<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN AADVANTAGE MILEAGE FUNDS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
AMERICAN AADVANTAGE MILEAGE FUNDS
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
AMERICAN AADVANTAGE BALANCED FUND
AMERICAN AADVANTAGE GROWTH AND INCOME FUND
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
Each a series of the AMERICAN AADVANTAGE FUNDS
AMERICAN AADVANTAGE BALANCED MILEAGE FUND
AMERICAN AADVANTAGE GROWTH AND INCOME MILEAGE FUND
AMERICAN AADVANTAGE INTERNATIONAL EQUITY MILEAGE FUND
Each a series of the AMERICAN AADVANTAGE MILEAGE FUNDS
February 28, 1996
Dear Shareholder:
The above Funds will be holding a combined special meeting of shareholders on
March 26, 1996. A notice of the meeting, proxy statement and proxy card(s) are
enclosed.
The proxy statement explains each proposal in detail. Please read it carefully.
The proposals are summarized as follows:
1) Shareholders of the Balanced Fund, the Growth and Income Fund, the
Balanced Mileage Fund, the Growth and Income Mileage Fund and their
corresponding portfolios will be asked to approve new Investment
Advisory Agreements between AMR Investment Services, Inc. ("Manager")
and Brandywine Asset Management, Inc. ("Brandywine") and between the
Manager and Boatmen's Trust Company.
2) Shareholders of the International Equity Fund, the International
Equity Mileage Fund and their corresponding portfolio will be asked to
approve a new Investment Advisory Agreement between the Manager and Rowe
Price-Fleming International, Inc.
3) Shareholders of each Fund will be asked to approve a proposal to
permit the Manager (following appropriate approval from the Boards of
Trustees of the Funds and their corresponding portfolios) to hire new
subadvisers or modify the subadvisory agreements of the Funds and their
corresponding portfolios without shareholder approval.
The Funds currently seek their investment objectives by investing all of their
investable assets in corresponding portfolios of the AMR Investment Services
Trust -- the Balanced, the Growth and Income and the International Equity
Portfolios ("Portfolios") -- which have investment objectives identical to the
corresponding Funds.
Each Fund and its Portfolio uses a multi-manager approach to portfolio
investing, which means that its assets are allocated to several portfolio
managers to provide diversification and to reduce the possible impact of any one
subadviser's sub-par performance on the performance of the Fund or Portfolio.
Approving these additional subadvisers will increase the Funds' flexibility to
add a new subadviser or replace an existing subadviser, should the need arise in
the future. The Manager, upon shareholder approval, expects to replace Capital
Guardian Trust Company with Brandywine as a subadviser to the Balanced Fund and
the Growth and Income Fund.
Pending approval by the Securities and Exchange Commission and by the
shareholders of the Funds and the Portfolios, the third proposal would permit
each Fund and Portfolio to hire new subadvisers and modify subadvisory
agreements without the prior approval of shareholders. By eliminating the need
for shareholder approval in these matters, the Funds and the Portfolios would
have greater flexibility in choosing subadvisers and they would save the
potentially considerable expense and effort involved in holding shareholder
meetings and soliciting proxies. There are no assurances, however, that the
Securities and Exchange Commission will grant the required approval.
<PAGE>
The shareholders also will be asked to authorize the Funds to vote at the
meeting of Portfolio investors to be held shortly thereafter and to obtain
voting instructions with respect thereto. The Funds will cast their votes on the
matters discussed in the enclosed Proxy Statement in the same proportion as the
votes cast by the Funds' shareholders at the meeting.
Please vote promptly by signing, dating and returning your Proxy Card(s). Should
you have any questions about the proposals, please do not hesitate to contact
us. Thank you for your cooperation and support.
Sincerely,
/s/ WILLIAM F. QUINN
------------------------------------
William F. Quinn
President
2
<PAGE>
If you own shares in more than one Trust, you will receive more than one proxy
card. Please be certain to vote each proxy card you receive.
AMERICAN AADVANTAGE FUNDS
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTICE OF COMBINED SPECIAL MEETING OF SHAREHOLDERS
--------------------------------------------------
TO THE SHAREHOLDERS OF:
AMERICAN AADVANTAGE BALANCED FUND ("Balanced Fund")
AMERICAN AADVANTAGE GROWTH AND INCOME FUND ("Growth/Income Fund")
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND ("International Fund")
Each a series of the AMERICAN AADVANTAGE FUNDS ("AAdvantage Trust")
AMERICAN AADVANTAGE BALANCED MILEAGE FUND ("Balanced Mileage Fund")
AMERICAN AADVANTAGE GROWTH AND INCOME MILEAGE FUND ("Growth/Income Mileage
Fund")
AMERICAN AADVANTAGE INTERNATIONAL EQUITY MILEAGE FUND ("International Mileage
Fund")
Each a series of the AMERICAN AADVANTAGE MILEAGE FUNDS ("Mileage Trust")
A combined special meeting of the shareholders of the above-referenced funds
("Funds") will be held on March 26, 1996 at 9:00 a.m. Central Standard Time at
the offices of AMR Investment Services, Inc. ("Manager"), 4333 Amon Carter
Boulevard, Fort Worth, Texas 76155, Room 6E1D-36, for the purposes set forth
below.
Under a Hub and Spoke(R)/1/ operating structure, each of the Funds seeks its
investment objective by investing all of its investable assets in a
corresponding portfolio of the AMR Investment Services Trust ("AMR Trust"). As a
result, you will be asked to vote twice on each of the following proposals,
(once to approve that proposal on behalf of the Funds, and once to approve that
proposal on behalf of the AMR Trust).
(1) To authorize the AAdvantage Trust and the Mileage Trust, on behalf of
the Funds, to vote at a meeting of the Balanced, the Growth and Income and
the International Equity Portfolios ("Portfolios") of the AMR Trust:
(a) To approve or disapprove a new Investment Subadvisory Agreement
between the Manager and Brandywine Asset Management, Inc. for the
Balanced and the Growth and Income Portfolios of the AMR Trust
(Balanced Fund, Growth/Income Fund, Balanced Mileage Fund and
Growth/Income Mileage Fund only);
(b) To approve or disapprove a new Investment Subadvisory Agreement
between the Manager and Boatmen's Trust Company for the Balanced and
the Growth and Income Portfolios of the AMR Trust (Balanced Fund,
Growth/Income Fund, Balanced Mileage Fund and Growth/Income Mileage
Fund only);
(c) To approve or disapprove a new Investment Subadvisory Agreement
between the Manager and Rowe Price-Fleming International, Inc. for
the International Equity Portfolio of the AMR Trust (International
Fund and International Mileage Fund only); and
(d) To approve or disapprove a proposal to permit the Manager to hire new
subadvisers or modify the subadvisory agreements of the Portfolios
without interest holder approval (Each Fund);
(2) To approve or disapprove a new Investment Subadvisory Agreement between
the Manager and Brandywine Asset Management, Inc. on behalf of the Balanced
and the Growth/Income Funds of the AAdvantage Trust and the Mileage Trust
(Balanced Fund, Growth/Income Fund, Balanced Mileage Fund and Growth/Income
Mileage Fund only);
(3) To approve or disapprove a new Investment Subadvisory Agreement between
the Manager and Boatmen's Trust Company on behalf of the Balanced and the
Growth/Income Funds of the AAdvantage Trust and the Mileage Trust (Balanced
Fund, Growth/Income Fund, Balanced Mileage Fund and Growth/Income Mileage
Fund only);
(4) To approve or disapprove a new Investment Subadvisory Agreement between
the Manager and Rowe Price-Fleming International, Inc. on behalf of the
International Fund of the AAdvantage Trust and the Mileage Trust
(International Fund and International Mileage Fund only);
- -------------------------
/1/ "Hub and Spoke" is a registered service mark of Signature Financial Group,
Inc.
<PAGE>
(5) To approve or disapprove a proposal to permit the Manager to hire new
subadvisers or modify the subadvisory agreements of the Funds without
shareholder approval (Each Fund); and
(6) To transact such other business as may properly come before the meeting or
any adjournments thereof.
You will be entitled to vote at the meeting and any adjournments thereof if you
owned shares of the Funds at the close of business on January 31, 1996. If you
attend the meeting, you may vote your shares in person. If you do not expect to
attend the meeting, please complete, date, sign and return the enclosed form(s)
in the enclosed postage paid envelope.
By order of the Board of Trustees,
CLIFFORD J. ALEXANDER
Secretary
February 28, 1996
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy form, date and
sign the form, and return the form in the envelope provided. If you sign, date
and return the proxy form but give no voting instructions, your shares will be
voted "FOR" all proposals noticed above. In order to avoid additional expense to
the Funds of further solicitation, management requests your cooperation in
mailing in your proxy form promptly. Unless proxies are signed by the
appropriate persons, they will not be voted.
2
<PAGE>
AMERICAN AADVANTAGE FUNDS
AMERICAN AADVANTAGE MILEAGE FUNDS
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
---------------------
PROXY STATEMENT
Combined Special Meeting of Shareholders
To Be Held on March 26, 1996
---------------------
This document is a proxy statement for the American AAdvantage Balanced
Fund ("Balanced Fund"), the American AAdvantage Growth and Income Fund
("Growth/Income Fund") and the American AAdvantage International Equity Fund
("International Fund"), which constitute three of the eight separate investment
portfolios of the American AAdvantage Funds ("AAdvantage Trust"), as well as the
American AAdvantage Balanced Mileage Fund ("Balanced Mileage Fund"), the
American AAdvantage Growth and Income Mileage Fund ("Growth/Income Mileage
Fund"), and the American AAdvantage International Equity Fund ("International
Mileage Fund"), which constitute three of the seven separate investment
portfolios of the American AAdvantage Mileage Funds ("Mileage Trust"). Each of
these funds are referred to herein collectively as the "Funds," or singularly as
a "Fund." This proxy statement is furnished in connection with the solicitation
of proxies made by, and on behalf of, the Board of Trustees of the AAdvantage
Trust ("AAdvantage Board") and the Board of Trustees of the Mileage Trust
("Mileage Board") to be used at the Combined Special Meeting of Shareholders of
the Funds and at any adjournments thereof ("Meeting"), to be held at 9:00 a.m.
on Tuesday, March 26, 1996, at the offices of AMR Investment Services, Inc.
("Manager"). The Manager serves as manager and administrator to the Funds.
Brokers Transaction Services, Inc., located at 7001 Preston Road, Dallas, Texas
75205, serves as underwriter to the AAdvantage Trust and the Mileage Trust. The
purpose of the Meeting is set forth in the accompanying Notice.
The Funds currently seek their investment objectives by investing all of
their investable assets in corresponding portfolios of the AMR Investment
Services Trust ("AMR Trust") -- the Balanced, the Growth and Income and the
International Equity Portfolios ("Portfolios") -- which have investment
objectives identical to the corresponding Funds. At a meeting of interest
holders of the Portfolios, each Fund will vote its interest in its corresponding
portfolio of the AMR Trust in proportion to the votes cast by that Fund's
shareholders at the Meeting. Each Fund will vote shares for which they receive
no voting instructions in the same proportion as the shares for which they do
receive voting instructions. Because a Fund's votes are proportionate to its
percentage interest in its corresponding Portfolio, the majority of a
Portfolio's interest holders could approve an action against which a majority of
the outstanding voting securities of its corresponding Fund had voted.
This proxy statement and the accompanying proxy will be mailed to shareholders
on or about February 28, 1996. The solicitation of proxies will be made by mail,
but also may include telephone or oral communications by employees of the
Manager, who will not receive any compensation for such solicitation. Boston
Financial Data Services, Inc. has been retained by the Manager solely for the
purpose of mailing proxy materials to shareholders and tabulating voting results
at a cost of approximately $4,000. The expenses incurred in connection with
preparing these proxy materials will be borne 25% by the AAdvantage Trust, 25%
by the Mileage Trust and 50% by the AMR Trust.
A majority of each Fund's shares of beneficial interest outstanding on January
31, 1996 ("Record Date"), represented in person or by proxy, constitutes a
quorum and a quorum must be present for the transaction of business with respect
to a Fund. If a quorum is not present, or if sufficient votes are not received
to approve any of the proposals, the persons named as proxies may propose one or
more adjournments of the meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a majority of those shares
represented at the meeting in person or by proxy. The persons named as proxies
will vote those proxies which they are entitled to vote FOR any such proposal in
favor of such an adjournment, and will vote those proxies required to be voted
AGAINST any such proposal against such adjournment. A shareholder vote may be
taken on one or more of the proposals in this proxy statement prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate.
Abstentions and broker non-votes will be counted as shares present for purposes
of determining whether a quorum is present but will not be voted for or against
any adjournment. Abstentions and broker non-votes will not be counted, however,
as votes cast for purposes of determining whether sufficient votes have been
received to approve a proposal. Accordingly, abstentions and broker
<PAGE>
non-votes effectively will be a vote against adjournment or against the proposal
where the required vote is a percentage of the shares present.
The proxies named in the enclosed proxy card will vote in accordance with your
directions as indicated thereon if your proxy card is received and has been
properly executed. If you give no voting instructions, your shares will be
voted in favor of the proposals described in this proxy statement. The proxy
card may be revoked by giving another proxy by letter or telegram, revoking your
proxy if received by the applicable Fund prior to the meeting or by appearing
and voting at the meeting.
As of the Record Date, there were issued and outstanding the following number of
shares of each Fund: Balanced Fund, 62,026,340; Growth/Income Fund, 55,303,206;
International Fund, 21,032,603; Balanced Mileage Fund, 102,718; Growth/Income
Mileage Fund, 212,561; and International Mileage Fund, 134,650. For a list of
shareholders who owned of record 5% or more of the shares of a Fund, the
AAdvantage Trust or the Mileage Trust as of the Record Date, see Appendix A.
Shareholders of record at the close of business on the Record Date will be
entitled to vote at the Meeting. Each full share of the Funds is entitled to
one vote and each fractional share is entitled to a proportionate share of one
vote. YOU MAY OBTAIN A COPY OF THE AADVANTAGE TRUST'S MOST RECENT ANNUAL REPORT
TO SHAREHOLDERS FREE OF CHARGE BY WRITING TO THE MANAGER AT 4333 AMON CARTER
BOULEVARD, MD 5645, FORT WORTH, TEXAS 76155, OR BY CALLING 1-800-423-7526.
Approval of the proposals outlined below with respect to a Fund requires the
affirmative vote of the holders of a "majority of the outstanding voting
securities" of that Fund entitled to vote on the particular proposal, as such
term is defined in the Investment Company Act of 1940, as amended ("1940 Act").
For that purpose, a vote of the holders of a "majority of the outstanding voting
securities" of a Fund means the lesser of either (1) the vote of 67% or more of
the shares of such Fund present at the meeting if the holders of more than 50%
of the outstanding Fund shares are present or represented by proxy, or (2) the
vote of the holders of more than 50% of the outstanding shares of such Fund.
Approval and implementation of the proposals with respect to any Fund is not
conditioned upon approval of these proposals by the shareholders of any other
Fund. Summarized below are the proposals the shareholders of each Fund are being
asked to consider:
Funds Proposals
- ----- ---------
Balanced Fund 1. To approve a new Subadvisory
Balanced Mileage Fund Agreement between the Manager and
(collectively, the Brandywine Asset Management, Inc.
- ------------------ 2. To approve a new Subadvisory Agreement
"Balanced Funds") between the Manager and Boatmen's
- ----------------- Trust Company.
Growth/Income Fund 3. To permit the Manager to hire new
Growth/Income Mileage Fund subadvisers or to modify subadvisory
(collectively, the agreements without shareholder approval.
"Growth/Income Funds")
International Fund 1. To approve a new Subadvisory Agreement
International Mileage Fund between the Manager and Rowe Price-
(collectively, the Fleming International, Inc.
"International Funds") 2. To permit the Manager to hire new
subadvisers or to modify subadvisory
agreements without shareholder approval.
PROPOSALS 1(a) and 2: APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT SUBADVISORY
AGREEMENT BETWEEN THE MANAGER AND BRANDYWINE ASSET MANAGEMENT, INC. [For
consideration by shareholders of the Balanced Funds and the Growth/Income Funds
only.]
PROPOSALS 1(b) and 3: APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT SUBADVISORY
AGREEMENT BETWEEN THE MANAGER AND BOATMEN'S TRUST COMPANY. [For consideration
by shareholders of the Balanced Funds and the Growth/Income Funds only.]
The Balanced Funds and the Growth/Income Funds invest all of their investable
assets in the Balanced Portfolio and the Growth and Income Portfolio
("Growth/Income Portfolio"), respectively, of the AMR Trust. The investment
performance of the Balanced and the Growth/Income Funds directly corresponds
with the investment performance of the Balanced and the Growth/Income
Portfolios.
Assets of the Balanced and the Growth/Income Funds currently are allocated by
the Manager among five investment subadvisers: Barrow Hanley Mewhinney and
Strauss, Inc., Capital Guardian Trust Company ("Capital"), GSB Investment
Management, Inc., Hotchkis and Wiley and Independence Investment Associates,
Inc. (collectively, the "Subadvisers").
2
<PAGE>
The Funds' assets are allocated in this manner to provide diversification and to
reduce the possible impact of any one Subadviser's sub-par performance on the
performance of a Fund. These Funds propose to add two additional subadvisers:
Brandywine Asset Management, Inc. ("Brandywine") and Boatmen's Trust Company
("Boatmen's"). Approving these additional subadvisers will give these Funds the
flexibility to add or replace a subadviser, should the need arise in the future.
The Manager currently does not intend to allocate any of the Portfolios' assets
to Boatmen's.
Each Subadviser has discretion to purchase and sell securities for the segment
of portfolio assets allocated to it in accordance with each Fund's investment
objectives, policies and restrictions and the more specific strategies provided
by the Manager. Although the Subadvisers are subject to general supervision by
the Trustees and officers of the Trusts and the Manager, these parties do not
evaluate the investment merits of specific securities transactions. The
allocation of assets among the Subadvisers can be changed at any time by the
Manager. Allocations will vary based upon a variety of factors, including the
overall investment performance of each Subadviser, cash flow needs and market
conditions. As compensation for its services, each Subadviser is paid a fee by
the Manager out of the proceeds of the Manager's management fee.
Consideration by the Boards
At a meeting held on February 15, 1996, the AAdvantage Board, the Mileage Board
and the Board of Trustees of the AMR Trust ("AMR Board") (collectively, the
"Boards"), including those Trustees who are not parties to any such agreements
or "interested persons," as such term is defined in the 1940 Act, of any such
party ("Independent Trustees") of each Trust, evaluated the Manager's proposal
to add Brandywine and Boatmen's as subadvisers to the Funds. The Boards then
approved, subject to the required shareholder approvals described herein, (1) a
new investment subadvisory agreement between the Manager and Brandywine (the
"Brandywine Agreement") and (2) a new investment subadvisory agreement between
the Manager and Boatmen's ("Boatmen's Agreement"), on behalf of each of the
Balanced Funds, the Growth/Income Funds and the Balanced and Growth/Income
Portfolios. The Boards also approved a proposal to present these new agreements
to shareholders for their approval.
In approving the new Brandywine and Boatmen's Agreements, the Boards analyzed
the factors they deemed relevant, including the nature, quality and scope of
services provided by Brandywine and Boatmen's to investment companies comparable
to the Funds. The Boards reviewed the ability of Brandywine and Boatmen's to
provide services to the Funds, as well as their personnel, operations, financial
condition or any other factor which would affect positively or negatively the
provision of those services. The Boards examined the performance of Brandywine
and Boatmen's with respect to compliance and regulatory matters. The Boards
reviewed Brandywine's and Boatmen's investment performance with respect to
accounts deemed comparable to the Balanced and the Growth/Income Funds. The
Boards also considered other factors it deemed relevant to Brandywine's and
Boatmen's performance as investment subadvisers.
Brandywine Asset Management, Inc.
Brandywine, with its principal office at 201 North Walnut Street, Wilmington,
Delaware 19801, is a professional investment counseling firm founded in 1986.
As of December 31, 1995, Brandywine had assets under management totaling
approximately $4.7 billion. For a list of investment companies similar to the
Balanced and the Growth/Income Funds advised by Brandywine, including its rate
of compensation, see Appendix B.
For its services to the Balanced and Growth/Income Portfolios, the Manager will
pay Brandywine an annualized fee equal to .225% and .25%, respectively, of the
average daily net assets of each Portfolio actually allocated to Brandywine for
management. If Brandywine is approved as a subadviser, it will receive a
portion of the assets previously allocated to Capital in the Balanced and
Growth/Income Portfolios. The transfer of assets in these Portfolios will not
change the Portfolios' or the Funds' current expense ratio.
Fees paid or accrued to the Subadvisers by the Manager on behalf of the Balanced
and the Growth/Income Funds of the AAdvantage Trust for the fiscal year ended
October 31, 1995 were $1,646,595 and $1,516,752, respectively. If the
Brandywine Agreement had been in effect during this period, assuming that
Brandywine was substituted for Capital, the Manager would have paid $1,661,104
and $1,531,156, respectively, on behalf of the Balanced and the Growth/Income
Funds of the AAdvantage Trust. These calculations assume that Brandywine and the
remaining Subadvisers managed equal portions of the Funds' assets, and that the
Subadvisers received the current blended advisory rate while Brandywine received
the fee set forth above. The difference in these amounts is approximately 0.9%
and 1.0%, respectively. The Mileage Trust did not begin active operations until
November 1, 1995.
To the extent that the assets of the Balanced Funds and the Growth/Income Funds
are invested in a corresponding Portfolio of the AMR Trust, Brandywine will not
receive a fee under its Agreements with the Manager on behalf of either the
AAdvantage Trust or the Mileage Trust. If the Funds no longer invest their
assets in a Portfolio, the Manager, on behalf of the applicable Funds, will
3
<PAGE>
pay Brandywine an annualized fee at the same rates as set forth above with
respect to any assets that Brandywine manages directly at the Fund level.
The names, addresses and principal occupations of the principal executive
officer and each director of Brandywine are as follows. Unless otherwise noted,
the address of the officer and directors set forth below is 201 North Walnut
Street, Wilmington, Delaware 19801.
<TABLE>
<CAPTION>
Name Address Principal Occupation
- ---- ------- --------------------
<S> <C> <C>
W. Anthony Hitschler President
Director
Frank G. Frey FMS Group, Inc. Director
610 Sentry Parkway President-FMS Group
Suite 200
Blue Bell, PA 19422
Michael D. Jamison Director
Managing Director
Francis A. Scotland BCA Publications Ltd. Director
1002 Sherbrooke St. West Managing Editor -
Suite 1600 Bank Credit Analysts
Montreal, Canada H3A 3L6 Publications
Steven S. Smith Director
Executive Vice
President
</TABLE>
Boatmen's Trust Company
Boatmen's, with its principal office at 100 North Broadway, St. Louis, Missouri
63102, is a professional trust and investment advisory firm founded in 1889 and
has been providing investment services since the 1930s. As of December 31,
1995, Boatmen's had discretionary assets under management totaling approximately
$45 billion including approximately $5 billion in mutual fund assets. Boatmen's
is a wholly-owned subsidiary of Boatmen's Bancshares, Inc. For a list of
similar investment companies advised by Boatmen's, including its rate of
compensation, see Appendix B.
For its services to the Balanced Portfolio and the Growth/Income Portfolio, the
Manager will pay Boatmen's an annualized fee equal to .25% of the average daily
net assets of each Portfolio actually allocated to Boatmen's for management. The
Manager anticipates that the substitution of Boatmen's for one of the
Subadvisers to these Portfolios will not change the Portfolios' or the Funds'
current expense ratio.
As noted above, fees paid or accrued to the Subadvisers by the Manager on behalf
of the Balanced and the Growth/Income Funds of the AAdvantage Trust for the
fiscal year ended October 31, 1995 were $1,646,595 and $1,516,752, respectively.
If the Boatmen's Agreement had been in effect during this period, assuming that
Boatmen's was substituted for one of the existing Subadvisers, the Manager would
have paid the remaining Subadvisers and Boatmen's $1,675,231 and $1,543,130 on
behalf of the Balanced and the Growth/Income Funds of the AAdvantage Trust,
respectively. These calculations assume that Boatmen's and the remaining
Subadvisers managed equal portions of the Funds' assets and that the Subadvisers
received the current blended advisory rate while Boatmen's received the fee set
forth above. The difference in each of these amounts is approximately 1.7%.
The Mileage Trust did not begin active operations until November 1, 1995.
To the extent that the assets of the Balanced Funds and the Growth/Income Funds
are invested in a corresponding portfolio of the AMR Trust, Boatmen's will not
receive a fee under its Agreements with the Manager on behalf of either the
AAdvantage Trust or the Mileage Trust. If the Funds no longer invest their
assets in the Portfolios, the Manager, on behalf of the applicable Funds, will
pay Boatmen's an annualized fee at the same rate as set forth above with respect
to any assets that Boatmen's manages directly at the Fund level.
The names, addresses and principal occupations of the principal executive
officer and each director of Boatmen's, are as follows. Unless otherwise noted,
the address of the officer and directors set forth below is 100 North Broadway,
St. Louis, Missouri 63102-4737.
4
<PAGE>
<TABLE>
<CAPTION>
Name Address Principal Occupation
- ---- ------- --------------------
<S> <C> <C>
Howard F. Baer Director
Retired
Clarence C. Barksdale 7425 Forsyth Blvd. Director
Campus Box 1227 Vice Chairman-
St. Louis, MO 63105 Washington University
Gerard D. Blatherwick Director
Retired
Stephen F. Brauer 11250 Hunter Drive Director
Bridgeton, MO 63044 President-Hunter
Engineering Company
Mary L. Burke, Ph.D. 175 South Mason Road Director
St. Louis, MO 63141 Head of School-
Whitfield School
Andrew B. Craig, III One Boatmen's Plaza Director
St. Louis, MO 63101 Chairman & Chief
Executive Officer
Boatmen's Bancshares,
Inc.
Donald Danforth, Jr. 700 Corporate Park Director
Drive, Suite 330 President-Danforth
St. Louis, MO 63105 Agri-Resources, Inc.
Martin E. Galt, III Chairman of the Board,
President and Chief
Executive Officer-
Boatmen's Trust Company
A. William Hager 139 Victor Street Director
St. Louis, MO 63104 Chairman of the Board-
Hager Hinge Company
Samuel B. Hayes, III One Boatmen's Plaza Director
St. Louis, MO 63101 President-Boatmen's
Bancshares, Inc.
Robert E. Kresko Pierre Laclede Center Director
7701 Forsyth, Suite 680
St. Louis, MO 63105
John Peters MacCarthy Director
Retired
James S. McDonnell, III Director
Retired
John B. McKinney One Metropolitan Director
Square, 15th Floor President and Chief
St. Louis, MO 63102 Executive Officer-
Laclede Steel Company
Reuben M. Morriss, III Director
Retired
William C. Nelson 10th & Baltimore Director
P.O. Box 419038 Chairman, President
Kansas City, MO 64183 and Chief Executive
Officer
Boatmen's First
National Bank of
Kansas City
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Name Address Principal Occupation
- ---- ------- --------------------
<S> <C> <C>
William A. Peck, MD 660 South Euclid Avenue, Director
Box 8106 Executive Vice
St. Louis, MO 63110 Chancellor and Dean
Washington University
School of Medicine
W.R. Persons Director
Retired
Jerry E. Ritter One Busch Place Director
St. Louis, MO 63118 Executive Vice
President, Chief
Financial Officer
and Administrative
Officer-Anheuser-
Busch Companies, Inc.
Louis S. Sachs P.O. Box 7104 Director
St. Louis, MO 63177 Chairman-Sachs
Properties, Inc.
Hugh Scott, III 101 South Hanley, Director
Suite 1910 Chairman and Chief
St. Louis, MO 63105 Executive Officer-
Western Diesel
Services, Inc.
Richard W. Shomaker Director
Retired
Brice R. Smith, Jr. 13723 Riverport Drive Director
Maryland Heights, Chairman of the Board-
MO 63043 Sverdrup Corporation
William D. Stamper 7777 Bonhomme, Director
Suite 1006 President-W.D.
St. Louis, MO 63105 Stamper Company
Janet M. Weakly 9889 Clayton Road Director
St. Louis, MO 63124 President-Janet McAfee
Inc. Real Estate
Gordon E. Wells Director
Retired
Eugene F. Williams, Jr. 515 Olive Street, Director
Suite 1505 Retired
St. Louis, MO 63101
</TABLE>
Terms of the New Subadvisory Agreements
Each new Agreement, if approved by shareholders, will become effective on or
about April 1, 1996 and will continue in effect for an initial term of two years
and thereafter from year to year, subject to approval annually by the Boards,
including a majority of the Independent Trustees of each Board, or by the vote
of the holders of a majority of the outstanding shares of a Fund, or by the
holders of a majority of the outstanding interests of a Portfolio, as
applicable.
Because a Fund's votes are proportionate to its percentage interest in its
corresponding Portfolio, the majority of a Portfolio's interest holders could
approve an action against which a majority of the outstanding voting securities
of its corresponding Fund had voted. Thus, if a majority of interest holders of
a Portfolio approve the new Agreements, but a Fund investing in the Portfolio
does not, the Agreements will go into effect for the Portfolio and therefore for
that Fund. However, should a Fund which has not approved the new Agreement
withdraw its investment in the corresponding Portfolio, after withdrawal it will
allocate its assets only to the Subadvisers approved by shareholders of that
Fund.
The Agreements do not protect Brandywine or Boatmen's against any liability to
the Funds, the Portfolios or to their shareholders/interest holders to which
they might otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of their duties or the reckless disregard of
their obligations under the proposed Agreements. The Agreements automatically
terminate upon assignment, and may be terminated without penalty at any time by
the Manager, upon not less than thirty days' nor more than sixty days' written
notice, by vote of a majority of the Boards or by vote of the holders of a
6
<PAGE>
majority of the outstanding shares of the Funds or by a majority of the interest
holders of the Portfolios, as applicable. Brandywine and Boatmen's also may
terminate their Agreement without penalty upon sixty days' written notice to the
AMR Trust.
THE BOARDS OF TRUSTEES RECOMMEND THAT YOU VOTE "FOR"
PROPOSALS 1(a), 1(b), 2 AND 3.
PROPOSALS 1(c) and 4: APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT SUBADVISORY
AGREEMENT BETWEEN THE MANAGER AND ROWE PRICE-FLEMING INTERNATIONAL, INC. [For
consideration by shareholders of the International Funds only.]
The International Funds invest all of their investable assets in the
International Equity Portfolio ("International Portfolio") of the AMR Trust. The
investment performance of the International Funds directly corresponds with the
investment performance of the International Portfolio.
Assets of the International Portfolio currently are allocated by the Manager
among three investment subadvisers: Hotchkis and Wiley, Morgan Stanley Asset
Management Inc. and Templeton Investment Counsel, Inc. (collectively, the
"International Subadvisers"). The International Portfolio's assets are allocated
in this manner to provide diversification and to reduce the possible impact of
any one subadviser's sub-par performance on the performance of the Portfolio.
The International Funds propose to add a fourth subadviser, Rowe Price-Fleming
International, Inc. ("Fleming"), to give the Funds the flexibility to add a
fourth active subadviser or replace an existing International Subadviser, should
the need arise in the future. The Manager does not currently intend to allocate
any assets of the International Portfolio to Fleming.
Each International Subadviser has discretion to purchase and sell securities for
its segment of the International Portfolio's assets in accordance with the
Portfolio's objectives, policies and restrictions and the more specific
strategies provided by the Manager. Although the International Subadvisers are
subject to general supervision by the Trustees and the officers of the Trusts
and the Manager, these parties do not evaluate the investment merits of specific
securities transactions. The allocation of assets among the International
Subadvisers can be changed at any time by the Manager. Allocations will vary
based upon a variety of factors, including the overall investment performance of
each International Subadviser, the International Portfolio's cash flow needs and
market conditions. As compensation for its services, each International
Subadviser is paid a fee by the Manager out of the proceeds of the Manager's
management fee.
Consideration by the Boards
At a meeting held on February 15, 1996, the Boards, including the Independent
Trustees of each Trust, approved, subject to the required shareholder approval
described herein, a new investment subadvisory agreement between the Manager and
Fleming (the "Fleming Agreement") on behalf of each of the International Funds
and the International Portfolio. The Boards also adopted a proposal to present
the Fleming Agreement to shareholders for their approval.
In approving the Fleming Agreement, the Boards analyzed the factors they deemed
relevant, including the nature, quality and scope of services provided by
Fleming to investment companies comparable to the International Portfolio. The
Boards reviewed the ability of Fleming to provide its services to the
International Portfolio, as well as its personnel, operation, financial
condition or any other factor which would affect positively or negatively the
providing of those services. The Boards examined the performance of Fleming
with respect to compliance and regulatory matters. The Boards reviewed
Fleming's investment performance with respect to accounts deemed comparable to
the International Portfolio. The Boards also considered other factors it deemed
relevant to Fleming's performance as an investment subadviser.
Rowe Price-Fleming International, Inc.
Fleming, with its principal office at 100 East Pratt Street, Baltimore, MD
21202, is a professional international investment management firm founded in
1979. As of December 31, 1995, Fleming had assets under management totaling
approximately $22 billion. Fleming is a Maryland corporation with stock held by
T. Rowe Price Associates (50%) and the Fleming Group (50%). For a list of
investment companies similar to the International Portfolio advised by Fleming,
including Fleming's rate of compensation, see Appendix B.
For its services to the International Portfolio when total assets under
Fleming's management are less than $200 million, the Manager will pay Fleming an
annualized fee equal to 0.75% of the first $20 million, 0.60% of the next $30
million and 0.50% on amounts over $50 million. When assets under Fleming's
management reach $200 million but are less than $500 million, the
7
<PAGE>
Manager will pay Fleming an annualized fee equal to 0.50% on all assets. When
assets exceed $500 million the Manager will pay Fleming an annualized fee equal
to 0.45% on all assets, and when assets exceed $750 million, the Manager will
pay Fleming an annualized fee of 0.40% on all assets. When assets allocated to
Fleming are between $184 million and $200 million, the fee would be higher than
if assets were over $200 million. To correct this situation, Fleming will credit
the Manager with an adjustment for the difference between the two fee schedules.
On a quarterly basis, it is calculated according to the following formula:
(((Assets Managed by Fleming) - $184 million) / $16 million) x $20,000
Solely for the purpose of determining the applicable percentage rates when
calculating Fleming's fees, there are included any other assets or trust assets
of American Airlines, Inc. which also are under management by Fleming. The
inclusion of such assets can result in lower overall fee rates being applied to
the International Portfolio and therefore to the Funds.
The following tables reflect the anticipated effect of these proposals on the
operating expenses of the International Funds, based on the expenses of the
International Fund and the International Portfolio as of October 31, 1995 and
the estimated expenses for the International Mileage Fund, which did not begin
active operations until November 1, 1995, for the current fiscal year. Current
"Management Fees" include the actual amount of fees paid by the International
Portfolio and the International Fund during the past fiscal year. Proposed
"Management Fees" restate such information using the fee schedule that would
have been applicable if the Fleming Agreement had been in effect during the past
fiscal year, assuming that each of the International Subadvisers and Fleming
managed equal portions of the Funds' assets and assuming that the International
Subadvisers received the current blended advisory rate while Fleming received
the fee set forth above.
<TABLE>
<CAPTION>
Current Expenses International Fund International Mileage Fund
- ---------------- -------------------------------- --------------------------
Institutional PlanAhead AMR
Class Class Class
------------- --------- -----
<S> <C> <C> <C> <C>
ClassCurrent Management Fees 0.43% 0.43% 0.43% 0.43%
12b-1 Fees 0.00 0.00 0.00 0.00(1)
Other Expenses 0.40 0.80 0.11 1.04(2)
---- ---- ---- ----
Total Operating Expenses 0.83% 1.23% 0.54% 1.47%(3)
<CAPTION>
Pro Forma Expenses International Fund International Mileage Fund
- ------------------ -------------------------------- --------------------------
Institutional PlanAhead AMR
Class Class Class
------------- --------- -----
<S> <C> <C> <C> <C>
Proposed Management Fees 0.46% 0.46% 0.46% 0.46%
12b-1 Fees 0.00 0.00 0.00 0.00(1)
Other Expenses 0.40 0.80 0.11 1.04(2)
---- ---- ---- ----
Total Operating Expenses 0.86% 1.26% 0.57% 1.50%(3)
</TABLE>
(1) Absent fee waivers, "12b-1 Fees" for the International Mileage Fund would
be 0.25%.
(2) "Other Expenses" before fee waivers and reimbursements are estimated to be
1.13% for the International Mileage Fund.
(3) "Total Operating Expenses" before fee waivers and reimbursements are
estimated to be 1.81% and 1.84%, respectively, for the International
Mileage Fund.
The following illustrates the expenses on a $1,000 investment under the current
and proposed pro forma expenses and fees listed above, assuming (1) a 5% annual
return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
Existing Fee Proposed Fee
--------------------------------------- ----------------------------------------
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Fund
Institutional Class $8 $26 $46 $103 $9 $27 $48 $106
PlanAhead Class 13 39 68 149 13 40 69 152
AMR Class 6 17 30 68 6 18 32 71
International Mileage Fund 15 46 80 176 15 47 82 179
</TABLE>
The assumption in this example of a 5% annual return is required by regulations
of the Securities and Exchange Commission ("SEC"). THE INFORMATION IN THE TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATES OF
RETURN. ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS THAN THOSE SHOWN.
8
<PAGE>
Fees paid or accrued to the International Subadvisers by the Manager on behalf
of the International Fund of the AAdvantage Trust for the fiscal year ended
October 31, 1995 were $826,060. If the Fleming Agreement had been in effect
during this period, assuming that each of the International Subadvisers and
Fleming managed equal portions of the International Fund's assets and also
assuming that the International Subadvisers received the current blended
advisory rate while Fleming received the fee set forth above, the Manager would
have paid the International Subadvisers and Fleming $891,275 on behalf of the
International Fund of the AAdvantage Trust. The difference in these amounts is
approximately 7.9%. The Mileage Trust did not begin active operations until
November 1, 1995.
To the extent that the assets of the International Funds are invested in the
International Portfolio, Fleming will not receive a fee under its Agreements
with the Manager on behalf of either the AAdvantage Trust or the Mileage Trust.
If the International Funds no longer invest their assets in the International
Portfolio, the Manager will pay Fleming an annualized fee as set forth above
with respect to any assets that Fleming manages directly at the Fund level.
The names, addresses and principal occupations of the principal executive
officer and each director of Fleming are as follows. Unless otherwise noted, the
address of the officer and directors set forth below is 100 East Pratt Street,
Baltimore, MD 21202. The persons below are employed by T. Rowe Price
Associates, Inc. except for Messrs. Garrett, Manser, Smith, Strutt and Wade.
<TABLE>
<CAPTION>
Name Address Principal Occupation
- ---- ------- --------------------
<S> <C> <C>
M. David Testa Director and Principal Executive Officer
George J. Collins Director
William J. Garrett 25 Copthall Avenue Director
London, EC2R 7DR England Chairman-Robert Fleming Securities Ltd.;
Director-Robert Fleming Holdings Ltd.,
Robert Fleming Investment Trust, Robert
Fleming Management Services Ltd. and various
other affiliates of Robert Fleming Holdings.
P. John Manser 25 Copthall Avenue Director
London, EC2R 7DR England Chairman-Robert Fleming & Co, Ltd.; Chief
Executive-Robert Fleming Holdings, Deputy
Chairman-Robert Fleming Asset Management Ltd.
and Director of various other affiliates of
Robert Fleming Holdings, Fleming Investment
Management Ltd. and Jardine Fleming Group Ltd.
Director of the UK Securities and Investments
Board.
James S. Riepe Director
George A. Roche Director
Alan H. Smith Jardine Fleming Holdings Director
46th Floor Jardine House Managing Director-Jardine Fleming Holdings, Ltd.;
GPO Box 70 Chairman-Jardine Fleming Investment Management Ltd.,
Hong Kong Jardine Fleming & Co., Ltd., Jardine Fleming
Securities Ltd.; Director-Robert Fleming Holdings,
Robert Fleming, Inc. and various other affiliates of
Jardine Fleming.
Henry C. T. Strutt Jardine Fleming Holdings Director
46th Floor Jardine House Managing Director-Jardine Fleming Holdings, Ltd.;
GPO Box 70 Director-Robert Fleming Holdings Ltd.; General
Hong Kong Manager-Jardine Fleming Holdings Ltd.
Martin G. Wade Director and President
</TABLE>
Terms of the Fleming Agreement
The Fleming Agreement, if approved by shareholders, will become effective on or
about April 1, 1996 and will continue in effect for an initial term of two years
and thereafter from year to year, subject to approval annually by the Boards,
including approval
9
<PAGE>
by a majority of the Independent Trustees of each Board, or by a vote of a
majority of the outstanding shares of each of the International Funds, or by the
holders of a majority of the outstanding interests of the International
Portfolio, as applicable.
Because each International Fund's votes are proportionate to its percentage
interest in the International Portfolio, the majority of the Portfolio's
interest holders could approve an action against which a majority of the
outstanding voting securities of one of the Funds had voted. Thus, if a
majority of interest holders of the International Portfolio approve the new
Fleming Agreement, but an International Fund does not, the Agreement will go
into effect for the Portfolio and therefore for that Fund. However, should a
Fund which has not approved the new Fleming Agreement withdraw its investment in
the International Portfolio, after withdrawal it will allocate its assets only
to the International Subadvisers approved by shareholders of that Fund.
The Fleming Agreement does not protect Fleming against any liability to the
International Funds, the International Portfolio or to its shareholders/interest
holders to which it might otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its duties or the reckless
disregard of its obligations under the proposed agreement. The Fleming
Agreement automatically terminates upon its assignment, and may be terminated
without penalty at any time by the Manager, upon not less than thirty days' nor
more than sixty days' written notice, by vote of a majority of the Trustees of
the Boards or by vote of a majority of the outstanding securities of each
International Fund or by a majority of the interest holders of the International
Portfolio. Fleming also may terminate the agreement without penalty upon sixty
days' written notice.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSALS 1(c) AND 4.
PROPOSALS 1(d) and 5: APPROVAL OR DISAPPROVAL OF A PROPOSAL TO PERMIT THE
MANAGER TO HIRE SUBADVISERS OR MODIFY SUBADVISORY AGREEMENTS WITHOUT SHAREHOLDER
APPROVAL. [For consideration by shareholders of all Funds.]
Section 15(a) of the 1940 Act and Rule 18f-2 thereunder require that the
shareholders of a Fund and interest holders of a Portfolio approve that Fund's
or Portfolio's subadvisory agreements and any amendments thereto. The Funds and
the Portfolios have filed an application with the SEC requesting an order
exempting them from these provisions ("SEC Order"). This SEC Order would permit
the Funds and Portfolios, which utilize a multi-manager approach to portfolio
investing, to hire new subadvisers, rehire existing subadvisers whose agreements
have been assigned (and, thus, automatically terminated) and modify subadvisory
agreements without the prior approval of shareholders. By eliminating
shareholder approval in these matters, the Funds would have greater flexibility
in choosing subadvisers and shareholders would save the considerable expenses
involved in holding shareholder meetings and soliciting proxies. The exemptive
application was authorized for filing by the Boards, including the Independent
Trustees of each Board, on November 15, 1995 and was filed with the SEC on
January 29, 1996. In the exemptive application, the Funds and the Portfolios
agreed to the following conditions:
(1) The SEC Order will apply solely to the subadvisory agreements between the
Manager and the subadvisers and not to the Management Agreement between
the Manager and the Funds or the Portfolios;
(2) Before a Fund or Portfolio may rely on the SEC Order, its implementation
must be approved by a majority of the Fund's outstanding voting securities
or by a majority of the Portfolio's interest holders. With respect to new
mutual funds organized by the Manager, proper disclosure regarding the SEC
Order will be made in the new funds' prospectuses;
(3) Any Fund relying upon the SEC Order will disclose in its prospectus the
existence, substance and effect of the Order;
(4) The Manager will continue to provide management and administrative
services to the Funds and Portfolios, and, subject to review and approval
of the Boards will: (a) set the Funds' and the Portfolios' overall
investment strategies; (b) select subadvisers; (c) allocate portfolio
assets among subadvisers; (d) monitor and evaluate the investment
performance of the subadvisers, including their compliance with the
investment objectives, policies and restrictions of the Funds and the
Portfolios; and (e) manage short-term investments of the Funds or
Portfolios (except that the International Subadvisers, and not the Manager,
will manage short-term investments for the International Funds and the
International Portfolio);
(5) A majority of the Boards will be Independent Trustees, and the nomination
of new or additional Independent Trustees will be left to the discretion of
the then existing Independent Trustees;
10
<PAGE>
(6) No Trust will enter into any subadvisory agreement with a subadviser that
is an "affiliated person," as defined in Section 2(a)(3) of the 1940 Act,
of the Funds, the Portfolios, or the Manager, other than by reason of
serving as a subadviser to one or more of the Funds or the Portfolios,
without such agreement (including the compensation to be paid thereunder)
being approved by the shareholders of the applicable Fund and/or Portfolio;
(7) No trustee or officer of a Trust or the Manager will own directly or
indirectly (other than through a pooled investment vehicle that is not
controlled by any such trustee or officer) any interest in a subadviser
except for: (a) ownership of interests in the Manager or any entity that
controls, or is controlled by, or under common control with, the Manager;
or (b) ownership of less than 1% of the outstanding securities of any class
or equity or debt securities of any publicly traded company that either a
subadviser controls, is controlled by, or is under common control with, a
subadviser; and
(8) Within 90 days of the hiring of any new subadviser or the implementation
of any proposed material change in a subadvisory agreement, the affected
Fund and Portfolio will furnish their shareholders all information about
the new subadviser or subadvisory agreement that would be included in a
proxy statement. Such information will include any change in such
disclosure caused by the addition of a new subadviser or any proposed
material change in a Fund's or Portfolio's subadvisory agreement. The Fund
and Portfolio will meet this condition by providing shareholders, within 90
days of the hiring of a subadviser or the implementation of any material
change to the terms of a subadvisory agreement, with an information
statement meeting the requirements of the federal proxy rules.
Thus, in accordance with condition (2), shareholder and interest holder approval
of this proposed new arrangement is being sought. Even if shareholders of the
Funds or interest holders of the Portfolios approve reliance on the SEC Order,
this proposal will not be implemented unless the SEC Order is granted. There is
no assurance that such an Order will be granted. In addition, the SEC Order
could be granted subject to different conditions than those set forth above. If
the SEC Order is granted, any new subadvisers added to the Funds and Portfolios
or any change in a subadvisory agreement will still require Trustee approval.
In order to approve new subadvisers, the Boards will analyze the factors they
deem relevant, including the nature, quality and scope of services provided by a
subadviser to investment companies comparable to the Funds. The Boards will
review the ability of the subadviser to provide its services to the Funds, as
well as its personnel, operation, financial condition or any other factor which
would affect the provision of those services. The Boards will examine the
performance of the subadviser with respect to compliance and regulatory matters
over the past fiscal year. The Boards will review the subadviser's investment
performance with respect to accounts deemed comparable. Finally, the Boards
will consider other factors deemed relevant to the subadviser's performance as
an investment adviser. The Boards believe that this review process provides
adequate shareholder protection in the selection of subadvisers.
Because the Funds' votes are proportionate to their percentage interest in their
corresponding Portfolio, the majority of a Portfolio's interest holders could
approve an action against which a majority of the outstanding voting securities
of one of the Funds had voted. Thus, if a majority of interest holders of a
Portfolio approve reliance upon the SEC Order, but a Fund investing in the
Portfolio does not, the Portfolio may rely upon the SEC Order, thereby affecting
the management of the underlying Fund. However, should a Fund that has not
approved reliance upon the SEC Order withdraw its investment in its
corresponding Portfolio, after withdrawal, that Fund will allocate its assets
only among the subadvisers whose most recent investment subadvisory agreement
has been approved by its shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE
"FOR" PROPOSALS 1(d) AND 5.
PORTFOLIO INFORMATION
For the fiscal year ended October 31, 1995, the International Fund paid
brokerage commissions of $18,937 to Morgan Stanley, Inc., an affiliate of Morgan
Stanley Asset Management which is a subadviser to the International Funds.
During that same period, the Balanced Fund paid $18 in brokerage commissions to
Sutro & Company, an affiliate of Independence Investment Associates which is a
subadviser to the Balanced Fund. These amounts represented 4% of the
International Fund's and 0.005% of the Balanced Fund's aggregate brokerage
commissions paid during the most recent fiscal year.
11
<PAGE>
SHAREHOLDER PROPOSALS
As a general matter, the Trusts do not hold annual or other regular meetings of
shareholders. Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholders' meeting should send their written
proposals to the Trusts at 4333 Amon Carter Boulevard, MD 5645, Fort Worth,
Texas 76155. In addition, the AAdvantage Trust and the Mileage Trust are each
required to convene a special shareholders' meeting upon written request for
such a meeting by their respective shareholders owning at least ten percent of
their outstanding shares.
OTHER BUSINESS
Management knows of no business to be presented to the meeting other than the
matters set forth in this proxy statement, but should any other matter requiring
a vote of shareholders arise, the proxies will vote thereon according to their
best judgment and in the best interests of the Funds.
By order of the Board of Trustees,
CLIFFORD J. ALEXANDER
Secretary
February 28, 1996
It is important that you execute and return
your Proxy Card(s) promptly.
12
<PAGE>
APPENDIX A
The following chart is a list of those shareholders who, as of Record Date,
owned of record more than 5% of the shares of a Fund.
<TABLE>
<CAPTION>
Number of Shares % of Shares
---------------- -----------
<S> <C> <C>
American AAdvantage Balanced Fund
- ---------------------------------
AMR Corporation and subsidiary companies and
Employee Benefit Trusts thereof 42,309,905 68%
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
Retirement Advisors of America 10,137,507 16%
5005 LBJ Freeway, Suite 1350
Dallas, TX 75244
Sky Chefs Master Trust 6,325,384 10%
601 Ryan Plaza Drive
Arlington, Texas 76011
American AAdvantage Growth and Income Fund
- ------------------------------------------
AMR Corporation and subsidiary companies and
Employee Benefit Trusts thereof 49,748,131 90%
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
Retirement Advisors of America 2,987,172 5%
5005 LBJ Freeway, Suite 1350
Dallas, Texas 75244
American AAdvantage International Equity Fund
- ---------------------------------------------
AMR Corporation and subsidiary companies and
Employee Benefit Trusts thereof 18,511,171 88%
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
NA Bank & Co. 1,087,264 5%
P.O. Box 2180
Tulsa, Oklahoma 74192
American AAdvantage Balanced Mileage Fund
- -----------------------------------------
Maurice T. & Winifred A. Downing 8,633 8%
11 Beacon Street
Dumont, NJ 07628-1201
Anthony Barrasso 5,813 6%
160 Floral Park St.
Islip Terrace, NY 11752-1312
American AAdvantage Growth and Income Mileage Fund
- --------------------------------------------------
John L. MacArthur 13,330 6%
9129 Westwood Shores
Fort Worth, TX 76179-3252
American AAdvantage International Equity Mileage Fund
- -----------------------------------------------------
John Thorup 7,791 6%
1845 N. Santa Rita
Tucson, AZ 85719-3562
</TABLE>
13
<PAGE>
APPENDIX B
The following chart is a list of similar investment companies to the funds
managed by Boatmen's, Brandywine and Fleming including assets under management
as of December 31, 1995:
<TABLE>
<CAPTION>
Fund Name Assets Under Management Subadviser's Annual Rate of Compensation
- --------- ----------------------- ----------------------------------------
<S> <C> <C>
Boatmen's
- ---------
Pilot Funds $140 Million 0.75% (currently waiving 0.25%)
Brandywine
- ----------
Frank Russell Equity III $68 Million 0.25%
Frank Russell Equity Income Fund $58 Million 0.25%
Fleming
- -------
T. Rowe Price $6,697 Million 0.35%-Fund Fee
International Stock Fund plus Price Group Fee of .34%
T. Rowe Price $52 Million 1.05% (covers investment management and
International Stock Fund operation expenses)
American Skandia Trust $195 Million 0.75% of the first $20 million;
T. Rowe Price International Equity 0.60% of the next $30 million;
Portfolio 0.50% of assets above $50 million
The Commerce Funds $27 Million 0.75% of the first $20 million
International Equity Fund 0.60% of the next $30 million
0.50% of assets above $50 million
Endeavor Series Trust $52 Million 0.75% of the first $20 million
T. Rowe Price International Stock 0.60% of the next $30 million
Portfolio 0.50% of assets above $50 million
when net assets exceed $200 million
0.50% on all assets
T. Rowe Price/JNL Series Trust $22 Million 0.75% of the first $20 million
International Equity Investment 0.60% of the next $30 million
Series 0.50% of assets above $50 million
and when net assets exceed $200 million
0.50% on all assets
Lutheran Brotherhood $21 Million 0.75% of the first $20 million
Family of Funds- 0.60% of the next $30 million
World Growth Fund 0.50% of assets above $50 million
when net assets exceed $200 million
0.50% on all assets
LB Series Fund, Inc. 0 0.75% of the first $20 million
World Growth Portfolio (Start up-Jan 1996) 0.60% of the next $30 million
0.50% of assets above $50 million
when net assets exceed $200 million
0.50% on all assets
(combined with above fund for fee calculation
purposes)
</TABLE>
14
<PAGE>
APPENDIX B
<TABLE>
<CAPTION>
Fund Name Assets Under Management Subadviser's Annual Rate of Compensation
- --------- ----------------------- ----------------------------------------
<S> <C> <C>
Frank Russell International $119 Million 0.75% of the first $20 million
Securities Fund 0.60% of the next $30 million
0.50% of assets above $50 million
when net assets exceed $200 million,
0.50% on all assets
Frank Russell International Fund $156 Million 0.75% of the first $20 million
0.60% of the next $30 million
0.50% of assets above $50 million
when net assets exceed $200 million,
0.50% on all assets
(combined with above fund for fee calculation
purposes)
</TABLE>
15
<PAGE>
PROXY
AMERICAN AADVANTAGE MILEAGE FUNDS
American AAdvantage Balanced Mileage Fund
American AAdvantage Growth and Income Mileage Fund
American AAdvantage International Equity Mileage Fund
Combined Special Meeting of Shareholders
March 26, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints as proxies William F. Quinn, Barry Y. Greenberg
and Janice B. Schwarz, each with the power of substitution, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of each of the above-referenced funds ("Funds") held of record by the
undersigned on January 31, 1996, at the meeting of shareholders to be held on
March 26, 1996, or any adjournment thereof, with discretionary power to vote
upon such other business as may properly come before the meeting. Unless
indicated to the contrary, this proxy shall be deemed to grant authority to vote
"FOR" the proposal.
The undersigned hereby acknowledges receipt of the Proxy Statement prepared on
behalf of the Board of Trustees with respect to the matter designated below.
Please date and sign this proxy and return promptly in the enclosed postage-paid
envelope to Boston Financial Data Services, Inc. at Proxy Services, P.O. Box
9261, Boston, MA 02205-8524. Please indicate your vote by an "X" in the
appropriate box below.
1. To authorize the American AAdvantage Mileage Funds, on behalf of the Funds,
to vote at a meeting of the Balanced, the Growth and Income and the
International Equity Portfolios ("Portfolios") of the AMR Investment
Services Trust ("AMR Trust") to:
(a) Approve a new Investment Subadvisory Agreement between the Manager and
Brandywine Asset Management, Inc. for the Balanced Portfolio and the
Growth and Income Portfolio of the AMR Trust (American AAdvantage
Balanced Mileage Fund and American AAdvantage Growth and Income Mileage
Fund only).
FOR ______ AGAINST _______ ABSTAIN ______
(b) Approve a new Investment Subadvisory Agreement between the Manager and
Boatmen's Trust Company for the Balanced Portfolio and the Growth and
Income Portfolio of the AMR Trust (American AAdvantage Balanced Mileage
Fund and American AAdvantage Growth and Income Mileage Fund only).
FOR _______ AGAINST _______ ABSTAIN ______
(c) Approve a new Investment Subadvisory Agreement between the Manager and
Rowe Price-Fleming International, Inc. for the International Equity
Portfolio of the AMR Trust (American AAdvantage International Equity
Mileage Fund only).
FOR _______ AGAINST _______ ABSTAIN ______
(d) Approve a proposal to permit the Manager to hire new subadvisers or
modify the subadvisory agreements of the Portfolios of the AMR Trust
without interest holder approval (Each Fund).
FOR _______ AGAINST _______ ABSTAIN ______
<PAGE>
2. Approve a new Investment Subadvisory Agreement between the Manager and
Brandywine Asset Management, Inc. on behalf of the American AAdvantage
Balanced Mileage Fund and the American AAdvantage Growth and Income Mileage
Fund (American AAdvantage Balanced Mileage Fund and American AAdvantage
Growth and Income Mileage Fund only).
FOR _______ AGAINST _______ ABSTAIN ______
3. Approve a new Investment Subadvisory Agreement between the Manager and
Boatmen's Trust Company on behalf of the American AAdvantage Balanced
Mileage Fund and the American AAdvantage Growth and Income Mileage Fund
(American AAdvantage Balanced Mileage Fund and American AAdvantage Growth
and Income Mileage Fund only).
FOR _______ AGAINST _______ ABSTAIN ______
4. Approve a new Investment Subadvisory Agreement between the Manager and Rowe
Price-Fleming International, Inc. on behalf of the American AAdvantage
International Equity Mileage Fund (American AAdvantage International Equity
Mileage Fund only);
FOR _______ AGAINST _______ ABSTAIN ______
5. Approve a proposal to permit the Manager to hire new subadvisers or modify
the subadvisory agreements of the Funds without shareholder approval (Each
Fund).
FOR _______ AGAINST _______ ABSTAIN ______
Please be sure to sign and date this Proxy. ____________________________
Date
___________________________________________ _____________________________
Shareholder sign here Co-owner sign here
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