<PAGE> 1
[AMERICAN AADVANTAGE MILEAGE FUNDS LOGO]
- Platinum Class(sm) -
P.O. Box 619003
Dallas/Fort Worth Airport, Texas
75261-9003
(800) 967-9009
- Mileage Class(R) -
P.O. Box 419643
Kansas City, Missouri 64141-6643
(800) 388-3344
This report is prepared for shareholders of the American
AAdvantage Mileage Funds and may be distributed to others
only if preceded or accompanied by a current prospectus.
ANNUAL
REPORT
October 31, 1997
[AMERICAN AADVANTAGE MILEAGE FUNDS LOGO]
Balanced Mileage Fund
Growth and Income Mileage Fund
International Equity Mileage Fund
Limited-Term Income Mileage Fund
Money Market Mileage Fund
Municipal Money Market Mileage Fund
U.S. Government Money Market Mileage Fund
Managed by AMR Investment Services, Inc.
<PAGE> 2
Dear Fellow Shareholder:
1997 marked the 10th anniversary for the American AAdvantage Funds family.
During that time the Funds have grown from $325 million in 1987 to over $6
billion. We have been blessed by both good market conditions and achieving our
goals to provide our shareholders with diversified, low-cost funds that have
consistently achieved above average returns. We are pleased to report to you on
this year's performance of the American AAdvantage Mileage Funds and provide you
with a copy of the Annual Report for the year ending October 31, 1997.
Balanced Mileage Fund
The Balanced Mileage Fund's total return for the year ending October 31,
1997 was 19.52%, slightly lagging the Lipper Balanced Index total return of
20.10%.
The Fund's 56.3% stock exposure was slightly below the Fund's "neutral"
stock weighting of 60% primarily due to expectations of slowing corporate profit
growth in 1997 and 1998. Stock segment returns were 31.18% versus the S&P 500
Index's return of 32.18%, while the bond segment's 9.16% return surpassed the
Lehman Govt/Corp Index total return of 8.81% for the year.
Stocks continued to climb to record highs as the strong U.S. economy
coupled with full employment and low inflation attracted domestic and foreign
investors alike. Performance was dominated by a few large cap growth stocks for
most of the year, but this trend reversed in the last months of the period as
investors moved out of the higher priced stocks into small to mid cap stocks
that perform well in a benign interest rate environment. Thirty year Treasury
bond yields fell from 6.64% at the end of October 1996 to 6.15% at the end of
October 1997 as fears of inflation abated. The Consumer Price Index (CPI)
remained low during the year, approaching an eleven year low for inflation in
the U.S.
The Fund employs an investment discipline that emphasizes purchasing
securities with above average growth expectations which are selling at a
discount to the market. As a result, the Fund significantly overweighted the
financial sector, which posted strong returns due to steady earnings growth and
continued consolidation in the banking industry. The Fund's performance was also
boosted by the superior stock selection and modest overweighting of the consumer
cyclicals sector. Growth in personal income and strong consumer confidence have
resulted in autos and retailers posting strong earnings. Although technology was
the best performing sector in the S&P 500 Index, the Fund underweighted this
area as very few technology stocks fall within the Fund's value parameters.
Growth and Income Mileage Fund
The Growth and Income Mileage Fund performed well for the year ending
October 31, 1997. The Fund's total return was 27.60%, just short of the Lipper
Growth and Income Index total return average of 28.03%.
Since the Fund utilizes the same investment managers and the same value
approach to stock selection as the Balanced Fund, it also benefited from
overweighted positions in financial and consumer cyclical stocks but was also
hurt from its underweighting in technology.
International Equity Mileage Fund
The International Equity Mileage Fund continued to post strong results on
an absolute and relative basis for the year ending October 31, 1997. The Fund's
total return for the one year period was 18.44%, compared to a 13.35% return for
the Lipper International Index.
<PAGE> 3
Relative to the EAFE Index (the Morgan Stanley Capital International
Europe, Australia and Far East Index), which returned 4.91% for the twelve month
period, the Fund added value through both good country and stock selection.
While overall EAFE returns were volatile and disappointing, returns for
Europe were much stronger and less volatile. Investors reacted positively to
stronger economic growth, higher corporate earnings, the increased likelihood of
European Monetary Union and a heightened focus on "shareholder value" and
"corporate restructurings". Additionally, low inflation and low interest rates
have given investors more confidence in the equity markets. Over the past twelve
months, successful overweightings particularly of the Dutch, Finnish, Norwegian
and Spanish markets, combined with positive stock selection in France and the
Netherlands, favorably impacted the Fund's returns.
The overall underweighting of the Japanese market and the Fund's
concentration in export-related companies within Japan added the most value
relative to EAFE returns. The Fund's average weighting was just over 13% for the
period while the EAFE Index's weighting was close to 32%. The Fund's Japanese
holdings returned 3.7% compared to Japan's index return of a negative 18.0% for
the twelve months ended October 31. The outlook for Japan remains cautious.
Despite the poor performance of the Japanese market, valuation levels for stocks
remain high relative to other parts of the world. In addition, the problems with
the banking system and the crisis in Southeast Asia continue to be cause for
concern. As a result, the Fund expects to continue to significantly underweight
Japan.
Limited-Term Income Mileage Fund
For the year ending October 31, 1997, the total return of the Limited-Term
Income Mileage Fund was 5.90%, compared to the Linked Lipper Short-Term
Investment Grade Debt Average of 6.05% for the twelve months.
This twelve month period was characterized by a moderate rise then fall in
interest rates. The two year Treasury note's yield ended the period at 5.61%, 13
basis points lower than the same time last year. The economy was relatively
strong for the entire period, but was able to grow without inflation, thus
keeping the Fed on the sidelines after it raised rates 25 basis points on March
25, 1997. For the period, the duration of the Fund was largely neutral or short
of its benchmark, which had a slightly negative impact on the Fund's returns. On
October 31, the portfolio's weighted average duration was 1.7 years.
The Fund realized incremental income by holding mortgage-backed securities.
During a period of generally unchanged prices, this higher income component
improved total return.
Money Market Funds
The American AAdvantage Money Market Mileage Fund, Municipal Money Market
Mileage Fund, and the U.S. Government Money Market Mileage Fund have all
continued to maintain a 'AAA', 'V-1+' rating by Fitch Investors Service, which
reflects their high credit quality and conservative investment guidelines.
Money Market Mileage Fund
For the year ending October 31, 1997, the Mileage Class of the American
AAdvantage Money Market Mileage Fund returned 5.14%, outperforming its Lipper
benchmark, the Money Market Instrument Funds' Average of 4.87%. During the same
period, the Platinum Class returned 4.71.
Since the March 25th FOMC meeting when the target Federal Funds rate was
raised by 25 basis points to 5.50%, the Federal Reserve has maintained a "bias
to tighten" but has elected to hold
2
<PAGE> 4
monetary policy stable as the economy continued to exhibit solid growth and
productivity with no signs of inflation.
One of the factors contributing to the Fund's performance during this
period was the decision to invest primarily in variable rate obligations indexed
to the London Interbank Offering Rate that reset on a quarterly basis with final
maturities of 397 days or less.
Municipal Money Market Mileage Fund
For the year ending October 31, 1997, the American AAdvantage Municipal
Money Market Mileage Fund achieved an annualized total return of 3.18%, and
outperformed its benchmark, the Lipper Tax-Exempt Money Market Funds' Average,
of 3.04%. Since its inception, the Fund has invested exclusively in high credit
worthy municipal issuers that have been further credit enhanced by either a bank
letter of credit or bond insurance.
U.S. Government Money Market Mileage Fund
For the year ending October 31, 1997, the American AAdvantage U.S.
Government Money Market Mileage Fund had an annualized total return for the
period of 5.00%, and outperformed its Lipper benchmark, the Lipper U.S.
Government Money Market Funds Average, of 4.86%.
As always, we appreciate your confidence and support and look forward to
serving you -- our shareholders -- over the next ten years.
Sincerely,
/s/ WILLIAM F. QUINN
William F. Quinn
President
American AAdvantage Mileage Funds
3
<PAGE> 5
AMERICAN AADVANTAGE BALANCED MILEAGE FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the Standard
& Poor's 500 Index, the Shearson Lehman Government/Corporate and the Lipper
Balanced Index.
<TABLE>
<CAPTION>
Annualized Returns 1 Year 5 Year 10 Year
------ ------ -------
<S> <C> <C> <C>
Mileage Fund *................. 19.52% 14.45% 12.88%
S&P 500........................ 32.18% 19.86% 17.16%
SLGC........................... 8.81% 7.62% 9.19%
Lipper Balanced Index.......... 20.10% 13.28% 12.73%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Nov-87 Oct-88 Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mileage Fund *............. $10,000 $11,463 $13,239 $12,545 $15,725 $17,102 $20,385 $20,351 $24,235 $28,105
S&P 500.................... $10,000 $11,477 $14,501 $13,415 $17,912 $19,695 $22,631 $23,522 $29,723 $36,862
SLGC....................... $10,000 $11,063 $12,406 $13,089 $15,100 $16,688 $18,967 $18,088 $21,010 $22,143
Lipper Balanced Index...... $10,000 $11,316 $13,228 $12,726 $16,311 $17,773 $20,632 $20,506 $24,112 $27,605
<CAPTION>
Oct-97
-------
<S> <C>
Mileage Fund *............. $33,590
S&P 500.................... $48,723
SLGC....................... $24,093
Lipper Balanced Index...... $33,153
</TABLE>
- ---------------
* Fund performance represents the total returns achieved by the Institutional
Class of the American AAdvantage Balanced Fund from 11/1/87 through 7/31/94,
the returns of the Mileage Class of the American AAdvantage Balanced Fund from
8/1/94 through 10/31/95 and the returns of the American AAdvantage Balanced
Mileage Fund since its 11/1/95 inception. Expenses of the Mileage Class and
Mileage Fund are higher than those of the Institutional Class. Therefore,
total returns shown may be higher than they would have been had the Mileage
Fund been in operation since 11/1/87.
4
<PAGE> 6
AMERICAN AADVANTAGE GROWTH AND INCOME MILEAGE FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the Standard
& Poor's 500 Index and the Lipper Growth & Income Index.
<TABLE>
<CAPTION>
Annualized Returns 1 Year 5 Year 10 Year
------ ------ -------
<S> <C> <C> <C>
Mileage Fund *................. 27.60% 18.78% 16.10%
S&P 500........................ 32.18% 19.86% 17.16%
Lipper Growth & Income Index.. 28.03% 18.17% 15.53%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Nov-87 Oct-88 Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mileage Fund *....... $10,000 $12,220 $14,780 $12,782 $17,106 $18,816 $22,859 $23,594 $28,397 $34,864 $44,488
S&P 500.............. $10,000 $11,477 $14,501 $13,415 $17,912 $19,695 $22,631 $23,522 $29,723 $36,862 $48,723
Lipper Growth &
Income Index........ $10,000 $11,817 $14,278 $12,627 $16,878 $18,382 $21,965 $22,659 $27,254 $33,086 $42,360
</TABLE>
- ---------------
* Fund performance represents the total returns achieved by the Institutional
Class of the American AAdvantage Growth and Income Fund from 11/1/87 through
7/31/94, the returns of the Mileage Class of the American AAdvantage Growth
and Income Fund from 8/1/94 through 10/31/95 and the returns of the American
AAdvantage Growth and Income Mileage Fund since its 11/1/95 inception.
Expenses of the Mileage Class and Mileage Fund are higher than those of the
Institutional Class. Therefore, total returns shown may be higher than they
would have been had the Mileage Fund been in operation since 11/1/87.
5
<PAGE> 7
AMERICAN AADVANTAGE INTERNATIONAL EQUITY MILEAGE FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the EAFE
(Europe, Australia and Far East) and the Lipper International Index.
<TABLE>
<CAPTION>
Annualized Returns 1 Year 5 Year Since Inception
------ ------ ---------------
<S> <C> <C> <C>
Mileage Fund *................. 18.44% 17.70% 11.87%
EAFE........................... 4.91% 12.07% 8.25%
Lipper International Index .... 13.35% 13.70% 10.44%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Aug-91 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97
------- ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mileage Fund **.................................... $10,000 $10,132 $8,910 $12,167 $13,578 $14,579 $16,992 $20,125
EAFE Index......................................... $10,000 $10,676 $9,286 $12,804 $14,132 $14,124 $15,645 $16,414
Lipper International Index......................... $10,000 $10,314 $9,792 $13,127 $14,638 $14,569 $16,412 $18,602
</TABLE>
- ---------------
* Inception date of American AAdvantage International Equity Fund was 8/7/91.
Changes in value for indices have a starting date of 8/7/91.
** Fund performance represents the total returns achieved by the Institutional
Class of the American AAdvantage International Equity Fund from 8/7/91
through 7/31/94, the returns of the Mileage Class of the American
AAdvantage International Equity Fund from 8/1/94 through 10/31/95 and the
returns of the American AAdvantage International Equity Fund since its
11/1/95 inception. Expenses of the Mileage Class and Mileage Fund are
higher than those of the Institutional Class. Therefore, total returns
shown may be higher than they would have been had the Mileage Fund been in
place since 8/7/91.
6
<PAGE> 8
AMERICAN AADVANTAGE LIMITED-TERM INCOME MILEAGE FUND
PERFORMANCE SUMMARY THROUGH OCTOBER 31, 1997
Comparison of Change in Value $10,000 Investment in the Fund, the Shearson
Lehman Government/Corporate 1 to 5 Year Index* and the Linked Lipper Average***.
<TABLE>
<CAPTION>
Annualized Returns 1 Year 5 Year Since Inception
------ ------ ---------------
<S> <C> <C> <C>
Mileage Fund *................. 5.90% 5.15% 6.78%
S&P 500........................ 32.18% 19.86% 17.16%
SLGC........................... 6.89% 6.10% 7.77%
Linked Lipper Average.......... 6.05% 5.13% 6.88%
</TABLE>
[GRAPH]
<TABLE>
<CAPTION>
Dec-87 Oct-88 Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95 Oct-96 Oct-97
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mileage Fund **...... $10,000 $10,670 $11,482 $12,345 $13,810 $14,906 $15,979 $16,052 $17,308 $18,096 $19,165
Linked Lipper
Average............. $10,000 $10,730 $11,696 $12,613 $14,026 $15,077 $16,048 $16,070 $17,459 $18,252 $19,358
Shearson Lehman G/C
1-5 Year Index...... $10,000 $10,675 $11,723 $12,715 $14,310 $15,622 $16,833 $16,795 $18,545 $19,655 $21,009
</TABLE>
- ---------------
* Inception date of the American AAdvantage Limited-Term Income Fund was
12/3/87. Changes in value for indices have a starting date of 12/3/87.
** Fund performance represents the total returns achieved by the Institutional
Class of the American AAdvantage Limited-Term Income Fund from 12/3/87
through 7/31/94, the returns of the Mileage Class of the American AAdvantage
Limited-Term Income Fund from 8/1/94 through 10/31/95 and the returns of the
American AAdvantage Limited-Term Income Mileage Fund since its 11/1/95
inception. Expenses of the Mileage Class and Mileage Fund are higher than
those of the Institutional Class. Therefore, total returns shown may be
higher than they would have been had the Mileage Fund been in place since
12/3/87.
*** The Linked Lipper Average is created by linking the Lipper Short-Term (1-5
Year) Investment Grade Debt Average from 11/30/87 through 12/31/95, the
Lipper Short-Intermediate Investment Grade Debt Average from 1/1/96 through
7/31/96 and the Lipper Short-Term (1-3 Year) Investment Grade Debt Average
since 8/1/96.
7
<PAGE> 9
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
American AAdvantage Balanced Mileage Fund
American AAdvantage Growth and Income Mileage Fund
American AAdvantage International Equity Mileage Fund
American AAdvantage Limited-Term Income Mileage Fund
American AAdvantage Money Market Mileage Fund
American AAdvantage Municipal Money Market Mileage Fund
American AAdvantage U.S. Government Money Market Mileage Fund
We have audited the accompanying statements of assets and liabilities of
the American AAdvantage Balanced Mileage Fund, the American AAdvantage Growth
and Income Mileage Fund, the American AAdvantage International Equity Mileage
Fund, the American AAdvantage Limited-Term Income Mileage Fund, the American
AAdvantage Money Market Mileage Fund, the American AAdvantage Municipal Money
Market Mileage Fund, and the American AAdvantage U.S. Government Money Market
Mileage Fund (collectively, "the Funds") (separate funds comprising the American
AAdvantage Mileage Funds) as of October 31, 1997, and the related statements of
operations, the statements of changes in net assets, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1997, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective American AAdvantage Mileage Funds at October 31, 1997,
the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
December 19, 1997
8
<PAGE> 10
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and International Limited-Term
Balanced Income Equity Income
-------- ---------- ------------- ------------
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
ASSETS:
Investment in Portfolio, at value....................... $ 3,447 $ 9,809 $ 5,236 $ 1,236
Receivable for fund shares sold......................... - 2,727 - -
Receivable for expense reimbursement (Note 2)........... 6 - - 1
Deferred organization costs, net........................ 6 6 6 6
-------- -------- -------- --------
TOTAL ASSETS........................................ 3,459 12,542 5,242 1,243
-------- -------- -------- --------
LIABILITIES:
Payable for fund shares redeemed........................ 2 - 2 -
Accrued organization costs.............................. 8 8 8 8
Management fees payable (Note 2)........................ 1 2 1 -
Other liabilities....................................... 11 19 12 9
-------- -------- -------- --------
TOTAL LIABILITIES................................... 22 29 23 17
-------- -------- -------- --------
NET ASSETS.................................................. $ 3,437 $ 12,513 $ 5,219 $ 1,226
======== ======== ======== ========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 2,777 9,991 4,345 1,264
Accumulated undistributed investment income............. 88 122 59 -
Accumulated net realized gain (loss).................... 545 977 181 (21)
Unrealized appreciation (depreciation) of investments... 27 1,423 634 (17)
-------- -------- -------- --------
NET ASSETS.................................................. $ 3,437 $ 12,513 $ 5,219 $ 1,226
======== ======== ======== ========
Shares outstanding (no par value)........................... 187,552 527,571 295,418 127,617
======== ======== ======== ========
Net asset value, offering and redemption price per share.... $ 18.32 $ 23.72 $ 17.67 $ 9.60
======== ======== ======== ========
</TABLE>
See accompanying notes
9
<PAGE> 11
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Municipal U.S. Government
Market Money Market Money Market
-------- ------------ ---------------
(in thousands, except share
and per share amounts)
<S> <C> <C> <C>
ASSETS:
Investment in Portfolio, at value....................... $154,976 $ 26,673 $ 28,926
Receivable for expense reimbursement (Note 2)........... 45 15 -
Deferred organization costs, net........................ 6 6 6
-------- ----------- -----------
TOTAL ASSETS........................................ 155,027 26,694 28,932
-------- ----------- -----------
LIABILITIES:
Accrued organization costs.............................. 8 8 8
Dividends payable....................................... 631 70 122
Management and administrative services fees payable
(Note 2).............................................. 20 1 1
Other liabilities....................................... 237 51 10
-------- ----------- -----------
TOTAL LIABILITIES................................... 896 130 141
-------- ----------- -----------
NET ASSETS.................................................. $154,131 $ 26,564 $ 28,791
======== =========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 154,131 26,564 28,791
-------- ----------- -----------
NET ASSETS.................................................. $154,131 $ 26,564 $ 28,791
======== =========== ===========
Shares outstanding (no par value)........................... N/A 26,563,593 28,790,677
=========== ===========
Net asset value, offering and redemption price per share.... N/A $ 1.00 $ 1.00
=========== ===========
MILEAGE CLASS:
Net asset value, offering and redemption price per share
(104,946,583 shares outstanding)...................... $ 1.00 N/A N/A
========
PLATINUM CLASS:
Net asset value, offering and redemption price per share
(49,184,010 shares outstanding)....................... $ 1.00 N/A N/A
========
</TABLE>
See accompanying notes
10
<PAGE> 12
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited- Municipal
Growth and International Term Money Money
Balanced Income Equity Income Market Market
------------- ------------- ------------- ------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME ALLOCATED FROM
PORTFOLIO:
Interest income............. $ 87 $ 16 $ 20 $ 76 $ 7,453 $ 1,004
Dividend income (net of
foreign taxes of $12 in
International Equity
Fund)..................... 48 216 113 - - -
Income derived from
securities lending, net... 1 1 2 - - -
Portfolio expenses (net of
reimbursement of $2 for
the Municipal Money Market
Fund)..................... (10) (28) (25) (3) (215) (48)
------------- ------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME
ALLOCATED FROM
PORTFOLIO............. 126 205 110 73 7,238 956
------------- ------------- ------------- ------------- ------------- -------------
FUND EXPENSES:
Management fees (Note 2).... 8 21 11 3 65 13
Administrative service
fees - Platinum Class
(Note 2).................. - - - - 147 -
Transfer agent fees......... 5 12 6 1 - 36
Transfer agent
fees - Mileage
Class..................... - - - - 147 -
Transfer agent
fees - Platinum Class..... - - - - 1 -
Professional fees........... 6 8 2 1 47 4
Registration fees and
expenses.................. 17 17 16 19 82 28
Distribution fees........... 8 21 11 3 - 67
Distribution fees - Mileage
Class..................... - - - - 260 -
Distribution fees - Platinum
Class..................... - - - - 67 -
Other expenses.............. 3 3 3 2 40 10
------------- ------------- ------------- ------------- ------------- -------------
TOTAL FUND EXPENSES..... 47 82 49 29 856 158
------------- ------------- ------------- ------------- ------------- -------------
Less reimbursement of
expenses (Note 2)..... 26 27 9 23 83 33
------------- ------------- ------------- ------------- ------------- -------------
NET FUND EXPENSES....... 21 55 40 6 773 125
------------- ------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME........... 105 150 70 67 6,465 831
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ALLOCATED FROM
PORTFOLIO:
Net realized gain (loss) on
investments and foreign
currency transactions..... 426 760 154 1 2 -
Change in net unrealized
appreciation or
depreciation of
investments and foreign
currency translations..... - 1,083 440 (6) - -
------------- ------------- ------------- ------------- ------------- -------------
NET GAIN (LOSS) ON
INVESTMENTS........... 426 1,843 594 (5) 2 -
------------- ------------- ------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ 531 $ 1,993 $ 664 $ 62 $ 6,467 $ 831
============= ============= ============= ============= ============= =============
<CAPTION>
U.S.
Government
Money
Market
-------------
<S> <C>
INVESTMENT INCOME ALLOCATED FROM
PORTFOLIO:
Interest income............. $ 775
Dividend income (net of
foreign taxes of $12 in
International Equity
Fund)..................... -
Income derived from
securities lending, net... -
Portfolio expenses (net of
reimbursement of $2 for
the Municipal Money Market
Fund)..................... (27)
-------------
NET INVESTMENT INCOME
ALLOCATED FROM
PORTFOLIO............. 748
-------------
FUND EXPENSES:
Management fees (Note 2).... 7
Administrative service
fees - Platinum Class
(Note 2).................. -
Transfer agent fees......... 14
Transfer agent
fees - Mileage
Class..................... -
Transfer agent
fees - Platinum Class..... -
Professional fees........... 2
Registration fees and
expenses.................. 20
Distribution fees........... 35
Distribution fees - Mileage
Class..................... -
Distribution fees - Platinum
Class..................... -
Other expenses.............. 5
-------------
TOTAL FUND EXPENSES..... 83
-------------
Less reimbursement of
expenses (Note 2)..... 22
-------------
NET FUND EXPENSES....... 61
-------------
NET INVESTMENT INCOME........... 687
-------------
REALIZED AND UNREALIZED GAIN
(LOSS) ALLOCATED FROM
PORTFOLIO:
Net realized gain (loss) on
investments and foreign
currency transactions..... 1
Change in net unrealized
appreciation or
depreciation of
investments and foreign
currency translations..... -
-------------
NET GAIN (LOSS) ON
INVESTMENTS........... 1
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ 688
=============
</TABLE>
See accompanying notes
11
<PAGE> 13
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited-Term
Balanced Growth and Income International Equity Income
--------------- ----------------- -------------------- ---------------
1997 1996 1997 1996 1997 1996 1997 1996
------ ------ ------- ------- --------- -------- ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................... $ 105 $ 68 $ 150 $ 99 $ 70 $ 37 $ 67 $ 75
Net realized gain (loss) on investments and
foreign currency transactions................. 426 154 760 371 154 79 1 (22)
Change in net unrealized appreciation or
depreciation of investments and foreign
currency translations......................... - 27 1,083 340 440 194 (6) (11)
------ ------ ------- ------- ------- ------ ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................. 531 249 1,993 810 664 310 62 42
------ ------ ------- ------- ------- ------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income........................... (77) (8) (112) (15) (40) (8) (67) (75)
Net realized gain on
investments................................... (35) - (154) - (52) - - -
------ ------ ------- ------- ------- ------ ------ ------
NET DISTRIBUTIONS TO SHAREHOLDERS........... (112) (8) (266) (15) (92) (8) (67) (75)
------ ------ ------- ------- ------- ------ ------ ------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares................... 830 2,652 10,940 8,945 2,290 3,953 483 1,752
Reinvestment of dividends and
distributions................................. 107 8 252 14 84 7 65 64
Cost of shares redeemed......................... (414) (407) (6,640) (3,521) (1,114) (876) (485) (616)
------ ------ ------- ------- ------- ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS................. 523 2,253 4,552 5,438 1,260 3,084 63 1,200
------ ------ ------- ------- ------- ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS.............. 942 2,494 6,279 6,233 1,832 3,386 58 1,167
NET ASSETS:
Beginning of period............................. 2,495 1 6,234 1 3,387 1 1,168 1
------ ------ ------- ------- ------- ------ ------ ------
END OF PERIOD*.................................. $3,437 $2,495 $12,513 $ 6,234 $ 5,219 $3,387 $1,226 $1,168
====== ====== ======= ======= ======= ====== ====== ======
*Includes undistributed net investment income
of............................................ $ 88 $ 60 $ 122 $ 84 $ 59 $ 29 $ - $ -
====== ====== ======= ======= ======= ====== ====== ======
</TABLE>
See accompanying notes
12
<PAGE> 14
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Municipal Money U.S. Government
Money Market Market Money Market
-------------------- ------------------- -----------------
1997 1996 1997 1996 1997 1996
-------- --------- -------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................... $ 6,465 $ 5,447 $ 831 $ 729 $ 687 $ 403
Net realized gain on investments......................... 2 4 - - 1 3
-------- --------- -------- -------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... 6,467 5,451 831 729 688 406
-------- --------- -------- -------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income.................................... - - (831) (729) (687) (403)
Net investment income - Mileage Class.................... (5,222) (5,054) - - - -
Net investment income - Platinum Class................... (1,243) (393) - - - -
Net realized gain on investments......................... - - - - (1) (3)
Net realized gain on investments - Mileage Class......... (2) (4) - - - -
-------- --------- -------- -------- ------- -------
NET DISTRIBUTIONS TO SHAREHOLDERS.................... (6,467) (5,451) (831) (729) (688) (406)
-------- --------- -------- -------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares............................ 151,656 240,656 20,081 47,645 28,992 16,949
Reinvestment of dividends and
distributions.......................................... 6,128 4,724 819 638 575 347
Cost of shares redeemed.................................. (125,791) (123,336) (23,062) (19,558) (11,414) (6,659)
-------- --------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS.................................. 31,993 122,044 (2,162) 28,725 18,153 10,637
-------- --------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS....................... 31,993 122,044 (2,162) 28,725 18,153 10,637
NET ASSETS:
Beginning of period...................................... 122,138 94 28,726 1 10,638 1
-------- --------- -------- -------- ------- -------
END OF PERIOD............................................ $154,131 $ 122,138 $ 26,564 $ 28,726 $28,791 $10,638
======== ========= ======== ======== ======= =======
</TABLE>
See accompanying notes
13
<PAGE> 15
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American AAdvantage Mileage Funds (the "Trust") is organized as a
Massachusetts business trust under a Declaration of Trust dated February 14,
1995 and is registered under the Investment Company Act of 1940 (the "Act"), as
amended, as a no-load, open-end management investment company. On July 19, 1995,
the Trust's Board of Trustees (the "Board") created seven separate series as
follows: American AAdvantage Balanced Mileage Fund, American AAdvantage Growth
and Income Mileage Fund, American AAdvantage International Equity Mileage Fund,
American AAdvantage Limited-Term Income Mileage Fund, American AAdvantage Money
Market Mileage Fund, American AAdvantage Municipal Money Market Mileage Fund and
American AAdvantage U.S. Government Money Market Mileage Fund (each a "Fund" and
collectively the "Funds"). Prior to March 1, 1997, the American AAdvantage U.S.
Government Money Market Mileage Fund was known as the American AAdvantage U.S.
Treasury Money Market Mileage Fund and operated under different investment
policies. The Funds commenced active operations on November 1, 1995. The Money
Market Mileage Fund commenced sales of a second class of shares designated as
"Platinum Class" on January 29, 1996. At the same time, the existing shares of
the Money Market Mileage Fund were redesignated as "Mileage Class" shares.
Each Fund invests all of its investable assets in the corresponding
portfolio of the AMR Investment Services Trust, an open-end diversified
management investment company, as follows:
<TABLE>
<S> <C> <C>
AMERICAN AADVANTAGE: & INVESTS ASSETS IN & AMR INVESTMENT SERVICES TRUST:
Balanced Mileage Fund Balanced Portfolio
Growth and Income Mileage Fund Growth and Income Portfolio
International Equity Mileage Fund International Equity Portfolio
Limited-Term Income Mileage Fund Limited-Term Income Portfolio
Money Market Mileage Fund Money Market Portfolio
Municipal Money Market Mileage Fund Municipal Money Market Portfolio
U.S. Government Money Market Mileage Fund U.S. Government Money Market Portfolio
</TABLE>
Each AMR Investment Services Portfolio has the same investment objectives
as its corresponding Fund. The value of such investment reflects each Fund's
proportionate interest in the net assets of the corresponding portfolio (.36%,
.59%, .69%, 1.32%, 7.86%, 26.49% and 21.95% at October 31, 1997 of the AMR
Investment Services Balanced, Growth and Income, International Equity,
Limited-Term Income, Money Market, Municipal Money Market and U.S. Government
Money Market Portfolios, respectively) (each a "Portfolio" and collectively the
"Portfolios"). The financial statements of the Portfolios are included elsewhere
in this report and should be read in conjunction with the Funds' financial
statements.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services.
14
<PAGE> 16
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
The following is a summary of the significant accounting policies followed
by the Funds.
Valuation of Investments
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements which are included elsewhere in this
report.
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income and realized and
unrealized gain (loss) in the Portfolio each day. All net investment income and
realized and unrealized gain (loss) of each Portfolio are allocated pro rata
among the corresponding Fund and other investors in each Portfolio at the time
of such determination. Dividends from net investment income of the Balanced,
Growth and Income and International Equity Mileage Funds normally will be
declared and paid annually. The Limited-Term Income Mileage Fund generally
declares dividends from net investment income daily, payable monthly.
Distributions, if any, of net realized capital gains normally will be paid
annually after the close of the fiscal year in which realized.
The Money Market, Municipal Money Market and U.S. Government Money Market
Mileage Funds (the "Money Market Funds") generally declare dividends daily from
net investment income and net short-term capital gain, if any, payable monthly.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently than generally accepted accounting
principles.
Federal Income and Excise Taxes
It is the policy of each of the Funds to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income as well as any net realized
capital gains on the sale of investments. Therefore, no federal income or excise
tax provision is required. At October 31, 1997, the Limited-Term Income Mileage
Fund had a capital loss carryforward for federal income tax purposes of
approximately $38,000 expiring in years 2004 - 2005.
All dividends paid by the Municipal Money Market Mileage Fund were
"exempt - interest dividends", therefore 100% free of any regular federal income
tax. Approximately 54% of interest earned was derived from investments in
certain private activity bonds for purposes of the federal alternative minimum
tax calculation.
Deferred Organization Expenses
Expenses incurred by a Fund in connection with its organization are being
amortized on a straight-line basis over a five-year period.
15
<PAGE> 17
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations. Expenses directly attributable to a Class of shares are charged to
that Class. Expenses incurred by the Trust with respect to any two or more of
the Funds are allocated in proportion to the net assets of each Fund, except
where allocations of direct expenses to each Fund can otherwise be made fairly.
Each share of each Fund, regardless of class, bears equally those expenses that
are allocated to the Fund as a whole.
Valuation of Shares
The price per share is calculated separately for each Fund on each day on
which shares are offered for sale and orders accepted or upon receipt of a
redemption request. Net asset value per share is computed by dividing the value
of a Fund's total assets (which includes the value of the Fund's investment in
its corresponding Portfolio), less liabilities, by the number of Fund shares
outstanding. With respect to a class of the Money Market Mileage Fund, price per
share is computed by dividing the value of the Class' pro rata allocation of the
Fund's investments and other assets, less liabilities, by the number of Class
shares outstanding.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Manager and the Trust entered into a Management Agreement which
obligates the Manager to provide or oversee administrative and management
services to the Funds. As compensation for performing the duties required under
the Management Agreement, the Manager receives an annualized fee of .25% of the
average daily net assets of the Balanced, Growth and Income, International
Equity and Limited-Term Income Mileage Funds and .05% of the net assets of each
of the Money Market Funds.
Administrative Services Plan
The Trust has adopted an Administrative Services Plan with respect to the
Platinum Class of the Money Market Mileage Fund. As compensation for providing
administrative services, the Manager receives an annual fee of .55% of the
average daily net assets of the Money Market Mileage Fund - Platinum Class.
Distribution Plan
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Act. A separate plan has been adopted by the Mileage Class and
Platinum Class of the Money Market Mileage Fund. Under the Plan, as compensation
for distribution assistance, the Manager receives an annual fee of .25% of the
average daily net assets of each Class or Fund. The fee will be payable without
regard to whether the amount of the fee is more or less than the actual expenses
incurred in a particular month by the Manager for distribution assistance.
During the year ended October 31, 1997, the Manager waived distribution fees
totaling $7,631, $19,488, $7,028, $2,623, $32,810 and $22,157 for the Balanced,
Growth and Income, International Equity, Limited-Term Income, Municipal Money
Market and
16
<PAGE> 18
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
U.S. Government Money Market Mileage Funds, respectively. During the same
period, the Manager waived $68,843 and $14,291 for the Money Market Mileage
Fund - Mileage Class and the Money Market Mileage Fund - Platinum Class,
respectively.
Other
Certain officers or trustees of the Trust are also officers of the Manager
or American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided free unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. For
the year ended October 31, 1997, the cost of air transportation was not material
to any of the Funds.
Reimbursement of Expenses
For the year ended October 31, 1997, the Manager reimbursed expenses
totaling $18,160, $7,624, $2,095 and $20,084 for the Balanced, Growth and
Income, International Equity and Limited-Term Income Mileage Funds,
respectively.
3. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares of the Funds (in
thousands). Each share of the Money Market Mileage Funds is valued at $1.00:
Year Ended October 31, 1997
<TABLE>
<CAPTION>
Growth and International Limited-Term
Balanced Income Equity Income
Mileage Fund Mileage Fund Mileage Fund Mileage Fund
----------------- ----------------- ----------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............................. 49 $ 830 502 $10,940 135 $ 2,290 50 $ 483
Reinvestment of dividends............... 7 107 13 252 5 84 7 65
Shares redeemed......................... (24) (414) (310) (6,640) (66) (1,114) (50) (485)
------- ------- ------- ------- ------- ------- ------- -------
Net increase in capital shares
outstanding........................... 32 $ 523 205 $ 4,552 74 $ 1,260 7 $ 63
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Money Market
Mileage Fund Municipal U.S. Government
------------------------------ Money Market Money Market
Mileage Class Platinum Class Mileage Fund Mileage Fund
------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold........................................... 85,725 65,931 20,081 28,992
Reinvestment of dividends............................. 5,027 1,101 819 575
Shares redeemed....................................... (92,514) (33,277) (23,062) (11,414)
------- ------- ------- -------
Net increase (decrease) in capital shares
outstanding......................................... (1,762) 33,755 (2,162) 18,153
======= ======= ======= =======
</TABLE>
17
<PAGE> 19
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
Year Ended October 31, 1996
<TABLE>
<CAPTION>
Growth and International Limited-Term
Balanced Income Equity Income
Mileage Fund Mileage Fund Mileage Fund Mileage Fund
----------------- ----------------- ----------------- -----------------
Shares Amount Shares Amount Shares Amount Shares Amount
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............................. 182 $ 2,652 514 $ 8,945 281 $ 3,953 178 $ 1,752
Reinvestment of dividends............... 1 8 1 14 1 7 7 64
Shares redeemed......................... (27) (407) (193) (3,521) (61) (876) (64) (616)
------- ------- ------- ------- ------- ------- ------- -------
Net increase in capital shares
outstanding........................... 156 $ 2,253 322 $ 5,438 221 $ 3,084 121 $ 1,200
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Money Market
Mileage Fund Municipal U.S. Government
------------------------------ Money Market Money Market
Mileage Class Platinum Class Mileage Fund Mileage Fund
------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold........................................... 214,459 26,197 47,645 16,949
Reinvestment of dividends............................. 4,392 332 638 347
Shares redeemed....................................... (112,236) (11,100) (19,558) (6,659)
-------- ------- ------- ------
Net increase in capital shares outstanding............ 106,615 15,429 28,725 10,637
======== ======= ======= ======
</TABLE>
18
<PAGE> 20
(This page intentionally left blank)
19
<PAGE> 21
AMERICAN AADVANTAGE MILEAGE FUNDS
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Growth and Income International Equity
------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended
October 31, October 31, October 31,
------------------------- ------------------------- -------------------------
1997 1996(1) 1997 1996(1) 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period(4)............................. $16.01 $13.97 $19.35 $15.94 $15.31 $13.15
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income(5)............ 0.58 0.49 0.31 0.34 0.25 0.20
Net gains (losses) on securities
(both realized and
unrealized)(5).................... 2.44 1.65 4.87 3.16 2.52 2.03
------ ------ ------ ------ ------ ------
Total from investment operations........ 3.02 2.14 5.18 3.50 2.77 2.23
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income............................ (0.49) (0.10) (0.34) (0.09) (0.18) (0.07)
Distributions from net realized
gains on securities............... (0.22) - (0.47) - (0.23) -
------ ------ ------ ------ ------ ------
Total distributions..................... (0.71) (0.10) (0.81) (0.09) (0.41) (0.07)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $18.32 $16.01 $23.72 $19.35 $17.67 $15.31
====== ====== ====== ====== ====== ======
Total return (annualized)(6)............ 19.52% 15.97% 27.60% 22.77% 18.44% 16.58%
====== ====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in
thousands)........................ $3,437 $2,495 $12,513 $6,234 $5,219 $3,387
Ratios to average net assets
(annualized)(5)(6):
Expenses....................... 0.99% 1.01% 0.99% 1.00% 1.47% 1.48%
Net investment income.......... 3.45% 3.58% 1.78% 2.13% 1.61% 1.63%
</TABLE>
- ---------------
(1) Capital Guardian Trust Company was replaced by Brandywine Asset Management
as an investment adviser to the Balanced and Growth and Income Funds on
April 1, 1996.
(2) The Platinum Class of the Money Market Mileage Fund commenced active
operations on January 29, 1996 and at that time the existing shares of the
Fund were designated as Mileage Class shares.
(3) Prior to March 1, 1997, the American AAdvantage U.S. Government Money Market
Mileage Fund was known as the American AAdvantage U.S. Treasury Money Market
Mileage Fund and operated under different investment policies.
(4) The net asset value per share for the Balanced, Growth and Income,
International Equity and Limited Term Income Mileage Funds has been adjusted
for a stock split which occurred on November 1, 1995 in the ratio of
1.43169, 1.254705, 1.520913 and 2.034588, respectively.
(5) The per share amounts and ratios reflect income and expenses assuming
inclusion of each Fund's proportionate share of the income and expenses of
the respective AMR Investment Services Portfolio.
(6) Operating results in the year and period indicated below excluded expenses
reimbursed by the Manager. Results prior to expense reimbursements were as
follows:
<TABLE>
<CAPTION>
Balanced Growth and Income International Equity
------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended
October 31, October 31, October 31,
------------------------- ------------------------- -------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets
(annualized)............................ 1.83% 2.93% 1.31% 1.88% 1.68% 2.71%
Ratio of net investment income to average
net assets (annualized)................. 2.61% 1.66% 1.46% 1.25% 1.40% 0.40%
</TABLE>
20
<PAGE> 22
AMERICAN AADVANTAGE MILEAGE FUNDS
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Municipal Money U.S. Government
Limited-Term Income Money Market(2) Market Money Market(3)
- ------------------- ----------------------------------------------- ----------------- -----------------
Mileage Class Platinum Class
------------------- -------------------------
Year Ended Year Ended January 29, Year Ended Year Ended
October 31, October 31, Year Ended to October 31, October 31,
- ------------------- ------------------- October 31, October 31, ----------------- -----------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- -------- -------- -------- -------- ----------- ----------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.65 $ 9.83 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ -------- -------- ------- ------- ------- ------- ------- -------
0.61 0.59 0.05 0.05 0.05 0.03 0.03 0.03 0.05 0.05
(0.05) (0.18) - - - - - - - -
------ ------ -------- -------- ------- ------- ------- ------- ------- -------
0.56 0.41 0.05 0.05 0.05 0.03 0.03 0.03 0.05 0.05
------ ------ -------- -------- ------- ------- ------- ------- ------- -------
(0.61) (0.59) (0.05) (0.05) (0.05) (0.03) (0.03) (0.03) (0.05) (0.05)
- - - - - - - - - -
------ ------ -------- -------- ------- ------- ------- ------- ------- -------
(0.61) (0.59) (0.05) (0.05) (0.05) (0.03) (0.03) (0.03) (0.05) (0.05)
------ ------ -------- -------- ------- ------- ------- ------- ------- -------
$ 9.60 $ 9.65 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======== ======== ======= ======= ======= ======= ======= =======
5.90% 4.55% 5.14% 5.12% 4.71% 4.78% 3.18% 3.19% 5.00% 4.98%
====== ====== ======== ======== ======= ======= ======= ======= ======= =======
$1,226 $1,168 $104,947 $106,709 $49,184 $15,429 $26,564 $28,726 $28,791 $10,638
0.85% 0.86% 0.67% 0.67% 1.09% 1.09% 0.65% 0.66% 0.62% 0.62%
6.37% 6.08% 5.02% 5.02% 4.64% 4.48% 3.13% 3.14% 4.91% 4.82%
</TABLE>
<TABLE>
<CAPTION>
Municipal Money U.S. Government
Limited-Term Income Money Market Market Money Market
- ------------------- ------------------------------------------- --------------- ---------------
Mileage Class Platinum Class
--------------- -------------------------
Year Ended Year Ended January 29, Year Ended Year Ended
October 31, October 31, Year Ended to October 31, October 31,
- ------------------- --------------- October 31, October 31, --------------- ---------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- -------- -------- ------ ------ ----------- ----------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.01% 3.19% 0.74% 0.78% 1.14% 1.24% 0.78% 0.80% 0.78% 1.11%
4.21% 3.75% 4.95% 4.91% 4.59% 4.33% 3.00% 3.00% 4.75% 4.33%
</TABLE>
21
<PAGE> 23
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
AMR Investment Services Balanced Portfolio
AMR Investment Services Growth and Income Portfolio
AMR Investment Services International Equity Portfolio
AMR Investment Services Limited-Term Income Portfolio
AMR Investment Services Money Market Portfolio
AMR Investment Services Municipal Money Market Portfolio
AMR Investment Services U.S. Government Money Market Portfolio
We have audited the accompanying statements of assets and liabilities of
the AMR Investment Services Balanced Portfolio, the AMR Investment Services
Growth and Income Portfolio, the AMR Investment Services International Equity
Portfolio, the AMR Investment Services Limited-Term Income Portfolio, the AMR
Investment Services Money Market Portfolio, the AMR Investment Services
Municipal Money Market Portfolio, and the AMR Investment Services U.S.
Government Money Market Portfolio (collectively, "the Portfolios") (separate
portfolios comprising the AMR Investment Services Trust), including the
schedules of investments as of October 31, 1997, and the related statements of
operations, the statements of changes in net assets, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Portfolios' management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the portfolios of the AMR Investment Services Trust at October 31, 1997,
the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
December 19, 1997
22
<PAGE> 24
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 18.96%
U.S. TREASURY BILLS - 1.05%
5.11%, Due 11/13/1997.......... $ 10,000 $ 9,985
----------
TOTAL U.S. TREASURY
BILLS.................... 9,985
----------
U.S. TREASURY BONDS - 4.44%
11.625%, Due 11/15/2004........ 4,000 5,306
10.375%, Due 11/15/2012........ 3,260 4,305
8.75%, Due 5/15/2017........... 1,420 1,825
8.125%, Due 8/15/2019.......... 4,485 5,491
8.75%, Due 8/15/2020........... 2,525 3,293
7.25%, Due 8/15/2022........... 12,000 13,515
6.75%, Due 8/15/2026........... 7,270 7,811
6.625%, Due 2/15/2027.......... 725 769
----------
TOTAL U.S. TREASURY
BONDS.................... 42,315
----------
U.S. TREASURY COUPON STRIPS - 1.44%
Due 11/15/2008................. 796 409
Due 5/15/2011.................. 4,000 1,746
Due 2/15/2016.................. 17,000 5,450
Due 11/15/2018................. 23,000 6,164
----------
TOTAL U.S. TREASURY COUPON
STRIPS................... 13,769
----------
U.S. TREASURY NOTES - 12.03%
5.125%, Due 11/30/1998......... 9,225 9,182
5.625%, Due 11/30/1998......... 6,000 6,002
5.125%, Due 12/31/1998......... 1,000 995
5.875%, Due 3/31/1999.......... 2,750 2,759
5.875%, Due 2/28/1999.......... 6,160 6,175
6.375%, Due 5/15/1999.......... 3,000 3,032
5.875%, Due 8/31/1999.......... 3,500 3,513
7.125%, Due 9/30/1999.......... 100 103
5.875%, Due 6/30/2000.......... 960 965
6.00%, Due 8/15/2000........... 2,000 2,016
6.125%, Due 9/30/2000.......... 5,770 5,833
8.50%, Due 11/15/2000.......... 5,500 5,921
5.625%, Due 11/30/2000......... 3,000 2,992
7.75%, Due 2/15/2001........... 8,800 9,325
6.375%, Due 3/31/2001.......... 2,000 2,039
6.50%, Due 5/31/2001........... 6,000 6,146
7.50%, Due 11/15/2001.......... 2,000 2,124
7.50%, Due 5/15/2002........... 2,000 2,138
6.375%, Due 8/15/2002.......... 6,250 6,410
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
6.25%, Due 2/15/2003........... $ 1,000 $ 1,021
5.75%, Due 8/15/2003........... 2,000 1,994
7.25%, Due 8/15/2004........... 1,500 1,616
7.875%, Due 11/15/2004......... 2,000 2,229
6.50%, Due 5/15/2005........... 5,000 5,184
6.50%, Due 8/15/2005........... 3,000 3,111
6.875%, Due 5/15/2006.......... 2,000 2,128
7.00%, Due 7/15/2006........... 8,025 8,609
6.125%, Due 8/15/2007.......... 4,000 4,088
6.25%, Due 8/15/2023........... 5,650 5,664
6.50%, Due 11/15/2026.......... 1,350 1,407
----------
TOTAL U.S. TREASURY
NOTES.................... 114,721
----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS....... 180,790
----------
U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS - 4.54%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 0.85%
Series 1194G, 6.50%,
Due 10/15/2006............... 1,500 1,509
Pool #E20271, 7.00%,
Due 11/1/2011................ 1,474 1,494
Series 1250F, 7.00%,
Due 4/15/2019................ 494 495
Pool #C00436, 7.50%,
Due 12/1/2025................ 4,503 4,599
----------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION..... 8,097
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 2.95%
Series 1993-85E, 6.50%,
Due 11/25/2007............... 1,558 1,549
Series 1349PG, 6.50%,
Due 5/15/2014................ 303 303
Pool #66185, 6.366%,
Due 7/1/2018................. 1,701 1,666
Series 1992-143G, 6.75%,
Due 10/25/2018............... 317 317
Series 1989-21G, 10.45%,
Due 4/25/2019................ 173 191
Discount Note, 0.00%,
Due 10/9/2019................ 2,950 714
Pool #218949, 7.50%,
Due 12/1/2023................ 693 705
</TABLE>
See accompanying notes
23
<PAGE> 25
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Pool #266196, 7.345%,
Due 1/1/2024................. $ 1,304 $ 1,324
Pool #306505, 8.00%,
Due 3/1/2025................. 1,216 1,259
Pool #308798, 7.277%,
Due 4/1/2025................. 231 241
Pool #339141, 7.00%,
Due 3/1/2026................. 3,369 3,377
TBA, 7.50%,
Due 1/21/1999................ 11,220 11,515
TBA, 7.00%,
Due 11/1/2026................ 2,470 2,478
TBA, 6.50%,
Due 11/1/2026................ 2,520 2,477
----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION..... 28,116
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.74%
Pool #102932, 10.50%,
Due 9/15/1998................ 3 3
Series 1994-2 CIO, 7.99125%,
Due 4/16/2010................ 985 992
Pool #180220, 9.00%,
Due 10/15/2016............... 817 872
Pool #1849, 8.50%,
Due 8/20/2024................ 453 471
TBA, 7.50%,
Due 10/15/2027............... 4,600 4,705
----------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION 7,043
----------
TOTAL U.S. AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 43,256
----------
ASSET-BACKED SECURITIES - 1.47%
Amresco Commercial Mortgage
Funding I, Series 1997-C1 A3,
7.19%, Due 6/17/2029......... 1,510 1,575
Asset Securitization
Corporation, Series 1997-D5
A1C, 6.75%, Due 2/14/2041.... 2,000 2,019
Chase Commercial Mortgage
Securities Corporation,
Series 1997-1 A2, 7.3%,
Due 2/19/2007................ 1,100 1,158
Chase Manhattan Auto Owner Trust,
1996-C A3, 5.95%,
Due 11/15/2000............... 850 852
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Chase Manhattan Credit Card
Master Trust, 1996-4A, 6.73%,
Due 2/15/2003................ $ 1,550 $ 1,571
ContiMortgage Home Equity
Loan Trust, 1994-4 A2, 7.96%,
Due 9/15/2009................ 876 887
CS First Boston Mortgage
Securities Corporation,
Series 1997-C1 A1C, 7.24%,
Due 4/20/2007................ 3,000 3,133
NationsBank Auto Owner Trust,
1996-A A3, 6.375%,
Due 7/15/2000................ 2,550 2,564
Western Financial Grantor
Trust, 1994-3 A2, 6.65%, Due
12/1/1999.................... 224 225
----------
TOTAL ASSET-BACKED
SECURITIES............... 13,984
----------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.05%
CFS, Series 1997-5 A1, 7.72%,
Due 6/15/2005................ 1,788 1,788
Champion Auto Grantor Trust,
Series 1997D-A, 6.27%,
Due 9/15/2002................ 1,106 1,106
Citicorp Mortgage Securities,
Incorporated,
1987-14 A1, 9.50%,
Due 9/25/2002.............. 438 436
1987-5 A1, 8.50%,
Due 4/25/2017.............. 505 503
DLJ Mortgage Acceptance
Corporation, 1994-Q1 2A1,
4.56029%, Due 3/25/2024...... 262 261
General Electric Capital
Mortgage Services,
Incorporated, 1992-4A A4,
8.00%, Due 4/25/2022......... 455 460
Green Tree Financial
Corporation, 1996-8 A4,
7.00%,
Due 10/15/2027............... 1,300 1,337
Independent National Mortgage
Corporation, 1995-F A5,
8.25%, Due 5/25/2010......... 600 629
The Money Store Home Equity
Trust, Series 1996 A-A8,
7.66%,
Due 8/15/2026................ 1,500 1,582
Olympic Automobile Receivables
Trust, Series 1995A, 7.875%,
Due 7/15/2001................ 733 744
Residential Asset
Securitization Trust, 1996-A3
A11, 7.50%,
Due 7/25/2011................ 845 861
</TABLE>
See accompanying notes
24
<PAGE> 26
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Residential Funding Mortgage 1,
1993-S28 A4, 6.35%,
Due 8/25/2023................ $ 300 $ 299
----------
TOTAL NON-AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 10,006
----------
CORPORATE BONDS - 15.05%
FINANCIAL - 6.36%
Associates Corporation of North America,
5.96%, Due 5/15/2037......... 1,750 1,777
BankAmerica Corporation, 9.75%,
Due 7/1/2000................. 600 653
Bankers Trust New York, 8.25%,
Due 5/1/2005................. 980 1,071
Bank One Corporation, 7.60%,
Due 5/1/2007................. 2,300 2,452
BanPonce, 8.327%, Due
2/1/2027..................... 1,000 1,055
CIT Group Holdings, 6.375%,
Due 5/21/1999................ 750 756
Capital One Bank
8.125%, Due 3/1/2000......... 1,690 1,758
7.35%, Due 6/20/2000......... 385 395
Chase Manhattan Corporation,
8.625%, Due 5/1/2002......... 700 763
Chemical New York Corporation,
9.75%, Due 6/15/1999......... 900 951
China International Trust,
9.00%,
Due 10/15/2006............... 1,100 1,163
Chrysler Financial Corporation,
6.95%, Due 3/25/2002......... 2,700 2,775
First Chicago Capital I,
6.4938%, Due 2/1/2027........ 2,000 1,949
First Chicago NBD, 9.875%, Due
8/15/2000.................... 1,000 1,094
First Union Corporation, 7.85%,
Due 1/1/2027................. 1,650 1,696
Fleet Financial Corporation,
7.92%, Due 12/11/2026........ 1,180 1,214
Ford Motor Credit Company,
7.95%, Due 5/17/1999......... 2,000 2,058
6.375%, Due 9/15/1999........ 1,000 1,007
7.75%, Due 11/15/2002........ 360 383
General Electric Capital Corporation,
7.875%, Due 12/1/2006........ 1,000 1,104
Lehman Brothers Holding, Incorporated,
7.41%, Due 5/25/1999......... 500 509
6.09%, Due 11/6/2000......... 3,000 3,005
7.375%, Due 5/15/2004........ 1,125 1,166
Mellon Capital, Incorporated,
7.72%, Due 12/1/2026......... 890 904
7.995%, Due 1/15/2027........ 1,490 1,551
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Merrill Lynch Mortgage
Investors, 7.12%, Due
6/18/2029.................... $ 660 $ 693
Mortgage Capital Funding,
Incorporated, 6.758%, Due
2/20/2004.................... 668 679
National Bank of Detroit,
7.125%, Due 5/15/2007........ 700 725
NationsBank Corporation,
7.00%, Due 9/15/2001......... 1,000 1,027
NWA Trust, 11.30%, Due
12/21/2012................... 1,971 2,546
Paine Webber, 7.74%, Due
1/30/2012.................... 2,200 2,392
PNC Funding Corporation,
6.875%, Due 7/15/2007........ 1,500 1,522
Sears Roebuck Acceptance
Corporation,
6.60%, Due 10/9/2001......... 4,270 4,320
6.71%, Due 9/17/2003......... 2,710 2,750
Simon Debartolo Group LP,
6.75%, Due 7/15/2004......... 750 749
6.875%, Due 10/27/2005....... 1,060 1,066
Spieker Properties Corporation,
8.00%, Due 7/19/2005......... 290 314
7.125%, Due 12/1/2006........ 260 266
Travelers/Aetna Property and Casualty,
6.75%, Due 4/15/2001......... 2,600 2,642
United Dominion Realty Corporation,
7.25%, Due 1/15/2007......... 1,000 1,032
Wells Fargo Capital,
7.96%, Due 12/15/2026........ 4,570 4,707
----------
TOTAL FINANCIAL............ 60,639
----------
INDUSTRIAL - 5.81%
A.H. Belo Corporation, 7.25%,
Due 9/15/2027................ 930 933
Atlantic Richfield Corporation,
8.50%, Due 4/1/2012.......... 1,270 1,518
9.875%, Due 3/1/2016......... 700 923
Bemis Company, Incorporated,
6.70% Due 7/1/2005........... 1,000 1,010
Capital Cities/ABC, 8.875%, Due
12/15/2000................... 1,000 1,078
Caterpillar Finance, 6.32%, Due
9/1/2000..................... 2,500 2,511
Coca-Cola Company, 6.625%, Due
10/1/2002.................... 1,000 1,020
Coca-Cola Enterprises, 6.70%,
Due 10/15/2036............... 1,120 1,151
Comcast Cable Communication,
144A, 8.375%, Due 5/1/2007
(Note B)..................... 4,000 4,435
CSX Corporation, 7.05%, Due
5/1/2002..................... 2,000 2,050
</TABLE>
See accompanying notes
25
<PAGE> 27
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Dresser Industries, 6.25%, Due
6/1/2000..................... $ 2,000 $ 2,012
E.I. DuPont de Nemours & Company,
6.75%, Due 10/15/2002........ 1,000 1,024
Exxon Capital Corporation,
7.45%, Due 12/15/2001........ 1,000 1,051
Halliburton Company, 7.53%, Due
5/12/2017.................... 905 970
Hershey Foods Company,
6.95%, Due 3/1/2007.......... 1,000 1,045
Hilton Hotels Corporation,
7.00%, Due 7/15/2004......... 2,180 2,196
7.95%, Due 4/15/2007......... 1,430 1,526
International Business
Machines, Incorporated,
7.125%, Due 12/1/2096........ 2,090 2,099
Keycorp, 7.826%, Due
12/1/2026.................... 2,000 2,036
The May Department Store
Company, 7.625%,
Due 8/15/2013................ 1,890 2,020
McDonald's Corporation, 6.50%,
Due 8/1/2007................. 1,000 1,013
Millipore Corporation, 7.50%,
Due 4/1/2007................. 700 740
Norfolk Southern, 7.80%,
Due 5/15/2027................ 1,680 1,820
Oracle Corporation, 6.91%, Due
2/15/2007.................... 1,250 1,279
Petroleum Geo-Services Corporation,
7.50%, Due 3/31/2007......... 1,610 1,691
Petroleum National, 144A,
7.125% Due 10/18/2006 (Note
B)........................... 3,000 2,882
Philip Morris Companies,
Incorporated,
8.25%, Due 10/15/2003........ 4,540 4,902
8.375%, Due 1/15/2017........ 625 641
Phillips 66 Capital 11
Corporation, 8.00%, Due
1/15/2037.................... 1,270 1,313
Service Corporation
International, 7.70%, Due
4/15/2009.................... 1,440 1,552
Stop & Shop Companies, 9.75%,
Due 2/1/2002................. 2,000 2,238
Sysco Corporation, 7.00%, Due
5/1/2006..................... 1,000 1,040
Texaco Cap, MTN, 6.19%, Due
7/9/2003..................... 750 743
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Walt Disney, Incorporated,
6.75%, Due 3/30/2006......... $ 1,000 $ 1,017
----------
TOTAL INDUSTRIAL........... 55,479
----------
UTILITY - 0.37%
General Telephone Southwest,
Incorporated, 8.50%, Due
11/15/2031................... 600 722
Southern California Edison
Company, 8.25%, Due
2/1/2000..................... 1,425 1,489
U.S. West Capital Funding,
6.85%, Due 1/15/2002......... 1,300 1,287
----------
TOTAL UTILITY.............. 3,531
----------
FOREIGN BONDS - 2.51%
BCH Cayman Islands Limited,
7.70%, Due 7/15/2006......... 2,080 2,200
Fokus Bank AS, Variable Rate,
Due 9/29/2004................ 1,600 1,616
Enersis SA, 6.90%, Due
12/1/2006.................... 1,500 1,516
European Investment Bank,
Due 11/6/2026................ 7,650 1,167
Foreningsbanken, Variable Rate,
Due 12/29/2049............... 3,000 3,019
Hydro-Quebec,
9.40%, Due 2/1/2021.......... 660 832
7.91%, Due 11/18/2024........ 670 814
Korea Development Bank,
5.875%, Due 12/1/1998........ 100 98
6.25%, Due 5/1/2000.......... 770 742
Midland Bank PLC, 7.625%, Due
6/15/2006.................... 910 971
Nordbanken, Variable Rate,
Due 10/29/2049............... 3,000 3,000
Potash Corporation Saskatchewan,
7.125%, Due 6/15/2007........ 630 652
Province of Quebec,
7.00%, Due 1/30/2007......... 1,750 1,802
5.735%, Due 3/2/2026......... 890 881
Santander Financial Issuance
Limited,
7.75%, Due 5/15/2005......... 250 267
7.00%, Due 4/1/2006.......... 460 471
</TABLE>
See accompanying notes
26
<PAGE> 28
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Skandinaviska Enskilda Banken,
Floating Rate, 6.71875%, Due
6/29/2049.................... $ 3,800 $ 3,876
----------
TOTAL FOREIGN BONDS........ 23,924
----------
TOTAL CORPORATE BONDS...... 143,573
----------
Shares
--------
PREFERRED STOCK - 0.16%
Home Ownership Funding 2,
Series 144A (Note B)......... 1,500 1,493
----------
TOTAL PREFERRED STOCK...... 1,493
----------
COMMON STOCK - 56.29%
FOREIGN STOCKS - 2.21%
Ace, Limited................... 20,400 1,896
British Petroleum PLC, ADR..... 20,251 1,777
Denison International PLC ADR
(non-income producing)....... 2,500 47
Elf Aquitane SA ADR............ 53,100 3,279
Energy Group PLC............... 34,150 1,379
Gallaher Group PLC, ADR (non-
income producing)............ 79,400 1,523
Groupe AB SA, ADR (non-income
producing)................... 38,720 288
Hanson PLC, ADR................ 34,150 871
Imperial Tobacco Group PLC..... 23,300 286
Mid Ocean, Limited............. 23,000 1,492
Millenium Chemicals,
Incorporated................. 24,171 568
New Holland, N.V............... 65,000 1,848
Royal Dutch Petroleum Company,
New York Registry............ 112,100 5,899
----------
TOTAL FOREIGN
STOCKS................... 21,153
----------
CONSUMER STAPLES - 7.05%
DEPARTMENT AND MAIL ORDER - 1.54%
Friedman's, Incorporated (non-
income producing)............ 19,300 344
J.C. Penney Company,
Incorporated................. 75,700 4,443
K Mart Corporation............. 294,500 3,884
Marks Brothers Jewelers,
Incorporated (non-income
producing)................... 3,100 50
Sears Roebuck & Company........ 124,700 5,222
Tupperware, Incorporated....... 30,000 752
----------
TOTAL DEPARTMENT AND MAIL
ORDER.................... 14,695
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
DISTILLERS AND BREWERS - 0.56%
Anheuser-Busch Companies,
Incorporated................. 127,400 $ 5,088
Brown-Foreman, Incorporated.... 5,575 274
----------
TOTAL DISTILLERS AND
BREWERS.................. 5,362
----------
DRUGS AND HOSPITAL SUPPLY - 1.10%
American Home Products
Corporation.................. 30,000 2,224
Apria Healthcare Group (non-
income producing)............ 4,237 64
Baxter International,
Incorporated................. 32,000 1,480
Bristol-Myers Squibb Company... 25,400 2,229
Foundation Health Systems...... 65,500 1,883
Healthcare Services Group (non-
income producing)............ 583 7
Integrated Health Services..... 379 12
Pharmacia & Upjohn,
Incorporated................. 82,300 2,613
----------
TOTAL DRUGS AND HOSPITAL
SUPPLY................... 10,512
----------
FOODS - 0.18%
Dominick's Supermarkets
Incorporated (non-income
producing)................... 11,500 420
Nabisco Holdings Corporation,
Class A...................... 31,975 1,315
----------
TOTAL FOODS................ 1,735
----------
LEISURE - 0.72%
American Coin Merchandising,
Incorporated (non-income
producing)................... 17,200 281
Hasbro, Incorporated........... 44,525 1,291
Mattel, Incorporated........... 100,850 3,921
Toys R Us, Incorporated........ 40,500 1,380
----------
TOTAL LEISURE.............. 6,873
----------
PUBLISHING - 0.44%
A.H. Belo, Incorporated, Class A 71,425 3,375
Playboy Enterprises............ 12,800 177
Readers Digest Association,
Incorporated................. 28,000 637
----------
TOTAL PUBLISHING........... 4,189
----------
RETAIL - OTHER - 0.01%
Intimate Brands,
Incorporated................. 6,645 142
----------
TOTAL RETAIL - OTHER....... 142
----------
SERVICES - 0.24%
Mac-Gray Corporation (non-
income producing)............ 8,800 130
</TABLE>
See accompanying notes
27
<PAGE> 29
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Transcoastal Marine Services,
Incorporated (non-income 2,700 $ 67
producing)...................
Wackenhut Corporation.......... 3,100 62
Waste Management,
Incorporated................. 86,200 1,999
----------
TOTAL SERVICES............. 2,258
----------
TOBACCO - 1.75%
Fortune Brands, Incorporated... 50,000 1,653
Philip Morris Companies,
Incorporated................. 299,850 11,882
RJR Nabisco Holdings........... 98,350 3,116
----------
TOTAL TOBACCO.............. 16,651
----------
MISCELLANEOUS - CONSUMER STAPLES - 0.51%
Nine West Group,
Incorporated................. 62 2,194
Pittston Company............... 53 1,922
Russell Corporation............ 25 734
----------
TOTAL MISCELLANEOUS -
CONSUMER STAPLES......... 4,850
----------
TOTAL CONSUMER STAPLES..... 67,267
----------
INTEREST SENSITIVE - 20.16%
BANKS - 5.78%
Banc One Corporation........... 42,400 2,210
BankAmerica Corporation........ 135,300 9,674
Bankers Trust Company
New York..................... 69,550 8,207
Chase Manhattan Corporation.... 119,000 13,730
CoreStates Financial Corporation... 15,000 1,091
Corus Bankshares,
Incorporated................. 6,400 224
First Chicago NBD.............. 100,281 7,295
First of America Bank
Corporation.................. 33,000 1,840
First Security Corporation..... 70,000 2,030
Fleet Financial Group,
Incorporated................. 38,000 2,444
J.P. Morgan & Company,
Incorporated................. 20,675 2,269
PNC Bank Corporation........... 86,200 4,095
Washington Federal,
Incorporated................. 690 20
----------
TOTAL BANKS................ 55,129
----------
BUILDING AND MATERIALS - 0.35%
Giant Cement Holding,
Incorporated (non-income
producing)................... 2,888 70
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
NCI Building Systems,
Incorporated (non-income 5,025 $ 183
producing)...................
PPG Industries, Incorporated... 54,500 3,086
----------
TOTAL BUILDING AND
MATERIALS................ 3,339
----------
FINANCE - 1.21%
Beneficial Corporation......... 29,000 2,224
Brandywine Realty Trust........ 4,100 96
First USA Paymentech........... 6,900 122
Household International,
Incorporated................. 20,000 2,265
MGI Properties, Incorporated... 3,897 90
Paine Webber Group,
Incorporated................. 58,900 2,603
The PMI Group, Incorporated.... 20,000 1,209
Redwood Trust, Incorporated.... 8,500 214
Washington Mutual,
Incorporated................. 40,000 2,738
----------
TOTAL FINANCE.............. 11,561
----------
INSURANCE - LIFE AND MULTI-LINE - 2.03%
American Financial Group,
Incorporated................. 57,275 2,180
American General Corporation... 28,600 1,459
Aon Corporation................ 126,450 6,820
FPIC Insurance Group (non-
income producing)............ 2,947 88
Lincoln National Corporation... 30,000 2,063
Old Republic International
Corporation.................. 65,950 2,358
Travelers Corporation.......... 62,337 4,364
----------
TOTAL INSURANCE - LIFE AND
MULTI-LINE............... 19,332
----------
INSURANCE - PROPERTY AND CASUALTY - 1.49%
Allstate Corporation........... 51,800 4,296
Chubb Corporation.............. 59,000 3,909
IPC Holdings, Limited.......... 6,830 210
Liberty Corporation............ 2,900 124
Mutual Risk Management,
Limited...................... 8,400 218
Nac Re Corporation............. 2,800 125
Safeco Corporation............. 25,000 1,191
TIG Holdings, Incorporated..... 122,000 4,133
----------
TOTAL INSURANCE - PROPERTY
AND CASUALTY............. 14,206
----------
SAVINGS AND LOAN - 0.28%
Coastal Bancorp,
Incorporated................. 717 20
H.F. Ahmanson & Company........ 45,000 2,655
----------
TOTAL SAVINGS AND LOAN..... 2,675
----------
</TABLE>
See accompanying notes
28
<PAGE> 30
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UTILITIES - ELECTRIC - 3.77%
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Central and Southwest
Corporation.................. 37,600 $ 811
CMS Energy Corporation......... 50,000 1,825
DTE Energy Company............. 109,700 3,373
Edison International........... 65,000 1,666
Entergy Corporation............ 329,200 8,045
Houston Industries,
Incorporated................. 78,500 1,707
Illinova Corporation........... 75,000 1,669
Northeast Utilities............ 359,400 4,133
Peco Energy Company............ 58,000 1,316
Potomac Electric Power......... 44,400 996
PP&L Resources, Incorporated... 61,000 1,319
Public Service Enterprise
Group, Incorporated.......... 38,400 996
Rochester Gas and Electric,
Incorporated................. 30,000 756
Texas Utilities Company........ 36,000 1,292
Unicom Corporation............. 214,600 6,009
----------
TOTAL UTILITIES -
ELECTRIC................. 35,913
----------
UTILITIES - NATURAL GAS - 0.35%
Equitable Resources,
Incorporated................. 37,100 1,180
Peoples Energy Corporation..... 46,000 1,645
Williams Companies............. 10,500 535
----------
TOTAL UTILITIES - NATURAL
GAS...................... 3,360
----------
UTILITIES - TELEPHONE - 2.63%
Alltel Corporation............. 55,000 1,946
AT&T Corporation............... 58,000 2,838
Bell Atlantic Corporation...... 12,328 985
GTE Corporation................ 90,400 3,836
MCI Communications
Corporation.................. 35,400 1,257
SBC Communications............. 104,284 6,635
US West, Incorporated.......... 190,200 7,572
----------
TOTAL UTILITIES -
TELEPHONE................ 25,069
----------
MISCELLANEOUS - INTEREST
SENSITIVE - 2.27%
American Express Company....... 143,700 11,209
Federal Home Loan Mortgage
Corporation.................. 70,150 2,657
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Federal National Mortgage 98,225 $ 4,758
Association..................
Fund American Enterprises,
Incorporated................. 7,425 887
Morgan Stanley Dean Witter
Discover & Company........... 45,200 2,215
----------
TOTAL MISCELLANEOUS -
INTEREST SENSITIVE....... 21,726
----------
TOTAL INTEREST
SENSITIVE................ 192,310
----------
CONSUMER CYCLICALS - 4.90%
AUTOMOBILE AND TRUCK - 4.41%
Chrysler Corporation........... 154,800 5,457
Dana Corporation............... 159,900 7,485
Eaton Corporation.............. 20,000 1,933
First Brands Corporation....... 98,750 2,518
Ford Motor Company............. 349,600 15,273
General Motors Corporation..... 142,800 9,166
Meritor Automotive,
Incorporated................. 8,333 186
----------
TOTAL AUTOMOBILE AND
TRUCK.................... 42,018
----------
ELECTRICAL HOUSEHOLD EQUIPMENT - 0.24%
Whirlpool Corporation.......... 37,000 2,243
----------
TOTAL ELECTRICAL
HOUSEHOLD EQUIPMENT........ 2,243
----------
TEXTILE - APPAREL - 0.01%
Designer Holdings, Limited..... 16,000 138
----------
TOTAL TEXTILE - APPAREL.... 138
----------
TIRE AND RUBBER - 0.24%
Goodyear Tire & Rubber
Company...................... 35,800 2,242
----------
TOTAL TIRE AND RUBBER...... 2,242
----------
TOTAL CONSUMER CYCLICALS... 46,641
----------
INTERMEDIATE GOODS & SERVICES - 13.74%
CHEMICALS - 2.09%
ARCO Chemical Company.......... 30,000 1,466
The Carbide/Graphite Group
(non-income producing)....... 6,000 214
Dow Chemical................... 81,300 7,378
E.I. DuPont de Nemours &
Company...................... 32,000 1,820
Eastman Chemical Company....... 66,400 3,959
</TABLE>
See accompanying notes
29
<PAGE> 31
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
FMC Corporation (non-income 44,350 $ 3,584
producing)...................
Geon Corporation............... 5,100 111
Great Lakes Chemical
Corporation.................. 27,000 1,269
Wellman Industries, Incorporated... 8,700 177
----------
TOTAL CHEMICALS............ 19,978
----------
FOREST PRODUCTS - 1.55%
Boise Cascade Corporation...... 29,700 1,028
Georgia-Pacific Corporation.... 13,000 1,103
International Paper Company.... 134,500 6,053
Louisiana Pacific
Corporation.................. 59,200 1,243
Mead Corporation............... 22,000 1,331
Union Camp Corporation......... 29,000 1,571
Westvaco Corporation........... 20,000 656
Weyerhaeuser Company........... 37,000 1,767
----------
TOTAL FOREST PRODUCTS...... 14,752
----------
METALS - ALUMINUM - 0.49%
Alumax, Incorporated........... 80,000 2,600
Aluminum Company of America.... 24,000 1,752
Citation Corporation
(non-income producing)....... 10,996 187
Commonwealth Industries
Incorporated................. 3,400 60
Northwest Pipe Company (non-
income producing)............ 757 18
WHX Corporation (non-income
producing)................... 5,400 72
----------
TOTAL METALS - ALUMINUM.... 4,689
----------
NATURAL GAS TRANSMISSION - 0.30%
Coastal Corporation............ 34,325 2,064
El Paso Natural Gas Company.... 13,844 830
----------
TOTAL NATURAL GAS
TRANSMISSION............. 2,894
----------
OIL - 4.97%
Abraxas Petroleum Corporation
(non-income producing)....... 14,291 266
Amoco Corporation.............. 27,400 2,512
Atlantic Richfield
Corporation.................. 40,000 3,293
Burlington Resources........... 49,486 2,422
Chevron Corporation............ 17,000 1,410
Coho Energy, Incorporated (non-
income producing)............ 12,757 150
Exxon Corporation.............. 93,100 5,720
Mobil Corporation.............. 16,000 1,165
Occidental Petroleum
Corporation.................. 233 6,495
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Oryx Energy Company............ 89,125 $ 2,457
Phillips Petroleum Company..... 211,000 10,207
Tenneco, Incorporated.......... 94,700 4,256
Ultramar Diamond Shamrock
Corporation.................. 58,000 1,791
Union Pacific Resources Group,
Incorporated................. 108,800 2,679
Union Texas Petroleum Holdings,
Incorporated................. 111,900 2,546
----------
TOTAL OIL.................. 47,369
----------
OIL SERVICE - 1.04%
Baker Hughes, Incorporated..... 216,800 9,959
----------
TOTAL OIL SERVICE.......... 9,959
----------
TRANSPORTATION - 1.68%
Airnet Systems................. 6,800 139
Burlington Northern,
Incorporated................. 14,800 1,406
CSX Corporation................ 126,100 6,896
Norfolk Southern Corporation... 228,600 7,344
Teekay Shipping Corporation.... 5,992 192
----------
TOTAL
TRANSPORTATION........... 15,977
----------
MISCELLANEOUS - INTERMEDIATE
GOODS & SERVICES - 1.62%
Alliance Communications
Corporation.................. 5,900 72
Dresser Industries,
Incorporated................. 226,800 9,554
GATX Corporation............... 33,000 2,131
Harnischfeger Industries,
Incorporated................. 12,800 504
Lukens, Incorporated........... 5,600 101
Mapco, Incorporated............ 94,100 3,105
----------
TOTAL MISCELLANEOUS -
INTERMEDIATE GOODS &
SERVICES................. 15,467
----------
TOTAL INTERMEDIATE GOODS &
SERVICES................. 131,085
----------
CAPITAL GOODS - 8.23%
AEROSPACE - 3.22%
Avteam, Incorporated
(non-income producing)....... 8,100 69
Coltec Industries, Incorporated
(non-income producing)....... 101,800 2,036
Harsco Corporation............. 40,000 1,660
Lockheed Martin Corporation.... 103,888 9,876
Northrop Corporation........... 21,000 2,294
Raytheon Company............... 66,800 3,624
Rockwell International
Corporation.................. 30,000 1,470
</TABLE>
See accompanying notes
30
<PAGE> 32
AMR INVESTMENT SERVICES BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
Textron, Incorporated.......... 128,600 $ 7,435
Thiokol Corporation............ 24,550 2,248
----------
TOTAL AEROSPACE............ 30,712
----------
ELECTRICAL EQUIPMENT - 1.30%
Dover Corporation.............. 5,750 388
Honeywell, Incorporated........ 54,800 3,730
ITT Industries, Incorporated... 92,600 2,923
MEMC Electronic Materials,
Incorporated................. 55,600 1,115
Westinghouse Electric
Corporation.................. 161,500 4,270
----------
TOTAL ELECTRICAL
EQUIPMENT................ 12,426
----------
ELECTRONICS - INDUSTRIAL - 0.29%
Channell Commercial
Corporation (non-income
producing)................... 1,190 15
PG&E Corporation............... 10,000 256
Stoneridge, Incorporated
(non-income producing)....... 12,200 198
VLSI Technology, Incorporated
(non-income producing)....... 77,300 2,290
----------
TOTAL ELECTRONICS -
INDUSTRIAL............... 2,759
----------
MACHINERY - 1.25%
Caterpillar Tractor Company.... 18,000 923
Deere and Company.............. 160,000 8,420
Gleason Corporation............ 4,060 112
Millipore Corporation.......... 62,325 2,438
----------
TOTAL MACHINERY............ 11,893
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- ----------
(dollars in thousands)
<S> <C> <C>
OFFICE EQUIPMENT - 2.17%
Applied Magnetics Corporation
(non-income producing)....... 5,140 $ 118
Data General Corporation
(non-income producing)....... 3,200 62
Exabyte Corporation (non-income
producing)................... 10,495 111
Hutchinson Technology.......... 5,200 137
International Business Machines
Corporation.................. 67,000 6,570
Lexmark International Group,
Incorporated, Class A
(non-income producing)....... 31,200 954
Micros Systems, Incorporated
(non-income producing)....... 5,453 245
Seagate Technology............. 38,000 1,031
Storage Tech Group............. 21,200 1,244
Xerox Corporation.............. 128,700 10,208
----------
TOTAL OFFICE
EQUIPMENT................ 20,680
----------
TOTAL CAPITAL GOODS........ 78,470
----------
TOTAL COMMON STOCK......... 536,926
----------
Par
Amount
--------
SHORT-TERM INVESTMENTS (NOTE A) - 11.66%
AMR Investments Strategic Cash
Business Trust............... $ 66,635 66,635
Banque Paribas, Euro TD,
5.6875%, Due 11/3/1997....... 44,541 44,541
----------
TOTAL SHORT-TERM
INVESTMENTS.............. 111,176
----------
TOTAL INVESTMENTS - 109.18%
(COST $888,520).............. 1,041,204
----------
LIABILITIES, NET OF OTHER
ASSETS - (9.18%)............. (87,537)
----------
TOTAL NET ASSETS - 100%........ $ 953,667
==========
</TABLE>
- ---------------
Based on the cost of investments of $889,971 for federal income tax purposes at
October 31, 1997, the aggregate gross unrealized appreciation was $158,434, the
aggregate gross unrealized depreciation was $7,201 and the net unrealized
appreciation of investments was $151,233.
(A) Rates associated with short-term investments represent yield to maturity.
(B) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $8,810,000 or 0.9% of net assets.
ABBREVIATIONS:
ADR - American Depositary Receipt
AG - Company
BA - Bankers Acceptance
FRN - Floating Rate Note
NV - Company
PLC - Public Limited Corporation
SA - Company
TBA - To Be Announced
TD - Time Deposit
See accompanying notes
31
<PAGE> 33
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
COMMON STOCK - 98.25%
FOREIGN STOCKS - 4.01%
Ace, Limited.................. 91,850 $ 8,537
British Petroleum PLC, ADR.... 99,176 8,704
Denison International PLC ADR
(non-income producing)...... 5,500 104
Elf Aquitane SA, ADR.......... 151,600 9,361
Energy Group, PLC............. 81,087 3,274
Gallaher Group PLC, ADR (non-
income producing)........... 217,200 4,168
Groupe AB SA, ADR (non-income
producing).................. 89,960 669
Hanson PLC, ADR............... 81,087 2,068
Imperial Tobacco Group PLC.... 108,400 1,332
Mid Ocean, Limited............ 86,000 5,579
Millenium Chemicals,
Incorporated................ 82,671 1,943
New Holland N.V............... 185,000 5,261
Royal Dutch Petroleum Company,
New York Registry........... 301,400 15,861
----------
TOTAL FOREIGN STOCKS...... 66,861
----------
CONSUMER STAPLES - 13.81%
DEPARTMENT AND MAIL ORDER - 2.46%
Friedman's, Incorporated (non-
income producing)........... 45,200 805
J.C. Penney Company,
Incorporated................ 256,800 15,071
K Mart Corporation............ 747,000 9,851
Marks Brothers Jewelers,
Incorporated (non-income
producing).................. 7,300 119
Sears Roebuck & Company....... 323,400 13,542
Tupperware, Incorporated...... 65,000 1,629
----------
TOTAL DEPARTMENT AND MAIL
ORDER................... 41,017
----------
DISTILLERS AND BREWERS - 1.31%
Anheuser-Busch Companies,
Incorporated................ 518,800 20,720
Brown-Foreman, Incorporated... 23,825 1,172
----------
TOTAL DISTILLERS AND
BREWERS................. 21,892
----------
DRUGS AND HOSPITAL SUPPLY - 2.05%
American Home Products
Corporation................. 52,000 3,855
Apria Healthcare Group (non-
income producing)........... 9,960 151
Baxter International,
Incorporated................ 70,000 3,238
Bristol-Myers Squibb
Company..................... 152,000 13,338
Foundation Health Systems..... 200,100 5,753
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Healthcare Services Group
(non-income producing)...... 1,337 $ 17
Integrated Health Services.... 888 28
Pharmacia & Upjohn,
Incorporated................ 245,000 7,779
----------
TOTAL DRUGS AND HOSPITAL
SUPPLY.................. 34,159
----------
FOOD PROCESSING - 0.19%
Heinz H.J. Company............ 5,000 232
I B P, Incorporated........... 128,400 2,977
----------
TOTAL FOOD PROCESSING..... 3,209
----------
FOODS - 0.60%
Dominick's Supermarkets,
Incorporated (non-income
producing).................. 27,100 989
Nabisco Holdings Corporation,
Class A..................... 218,825 8,999
----------
TOTAL FOODS............... 9,988
----------
LEISURE - 1.73%
American Coin Merchandising,
Incorporated (non-income
producing).................. 40,800 666
Hasbro, Incorporated.......... 362,975 10,526
Mattel, Incorporated.......... 359,350 13,970
Toys R Us, Incorporated....... 107,500 3,662
----------
TOTAL LEISURE............. 28,824
----------
PUBLISHING - 0.73%
A.H. Belo, Incorporated, Class A... 248,875 11,759
Playboy Enterprises........... 30,000 414
----------
TOTAL PUBLISHING.......... 12,173
----------
RETAIL - Other - 0.02%
Intimate Brands,
Incorporated................ 15,565 333
----------
TOTAL RETAIL - OTHER...... 333
----------
SERVICES - 0.45%
Mac-Gray Corporation (non-
income producing)........... 22,200 327
Transcoastal Marine Services,
Incorporated (non-income
producing).................. 6,200 154
Wackenhut Corporation......... 7,300 147
Waste Management,
Incorporated................ 300,000 6,956
----------
TOTAL SERVICES............ 7,584
----------
TOBACCO - 3.27%
Fortune Brands,
Incorporated................ 142,000 4,695
Philip Morris Companies,
Incorporated................ 935,950 37,087
RJR Nabisco Holdings.......... 401,670 12,728
----------
TOTAL TOBACCO............. 54,510
----------
</TABLE>
See accompanying notes
32
<PAGE> 34
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
MISCELLANEOUS - CONSUMER STAPLES - 0.99%
Nine West Group,
Incorporated................ 269,300 $ 9,510
Pittston Company.............. 189,600 6,849
Russell Corporation........... 11,000 323
----------
TOTAL MISCELLANEOUS -
CONSUMER STAPLES........ 16,682
----------
TOTAL CONSUMER STAPLES.... 230,371
----------
INTEREST SENSITIVE - 32.73%
BANKS - 9.55%
Banc One Corporation.......... 108,100 5,635
BankAmerica Corporation....... 366,700 26,219
Bankers Trust Company
New York.................... 225,850 26,650
Chase Manhattan Corporation... 311,714 35,964
CoreStates Financial
Corporation................. 50,000 3,638
Corus Bankshares,
Incorporated................ 15,000 525
First Chicago NBD............. 259,965 18,912
First of America Bank
Corporation................. 79,000 4,404
First Security Corporation.... 184,250 5,343
First Union Corporation....... 34,000 1,668
Fleet Financial Group,
Incorporated................ 77,000 4,952
J.P. Morgan & Company,
Incorporated................ 96,425 10,583
NationsBank Corporation....... 80,000 4,790
PNC Bank Corporation.......... 207,700 9,866
Washington Federal,
Incorporated................ 1,617 48
----------
TOTAL BANKS............... 159,197
----------
BUILDING AND MATERIALS - 0.60%
Giant Cement Holding,
Incorporated (non-income
producing).................. 6,742 163
NCI Building Systems,
Incorporated (non-income
producing).................. 11,797 430
PPG Industries,
Incorporated................ 166,600 9,434
----------
TOTAL BUILDING AND
MATERIALS............... 10,027
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
FINANCE - 1.60%
Beneficial Corporation........ 71,000 $ 5,445
Brandywine Realty Trust....... 9,600 225
First USA Paymentech.......... 16,300 287
Household International,
Incorporated................ 46,000 5,210
MGI Properties,
Incorporated................ 9,159 211
Paine Webber Group,
Incorporated................ 128,800 5,691
The PMI Group, Incorporated... 47,000 2,841
Redwood Trust, Incorporated... 19,300 485
Washington Mutual,
Incorporated................ 92,000 6,296
----------
TOTAL FINANCE............. 26,691
----------
INSURANCE - LIFE AND MULTI-LINE - 4.08%
American Financial Group,
Incorporated................ 247,075 9,404
American General
Corporation................. 88,600 4,519
Aon Corporation............... 276,100 14,892
FPIC Insurance Group,
Incorporated (non-income
producing).................. 7,020 209
Hartford Financial Services
Group, Incorporated......... 43,200 3,499
Lincoln National
Corporation................. 82,000 5,638
Old Republic International
Corporation................. 389,850 13,937
TransAmerica Corporation...... 60,000 6,056
Travelers Corporation......... 142,791 9,995
----------
TOTAL INSURANCE - LIFE
AND MULTI-LINE.......... 68,149
----------
INSURANCE - PROPERTY AND CASUALTY - 1.87%
Allstate Corporation.......... 124,414 10,319
Chubb Corporation............. 102,600 6,797
IPC Holdings, Limited......... 16,010 493
Liberty Corporation........... 6,900 295
Mutual Risk Management,
Limited..................... 19,600 508
Nac Re Corporation............ 6,700 298
Safeco Corporation............ 69,000 3,286
TIG Holdings, Incorporated.... 273,500 9,265
----------
TOTAL INSURANCE - PROPERTY
AND CASUALTY............ 31,261
----------
SAVINGS AND LOAN - 0.40%
Coastal Bancorp,
Incorporated................ 1,681 47
H.F. Ahmanson & Company....... 112,000 6,608
----------
TOTAL SAVINGS AND LOAN.... 6,655
----------
</TABLE>
See accompanying notes
33
<PAGE> 35
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
UTILITIES - ELECTRIC - 5.91%
Central and Southwest
Corporation................. 175,000 $ 3,773
CMS Energy Corporation........ 140,000 5,110
DTE Energy Company............ 331,500 10,194
Edison International.......... 202,500 5,189
Entergy Corporation........... 776,400 18,973
Houston Industries,
Incorporated................ 186,300 4,052
Illinova Corporation.......... 215,000 4,784
New York State Electric & Gas
Corporation................. 70,000 1,868
Northeast Utilities........... 863,600 9,931
Peco Energy Company........... 148,900 3,378
Potomac Electric Power........ 128,800 2,890
PP&L Resources,
Incorporated................ 210,900 4,561
Public Service Enterprise
Group, Incorporated......... 153,900 3,992
Rochester Gas and Electric,
Incorporated................ 40,000 1,008
Texas Utilities Company....... 138,400 4,965
Unicom Corporation............ 500,900 14,025
----------
TOTAL UTILITIES -
ELECTRIC................ 98,693
----------
UTILITIES - NATURAL GAS - 0.57%
Equitable Resources,
Incorporated................ 111,900 3,560
Peoples Energy Corporation.... 68,000 2,431
Williams Companies,
Incorporated................ 69,000 3,515
----------
TOTAL UTILITIES - NATURAL
GAS..................... 9,506
----------
UTILITIES - TELEPHONE - 4.06%
Alltel Corporation............ 122,300 4,326
AT&T Corporation.............. 176,200 8,623
Bell Atlantic Corporation..... 43,720 3,492
GTE Corporation............... 229,800 9,752
MCI Communications
Corporation................. 111,300 3,951
SBC Communications............ 251,577 16,007
US West, Incorporated......... 543,600 21,642
----------
TOTAL UTILITIES -
TELEPHONE............... 67,793
----------
MISCELLANEOUS - INTEREST SENSITIVE - 4.09%
American Express Company...... 358,600 27,971
Federal Home Loan Mortgage
Corporation................. 327,450 12,402
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Federal National Mortgage
Association................. 338,975 $ 16,419
Fund American Enterprises,
Incorporated................ 42,750 5,109
Morgan Stanley Dean Witter
Discover & Company.......... 128,400 6,292
----------
TOTAL MISCELLANEOUS -
INTEREST SENSITIVE...... 68,193
----------
TOTAL INTEREST
SENSITIVE............... 546,165
----------
CONSUMER CYCLICALS - 7.79%
AUTOMOBILE AND TRUCK - 7.00%
Chrysler Corporation.......... 403,100 14,209
Dana Corporation.............. 441,100 20,649
Eaton Corporation............. 61,000 5,894
First Brands Corporation...... 388,150 9,898
Ford Motor Company............ 925,800 40,446
General Motors Corporation.... 394,600 25,328
Meritor Automotive,
Incorporated................ 20,333 454
----------
TOTAL AUTOMOBILE AND
TRUCK................... 116,878
----------
ELECTRICAL HOUSEHOLD EQUIPMENT - 0.39%
Whirlpool Corporation......... 107,900 6,541
----------
TOTAL ELECTRICAL HOUSEHOLD
EQUIPMENT............... 6,541
----------
TEXTILE - APPAREL - 0.02%
Designer Holdings, Limited.... 37,600 324
----------
TOTAL TEXTILE - APPAREL... 324
----------
TIRE AND RUBBER - 0.38%
Goodyear Tire & Rubber
Company..................... 100,100 6,269
----------
TOTAL TIRE AND RUBBER..... 6,269
----------
TOTAL CONSUMER
CYCLICALS............... 130,012
----------
INTERMEDIATE GOODS & SERVICES - 25.28%
CHEMICALS - 3.58%
ARCO Chemical Company......... 96,000 4,692
The Carbide/Graphite Group
(non-income producing)...... 14,100 502
Dow Chemical.................. 219,000 19,892
E.I. DuPont de Nemours &
Company..................... 82,000 4,664
Eastman Chemical Company...... 190,175 11,339
FMC Corporation (non-income
producing).................. 184,950 14,946
Geon Corporation.............. 12,100 262
Great Lakes Chemicals
Corporation................. 65,600 3,083
</TABLE>
See accompanying notes
34
<PAGE> 36
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Wellman Industries,
Incorporated................ 20,400 $ 414
----------
TOTAL CHEMICALS........... 59,794
----------
FOREST PRODUCTS - 2.46%
Boise Cascade Corporation..... 89,000 3,082
Georgia-Pacific Corporation... 37,000 3,138
International Paper Company... 371,600 16,722
Louisiana Pacific
Corporation................. 155,900 3,274
Mead Corporation.............. 47,000 2,844
Union Camp Corporation........ 71,000 3,847
Westvaco Corporation.......... 92,100 3,022
Weyerhaeuser Company.......... 108,000 5,157
----------
TOTAL FOREST PRODUCTS..... 41,086
----------
METALS - ALUMINUM - 0.70%
Alumax, Incorporated.......... 206,500 6,711
Aluminum Company of America... 58,000 4,234
Citation Corporation (non-
income producing)........... 25,868 440
Commonwealth Industries,
Incorporated................ 7,600 134
Northwest Pipe Company (non-
income producing)........... 1,776 43
WHX Corporation (non-income
producing).................. 12,700 169
----------
TOTAL METALS - ALUMINUM... 11,731
----------
NATURAL GAS TRANSMISSION - 0.64%
Coastal Corporation........... 117,575 7,069
El Paso Natural Gas Company... 59,759 3,582
----------
TOTAL NATURAL GAS
TRANSMISSION............ 10,651
----------
OIL - 10.69%
Abraxas Petroleum Corporation
(non-income producing)...... 33,518 624
Amoco Corporation............. 69,600 6,381
Atlantic Richfield
Corporation................. 368,500 30,332
Burlington Resources.......... 202,141 9,892
Chevron Corporation........... 43,000 3,566
Coho Energy, Incorporated
(non-income producing)...... 30,064 353
Exxon Corporation............. 225,200 13,836
Mobil Corporation............. 44,000 3,204
Occidental Petroleum
Corporation................. 556,300 15,507
Oryx Energy Company........... 370,475 10,211
Phillips Petroleum Company.... 539,900 26,118
Tenneco, Incorporated......... 228,800 10,282
Texaco, Incorporated.......... 336,600 19,165
Ultramar Diamond Shamrock
Corporation................. 142,000 4,384
Union Pacific Resources Group,
Incorporated................ 410,300 10,104
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
Union Texas Petroleum
Holdings, Incorporated...... 513,700 $ 11,687
Valero Refining and
Marketing................... 89,200 2,687
----------
TOTAL OIL................. 178,333
----------
OIL SERVICE - 1.60%
Baker Hughes, Incorporated.... 581,100 26,694
----------
TOTAL OIL SERVICE......... 26,694
----------
TRANSPORTATION - 2.75%
Airnet Systems................ 16,000 328
Burlington Northern,
Incorporated................ 47,200 4,484
CSX Corporation............... 390,300 21,345
Norfolk Southern
Corporation................. 599,400 19,256
Teekay Shipping Corporation... 14,049 450
----------
TOTAL TRANSPORTATION...... 45,863
----------
MISCELLANEOUS - INTERMEDIATE GOODS
& SERVICES - 2.86%
Alliance Communications
Corporation................. 14,000 170
Dresser Industries,
Incorporated................ 594,300 25,035
GATX Corporation.............. 73,900 4,771
Harnischfeger Industries,
Incorporated................ 30,900 1,217
Lukens, Incorporated.......... 13,200 238
Mapco, Incorporated........... 358,100 11,817
USX-US Steel Group............ 130,000 4,420
----------
TOTAL MISCELLANEOUS -
INTERMEDIATE GOODS &
SERVICES................ 47,668
----------
TOTAL INTERMEDIATE GOODS &
SERVICES................ 421,820
----------
CAPITAL GOODS - 14.63%
AEROSPACE - 5.88%
Avteam, Incorporated (non-
income producing)........... 19,000 161
Coltec Industries,
Incorporated (non-income
producing).................. 484,600 9,692
Harsco Corporation............ 112,000 4,648
Lockheed Martin Corporation... 298,648 28,390
Northrop Corporation.......... 51,000 5,572
Raytheon Company.............. 158,400 8,593
Rockwell International
Corporation................. 61,000 2,989
Textron, Incorporated......... 440,300 25,455
Thiokol Corporation........... 137,250 12,567
----------
TOTAL AEROSPACE........... 98,067
----------
</TABLE>
See accompanying notes
35
<PAGE> 37
AMR INVESTMENT SERVICES GROWTH AND INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
ELECTRICAL EQUIPMENT - 1.92%
Dover Corporation............. 35,050 $ 2,366
Honeywell, Incorporated....... 139,100 9,467
ITT Industries,
Incorporated................ 208,800 6,590
MEMC Electronic Materials,
Incorporated................ 170,400 3,419
Westinghouse Electric
Corporation................. 388,400 10,268
----------
TOTAL ELECTRICAL
EQUIPMENT............... 32,110
----------
ELECTRONICS - INDUSTRIAL - 0.54%
Channell Commercial
Corporation (non-income
producing).................. 2,790 35
PG&E Corporation.............. 36,620 936
Stoneridge, Incorporated (non-
income producing)........... 28,600 465
VLSI Technology, Incorporated
(non-income producing)...... 257,500 7,628
----------
TOTAL ELECTRONICS -
INDUSTRIAL.............. 9,064
----------
MACHINERY - 2.70%
Caterpillar Tractor Company... 73,300 3,757
Deere and Company............. 467,500 24,602
Gleason Corporation........... 9,520 262
Millipore Corporation......... 269,075 10,528
Tecumseh Products Company..... 113,900 5,909
----------
TOTAL MACHINERY........... 45,058
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
---------- ----------
(dollars in thousands)
<S> <C> <C>
OFFICE EQUIPMENT - 3.59%
Applied Magnetics Corporation
(non-income producing)...... 12,050 $ 277
Data General Corporation (non-
income producing)........... 10,000 193
Exabyte Corporation (non-
income producing)........... 24,606 260
Hutchinson Technology......... 12,300 324
International Business
Machines Corporation........ 160,200 15,710
Lexmark International Group
Incorporated, Class A....... 103,100 3,151
Micros Systems, Incorporated
(non-income producing)...... 12,740 573
Seagate Technology............ 124,100 3,366
Storage Tech Group............ 77,400 4,542
Xerox Corporation............. 396,400 31,439
----------
TOTAL OFFICE EQUIPMENT.... 59,835
----------
TOTAL CAPITAL
GOODS................... 244,134
----------
TOTAL COMMON
STOCK................... 1,639,363
----------
Par
Amount
----------
SHORT-TERM INVESTMENTS (NOTE A) - 4.98%
AMR Investments Strategic Cash
Business Trust.............. $ 44,725 44,725
Bank of Tokyo-Mitsubishi,
Limited, BA, 5.58%,
Due 11/28/1997.............. 10,000 9,959
Banque Paribas, Euro TD,
5.6875%, Due 11/3/1997...... 19,373 19,373
Sanwa Bank, Limited, BA,
5.635%, Due 11/12/1997...... 9,000 8,985
----------
TOTAL SHORT-TERM
INVESTMENTS............. 83,042
----------
TOTAL INVESTMENTS - 103.23%
(COST $1,322,925)........... 1,722,405
----------
LIABILITIES, NET OF OTHER
ASSETS - (3.23%)............ (53,805)
----------
TOTAL NET ASSETS - 100%....... $1,668,600
==========
</TABLE>
- ---------------
Based on the cost of investments of $1,325,782 for federal income tax purposes
at October 31, 1997, the aggregate gross unrealized appreciation was $417,200,
the aggregate gross unrealized depreciation was $20,577, and the net unrealized
appreciation of investments was $396,623.
(A) Rates associated with short-term investments represent yield to maturity.
ABBREVIATIONS:
ADR - American Depositary Receipt
BA - Bankers Acceptance
NV - Company
PLC - Public Limited Corporation
SA - Company
TD - Time Deposit
See accompanying notes
36
<PAGE> 38
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
AUSTRALIA COMMON STOCKS - 3.29%
Australia & New Zealand
Banking Group.............. 843,442 $ 5,899
Brambles Industries,
Limited.................... 180,312 3,475
CSR, Limited................. 680,000 2,368
Foster's Brewing Group,
Limited.................... 1,027,800 1,956
GIO Australia Holdings, Limited... 486,509 1,248
Goodman Fielder, Limited..... 1,150,000 1,767
News Corporation, Limited.... 210,000 1,008
News Corporation Preferred
Rights..................... 345,000 1,534
Pioneer International,
Limited.................... 1,024,615 2,716
QBE Insurance Group, Limited... 536,496 2,515
RGC, Limited................. 275,000 562
-----------
TOTAL AUSTRALIA COMMON
STOCKS................. 25,048
-----------
AUSTRIA -- 1.17%
PREFERRED STOCKS -- 0.27%
Bank Austria AG.............. 44,000 2,013
-----------
TOTAL AUSTRIA PREFERRED
STOCKS................. 2,013
-----------
COMMON STOCKS -- 0.90%
Boehler-Uddeholm AG.......... 50,185 3,605
Evn Energie-Versorgung
Niederroesterreich AG...... 3,960 461
Mayr-Melnhof Karton AG....... 16,000 853
VA Technologie AG............ 11,000 1,956
-----------
TOTAL AUSTRIA COMMON
STOCKS................. 6,875
-----------
TOTAL AUSTRIA............ 8,888
-----------
BELGIUM COMMON STOCKS - 0.47%
Electrabel SA................ 4,400 988
GIB Holdings, Limited, NPV... 22,000 1,115
Solvay Et Cie, NPV........... 25,000 1,507
-----------
TOTAL BELGIUM COMMON
STOCKS................. 3,610
-----------
CANADA COMMON STOCKS - 2.43%
Anderson Exploration,
Limited.................... 115,000 1,265
Bank of Nova Scotia.......... 67,839 2,992
Canadian Imperial Bank of
Commerce................... 120,000 3,509
IMASCO, Limited.............. 119,000 3,784
Noranda, Incorporated........ 133,620 2,352
Oshawa Group, Limited........ 66,000 1,138
Potash Corporation of
Saskatchewan............... 6,520 532
Telus Corporation............ 146,850 2,944
-----------
TOTAL CANADA COMMON
STOCKS................. 18,516
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
DENMARK COMMON STOCKS - 0.96%
BG Bank...................... 20,750 $ 1,335
Den Danske Bank.............. 13,400 1,514
Novo Nordisk AS, "B"......... 6,850 742
Teledanmark AS, "B".......... 16,700 981
Unidanmark AS, "A"........... 40,800 2,759
-----------
TOTAL DENMARK COMMON
STOCKS................. 7,331
-----------
FINLAND COMMON STOCKS - 2.73%
Enso-Gutzeit OY, "R"......... 212,000 1,990
Huhtamaki Group I Free....... 27,500 1,134
Merita Bank, Limited......... 785,000 3,844
Metra OY,"B"................. 121,565 3,247
Metsa-Serla OY, "B".......... 100,000 881
Nokia OY, "A"................ 43,500 3,805
Rauma OY..................... 50,878 955
UPM-Kymmene OY............... 221,030 4,923
-----------
TOTAL FINLAND COMMON
STOCKS................. 20,779
-----------
FRANCE COMMON STOCKS - 8.60%
Adecco SA.................... 2,820 917
Alcatel Alsthom CG........... 53,000 6,409
Axa SA....................... 35,542 2,439
Banque Nationale de Paris.... 68,190 3,021
Bertrande Faure.............. 39,500 2,388
Bongrain SA.................. 2,370 873
Elf Aquitaine SA............. 78,300 9,713
France Telecom SA............ 29,449 1,117
Groupe Danone................ 19,200 2,942
La Farge-Coppee SA........... 97,218 6,087
Pechiney SA.................. 41,800 1,723
Pernod-Ricard................ 78,934 3,666
Peugot SA.................... 12,800 1,452
Rhone-Poulenc, "A"........... 50,000 2,185
Sa Des Galeries Lafayette.... 162 76
Saint Gobain................. 13,148 1,891
Schneider SA................. 37,500 2,007
Scor SA...................... 31,500 1,466
Seita........................ 109,712 3,507
Societe Generale............. 23,339 3,203
Total Petroleum Company,
"B"........................ 48,200 5,359
Usinor Sacilor............... 186,702 3,098
Valeo SA..................... 13 1
-----------
TOTAL FRANCE COMMON
STOCKS................. 65,540
-----------
</TABLE>
See accompanying notes
37
<PAGE> 39
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
GERMANY - 4.64%
PREFERRED STOCKS - 0.81%
Dyckerhoff AG................ 7,614 $ 2,345
Herlitz AG................... 11,947 768
Volkswagen AG................ 6,700 3,087
-----------
TOTAL GERMANY PREFERRED
STOCKS................. 6,200
-----------
COMMON STOCKS - 3.83%
BASF AG...................... 72,600 2,468
BAYER AG..................... 188,525 6,791
Commerzbank AG............... 160,550 5,504
Deutsche Bank AG............. 36,000 2,382
Hoechst AG................... 44,000 1,694
Karstadt AG.................. 3,100 1,077
Muenchener Rueckversicherungs
AG......................... 3000 627
Varta AG
(non-income producing)..... 1,520 236
Veba AG...................... 87,300 4,920
Viag AG...................... 5,940 2,778
Volkswagen AG................ 1,150 684
-----------
TOTAL GERMANY COMMON
STOCKS................. 29,161
-----------
TOTAL GERMANY............ 35,361
-----------
HONG KONG COMMON STOCKS - 3.13%
Amoy Properties.............. 20,500 18
Asia Satellite
Telecommunications
Holdings, Limited.......... 275,000 662
Cheung Kong Holdings,
Limited.................... 235,000 1,634
China Light and Power
Company.................... 818,000 4,307
Dickson Concepts
(International), Limited... 643,000 1,385
Hang Lung Development
Company, Limited........... 1,268,000 1,747
Hong Kong Aircraft
Engineering Company,
Limited.................... 7,200 19
Hong Kong Electric
Holdings................... 368,400 1,249
Hong Kong Telecommunications,
Limited.................... 1,024,400 1,961
HSBC Holdings, Limited....... 114,500 2,592
Hutchinson Whampoa,
Limited.................... 200,000 1,384
Hysan Development Company,
Limited.................... 32,000 67
National Mutual of Asia, Limited... 1,700,000 1,540
New Asia Realty and Trust
Company, Limited........... 135,000 321
New World Development
Company, Limited........... 656,000 2,308
Peregrine Investments
Holdings, Limited.......... 605,000 595
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Peregrine Investments
Holdings, Limited
Warrants................... 55,000 $ 2
Swire Pacific, Limited,
"A"........................ 383,500 2,049
-----------
TOTAL HONG KONG COMMON
STOCKS................. 23,840
-----------
IRELAND COMMON STOCKS - 0.47%
Jefferson Smurfit............ 1,199,242 3,554
-----------
TOTAL IRELAND COMMON
STOCKS................. 3,554
-----------
ITALY - 3.31%
PREFERRED STOCK - 0.15%
Concessioni E Costruzioni
Autostrade................. 525,000 1,165
-----------
TOTAL ITALY PREFERRED
STOCK.................. 1,165
-----------
COMMON STOCKS - 3.16%
Burgo (Cartiere) SPA......... 229,020 1,371
Danieli Group Risp........... 473,960 1,852
Eni SPA...................... 778,000 4,382
Fiat SPA..................... 880,000 2,804
Instituto Nazionale Delle
Assicurazioni.............. 1,300,000 2,096
Mediaset..................... 336,900 1,531
Merloni Elettrodomestici
SPA........................ 185,500 697
STET Risp Non Convertible.... 550,000 3,453
STET Telecom Italia Risp..... 1,452,209 5,877
-----------
TOTAL ITALY COMMON
STOCKS................. 24,063
-----------
TOTAL ITALY.............. 25,228
-----------
JAPAN COMMON STOCKS - 10.98%
Aisin Seiki Company,
Limited.................... 151,000 1,720
Aoyama Trading Company....... 42,300 1,136
Canon, Incorporated.......... 90,000 2,185
Chudenko Corporation......... 33,000 804
Daibiru Corporation.......... 168,000 1,802
Daicel Chemical.............. 271,000 744
Fuji Photo Film.............. 222,000 8,048
Hitachi Koki Company, Limited... 53,000 257
Hitachi, Limited............. 324,000 2,492
Japan Tobacco................ 388 3,184
KAO Corporation.............. 296,000 4,135
Kioto Manufacturing Company,
Limited.................... 375,000 2,245
Matsushita Electric
Industrial Company......... 264,000 4,434
MOS Food Services............ 97,000 1,298
NKK Corporation.............. 711,000 987
NEC Corporation.............. 79,000 867
Nichicon Corporation......... 234,000 2,899
Nichido Fire & Marine
Insurance.................. 393,000 2,539
Nintendo Company, Limited.... 35,200 3,044
</TABLE>
See accompanying notes
38
<PAGE> 40
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Nissan Motor Company......... 336,000 $ 1,791
Promise Company, Limited..... 77,300 4,525
Ryosan Company............... 12,000 232
Sekisui Chemical Company,
Limited.................... 538,000 4,236
Shionogi & Company........... 168,000 1,021
Sony Corporation............. 97,800 8,124
Sumitomo Marine & Fire
Insurance.................. 442,000 2,947
Sumitomo Rubber Industries... 86,000 488
Suzuki Motor Company,
Limited.................... 193,000 2,054
TDK Corporation.............. 30,000 2,489
Toyo Seikan Kaisha........... 198,000 3,111
Yamanouchi Pharmaceutical.... 110,000 2,707
Yamato Kogyo Company,
Limited.................... 110,000 869
Yodogawa Steel Works......... 499,000 2,660
Yoshinoya D & C Company,
Limited.................... 39 412
Yoshitomi Pharmaceutical..... 185,000 1,181
-----------
TOTAL JAPAN COMMON
STOCKS................. 83,667
-----------
MALAYSIA COMMON STOCKS - 0.72%
Arab Malaysian Finance....... 780,000 407
Bolton Properties............ 909,000 377
Genting BHD.................. 623,700 1,750
Golden Hope Plantations
BHD........................ 968,000 1,260
Hicom Holdings BHD........... 506,300 428
Kedah Cement Holdings BHD.... 729,000 459
Malaysian International
Shipping Corporation BHD... 459,666 768
-----------
TOTAL MALAYSIA COMMON
STOCKS................. 5,449
-----------
MEXICO COMMON STOCKS - 0.19%
Alfa, SA..................... 121,000 884
Grupo Mexico SA.............. 145,000 560
-----------
TOTAL MEXICO COMMON
STOCKS................. 1,444
-----------
NETHERLANDS COMMON STOCKS - 6.34%
ABN AMRO Holdings NV......... 162,700 3,278
Aegon NV..................... 34,000 2,680
Akzo Nobel NV................ 63,150 11,132
Fortis Amev NV............... 51,654 2,031
Hollandsche Beton Groep NV... 158,040 3,168
Internationale Nederlanden
Groep NV................... 202,045 8,485
Koninklijke Bijenkorf Beheer NV... 17,400 1,098
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Koninklijke KNP BT........... 54,100 $ 1,232
Phillips Electronics......... 110,600 8,662
Royal PTT Nederland NV....... 115,410 4,412
Unilever NV.................. 40,000 2,127
-----------
TOTAL NETHERLANDS COMMON
STOCKS................. 48,305
-----------
Par
Amount
---------
NEW ZEALAND - 0.93%
FOREIGN BONDS - 0.01%
Brierley Investments, Limited
Subordinated Convertible,
9.00%, Due 6/30/1998....... $ 63 43
-----------
TOTAL NEW ZEALAND FOREIGN
BONDS.................. 43
-----------
Shares
---------
COMMON STOCKS - 0.92%
Brierley Investments,
Limited.................... 1,600,000 1,238
Carter Holt Harvey,
Limited.................... 220,000 384
Fisher & Paykel, Limited..... 230,000 732
Fletcher Challenge
Building................... 775,250 2,345
Fletcher Challenge Forest.... 8,284 8
Fletcher Challenge Paper..... 365,000 601
Lion Nathan, Limited......... 693,000 1,677
-----------
TOTAL NEW ZEALAND COMMON
STOCKS................. 6,985
-----------
TOTAL NEW ZEALAND........ 7,028
-----------
NORWAY COMMON STOCKS - 2.21%
Den Norsk Bank, Series A..... 387,600 1,755
Kvaerner Industries AS....... 49,789 2,564
Norsk Hydro AS............... 40,000 2,203
Nycomed AS, Series B......... 293,225 7,288
Saga Petroleum, Series B Free... 100,000 1,771
Unitor AS.................... 80,000 1,268
-----------
TOTAL NORWAY COMMON
STOCKS................. 16,849
-----------
SINGAPORE COMMON STOCKS - 0.71%
Fraser & Neave, Limited...... 230,000 1,155
Hong Kong Land............... 673,847 1,536
Inchcape Berhad.............. 325,000 1,025
Sembawang Corporation........ 295,000 908
Singapore Finance, Limited... 387,000 362
Van Der Horst................ 440,000 386
-----------
TOTAL SINGAPORE COMMON
STOCKS................. 5,372
-----------
SPAIN COMMON STOCKS - 2.97%
Banco Popular Espanol........ 28,000 1,655
Banco Santander SA........... 112,730 3,160
Iberdrola SA................. 410,357 4,912
</TABLE>
See accompanying notes
39
<PAGE> 41
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Repsol SA (BR)............... 127,420 $ 5,347
Telefonica de Espana......... 277,400 7,576
-----------
TOTAL SPAIN COMMON
STOCKS................. 22,650
-----------
SOUTH KOREA COMMON STOCKS - 0.07%
Korea Electric Power
Corporation................ 37,500 532
-----------
TOTAL SOUTH KOREA COMMON
STOCKS................. 532
-----------
SWEDEN COMMON STOCKS - 3.86%
Assidoman AB................. 56,000 1,571
Astra AB, "B" Free........... 55,200 856
Electrolux AB, "B"........... 92,085 7,628
Esselte AB, Class "A"........ 2,000 42
Esselte AB, Class "B"........ 17,000 370
Granges AB................... 22,050 361
Marieberg Tidnings........... 77,267 2,065
Nordbanken AS................ 35,900 1,127
Pharmacia & Upjohn,
Incorporated............... 59,100 1,883
Skandia Forsakrings AB....... 16,600 776
SKF AB, "B" Free............. 112,100 2,606
Sparbanken Sverige AB, "A"... 144,900 3,291
Stora Kopparsbergs Bergslags,
"A"........................ 82,100 1,135
Stora Kopparsbergs Bergslags,
"B"........................ 25,800 355
Svedala Industries, "A"
Free....................... 90,000 1,768
Svenska Cellulosa, "B"
Free....................... 52,600 1,181
Volvo AB..................... 90,000 2,357
-----------
TOTAL SWEDEN COMMON
STOCKS................. 29,372
-----------
SWITZERLAND COMMON STOCKS - 5.29%
ABB AG....................... 1,690 2,209
Forbo Holding AG............. 3,280 1,292
Holderbank Financial
Glarus-B................... 2,810 2,268
Nestle SA.................... 8,021 11,333
Novartis AG.................. 2,879 4,521
Schindler Holding AG (Reg)... 140 170
Schindler Holding AG (BR).... 1,400 1,549......
Sig Schweitz Industries AG... 2,200 5,940
Societe Generale de
Surveillance............... 240 464
Sulzer AG.................... 4,279 3,138
Swiss Reinsurance Company.... 3,876 5,854
Zurich Versicherungs......... 3,800 1,573
-----------
TOTAL SWITZERLAND COMMON
STOCKS................. 40,311
-----------
UNITED KINGDOM COMMON STOCKS - 20.39%
Aggreko, PLC................. 502,977 1,316
Albert Fisher Group, PLC..... 262,500 164
Allied Domecq, PLC........... 510,710 4,132
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Associated British Foods
Group, PLC................. 46,600 $ 371
Bank of Scotland............. 255,380 2,123
Barclays, PLC................ 27,900 705
BAT Industries, PLC.......... 827,564 7,265
BG, PLC...................... 1,615,700 7,065
British Energy, PLC.......... 300,000 1,954
British Telecommunications... 640,900 4,855
BTR, PLC..................... 1,978,800 6,744
Bunzl, PLC................... 121,100 504
Burmah Castrol, PLC.......... 221,050 3,766
Burton Group, PLC............ 335,000 712
Coats Viyella, PLC........... 1,649,500 3,015
Commercial Union, PLC........ 487,600 6,342
Cookson Group, PLC........... 613,900 2,460
Cortaulds, PLC............... 362,000 1,678
Cortaulds Textiles, PLC...... 150,000 864
Danka Business Systems, PLC.. 64,700 610
De La Rue, PLC............... 197,800 1,413
Energy Group, PLC............ 124,000 1,261
English China Claylord
Group...................... 348,410 1,519
Grand Metropolitan, PLC...... 417,350 3,755
Great Universal Stores....... 239,500 2,849
Hanson, PLC.................. 724,600 3,724
Harrisons & Crosfield, PLC... 1,391,800 2,952
Hillsdown Holdings, PLC...... 1,140,100 3,231
Hyder, PLC................... 289,000 4,359
Imperial Chemical Industries, PLC.. 37,000 552
Imperial Tobacco Group....... 195,100 1,199
Inchcape, PLC................ 150,000 546
Kwik Save Group, PLC......... 264,000 1,370
Lex Service.................. 350,000 2,465
London Pacific Group, PLC.... 74,000 259
Lucasvarity, PLC............. 410,000 1,403
Medeva, PLC.................. 255,000 879
National Grid Group, PLC..... 300,000 1,394
National Power, PLC.......... 50,000 415
National Westminster Bank,
PLC........................ 485,419 7,017
Northern Foods, PLC.......... 500,000 1,937
Peninsular & Orient Steam
Company.................... 269,158 3,117
Pilkington, PLC.............. 363 1
PowerGen, PLC................ 310,400 3,443
Premier Farnell, PLC......... 225,800 1,757
Racal Electronics, PLC....... 320,404 1,187
Reckitt & Coleman, PLC....... 394,754 6,034
Redland, PLC................. 1,228,854 7,006
Rolls Royce, PLC............. 305,273 1,074
Royal & Sun Alliance
Insurance Group............ 342,325 3,298
Safeway, PLC................. 309,677 2,023
Salvesen (Christian), PLC.... 502,977 843
</TABLE>
See accompanying notes
40
<PAGE> 42
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
(dollars in thousands)
<S> <C> <C>
Shell Transportation &
Trading, PLC............... 135,000 $ 956
Southern Electric, PLC....... 175,900 1,348
Storehouse................... 762,900 2,814
Tate & Lyle, PLC............. 549,000 4,184
Tesco, PLC................... 343,819 2,720
Thames Water Group, PLC...... 189,800 2,877
Unilever, PLC................ 522,900 3,884
WPP Group, PLC............... 1,005,500 4,603
Wace Group, PLC.............. 666,200 346
Williams, PLC................ 111,466 659
-----------
TOTAL UNITED KINGDOM
COMMON STOCKS.......... 155,318
-----------
UNITED STATES - 15.80%
FOREIGN SECURITIES DENOMINATED IN U.S. DOLLARS - 2.48%
Cho Hung Bank GDR............ 170,000 629
Dairy Farm International..... 908,000 717
G P Batteries International,
Limited.................... 137,000 401
Kookmin Bank GDR............. 50,000 310
Jardine Matheson Holdings,
Limited.................... 871,000 5,574
Jardine Strategic............ 1,606,000 5,139
New Holland NV............... 79,700 2,266
Nova Corporation............. 150,000 1,350
Stolt-Nielsen SA, "B"........ 38,000 1,007
Telmex ADR................... 35,000 1,514
-----------
TOTAL FOREIGN SECURITIES
DENOMINATED IN U.S.
DOLLARS................ 18,907
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount
---------
<S> <C> <C>
UNITED STATES GOVERNMENT AND AGENCY OBLIGATIONS (NOTE
A) - 5.83%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.09%
Discount Note, 5.189%,
Due 11/7/1997.............. $ 2,895 2,892
Discount Note, 5.192%,
Due 11/13/1997............. 1,505 1,502
Discount Note, 5.198%,
Due 11/21/1997............. 1,710 1,705
Discount Note, 5.198%,
Due 11/28/1997............. 1,400 1,394
Discount Note, 5.205%,
Due 12/1/1997.............. 6,600 6,569
</TABLE>
<TABLE>
<CAPTION>
Par
Amount
---------
<S> <C> <C>
Discount Note, 5.206%,
Due 12/3/1997.............. $ 4,225 $ 4,204
Discount Note, 5.208%,
Due 12/5/1997.............. 5,290 5,262
-----------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION... 23,528
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.99%
5.196%, Due 11/17/1997....... 855 853
5.19%, Due 1/8/1998.......... 2,000 1,998
5.234%, Due 1/15/1998........ 3,769 3,725
5.25%, Due 3/25/1998......... 1,000 999
-----------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION... 7,575
-----------
U.S. TREASURY BILLS - 1.75%
4.805%, Due 12/26/1997....... 255 253
4.88%, Due 1/2/1998.......... 6,290 6,236
4.925%, Due 1/8/1998......... 2,468 2,445
4.96%, Due 1/15/1998......... 116 115
4.98%, Due 1/22/1998......... 2,175 2,150
5.05%, Due 1/29/1998......... 2,115 2,088
-----------
TOTAL U.S. TREASURY
BILLS.................. 13,287
-----------
TOTAL UNITED STATES
GOVERNMENT AND
AGENCY OBLIGATIONS..... 44,390
-----------
SHORT-TERM INVESTMENTS (NOTE B) - 7.49%
AMR Investments Strategic
Cash Business Trust........ 47,053 47,053
E I DuPont de Nemours, CP,
Due 11/7/1997.............. 10,000 9,989
-----------
TOTAL SHORT-TERM
INVESTMENTS............ 57,042
-----------
TOTAL UNITED STATES........ 120,339
-----------
TOTAL INVESTMENTS -
101.66% (COST $664,005).... 774,331
-----------
LIABILITIES, NET OF OTHER
ASSETS
- (1.66%)................. (12,658)
-----------
TOTAL NET ASSETS - 100%...... $ 761,673
===========
</TABLE>
See accompanying notes
41
<PAGE> 43
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
Based on the cost of investments of $664,338 for federal income tax purposes at
October 31, 1997, the aggregate gross unrealized appreciation was $142,497, the
aggregate gross unrealized depreciation was $32,504, and the net unrealized
appreciation of investments was $109,993.
(A) Rates associated with United States Government Bonds represent yield to
maturity from time of purchase.
(B) Rates associated with short-term investments represent yield to maturity or
yield to next reset date.
ABBREVIATIONS:
AB - Company (Sweden)
ADR - American Depository Receipt (United States)
AG - Company (Austria, Germany, Switzerland)
AS - Company (Denmark, Norway, Sweden)
BHD - Berhard (Malaysia)
BR - Bearer (Spain, Switzerland)
CG - Company General (France)
CP - Commercial Paper (United States)
GDR - Global Depository Receipt (United States)
NPV - No Par Value (Belgium)
NV - Company (Netherlands, United States)
OY - Company (Finland)
PLC - Public Limited Corporation (United Kingdom)
SA - Company (Belgium, France, Mexico, Spain, Switzerland, United States)
SPA - Company (Italy)
INDUSTRY DIVERSIFICATION
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Basic Industry.............................................. 29.56%
Capital Goods............................................... 10.53%
Consumer Goods & Services................................... 21.79%
Energy...................................................... 5.65%
Financing, Insurance & Real Estate.......................... 16.22%
Transportation.............................................. 0.51%
Utilities................................................... 4.00%
Short Term Investments...................................... 13.32%
Other Assets (Liabilities).................................. (1.58)%
------
NET ASSETS........................................ 100.00%
======
</TABLE>
See accompanying notes
42
<PAGE> 44
AMR INVESTMENT SERVICES LIMITED-TERM INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- --------
(dollars in thousands)
<S> <C> <C>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS - 26.82%
Federal Home Loan Mortgage
Corporation, M H-1 A REMIC,
10.15%, Due 4/15/2006........ $ 102 $ 103
Federal National Mortgage
Association, 9.85%, Due
11/1/2018.................... 12,870 14,563
Government National Mortgage
Association, Pool #780173,
9.50%, Due 12/15/2019........ 9,582 10,425
--------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS....... 25,091
--------
CORPORATE OBLIGATIONS - 44.03%
BANK FUNDING - 13.63%
Bank of America, 12.50%, Due
4/1/2001..................... 5,000 5,914
Southtrust Bank of Alabama,
5.58%, Due 2/6/2006, Puttable
2/6/2001..................... 7,000 6,839
--------
TOTAL BANK FUNDING......... 12,753
--------
FINANCIAL - 22.35%
Bear Stearns Company, Variable
Rate, 5.89%, Due 7/10/2000... 5,000 4,983
Chrysler Finance Corporation,
Variable Rate, 5.86%, Due
7/17/2000.................... 5,000 4,978
Ford Motor Credit Corporation,
Variable Rate, 5.99%, Due
8/7/2000..................... 5,000 4,978
Merrill Lynch and Company,
Variable Rate, 5.88%, Due
6/27/2000.................... 6,000 5,973
--------
TOTAL FINANCIAL............ 20,912
--------
INDUSTRIAL - 4.50%
Phillip Morris Companies,
Incorporated 7.25%, Due
1/15/2003.................... 3,000 3,083
Weyerhaeuser Company, 9.05%,
Due 2/1/2003................. 1,000 1,123
--------
TOTAL INDUSTRIAL........... 4,206
--------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
---------- --------
(dollars in thousands)
<S> <C> <C>
FOREIGN - 3.55%
Province of Quebec, 8.80%, Due
4/15/2003.................... $ 3,000 $ 3,327
--------
TOTAL FOREIGN.............. 3,327
--------
TOTAL CORPORATE
OBLIGATIONS.............. 41,198
--------
ASSET-BACKED SECURITIES - 10.86%
Citibank Credit Card Master
Trust, Series 1997 3-B,
6.989%, Due 2/10/2004........ 5,000 5,138
Saxon Asset Securities Trust,
Series 1996-2A2, 6.475%, Due
11/25/2020................... 5,000 5,024
--------
TOTAL ASSET-BACKED
SECURITIES............... 10,162
--------
NON-AGENCY MORTGAGE BACKED OBLIGATIONS - 16.85%
Collateralized Mortgage
Obligation Trust, 56 A,
9.00%, Due 5/1/2014.......... 107 110
Residential Funding Securities
Corporation, 1995-1 KS1,
6.3375%, Due 6/25/2025....... 2,184 2,201
Resolution Trust Corporation,
1992-MH3 B1, 7.25%, Due
12/15/2011................... 4,250 4,249
1992-7 A3, 4.9255%, Due
3/25/2022.................... 2,267 2,239
1992-6 A3, 5.49291%, Due
1/25/2026.................... 2,241 2,245
1992-1 A1, 5.10934%, Due
5/25/2028.................... 2,215 2,229
1992-4 A2, 4.8047%, Due
7/25/2028.................... 2,444 2,492
--------
TOTAL NON-AGENCY MORTGAGE
BACKED OBLIGATIONS....... 15,765
--------
SHORT-TERM INVESTMENTS (NOTE A) - 0.70%
First Boston Treasury Tri-Party Repurchase
Agreement, 5.65%, Due 11/3/1997
(Collateral held at The Chase Manhattan
Bank, N.A., by 8.875%, U.S. Treasury
Note, Due 2/15/1999 - Market
Value - $677)............................ 658
--------
TOTAL SHORT-TERM
INVESTMENTS.............. 658
--------
</TABLE>
See accompanying notes
43
<PAGE> 45
AMR INVESTMENT SERVICES LIMITED-TERM INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- --------
(dollars in thousands)
<S> <C> <C>
TOTAL INVESTMENTS - 99.26%
(COST $92,996)............... $ 92,874
--------
OTHER ASSETS, NET OF
LIABILITIES - 0.74%.......... 695
--------
TOTAL NET ASSETS - 100%........ $ 93,569
========
</TABLE>
- ---------------
Based on the cost of investments of $92,996 for federal income tax purposes at
October 31, 1997, the aggregate gross unrealized appreciation was $320, the
unrealized depreciation was $442, and the net unrealized depreciation of
investments was $122.
(A) Rates associated with short-term investments represent yield to maturity.
ABBREVIATIONS:
REMIC - Real Estate Mortgage Investment Conduit
See accompanying notes
44
<PAGE> 46
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
<S> <C> <C>
(dollars in thousands)
EURODOLLAR TIME DEPOSITS (NOTE A) - 3.98%
Fuji Bank Limited, 5.5625%,
Due 11/3/1997.............. $ 13,390 $ 13,390
Skandinaviska Enskilda
Banken, 5.75%, Due
11/3/1997.................. 65,000 65,000
----------
TOTAL EURODOLLAR TIME
DEPOSITS............... 78,390
----------
CERTIFICATES OF DEPOSIT (NOTE A) - 39.77%
FOREIGN BANKS - 19.02%
Banca CRT S.p.A., New York,
Variable Rate, 5.71875%,
Due 2/20/1998.............. 15,000 15,000
5.71875%, Due 4/9/1998..... 80,000 80,000
Christiania Bank, Variable
Rate, 5.65875%, Due
6/29/1988.................. 100,000 100,000
Instituto Bancario San Paolo
S.p.A., Variable Rate,
5.65766%, Due 5/22/1998.... 80,000 80,000
Postipankki, Limited, New
York, Variable Rate,
5.61234%, Due 10/28/1998
(Note C)................... 100,000 100,000
----------
TOTAL FOREIGN BANKS...... 375,000
----------
DOMESTIC BANKS - 20.75%
Banco Popular de Puerto Rico,
Variable Rate,
5.72%, Due 4/9/1998
(Note B)................. 40,000 40,000
5.67875% Due 6/15/1998,
(Note B)................. 50,000 50,000
Comerica Bank, Detroit,
5.57875%, Due 9/11/1998.... 95,000 94,948
CoreStates Bank N.A.,
Variable Rate,
5.71%, Due 4/3/1998........ 25,000 25,000
5.65875%, Due 6/12/1998.... 25,000 25,000
Mellon Bank, N.A., Variable
Rate, 5.65875%, Due
6/16/1998.................. 87,000 87,000
U.S. Bank, N.A., Variable
Rate, 5.59375%, Due
6/22/1998.................. 87,200 87,170
----------
TOTAL DOMESTIC BANKS..... 409,118
----------
TOTAL CERTIFICATES OF
DEPOSIT................ 784,118
----------
PROMISSORY NOTES (NOTES A AND C) - 15.98%
First Allmerica Financial
Life Insurance Company,
Variable Rate, Due
11/5/1998 (Note D)......... 40,000 40,000
General American Life
Insurance Company,
5.76875%, Due 11/21/1997... 80,000 80,000
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
<S> <C> <C>
(dollars in thousands)
Goldman Sachs Group L.P.,
Variable Rate, 5.7925%, Due
7/21/1998 (Note C)......... $ 95,000 $ 95,000
Jackson National Life
Insurance Company,
5.75438%, Due 9/1/1998
(Note C)................... 100,000 100,000
----------
TOTAL PROMISSORY NOTES... 315,000
----------
COMMERCIAL PAPER (NOTE A) - 8.37%
Bankers Trust New York
Corporation, Variable Rate,
5.67875%, Due 11/3/1997.... 90,000 90,000
General Electric Capital
Corporation, Variable Rate,
5.64875%, Due 2/20/1998.... 75,000 75,000
----------
TOTAL COMMERCIAL PAPER... 165,000
----------
VARIABLE RATE MEDIUM-TERM NOTES
(NOTE A) - 33.26%
American Honda Finance
Corporation, 144A, (Note E)
5.76781%, Due 4/6/1998..... 25,000 24,998
5.71875%, Due 4/8/1998..... 50,000 49,994
5.71875%, Due 4/9/1998..... 40,000 40,009
Bear Stearns Companies,
Incorporated, 5.70%, Due
2/13/1998.................. 70,000 70,000
6.10%, Due 5/15/1998....... 8,000 8,025
Caterpillar Financial
Services Corporation,
5.70%, Due 4/13/1998....... 42,000 42,000
Fleet Financial Group,
Incorporated, 5.85%, Due
2/13/1998.................. 12,000 12,005
Fleet Mortgage Group,
Incorporated, 6.00%, Due
7/27/1998.................. 22,500 22,536
General Motors Acceptance
Corporation, 5.71875%, Due
2/23/1998
(Note D)................. 70,000 70,000
5.59875%, Due 9/21/1998.... 15,000 14,991
5.76859%, Due 10/22/1998
(Note D)................. 25,000 25,000
International Business
Machines Credit
Corporation, 5.59219%, Due
9/10/1998.................. 42,000 41,976
Lehman Brothers Holdings,
Incorporated, 5.79687%, Due
12/5/1997
(Note C)................. 100,000 100,000
Merrill Lynch and Company,
Incorporated, 5.65266%, Due
3/3/1998................... 38,000 37,998
5.93875%, Due 5/19/1998.... 25,000 25,039
</TABLE>
See accompanying notes
45
<PAGE> 47
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
---------- ----------
<S> <C> <C>
(dollars in thousands)
Sanwa Business Credit
Corporation, 144A, (Note E)
5.75%, Due 1/12/1998....... $ 38,000 $ 38,000
5.70875%, Due 2/24/1998.... 33,000 33,000
----------
TOTAL VARIABLE RATE
MEDIUM-TERM NOTES...... 655,571
----------
TOTAL INVESTMENTS - 101.36%
(COST $1,998,079).......... 1,998,079
----------
LIABILITIES, NET OF OTHER
ASSETS - (1.36%)........... (26,749)
----------
TOTAL NET ASSETS - 100%...... $1,971,330
==========
</TABLE>
- ---------------
Based on the cost of investments of $1,998,079 for federal income tax purposes
at October 31, 1997, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity or
yield to next reset date.
(B) Obligation is subject to a same day credit quality put back to issuer.
(C) Obligation is subject to an unconditional put back to the issuer with seven
calendar days notice.
(D) Obligation is subject to an unconditional put back to the issuer with ninety
calendar days notice.
(E) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $186,001,000 or 9.4% of net
assets.
ABBREVIATION:
L.P. - Limited Partnership
See accompanying notes
46
<PAGE> 48
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
MUNICIPAL OBLIGATIONS - 94.64%
COMMERCIAL PAPER (NOTE A) - 15.00%
City of Burlington, Kansas
Customized Purchase Pollution
Control Refunding and
Improvement Revenue Bonds,
Series 1985B, 3.75%,
Due 11/19/1997, matures
9/1/2015, LOC Societe
Generale..................... $ 1,600 $ 1,600
Michigan State Housing
Development Authority Multi-
family Housing Revenue Bonds,
Series 1988A, 3.70%, Due
11/25/1997, LOC Credit
Suisse....................... 2,000 2,000
Missouri State Environmental
Improvement and Energy
Resource Authority Pollution
Control Revenue (Union
Electric Company Project)
Series 1985A, 3.65%, Due
12/4/1997, LOC Union Bank of
Switzerland.................. 3,500 3,500
Montgomery County, Pennsylvania
Industrial Development
Pollution Control Revenue
(Peco Energy Company), Series
1996, 3.70%, Due 2/5/1998,
LOC Canadian Imperial Bank... 3,000 3,000
Sweetwater County, Wyoming
Customized Pollution Control
Refunding (Pacificorp
Project), Series 1988A,
3.80%, Due 1/14/1998, LOC
Union Bank of Switzerland.... 3,000 3,000
Toledo-Lucas County, Ohio Port
Facility Refunding Revenue
(CSX Transportation,
Incorporated), Series 1992,
3.80%, Due 1/14/1998, LOC
Bank of Nova Scotia.......... 1,000 1,000
West Virginia Public Energy
Authority Revenue Bonds
(Morgantown Association
Project), Series 1989, 3.75%,
Due 11/13/1997, LOC Swiss
Bank......................... 1,000 1,000
----------
TOTAL COMMERCIAL PAPER..... 15,100
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
VARIABLE RATE DEMAND OBLIGATIONS
(NOTE A) - 79.64%
ALASKA - 3.38%
Alaska Industrial Development &
Export Authority Refunding
Revenue Bonds (American
President Lines), Series
1991, 3.95%, Due 11/1/2009,
LOC Industrial Bank Japan,
Limited...................... $ 3,405 $ 3,405
----------
TOTAL ALASKA............... 3,405
----------
ARIZONA - 2.38%
Apache County, Arizona
Industrial Development
Authority Pollution Control
Revenue (Tucson Electric
Power Company), Series 1981B,
3.75%, Due 10/1/2021, LOC
Bank of Tokyo-Mitsubishi,
Limited...................... 2,400 2,400
----------
TOTAL ARIZONA.............. 2,400
----------
ARKANSAS - 1.19%
Little River County, Arkansas
Solid Waste Disposal Revenue
Bonds (Georgia-Pacific
Corporation Project), Series
1991, 3.80%, Due 11/1/2026,
LOC Sumitomo Bank, Limited... 1,200 1,200
----------
TOTAL ARKANSAS............. 1,200
----------
CALIFORNIA - 9.63%
California Pollution Control
Finance Authority Control
Resource Recovery (Wadham
Energy LP), Series 1987A,
3.80%, Due 11/1/17, LOC
Banque Paribas............... 3,800 3,800
California Statewide Community
Development Authority
Industrial Development
Revenue Bonds (Nichirin-Flex
U.S.A., Incorporated
Project), Series 1989, 3.80%,
Due 10/1/2009, LOC Dai-Ichi
Kangyo Bank, Limited......... 2,500 2,500
</TABLE>
See accompanying notes
47
<PAGE> 49
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Los Angeles County Industrial
Development Authority (Gary
A. Bandy), 3.70%, Due
12/1/2007, LOC Dai-Ichi
Kangyo Bank, Limited......... $ 345 $ 345
Los Angeles County Industrial
Development Authority
(Bicara, Limited Project),
Series 1987A-II, 3.70%, Due
12/1/2007, LOC Dai-Ichi
Kangyo Bank, Limited......... 550 550
Los Angeles Multifamily Housing
Revenue Bonds (Channel
Gateway Apartments Project),
Series 1989B, 4.20%, Due
8/1/2019, LOC Fuji Bank,
Limited, Los Angeles......... 2,500 2,500
----------
TOTAL CALIFORNIA........... 9,695
----------
COLORADO - 1.09%
Moffat County Pollution Control
Revenue (Ute Electric Company
Project), Bond Insurance -
AMBAC Indemnity Corporation,
Series 1984, 3.70%, due
7/1/2010, SPA Societe
Generale..................... 1,100 1,100
----------
TOTAL COLORADO............. 1,100
----------
CONNECTICUT - 2.98%
Connecticut State Health and
Education Facilities
Authority Revenue (Edgehill
Project), Series 1997B,
3.85%, Due 7/1/2004, LOC
Banque Paribas............... 3,000 3,000
----------
TOTAL CONNECTICUT.......... 3,000
----------
FLORIDA - 2.28%
Broward County, Florida Housing
Finance Authority Multifamily
Housing Revenue
Bonds(Parkview Partnership
Limited), 3.90%, Due
12/1/2010, LOC Fuji Bank,
Limited...................... 1,000 1,000
Dade County, Florida Capital
Asset Acquisition Special
Obligation Bonds, Series
1990, 3.95%, Due 10/1/2010,
LOC Sanwa Bank, Limited...... 1,300 1,300
----------
TOTAL FLORIDA.............. 2,300
----------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
GEORGIA - 4.57%
Industrial Development
Authority of Cartersville
(Sekisui Jushi America,
Incorporated Project), Series
1992, 4.05%, Due 6/1/2012,
LOC Sanwa Bank, Limited...... $ 1,100 $ 1,100
Thomaston-Upson County
Industrial Development
Revenue Authority (Yamaha
Music Manufacturing,
Incorporated Project), Series
1988, 4.05%, Due 8/1/2018,
LOC Bank of Tokyo-Mitsubishi,
Limited...................... 3,500 3,500
----------
TOTAL GEORGIA.............. 4,600
----------
HAWAII - 2.98%
Department of Budget and
Finance of the State of
Hawaii, Special Purpose
Revenue Bonds (G.N. Wilcox
Memorial Hospital Project),
Series 1988, 4.25%, Due
7/1/2018, LOC Fuji Bank,
Limited...................... 2,000 2,000
Hawaii State Housing Finance &
Development Revenue Bonds
(Kamakee Vista Rental Housing
Systems Project), Series
1990A, 3.80%, Due 7/1/2025,
LOC Industrial Bank of Japan,
Limited...................... 1,000 1,000
----------
TOTAL HAWAII............... 3,000
----------
ILLINOIS - 2.67%
Illinois Development Finance
Authority (Illinois Power
Project), Series 1987B,
4.00%, Due 3/1/2017, LOC Bank
of Tokyo-Mitsubishi,
Limited...................... 900 900
Illinois Housing Development
Authority Multifamily
Mortgage - Revenue Bonds
(Hyde Park Project), Series
1989, 4.10%, Due 2/1/2024,
LOC Sumitomo Bank, Limited... 1,360 1,360
Oswego, Illinois Industrial
Development Revenue Bonds
(Griffith Laboratories World
Wide, Incorporated Project),
Series 1995, 3.65%, Due
7/1/2025, LOC ABN AMRO Bank,
N.V.......................... 430 430
----------
TOTAL ILLINOIS............. 2,690
----------
</TABLE>
See accompanying notes
48
<PAGE> 50
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
INDIANA - 3.23%
Fort Wayne Industrial Economic
Development Revenue Bonds
(ND-Tech Corporation
Project), Series 1989, 3.70%,
Due 7/1/2009, LOC Societe
Generale..................... $ 1,000 $ 1,000
Princeton Industrial
Development Revenue Bonds
(Orion Electric America,
Incorporated Project), Series
1987, 3.80%, Due 4/30/2017,
LOC Bank of Tokyo-Mitsubishi,
Limited...................... 455 455
Seymour Economic Development
Revenue Bonds (Kobelco Metal
Powder of America,
Incorporated Project), Series
1987, 4.05%, Due 12/15/1997,
LOC Industrial Bank of Japan,
Limited...................... 600 600
Shelbyville, Indiana Economic
Development Revenue Bonds
(Nippisun Indiana Corporation
Project), Series 1991, 4.25%,
Due 9/1/2006, LOC Industrial
Bank of Japan, Limited....... 1,200 1,200
----------
TOTAL INDIANA.............. 3,255
----------
IOWA - 1.11%
Dubuque, Iowa Industrial
Development Revenue Bonds
(Swiss Valley Farms Company
Project), Series 1987, 3.75%,
Due 12/1/2001, LOC Rabobank
Nederland.................... 1,120 1,120
----------
TOTAL IOWA................. 1,120
----------
KENTUCKY - 2.48%
Bowling Green Industrial
Building Revenue Bonds (TWN
Fastener, Incorporated
Project), Series 1988, 4.05%,
Due 3/1/2008, LOC Industrial
Bank of Japan, Limited....... 900 900
Hopkinsville Industrial
Development Revenue Bonds
(American Precision
Machinery, Incorporated
Project), Series 1990, 3.95%,
Due 5/1/2000, LOC Bank of
Tokyo-Mitsubishi, Limited.... 1,400 1,400
Hopkinsville, Kentucky
Industrial Building Revenue
Refunding Bonds (Co Par,
Incorporated Project), Series
1994A, 4.05%, Due 4/1/2004,
LOC Dai-Ichi Kangyo Bank,
Limited...................... 100 100
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Shelbyville, Kentucky
Industrial Building Revenue
Bonds (Ichikoh Manufacturing,
Incorporated Project), Series
1987, 4.05%, Due 10/1/2007,
LOC Industrial Bank of Japan,
Limited...................... $ 100 $ 100
----------
TOTAL KENTUCKY............. 2,500
----------
LOUISIANA - 2.04%
Jefferson Parish Louisiana
Hospital District #1 (West
Jefferson Medical Center
Project), Series 1986, 3.75%,
Due 1/1/2026, LOC Rabobank
Nederland.................... 1,185 1,185
Louisiana Housing Finance
Agency Multifamily Revenue
Refunding Bonds (New
Orleanian Project), Series
1988, 3.90%, Due 12/1/2025,
LOC Sumitomo Bank, Limited... 870 870
----------
TOTAL LOUISIANA............ 2,055
----------
MISSOURI - 3.48%
Missouri Higher Education Loan
Authority Revenue Bonds,
Series 1988A, 3.70%, Due
6/1/2017, LOC National
Westminster Bank, PLC........ 3,500 3,500
----------
TOTAL MISSOURI............. 3,500
----------
NEBRASKA - 0.89%
Lancaster County, Nebraska
Industrial Revenue Bonds
(Sun-Husker Foods,
Incorporated Project), Series
1989, 4.05%, Due 8/15/2009,
LOC Bank of Tokyo-Mitsubishi,
Limited...................... 900 900
----------
TOTAL NEBRASKA............. 900
----------
NEVADA - 3.18%
Clark County, Nevada Industrial
Development Revenue Bonds
Pollution Control Refunding
Revenue Bonds (Nevada Power
Company Project), Series
1995A, 3.80%, Due 10/1/2030,
LOC Barclays Bank, PLC....... 700 700
Clark County, Nevada Industrial
Development Revenue Bonds
Pollution Control Refunding
Revenue Bonds (Nevada Power
Company Project), Series
1995C, 3.70%, Due 10/1/2030,
LOC Barclays Bank, PLC....... 2,500 2,500
----------
TOTAL NEVADA............... 3,200
----------
</TABLE>
See accompanying notes
49
<PAGE> 51
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
NEW JERSEY - 2.91%
New Jersey Health Care
Facilities Financing
Authority Revenue
Bonds(Carrier Foundation
Project), Bond Insurance -
FGIC, Series 1985C, 3.95%,
Due 7/1/2005, SPA Banque
Paribas...................... $ 2,935 $ 2,935
----------
TOTAL NEW JERSEY........... 2,935
----------
NEW YORK - 4.47%
New York, New York General
Obligation Bonds, Series
1993B-2, 3.75%, Due
8/15/2020, LOC Morgan
Guaranty Trust............... 1,000 1,000
New York, New York General
Obligation Bonds, Series
1993B-4, 3.75%, Due
8/15/2023, LOC Union Bank of
Switzerland.................. 1,500 1,500
New York, New York General
Obligation Bonds, Bond
Insurance - FGIC, Series
1992B, 3.75%, Due
10/1/2020.................... 2,000 2,000
----------
TOTAL NEW YORK............. 4,500
----------
OHIO - 3.77%
Saint Mary's, Ohio Industrial
Development Revenue Bonds
(Setex, Incorporated
Project), Series 1988, 4.05%,
Due 12/1/2001, LOC Industrial
Bank of Japan, Limited....... 1,500 1,500
Ohio State Environmental
Improvement Revenue (U S
Steel Corporation Project),
Series 1986, 3.85%, Due
5/1/2011, LOC Sanwa
Limited...................... 2,300 2,300
----------
TOTAL OHIO................. 3,800
----------
PENNSYLVANIA - 7.24%
Cambria County Industrial
Development Authority
Resource Recovery Revenue
Bonds(Cambria Cogen Company
Project), Series 1989 V-1,
3.70%, Due 9/1/2019, LOC ABN
AMRO Bank, N.V.,............. 1,000 1,000
Cambria County Industrial
Development Authority
Resource Recovery Revenue
Bonds(Cambria Cogen Company
Project), Series 1989 V-2,
3.70%, Due 9/1/2019, LOC ABN
AMRO Bank, N.V.,............. 900 900
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Cambria County Industrial
Development Authority
Resource Recovery Revenue
Bonds (Cambria Cogen Company
Project), Series 1991 V-1,
3.70%, Due 9/1/2019, LOC ABN
AMRO Bank, N.V............... $ 2,150 $ 2,150
Gettysburg Area Industrial
Development Authority
Industrial Development
Refunding Bonds (Dal-Tile
Corporation), Series 1987B,
3.80%, Due 3/1/2004, LOC
Credit Suisse................ 1,570 1,570
Northumberland County
Industrial Development
Authority Resource Recovery
Revenue Bonds (Foster Wheeler
Mt. Carmel, Incorporated
Project), Series 1987A,
3.75%, Due 2/1/2010, LOC
Union Bank of Switzerland.... 1,000 1,000
Northumberland County
Industrial Development
Authority Resource Recovery
Revenue Bonds (Foster Wheeler
Mt. Carmel, Incorporated
Project), Series 1987B,
3.75%, Due 2/1/2010, LOC
Union Bank of Switzerland.... 670 670
----------
TOTAL PENNSYLVANIA......... 7,290
----------
TENNESSEE - 0.80%
Blount County Industrial
Development Revenue Bonds
(Advanced Crystal Technology,
Incorporated Project), Series
1988, 4.05%, Due 8/1/2008,
LOC Industrial Bank of Japan,
Limited...................... 500 500
Covington, Tennessee Industrial
Development Board Industrial
Development Revenue Bonds
(Charms Company Project),
Series 1992, 3.70%, Due
6/1/2027, LOC Societe
Generale..................... 300 300
----------
TOTAL TENNESSEE............ 800
----------
TEXAS - 0.70%
Harris County, Texas Industrial
Development Revenue Bonds
(Zeon Chemicals Project),
Series 1989, 3.90%, Due
2/1/2009, LOC Industrial Bank
of Japan, Limited............ 600 600
</TABLE>
See accompanying notes
50
<PAGE> 52
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Harris County, Texas Industrial
Development Revenue Bonds
(Chusei "USA" Project),
Series 1991C, 3.60%, Due
8/1/2001, LOC Bank of Tokyo-
Mitsubishi, Limited.......... $ 100 $ 100
----------
TOTAL TEXAS................ 700
----------
UTAH - 3.28%
Housing Authority of Provo
City, Utah Multifamily Rental
Housing Revenue Refunding
Bonds(Branbury Park Project),
Series 1987A, 3.80%, Due
12/1/2010, LOC Dai-Ichi
Kangyo Bank, Limited......... 2,000 2,000
Housing Authority of Provo
City, Utah Multifamily Rental
Housing Revenue Refunding
Bonds (Branbury Park
Project), Series 1987B,
3.85%, Due 12/1/2010, LOC
Dai-Ichi Kangyo, Bank,
Limited...................... 300 300
Utah State Board of Regents
Student Loan Revenue Bonds,
Bond Insurance-AMBAC
Indemnity Corporation, Series
1988C, 3.70%, Due
11/1/2013.................... 1,000 1,000
----------
TOTAL UTAH................. 3,300
----------
VIRGINIA - 0.20%
Virginia Housing Development
Authority (AHC Service
Corporation), Series 1987A,
3.75%, Due 9/1/2017, LOC Bank
of Tokyo-Mitsubishi,
Limited...................... 200 200
----------
TOTAL VIRGINIA............. 200
----------
WASHINGTON - 5.60%
Pierce County, Washington
Economic Development
Corporation Dock & Warf
Facilities Revenue Bonds (SCS
Industries Project), Series
1995, 3.70%, Due 7/1/2030,
LOC Bank of Nova Scotia...... 3,585 3,585
Port Angeles Industrial
Development Corporation
(Daishowa America Project),
Series 1992, 4.05%, Due
8/1/2007, LOC Industrial Bank
of Japan, Limited............ 200 200
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- -----------
(dollars in thousands)
<S> <C> <C>
Port Angeles Industrial
Development Corporation
Revenue Bonds, Series 1992B,
4.05%, Due 12/1/2007, LOC
Industrial Bank of Japan,
Limited...................... $ 300 $ 300
Port Everett Revenue Bonds,
Series 1986, 4.05%, Due
12/1/2006, LOC Sumitomo Bank,
Limited...................... 1,550 1,550
----------
TOTAL WASHINGTON........... 5,635
----------
WEST VIRGINIA - 1.11%
Marion County, West Virginia
Solid Waste Disposal Facility
(Grant Town Cogeneration
Project), Series 1990B,
3.70%, Due 10/1/2017, LOC
National Westminster Bank,
PLC.......................... 115 115
Marion County, West Virginia
Solid Waste Disposal Facility
(Grant Town Cogeneration
Project), Series 1990C,
3.70%, Due 10/1/2017, LOC
National Westminster Bank,
PLC.......................... 1,000 1,000
----------
TOTAL WEST VIRGINIA........ 1,115
----------
TOTAL VARIABLE RATE DEMAND
OBLIGATIONS.............. 80,195
----------
TOTAL MUNICIPAL
OBLIGATIONS.............. 95,295
----------
OTHER INVESTMENTS - 3.82%
Alliance Capital Management
Institutional Reserves
Tax-Free Portfolio(#38)...... 2,193 2,193
Provident Institutional Funds
Municipal Cash Fund.......... 1,653 1,653
----------
TOTAL OTHER
INVESTMENTS.............. 3,846
----------
TOTAL INVESTMENTS - 98.46%
(COST $99,141)............... 99,141
----------
OTHER ASSETS, NET OF
LIABILITIES - 1.54%.......... 1,550
----------
TOTAL NET ASSETS - 100%........ $ 100,691
==========
</TABLE>
- ---------------
Based on the cost of investments of $99,141 for federal income tax purposes at
October 31, 1997, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity or
yield to next reset date.
See accompanying notes
51
<PAGE> 53
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
ABBREVIATIONS:
FGIC - Financial Guaranty Insurance Company
LOC - Letter of Credit
MBIA - Municipal Bond Investors Assurance
NV - Company
PLC - Public Limited Corporation
SPA - Support Agreement
See accompanying notes
52
<PAGE> 54
AMR INVESTMENT SERVICES U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Value
-------- ---------
(dollars in thousands)
<S> <C> <C>
U.S. TREASURY REPURCHASE AGREEMENTS (NOTES A AND
B) - 42.86%
Goldman Sachs Tri-Party
Government Repurchase
Agreement, 5.75%, Due
11/3/1997 (Collateral held at
The Bank of New York Company,
Incorporated by Federal Home
Loan Mortgage Corporation
7.00%, Due 9/1/2010 through
Federal National Mortgage
Association 7.00%, Due
10/1/2027 - Market Value
$30,412)...................... $30,000 $ 30,000
UBS Securities Tri-Party
Government National Mortgage
Association Repurchase
Agreement, 5.74%, Due
11/3/1997 (Collateral held at
The Chase Manhattan Bank, N.A.
by Federal National Mortgage
Association 7.25%, Due
10/1/2015 through Federal
National Mortgage Association
7.479%, Due 4/1/2027 - Market
Value $27,002)................ 26,483 26,483
--------
TOTAL U.S. TREASURY
REPURCHASE AGREEMENTS..... 56,483
</TABLE>
<TABLE>
<CAPTION>
Par
Amount Value
-------- ---------
(dollars in thousands)
<S> <C> <C>
--------
U.S. GOVERNMENT AGENCY INSTRUMENTS (NOTE A) - 56.88%
Federal Home Loan Bank Variable
Rate, 5.49%, Due 7/7/1998..... $50,000 $ 49,970
Federal National Mortgage
Association, Variable Rate,
5.46375%, Due 9/10/1998....... 25,000 24,983
--------
TOTAL U.S. GOVERNMENT AGENCY
INSTRUMENTS............... 74,953
--------
TOTAL INVESTMENTS - 99.74%
(COST - $131,436)............. 131,436
--------
OTHER ASSETS, NET OF
LIABILITIES - 0.26%........... 344
--------
TOTAL NET ASSETS - 100%......... $131,780
========
</TABLE>
- ---------------
Based on the cost of investments of $131,436 for federal income tax purposes at
October 31, 1997, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity,
or yield to next reset date.
(B) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is held at the Portfolio's
custodian bank, NationsBank of Texas, N.A., or at subcustodian banks, as
indicated. The collateral is monitored daily by the Portfolio so that its
market value exceeds the carrying value of the repurchase agreement.
See accompanying notes
53
<PAGE> 55
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited-
Growth and International Term
Balanced Income Equity Income
---------- ---------- ------------- ----------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities at value (cost - $888,520;
$1,322,925; $664,005; $92,996, respectively).......... $1,041,204 $1,722,405 $ 774,331 $ 92,874
Cash, including foreign currency........................ - - 31,919 -
Unrealized appreciation on foreign currency contracts... - - 542 -
Dividends and interest receivable....................... 6,996 2,841 2,190 761
Reclaims receivable..................................... - - 794 -
Receivable for investments sold......................... 15,416 7,751 1,521 -
Deferred organization costs, net........................ 18 18 18 18
---------- ---------- ---------- ----------
TOTAL ASSETS........................................ 1,063,634 1,733,015 811,315 93,653
---------- ---------- ---------- ----------
LIABILITIES:
Payable for investments purchased....................... 42,310 18,160 1,144 -
Payable upon return of securities loaned................ 66,635 44,725 47,053 -
Management and investment advisory fees payable
(Note 2).............................................. 908 1,423 1,109 20
Accrued organization costs.............................. 35 35 35 35
Other liabilities....................................... 79 72 301 29
---------- ---------- ---------- ----------
TOTAL LIABILITIES................................... 109,967 64,415 49,642 84
---------- ---------- ---------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $ 953,667 $1,668,600 $ 761,673 $ 93,569
========== ========== ========== ==========
</TABLE>
See accompanying notes
54
<PAGE> 56
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Municipal U.S. Government
Market Money Market Money Market
---------- ------------ ---------------
(in thousands)
<S> <C> <C> <C>
ASSETS:
Investments in securities at value (cost - $1,998,079;
$99,141; $131,436, respectively)*..................... $1,998,079 $ 99,141 $ 131,436
Cash.................................................... - - 5
Dividends and interest receivable....................... 13,541 378 397
Receivable for investments sold......................... - 1,210 -
Deferred organization costs, net........................ 18 18 18
---------- ---------- ----------
TOTAL ASSETS........................................ 2,011,638 100,747 131,856
---------- ---------- ----------
LIABILITIES:
Payable for investments purchased....................... 40,000 - -
Management and investment advisory fees payable (Note
2).................................................... 264 13 17
Accrued organization costs.............................. 35 35 35
Other liabilities....................................... 9 8 24
---------- ---------- ----------
TOTAL LIABILITIES................................... 40,308 56 76
---------- ---------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $1,971,330 $ 100,691 $ 131,780
========== ========== ==========
</TABLE>
- ---------------
* Includes repurchase agreements of $56,483 for the U.S. Government Money Market
Portfolio.
See accompanying notes
55
<PAGE> 57
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited- Municipal
Growth and International Term Money Money
Balanced Income Equity Income Market Market
------------- ------------- ------------- ------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........ $ 28,940 $ 2,572 $ 2,891 $ 14,595 $ 106,645 $ 3,607
Dividend income (net of
foreign taxes of
$1,542 in
International Equity
Portfolio)........... 15,983 35,305 15,631 - - -
Income derived from
securities lending,
net.................. 240 203 322 1 - -
------------- ------------- ------------- ------------- ------------- -------------
TOTAL INVESTMENT
INCOME........... 45,163 38,080 18,844 14,596 106,645 3,607
------------- ------------- ------------- ------------- ------------- -------------
EXPENSES:
Management and
investment advisory
fees (Note 2)........ 3,143 4,340 2,828 506 2,813 143
Custodian fees......... 120 94 515 45 130 7
Professional fees...... 43 42 25 15 70 -
Amortization of
organization costs... 15 15 15 15 15 15
Other expenses......... 83 108 50 27 57 18
------------- ------------- ------------- ------------- ------------- -------------
TOTAL EXPENSES..... 3,404 4,599 3,433 608 3,085 183
------------- ------------- ------------- ------------- ------------- -------------
Less fees waived
(Note 2)......... - - - - - 8
------------- ------------- ------------- ------------- ------------- -------------
NET EXPENSES....... 3,404 4,599 3,433 608 3,085 175
------------- ------------- ------------- ------------- ------------- -------------
NET INVESTMENT INCOME...... 41,759 33,481 15,411 13,988 103,560 3,432
------------- ------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss) on
investments.......... 134,243 123,365 24,290 (355) 31 -
Net realized loss on
foreign currency
transactions......... - - (2,959) - - -
Change in net
unrealized
appreciation or
depreciation of
investments.......... 16,668 166,119 77,517 (644) - -
Change in net
unrealized
depreciation of
foreign currency
contracts and
translations......... - - (20,412) - - -
------------- ------------- ------------- ------------- ------------- -------------
NET GAIN (LOSS) ON
INVESTMENTS...... 150,911 289,484 78,436 (999) 31 -
------------- ------------- ------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $ 192,670 $ 322,965 $ 93,847 $ 12,989 $ 103,591 $ 3,432
============= ============= ============= ============= ============= =============
<CAPTION>
U.S.
Government
Money
Market
-------------
<S> <C>
INVESTMENT INCOME:
Interest income........ $ 6,453
Dividend income (net of
foreign taxes of
$1,542 in
International Equity
Portfolio)........... -
Income derived from
securities lending,
net.................. -
-------------
TOTAL INVESTMENT
INCOME........... 6,453
-------------
EXPENSES:
Management and
investment advisory
fees (Note 2)........ 175
Custodian fees......... 9
Professional fees...... 2
Amortization of
organization costs... 15
Other expenses......... 19
-------------
TOTAL EXPENSES..... 220
-------------
Less fees waived
(Note 2)......... -
-------------
NET EXPENSES....... 220
-------------
NET INVESTMENT INCOME...... 6,233
-------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain
(loss) on
investments.......... 5
Net realized loss on
foreign currency
transactions......... -
Change in net
unrealized
appreciation or
depreciation of
investments.......... -
Change in net
unrealized
depreciation of
foreign currency
contracts and
translations......... -
-------------
NET GAIN (LOSS) ON
INVESTMENTS...... 5
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS............... $ 6,238
=============
</TABLE>
See accompanying notes
56
<PAGE> 58
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Growth and Income International Equity Limited-Term Income
----------------------- ----------------------- --------------------- --------------------
1997 1996 1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income....... $ 41,759 $ 36,765 $ 33,481 $ 27,284 $ 15,411 $ 8,135 $ 13,988 $ 12,102
Net realized gain (loss) on
investments and foreign
currency transactions..... 134,243 67,731 123,365 77,846 21,331 11,172 (355) (3,216)
Change in net unrealized
appreciation or
depreciation of
investments and foreign
currency translations..... 16,668 27,670 166,119 94,294 57,105 30,752 (644) 458
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. 192,670 132,166 322,965 199,424 93,847 50,059 12,989 9,344
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS:
Contributions............... 282,834 1,029,398 446,329 1,053,593 397,499 397,164 95,910 292,820
Withdrawals................. (417,319) (266,082) (212,851) (140,860) (134,169) (42,727) (188,507) (128,987)
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL
INTERESTS.............. (134,485) 763,316 233,478 912,733 263,330 354,437 (92,597) 163,833
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS........................ 58,185 895,482 556,443 1,112,157 357,177 404,496 (79,608) 173,177
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
NET ASSETS:
Beginning of period......... 895,482 - 1,112,157 - 404,496 - 173,177 -
---------- ---------- ---------- ---------- -------- ---------- -------- ---------
END OF PERIOD............... $ 953,667 $ 895,482 $1,668,600 $1,112,157 $761,673 $ 404,496 $ 93,569 $ 173,177
========== ========== ========== ========== ======== ========== ======== =========
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- ------------------------------------------------------------------------------------------------------------------
RATIOS:
Expenses to average net
assets (annualized)....... 0.34% 0.36% 0.34% 0.35% 0.57% 0.56% 0.30% 0.31%
Net investment income to
average net assets
(annualized).............. 4.11% 4.26% 2.45% 2.81% 2.55% 2.50% 6.91% 6.67%
Portfolio turnover rate..... 105% 76% 35% 40% 15% 19% 282% 304%
Average commission rate
paid*..................... $ 0.0385 $ 0.0409 $ 0.0395 $ 0.0412 $ 0.0164 $ 0.0192 - -
</TABLE>
* Foreign commissions usually are lower than U.S. commissions when expressed as
cents per share due to the lower per share price of many non-U.S. securities.
See accompanying notes
57
<PAGE> 59
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended October 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Municipal Money Market U.S. Government Money Market
--------------------------- ----------------------- -----------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ---------- ---------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income............... $ 103,560 $ 87,138 $ 3,432 $ 2,196 $ 6,233 $ 4,734
Net realized gain on investments.... 31 73 - - 5 39
------------ ------------ --------- --------- --------- ---------
TOTAL INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... 103,591 87,211 3,432 2,196 6,238 4,773
------------ ------------ --------- --------- --------- ---------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions....................... 18,538,305 14,620,176 186,159 189,085 365,792 275,202
Withdrawals......................... (18,435,488) (12,942,465) (170,158) (110,023) (330,942) (189,283)
------------ ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL
INTERESTS..................... 102,817 1,677,711 16,001 79,062 34,850 85,919
------------ ------------ --------- --------- --------- ---------
NET INCREASE IN NET ASSETS.............. 206,408 1,764,922 19,433 81,258 41,088 90,692
------------ ------------ --------- --------- --------- ---------
NET ASSETS:
Beginning of period................. 1,764,922 - 81,258 - 90,692 -
------------ ------------ --------- --------- --------- ---------
END OF PERIOD....................... $ 1,971,330 $ 1,764,922 $ 100,691 $ 81,258 $ 131,780 $ 90,692
============ ============ ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- ------------------------------------------------------------------------------------------------------------------
RATIOS:
Expenses to average net assets
(annualized)*..................... 0.16% 0.17% 0.18% 0.13% 0.19% 0.20%
Net investment income to average net
assets (annualized)*.............. 5.52% 5.45% 3.59% 3.59% 5.32% 5.18%
</TABLE>
- ---------------
* Operating results of the Municipal Money Market Portfolio in the years
indicated below excluded fees waived by the Manager. Results prior to expenses
waived were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
Ratio of expenses to average net assets..................... 0.19% 0.21%
Ratio of net investment income to average net assets........ 3.58% 3.51%
</TABLE>
See accompanying notes
58
<PAGE> 60
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
AMR Investment Services Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York pursuant to a Declaration of Trust dated as of June 27, 1995 and
amended on August 11, 1995. Beneficial interests in the Trust are divided into
separate series, each having distinct investment objectives and policies. These
financial statements relate to the AMR Investment Services Balanced Portfolio,
the AMR Investment Services Growth and Income Portfolio, the AMR Investment
Services International Equity Portfolio, the AMR Investment Services
Limited-Term Income Portfolio, the AMR Investment Services Money Market
Portfolio, the AMR Investment Services Municipal Money Market Portfolio and the
AMR Investment Services U.S. Government Money Market Portfolio (each a
"Portfolio" and collectively the "Portfolios"). Prior to March 1, 1997, the AMR
Investment Services U.S. Government Money Market Portfolio was known as the AMR
Investment Services U.S. Treasury Money Market Portfolio and operated under
different investment policies. The assets of each Portfolio belong only to that
Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other. The Trust commenced active operations on November 1,
1995.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Security Valuation
Equity securities that are primarily traded on domestic securities
exchanges are valued at the last quoted sales price on a designated exchange
prior to the close of trading on the New York Stock Exchange (the "Exchange")
or, lacking any current sales, on the basis of the last current bid price prior
to the close of trading on the Exchange. Portfolio securities that are primarily
traded on foreign securities exchanges are generally valued at the preceding
closing values of such securities on their respective exchanges where primarily
traded. Over-the-counter equity securities are valued on the basis of the last
bid price on that date prior to the close of trading. Debt securities (other
than short-term securities) normally will be valued on the basis of prices
provided by a pricing service and may take into account appropriate factors such
as institution-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data. In some cases, the prices of debt securities may be determined using
quotes obtained from brokers. Securities for which market quotations are not
readily available are valued at fair value, as determined in good faith and
pursuant to procedures approved by the Trust's Board of Trustees (the "Board").
Investment grade short-term obligations with 60 days or less to maturity and
securities of the Money Market, Municipal Money Market and U.S. Government Money
Market Portfolios (the "Money Market Portfolios") are valued using the amortized
cost method. In the event that a deviation of 1/2 of 1% or more exists between
the $1.00 per share price of the Money Market Portfolios, calculated at
amortized cost, and the price per share calculated by reference to market
quotations, or if there is any other deviation which the Board believes would
result in a material dilution to shareholders or purchasers, the Board will
promptly consider the appropriate action which should be initiated.
59
<PAGE> 61
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Dividend income is recorded on the ex-dividend date except
certain dividends from foreign securities which are recorded as soon as the
information is available to the Portfolios. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
amortization of premiums or accretion of discounts on investment grade
short-term securities and zero coupon instruments. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the bid price of such currencies
against U.S. dollars as last quoted by a recognized dealer. Income, expenses and
purchases and sales of investments are translated into U.S. dollars at the rate
of exchange prevailing on the respective dates of such transactions. The
Portfolios include that portion of the results of operations resulting from
changes in foreign exchange rates with net realized and unrealized gain on
investments, as appropriate.
Forward Foreign Currency Contracts
The International Equity Portfolio may enter into forward foreign currency
contracts to hedge the exchange rate risk on investment transactions or to hedge
the value of portfolio securities denominated in foreign currencies. Forward
foreign currency contracts are valued at the forward exchange rate prevailing on
the day of valuation.
Federal Income and Excise Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of sub-chapter M of the
Internal Revenue Code.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Portfolio from a securities dealer or a bank which are subject to resale at a
later date. Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is monitored daily by each
Portfolio so that the collateral's market value exceeds the carrying value of
the repurchase agreement.
Deferred Organization Expenses
Expenses incurred by a Portfolio in connection with its organization are
being amortized on a straight-line basis over a five-year period.
60
<PAGE> 62
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. Investment assets of the
Balanced, Growth and Income and International Equity Portfolios ("Variable NAV
Portfolios") are managed by multiple investment advisers which have entered into
separate investment advisory agreements with the Manager. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Portfolios an annualized fee equal to .10% of the average
daily net assets of the Variable NAV Portfolios plus amounts paid by the Manager
to the investment advisors hired by the Manager to direct investment activities
of the Portfolios. Management fees are paid as follows (dollars in thousands):
<TABLE>
<CAPTION>
Amounts paid to Net Amounts
Management Management Investment Retained by
Fee Rate Fee Advisors Manager
---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Balanced Portfolio........................................ .225%-.70% $3,143 $2,128 $1,015
Growth and Income Portfolio............................... .225%-.70% 4,340 2,976 1,364
International Equity Portfolio............................ .25%-.90% 2,828 2,224 604
</TABLE>
The Manager serves as the sole investment adviser to the Limited-Term
Income Portfolio and each of the Money Market Portfolios. Pursuant to the
Management Agreement, the Manager receives from the Portfolios an annualized fee
equal to .25% of the average daily net assets of the Limited-Term Income
Portfolio and .15% of the average daily net assets of each of the Money Market
Portfolios. During the year ended October 31, 1997, the Manager waived
management fees totaling $7,534 for the Municipal Money Market Portfolio.
Other
Certain officers or trustees of the Trust are also officers of the Manager
or American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided free unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. For
the year ended October 31, 1997, the cost of air transportation was not material
to any of the Portfolios.
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended October 31, 1997 (excluding
short-term investments) are as follows (in thousands):
<TABLE>
<CAPTION>
Growth and International Limited-Term
Balanced Income Equity Income
Portfolio Portfolio Portfolio Portfolio
---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Purchases............................................ $1,021,589 $729,708 $315,060 $533,660
Proceeds from sales.................................. $1,121,578 $459,559 $ 84,780 $612,495
</TABLE>
61
<PAGE> 63
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
4. COMMITMENTS
In order to protect itself against a decline in the value of particular
foreign currencies against the U.S. dollar, the International Equity Portfolio
has entered into forward contracts to deliver or receive foreign currency in
exchange for U.S. dollars as described below. The Portfolio bears the market
risk that arises from changes in foreign exchange rates, and accordingly, the
unrealized gain (loss) on these contracts is reflected in the accompanying
financial statements. The Portfolio also bears the credit risk if the
counterparty fails to perform under the contract. At October 31, 1997, the
Portfolio had outstanding forward foreign currency contracts as follows:
<TABLE>
<CAPTION>
Settlement Unrealized
Contracts to Deliver Date Value Gain/(Loss)
-------------------- ---------- ------- -----------
(amounts in thousands)
<S> <C> <C> <C> <C>
3,500 AUD......................................................... 1/12/98 $ 2,458 $277
56 CHF......................................................... 11/3/97 40 0
102 DEM......................................................... 11/3/97 59 0
300,000 ESP......................................................... 12/2/97 2,058 251
79,000 FRF......................................................... 6/19/98 13,830 12
------- ----
Total contracts to deliver (Receivable amount $18,985)............... $18,445 $540
======= ====
Contracts to Receive
- ---------------------------------------------------------------------
(amounts in thousands)
187 AUD......................................................... 11/6/97 $ 132 $ 0
83 CHF......................................................... 11/3/97 59 0
300,000 JPY......................................................... 11/5/97 2,494 (6)
52 SGD......................................................... 11/7/97 33 0
4,318 DEM......................................................... 11/4/97 2,508 8
69 DEM......................................................... 11/3/97 40 0
22 AUD......................................................... 11/7/97 16 0
25 AUD......................................................... 11/10/97 17 0
------- ----
Total contracts to receive (Payable amount $5,297)................... $ 5,299 $ 2
======= ====
</TABLE>
The Portfolios may purchase securities with delivery or payment to occur at
a later date. At the time the Portfolios enter into a commitment to purchase a
security, the transaction is recorded and the value of the security is reflected
in the net asset value. The value of the security may vary with market
fluctuations. No interest accrues to the Portfolios until payment takes place.
At the time the Portfolios enter into this type of transaction it is required to
segregate cash or other liquid assets equal to the value of the securities
purchased. At October 31, 1997 the Balanced Portfolio had $21,175,000 in
purchase commitments outstanding (2% of net assets), with a corresponding amount
of assets segregated.
5. SECURITIES LENDING
The Portfolios participate in a securities lending program under which
securities are loaned to selected institutional investors. All such loans
require collateralization with cash, securities of the U.S. Government and its
agencies or letters of credit that at all times equal at least 100% of the
market
62
<PAGE> 64
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
(Continued)
- --------------------------------------------------------------------------------
value of the loaned securities plus accrued interest. The Portfolios may bear
the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower of securities fail financially. The Portfolios
receive the interest on the collateral less any fees and rebates paid to agents
and transferees of securities. The Portfolios also continue to receive interest
on the securities loaned, and any gain or loss in the market price of securities
loaned that may occur during the term of the loan will be for the account of the
Portfolio.
At October 31, 1997, securities with a market value of approximately
$66,477,000, $44,612,000 and $51,436,000 were loaned by the Balanced, Growth and
Income and International Equity Portfolios, respectively. The Custodian for each
Portfolio held an investment in the AMR Investments Strategic Cash Business
Trust (the "Business Trust") totaling $66,635,000, $44,725,000 and $47,053,000
for the Balanced, Growth and Income and International Equity Portfolios,
respectively. In addition, the Custodian held non-cash collateral totaling
$7,446,000 for the International Equity Portfolio. The Manager serves as Trustee
and as investment adviser to the Business Trust. The Manager receives from the
Business Trust an annualized fee equal to 0.10% of the average daily net assets
of the Business Trust.
63
