broker-dealer, may execute portfolio transactions and receive usual and
customary brokerage commissions (within the meaning of Rule 17e-1 of the 1940
Act) for doing so.

The Money Market Portfolios, the Intermediate Bond Portfolio and the
Short-Term Bond Portfolio normally will not incur any brokerage commissions on
their transactions because money market and debt instruments are generally
traded on a "net" basis with dealers acting as principal for their own accounts
and without a stated commission. The price of the obligation, however, usually
includes a profit to the dealer. Obligations purchased in underwritten offerings
include a fixed amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. No commissions or discounts are
paid when securities are purchased directly from an issuer.

No Portfolio, other than the Short-Term Bond Portfolio, currently expects
its portfolio turnover rate to exceed 100%. The portfolio turnover rate for the
Short-Term Bond Portfolio for the fiscal year ended October 31, 1997 was 282%.
The portfolio turnover rate for the Balanced Portfolio for the fiscal year ended
October 31, 1997 was 105%. This was due to an unusually large redemption in the
Balanced Fund, which is not expected to reoccur. A Portfolio's turnover rate, or
the frequency of portfolio transactions, will vary from year to year depending
on market conditions and the Portfolio's cash flows. High portfolio activity
increases a Portfolio's transaction costs, including brokerage commissions and
may result in a greater number of taxable transactions.

ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS -- As previously described,
investors should be aware that each Fund, unlike mutual funds that directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing all of its investable assets in a
corresponding Portfolio of the AMR Trust, which is a separate investment
company, or in the Equity 500 Index Portfolio, which is a separate investment
company advised by BT. Since a Fund will invest only in its corresponding
Portfolio, that Fund's shareholders will acquire only an indirect interest in
the investments of the Portfolio.

The Manager expects, although it cannot guarantee, that the Trust will
achieve economies of scale by investing in the AMR Trust and the Equity 500
Index Portfolio. In addition to selling their interests to the Funds, the
Portfolios sell their interests to other non-affiliated investment companies
and/or other institutional investors. All institutional investors in a Portfolio
pay a proportionate share of the Portfolio's expenses and invest in that
Portfolio on the same terms and conditions. However, other investment companies
investing all of their assets in a Portfolio are not required to sell their
shares at the same public offering price as a Fund and are allowed to charge
different sales commissions. Therefore, investors in a Fund may experience
different returns from investors in another investment company that invests
exclusively in that Fund's corresponding Portfolio.

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

Portfolio, unless otherwise specified. Written notice will be provided to
shareholders of a Fund within thirty days prior to any changes in its
corresponding Portfolio's investment objective. If the investment objective of a
Portfolio changes and the shareholders of its corresponding Fund do not approve
a parallel change in that Fund's investment objective, the Fund would seek an
alternative investment vehicle or the Manager and the investment advisers would
actively manage the Fund.

See "Management and Administration of the Trusts" for a complete
description of the investment management fee and other expenses associated with
a Fund's investment in its corresponding Portfolio. This Prospectus and the SAI
contain more detailed information about each Fund and its corresponding
Portfolio, including information related to (1) the investment objective,
policies and restrictions of each Fund and its corresponding Portfolio, (2) the
Board of Trustees and officers of the Trust, the AMR Trust and the Equity 500
Index Portfolio Board, (3) brokerage practices, (4) the Funds' shares, including
the rights and liabilities of its shareholders, (5) additional performance
information, including the method used to calculate yield and total return, and
(6) the determination of the value of each Fund's shares.

INVESTMENT RESTRICTIONS

The following fundamental investment restrictions and the non-fundamental
investment restriction are identical for each Fund and its corresponding
Portfolio. Therefore, although the following discusses the investment
restrictions of each Portfolio, it applies equally to each Fund. The following
fundamental investment restrictions may be changed with respect to a particular
Fund by the majority vote of that Fund's outstanding shares or with respect to a
Portfolio by the majority vote of that Portfolio's interest holders. No
Portfolio may:

- Invest more than 5% of its total assets (taken at market value) in
securities of any one issuer, other than obligations issued by the U.S.
Government, its agencies and instrumentalities, or purchase more than 10%
of the voting securities of any one issuer, with respect to 75% of a
Portfolio's total assets. In addition, although not a fundamental
investment restriction and therefore subject to change without shareholder
vote, the Money Market Portfolio and the U.S. Government Money Market
Portfolio apply this restriction with respect to 100% of their assets.

- Invest more than 25% of its total assets in the securities of companies
primarily engaged in any one industry, provided that: (i) this limitation
does not apply to obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities; (ii) municipalities and their agencies
and authorities are not deemed to be industries; and (iii) financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance, and diversified
finance will be considered separate industries). With respect to the Money
Market Portfolio, this restriction does not apply to the banking industry.

The following non-fundamental investment restriction may be changed with
respect to a particular Fund by a vote of a majority of the Board or with
respect to a Portfolio by a vote of a majority of the AMR Trust Board or the
Equity 500 Index Portfolio Board, as appropriate: no Portfolio may invest more
than 15% (or, with respect to any Money Market Portfolio, 10%) of its net assets
in illiquid securities, including time deposits and repurchase agreements that
mature in more than seven days.

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

YIELDS AND TOTAL RETURNS

generated during that week is earned each week over a one-year period, and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the investment income earned is assumed to be
reinvested. The effective yield will be slightly higher than the current yield
because of the compounding effect of this assumed reinvestment. The Municipal
Money Market Fund also may quote "tax equivalent yields," which show the taxable
yields a shareholder would have to earn before federal income taxes to equal
this Fund's tax-exempt yields. The tax equivalent yield is calculated by
dividing the Fund's tax-exempt yield by the result of one minus a stated federal
income tax rate. If only a portion of the Fund's investment income was
tax-exempt, only that portion is adjusted in the calculation. As stated earlier,
the Fund considers interest on private activity obligations to be exempt from
federal income tax. Each class of a Fund has different expenses which will
impact its performance.

Advertised yields for the Institutional Class of the Balanced Fund, the
Growth and Income Fund, the International Equity Fund, the S&P 500 Index Fund,
the Intermediate Bond Fund and the Short-Term Bond Fund (collectively, the
"Variable NAV Funds") will be computed by dividing the net investment income per
share earned by the applicable class during the relevant time period by the
maximum offering price per share for that class on the last day of the period.
Additionally, each class of the Intermediate Bond Fund and the Short-Term Bond
Fund may advertise a "monthly distribution rate." This rate is based on an
annualized monthly dividend accrual rate per share compared with the month-end
share price of each class of the Fund.

Total return quotations advertised by the Funds may reflect the average
annual compounded (or aggregate compounded) rate of return during the designated
time period based on a hypothetical initial investment and the redeemable value
of that investment at the end of the period. The Funds will at times compare
their performance to applicable published indices, and also may disclose their
performance as ranked by certain ranking entities. See the SAI for more
information about the calculation of yields and total returns.

MANAGEMENT AND ADMINISTRATION OF THE TRUSTS

FUND MANAGEMENT AGREEMENT -- The Board has general supervisory responsibility
over the Trust's affairs, while the business affairs of the AMR Trust and the
Equity 500 Index Portfolio are subject to the supervision of their respective
Boards. The Manager provides or oversees all administrative, investment advisory
and portfolio management services for the Trust pursuant to a Management
Agreement dated April 3, 1987, as amended July 25, 1997, together with the
Administrative Services Agreement described below. The AMR Trust and the Manager
also entered into a Management Agreement dated October 1, 1995, as amended July
25, 1997, that obligates the Manager to provide or oversee all administrative,
investment advisory and portfolio management services for the AMR Trust. The
Manager, located at 4333 Amon Carter Boulevard, MD 5645, Fort Worth, Texas
76155, is a wholly owned subsidiary of AMR Corporation ("AMR"), the parent
company of American Airlines, Inc., and was organized in 1986 to provide
investment management, advisory, administrative and asset management consulting
services. The assets of the Balanced Portfolio, the Growth and Income Portfolio
and the International Equity Portfolio are allocated by the Manager among
multiple investment advisers designated for that Portfolio. The assets of the
Intermediate Bond Portfolio are allocated by the Manager between the Manager and
another investment adviser. BT serves as investment adviser and administrator
of, and provides custody and transfer agency services to, the Equity 500 Index
Portfolio. See "Investment Advisers." The Manager serves as the sole active
investment adviser to the Money Market Portfolios and the Short-Term Bond
Portfolio. In addition, with the exception of the International Equity Portfolio
and the Equity 500 Index Portfolio, if so requested by any investment adviser,
the Manager will make the investment decisions with respect to assets allocated
to that investment adviser which the investment adviser determines should be
invested in short-term obligations of the type permitted for investment by the
Money Market Portfolio. As of December 31, 1997, the Manager had assets under
management totaling approximately $18.4 billion including approximately $6.1
billion under active management and $12.3 billion as named fiduciary or
fiduciary adviser. Of the total, approximately $14.2 billion of assets are
related to AMR. American Airlines, Inc. is not responsible for investments made
in the American AAdvantage Funds.

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

Except as otherwise provided below, the Manager bears the expense of
providing the above services and pays the fees of the investment advisers of the
Funds and the Portfolios of the AMR Trust. As compensation for paying the
investment advisory fees and for providing the Portfolios with advisory and
asset allocation services, the Manager receives from the AMR Trust an annualized
advisory fee that is calculated and accrued daily, equal to the sum of (1) 0.15%
of the net assets of the Money Market Portfolios, (2) 0.25% of the net assets of
the Intermediate Bond Portfolio and the Short-Term Bond Portfolio, (3) 0.10% of
the net assets of the other Portfolios of the AMR Trust, plus (4) all fees
payable by the Manager to the investment advisers of the Balanced, the Growth
and Income and the International Equity Portfolios, as described in "Investment
Advisers." The advisory fee is payable quarterly in arrears. To the extent that
a Fund invests all of its investable assets in its corresponding Portfolio, the
Manager will not receive an advisory fee under its Management Agreement with the
Trust. The Manager receives compensation in connection with securities lending
activities. If a Portfolio lends its portfolio securities and receives cash
collateral from the borrower, the Manager may receive up to 25% of the net
annual interest income (the gross interest earned by the investment less the
amount paid to the borrower as well as related expenses) received from the
investment of such cash. If a borrower posts collateral other than cash, the
borrower will pay to the lender a loan fee. The Manager may receive up to 25% of
the loan fees posted by borrowers. Currently, the Manager receives 10% of the
net annual interest income from the investment of cash collateral or 10% of the
loan fees posted by borrowers. In addition, the Manager is compensated through
the Administrative Services Agreement as described below for other services
provided.

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

The Trust is responsible for expenses not otherwise assumed by the Manager,
including the following: audits by independent auditors; transfer agency,
custodian, dividend disbursing agent and shareholder recordkeeping services;
taxes, if any, and the preparation of each Fund's tax returns; interest; costs
of Trustee and shareholder meetings; printing and mailing prospectuses and
reports to existing shareholders; fees for filing reports with regulatory bodies
and the maintenance of the Funds' existence; legal fees; fees to federal and
state authorities for the registration of shares; fees and expenses of
Independent Trustees; insurance and fidelity bond premiums; fees paid to
consultants providing reports regarding adherence by investment advisers to the
investment style of a Portfolio; and any extraordinary expenses of a
nonrecurring nature.

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

Trust. To the extent that a Fund invests all of its investable assets in a
corresponding Portfolio, however, an investment adviser will receive an advisory
fee only on behalf of the Portfolio and not on behalf of its corresponding Fund.
As described below, the assets of the Balanced, the Growth and Income and the
International Equity Portfolios are allocated among the investment advisers
designated for each Portfolio and the assets of the Intermediate Bond Portfolio
are allocated between the Manager and another investment adviser. The Manager is
permitted to enter into new or modified advisory agreements with existing or new
investment advisers without approval of Fund shareholders or Portfolio interest
holders, but subject to approval of the Board and the AMR Trust Board. The
Securities and Exchange Commission issued an exemptive order which eliminates
the need for shareholder/interest holder approval subject to compliance with
certain conditions. These conditions include the requirement that within 90 days
of hiring a new adviser or implementing a material change with respect to an
advisory contract, the applicable Fund send a notice to shareholders containing
information about the change that would be included in a proxy statement. The
Manager recommends investment advisers to the Board and the AMR Trust Board
based upon its continuing quantitative and qualitative evaluation of the
investment advisers' skill in managing assets using specific investment styles
and strategies. The allocation of assets among investment advisers may be
changed at any time by the Manager. Allocations among investment advisers will
vary based upon a variety of factors, including the overall investment
performance of each investment adviser, the Portfolio's cash flow needs and
market conditions. The Manager need not allocate assets to each investment
adviser designated for a Portfolio. The investment advisers can be terminated
without penalty to the AMR Trust by the Manager, the AMR Trust Board or the
interest holders of the applicable Portfolio. Short-term investment performance,
by itself, is not a significant factor in selecting or terminating an investment
adviser, and the Manager does not expect to recommend frequent changes of
investment advisers. The Prospectus will be supplemented if additional
investment advisers are retained or the contract with any existing investment
adviser is terminated.

Each investment adviser has discretion to purchase and sell securities for
its segment of a Portfolio's assets in accordance with that Portfolio's
objectives, policies and restrictions and the more specific strategies provided
by the Manager. Although the investment advisers are subject to general
supervision by the AMR Trust Board, the Equity 500 Index Portfolio Board and the
Manager, as appropriate, these parties do not evaluate the investment merits of
specific securities transactions. As compensation for its services, each
investment adviser, except BT, is paid a fee by the Manager out of the proceeds
of the management fee received by the Manager from the AMR Trust.

ADMINISTRATIVE SERVICES AGREEMENTS -- The Manager and the Trust entered into an
Administrative Services Agreement which obligates the Manager to provide the
Funds those administrative and management services (other than investment
advisory services) described in the Management Agreement. As compensation for
these services, the Manager receives an annualized fee of 0.25% of the net
assets of the Institutional Class of the Variable NAV Funds and 0.05% of the net
assets of the Institutional Class of the Money Market Funds. The fee is payable
quarterly in arrears.

BT serves as the administrator to the Equity 500 Index Portfolio. Under an
Administration and Services Agreement with the Portfolio, BT calculates the
value of the assets of the Portfolio and generally assists the Equity 500 Index
Portfolio Board in all aspects of the administration and operation of the
Portfolio. The Administration and Services Agreement provides for the Portfolio
to pay BT a fee, computed daily and paid monthly, at the rate of 0.05% of the
average daily net assets of the Portfolio. Under the Administration and Services
Agreement, BT may delegate one or more of its responsibilities to others,
including Federated Services Company, at BT's expense.

DISTRIBUTION OF TRUST SHARES -- Shares are distributed through the Funds'
principal underwriter, BTS. BTS is compensated by the Manager, and not the
Trust. The Trust does not incur any direct distribution expenses related to
Institutional Class shares. However, the Trust has adopted a Distribution Plan
in accordance with Rule 12b-1 under the 1940 Act which authorizes the use of any
fees received by the Manager in accordance with the Administrative Services and
Management Agreements and any fees received by the investment advisers pursuant
to their Advisory Agreements with the Manager, to be used for distribution
purposes.
PROSPECTUS
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ALLOCATION OF FUND EXPENSES -- Expenses of each Fund generally are allocated
equally among the shares of that Fund, regardless of class. However, certain
expenses approved by the Board will be allocated solely to the class to which
they relate.

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

CUSTODIAN -- STATE STREET BANK & TRUST COMPANY ("State Street"), Boston,
Massachusetts, serves as custodian for the Portfolios of the AMR Trust and the
Funds. BANKERS TRUST COMPANY, New York, New York, serves as custodian and
transfer agent for the assets of the Equity 500 Index Portfolio.

TRANSFER AGENT -- State Street serves as transfer agent and provides transfer
agency services for Fund shareholders through its affiliate NATIONAL FINANCIAL
DATA SERVICES ("NFDS"), Kansas City, Missouri.

INDEPENDENT AUDITOR -- The independent auditor for the Funds (except as noted
otherwise) and the AMR Trust is ERNST & YOUNG LLP, Dallas, Texas. The
independent auditor for the S&P 500 Index Fund and the Equity 500 Index
Portfolio is COOPERS & LYBRAND L.L.P., Kansas City, Missouri.

INVESTMENT ADVISERS

Set forth below is a brief description of the investment advisers for each
Fund and its corresponding Portfolio, except for the Money Market Funds and
their corresponding Portfolios, whose sole investment adviser is the Manager.
References to the investment advisers retained by a Portfolio also apply to the
corresponding Fund. Except for the Manager and BT, none of the investment
advisers provides any services to the Funds or the Portfolios except for
portfolio investment management and related recordkeeping services, or has any
affiliation with the Trust, the AMR Trust, the Equity 500 Index Portfolio or the
Manager. BT provides investment advisory, administrative and other services to
the Equity 500 Index Portfolio. See "Bankers Trust Company" below for a
discussion of those services.

William F. Quinn has served as President of the Manager since it was
founded in 1986 and Nancy A. Eckl serves as Vice President-Trust Investments of
the Manager. Ms. Eckl previously served as Vice President-Finance and Compliance
of the Manager from December 1990 to May 1995. In these capacities, Mr. Quinn
and Ms. Eckl have primary responsibility for the day-to-day operations of the
Balanced Fund, the Growth and Income Fund, the International Equity Fund, the
Intermediate Bond Fund and their corresponding Portfolios. These
responsibilities include oversight of the investment advisers, regular review of
each investment adviser's performance and asset allocations among them.

Michael W. Fields is responsible for the portfolio management oversight of
the Short-Term Bond Fund and its corresponding Portfolio as well as the portion
of the Intermediate Bond Fund and its corresponding Portfolio, allocated to the
Manager. Mr. Fields has been with the Manager since it was founded in 1986 and
serves as Vice President-Fixed Income Investments. Benjamin L. Mayer is
responsible for the day-to-day portfolio management of these Funds and
Portfolios. Mr. Mayer has served as Senior Portfolio Manager of the Manager
since May 1995. Prior to that time, he was a Vice President of Institutional
Fixed Income Sales at Merrill Lynch, Pierce, Fenner & Smith from January 1994 to
April 1995 and Vice President, Regional Senior Strategist from April 1989 to
January 1994.

Frank Salerno, Managing Director of BT, is responsible for the day-to-day
management of the Equity 500 Index Portfolio. Mr. Salerno has been employed by
BT since prior to 1989 and has managed the Equity 500 Index Portfolio's assets
since the Portfolio commenced operations December 31, 1992.

PROSPECTUS
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the international and domestic institutional market, with a global network of
over 90 offices in more than 50 countries. As of September 30, 1997, Bankers
Trust New York Corporation was the seventh largest bank holding company in the
United States with total assets of approximately $100 billion and approximately
$300 billion in assets under management globally. Of that total, approximately
$143 billion are in U.S. equity index assets alone. BT serves as investment
adviser and administrator to the Equity 500 Index Portfolio. For its services,
BT receives a fee from the Equity 500 Index Portfolio, computed daily and paid
monthly, at the annual rate of 0.10% of the average daily net assets of the
Portfolio, of which BT is currently waiving 0.05%.

BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("Barrow"), 3232 McKinney Avenue,
15th Floor, Dallas, Texas 75204, is a professional investment counseling firm
which has been providing investment advisory services since 1979. The firm is
wholly owned by United Asset Management Corporation, a Delaware corporation. As
of December 31, 1997, Barrow had discretionary investment management authority
with respect to approximately $28.8 billion of assets, including approximately
$1.9 billion of assets of AMR and its subsidiaries and affiliated entities.
Barrow serves as an investment adviser to the Balanced Portfolio, the Growth and
Income Portfolio, the Intermediate Bond Portfolios and the Short-Term Bond
Portfolio, although the Manager does not presently intend to allocate any of the
assets in the Short-Term Bond Portfolio to Barrow. The Manager pays Barrow an
annualized fee equal to .30% on the first $200 million in AMR Trust assets under
its discretionary management, .20% on the next $300 million, .15% on the next
$500 million, and .125% on assets over $1 billion.

BRANDYWINE ASSET MANAGEMENT, INC. ("Brandywine"), 201 North Walnut Street,
Wilmington, Delaware 19801, is a professional investment counseling firm founded
in 1986. Brandywine is a wholly owned subsidiary of Legg Mason, Inc. As of
December 31, 1997, Brandywine had assets under management totaling approximately
$7.5 billion, including approximately $894 million of assets of AMR and its
subsidiaries and affiliated entities. Brandywine serves as an investment adviser
to the Balanced and the Growth and Income Portfolios. The Manager pays
Brandywine an annualized fee equal to .225% of assets in the Balanced Portfolio
and .25% of assets in the Growth and Income Portfolio of the first $500 million
of AMR Trust assets under its discretionary management, .225% of the next $100
million on all assets and .20% on all excess assets.

GSB INVESTMENT MANAGEMENT, INC. ("GSB"), 301 Commerce Street, Fort Worth,
Texas 76102, is a professional investment management firm which was founded in
1987 by Frank P. Ganucheau, Mark J. Stupfel, and Lyle E. Brumley. GSB is wholly
owned by United Asset Management Corporation, a Delaware corporation. As of
December 31, 1997, GSB managed approximately $3.5 billion of assets, including
approximately $905 million of assets of AMR and its subsidiaries and affiliated
entities. GSB serves as an investment adviser to the Balanced Portfolio and the
Growth and Income Portfolio. The Manager pays GSB an annualized fee equal to
.30% of the first $100 million in AMR Trust assets under its discretionary
management, .25% of the next $100 million, .20% of the next $100 million and
.15% on all excess assets.

HOTCHKIS AND WILEY, 800 West Sixth Street, 5th Floor, Los Angeles,
California 90017, is a professional investment counseling firm which was founded
in 1980 by John F. Hotchkis and George Wiley. Hotchkis and Wiley is a division
of the Capital Management Group of Merrill Lynch Asset Management, L.P., a
wholly owned indirect subsidiary of Merrill Lynch & Co., Inc. Assets under
management as of December 31, 1997 were approximately $12.3 billion, which
included approximately $1.1 billion of assets of AMR and its subsidiaries and
affiliated entities. Hotchkis and Wiley serves as an investment adviser to the
Balanced Portfolio, the Growth and Income Portfolio and the International Equity
Portfolio. The Manager pays Hotchkis and Wiley an annualized fee equal to .60%
of the first $10 million of AMR Trust assets under its discretionary management,
.50% of the next $140 million of assets, .30% of the next $50 million of assets,
.20% of the next $800 million of assets and .15% of all excess assets.

INDEPENDENCE INVESTMENT ASSOCIATES, INC. ("IIA"), 53 State Street, Boston,
Massachusetts 02109, is a professional investment counseling firm which was
founded in 1982. The firm is a wholly owned subsidiary of John Hancock Mutual
Life Insurance Company. Assets under management as of December 31, 1997,
including funds managed for its parent company, were approximately $26.7
billion, which included approximately $1.1 billion of assets of AMR and its
subsidiaries and affiliated entities. IIA serves as an investment adviser to the
Balanced Portfolio and the Growth and Income Portfolio. The Manager pays IIA an
annualized fee equal to .50%
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of the first $30 million of AMR Trust assets under its discretionary management,
.25% of the next $70 million of assets, and .20% of all excess assets.

MORGAN STANLEY ASSET MANAGEMENT INC. ("MSAM"), 25 Cabot Square, London,
United Kingdom E14 4QA, is a wholly owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co. MSAM provides portfolio management and named fiduciary
services to taxable and nontaxable institutions, international organizations and
individuals investing in United States and international equity and debt
securities. As of September 30, 1997, MSAM, together with its other asset
management affiliates, had assets under management (including assets under
fiduciary advisory control) totaling approximately $142.5 billion, including
approximately $112.3 billion under active management and $20.2 billion as named
fiduciary or fiduciary adviser. As of December 31, 1997, MSAM had investment
authority over approximately $561.9 million of assets of AMR and its
subsidiaries and affiliated entities. MSAM serves as an investment adviser to
the International Equity Portfolio. The Manager pays MSAM an annual fee equal to
.80% of the first $25 million of AMR Trust assets under its discretionary
management, .60% of the next $25 million in assets, .50% of the next $25 million
in assets and .40% on all excess assets.

TEMPLETON INVESTMENT COUNSEL, INC. ("Templeton"), 500 East Broward Blvd.,
Suite 2100, Fort Lauderdale, Florida 33394-3091, is a professional investment
counseling firm which has been providing investment services since 1979.
Templeton is indirectly owned by Franklin Resources, Inc. As of December 31,
1997, Templeton had discretionary investment management authority with respect
to approximately $21.7 billion of assets, including approximately $511.6 million
of assets of AMR and its subsidiaries and affiliated entities. Templeton serves
as an investment adviser to the International Equity Portfolio. The Manager pays
Templeton an annualized fee equal to .50% of the first $100 million of AMR Trust
assets under its discretionary management, .35% of the next $50 million in
assets, .30% of the next $250 million in assets and .25% on assets over $400
million.

Solely for the purpose of determining the applicable percentage rates when
calculating the fees for each investment adviser other than MSAM and BT, there
shall be included all other assets or trust assets of American Airlines, Inc.
also under management by each respective investment adviser (except assets
managed by Barrow under the HALO Bond Program). For the purpose of determining
the applicable percentage rates when calculating MSAM's fees, all equity account
assets managed by MSAM on behalf of American Airlines, Inc. shall be included.
The inclusion of any such assets will result in lower overall fee rates being
applied to the applicable Portfolio.

PURCHASE, REDEMPTION AND VALUATION OF SHARES

PURCHASING SHARES OF THE TRUST -- Institutional Class shares are offered without
a sales charge to institutions -- including bank trust departments acting on
behalf of their clients (such as employee benefit plans, personal trusts and
other accounts for which the bank acts as agent or fiduciary); endowment funds
and charitable foundations; employee welfare plans which are tax-exempt under
Section 501(c)(9) of the Internal Revenue Code of 1986, as amended ("Code");
qualified pension and profit sharing plans, and cash or deferred arrangements
under Section 401(k) of the Code; corporations; and other institutional
investors who make an initial investment of at least $2 million. The Manager may
allow a reasonable period of time after opening an account for an investor to
meet the initial investment requirement. The Manager may waive the minimum
investment requirement for certain individuals associated with AMR or the
Manager, as more fully described in the SAI. In addition, for investors such as
investment advisors, trust companies and financial advisors who make investments
for a group of clients, the minimum initial investment can be met through an
aggregated purchase order for more than one client. Shares purchased through
financial intermediaries may be subject to transaction fees.

Trust shares are sold without a sales charge at the net asset value next
determined after the acceptance of a purchase order. Shares of the Variable NAV
Funds are offered and purchase orders accepted until the close of the New York
Stock Exchange, generally 4:00 p.m. Eastern time, on each day on which the
Exchange is open for trading which excludes the following business holidays: New
Year's Day, Martin Luther King's Birthday, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
("Business Day"). Shares of the Money Market Fund are offered and orders
accepted until 3:00 p.m. Eastern
PROSPECTUS
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time, or the close of the Exchange (whichever comes first) on each day on which
the Exchange is open for business except for Columbus Day and Veteran's Day
("Money Market Business Day") and during which federal funds become available to
the Fund. Shares are offered and orders are accepted for the Municipal Money
Market Fund until 11:45 a.m. Eastern time, or the close of the Exchange
(whichever comes first) and for the U.S. Government Money Market Fund until 2:00
p.m. Eastern time, or the close of the Exchange (whichever comes first) on each
Money Market Business Day. The Trust reserves the right to reject any order for
the purchase of shares and to limit or suspend, without prior notice, the
offering of shares.

BY WIRE -- Purchases may be made by wiring funds. If opening a new account, an
investor should first forward a completed new account application to the Manager
at P.O. Box 619003, MD 5645, DFW Airport, TX 75261-9003 or by facsimile to (817)
967-0768. To ensure prompt receipt of a transmission by wire, the investor
should: telephone NFDS at (800) 658-5811 and specify the Fund whose shares are
to be purchased; provide the name, address, telephone number and account number
of the investor; and identify the amount being wired and by which bank. NFDS
will provide the investor with an account number. The investor should instruct
its bank to designate the account number and transmit the federal funds to:
State Street Bank & Trust Co., ABA Routing #0110-0002-8; AC-9905-342-3;
Attention: American AAdvantage Funds-Institutional Class and reference the
specific Fund.

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

BY MAIL -- Share purchases of any Fund may be made by mail by sending a check or
other negotiable bank draft payable to American AAdvantage Funds to: "American
AAdvantage Funds, P.O. Box 419643, Kansas City, MO, 64141-6643." An additional
purchase of shares should be accompanied by the Fund name and shareholder's
account number. Purchase checks are accepted subject to collection at full face
value in U.S. funds and must be drawn in U.S. dollars on a U.S. bank.

REDEEMING SHARES OF THE TRUST -- Shares of the Funds may be redeemed by
telephone or by mail on any Business Day for the Variable NAV Funds and on any
Money Market Business Day for the Money Market Funds.

BY TELEPHONE -- Shares may be redeemed by telephone. Proceeds from redemption
orders placed by the following deadlines generally will be transmitted to
shareholders on the same day: 2:00 p.m. Eastern time for the Money Market Fund
and the U.S. Government Money Market Fund, and 11:45 a.m. Eastern time for the
Municipal Money Market Fund. Proceeds from redemption orders received by 4:00
p.m. Eastern Time for the Variable NAV Funds generally will be transmitted to
shareholders the next Business Day.

Neither the Trust, its transfer agent, nor their respective officers,
trustees, directors, employees, or agents will be responsible for the
authenticity of instructions provided by telephone, nor for any loss, liability,
cost or expense

PROSPECTUS
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for acting upon instructions furnished thereunder if they reasonably believe
that such instructions are genuine. The Funds employ procedures reasonably
designed to confirm that instructions communicated by telephone are genuine.

BY MAIL -- Variable NAV Fund shares may be redeemed on any Business Day by
writing directly to the Funds at the address above under "Purchasing Shares of
the Trust -- By Mail." Shares of the Money Market Funds may be redeemed on any
Money Market Business Day by writing to the same address. The redemption price
will be the net asset value per share next determined after receipt by the
transfer agent of all required documents in good order. "Good order" means that
the request must include a letter of instruction or stock assignment specifying
(1) the account number and Fund name; (2) the number of shares or dollar amount
to be redeemed; (3) signature of an authorized signatory for the owners of the
shares in the exact names in which they appear on the account; (4) other
supporting legal documents, if required, in the case of estates, trusts,
guardianships, custodians, corporations, IRAs and welfare, pension and
profit-sharing plans; and (5) any share certificates being redeemed must be
returned duly endorsed or accompanied by a stock assignment with signatures
guaranteed by a bank, trust company or member of a recognized stock exchange.
Shares redeemed through financial intermediaries may be subject to transaction
fees.

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

FULL REDEMPTIONS -- Unpaid dividends credited to an account up to the date of
redemption of all shares of a Money Market Fund generally will be paid at the
time of redemption.

EXCHANGE PRIVILEGE -- Institutional Class shares which have been registered in a
shareholder's name for at least 15 days may be exchanged into shares of the
Institutional Class of another Fund. Shareholders may exchange shares by sending
the Funds a written request or by calling NFDS at (800) 658-5811. The exchange
will be processed at the next share price calculated after the request is
received in good order by the Funds.

The general redemption policies apply to redemptions by telephone exchange.
The exchange privilege may be modified or terminated at any time by the Funds.
The Funds reserve the right to limit the number of telephone exchanges an
investor may exercise.

VALUATION OF SHARES -- The net asset value of each share (share price) of the
Variable NAV Funds is determined as of the close of the Exchange, generally 4:00
p.m. Eastern time, on each Business Day and the net asset value of each share of
the Money Market Funds is determined as of the close of the Exchange, generally
4:00 p.m. Eastern time, on each Money Market Business Day. The net asset value
of all outstanding shares of a Fund will be determined by computing the Fund's
total assets (which is the value of the Fund's investment in its corresponding
Portfolio), subtracting all of the Fund's liabilities, and dividing the result
by the total number of Fund shares outstanding at such time. The net asset value
of shares of the Institutional Class will be determined based on a pro rata
allocation of the value of the Fund's corresponding Portfolio's investment
income, expenses and total capital gains and losses. The allocation will be
based on comparative net asset value at the beginning of the day except for
expenses related solely to one class of shares ("Class Expenses") which will be
borne only by the appropriate class of shares. Because of the Class Expenses,
the net income attributable to and the dividends

PROSPECTUS
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<PAGE> 34

payable for each class of shares may be different. Additionally, the Variable
NAV Funds may compute differing share prices as a result of Class Expenses.

Equity securities listed on securities exchanges, including all but United
Kingdom securities of the International Equity Portfolio, are valued at the last
quoted sales price on a designated exchange prior to the close of trading on the
Exchange or, lacking any sales, on the basis of the last current bid price prior
to the close of trading on the Exchange. Securities of the United Kingdom held
in the International Equity Portfolio are priced at the last jobber price (mid
of the bid and offer prices quoted by the leading stock jobber in the security)
prior to close of trading on the Exchange. Trading in foreign markets is usually
completed each day prior to the close of the Exchange. However, events may occur
which affect the values of such securities and the exchange rates between the
time of valuation and the close of the Exchange. Should events materially affect
the value of such securities during this period, the securities are priced at
fair value, as determined in good faith and pursuant to procedures approved by
the AMR Trust Board. 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) will normally 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 AMR Trust
Board for the AMR Trust Portfolios. Assets and liabilities denominated in
foreign currencies and forward currency contracts are translated into U.S.
dollar equivalents based on prevailing market rates. Portfolio obligations held
by the Money Market Portfolios are valued in accordance with the amortized cost
method, which is designed to enable those Portfolios and their corresponding
Funds to maintain a consistent $1.00 per share net asset value. Investment grade
short-term obligations with 60 days or less to maturity held by all other
Portfolios also are valued using the amortized cost method as described in the
SAI.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAX MATTERS

DIVIDENDS AND OTHER DISTRIBUTIONS -- Dividends and other distributions paid on
each class of a Fund's shares are calculated at the same time and in the same
manner. Dividends from the net investment income of the Balanced Fund, the
Growth and Income Fund and the International Equity Fund normally are declared
annually. Dividends consisting of substantially all of the net investment income
of the Intermediate Bond Fund and the Short-Term Bond Fund, which are paid
monthly, normally are declared on each Business Day immediately prior to the
determination of the net asset value and are payable to shareholders of record
as of the close of business on the day on which declared. The S&P 500 Index Fund
distributes income dividends on the first Business Day in April, July and
October. In December, the S&P 500 Index Fund will distribute another income
dividend, plus any capital gains. Each Fund may make an additional dividend or
other distribution, if necessary, to avoid a 4% excise tax on certain
undistributed income and gain. A Fund's net investment income attributable to
the Institutional Class consists of that class's pro rata share of the Fund's
share of dividends and interest (including discount) accrued on the securities
held by its corresponding Portfolio, less applicable expenses of the Fund and
the Portfolio attributable to the Institutional Class. Distributions of a Fund's
share of its corresponding Portfolio's realized net short-term capital gain, net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), and net gains from foreign currency transactions, if any,
normally will be made annually.

All of each Money Market Fund's net investment income and net short-term
capital gain, if any, generally is declared as dividends on each Money Market
Business Day immediately prior to the determination of the net asset value.
Dividends generally will be paid on the first day of the following month. Each
Money Market Fund's net investment income attributable to the Institutional
Class will consist of (1) that class' pro rata share of the Fund's share of
interest accrued and discount earned on its corresponding Portfolio's
securities, less amortization of premium and expenses of both the Portfolio and
(2) the Fund's expenses attributable to the Institutional Class. The Money
Market Portfolios do not expect to realize net capital gain and, therefore, the
Money Market Funds do not foresee paying any capital gain distributions. If any
Money Market Fund (either directly or indirectly through its corresponding
Portfolio) incurs or anticipates any unusual expenses, loss or depreciation that
would
PROSPECTUS
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<PAGE> 35

affect its net asset value or income for a particular period adversely, the
Board would at that time consider whether to adhere to the dividend policy
described above or to revise it in the light of the then prevailing
circumstances.

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

TAX INFORMATION -- Each Fund is treated as a separate corporation for federal
income tax purposes and intends to qualify or to continue to qualify for
treatment as a regulated investment company under the Code. In each taxable year
that a Fund so qualifies, the Fund (but not its shareholders) will be relieved
of federal income tax on that part of its investment company taxable income
(generally, net investment income plus any net short-term capital gain and gains
from certain foreign currency transactions) and net capital gain that it
distributes to its shareholders. However, a Fund will be subject to a
nondeductible 4% excise tax to the extent that it fails to distribute by the end
of any calendar year substantially all of its ordinary income for that calendar
year and its capital gain net income for the one-year period ending on October
31 of that year, plus certain other amounts. For these and other purposes,
dividends and other distributions declared by a Fund in October, November or
December of any year and payable to shareholders of record on a date in one of
those months will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if they are paid by the Fund during the
following January. Each Portfolio received a ruling from the Internal Revenue
Service or an opinion of counsel that it is or should be classified for federal
income tax purposes as a partnership; accordingly, no Portfolio is subject to
federal income tax.

Dividends from a Fund's investment company taxable income are taxable to
its shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether received in cash or paid in additional Fund shares.
Distributions of a Fund's net capital gain (whether received in cash or paid in
additional Fund shares), when designated as such, generally are taxable to its
shareholders as long-term capital gain, regardless of how long they have held
their Fund shares. A capital gain distribution from a Fund also may be offset by
capital losses from other sources. Under the Taxpayer Relief Act of 1997,
different maximum tax rates apply to a noncorporate taxpayer's net capital gain
depending on the taxpayer's holding period and marginal rate of federal income
tax -- generally, 28% for gain recognized on securities held for more than one
year but not more than 18 months and 20% (10% for taxpayers in the 15% marginal
tax bracket) for gain recognized on securities held for more than 18 months.
Pursuant to an Internal Revenue Service notice, the Fund may divide each net
capital gain distribution into a 28% rate gain distribution and a 20% rate gain
distribution (in accordance with the Fund's holding periods for the securities
it sold that generated the distributed gain) and its shareholders must treat
those portions accordingly.

Some foreign countries may impose income or withholding taxes on certain
dividends payable to the International Equity Portfolio. The International
Equity Fund's share of any such withheld taxes may be treated by that Fund as a
deduction or, if it satisfies certain requirements, it may elect to flow the tax
through to its shareholders, who in turn may either deduct the taxes or use them
in calculating credits against their federal income tax.

A portion of the income dividends paid by the Balanced Fund, the Growth and
Income Fund and the S&P 500 Index Fund is eligible for the dividends-received
deduction allowed to corporations. The eligible portion may not exceed the
respective Fund's aggregate dividends received from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction may be subject indirectly to the AMT. The
International Equity Fund's dividends most likely will not qualify for the
dividends-received deduction because none of the dividends received by that Fund
are expected to be paid by U.S. corporations.

PROSPECTUS
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<PAGE> 36

Distributions by the Municipal Money Market Fund that it designates as
"exempt-interest dividends" generally may be excluded from gross income by its
shareholders. If the Municipal Money Market Portfolio earns taxable income from
any of its investments, the Municipal Money Market Fund's share of income will
be distributed to its shareholders as a taxable dividend. To the extent that
Portfolio invests in private activity obligations, that Fund's shareholders will
be required to treat a portion of its dividends as a "tax preference item" in
determining their liability for the AMT. Exempt-interest dividends also may be
subject to state and local income tax laws. Because some states exempt from
income tax the interest on their own obligations and obligations of governmental
agencies and municipalities in the state, shareholders will receive tax
information each year regarding the Municipal Money Market Fund's
exempt-interest income by state. Interest on indebtedness incurred or continued
by a shareholder to purchase or carry shares of that Fund is not deductible.

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

If shares are purchased shortly before the record date for a dividend
(other than an exempt-interest dividend) or other distribution, the investor
will pay full price for the shares and receive some portion of the price back as
a taxable distribution.

Each Fund notifies its shareholders following the end of each calendar year
of the amounts of dividends and capital gain distributions paid (or deemed paid)
(and for the International Equity Fund, if it satisfies the requirements and
makes the election referred to above, their share of that Fund's share of any
foreign taxes paid by the International Equity Portfolio) that year and of any
portion of those dividends that qualifies for the corporate dividends-received
deduction. The information regarding capital gain distributions designates the
portions thereof subject to the different maximum rates of tax applicable to
noncorporate taxpayers' net capital gain indicated above. The notice sent by the
Municipal Money Market Fund specifies the amounts of exempt-interest dividends
(and the portion thereof, if any, that is a tax preference item for purposes of
the AMT) and any taxable dividends.

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

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

GENERAL INFORMATION

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

PROSPECTUS
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<PAGE> 37

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

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

As more fully described in the SAI, the following persons may be deemed to
control certain Funds by virtue of their ownership of more than 25% of the
outstanding shares of a Fund as of January 31, 1998:

AMERICAN AADVANTAGE BALANCED FUND
AMR Corporation and subsidiary companies and Employee Benefit Trusts
thereof 81%
AMERICAN AADVANTAGE GROWTH AND INCOME FUND
AMR Corporation and subsidiary companies and Employee Benefit Trusts
thereof 85%
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
AMR Corporation and subsidiary companies and Employee Benefit Trusts
thereof 60%
AMERICAN AADVANTAGE S&P 500 INDEX FUND
AMR Corporation and subsidiary companies and Employee Benefit Trusts
thereof 100%
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
AMR Corporation and subsidiary companies and Employee Benefit Trusts
thereof 72%

The Manager has taken steps that it believes are reasonably designed to
address the potential failure of computer programs used by the Manager and the
Funds' service providers to address the Year 2000 issue. There can be no
assurance that these steps will be sufficient to avoid any adverse impact.

PROSPECTUS
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<PAGE> 38

SHAREHOLDER COMMUNICATIONS

Shareholders will receive periodic reports, including annual and
semi-annual reports which will include financial statements showing the results
of the Funds' operations and other information. The financial statements of the
Funds will be audited by the independent auditors at least annually. Shareholder
inquiries and requests for information regarding the other investment companies
which also invest in the AMR Trust should be made in writing to the Funds at
P.O. Box 619003, MD 5645, Dallas/Fort Worth Airport, Texas 75261-9003, or by
calling (800) 388-3344. Shareholder inquiries and requests for information
regarding the other investment companies that also invest in the Equity 500
Index Portfolio should be made by calling (800) 730-1313.

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

American AAdvantage Funds is a registered service mark of AMR Corporation.
PlanAhead Class is a registered service mark, and Platinum Class, American
AAdvantage Balanced Fund, American AAdvantage Growth and Income Fund, American
AAdvantage International Equity Fund, American AAdvantage Intermediate Bond
Fund, American AAdvantage Short-Term Bond Fund, American AAdvantage Money Market
Fund, American AAdvantage Municipal Money Market Fund and American AAdvantage
U.S. Government Money Market Fund are service marks of AMR Investment Services,
Inc.
PROSPECTUS
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<PAGE> 39

-- NOTES --
<PAGE> 40

American Advantage Funds(R) Logo

- INSTITUTIONAL CLASS -
P.O. Box 419643
Kansas City, MO 64141-6643
(800) 658-5811

- PLANAHEAD CLASS(R) -
P.O. Box 419643
Kansas City, MO 64141-6643
(800) 388-3344

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

Access our website at www.aafunds.com

INST-PRO-0398
<PAGE> 41

THIS PROSPECTUS contains important information about the PLANAHEAD CLASS OF THE
AMERICAN AADVANTAGE FUNDS ("Trust"), an open-end management investment company
which consists of multiple investment portfolios. This Prospectus pertains only
to the nine funds listed on this cover page (individually referred to as a
"Fund" and, collectively, the "Funds"). EACH FUND, EXCEPT THE S&P 500 INDEX
FUND, SEEKS ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS
IN A CORRESPONDING PORTFOLIO OF THE AMR INVESTMENT SERVICES TRUST ("AMR
TRUST"). THE S&P 500 INDEX FUND INVESTS ALL OF ITS INVESTABLE ASSETS IN THE
EQUITY 500 INDEX PORTFOLIO. (THE EQUITY 500 INDEX PORTFOLIO AND THE PORTFOLIOS
OF THE AMR TRUST ARE REFERRED TO HEREIN AS A "PORTFOLIO" AND, COLLECTIVELY, THE
"PORTFOLIOS.") EACH PORTFOLIO HAS AN INVESTMENT OBJECTIVE IDENTICAL TO THE
INVESTING FUND. The investment experience of each Fund will correspond directly
with the investment experience of each Portfolio. Each Fund consists of
multiple classes of shares designed to meet the needs of different groups of
investors. PlanAhead Class shares are available to all investors, including
smaller institutional investors, investors using intermediary organizations
such as discount brokers or plan sponsors, individual retirement accounts, and
self-employed individual retirement plans. Prospective PlanAhead Class
investors should read this Prospectus carefully before making an investment
decision and retain it for future reference.

IN ADDITION TO THIS PROSPECTUS, a Statement of Additional Information ("SAI")
dated March 1, 1998 has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The SAI contains more detailed
information about the Funds. For a free copy of the SAI, call (800) 388-3344.
For further information about the PlanAhead Class or for information on the
other classes of shares, please refer to the appropriate address and phone
number on the back cover of this Prospectus.

The Securities and Exchange Commission maintains a Web Site
(http://www.sec.gov) that contains the SAI, material incorporated by reference
and other information regarding the Funds and the Portfolios.

AN INVESTMENT IN THE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THEY WILL BE ABLE TO
MAINTAIN A STABLE PRICE OF $1.00 PER SHARE.

PROSPECTUS
March 1, 1998
[AMERICAN AADVANTAGE LOGO]
BALANCED FUND - PlanAhead Class -
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND
S&P 500 INDEX FUND
INTERMEDIATE BOND FUND
SHORT-TERM BOND FUND
MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
Managed by AMR Investment Services, Inc.

LOGO
<PAGE> 42

The AMERICAN AADVANTAGE S&P INDEX FUND(1) ("S&P 500 Index Fund") seeks to
provide investment results that, before expenses, correspond to the total return
of common stocks publicly traded in the United States, as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500" or "Index"), by
investing all of its investable assets in the Equity 500 Index Portfolio which
in turn invests in common stocks of companies that compose the S&P 500.

The AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) ("Intermediate Bond Fund")
and the AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) ("Short-Term Bond Fund,"
formerly the American AAdvantage Limited-Term Income Fund) each seeks income and
capital appreciation by investing all of its investable assets in the
Intermediate Bond Portfolio of the AMR Trust ("Intermediate Bond Portfolio"),
and the Short-Term Bond Portfolio of the AMR Trust ("Short-Term Bond Portfolio,"
formerly the "Limited-Term Income Portfolio"), respectively, which in turn
primarily invest in debt obligations. The Intermediate Bond Fund seeks to
maintain a dollar weighted average duration of three to seven years and the
Short-Term Bond Fund seeks to maintain a dollar weighted average duration of one
to three years.

The AMERICAN AADVANTAGE MONEY MARKET FUND(SM) ("Money Market Fund"), AMERICAN
AADVANTAGE MUNICIPAL MONEY MARKET FUND(SM) ("Municipal Money Market Fund") and
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET FUND(SM) ("U.S. Government
Money Market Fund") (collectively, the "Money Market Funds") each seeks current
income, liquidity, and the maintenance of a stable price per share of $1.00 by
investing all of its investable assets in the Money Market Portfolio of the AMR
Trust ("Money Market Portfolio"), the Municipal Money Market Portfolio of the
AMR Trust ("Municipal Money Market Portfolio") and the U.S. Government Money
Market Portfolio of the AMR Trust ("U.S. Government Money Market Portfolio"),
respectively (collectively the "Money Market Portfolios"), which in turn invest
in high quality, short-term obligations. The Municipal Money Market Portfolio
invests primarily in municipal obligations and the U.S. Government Money Market
Portfolio invests exclusively in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in repurchase agreements that
are collateralized by such obligations.

Under a master-feeder operating structure, each Fund seeks its investment
objective by investing all of its investable assets in a corresponding Portfolio
as described above. Each Portfolio's investment objective is identical to that
of its corresponding Fund. Whenever the phrase "all of the Fund's investable
assets" is used, it means that the only investment securities that will be held
by a Fund will be that Fund's interest in its corresponding Portfolio. AMR
Investment Services, Inc. ("Manager") provides investment management and
administrative services to the Portfolios, except for the Equity 500 Index
Portfolio, and administrative services to the Funds. Bankers Trust Company
("BT") provides investment advisory, administrative and other services to the
Equity 500 Index Portfolio. This master-feeder operating structure is different
from that of many other investment companies which directly acquire and manage
their own portfolios of securities. Accordingly, investors should carefully
consider this investment approach. See "Investment Objectives, Policies and
Risks -- Additional Information About the Portfolios." A Fund may withdraw its
investment in a corresponding Portfolio at any time if the

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

(1) S&P is a trademark of The McGraw-Hill Companies, Inc. and has been licensed
for use. "Standard and Poor's(R)," "S&P(R)," "Standard & Poor's 500,"
"S&P(R)" and "500" are all trademarks of The McGraw-Hill Companies, Inc. and
have been licensed for use by Bankers Trust Company. The S&P 500 Index Fund
is not sponsored, sold or promoted by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing in
that Fund.
PROSPECTUS
2
<PAGE> 43

Trust's Board of Trustees ("Board") determines that it would be in the best
interest of that Fund and its shareholders to do so. Upon any such withdrawal,
that Fund's assets would be invested in accordance with the investment policies
and restrictions described in this Prospectus and the SAI.

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

<TABLE>
<S> <C>
TABLE OF FEES AND EXPENSES.............. 3
FINANCIAL HIGHLIGHTS.................... 4
INTRODUCTION............................ 11
INVESTMENT OBJECTIVES, POLICIES AND
RISKS................................... 11
INVESTMENT RESTRICTIONS................. 23
YIELDS AND TOTAL RETURNS................ 24
MANAGEMENT AND ADMINISTRATION OF THE
TRUSTS.................................. 25
INVESTMENT ADVISERS..................... 28

HOW TO PURCHASE SHARES.................. 30
HOW TO REDEEM SHARES.................... 31
RETIREMENT ACCOUNTS..................... 33
EXCHANGE PRIVILEGE...................... 33
VALUATION OF SHARES..................... 33
DIVIDENDS, OTHER DISTRIBUTIONS AND TAX
MATTERS................................. 34
GENERAL INFORMATION..................... 36
SHAREHOLDER COMMUNICATIONS.............. 37

</TABLE>

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

TABLE OF FEES AND EXPENSES

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

<TABLE>
<CAPTION>
U.S.
GROWTH INTER- S&P INTER- SHORT- MUNICIPAL GOVERNMENT
AND NATIONAL 500 MEDIATE TERM MONEY MONEY MONEY
BALANCED INCOME EQUITY INDEX BOND BOND MARKET MARKET MARKET
FUND FUND FUND FUND(1) FUND(1) FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 0.33% 0.33% 0.48% 0.05%(2) 0.25% 0.25% 0.15% 0.15% 0.15%

12b-1 Fees 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other Expenses 0.57 0.60 0.66 0.50(3) 0.61(3) 0.60(3) 0.39 0.45(3) 0.37
---- --- ---- ---- ---- ---- --- ----- -----

Total Operating Expenses 0.90% 0.93% 1.14% 0.55%(4) 0.86%(4) 0.85%(4) 0.54% 0.60%(4) 0.52%
==== === ==== ==== ==== ==== === ===== =====
</TABLE>

(1) Because the S&P 500 Index Fund and the Intermediate Bond Fund shares were
not offered for sale prior to March 1, 1998, their Annual Operating Expenses
are based on estimates.

(2) The investment adviser has voluntarily agreed to waive a portion of the
investment advisory fee of the S&P 500 Index Fund. Without such waiver, the
"Management Fee" would be equal to 0.10%.

(3) "Other Expenses" before fee waivers are estimated to be 0.85% for the S&P
500 Index Fund, 0.65% for the Short-Term Bond Fund and 0.46% for the
Municipal Money Market Fund.

(4) "Total Operating Expenses" before fee waivers are estimated to be 0.95% for
the S&P 500 Index Fund, 0.90% for the Short-Term Bond Fund and 0.61% for the
Municipal Money Market Fund.

PROSPECTUS
3
<PAGE> 44

EXAMPLES

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Balanced Fund $ 9 $29 $50 $111

Growth and Income Fund 9 30 51 114

International Equity Fund 12 36 63 139

S&P 500 Index Fund 6 18 31 69

Intermediate Bond Fund 9 27 48 106

Short-Term Bond Fund 9 27 47 105

Money Market Fund 6 17 30 68

Municipal Money Market Fund 6 19 33 75

U.S. Government Money Market Fund 5 17 29 65
</TABLE>

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

FINANCIAL HIGHLIGHTS

The financial highlights in the following tables have been derived from
financial statements of the Trust. The information has been audited by Ernst &
Young LLP, independent auditors. Such information should be read in conjunction
with the financial statements and the report of the independent auditors
appearing in the Annual Report incorporated by reference in the SAI, which
contains further information about performance of the Funds and can be obtained
by investors without charge. Financial highlights are not available for the S&P
500 Index Fund and the Intermediate Bond Fund because they had not commenced
operations as of October 31, 1997.

PROSPECTUS
4
<PAGE> 45

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
BALANCED FUND
------------------------------------------------------------------------------------------------
PLANAHEAD CLASS INSTITUTIONAL CLASS(1)
--------------------------------------------------- -----------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED YEAR ENDED OCTOBER 31,
------------------------------------ OCTOBER 31, -----------------------------------------
1997(5) 1996(5)(6) 1995(4)(5) 1994(1)(3) 1994(3) 1993 1992 1991
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $15.03 $13.90 $12.35 $12.35 $13.23 $11.99 $11.60 $9.87
----- ------ ------ ------- ---- ---- ---- ----
Income from investment
operations:
Net investment income 0.63(7) 0.57(7) 0.54 0.12 0.57 0.49 0.55 0.58
Net gains (losses) on
securities (both realized
and unrealized) 2.10(7) 1.56(7) 1.67 (0.12) (0.54) 1.57 0.41 1.79
----- ------ ------ ------- ---- ---- ---- ----
Total from investment
operations 2.73 2.13 2.21 0.00 0.03 2.06 0.96 2.37
----- ------ ------ ------- ---- ---- ---- ----
Less distributions:
Dividends from net
investment income (0.57) (0.56) (0.52) -- (0.56) (0.52) (0.56) (0.64)
Distributions from net
realized gains on
securities (1.16) (0.44) (0.14) -- (0.34) (0.30) (0.01) --
----- ------ ------ ------- ---- ---- ---- ----
Total distributions (1.73) (1.00) (0.66) -- (0.90) (0.82) (0.57) (0.64)
----- ------ ------ ------- ---- ---- ---- ----
Net asset value, end of
period $16.03 $15.03 $13.90 $12.35 $12.36 $13.23 $11.99 $11.60
===== ====== ====== ======= ==== ==== ==== ====
Total return (annualized)(8) 19.75% 16.01% 19.06% (0.16%)(9) (0.08%) 19.19% 8.75% 25.35%
===== ====== ====== ======= ==== ==== ==== ====
Ratios/supplemental data:
Net assets, end of period
(in thousands) $34,354 $18,000 $5,450 $528 $222,873 $532,543 $370,087 $311,906
Ratios to average net
assets(10)(11)(12)(13):
Expenses 0.90%(7) 0.97%(7) 0.99% 0.92% 0.36% 0.34% 0.35% 0.37%
Net investment income 3.52%(7) 3.64%(7) 3.70% 4.04% 4.77% 4.91% 5.31% 6.06%
Portfolio turnover rate(14) 105% 76% 73% 48% 48% 83% 80% 55%
Average commission rate
paid(14) $0.0385 $0.0409 -- -- -- -- -- --

<CAPTION>
BALANCED FUND
------------------------------
INSTITUTIONAL CLASS(1)
------------------------------
YEAR ENDED OCTOBER 31,
------------------------------
1990(2) 1989 1988
------------------------------
<S> <C> <C> <C>
Net asset value, beginning
of period $11.05 $10.13 $9.08
---- ---- ----
Income from investment
operations:
Net investment income 0.57 0.53 0.56
Net gains (losses) on
securities (both realized
and unrealized) (1.18) 0.90 0.73
---- ---- ----
Total from investment
operations (0.61) 1.43 1.29
---- ---- ----
Less distributions:
Dividends from net
investment income (0.51) (0.51) (0.24)
Distributions from net
realized gains on
securities (0.06) -- --
---- ---- ----
Total distributions (0.57) (0.51) (0.24)
---- ---- ----
Net asset value, end of
period $9.87 $11.05 $10.13
==== ==== ====
Total return (annualized)(8) (5.24%) 15.49% 14.63%
==== ==== ====
Ratios/supplemental data:
Net assets, end of period
(in thousands) $233,702 $210,119 $147,581
Ratios to average net
assets(10)(11)(12)(13):
Expenses 0.44% 0.47% 0.52%
Net investment income 6.50% 6.32% 6.25%
Portfolio turnover rate(14) 62% 78% 77%
Average commission rate
paid(14) -- -- --
</TABLE>

(1) The Balanced Fund commenced active operations on July 17, 1987. The
PlanAhead Class commenced active operations on August 1, 1994 and at that
time, existing shares of the Balanced Fund were designated as Institutional
Class shares.

(2) Penmark Investments, Inc. was replaced by Independence Investment
Associates, Inc. as an investment adviser to the Fund as of the close of
business on February 28, 1990.

(3) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.

(4) GSB Investment Management, Inc. was added as an investment adviser to the
Balanced Fund on January 1, 1995.

(5) 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.

(6) Capital Guardian Trust Company was replaced by Brandywine Asset Management,
Inc. as an investment adviser to the Balanced Fund on April 1, 1996.

(7) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the Balanced Portfolio.

(8) Total return reflects accrual for the maximum shareholder services fee of
0.30% for periods prior to August 1, 1994.

(9) Total return 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 for the period August 1, 1994 (commencement of
operations) through October 31, 1994. Due to the different expense
structures between the classes, total return for the PlanAhead Class would
vary from the results shown had it been in operation for the entire year.

(10) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager,
which amounted to approximately $.01 per share in each period on an
annualized basis.

(11) The method of determining average net assets was changed from a monthly
average to a daily average starting with the periods ended October 31,
1994.

(12) Operating results of the PlanAhead Class exclude fees waived by the
Manager. Had the PlanAhead Class paid such fees during the period, the
ratio of expenses and net investment income to average net assets would
have been 0.99% and 3.97%, respectively, for the period ended October 31,
1994 and 1.09% and 3.60%, respectively, for the year ended October 31,
1995.

(13) Annualized.

(14) On November 1, 1995, the Balanced Fund began investing all of its
investable assets in the Balanced Portfolio. Portfolio turnover rate and
average commission rate paid for the years ended October 31, 1996 and 1997
are those of the Balanced Portfolio. Calculation and disclosure of the
average commission rate paid was not required prior to 1996.

PROSPECTUS
5
<PAGE> 46

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
---------------------------------------------------------------------------------------------
PLANAHEAD CLASS INSTITUTIONAL CLASS(1)
------------------------------------------------- ----------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED YEAR ENDED OCTOBER 31,
---------------------------------- OCTOBER 31, ----------------------------------------
1997(5) 1996(5)(6) 1995(5) 1994(1)(4) 1994(4) 1993 1992(3) 1991
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $18.33 $15.81 $14.17 $13.99 $14.63 $12.79 $12.10 $9.47
----- ------- ----- ------- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.35(7) 0.39(7) 0.40 0.05 0.43 0.36 0.39 0.42
Net gains (losses) on
securities (both realized
and unrealized) 4.39(7) 3.10(7) 2.22 0.13 0.08 2.21 0.77 2.70
----- ------- ----- ------- ----- ----- ----- -----
Total from investment
operations 4.74 3.49 2.62 0.18 0.51 2.57 1.16 3.12
----- ------- ----- ------- ----- ----- ----- -----
Less distributions:
Dividends from net
investment income (0.38) (0.40) (0.44) -- (0.41) (0.37) (0.39) (0.49)
Distributions from net
realized gains on
securities (1.31) (0.57) (0.54) -- (0.54) (0.36) (0.08) --
----- ------- ----- ------- ----- ----- ----- -----
Total distributions (1.69) (0.97) (0.98) -- (0.95) (0.73) (0.47) (0.49)
----- ------- ----- ------- ----- ----- ----- -----
Net asset value, end of
period $ 21.38 $18.33 $15.81 $14.17 $14.19 $14.63 $12.79 $12.10
===== ======= ===== ======= ===== ===== ===== =====
Total return (annualized)(8) 27.64% 22.98% 20.14% 3.21%(9) 3.36% 21.49% 10.00% 33.83%
===== ======= ===== ======= ===== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period
(in thousands) $29,684 $16,084 $4,821 $56 $22,737 $477,088 $339,739 $264,628
Ratios to average net
assets(10)(11)(12)(13):
Expenses 0.93%(7) 0.94%(7) 0.99% 0.95% 0.33% 0.34% 0.36% 0.37%
Net investment income 1.85%(7) 2.16%(7) 2.23% 1.50% 3.28% 3.12% 3.57% 4.19%
Portfolio turnover rate(14) 35% 40% 26% 23% 23% 30% 35% 52%
Average commission rate
paid(14) $.0395 $0.0412 -- -- -- -- -- --

<CAPTION>
GROWTH AND INCOME FUND
------------------------------
INSTITUTIONAL CLASS(1)
------------------------------
YEAR ENDED OCTOBER 31,
------------------------------
1990(2) 1989 1988
------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
period $11.59 $9.96 $8.30
----- ----- -----
Income from investment
operations:
Net investment income 0.42 0.42 0.42
Net gains (losses) on
securities (both realized
and unrealized) (1.94) 1.59 1.40
----- ----- -----
Total from investment
operations (1.52) 2.01 1.82
----- ----- -----
Less distributions:
Dividends from net
investment income (0.43) (0.38) (0.16)
Distributions from net
realized gains on
securities (0.17) -- --
----- ----- -----
Total distributions (0.60) (0.38) (0.16)
----- ----- -----
Net asset value, end of
period $9.47 $11.59 $9.96
===== ===== =====
Total return (annualized)(8) (13.52%) 20.94% 22.20%
===== ===== =====
Ratios/supplemental data:
Net assets, end of period
(in thousands) $182,430 $187,869 $140,073
Ratios to average net
assets(10)(11)(12)(13):
Expenses 0.45% 0.45% 0.53%
Net investment income 4.49% 4.40% 4.20%
Portfolio turnover rate(14) 41% 50% 56%
Average commission rate
paid(14) -- -- --
</TABLE>

(1) The Growth and Income Fund commenced active operations on July 17, 1987.
The PlanAhead Class commenced active operations on August 1, 1994 and at
that time, existing shares of the Growth and Income Fund were designated as
Institutional Class shares.

(2) GSB Investment Management, Inc. was added as an investment adviser to the
Growth and Income Fund on April 10, 1990.

(3) The assets of the Growth and Income Fund previously managed by Atlanta
Capital Management were transferred to GSB Investment Management, Inc. as
of the close of business on December 5, 1991.

(4) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.

(5) 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.

(6) 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.

(7) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the Growth and Income Portfolio.

(8) Total return reflects accrual for the maximum shareholder services fee of
0.30% for periods prior to August 1, 1994.

(10) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager,
which amounted to less than $.01 per share in each period on an annualized
basis.

(11) The method of determining average net assets was changed from a monthly
average to a daily average starting with the periods ended October 31,
1994.

(12) Operating results of the PlanAhead Class exclude fees waived by the
Manager. Had the PlanAhead Class paid such fees during the period, the
ratio of expenses and net investment income to average net assets would
have been 1.05% and 1.40%, respectively, for the period ended October 31,
1994, 1.08% and 2.14%, respectively, for the year ended October 31, 1995,
and 0.96% and 2.14%, respectively, for the year ended October 31, 1996.

(13) Annualized.

(14) On November 1, 1995 the Growth and Income Fund began investing all of its
investable assets in the Growth and Income Portfolio. Portfolio turnover
rate and average commission rate paid for the years ended October 31, 1996
and 1997 are those of the Growth and Income Portfolio. Calculation and
disclosure of the average commission rate paid was not required prior to
1996.

PROSPECTUS
6
<PAGE> 47

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
------------------------------------------------------------------------------------------------
PLANAHEAD CLASS INSTITUTIONAL CLASS
----------------------------------------------- ----------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED YEAR ENDED OCTOBER 31, PERIOD ENDED
------------------------------- OCTOBER 31, ------------------------------- OCTOBER 31,
1997(5) 1996(5) 1995(5) 1994(1)(3)(4) 1994(3)(4) 1993(2) 1992 1991(1)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $14.90 $13.20 $12.85 $12.61 $12.07 $8.93 $10.13 $10.00
----- ---- ----- -------- ------- ----- ----- --------
Income from investment
operations:
Net investment income 0.30(6) 0.26(6) 0.24 0.06 0.32 0.17 0.12 --
Net gains (losses) on
securities (both realized and
unrealized) 2.41(6) 1.92(6) 0.64 0.18 1.10 3.09 (1.31) 0.13
----- ---- ----- -------- ------- ----- ----- --------
Total from investment
operations 2.71 2.18 0.88 0.24 1.42 3.26 (1.19) 0.13
----- ---- ----- -------- ------- ----- ----- --------
Less distributions:
Dividends from net investment
income (0.28) (0.24) (0.21) -- (0.17) (0.12) (0.01) --
Distributions from net
realized gains on securities (0.41) (0.24) (0.32) -- (0.45) -- -- --
----- ---- ----- -------- ------- ----- ----- --------
Total distributions (0.69) (0.48) (0.53) -- (0.62) (0.12) (0.01) --
----- ---- ----- -------- ------- ----- -----
Net asset value, end of period $16.92 $14.90 $13.20 $12.85 $12.87 $12.07 $8.93 $10.13
===== ==== ===== ======== ======= ===== ===== ========
Total return (annualized)(7) 18.71% 16.95% 7.37% 11.60%(8) 11.77% 36.56% (12.07%) 5.69%
===== ==== ===== ======== ======= ===== ===== ========
Ratios/supplemental data:
Net assets, end of period
(in thousands) $20,075 $7,138 $1,456 $375 $23,115 $66,652 $38,837 $10,536
Ratios to average net
assets(9)(10)(11):
Expenses 1.14%(6) 1.17%(6) 1.33% 1.25% 0.61% 0.78% 1.17% 1.90%(12)
Net investment income 1.95%(6) 1.76%(6) 2.08% 1.86% 2.74% 2.00% 2.04% 0.38%(12)
Portfolio turnover rate(13) 15% 19% 21% 37% 37% 61% 21% 2%
Average commission rate
paid(13) $0.0164 $0.0192 -- -- -- -- -- --
</TABLE>

(1) The International Equity Fund commenced active operations on August 7,
1991. The PlanAhead Class commenced active operations on August 1, 1994 and
at that time, existing shares of the International Equity Fund were
designated as Institutional Class shares.

(2) HD International Limited was replaced by Hotchkis and Wiley as an
investment adviser to the International Equity Fund as of the close of
business on May 21, 1993.

(3) Morgan Stanley Asset Management Inc. was added as an investment adviser to
the International Equity Fund as of August 1, 1994.

(4) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.

(5) 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.

(6) 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 International Equity Portfolio.

(7) Total return reflects accrual for the maximum shareholder services fee of
0.30% for periods prior to August 1, 1994.

(8) Total return 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 for the period August 1, 1994 (commencement of
operations) through October 31, 1994. Due to the different expense
structures between the classes, total return for the PlanAhead Class would
vary from the results shown had it been in operation for the entire year.

(9) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager.
Such fees amounted to less than $.04 per share in each period on an
annualized basis and were waived by the Manager for the period ended
October 31, 1991.

(10) The method of determining average net assets was changed from a monthly
average to a daily average starting with the periods ended October 31,
1994.

(11) Annualized.

(12) Estimated based on expected annual expenses and actual average net assets.

(13) On November 1, 1995 the International Equity Fund began investing all of
its investable assets in the International Equity Portfolio. Portfolio
turnover rate and average commission rate paid for the years ended October
31, 1996 and 1997 are those of the International Equity Portfolio.
Calculation and disclosure of the average commission rate paid was not
required prior to 1996.

PROSPECTUS
7
<PAGE> 48

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SHORT-TERM BOND FUND
-----------------------------------------------------------------------------
PLANAHEAD CLASS INSTITUTIONAL CLASS
-------------------------------------------- ------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED YEAR ENDED OCTOBER 31,
----------------------------- OCTOBER 31, ------------------------------
1997 1996 1995 1994(1) 1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $9.68 $9.82 $9.68 $9.78 $10.23 $10.13 $10.07
--- --- --- ------ --- --- ---
Income from investment
operations:
Net investment income 0.61(3) 0.60(3) 0.59 0.13 0.52 0.58 0.75
Net gains (losses) on
securities (both realized
and unrealized) 0.05(3) (0.14)(3) 0.14 (0.10) (0.46) 0.15 0.06
--- --- --- ------ --- --- ---
Total from investment
operations 0.56 0.46 0.73 0.03 0.06 0.73 0.81
--- --- --- ------ --- --- ---
Less distributions:
Dividends from net
investment income (0.61) (0.60) (0.59) (0.13) (0.52) (0.58) (0.75)
Distributions from net
realized gains on
securities -- -- -- -- (0.10) (0.05) --
--- --- --- ------ --- --- ---
Total distributions (0.61) (0.60) (0.59) (0.13) (0.62) (0.63) (0.75)
--- --- --- ------ --- --- ---
Net asset value, end of
period $9.63 $9.68 $9.82 $9.68 $9.67 $10.23 $10.13
=== === === ====== === === ===
Total return (annualized)(4) 6.01% 4.83% 7.83% 0.45%(5) 0.42% 7.20% 7.94%
=== === === ====== === === ===
Ratios/supplemental data:
Net assets, end of period
(in thousands) $5,096 $3,399 $1,576 $403 $112,141 $238,874 $209,928
Ratios to average net
assets(6)(7)(8)(9):
Expenses 0.85%(3) 0.85%(3) 0.83% 0.79% 0.31% 0.26% 0.27%
Net investment income 6.36%(3) 6.11%(3) 6.16% 5.10% 5.26% 5.76% 7.40%
Portfolio turnover rate(10) 282% 304% 183% 94% 94% 176% 133%

<CAPTION>
SHORT-TERM BOND FUND
-------------------------------------------
INSTITUTIONAL CLASS
-------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED
---------------------------- OCTOBER 31,
1991(2) 1990 1989 1988(1)
-------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $9.76 $9.94 $10.12 $10.00
--- --- ---
Income from investment
operations:
Net investment income 0.83 0.92 0.96 0.64
Net gains (losses) on
securities (both realized
and unrealized) 0.31 (0.18) (0.12) 0.05
--- --- --- ------
Total from investment
operations 1.14 0.74 0.84 0.69
--- --- --- ------
Less distributions:
Dividends from net
investment income (0.83) (0.92) (1.02) (0.57)
Distributions from net
realized gains on
securities -- -- -- --
--- --- --- ------
Total distributions (0.83) (0.92) (1.02) (0.57)
--- --- --- ------
Net asset value, end of
period $10.07 $9.76 $9.94 $10.12
=== === === ======
Total return (annualized)(4) 11.87% 7.51% 7.62% 7.41%
=== === === ======
Ratios/supplemental data:
Net assets, end of period
(in thousands) $141,629 $83,265 $60,507 $40,855
Ratios to average net
assets(6)(7)(8)(9):
Expenses 0.35% 0.48% 0.59% 0.50%
Net investment income 8.42% 9.44% 9.77% 8.01%
Portfolio turnover rate(10) 165% 156% 158% 127%
</TABLE>

(1) The Short-Term Bond Fund commenced active operations on December 3, 1987.
Prior to March 1, 1998, the Short-Term Bond Fund was known as the
Limited-Term Income Fund. The PlanAhead Class commenced active operations
on August 1, 1994 and at that time existing shares of the Short-Term Bond
Fund were designated as Institutional Class shares.

(2) AMR Investment Services, Inc. began portfolio management of the Short-Term
Bond Fund on March 1, 1991 replacing Brown Brothers, Harriman & Co. and
Barrow, Hanley, Mewhinney & Strauss, Inc.

(3) 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 Limited-Term Income Portfolio.

(4) Total return reflects accrual for the maximum shareholder services fee of
0.30% for periods prior to August 1, 1994.

(5) Total return 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 for the period August 1, 1994 (commencement of
operations) through October 31, 1994. Due to the different expense
structures between the classes, total return for the PlanAhead Class would
vary from the results shown had it been in operation for the entire year.

(6) Effective August 1, 1994, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager.
Such fees amounted to less than $.03 per share in each period on an
annualized basis.

(7) The method of determining average net assets was changed from a monthly
average to a daily average starting with the periods ended October 31,
1994.

(8) Operating results of the PlanAhead Class exclude fees waived by the
Manager. Had the PlanAhead Class paid such fees during the period, the
ratio of expenses and net investment income to average net assets would
have been 1.00% and 4.89%, respectively, for the period ended October 31,
1994, 1.06% and 5.94%, respectively, for the year ended October 31, 1995,
0.94% and 6.02%, respectively, for the year ended October 31, 1996, and
0.90% and 6.31%, respectively, for the year ended October 31, 1997.

(9) Annualized.

(10) On November 1, 1995 the Short-Term Bond Fund began investing all of its
investable assets in the Short-Term Bond Portfolio. Portfolio turnover rate
for the years ended October 31, 1996 and 1997 is that of the Short-Term
Bond Portfolio.

PROSPECTUS
8
<PAGE> 49

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MONEY MARKET FUND
-------------------------------------------------------------------------------------
PLANAHEAD CLASS INSTITUTIONAL CLASS
---------------------------------------------- ------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED YEAR ENDED OCTOBER 31,
------------------------------- OCTOBER 31, ------------------------------------
1997 1996 1995 1994(1) 1994 1993 1992
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--- --- --- ------ --- --- ---
Net investment income 0.05(2) 0.05(2) 0.05 0.01 0.04 0.03 0.04
Less dividends from net investment
income (0.05) (0.05) (0.05) (0.01) (0.04) (0.03) (0.04)
--- --- --- ------ --- --- ---
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=== === === ====== === === ===
Total return (annualized) 5.28% 5.21% 5.60% 3.73%(3) 3.85% 3.31% 4.41%
=== === === ====== === === ===
Ratios/supplemental data:
Net assets, end of period (in
thousands) $189,189 $106,890 $41,989 $25 $1,893,144 $2,882,974 $2,223,829
Ratios to average net assets(4)(5)(6):
Expenses 0.54%(2) 0.58%(2) 0.55% 0.70% 0.21% 0.23% 0.26%
Net investment income 5.17%(2) 5.06%(2) 5.56% 4.42% 3.63% 3.23% 4.06%

<CAPTION>
MONEY MARKET FUND
-----------------------------------------
INSTITUTIONAL CLASS
-----------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------
1991(1) 1990 1989 1988
-----------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
--- --- --- ---
Net investment income 0.07 0.08 0.09 0.08
Less dividends from net investment
income (0.07) (0.08) (0.09) (0.08)
--- --- --- ---
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
=== === === ===
Total return (annualized) 7.18% 8.50% 9.45% 7.54%
=== === === ===
Ratios/supplemental data:
Net assets, end of period (in
thousands) $715,280 $745,405 $385,916 $330,230
Ratios to average net assets(4)(5)(6):
Expenses 0.24% 0.20% 0.22% 0.28%
Net investment income 6.93% 8.19% 9.11% 7.54%
</TABLE>

(1) The Money Market Fund commenced active operations on September 1, 1987 and
on November 1, 1991, the existing shares of the Fund were designated as
Institutional Class shares. The PlanAhead Class commenced active operations
on August 1, 1994.

(2) 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 Money Market Portfolio.

(3) Total return 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 for the period August 1, 1994 (commencement of operations)
through October 31, 1994. Due to the different expense structures between
the classes, total return for the PlanAhead Class would vary from the
results shown had it been in operation for the entire year.

(4) The method of determining average net assets was changed from a monthly
average to a daily average starting with the year ended October 31, 1992.

(5) Effective October 1, 1990, expenses include administrative services fees
paid by the Fund to the Manager. Prior to that date, expenses exclude
shareholder services fees paid directly by shareholders to the Manager,
which amounted to less than $.01 per share in each period on an annualized
basis.

(6) Annualized.

PROSPECTUS
9
<PAGE> 50

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MUNICIPAL MONEY MARKET FUND U.S. GOVERNMENT MONEY MARKET FUND
--------------------------------------------------------- ------------------------------------------
PLANAHEAD CLASS INSTIT. CLASS PLANAHEAD CLASS
----------------------------------------- ------------- ------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED PERIOD ENDED YEAR ENDED OCTOBER 31, PERIOD ENDED
-------------------------- OCTOBER 31, OCTOBER 31, --------------------------- OCTOBER 31,
1997 1996 1995 1994(1) 1994(1) 1997 1996 1995 1994(1)
--------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--- --- --- ------ ------- --- --- --- ------
Net investment income 0.03(2) 0.03(2) 0.03 0.01 0.02 0.05(2) 0.05(2) 0.05 0.01
Less dividends from net
investment income (0.03) (0.03) (0.03) (0.01) (0.02) (0.05) (0.05) (0.05) (0.01)
--- --- --- ------ ------- --- --- --- ------
Net asset value, end of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=== === === ====== ======= === === === ======
Total return (annualized) 3.24% 3.27% 3.39% 2.35%(3) 2.44% 5.08% 4.94% 5.19% 3.58%(3)
=== === === ====== ======= === === === ======
Ratios/supplemental data:
Net assets, end of
period (in thousands) $9,590 $2,340 $129 $0 $9,736 $4,046 $1,822 $530 $0
Ratios to average net
assets(4)(5)(6):
Expenses 0.60%(2) 0.62%(2) 0.72% 0.77% 0.30% 0.52%(2) 0.67%(2) 0.76% 0.75%
Net investment income 3.18%(2) 3.12%(2) 3.32% 2.49% 2.38% 5.00%(2) 4.74%(2) 5.19% 3.94%

<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND
-------------------------------------
INSTITUTIONAL CLASS
-------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED
---------------------- OCTOBER 31,
1994 1993 1992(1)
-------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00
----- ----- -------
Net investment income 0.04 0.03 0.02
Less dividends from net
investment income (0.04) (0.03) (0.02)
----- ----- -------
Net asset value, end of
period $1.00 $1.00 $1.00
===== ===== =======
Total return (annualized) 3.70% 3.07% 3.61%
===== ===== =======
Ratios/supplemental data:
Net assets, end of
period (in thousands) $67,607 $136,813 $91,453
Ratios to average net
assets(4)(5)(6):
Expenses 0.25% 0.23% 0.27%(7)
Net investment income 3.44% 2.96% 3.46%(7)
</TABLE>

(1) The U.S. Government Money Market Fund commenced active operations on March
2, 1992. The PlanAhead Class of the U.S. Government Money Market Fund
commenced active operations on August 1, 1994. The Institutional Class of
the Municipal Money Market Fund commenced active operations on November 10,
1993 and the PlanAhead Class commenced active operations on August 1, 1994.

(2) 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 Fund's corresponding Portfolio.

(3) Total return for the period ended October 31, 1994 reflects Institutional
Class returns from the beginning of the period through July 31, 1994 and
returns of the PlanAhead Class for the period August 1, 1994 (commencement
of operations) through October 31, 1994. Due to the different expense
structures between the classes, total return for the PlanAhead Class would
vary from the results shown had it been in operation for the entire year.

(4) The method of determining average net assets was changed from a monthly
average to a daily average starting with the periods ended October 31, 1994.

(5) Annualized.

(6) Operating results for the Municipal Money Market Fund exclude fees waived by
the Manager. Had the Fund paid such fees, the ratio of expenses and net
investment income to average net assets would have been 0.97% and 2.29%,
respectively, for the period ended October 31, 1994, 0.92% and 3.12%,
respectively, for the year ended October 31, 1995, 0.67% and 3.07%,
respectively, for the year ending October 31, 1996 and 0.61% and 3.17%,
respectively, for the year ending October 31, 1997 for the PlanAhead Class,
and 0.50% and 2.18%, respectively, for the Institutional Class for the
period ended October 31, 1994.

(7) Estimated based on expected annual expenses and actual average net assets.

PROSPECTUS
10
<PAGE> 51

INTRODUCTION

The Trust is an open-end, diversified management investment company
organized as a Massachusetts business trust on January 16, 1987. The Funds are
nine of ten investment portfolios of the Trust. Each Fund has a distinctive
investment objective and investment policies. Each Fund, except the S&P 500
Index Fund, invests all of its investable assets in a corresponding Portfolio of
the AMR Trust which has an identical investment objective. The S&P 500 Index
Fund invests all of its investable assets in the Equity 500 Index Portfolio,
which is a separate investment company, advised by BT with an identical
investment objective. The Manager provides the Portfolios, except the Equity 500
Index Portfolio, with business and asset management services, including the
evaluation and monitoring of the investment advisers, and it provides the Funds
with administrative services. BT provides the Equity 500 Index Portfolio with
investment advisory, administrative and other services.

The Funds, except the S&P 500 Index Fund, currently consist of three
classes of shares and the S&P 500 Index Fund currently consists of two classes
of shares, including the "PlanAhead Class" which is available to all investors,
including smaller institutional investors, investors using intermediary
organizations such as discount brokers or plan sponsors, individual retirement
accounts ("IRAs"), and self-employed individual retirement plans ("HR-10 Plans"
or "Keogh Plans"). For further information about the Funds' other classes,
including eligibility requirements, refer to the appropriate address and phone
number on the back cover of this Prospectus.

The assets of the Balanced Portfolio, the Growth and Income Portfolio and
the International Equity Portfolio are allocated by the Manager among investment
advisers designated for each of those Portfolios. BT serves as the investment
adviser to the Equity 500 Index Portfolio. The assets of the Intermediate Bond
Portfolio are allocated by the Manager between the Manager and another
investment adviser. Investment decisions for the Short-Term Bond Portfolio and
the Money Market Portfolios are made directly by the Manager. With the exception
of the S&P 500 Index Fund, each investment adviser has discretion to purchase
and sell portfolio securities in accordance with the investment objectives,
policies and restrictions described in this Prospectus, the SAI, and specific
investment strategies developed by the Manager. See "Investment Advisers."

PlanAhead Class shares are offered without a sales charge at the net asset
value next determined after an investment is received and accepted. Shares will
be redeemed at the next share price calculated after receipt of a redemption
order. See "How to Purchase Shares" and "How to Redeem Shares."

INVESTMENT OBJECTIVES, POLICIES AND RISKS

The investment objective and policies of each Fund and its corresponding
Portfolio are described below. Except as otherwise indicated, the investment
policies of any Fund may be changed at any time by the Board to the extent that
such changes are consistent with the investment objective of the applicable
Fund. However, each Fund's investment objective may not be changed without a
majority vote of that Fund's outstanding shares, which is defined as the lesser
of (a) 67% of the shares of the applicable Fund present or represented if the
holders of more than 50% of the shares are present or represented at the
shareholders' meeting, or (b) more than 50% of the shares of the applicable Fund
(hereinafter, "majority vote"). Except for the Equity 500 Index Portfolio, a
Portfolio's investment objective may not be changed without a majority vote of
that Portfolio's interest holders. The investment objective of the Equity 500
Index Portfolio is not a fundamental policy. Shareholders of the S&P 500 Index
Fund will receive thirty days' prior written notice with respect to any change
in the investment objective of the Equity 500 Index Portfolio.

PROSPECTUS
11
<PAGE> 52

AMERICAN AADVANTAGE BALANCED FUND -- This Fund's investment objective is to
realize both income and capital appreciation. This Fund seeks its investment
objective by investing all of its investable assets in the Balanced Portfolio,
which invests primarily in equity and debt securities. Although equity
securities (such as stocks) will be purchased primarily for capital appreciation
and debt securities (such as bonds) will be purchased primarily for income
purposes, income and capital appreciation potential will be considered in
connection with all such investments. Excluding collateral for securities
loaned, ordinarily the Portfolio will have a minimum of 30% and a maximum of 70%
of its assets invested in equity securities and a minimum of 30% and a maximum
of 70% of its assets invested in debt securities which, at the time of purchase,
are rated in one of the four highest rating categories by all nationally
recognized statistical rating organizations ("Rating Organizations") rating that
security such as Standard & Poor's ("S&P") or Moody's Investor Services, Inc.
("Moody's") or, if unrated, are deemed to be of comparable quality by the
applicable investment adviser. Obligations rated in the fourth highest rating
category are limited to 25% of the Portfolio's debt allocation. Obligations
rated in the BBB or Baa categories by any Rating Organization have speculative
characteristics and thus changes in economic conditions or other circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade bonds. See the SAI for a description
of debt ratings. The Portfolio, at the discretion of the investment advisers,
may retain a security that has been downgraded below the initial investment
criteria. The Portfolio usually invests between 50% and 65% of its assets in
equity securities and between 35% and 50% of its assets in debt securities. The
remainder of the Portfolio's assets may be invested in cash or cash equivalents,
including obligations that are permitted investments for the Money Market
Portfolio and in other investment companies. However, when its investment
advisers deem that market conditions warrant, the Portfolio may, for temporary
defensive purposes, invest up to 100% of its assets in cash, cash equivalents
and investment grade short-term obligations.

The Portfolio also may engage in dollar rolls or purchase or sell securities
on a "when-issued" or "forward commitment" basis. The purchase or sale of
when-issued securities enables an investor to hedge against anticipated changes
in interest rates and prices by locking in an attractive price or yield. The
price of when-issued securities is fixed at the time the commitment to purchase
or sell is made, but delivery and payment for the when-issued securities take
place at a later date, normally one to two months after the date of purchase.
During the period between purchase and settlement, no payment is made by the
purchaser to the issuer and no interest accrues to the purchaser. Such
transactions therefore involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date or if the value of the security
to be sold increases prior to the settlement date. A sale of a when-issued
security also involves the risk that the other party will be unable to settle
the transaction. Dollar rolls are a type of forward commitment transaction.
Purchases and sales of securities on a forward commitment basis involve a
commitment to purchase or sell securities with payment and delivery to take
place at some future date, normally one to two months after the date of the
transaction. As with when-issued securities, these transactions involve certain
risks, but they also enable an investor to hedge against anticipated
PROSPECTUS
12
<PAGE> 53

changes in interest rates and prices. Forward commitment transactions are
executed for existing obligations, whereas in a when-issued transaction, the
obligations have not yet been issued. When purchasing securities on a
when-issued or forward commitment basis, a segregated account of liquid assets
at least equal to the value of purchase commitments for such securities will be
maintained until the settlement date.

PROSPECTUS
13
<PAGE> 54

equivalents, including obligations that are permitted investments for the Money
Market Portfolio or in other investment companies. However, when its investment
advisers deem that market conditions warrant, the Portfolio may, for temporary
defensive purposes, invest up to 100% of its assets in cash, cash equivalents,
other investment companies and investment grade short-term obligations.

The Portfolio may trade forward foreign currency contracts ("forward
contracts"), which are derivatives, to hedge currency fluctuations of underlying
stock or bond positions, or in other circumstances permitted by the Commodity
Futures Trading Commission ("CFTC"). Forward contracts to sell foreign currency
may be used when the management of the Portfolio believes that the currency of a
particular foreign country may suffer a decline against the U.S. dollar. Forward
contracts also are entered into to set the exchange rate for a future
transaction. In this manner, the Portfolio may protect itself against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar or other currency which is being used for the security purchase and the
foreign currency in which the security is denominated during the period between
the date on which the security is purchased or sold and the date on which
payment is made or received. Forward contracts involve certain risks which
include, but are not limited to: (1) imperfect correlation between the
securities hedged and the contracts themselves; and (2) possible decrease in the
total return of the Portfolio. Forward contracts are discussed in greater detail
in the SAI.

Under normal conditions, the Portfolio will invest at least 80% of its
assets in common stocks of companies that compose the S&P 500. In seeking to
replicate the performance of the S&P 500, BT, the Portfolio's investment
adviser, will attempt over time to allocate the Portfolio's investments among
common stocks in approximately the same weightings as the S&P 500, beginning
with the heaviest-weighted stocks that make up a larger portion of the Index's
value. Over the long term, BT normally seeks a correlation between the
performance of the Portfolio, before expenses, and that of the S&P 500 of 0.98
or better. A figure of 1.00 would indicate perfect correlation. In the unlikely
event that the correlation is not achieved, the Equity 500 Index Portfolio Board
will consider alternative structures.

put options, and purchasing call options. When the Portfolio wishes to sell
securities, because of shareholder redemptions or otherwise, it may use stock
index futures or options thereon to hedge against market risk until the sale can
be completed. These strategies could include selling futures contracts, writing
call options, and purchasing put options.

The Portfolio intends to stay invested in the securities described above to
the extent practical in light of the objective and long-term investment
perspective. However, the Portfolio's assets may be invested in short-term
instruments with remaining maturities of 397 days or less to meet anticipated
redemptions and expenses or for day-to-day operating purposes. Short-term
instruments consist of (1) short-term obligations of the U.S. Government, its
agencies, instrumentalities, authorities or political subdivisions; (2) other
short-term debt securities rated Aa or higher by Moody's or AA or higher by S&P
or, if unrated, of comparable quality in the opinion of BT; (3) commercial
paper; (4) bank obligations, including negotiable certificates of deposit, time
deposits and bankers' acceptances; and (5) repurchase agreements. At the time
the Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer or the issuer's parent must have outstanding debt rated
Aa or higher by Moody's or AA or higher by S&P or outstanding commercial paper
or bank obligations rated Prime-1 by Moody's or A-1 by S&P; or, if no such
ratings are available, the instrument must be of comparable quality in the
opinion of BT.

The S&P 500 is a well-known stock market index that includes common stocks
of 500 companies from several industrial sectors representing a significant
portion of the market value of all common stocks publicly traded in the United
States, most of which are listed on the New York Stock Exchange (the
"Exchange"). Stocks in the S&P 500 are weighted according to their market
capitalization (the number of shares outstanding multiplied by the stock's
current price). BT believes that the performance of the S&P 500 is
representative of the performance of publicly traded common stocks in general.
The composition of the S&P 500 is determined by S&P and is based on such factors
as the market capitalization and trading activity of each stock and its adequacy
as a representation of stocks in a particular industry group, and may be changed
from time to time.

The Fund and the Portfolio are not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the owners
of the Fund or the Portfolio or any member of the public regarding the
advisability of investing in securities generally or in the Fund and the
Portfolio particularly or the ability of the S&P 500 to track general stock
market performance. S&P does not guarantee the accuracy and/or the completeness
of the S&P 500 or any data included therein.

S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED
BY THE FUND OR THE PORTFOLIO, OWNERS OF THE FUND OR THE PORTFOLIO, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR ANY DATA INCLUDED THEREIN. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES AND HEREBY EXPRESSLY DISCLAIMS ALL SUCH
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 OR ANY DATA INCLUDED THEREIN.

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AMERICAN AADVANTAGE INTERMEDIATE BOND FUND and AMERICAN AADVANTAGE SHORT-TERM
BOND FUND -- The investment objective of these Funds is to realize income and
capital appreciation. As an investment policy, each Fund primarily seeks income
and secondarily seeks capital appreciation. The Intermediate Bond Fund and the
Short-Term Bond Fund seek their investment objective by investing all of their
investable assets in the Intermediate Bond Portfolio and the Short-Term Bond
Portfolio, respectively, which invest primarily in debt obligations. Permissible
investments include securities of the U.S. Government and its agencies and
instrumentalities, including STRIPS and other zero coupon obligations; corporate
bonds, notes and debentures; non-convertible preferred stocks; mortgage-backed
securities; asset-backed securities; domestic, Yankeedollar and Eurodollar
certificates of deposit, bank deposit notes, and bank notes; other investment
companies; and cash or cash equivalents including obligations that are permitted
investments for the Money Market Portfolio. Such obligations may have a fixed,
variable or floating rate of interest. At the time of purchase, all such
securities will be rated in one of the four highest rating categories by all
Rating Organizations rating such obligation or, if unrated, will be deemed to be
of comparable quality by the Manager or the investment adviser. Obligations
rated in the fourth highest rating category are limited to 25% of each
Portfolio's total assets. See "American AAdvantage Balanced Fund" for a
description of the risks involved with these obligations. The Portfolios, at the
discretion of the Manager and the investment adviser, may retain a security
which has been downgraded below the initial investment criteria. See the SAI for
definitions of the foregoing securities and for a description of debt ratings.
Principal and/or interest payments for obligations of the U.S. Government's
agencies or instrumentalities may or may not be backed by the full faith and
credit of the U.S. Government.

supported only by the discretionary authority of the U.S. Government to purchase
the agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported with various credit enhancements such
as pool insurance, guarantees issued by governmental entities, a letter of
credit from a bank or senior/subordinated structures.

of the amortized cost valuation method. Obligations in which the Money Market
Portfolios invest generally have remaining maturities of 397 days or less,
although instruments subject to repurchase agreements and certain variable and
floating rate obligations may bear longer final maturities. The average
dollar-weighted portfolio maturity of each Money Market Portfolio will not
exceed 90 days. The Manager serves as the sole investment adviser to the Money
Market Funds. See "Management and Administration of the Trust."

AMERICAN AADVANTAGE MONEY MARKET FUND -- The Fund's corresponding Portfolio may
invest in obligations permitted to be purchased under Rule 2a-7 of the 1940 Act
including, but not limited to, (1) obligations of the U.S. Government or its
agencies or instrumentalities; (2) loan participation interests, medium-term
notes, funding agreements and asset-backed securities; (3) domestic,
Yankeedollar and Eurodollar certificates of deposit, time deposits, bankers'
acceptances, commercial paper, bank deposit notes and other promissory notes,
including floating or variable rate obligations issued by U.S. or foreign bank
holding companies and their bank subsidiaries, branches and agencies; and (4)
repurchase agreements involving the obligations listed above. The Money Market
Portfolio will invest only in issuers or instruments that at the time of
purchase (1) have received the highest short-term rating by two Rating
Organizations such as "A-1" by S&P and "P-1" by Moody's; (2) are single rated
and have received the highest short-term rating by a Rating Organization; or (3)
are unrated, but are determined to be of comparable quality by the Manager
pursuant to guidelines approved by the AMR Trust Board and subject to
ratification by the AMR Trust Board. See the SAI for definitions of the
foregoing instruments and rating systems. The Portfolio may invest in other
investment companies. The Portfolio also may purchase or sell securities on a
when-issued or forward commitment basis as described under "American AAdvantage
Balanced Fund."

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

invest only in issuers or instruments that at the time of purchase (1) are
guaranteed by the U.S. Government, its agencies, or instrumentalities; (2) are
secured by letters of credit that are irrevocable and issued by banks which
qualify as authorized issuers for the Money Market Portfolio (see "American
AAdvantage Money Market Fund"); (3) are guaranteed by one or more municipal bond
insurance policies that cannot be canceled and are issued by third-party
guarantors possessing the highest claims- paying rating from a Rating
Organization; (4) have received one of the two highest short-term ratings from
at least two Rating Organizations; (5) are single rated and have received one of
the two highest short-term ratings from that Rating Organization; (6) have no
short-term rating but the instrument is comparable to the issuer's rated
short-term debt; (7) have no short-term rating (or comparable rating) but have
received one of the top two long-term ratings from all Rating Organizations
rating the issuer or instrument; or (8) are unrated, but are determined to be of
comparable quality by the Manager pursuant to guidelines approved by, and
subject to the oversight of, the AMR Trust Board. The Portfolio also may invest
in other investment companies. Ordinarily at least 80% of the Portfolio's net
assets will be invested in municipal obligations the interest from which is
exempt from federal income tax. However, should market conditions warrant, the
Portfolio may invest up to 20% (or for temporary defensive purposes, up to 100%)
of its assets in eligible investments for the Money Market Portfolio which are
subject to federal income tax.

obligations. As a result, a substantial portion of the Fund's distributions may
be a tax preference item, which will reduce the net return from the Fund for
taxpayers subject to the AMT. Interest on "qualified" private activity
obligations is exempt from federal income tax.

SECURITIES LENDING. Each Portfolio may lend securities to broker-dealers or
other institutional investors pursuant to agreements requiring that the loans be
continuously secured by any combination of cash, securities of the U.S.
Government and its agencies and instrumentalities and approved bank letters of
credit that at all times equal at least 100% of the market value of the loaned
securities. Although the Equity 500 Index Portfolio may lend its securities, it
has agreed that it will abstain from doing so. Securities loans will not be made
if, as a result, the aggregate amount of all outstanding securities loans by any
Portfolio of the AMR Trust would exceed 33 1/3% of its total assets (including
the market value of collateral received). A Portfolio continues to receive
interest on the securities loaned and simultaneously earns either interest on
the investment of the cash collateral or fee income if the loan is otherwise
collateralized. Should the borrower of the securities fail financially, there is
a risk of delay in recovery of the securities loaned or loss of rights in the
collateral. However, the Portfolios seek to minimize this risk by making loans
only to borrowers which are deemed to be of good financial standing and which
have been approved by the AMR Trust Board. For purposes of complying with each
Portfolio's investment policies and restrictions, collateral received in
connection with securities loans will be deemed an asset of a Portfolio to the
extent required by law. Except for the Equity 500 Index Portfolio, the Manager
will receive compensation for administrative and oversight functions with
respect to securities lending. The amount of such compensation will depend on
the income generated by the loan of each Portfolio's securities. The SEC has
granted exemptive relief that permits the Portfolios to invest cash collateral
received from securities lending transactions in shares of one or more private
investment companies managed by the Manager. Subject to receipt of exemptive
relief from the SEC, the Portfolios also may invest cash collateral received
from securities lending transactions in shares of one or more registered
investment companies managed by the Manager. See the SAI for further information
regarding loan transactions.

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PRIVATE PLACEMENT OFFERINGS. Investments in private placement offerings are
made in reliance on the "private placement" exemption from registration afforded
by Section 4(2) of the Securities Act of 1933 (the "1933 Act"), and resold to
qualified institutional buyers under Rule 144A under the 1933 Act ("Section 4(2)
securities"). Section 4(2) securities are restricted as to disposition under the
federal securities laws, and generally are sold to institutional investors, such
as the Portfolios, that agree they are purchasing the securities for investment
and not with an intention to distribute to the public. Any resale by the
purchaser must be pursuant to an exempt transaction and may be accomplished in
accordance with Rule 144A. Section 4(2) securities normally are resold to other
institutional investors such as the Portfolios through or with the assistance of
the issuer or dealers that make a market in the Section 4(2) securities, thus
providing liquidity. The Money Market Portfolios will not invest more than 10%
(and the other Funds' respective Portfolios, no more than 15%) of their
respective net assets in Section 4(2) securities and illiquid securities unless
the applicable investment adviser determines, by continuous reference to the
appropriate trading markets and pursuant to guidelines approved by the AMR Trust
Board or the Equity 500 Index Portfolio Board that any Section 4(2) securities
held by such Portfolio in excess of this level are at all times liquid.

The AMR Trust Board, the Equity 500 Index Portfolio Board and the applicable
investment adviser, pursuant to the guidelines approved by their respective
Boards, will carefully monitor the Portfolios' investments in Section 4(2)
securities offered and sold under Rule 144A, focusing on such important factors,
among others, as: valuation, liquidity, and availability of information.
Investments in Section 4(2) securities could have the effect of reducing a
Portfolio's liquidity to the extent that qualified institutional buyers no
longer wish to purchase these restricted securities.

BROKERAGE PRACTICES AND PORTFOLIO TURNOVER -- Each investment adviser will place
its own orders to execute securities transactions which are designed to
implement the applicable Portfolio's investment objective and policies. In
placing such orders, each investment adviser will seek the best available price
and most favorable execution. The full range and quality of services offered by
the executing broker or dealer will be considered when making these
determinations. Pursuant to written guidelines approved by the AMR Trust Board
or the Equity 500 Index Portfolio Board, as appropriate, an investment adviser
of a Portfolio, or its affiliated broker-dealer, may execute portfolio
transactions and receive usual and customary brokerage commissions (within the
meaning of Rule 17e-1 under the 1940 Act) for doing so.

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

See "Management and Administration of the Trusts" for a complete description
of the investment management fee and other expenses associated with the Fund's
investment in its corresponding Portfolio. This Prospectus and the SAI contain
more detailed information about each Fund and its corresponding Portfolio,
including information related to (1) the investment objective, policies and
restrictions of each Fund and its corresponding Portfolio, (2) the Board of
Trustees and officers of the Trust, the AMR Trust and the Equity 500 Index
Portfolio Board, (3) brokerage practices, (4) the Funds' shares, including the
rights and liabilities of its shareholders, (5) additional performance
information, including the method used to calculate yield and total return, and
(6) the determination of the value of each Fund's shares.

INVESTMENT RESTRICTIONS

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although not a fundamental investment restriction and therefore subject to
change without shareholder vote, the Money Market Portfolio and the U.S.
Government Money Market Portfolio apply this restriction with respect to
100% of their assets.

YIELDS AND TOTAL RETURNS

From time to time each class of the Money Market Funds may advertise their
"current yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
current yield refers to the investment income generated over a seven
calendar-day period (which period will be stated in the advertisement). This
yield is then annualized by assuming the amount of investment income generated
during that week is earned each week over a one-year period and is shown as a
percentage of the investment. The effective yield is calculated similarly but,
when annualized, the investment income earned is assumed to be reinvested. The
effective yield will be slightly higher than the current yield because of the
compounding effect of this assumed reinvestment. The Municipal Money Market Fund
also may quote "tax equivalent yields," which show the taxable yields a
shareholder would have to earn before federal income taxes to equal this Fund's
tax-exempt yields. The tax equivalent yield is calculated by dividing the Fund's
tax-exempt yield by the result of one minus a stated federal income tax rate. If
only a portion of the Fund's investment income was tax-exempt, only that portion
is adjusted in the calculation. As stated earlier, the Fund considers interest
on private activity obligations to be exempt from federal income tax. Each class
of a Fund has different expenses which will impact its performance.

Advertised yields for the PlanAhead Class of the Balanced Fund, the Growth
and Income Fund, the International Equity Fund, the S&P 500 Index Fund, the
Intermediate Bond Fund and the Short-Term Bond Fund (collectively, the "Variable
NAV Funds") will be computed by dividing the net investment income per share
earned by that class during the relevant time period by the maximum offering
price per share for that class on the last day of the period. Additionally, each
class of the Intermediate Bond Fund and the Short-Term Bond Fund may advertise a
"monthly distribution rate." This rate is based on an annualized monthly
dividend accrual rate per share compared with the month-end share price of each
class of the Fund.

MANAGEMENT AND ADMINISTRATION OF THE TRUSTS

FUND MANAGEMENT AGREEMENT -- The Board has general supervisory responsibility
over the Trust's affairs, while the business affairs of the AMR Trust and the
Equity 500 Index Portfolio are subject to the supervision of their respective
Board of Trustees. The Manager provides or oversees all administrative,
investment advisory and portfolio management services for the Trust pursuant to
a Management Agreement dated April 3, 1987, as amended July 25, 1997, together
with the Administrative Services Agreement described below. The AMR Trust and
the Manager also entered into a Management Agreement dated October 1, 1995, as
amended July 25, 1997, that obligates the Manager to provide or oversee all
administrative, investment advisory and portfolio management services for the
AMR Trust. The Manager, located at 4333 Amon Carter Boulevard, MD 5645, Fort
Worth, Texas 76155, is a wholly owned subsidiary of AMR Corporation ("AMR"), the
parent company of American Airlines, Inc., and was organized in 1986 to provide
investment management, advisory, administrative and asset management consulting
services. The assets of the Balanced Portfolio, the Growth and Income Portfolio
and the International Equity Portfolio are allocated by the Manager among
multiple investment advisers designated for that Portfolio. The assets of the
Intermediate Bond Portfolio are allocated by the Manager between the Manager and
another investment adviser. BT serves as investment adviser and administrator
of, and provides custody and transfer agency services to, the Equity 500 Index
Portfolio. See "Investment Advisers." The Manager serves as the sole active
investment adviser to the Money Market Portfolios and the Short-Term Bond
Portfolio. In addition, with the exception of the International Equity Portfolio
and the Equity 500 Index Portfolio, if so requested by any investment adviser,
the Manager will make the investment decisions with respect to assets allocated
to that investment adviser which the investment adviser determines should be
invested in short-term obligations of the type permitted for investment by the
Money Market Portfolio. As of December 31, 1997, the Manager had assets under
management totaling approximately $18.4 billion including approximately $6.1
billion under active management and $12.3 billion as named fiduciary or
fiduciary adviser. Of the total, approximately $14.2 billion of assets are
related to AMR. American Airlines, Inc. is not responsible for investments made
in the American AAdvantage Funds.

Except as otherwise provided below, the Manager bears the expense of
providing the above services and pays the fees of the investment advisers of the
Funds and the Portfolios of the AMR Trust. As compensation for paying the
investment advisory fees and for providing the Portfolios with advisory and
asset allocation services, the Manager receives from the AMR Trust an annualized
advisory fee that is calculated and accrued daily, equal to the sum of (1) 0.15%
of the net assets of the Money Market Portfolios, (2) 0.25% of the net assets of
the Intermediate Bond Portfolio and the Short-Term Bond Portfolio, (3) 0.10% of
the net assets of the other Portfolios of the AMR Trust, plus (4) all fees
payable by the Manager to the investment advisers of the Balanced, the Growth
and Income and the International Equity Portfolios as described in "Investment
Advisers." The advisory fee is payable quarterly in arrears. To the extent that
a Fund invests all of its investable assets in its corresponding Portfolio, the
Manager will not receive an advisory fee under its Management Agreement with the
Trust. The Manager receives compensation in connection with securities lending
activities. If a Portfolio lends its portfolio securities and receives cash
collateral from the borrower, the Manager may receive up to 25% of the net
annual interest income (the gross interest earned by the investment less the
amount paid to the borrower as well as related expenses) received from the
investment of such cash. If a borrower posts collateral other than cash, the
PROSPECTUS
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borrower will pay to the lender a loan fee. The Manager may receive up to 25% of
the loan fees posted by borrowers. Currently, the Manager receives 10% of the
net annual interest income from the investment of cash collateral or 10% of the
loan fees posted by borrowers. In addition, the Manager is compensated through
the Administrative Services Agreement as described below for other services
provided.

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

FUND ADVISORY AGREEMENTS -- Each investment adviser, except BT, has entered into
a separate investment advisory agreement with the Manager to provide investment
advisory services to the Funds and the Portfolios of the AMR Trust. To the
extent that a Fund invests all of its investable assets in a corresponding
Portfolio, however, an investment adviser will receive an advisory fee only on
behalf of the Portfolio and not on behalf of its corresponding Fund. As
described below, the assets of the Balanced, the Growth and Income and the
International Equity Portfolios are allocated among the investment advisers
designated for each Portfolio and the assets of the Intermediate Bond Portfolio
are allocated between the Manager and another investment adviser. The Manager is
permitted to enter into new or modified advisory agreements with existing or new
investment advisers without the approval of Fund shareholders or Portfolio
interest holders, but subject to approval of the Board and the AMR Trust Board.
The Securities and Exchange Commission issued an exemptive order which
eliminates the need for shareholder/interest holder approval, subject to
compliance with certain conditions. These conditions include the requirement
that within 90 days of hiring a new adviser or implementing a material change
with respect to an advisory contract, the applicable Fund send a notice to
shareholders containing information about the change that would be included in a
proxy statement. The Manager recommends investment advisers to the Board and the
AMR Trust Board based upon its continuing quantitative and qualitative
evaluation of the investment advisers' skill in managing assets using specific
investment styles and strategies. The allocation of assets among investment
advisers may be changed at any time by the Manager. Allocations among investment
advisers will vary based upon a variety of factors, including the overall
investment performance of each investment adviser, the Portfolio's cash flow
needs and market conditions. The Manager need not allocate assets to each
investment adviser designated for a Portfolio. The investment advisers can be
terminated without penalty to the AMR Trust by the Manager, the AMR Trust Board
or the interest holders of the applicable Portfolio. Short-term investment
performance, by itself, is not a significant factor in selecting or terminating
an investment adviser, and the Manager does not expect to recommend frequent
changes of investment advisers. The Prospectus will be supplemented if
additional investment advisers are retained or the contract with any existing
investment adviser is terminated.
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ADMINISTRATIVE SERVICES AGREEMENTS -- The Manager and the Trust entered into an
Administrative Services Agreement which obligates the Manager to provide the
Funds those administrative and management services (other than investment
advisory services) described in the Management Agreement. As compensation for
these services, the Manager receives an annualized fee of 0.25% of the net
assets of the PlanAhead Class of the Variable NAV Funds and 0.05% of the net
assets of the PlanAhead Class of the Money Market Funds. The fee is payable
quarterly in arrears.

DISTRIBUTION OF TRUST SHARES -- Shares are distributed through the Funds'
principal underwriter, Brokers Transaction Services, Inc. ("BTS"). BTS is
compensated by the Manager, and not the Trust. The Trust does not incur any
direct distribution expenses relating to the PlanAhead Class. However, the Trust
has adopted a Distribution Plan in accordance with Rule 12b-1 under the 1940 Act
which authorizes the use of any fees received by the Manager in accordance with
the Administrative Services and the Management Agreements and any fees received
by the investment advisers pursuant to their Advisory Agreements with the
Manager, to be used for distribution purposes.

SERVICE PLAN -- The PlanAhead Class has adopted a service plan ("Service Plan")
which provides that each Fund's PlanAhead Class will pay 0.25% per annum of its
average daily net assets to the Manager (or another entity approved by the
Board). The Manager or these approved entities may spend such amounts on any
activities or expenses primarily intended to result in or relate to the
servicing of PlanAhead Class shares including but not limited to payment of
shareholder service fees and transfer agency or sub-transfer agency expenses.
The fee, which is included as part of a Fund's "Other Expenses" in the Table of
Fees and Expenses of this Prospectus, will be payable monthly in arrears without
regard to whether the amount of the fee is more or less than the actual expenses
incurred in a particular month by the entity for the services provided pursuant
to the Service Plan. The primary expenses expected to be incurred under the
Service Plan are transfer agency fees and servicing fees paid to financial
intermediaries such as plan sponsors and discount brokers.

The Service Plan will continue in effect so long as its continuance is
approved at least annually by a majority of the Trustees, including the
affirmative votes of a majority of the Trustees of the Board who are not parties
to the Service Plan or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of considering
such approval, or by the vote of shareholders. The Service Plan may be
terminated with respect to a particular PlanAhead Class at any time, without the
payment of any penalty, by a vote of a majority of the Independent Trustees or
by a vote of a majority of the outstanding voting securities of the applicable
Fund's PlanAhead Class.

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

TRANSFER AGENT -- State Street serves as transfer agent and provides transfer
agency services for Fund shareholders through its affiliate NATIONAL FINANCIAL
DATA SERVICES, ("NFDS"), Kansas City, Missouri.

INDEPENDENT AUDITOR -- The independent auditor for the Funds except the S&P 500
Index Fund and the AMR Trust is ERNST & YOUNG LLP, Dallas, Texas. The
independent auditor for the S&P 500 Index Fund and the Equity 500 Index
Portfolio is COOPERS & LYBRAND L.L.P., Kansas City, Missouri.

INVESTMENT ADVISERS

William F. Quinn has served as President of the Manager since it was founded
in 1986, and Nancy A. Eckl serves as Vice President - Trust Investments of the
Manager. Ms. Eckl previously served as Vice President - Finance and Compliance
of the Manager from December 1990 to May 1995. In these capacities, Mr. Quinn
and Ms. Eckl have primary responsibility for the day-to-day operations of the
Balanced Fund, the Growth and Income Fund, the International Equity Fund, the
Intermediate Bond Fund and their corresponding Portfolios. These
responsibilities include oversight of the investment advisers, regular review of
each investment adviser's performance and asset allocations among them.

Michael W. Fields is responsible for the portfolio management oversight of
the Short-Term Bond Fund and its corresponding Portfolio as well as the portion
of the Intermediate Bond Fund and its corresponding Portfolio allocated to the
Manager. Mr. Fields has been with the Manager since it was founded in 1986 and
serves as Vice President - Fixed Income Investments. Benjamin L. Mayer is
responsible for the day-to-day portfolio management of these Funds and
Portfolios. Mr. Mayer has served as Senior Portfolio Manager of the Manager
since May 1995. Prior to that time, he was a Vice President of Institutional
Fixed Income Sales at Merrill, Lynch, Pierce, Fenner & Smith from January 1994
to April 1995 and Vice President, Regional Senior Strategist from April 1989 to
January 1994.

conducts a variety of general banking and trust activities and is a major
wholesale supplier of financial services to the international and domestic
institutional market, with a global network of over 90 offices in more than 50
countries. As of September 30, 1997, Bankers Trust New York Corporation was the
seventh largest bank holding company in the United States with total assets of
approximately $100 billion and approximately $300 billion in assets under
management globally. Of that total, approximately $143 billion are in U.S.
equity index assets alone. BT serves as investment adviser and administrator to
the Equity 500 Index Portfolio. For its services, BT receives a fee from the
Equity 500 Index Portfolio, computed daily and paid monthly, at the annual rate
of 0.10% of the average daily net assets of the Portfolio, of which BT is
currently waiving 0.05%.

BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. ("Barrow"), 3232 McKinney Avenue,
15th Floor, Dallas, Texas 75204, is a professional investment counseling firm
which has been providing investment advisory services since 1979. The firm is
wholly owned by United Asset Management Corporation, a Delaware corporation. As
of December 31, 1997, Barrow had discretionary investment management authority
with respect to approximately $28.8 billion of assets, including approximately
$1.9 billion of assets of AMR and its subsidiaries and affiliated entities.
Barrow serves as an investment adviser to the Balanced Portfolio, the Growth and
Income Portfolio, the Intermediate Bond Portfolio and the Short-Term Bond
Portfolio, although the Manager does not presently intend to allocate any of the
assets in the Short-Term Bond Portfolio to Barrow. The Manager pays Barrow an
annualized fee equal to .30% on the first $200 million in AMR Trust assets under
its discretionary management, .20% on the next $300 million, .15% on the next
$500 million and .125% on assets over $1 billion.

BRANDYWINE ASSET MANAGEMENT, INC., ("Brandywine"), 201 North Walnut Street,
Wilmington, Delaware 19801, is a professional investment counseling firm founded
in 1986. Brandywine is a wholly owned subsidiary of Legg Mason, Inc. As of
December 31, 1997, Brandywine had assets under management totaling approximately
$7.5 billion, including approximately $894 million of assets of AMR and its
subsidiaries and affiliated entities. Brandywine serves as an investment adviser
to the Balanced and the Growth and Income Portfolios. The Manager pays
Brandywine an annualized fee equal to .225% of assets in the Balanced Portfolio
and .25% of assets in the Growth and Income Portfolio of the first $500 million
of AMR Trust assets under its discretionary management, .225% of the next $100
million on all assets and .20% on all excess assets.

HOTCHKIS AND WILEY, 800 West Sixth Street, 5th Floor, Los Angeles,
California 90017, is a professional investment counseling firm which was founded
in 1980 by John F. Hotchkis and George Wiley. Hotchkis and Wiley is a division
of the Capital Management Group of Merrill Lynch Asset Management, L.P., a
wholly owned indirect subsidiary of Merrill Lynch & Co., Inc. Assets under
management as of December 31, 1997 were approximately $12.3 billion, which
included approximately $1.1 billion of assets of AMR and its subsidiaries and
affiliated entities. Hotchkis and Wiley serves as an investment adviser to the
Balanced Portfolio, the Growth and Income Portfolio and the International Equity
Portfolio. The Manager pays Hotchkis and Wiley an annualized fee equal to .60%
of the first $10 million of AMR Trust assets under its discretionary management,
.50% of the next $140 million of assets, .30% on the next $50 million of assets,
.20% of the next $800 million of assets and .15% of all excess assets.

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$1.1 billion of assets of AMR and its subsidiaries and affiliated entities. IIA
serves as an investment adviser to the Balanced Portfolio and the Growth and
Income Portfolio. The Manager pays IIA an annualized fee equal to .50% of the
first $30 million of AMR Trust assets under its discretionary management, .25%
of the next $70 million of assets and .20% of all excess assets.

MORGAN STANLEY ASSET MANAGEMENT INC. ("MSAM"), 25 Cabot Square, London,
United Kingdom, E14 4QA, is a wholly owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co. MSAM provides portfolio management and named fiduciary
services to taxable and nontaxable institutions, international organizations and
individuals investing in United States and international equity and debt
securities. As of September 30, 1997, MSAM, together with its other asset
management affiliates, had assets under management (including assets under
fiduciary advisory control) totaling approximately $142.5 billion, including
approximately $112.3 billion under active management and $20.2 billion as named
fiduciary or fiduciary adviser. As of December 31, 1997, MSAM had investment
authority over approximately $561.9 million of assets of AMR and its
subsidiaries and affiliated entities. MSAM serves as an investment adviser to
the International Equity Portfolio. The Manager pays MSAM an annual fee equal to
.80% of the first $25 million of AMR Trust assets under its discretionary
management, .60% of the next $25 million in assets, .50% of the next $25 million
in assets and .40% on all excess assets.

TEMPLETON INVESTMENT COUNSEL, INC. ("Templeton"), 500 East Broward Blvd.,
Suite 2100, Fort Lauderdale, Florida 33394-3091, is a professional investment
counseling firm which has been providing investment services since 1979.
Templeton is indirectly owned by Franklin Resources, Inc. As of December 31,
1997, Templeton had discretionary investment management authority with respect
to approximately $21.7 billion of assets, including approximately $511.6 million
of assets of AMR and its subsidiaries and affiliated entities. Templeton serves
as an investment adviser to the International Equity Portfolio. The Manager pays
Templeton an annualized fee equal to .50% of the first $100 million of AMR Trust
assets under its discretionary management, .35% of the next $50 million of
assets, .30% of the next $250 million of assets and .25% on assets over $400
million.

HOW TO PURCHASE SHARES

Shares are offered on a continuous basis. Purchase orders should be directed
to NFDS either by mail, by pre-authorized investment or by wire as described
below. The minimum initial purchase for each Fund is $2,500, except for IRA
accounts for which a $2,000 minimum applies. The Funds have no obligation to
accept purchase requests or maintain accounts which do not meet minimum purchase
requirements. Accounts opened through financial intermediaries may be subject to
lower or higher minimums. The minimum for subsequent purchases is $50, except
for wire purchases for which a $500 minimum applies. Shares purchased through
financial intermediaries may be subject to transaction fees. The management of
the Fund reserves the right to waive or change the minimum investment
requirements and to charge an annual fee of $12 (to offset the costs of
servicing accounts with low balances) if an account balance falls below certain
asset levels.

An order to purchase shares of a Variable NAV Fund will be executed at the
next share price calculated Monday through Friday on each day on which the
Exchange is open for trading, which excludes the following business holidays:
New Year's Day, Martin Luther King's Birthday, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
("Business Day"). Shares of the Variable NAV Funds are offered and purchase
orders are accepted until the close of the Exchange, generally 4:00 p.m.

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Eastern time, on each Business Day. An order to purchase shares of the Money
Market Funds will be executed at the Fund's next determined net asset value per
share on any day on which the Exchange is open for business except for Columbus
Day and Veteran's Day ("Money Market Business Day") and during which federal
funds become available to the Fund. Shares are offered and orders are accepted
for the Municipal Money Market Fund until 11:45 a.m. Eastern time, or the close
of the Exchange (whichever comes first); for the U.S. Government Money Market
Fund until 2:00 p.m. Eastern time, or the close of the Exchange (whichever comes
first) and for the Money Market Fund until 3:00 p.m. Eastern time, or the close
of the Exchange (whichever comes first), on each Money Market Business Day. The
Trust reserves the right to reject any order for the purchase of shares and to
limit or suspend, without prior notice, the offering of shares. "Federal funds"
are funds deposited by a commercial bank in an account at a federal reserve bank
that can be transferred to a similar account of another bank in one day and thus
may be made immediately available to a Money Market Fund through its custodian.

OPENING AN ACCOUNT -- A completed and signed PlanAhead Class application is
required for each new account opened, regardless of the method chosen for making
an initial investment. If assistance is required in filling out the application,
or if extra applications are required, call (800) 388-3344. See "Retirement
Accounts" for information on opening retirement accounts.

PURCHASING BY MAIL -- To open an account by mail, complete the application form,
include a check payable to the American AAdvantage Funds ($2,500 minimum or
$2,000 for IRAs) and mail both to:

American AAdvantage Funds
c/o NFDS
P.O. Box 419643
Kansas City, MO 64141-6643

Purchase checks are accepted subject to collection at full face value in
U.S. funds and must be drawn in U.S. dollars on a U.S. bank. The Funds will not
accept "starter" checks or third party checks. If your order to purchase shares
of a Fund is canceled because your check does not clear, you will be responsible
for any resulting loss incurred by the Fund. For subsequent purchases by mail
make your check payable to the American AAdvantage Funds ($50 minimum) and
include your account number on your check. Mail to the address printed above.
Include either the detachable form from your account statement, the deposit
slips from your checkbook (if you have a Money Market account and opted for
checking) or a letter with the account name and number.

SUBSEQUENT PURCHASES BY PRE-AUTHORIZED AUTOMATIC INVESTMENT -- Pre-Authorized
Automatic Investment allows you to make monthly or quarterly, automatic
transfers ($50 minimum) from your bank account to purchase shares in the Fund of
your choice after an account has been open. To establish this option, provide
the appropriate information on the application form and attach a voided check
from your bank account. Funds will be transferred automatically from your bank
account via Automated Clearing House ("ACH") on the 5th day of each month or
quarter.

State Street Bank & Trust Co.
ABA Routing #0110-0002-8, AC-9905-342-3
Attention: American AAdvantage Funds-PlanAhead Class, and specify the
Fund to be purchased.

You will be responsible for any charges assessed by your bank to handle
wire transfers.

HOW TO REDEEM SHARES

Shares of the Variable NAV Funds may be redeemed by telephone, by
pre-authorized automatic redemption or by mail on any Business Day. Shares of
the Money Market Funds may be redeemed by telephone, by writing a

PROSPECTUS
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<PAGE> 72

check, by pre-authorized automatic redemption or by mail on any Money Market
Business Day. Shares will be redeemed at the net asset value next calculated
after the applicable Fund has received and accepted the redemption request.
Proceeds from a redemption of shares purchased by check or pre-authorized
automatic purchase may be withheld until the funds have cleared, which may take
up to 15 days. Although the Funds intend to redeem shares in cash, each Fund
reserves the right to pay the redemption price in whole or in part by a
distribution of readily marketable securities held by the applicable Fund's
corresponding Portfolio. See the SAI for further information concerning
redemptions in kind.

Redemption proceeds generally will be sent within one Business Day or Money
Market Business Day, as applicable. However, if making immediate payment could
affect a Fund adversely, it may take up to seven days to send payment.

A minimum of $2,500 ($2,000 for IRAs) is required in order to maintain an
account in a Fund. Otherwise, a Fund may give a shareholder 60 days' notice to
increase the account balance to this level in order to avoid the imposition of
an account fee or account closure. If a shareholder does not increase the
account balance to $2,500 within the 60 day period, the Fund is entitled to
close the account and mail the proceeds to the address of record.

To ensure timely acceptance of a redemption request, please adhere to the
following procedures.

REDEEMING BY TELEPHONE -- Shares may be redeemed by telephone if your account
application reflects that option. Telephone redemptions in any 30 day period
shall not exceed $25,000 without the express written consent of the Trust. In
order to redeem by telephone, you should call NFDS at (800) 388-3344. Redemption
proceeds will be mailed only to the address of record or mailed or wired to a
commercial bank account designated on the account application.

By establishing the telephone redemption service, you authorize the Funds or
their agent to act upon verbal instructions to redeem shares for any account for
which such service has been authorized. In an effort to prevent unauthorized or
fraudulent redemption requests by telephone, NFDS will employ reasonable
procedures specified by the Funds to confirm that such instructions are genuine.
For instance, all telephone redemption requests will be recorded and proceeds of
telephone redemption requests will be sent only to the address or account
designated in the application. Neither the Funds, the Trusts, the Equity 500
Index Portfolio, the Manager, State Street, NFDS, or their trustees, directors
or officers will be liable for any unauthorized or fraudulent redemption
instructions received by telephone. Due to the volume of calls or other unusual
circumstances, telephone redemptions may be difficult to implement during
certain time periods. This service may be amended or terminated at any time by
the transfer agent or the Trust without prior notice.

REDEEMING BY CHECK -- If you elect so on the application, shares of the Money
Market Funds may be redeemed through the check writing feature. There is no
limit on the number of checks written per month and no check redemption fees.
Checks must be written in amounts of $100 or more. Check drafts however, are not
returned to you. If copies of drafts are required, a service charge of $2 per
check will be assessed to you.

PRE-AUTHORIZED AUTOMATIC REDEMPTIONS -- You can arrange to have a pre-authorized
amount ($100 or more) redeemed from your account and automatically deposited
into a bank account, via ACH, on the 15th day of each month. For more
information regarding pre-authorized automatic redemptions, contact NFDS at
(800) 388-3344.

REDEEMING BY MAIL -- Except for certain intermediary accounts, a letter of
instruction may be mailed to American AAdvantage Funds -- PlanAhead Class, c/o
NFDS, P.O. Box 419643, Kansas City, MO 64141-6643 to redeem shares. The letter
should specify the Fund (Balanced, Growth and Income, International Equity, S&P
500 Index, Intermediate Bond, Short-Term Bond, Money Market, Municipal Money
Market or U.S. Government Money Market Fund), the number of shares or dollar
amount to be redeemed, the shareholder's name and account number. The letter of
instruction must be signed by all persons required to sign for the account,
exactly as it is registered. For redemption requests over $25,000 seeking (i)
authorization to send redemption proceeds to

PROSPECTUS
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<PAGE> 73

an address other than the address of record or to a commercial bank account
other than the account designated on the application, or (ii) redemptions for an
account whose address of record has been changed within thirty days, the letter
of instruction must be accompanied by a signature guarantee by a financial
institution satisfying the standards established by NFDS.

REDEEMING BY WIRE -- Shares may be redeemed by wire if your account application
reflects that option. Redemption proceeds will be transmitted directly to your
predesignated account at a domestic bank upon request, for amounts of at least
$500. In order to redeem by wire, call (800) 388-3344. Your account will be
charged $10 for wire redemptions to cover transaction costs.

FULL REDEMPTIONS -- Unpaid dividends credited to an account up to the date of
redemption of all shares of a Money Market Fund generally will be paid at the
time of redemption.

RETIREMENT ACCOUNTS

Individual retirement accounts, including SEPs and Keoghs, are eligible
investors in the PlanAhead Class. State Street generally serves as custodian for
retirement accounts in the PlanAhead Class. A special retirement account
application is required in order to open this type of account. Each shareholder
is charged an administrative fee of $12.00 per year for each retirement account
regardless of the number of Funds. To receive a retirement account application,
or if you have any questions about establishing this type of account, call NFDS
at (800) 388-3344.

EXCHANGE PRIVILEGE

PlanAhead Class shares which have been registered in a shareholder's name
for at least 15 days may be exchanged into shares of the PlanAhead Class of
another Fund. A minimum exchange of $50 is required into existing accounts. If a
shareholder wishes to establish a new account in the PlanAhead Class of another
Fund by making an exchange, a $2,500 minimum is required.

Except for certain intermediary accounts, shareholders may exchange shares
by sending the Funds a written request or by calling NFDS at (800) 388-3344. The
exchange will be processed at the next share price calculated after the request
is received in good order by the Funds. In establishing a telephone exchange
service, shareholders authorize the Funds or their agent to act upon verbal
instructions to exchange shares from any account for which such service is
authorized to any identically registered PlanAhead Class account(s). NFDS will
use reasonable procedures specified by the Funds to confirm that such
instructions are genuine such as the recording of all telephone exchange
requests. If reasonable procedures as described above are implemented, neither
the Funds, the Trusts, the Equity 500 Index Portfolio, the Manager, State
Street, NFDS, nor their trustees, directors or officers will be liable for any
unauthorized or fraudulent instructions.

VALUATION OF SHARES

The net asset value of each share (share price) of the Variable NAV Funds is
determined as of the close of the Exchange, generally 4:00 p.m. Eastern time, on
each Business Day and the net asset value of each share of the Money Market
Funds is determined as of the close of the Exchange, generally 4:00 p.m. Eastern
time, on each Money Market Business Day. The net asset value of all outstanding
shares of a Fund will be determined by computing the Fund's total assets (which
is the value of the Fund's investment in its corresponding Portfolio),
subtracting all of the Fund's liabilities, and dividing the result by the total
number of Fund shares outstanding at such time. The net asset value of shares of
the PlanAhead Class will be determined based on a pro rata allocation

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<PAGE> 74

of the value of the Fund's corresponding Portfolio's investment income, expenses
and total capital gains and losses. The allocation will be based on comparative
net asset value at the beginning of the day except for expenses related solely
to one class of shares ("Class Expenses") which will be borne only by the
appropriate class of shares. Because of the Class Expenses, the net income
attributable to and the dividends payable may be different for each class of
shares. Additionally, the Variable NAV Funds may compute differing share prices
as a result of Class Expenses.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAX MATTERS

DIVIDENDS AND OTHER DISTRIBUTIONS -- Dividends and other distributions paid on
each class of a Fund's shares are calculated at the same time and in the same
manner. Dividends from the net investment income of the Balanced Fund, the
Growth and Income Fund and the International Equity Fund normally are declared
annually. Dividends consisting of substantially all of the net investment income
of the Intermediate Bond Fund and the Short-Term Bond Fund, which are paid
monthly, normally are declared on each Business Day immediately prior to the
determination of the net asset value and are payable to shareholders of record
as of the close of business on the day on which declared. The S&P 500 Index Fund
distributes income dividends on the first Business Day in April, July and
October. In December, the S&P 500 Index Fund will distribute another income
dividend, plus any capital gains. Each Fund may make an additional dividend or
other distribution, if necessary, to avoid a 4% excise tax on certain
undistributed income and gain. A Fund's net investment income attributable to
the PlanAhead Class consists of that class's pro rata share of the Fund's share
of dividends and interest (including discount) accrued on its corresponding
Portfolio's securities, less applicable expenses of the Fund and the Portfolio
attributable to the PlanAhead Class. Distributions of a Fund's share of its
corresponding Portfolio's realized net short-term capital gain, net capital gain
(the excess of net long-term capital gain over net short-term capital loss), and
net gains from foreign currency transactions, if any, normally will be made
annually.

Fund's share of interest accrued and discount earned on its corresponding
Portfolio's securities less amortization of premium and expenses of both the
Portfolio and (2) the Fund's expenses attributable to the PlanAhead Class. The
Money Market Portfolios do not expect to realize net capital gain, and,
therefore, the Money Market Funds do not foresee paying any capital gain
distributions. If any Money Market Fund (either directly or indirectly through
its corresponding portfolio) incurs or anticipates any unusual expenses, loss or
depreciation that would affect its net asset value or income for a particular
period adversely, the Board would at that time consider whether to adhere to the
dividend policy described above or to revise it in the light of the then
prevailing circumstances.

Unless a shareholder elects otherwise on the account application, all
dividends and other distributions on a Fund's PlanAhead Class shares will be
automatically paid in additional PlanAhead Class shares of that Fund. However, a
shareholder may choose to have distributions of net capital gain (and, if
applicable, net foreign currency gains) paid in shares and dividends paid in
cash or to have all such distributions and dividends paid in cash. An election
may be changed at any time by delivering written notice that is received by the
transfer agent at least ten days prior to the payment date for a dividend or
other distribution.

TAX INFORMATION -- Each Fund is treated as a separate corporation for federal
income tax purposes and intends to qualify or to continue to qualify for
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended. In each taxable year that a Fund so qualifies, the Fund (but
not its shareholders) will be relieved of federal income tax on that part of its
investment company taxable income (generally, net investment income plus any net
short-term capital gain and gains from certain foreign currency transactions)
and net capital gain that it distributes to its shareholders. However, a Fund
will be subject to a nondeductible 4% excise tax to the extent that it fails to
distribute by the end of any calendar year substantially all of its ordinary
income for that calendar year and its capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts. For these
and other purposes, dividends and other distributions declared by a Fund in
October, November or December of any year and payable to shareholders of record
on a date in one of those months will be deemed to have been paid by the Fund
and received by the shareholders on December 31 of that year if they are paid by
the Fund during the following January. Each Portfolio has received a ruling from
the Internal Revenue Service or an opinion of counsel that it is or should be
classified for federal income tax purposes as a partnership; accordingly, no
Portfolio is subject to federal income tax.

Dividends from a Fund's investment company taxable income are taxable to its
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether received in cash or paid in additional Fund shares.
Distributions of a Fund's net capital gain (whether received in cash or paid in
additional Fund shares), when designated as such, generally are taxable to its
shareholders as long-term capital gain, regardless of how long they have held
their Fund shares. A capital gain distribution from a Fund also may be offset by
capital losses from other sources. Under the Taxpayer Relief Act of 1997,
different maximum tax rates apply to a noncorporate taxpayer's net capital gain
depending on the taxpayer's holding period and marginal rate of federal income
tax -- generally, 28% for gain recognized on securities held for more than one
year but not more than 18 months and 20% (10% for taxpayers in the 15% marginal
tax bracket) for gain recognized on securities held for more than 18 months.
Pursuant to an Internal Revenue Service notice, the Fund may divide each net
capital gain distribution into a 28% rate gain distribution and a 20% rate gain
distribution (in accordance with the Fund's holding periods for the securities
it sold that generated the distributed gain) and its shareholders must treat
those portions accordingly.

Some foreign countries may impose income or withholding taxes on certain
dividends payable to the International Equity Portfolio. The International
Equity Fund's share of any such withheld taxes may be treated by that Fund as a
deduction or, if it satisfies certain requirements, it may elect to flow the tax
through to its shareholders, who in turn may deduct the taxes or use them in
calculating credits against their federal income tax.

received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction may be subject indirectly to the AMT. The
International Equity Fund's dividends most likely will not qualify for the
dividends-received deduction because none of the dividends received by that Fund
are expected to be paid by U.S. corporations.

Distributions by the Municipal Money Market Fund that it designates as
"exempt-interest dividends" generally may be excluded from gross income by its
shareholders. If the Municipal Money Market Portfolio earns taxable income from
any of its investments, the Municipal Money Market Fund's share of income will
be distributed to its shareholders as a taxable dividend. To the extent that
Portfolio invests in certain private activity obligations, that Fund's
shareholders will be required to treat a portion of its dividends as a "tax
preference item" in determining their liability for the AMT. Exempt-interest
dividends also may be subject to state and local income tax laws. Because some
states exempt from income tax the interest on their own obligations and
obligations of governmental agencies of and municipalities in the state,
shareholders will receive tax information each year regarding the Municipal
Money Market Fund's exempt-interest income by state. Interest on indebtedness
incurred or continued by a shareholder to purchase or carry shares of that Fund
is not deductible.

Redemption of Fund shares (other than shares of the Money Market Funds) may
result in taxable gain or loss to the redeeming shareholder, depending upon
whether the redemption proceeds exceed or are less than the shareholder's
adjusted basis for the redeemed shares. An exchange of shares of a Fund for
shares of any other Fund (see "Exchange Privileges") generally will have similar
tax consequences. If shares of a Fund are sold at a loss after being held for
six months or less, the loss will be treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received on those shares.

If shares are purchased shortly before the record date for a dividend (other
than an exempt-interest dividend) or other distribution, the investor will pay
full price for the shares and receive some portion of the price back as a
taxable distribution.

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

GENERAL INFORMATION

affecting that Fund. All shares of the Trust vote on matters affecting the Trust
as a whole. Share voting rights are not cumulative, and shares have no
preemptive or conversion rights. Shares of the Trust are nontransferable. Each
series in the Trust will not be involved in any vote involving a Portfolio in
which it does not invest its assets. Shareholders of all of the series of the
Trust, however, will vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.

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

<TABLE>
<S> <C>
AMERICAN AADVANTAGE BALANCED FUND
AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof 81%
AMERICAN AADVANTAGE GROWTH AND INCOME FUND
AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof 85%
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof 60%
AMERICAN AADVANTAGE S&P 500 INDEX FUND
AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof 100%
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof 72%
</TABLE>

SHAREHOLDER COMMUNICATIONS

Shareholders will receive periodic reports, including annual and semi-annual
reports which will include financial statements showing the results of the
Funds' operations and other information. The financial statements of the Funds
will be audited by the independent auditors at least annually. Shareholder
inquiries and requests for information regarding the other investment companies
which also invest in the AMR Trust should be made in writing to the Funds at
P.O. Box 619003, MD5645, Dallas/Fort Worth Airport, Texas 75261-9003, or by

PROSPECTUS
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calling (800) 388-3344. Shareholder inquiries and requests for information
regarding the other investment companies that also invest in the Equity 500
Index Portfolio should be made by calling (800) 730-1313.

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

American AAdvantage Funds is a registered service mark of AMR Corporation.
PlanAhead Class is a registered service mark and Platinum Class, American
AAdvantage Balanced Fund, American AAdvantage Growth and Income Fund, American
AAdvantage International Equity Fund, American AAdvantage Intermediate Bond
Fund, American AAdvantage Short-Term Bond Fund, American AAdvantage Money Market
Fund, American AAdvantage Municipal Money Market Fund and American AAdvantage
U.S. Government Money Market Fund are service marks of AMR Investment Services,
Inc.
PROSPECTUS
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<PAGE> 79

-- NOTES --
<PAGE> 80

American Advantage Funds(R) Logo

- PLANAHEAD CLASS(R) -
P.O. Box 419643
Kansas City, MO 64141-6643
(800) 388-3344

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

- INSTITUTIONAL CLASS -
P.O. Box 419643
Kansas City, MO 64141-6643
(800) 658-5811

Access our website at www.aafunds.com

PLAN-PRO-0398
<PAGE> 81

THIS PROSPECTUS contains important information about the AMR Class of the
AMERICAN AADVANTAGE FUNDS ("Trust") and the Institutional Class of the S&P 500
Index Fund of the Trust. The Trust is an open-end management investment company
comprised of multiple investment portfolios. This Prospectus pertains only to
the six funds listed on this cover page (individually referred to as a "Fund"
and, collectively, the "Funds"). EACH FUND, EXCEPT THE S&P 500 INDEX FUND,
SEEKS ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A
CORRESPONDING PORTFOLIO OF THE AMR INVESTMENT SERVICES TRUST ("AMR TRUST"). THE
S&P 500 INDEX FUND INVESTS ALL OF ITS INVESTABLE ASSETS IN THE EQUITY 500 INDEX
PORTFOLIO. (THE EQUITY 500 INDEX PORTFOLIO AND THE PORTFOLIOS OF THE AMR TRUST
ARE REFERRED TO HEREIN INDIVIDUALLY AS A "PORTFOLIO" AND, COLLECTIVELY, THE
"PORTFOLIOS.") EACH PORTFOLIO HAS AN INVESTMENT OBJECTIVE IDENTICAL TO THE
INVESTING FUND. The investment experience of each Fund will correspond directly
with the investment experience of each Portfolio. Each Fund, except the S&P 500
Index Fund, offers the AMR Class of shares to tax exempt retirement and benefit
plans of AMR Corporation and its affiliates, and the S&P 500 Index Fund offers
the Institutional Class of shares to institutional investors, investing at
least $2 million in the Fund. Prospective investors should read this Prospectus
carefully before making an investment decision and retain it for future
reference.

PROSPECTUS
March 1, 1998
[AMERICAN AADVANTAGE LOGO]
- AMR Class -
BALANCED FUND
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND
INTERMEDIATE BOND FUND
SHORT-TERM BOND FUND
- Institutional Class -
S&P 500 INDEX FUND
Managed by AMR Investment Services, Inc.

<PAGE> 82

The AMERICAN AADVANTAGE S&P 500 INDEX FUND(1) - INSTITUTIONAL CLASS ("S&P 500
Index Fund") seeks to provide investment results that, before expenses,
correspond to the total return of common stocks publicly traded in the United
States, as represented by the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500" or "Index"), by investing all of its investable assets in the
Equity 500 Index Portfolio which in turn invests in common stocks of companies
that compose the S&P 500.

The AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) ("Intermediate Bond Fund")
and the AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) ("Short-Term Bond Fund,"
formerly the American AAdvantage Limited-Term Income Fund) each seeks income and
capital appreciation by investing all of its investable assets in the
Intermediate Bond Portfolio of the AMR Trust ("Intermediate Bond Portfolio") and
the Short-Term Bond Portfolio of the AMR Trust ("Short-Term Bond Portfolio,"
formerly the Limited-Term Income Portfolio), respectively, which in turn
primarily invest in debt obligations. The Intermediate Bond Fund seeks to
maintain a dollar weighted average duration of three to seven years and the
Short-Term Bond Fund seeks to maintain a dollar weighted average duration of one
to three years.

Under a master-feeder operating structure, each Fund seeks its investment
objective by investing all of its investable assets in a corresponding Portfolio
as described above. Each Portfolio's investment objective is identical to that
of its corresponding Fund. Whenever the phrase "all of the Fund's investable
assets" is used, it means that the only investment securities that will be held
by a Fund will be that Fund's interest in its corresponding Portfolio. AMR
Investment Services, Inc. ("Manager") provides investment management and
administrative services to the Portfolios, except for the Equity 500 Index
Portfolio, and administrative services to the Funds. Bankers Trust Company
("BT") provides investment advisory, administrative and other services to the
Equity 500 Index Portfolio. This master-feeder structure is different from that
of many other investment companies which directly acquire and manage their own
portfolios of securities. Accordingly, investors should carefully consider this
investment approach. See "Investment Objectives, Policies and
Risks -- Additional Information About the Portfolios." A Fund may withdraw its
investment in a corresponding Portfolio at any time if the Trust's Board of
Trustees ("Board") determines that it would be in the best interest of that Fund
and its shareholders to do so. Upon any such withdrawal, that Fund's assets
would be invested in accordance with the investment policies and restrictions
described in this Prospectus and the SAI.

<TABLE>
<S> <C>
Table of Fees and Expenses...................................3
Financial Highlights.........................................4
Introduction.................................................9
Investment Objectives, Policies and
Risks.......................................................9
Investment Restrictions......................................19
Yields and Total Returns.....................................20
Management and Administration of the Trusts..................20
Investment Advisers..........................................23
Purchase, Redemption and Valuation of
Shares......................................................25
Dividends, Other Distributions and Tax
Matters.....................................................27
General Information..........................................28
Shareholder Communications...................................29
</TABLE>

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

(1) S&P is a trademark of The McGraw-Hill Companies, Inc. and has been licensed
for use. "Standard & Poor's(R)", "S&P(R)", "Standard & Poor's 500", "S&P
500(R)", and "500" are all trademarks of The McGraw-Hill Companies, Inc. and
have been licensed for use by Bankers Trust Company. The S&P 500 Index Fund
is not sponsored, sold or promoted by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing in
that Fund.
PROSPECTUS
2
<PAGE> 83

TABLE OF FEES AND EXPENSES

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

<TABLE>
<CAPTION>
INSTITUTIONAL
AMR CLASS CLASS
------------------------------------------------------------------------ -------------
GROWTH AND INTERNATIONAL INTERMEDIATE SHORT-TERM S&P 500
BALANCED FUND INCOME FUND EQUITY FUND BOND FUND(1) BOND FUND INDEX FUND
<S> <C> <C> <C> <C> <C> <C>
Management Fees 0.33% 0.33% 0.48% 0.25% 0.25% 0.05%(2)

12b-1 Fees 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Other Expenses 0.01% 0.01% 0.10% 0.13% 0.07% 0.15%(3)
---- ---- ---- ---- ---- ----

Total Operating Expenses 0.34% 0.34% 0.58% 0.38% 0.32% 0.20%(4)
==== ==== ==== ==== ==== ====

</TABLE>

(1) Because the Intermediate Bond Fund had not commenced active operations prior
to October 31, 1997, its Annual Operating Expenses are based on estimates.
(2) The investment adviser has voluntarily agreed to waive a portion of its
investment advisory fee. Without such waiver, the "Management Fee" would be
equal to 0.10%.
(3) "Other Expenses" before fee waivers are 0.53%.
(4) "Total Operating Expenses" before fee waivers are 0.63%.

EXAMPLES

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Balanced Fund $3 $11 $ 19 $ 43

Growth and Income Fund 3 11 19 43

International Equity Fund 6 19 32 73

Intermediate Bond Fund 4 12 21 48

Short-Term Bond Fund 3 10 18 41

S&P 500 Index Fund 2 6 11 26
</TABLE>

The purpose of the table above is to assist a potential investor in
understanding the various costs and expenses to be incurred directly or
indirectly as a shareholder in the AMR Class of a Fund or the Institutional
Class of the S&P 500 Index Fund. Additional information may be found under
"Management and Administration of the Trusts" and "Investment Advisers."

PROSPECTUS
3
<PAGE> 84

FINANCIAL HIGHLIGHTS

The financial highlights in the following tables have been derived from
financial statements of the Trust. The financial highlights for each Fund except
the S&P 500 Index Fund and the Intermediate Bond Fund, have been audited by
Ernst & Young LLP, independent auditors. The financial highlights of the S&P 500
Index Fund have been audited by Coopers & Lybrand, L.L.P., independent auditors.
Such information should be read in conjunction with the financial statements and
the report of the independent auditors appearing in the Annual Report
incorporated by reference in the SAI, which contains further information about
performance of the Funds and can be obtained by investors without charge.
Financial highlights are not available for the Intermediate Bond Fund because as
of October 31, 1997 it had not commenced active operations.

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
BALANCED FUND
---------------------------------------------------------------------------------------
AMR CLASS INSTITUTIONAL CLASS(1)
---------------------------------------------------- ------------------------------
PERIOD
YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31,
-------------------------------------- OCTOBER 31, ------------------------------
1997(5) 1996(5)(6) 1995(4)(5) 1994 (1)(3) 1994(3) 1993 1992
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.18 $ 13.98 $ 12.36 $ 12.35 $ 13.23 $ 11.99 $ 11.60
-------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.70(7) 0.63(7) 0.58 0.14 0.57 0.49 0.55
Net gains (losses) on securities (both
realized and unrealized) 2.13(7) 1.61(7) 1.71 (0.13) (0.54) 1.57 0.41
-------- -------- -------- -------- -------- -------- --------
Total from investment operations 2.83 2.24 2.29 0.01 0.03 2.06 0.96
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.62) (0.60) (0.53) -- (0.56) (0.52) (0.56)
Distributions from net realized gains
on securities (1.16) (0.44) (0.14) -- (0.34) (0.30) (0.01)
-------- -------- -------- -------- -------- -------- --------
Total distributions (1.78) (1.04) (0.67) -- (0.90) (0.82) (0.57)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 16.23 $ 15.18 $ 13.98 $ 12.36 $ 12.36 $ 13.23 $ 11.99
======== ======== ======== ======== ======== ======== ========
Total return (annualized)(8) 20.36% 16.77% 19.77% (0.08)%(9) (0.08)% 19.19% 8.75%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (in
thousands) $769,289 $576,673 $542,619 $393,504 $222,873 $532,543 $370,087
Ratios to average net
assets(10)(11)(12):
Expenses 0.34%(7) 0.37%(7) 0.38% 0.36% 0.36% 0.34% 0.35%
Net investment income 4.09%(7) 4.26%(7) 4.54% 4.65% 4.77% 4.91% 5.31%
Portfolio turnover rate(13) 105% 76% 73% 48% 48% 83% 80%
Average commission rate paid(13) $ 0.0385 $ 0.0409 -- -- -- -- --

<CAPTION>
BALANCED FUND
-----------------------------------------
INSTITUTIONAL CLASS(1)
-----------------------------------------

YEAR ENDED OCTOBER 31,
-----------------------------------------
1991 1990(2) 1989 1988
-----------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.87 $ 11.05 $ 10.13 $ 9.08
-------- -------- -------- --------
Income from investment operations:
Net investment income 0.58 0.57 0.53 0.56
Net gains (losses) on securities (both
realized and unrealized) 1.79 (1.18) 0.90 0.73
-------- -------- -------- --------
Total from investment operations 2.37 (0.61) 1.43 1.29
-------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.64) (0.51) (0.51) (0.24)
Distributions from net realized gains
on securities -- (0.06) -- --
-------- -------- -------- --------
Total distributions (0.64) (0.57) (0.51) (0.24)
-------- -------- -------- --------
Net asset value, end of period $ 11.60 $ 9.87 $ 11.05 $ 10.13
======== ======== ======== ========
Total return (annualized)(8) 25.35% (5.24)% 15.49% 14.63%
======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (in
thousands) $311,906 $233,702 $210,119 $147,581
Ratios to average net
assets(10)(11)(12):
Expenses 0.37% 0.44% 0.47% 0.52%
Net investment income 6.06% 6.50% 6.32% 6.25%
Portfolio turnover rate(13) 55% 62% 78% 77%
Average commission rate paid(13) -- -- -- --
</TABLE>

(1) The Balanced Fund commenced active operations on July 17, 1987. The AMR
Class commenced active operations on August 1, 1994 and at that time
existing shares of the Balanced Fund were designated as Institutional Class
shares.

(2) Penmark Investments, Inc. was replaced by Independence Investment
Associates, Inc. as an investment adviser to the Fund as of the close of
business on February 28, 1990.

(3) Average shares outstanding for the period rather than end of period shares
were used to compute net investment income per share.

(4) GSB Investment Management, Inc. was added as an investment adviser to the
Balanced Fund on January 1, 1995.

(5) 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.

(6) Capital Guardian Trust Company was replaced by Brandywine Asset Management,
Inc. as an investment adviser to the Balanced Fund on April 1, 1996.

(7) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the Balanced Portfolio.

(8) Total return reflects accrual for the maximum shareholder services fee of
.30% for periods prior to August 1, 1994.

(9) Total return for the AMR Class for the period ended October 31, 1994
reflects Institutional Class returns from November 1, 1993 through July 31,
1994 and returns of the AMR Class for the period August 1, 1994
(commencement of operations) through October 31, 1994. Due to the different
expense structures between the classes, total returns for the AMR Class
would vary from the results shown had it been in operation for the entire
year.

(11) The method of determining average net assets was changed from a monthly
average to a daily average starting with the periods ended October 31,
1994.

(12) Annualized.

(13) On November 1, 1995 the Balanced Fund began investing all of its investable
assets in the Balanced Portfolio. Portfolio turnover rate and average
commission rate paid for the years ended October 31, 1996 and 1997 are
those of the Balanced Portfolio. Calculation and disclosure of the average
commission rate paid was not required prior to 1996.

PROSPECTUS
4
<PAGE> 85

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-----------------------------------------------------------------------------------------------------
AMR CLASS INSTITUTIONAL CLASS(1)
---------------------------------------------------- --------------------------------------------
PERIOD
YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31,
-------------------------------------- OCTOBER 31, --------------------------------------------
1997(5) 1996(5)(6) 1995(5) 1994(1)(4) 1994(4) 1993 1992(3) 1991
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 18.56 $ 15.95 $ 14.20 $ 13.99 $ 14.63 $ 12.79 $ 12.10 $ 9.47
----- ----- ----- ------- ------- ----- ----- -----
Income from investment
operations:
Net investment income 0.45(7) 0.47(7) 0.44 0.11 0.43 0.36 0.39 0.42
Net gains (losses) on
securities (both
realized and
unrealized) 4.47(7) 3.15(7) 2.30 0.10 0.08 2.21 0.77 2.70
----- ----- ----- ------- ------- ----- ----- -----
Total from investment
operations 4.92 3.62 2.74 0.21 0.51 2.57 1.16 3.12
----- ----- ----- ------- ------- ----- ----- -----
Less distributions:
Dividends from net
investment income (0.47) (0.44) (0.45) -- (0.41) (0.37) (0.39) (0.49)
Distributions from net
realized gains on
securities (1.31) (0.57) (0.54) -- (0.54) (0.36) (0.08) --
----- ----- ----- ------- ------- ----- ----- -----
Total distributions (1.78) (1.01) (0.99) -- (0.95) (0.73) (0.47) (0.49)
----- ----- ----- ------- ------- ----- ----- -----
Net asset value, end of
period $ 21.70 $ 18.56 $ 15.95 $ 14.20 $ 14.19 $ 14.63 $ 12.79 $ 12.10
===== ====== ===== ======= ======= ===== ===== =====
Total return
(annualized)(8) 28.40% 23.66% 21.03% 3.43%(9) 3.36% 21.49% 10.00% 33.83%
===== ====== ===== ======= ======= ===== ===== =====
Ratios/supplemental
data:
Net assets, end of
period (in
thousands) $1,431,805 $1,008,518 $706,884 $505,892 $ 22,737 $477,088 $339,739 $264,628
Ratios to average net
assets(10)(11)(12):
Expenses 0.34%(7) 0.36%(7) 0.38% 0.37% 0.33% 0.34% 0.36% 0.37%
Net investment
income 2.45%(7) 2.80%(7) 3.20% 3.18% 3.28% 3.12% 3.57% 4.19%
Portfolio turnover
rate(13) 35% 40% 26% 23% 23% 30% 35% 52%
Average commission
rate paid(13) $ 0.0395 $ 0.0412 -- -- -- -- -- --

<CAPTION>
GROWTH AND INCOME FUND
------------------------------
INSTITUTIONAL CLASS(1)
------------------------------

YEAR ENDED OCTOBER 31,
------------------------------
1990(2) 1989 1988
------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $ 11.59 $ 9.96 $ 8.30
----- ----- -----
Income from investment
operations:
Net investment income 0.42 0.42 0.42
Net gains (losses) on
securities (both
realized and
unrealized) (1.94) 1.59 1.40
----- ----- -----
Total from investment
operations (1.52) 2.01 1.82
----- ----- -----
Less distributions:
Dividends from net
investment income (0.43) (0.38) (0.16)
Distributions from net
realized gains on
securities (0.17) -- --
----- ----- -----
Total distributions (0.60) (0.38) (0.16)
----- ----- -----
Net asset value, end of
period $ 9.47 $ 11.59 $ 9.96
===== ===== =====
Total return
(annualized)(8) (13.52)% 20.94% 22.20%
===== ===== =====
Ratios/supplemental
data:
Net assets, end of
period (in
thousands) $182,430 $187,869 $140,073
Ratios to average net
assets(10)(11)(12):
Expenses 0.45% 0.45% 0.53%
Net investment
income 4.49% 4.40% 4.20%
Portfolio turnover
rate(13) 41% 50% 56%
Average commission
rate paid(13) -- -- --
</TABLE>

(1) The Growth and Income Fund commenced active operations on July 17, 1987.
The AMR Class commenced active operations on August 1, 1994 and at that
time existing shares of the Growth and Income Fund were designated as
Institutional Class shares.